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02.05.2018 12:15:00
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Engility Reports First Quarter 2018 Results
CHANTILLY, Va., May 2, 2018 /PRNewswire/ -- Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the first quarter ended March 30, 2018.
CEO Commentary
"We had a successful first quarter as we exceeded revenue and bookings expectations and recorded profit that was consistent with our full-year guidance," said Lynn Dugle, Chairman, President and CEO of Engility. "We are effectively executing our strategy to protect our base, grow existing contracts and deliver tool-enabled solutions to expand into new markets. We are excited about the future given the quality of our pipeline, an improving federal budget environment and the internal investments we are making to achieve organic growth in 2019."
First Quarter 2018 Results
Total revenue for the first quarter of 2018 was $477 million. GAAP operating income was $27 million and GAAP operating margin was 5.8%. GAAP net income attributable to Engility was $6 million, or $0.17 per diluted share. GAAP net income attributable to Engility includes $10 million, or $0.28 per diluted share, of debt repricing, income taxes and non-core operating costs. Cash taxes paid in the first quarter of 2018 were $0.3 million. These costs are outlined in the non-GAAP financial information provided in the tables included herein. EBITDA was $39 million and EBITDA margin was 8.1%.
Adjusted operating income was $35 million and adjusted operating margin was 7.4%. Adjusted EBITDA was $40 million and adjusted EBITDA margin was 8.4%.
The company also closed on the repricing of its aggregate $703 million B1 and B2 term loans during the first quarter of 2018. As a result of this transaction, the company lowered the interest rates on both term loans by 50 basis points and increased the capacity on its revolving loan facility by $25 million.
Information about the Company's use of non-GAAP financial information is provided below under "Non-GAAP Measures."
Key Performance Indicators
- Book-to-bill ratio for the first quarter of 2018 was 0.9x on net bookings of $440 million. Trailing twelve-month book-to-bill ratio was 0.9x on net bookings of $1.8 billion.
- Total estimated contract value at the end of the first quarter of 2018 was $3.4 billion, consistent with the value at the end of 2017.
- Days sales outstanding, net of advanced payments, was 61 days at the end of the first quarter of 2018, compared to 60 days at the end of the first quarter of 2017.
- Cash flows generated from operating activities for the first quarter of 2018 was $6 million, compared to cash used of $12 million for first quarter of 2017.
- During the first quarter of 2018, the company made total debt payments of $20 million.
Key First Quarter 2018 Contract Awards
- Awarded an $85 million Naval Air Warfare Center Aircraft Division Code AIR-4.1—Systems Engineering Department recompete contract. Under this contract, the company will provide systems engineering assessment of cost, schedule, emerging technology and maturity of design for all NAVAIR acquisition programs in support of the NAVAIR Systems Engineering Department.
- Awarded three significant sole-source contacts with the U.S. intelligence community totaling $76 million. The company will perform classified intelligence analysis, cybersecurity and systems engineering efforts.
- Obtained a position for new work on the recently awarded Mission Systems Operations Contract. This further expands the company's work at NASA's Johnson Space Center in Houston and enables us to establish new relationships and enhance existing ones.
Recent Developments
- In April 2018, awarded a $90 million SeaPort-e® task order to support the U.S. Navy's tactical afloat and submarine local area networks. Engility's cybersecurity, software and systems engineering expertise will continue to help the Navy field their next generation tactical afloat networks.
- In April 2018, launched MetaSift™, a highly-versatile data analytics integration platform developed specifically to help the intelligence and defense communities better find actionable information in huge amounts of data. Built on an open architecture, the platform uses source-agnostic tools to ingest, manage and quickly retrieve data.
Fiscal Year 2018 Guidance
The company is reiterating the fiscal year 2018 guidance it first issued on March 1, 2018, based on Engility's financial results for the first quarter of 2018 and its current outlook for the remainder of 2018. The table below summarizes the company's fiscal year 2018 guidance.
