Cubic Corp. (CUB) Misses Q4 EPS by 8c, Offers FY20 Guidance, o Acquire Remaining Stakes of Pixia and Delerrok

Cubic Corp. (NYSE: CUB) reported Q4 EPS of $1.86, $0.08 worse than the analyst estimate of $1.94. Revenue for the quarter came in at $471.2 million versus the consensus estimate of $440.34 million.

GUIDANCE:

Cubic Corp. sees FY2020 EPS of $3.10-$3.70, versus the consensus of $3.97. Cubic Corp. sees FY2020 revenue of $1.58-1.64 billion, versus the consensus of $1.59 billion.

• Adjusted EBITDA: $170 million to $190 million

Purchase Agreement to Acquire Delerrok Inc. (“Delerrok”)

During fiscal years 2018 and 2019, Cubic paid a total of $6.5 million in cash to purchase 17.5% of the outstanding common stock of Delerrok, a private company based in Vista, California, that provides a cloud-hosted, multi-agency fare collection platform for small- to mid-sized transit operators. The purchase agreement includes an option to acquire the remaining 82.5% of its common stock, which Cubic exercised in November 2019 and expects to close in December 2019, subject to customary closing conditions. Cubic will pay cash of $36.4 million at closing, which will be funded from borrowings under Cubic’s existing credit facilities, and a potential earn-out of up to $2.0 million if Delerrok achieves certain sales goals in the first 12 months after closing.

“We look forward to continuing our partnership with Delerrok to expand our services to small- and mid-market transportation customers with an innovative fare collection-as-a-service solution. Our industry expertise in fare collection and real-time information solutions and services, combined with Delerrok’s innovative and scalable technology, will allow us to deliver a cost-effective and complete offering for transit agencies of all sizes,” added Feldmann.

The acquisitions of Pixia and Delerrok are expected to contribute approximately $40 million in sales, $15 million of Adjusted EBITDA and add approximately $0.20 to Adjusted EPS for fiscal year 2020.

Purchase Agreement to Acquire PIXIA Corp (Pixia)

In June 2019, Cubic paid $50.0 million in cash to purchase 20% of the outstanding capital stock of Pixia, a private company based in Herndon, Virginia, that provides high performance, cloud-based solutions to manage and access massive amounts of imagery data. The purchase agreement includes an option to purchase the remaining 80% of its capital stock for $200.0 million, which Cubic exercised in November 2019 and expects to close by February 2020, subject to customary closing conditions. The all-cash transaction will be funded from borrowings under Cubic’s existing credit facilities.

“Pixia enhances our C2ISR digital platform and further enables our real-time, battlefield cloud strategy to provide information to the edge of the battlefield. We look forward to welcoming the Pixia team to Cubic. Together, we will offer best-in-class solutions to address big data challenges for the Intelligence Community,” said Feldmann.

For earnings history and earnings-related data on Cubic Corp. (CUB) click here.

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