- Press Release
- Sep 26, 2022
Orbital Sciences CEO David Thompson on Q2 2014 Results – Earnings Call Transcript
Orbital released its second quarter 2014 financial results and conducted a conference call with financial analysts and investors. This is the transcript.
– David Thompson – Chairman, President and CEO
– Garrett Pierce – Chief Financial Officer
– Barry Beneski – SVP Communications
Good morning, my name is Shirley and I will be your conference operator today. At this time, I would like to welcome, everyone to the Second Quarter 2014 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. (Operator Instructions).
Thank you. Mr. David Thompson, you may begin your conference.
David Thompson – Chairman, President and CEO
Thank you, Shirley and good morning, everyone. Thank you for joining us today to discuss Orbital’s second quarter financial results. I’m Dave Thompson, and with me on the phone this morning are Garrett Pierce and Barry Beneski.
Before we get underway I’d like to ask everyone to take note of the Safe Harbor paragraph and other important information that appears at the end of our financial press release. This paragraph in particular emphasizes the major uncertainties and risks in the forward-looking statements that we will make this morning. So please keep these factors as well as the other information in mind as we discuss the company’s future operational outlook and our financial guidance during the call.
We’ll follow our customary outline this morning. I’ll begin by discussing some highlights from the second quarter and then turn it over to Garrett. He will cover our quarterly financial results in greater detail and update our guidance for the remainder of the year.
After that, I’ll recap recent operational events and also provide a preview of upcoming operational activity for the next three months. And finally, I’ll also address second quarter new business contract backlog and our outlook for the rest of this year and I’ll also provide an update on Orbital’s planned merger with the ATK. At that point, we’ll open up the call for questions.
Let’s begin with some highlights from our second quarter and Garrett and I will cover each of these in more depth later in the call. First, I’ll recap the big news from the second quarter as I think you all know in late April Orbital and ATK announced the proposed merger-of-equals combination of our company and ATK’s Aerospace and Defense Group. As we noted at the time this combination will create a $4.5 billion space defense and aviation systems manufacture and both an unmatched record of product innovation and a very sharp focus on affordability.
When merger closes which is expected later this year. Orbital ATK will have a substantially broader customer base with the technological capabilities and competitive advantages to enable sustain growth in revenue earnings and cash flow as well as to realize substantial near-term opportunities for both strategic and financial synergies.
Second, let’s look at our financial performance in the second quarter. Revenues were down about 5% to $318 million, primarily on reduce sales of scientific and national security satellites and space launch vehicles. Excluding $6.6 million of merger related expenses, adjusted operating margin was about 6.9% in the quarter and adjusted EPS on a same basis was $.0.34 per share.
Free cash flow was about $17 million in the quarter, which increased our cash balances, to $366 million at the end of January. Due to the delayed start of work on several commercial communication satellite contracts that have been expected earlier in the year, but which are only ramping up now we are reducing our revenue estimates for 2014 by $50 million to $75 million to a new range of $1.4 billion to $1.425 billion.
We are however maintaining our previous operating margin EPS and free cash flow targets excluding merger related costs as Garrett will discuss momentarily. Next, let’s turn to operational highlights, the company carried out five space missions in the last three months and delivered 10 additional satellites and launch vehicles for future uses. Recent missions included the 13th consecutive successful launch of the company’s Orbital Boost Vehicle Interceptor for the Missile Defense Agency’s GMD program. This was a prerequisite for the Pentagon to proceed with the expanded deployment of additional GMD interceptors over the next three years and so therefore it was very important.
We also launched our fourth Antares rocket this past weekend which boosted the company’s third Cygnus spacecraft into orbit in advance of its rendezvous and docking with the International Space Station which took place yesterday.
Finally, here is a summary of new business activity. New contract awards and options exercises totaled approximately $550 million in the second quarter. These included two orders for our recently introduced GEOStar-3 medium class communication satellite which will provide high throughput capacity in both KA and KU bands, use a hybrid electric chemical propulsion system and boost satellite revenue quite substantially in the second half of the year.
Firm contract backlog increased 5% to approximately $2.27 billion while total backlog was $4.76 billion at the end of the second quarter. Looking ahead to the second half of the year, Orbital is pursuing a dozen or so major new business opportunities widely distributed across our product lines that are valued in excess of $1.5 billion. I’ll discuss these in a little more detail in a few minutes. First though, I’d like to ask Garrett to take you through the company’s financial results from the second quarter and to update our guidance for 2014. Garrett?