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Shares of KeyW Holding Corp. (NASDAQ: KEYW) were down 16.7% as of 11:00 a.m. EST Friday after the intelligence and counterterrorism technology solutions specialist announced preliminary 2016 results and a new public offering of common stock.
KeyW is slated to formally release fourth-quarter and full-year 2016 results on March 8, 2017. But as it stands, KeyW anticipates full-year 2016 revenue from continuing operations to be in the range of $290 million to $293 million -- near the low end of its previous guidance provided in November, which called for 2016 revenue of $290 million to $300 million -- and net income from continuing operations of $3 million to $5 million. KeyW also expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $31 million to $33 million, which translates to adjusted EBITDA margin (based on the midpoint of its new revenue guidance) of roughly 10.6% to 11.3% -- again, near the low end of previous guidance for adjusted EBITDA margin of 10% to 13%.
In addition, KeyW announced a new public offering of of 8.5 million shares of common stock, priced at $10.50 per share (before underwriting discounts and commissions), and granted the underwriters a 30-day option to purchase up to an additional 1.275 million shares. Keeping in mind that KeyW's entire market capitalization sits at just above $400 million with shares trading at $10.14 as of this writing, and assuming the underwriters exercise their option in full, these new shares represent nearly 28% of the company's current float.
KeyW states it will use the proceeds of the offering "to finance possible future acquisitions," as well as for working capital and general corporate purposes. So it should be interesting to see whether the company has an imminent acquiree in mind. But in the end, since the pricing of this large, dilutive new offering came in well below yesterday's closing price, as well as KeyW's underwhelming preliminary 2016 results, I wouldn't blame investors for taking at least some of their money off the table and putting it to work elsewhere.
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