Fiscal Year 2018 Guidance | |
Revenue | $1.83 billion - $1.91 billion |
GAAP Diluted EPS (1) | $0.81 - $0.91 |
EBITDA | $160 million - $170 million |
Operating Cash Flow | $100 million - $110 million |
(1) | 2018 GAAP diluted EPS guidance includes approximately $25 million of amortization expense related to intangible assets acquired by the company. It also assumes diluted weighted-average outstanding shares of approximately 38 million and a full-year effective tax rate of approximately 25 percent. |
Non-GAAP Measures
The tables under "Engility Holdings, Inc. Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Engility has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions of TASC, Inc. and Dynamics Research Corporation, costs associated with a loss or gain on the disposal or sale of property, plant and equipment, acquisition, restructuring and related expenses, legal and settlement costs, refinancing-related expenses, and the impact of certain tax related items. These items have been adjusted because they are not considered core to the company's business or otherwise not considered operational or because these charges are non-cash or non-recurring. The company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility's performance during the periods presented and the company's ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.
With respect to our "Fiscal Year 2018 Guidance" above, reconciliation of EBITDA guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. We are unable to reconcile EBITDA to net income due to our inability to predict certain non-cash items included in net income, including taxes and timing of potential restructuring charges. The disclosure of such reconciliations may imply to our investors a degree of precision in our calculations that is not possible. For the same reasons, the company is unable to address the probable significance of the unavailable information.
Conference Call Information
Engility will host a conference call at 8:30 a.m. Eastern Time on May 2, 2018 (today), to discuss the financial results for its first quarter 2018.
Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at http://www.engility.com. Listeners also may access a slide presentation on the website, which summarizes the company's first quarter 2018 results. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.
Listeners also may participate in the conference call by dialing (888) 655-5029 (domestic) or (503) 343-6026 (international) and entering pass code 2791259.
A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through May 9, 2018 at (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering pass code 2791259.
About Engility
Engility (NYSE: EGL), a $2 billion technology leader, has thousands of employees around the world working to make a difference. Our history of delivering results for the defense, federal civilian, intelligence and space industries spans more than 60 years. We provide leading-edge solutions and services on Earth, in space and across cyber by leveraging expertise in systems engineering & integration, high performance computing, cybersecurity, readiness & training, enterprise modernization and mission operations support. To learn more about us, please visit www.engility.com and connect with us on Facebook, LinkedIn and Twitter.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility's future prospects, projected financial results, estimated integration costs and acquisition related amortization expenses and business plans. Words such as "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility's actual results to differ materially from those described in the forward-looking statements can be found under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2017, and more recent documents that have been filed with the Securities and Exchange Commission (SEC) and are available on the investor relations section of Engility's website (http://www.engility.com) and on the SEC's website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.
