CEO Brad Feldmann Details Cubic’s C4ISR Push, Defense Business Investments

tablet, soldier, c4isrIn a one-year span that featured announcements of three acquisitions, Cubic Corp. unveiled a nearly $400 million bet that the C4ISR market will spur long-term growth in the San Diego-based contractor’s global defense business that represents roughly 60 percent of its estimated $1.5 billion in revenue.

Cubic made its first move of that C4ISR expansion effort in December 2014 with the $114.5 million acquisition of DTECH Labs, a Sterling, Va.-based manufacturer of ruggedized communications equipment and modular networking tools for use in portable, vehicle, airborne and dismounted settings.

The company then disclosed the second and third steps of its shift one year later through the $232.5 million purchase of tactical communications equipment maker GATR Technologies and in conjunction the $39 million buy of TeraLogics, which designs full-motion video analysis and distribution platforms for customers in the defense, intelligence and commercial arenas.

Bradley-Feldmann
Brad Feldmann

Altogether, Cubic put $386 million toward the acquisitions in a strategy CEO Brad Feldmann described to ExecutiveBiz as one aimed in part at building a “mission chain” for soldiers and other personnel that use surveillance and communications equipment in missions while on the ground.

“The idea is to be a full lifecycle provider and provide a full subsystem capability for people on the ground,” Feldmann told ExecutiveBiz in an interview conducted at DTECH’s headquarters in Ashburn.

The triple-play of acquisitions positions Cubic as an original equipment manufacturer and a primary source for work on the upgrade cycles, he said.

“We felt by getting all these pieces, we could bid larger opportunities and gain revenue growth with these new sub-capabilities.”

Cubic also added new work with customers such as Special Operations Command and the Defense Information Systems Agency through the deals, plus an added footprint with the U.S. Army through a contract GATR holds with the branch’s Communications-Electronics Command.

Within the government contracting market, consolidation among the largest services-oriented companies has dominated GovCon’s merger-and-acquisition environment within the past 14 months in moves such as Leidosdeal to merge with Lockheed Martin‘s information technology segment, CACI International‘s $550 million purchase of the L-3 National Security Solutions business and Science Applications International Corp.’s $820 million buy of intelligence community contractor Scitor.

Cubic logoOther contractors like Cubic that manufacture systems and platforms have looked toward targeted capability-based acquisitions to add new products and other offerings as L-3 Communications purchased ISR and geospatial technology maker ForceX and Boeing bought video processing system manufacturer 2d3 Sensing.

“Generally, you can have higher margins with products, if they are operated efficiently you can get good returns on capital. In the products business, you generally see companies doing opportunistic kinds of buys for things that fit in their strategy,” Feldmann said.

“In our instance with those acquisitions we made one can see the overall strategy in what we’re trying to do with creating a mission chain. We’re a technology company that provides both systems and services.”

The company started its current fiscal year with a first quarter net loss of $5.4 million, or 20 cents per share, with an operating loss of $8.1 million but Feldmann views Cubic’s direction as one set for to set it in direction for growth in the rest of FY 2016.

Both the series of acquisitions and the company’s OneCubic initiative to realign its defense business affected first quarter results, Feldmann said.

“The first quarter is historically not great for us and there are the investments in our business on top of that. We have a lot of shipments in the latter half that have good margins and see FY 2016 being a good year,” he added.

“We see us hitting it out of the park in 2017.”

Cubic’s international market activity will also be a factor in its long-term prospects as Feldmann estimated the defense segment’s revenue as split evenly between the U.S. and foreign customers through either foreign military sales contracts or direct commercial sales.

“We’ve expanded greatly with our ground combat training and are working with 25 armies worldwide,” Feldmann said.

The current global security environment and governments’ strategies to combat terrorism and other potential threats means defense spending environments in the U.S. and abroad will present opportunities for contractors in the training market particularly, Feldmann said.

“We see opportunities in the Middle East and also see increased demand signals with the shift to the Pacific,” he said.

“Peace has not broken out around the world.”

 

You may also be interested in...

Cristal Rice VP-Readiness

PAE Names Cristal Rice as VP of Readiness, Sustainment; John Heller Quoted

PAE has appointed Cristal Rice as the vice president of its Readiness & Sustainment group. Rice is an aerospace industry executive with that has deep experience in team leadership and business development. “Cristal has a demonstrated track record for leading high-performing teams and standing up new business development organizations,” said PAE president and CEO, and 2020 Wash100 Award recipient, John Heller

Josh Schoeller CEO LexisNexis Health Care

LexisNexis Risk Solutions Names New Executives to Health Care Business; Josh Schoeller Quoted

LexisNexis Risk Solutions has appointed new executives to its Health Care Business leadership team. Dave Corbett will serve as head of Sales and Client Engagement and Jeff Diamond has been promoted to senior vice president of Commercial Operations. “[Corbett] brings tremendous experience in nurturing client relationships and leading high-performing sales teams that will help us deliver more value for our clients,” said Josh Schoeller, CEO of LexisNexis Risk Solutions' health care business.

Don Brown GM of Government Services Telesat

Don Brown: Telesat’s US Subsidiary to Help Lockheed, SDA Test Commercial-Gov’t Space Network Interoperability

A Telesat subsidiary will participate in a Lockheed Martin-led team that won a $187.5M contract from the Space Development Agency to provide 10 space vehicles with communication links to explore interoperability between commercial and government satellites.