Media: Scott Fazekas Engility Holdings, Inc. (703) 984-5068 | Investor Relations: Dave Spille Engility Holdings, Inc. (703) 984-6120 |
ENGILITY HOLDINGS, INC. | ||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(in thousands, except per share data) | ||||||||
Three Months Ended | ||||||||
March 30, 2018 | March 31, 2017 | |||||||
Revenue | $ | 476,560 | $ | 485,215 | ||||
Costs and expenses | ||||||||
Cost of revenue | 412,022 | 415,023 | ||||||
Selling, general and administrative expenses | 37,075 | 36,506 | ||||||
Total costs and expenses | 449,097 | 451,529 | ||||||
Operating income | 27,463 | 33,686 | ||||||
Interest expense, net | 19,378 | 20,921 | ||||||
Other expenses (income), net | (142) | 7 | ||||||
Income before provision for income taxes | 8,227 | 12,758 | ||||||
Provision for income taxes | 1,639 | 5,010 | ||||||
Net income | 6,588 | 7,748 | ||||||
Less: Net income attributable to non-controlling interest | 99 | 815 | ||||||
Net income attributable to Engility | $ | 6,489 | $ | 6,933 | ||||
Earnings per share attributable to Engility | ||||||||
Basic | $ | 0.18 | $ | 0.19 | ||||
Diluted | $ | 0.17 | $ | 0.18 | ||||
Weighted average number of shares outstanding | ||||||||
Basic | 36,853 | 36,781 | ||||||
Diluted | 37,457 | 37,766 | ||||||
ENGILITY HOLDINGS, INC. | ||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands) | ||||||||
March 30, | December 31, | |||||||
2018 | 2017 | |||||||
Assets: | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 22,172 | $ | 41,890 | ||||
Accounts receivables, net | 101,183 | 108,100 | ||||||
Unbilled receivables | 249,300 | 222,994 | ||||||
Other current assets | 19,646 | 19,681 | ||||||
Total current assets | 392,301 | 392,665 | ||||||
Property, plant and equipment, net | 42,153 | 44,006 | ||||||
Goodwill | 1,071,371 | 1,071,371 | ||||||
Identifiable intangible assets, net | 353,288 | 361,410 | ||||||
Deferred tax assets | 147,124 | 150,535 | ||||||
Other assets | 5,151 | 6,021 | ||||||
Total assets | $ | 2,011,388 | $ | 2,026,008 | ||||
Liabilities and Equity: | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 25,260 | $ | 26,947 | ||||
Accounts payable, trade | 52,392 | 52,954 | ||||||
Accrued employment costs | 92,975 | 77,545 | ||||||
Accrued expenses | 70,378 | 74,856 | ||||||
Advance payments and billings in excess of costs incurred | 27,833 | 30,380 | ||||||
Income tax liabilities | 261 | 548 | ||||||
Other current liabilities | 15,755 | 26,688 | ||||||
Total current liabilities | 284,854 | 289,918 | ||||||
Long-term debt | 922,465 | 938,687 | ||||||
Income tax liabilities | 61,133 | 62,219 | ||||||
Other liabilities | 58,877 | 59,079 | ||||||
Total liabilities | 1,327,329 | 1,349,903 | ||||||
Equity: | ||||||||
Preferred stock, par value $0.01 per share, 25,000 shares authorized, | — | — | ||||||
Common stock, par value $0.01 per share, 175,000 shares authorized, | 370 | 368 | ||||||
Additional paid-in capital | 1,245,262 | 1,244,940 | ||||||
Accumulated deficit | (568,360) | (576,019) | ||||||
Accumulated other comprehensive loss | (2,855) | (3,805) | ||||||
Total equity attributable to Engility | 674,417 | 665,484 | ||||||
Non-controlling interest | 9,642 | 10,621 | ||||||
Total equity | 684,059 | 676,105 | ||||||
Total liabilities and equity | $ | 2,011,388 | $ | 2,026,008 | ||||
ENGILITY HOLDINGS, INC. | ||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(in thousands) | ||||||||
Three Months Ended | ||||||||
March 30, 2018 | March 31, 2017 | |||||||
Operating activities: | ||||||||
Net income | $ | 6,588 | $ | 7,748 | ||||
Share-based compensation | 2,183 | 1,637 | ||||||
Depreciation and amortization | 11,137 | 10,861 | ||||||
Loss (gain) on sale of property, plant and equipment | 3 | (570) | ||||||
Loss on extinguishment of debt | 253 | — | ||||||
Amortization of bank debt fees | 1,920 | 2,133 | ||||||
Deferred income taxes | 2,519 | 6,319 | ||||||
Excess tax deduction on share-based compensation | 146 | (416) | ||||||
Changes in operating assets and liabilities: | ||||||||
Receivables | (13,906) | (21,122) | ||||||
Other assets | (4,126) | 130 | ||||||
Accounts payable, trade | (539) | 7,811 | ||||||
Accrued employment costs | 15,429 | (8,122) | ||||||
Accrued expenses | (5,057) | (3,144) | ||||||
Advance payments and billings in excess of costs incurred | (2,547) | 816 | ||||||
Other liabilities | (8,191) | (16,474) | ||||||
Net cash provided by (used in) operating activities | 5,812 | (12,393) | ||||||
Investing activities: | ||||||||
Proceeds from sale of business, net of amount placed in escrow | (1,900) | 23,005 | ||||||
Proceeds from sale of property, plant and equipment | — | 2,902 | ||||||
Capital expenditures | (608) | (1,505) | ||||||
Net cash provided by (used in) investing activities | (2,508) | 24,402 | ||||||
Financing activities: | ||||||||
Repayment of long-term debt | (20,038) | (32,336) | ||||||
Gross borrowings from revolving credit facility | 60,000 | 129,000 | ||||||
Gross repayments of revolving credit facility | (60,000) | (129,000) | ||||||
Debt issuance costs | (45) | — | ||||||
Payment of employee withholding taxes on share-based compensation | (1,861) | (41) | ||||||
Dividends paid | — | (407) | ||||||
Distributions to non-controlling interest member | (1,078) | (2,586) | ||||||
Net cash used in financing activities | (23,022) | (35,370) | ||||||
Net change in cash and cash equivalents | (19,718) | (23,361) | ||||||
Cash and cash equivalents, beginning of period | 41,890 | 48,236 | ||||||
Cash and cash equivalents, end of period | $ | 22,172 | $ | 24,875 | ||||
ENGILITY HOLDINGS, INC. | ||||||||
RECONCILIATION OF NON-GAAP MEASURES | ||||||||
The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented. | ||||||||
Adjusted Operating Income and Adjusted Operating Margin | ||||||||
(dollars in thousands) | ||||||||
Three Months Ended | ||||||||
March 30, 2018 | March 31, 2017 | |||||||
Net income | $ | 6,588 | $ | 7,748 | ||||
Provision for income taxes (1) | 1,639 | 5,010 | ||||||
Other expenses (income), net | (142) | 7 | ||||||
Interest expense, net (2) | 19,378 | 20,921 | ||||||
Operating income | 27,463 | 33,686 | ||||||
Adjustments | ||||||||
Acquisition, restructuring and related expenses, | 1,432 | 1,403 | ||||||
Acquisition-related intangible amortization | 6,334 | 6,335 | ||||||
Loss on sale of business and property, plant and | 3 | (570) | ||||||
Total adjustments | 7,769 | 7,168 | ||||||
Adjusted operating income | $ | 35,232 | $ | 40,854 | ||||
Operating margin | 5.8 | % | 6.9 | % | ||||
Adjusted operating margin | 7.4 | % | 8.4 | % | ||||
(1) | Cash paid for income taxes for the three months ended March 30, 2018 and March 31, 2017 was $251 and $203, respectively. |
(2) | Interest expense, net, included refinancing-related expenses of $1,918 and $1,692 for the three months ended March 30, 2018 and March 31, 2017, respectively. |
Supplemental: | |
For the three months ended March 30, 2018 and March 31, 2017, the impacts to GAAP net income attributable to Engility from the provision for income taxes and the adjustments noted in the above table were $9 million and $12 million, respectively. These results have not been adjusted for cash taxes paid or refinancing-related expenses as noted in footnote 1 and footnote 2, respectively. |
ENGILITY HOLDINGS, INC. | ||||||||
Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA | ||||||||
(dollars in thousands) | ||||||||
Three Months Ended | ||||||||
March 30, 2018 | March 31, 2017 | |||||||
Net income | $ | 6,588 | $ | 7,748 | ||||
Interest, taxes, and depreciation and amortization | ||||||||
Interest expense | 19,378 | 20,921 | ||||||
Provision for income taxes | 1,639 | 5,010 | ||||||
Depreciation and amortization | 11,137 | 10,861 | ||||||
EBITDA | 38,742 | 44,540 | ||||||
Adjustments to EBITDA | ||||||||
Acquisition, restructuring and related expenses, | 1,432 | 1,403 | ||||||
Loss on sale of business and property, plant and | 3 | (570) | ||||||
Adjusted EBITDA | $ | 40,177 | $ | 45,373 | ||||
EBITDA Margin | 8.1 | % | 9.2 | % | ||||
Adjusted EBITDA Margin | 8.4 | % | 9.4 | % | ||||
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SOURCE Engility
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