NCI, Inc. Reports Second Quarter Financial Results

NCI, Inc. (NASDAQ:NCIT), a leading provider of information technology (IT), engineering, logistics, and professional services and solutions to U.S. Federal Government agencies, announced today results for the second quarter 2010. The table below is a summary of our financial results:

Reported Results

For the second quarter of 2010, NCI reported revenues of $126.6 million compared to $108.5 million for the second quarter of 2009, with an organic revenue growth rate of approximately 13%. We define our organic growth rate as the increase in revenue, from period to period, excluding the effect of acquisitions. Operating income for the second quarter of 2010 was $9.1 million, compared to $8.7 million for the second quarter of 2009. Operating margin of 7.2% for the second quarter of 2010 compared with an operating margin of 8.0% for the same period in 2009. Net income for the second quarter was $5.4 million compared to $5.1 million for the same period in 2009. Diluted earnings per share for the second quarter were $0.39 per share, compared to $0.37 per share for the comparable period in 2009. The effective tax rate for the second quarter of 2010 was 39.5% compared to 39.8% for the comparable period in 2009. Diluted shares outstanding for the second quarter of 2010 were 13.9 million shares compared to 13.8 million shares for the second quarter of 2009.

For the first six months of 2010, NCI reported revenue of $241.6 million, compared to $213.5 million for the first six months of 2009. This represents a growth rate of 13% and an organic growth rate of 10%. Operating income for the first six months of 2010 was $17.9 million, or an operating margin of 7.4%, compared to $16.6 million, or an operating margin of 7.8%, for the first six months of 2009. Net income for the first six months of 2010 was $10.9 million, compared to $9.8 million for the same period in 2009. Diluted earnings per share for the first six months of 2009 were $0.78 per share, compared to $0.71 per share for the comparable period in 2009. Diluted shares outstanding were approximately 13.9 million shares for the first half of 2010 and approximately 13.7 million for the first half of 2009.

CEO Comments

Charles K. Narang, NCI’s Chairman and CEO, said, "I am pleased to report solid results for the quarter. On a year-over-year basis, we continue to see solid progress of our top-line with reported revenue growth of approximately 17% for the second quarter of 2010. Organic growth for the quarter was 13%. Though there are challenges in our marketplace, we believe that NCI is uniquely positioned to continue supporting our customers’ critical missions.”

Business Discussion

NCI’s President, Terry Glasgow, stated, "We are very pleased to report that we have been awarded the Rapid Response Program 3^rd Generation Contract from the U.S. Army Communications-Electronics Command. This contract will provide support to DoD, and other Federal Agencies across a very broad range of engineering, program management and C4ISR services. This multiple award IDIQ contract is for a five year period of performance and has a ceiling price of $16.4 billion. We are excited with the possibilities that this new contract provides for NCI as we position for growth in 2011 and beyond.”

Key Metrics

NCI reported total backlog at the end of the second quarter of $1,424 million, of which $230 million was funded backlog. This compares to total backlog of $1,120 million as of June 30, 2009 which included $205 million in funded backlog. During the second quarter of 2010, approximately 86% of revenue was from prime contracts. Time-and-materials contracts accounted for 55% of revenue; cost-plus contracts accounted for 15% of revenue; and fixed-price contracts accounted for 30% of revenue for the second quarter of 2010. Our customer mix for the second quarter of 2010 reflects approximately 90% of revenue from the Department of Defense and Intelligence customers, and approximately 10% of revenue from Federal Civilian agencies. Days sales outstanding in accounts receivable, or DSO, for the quarter was 64 days, or a 10-day improvement from the previous quarter.

Outlook

The table below summarizes the guidance ranges for the third quarter of 2010 and full year. This outlook does not reflect the impact of any future acquisitions.

Conference Call Information

The NCI, Inc. executive management will hold a conference call today at 5 p.m. ET, to discuss our second quarter 2010 results and answer questions. Interested parties may access the call by dialing (877) 704-5380 (domestic) or (913) 312-1294 (international). The confirmation code for the live call is 4780018. The conference call will be webcast (listen only) simultaneously via the Internet at www.nciinc.com.

A replay of the call will be available beginning at 8 p.m. ET today and will remain available for a two-week period. To access the replay, call (888) 203-1112 (domestic) or (719) 457-0820 (international). The confirmation code for the replay is 4780018. A replay webcast will also be available on the NCI, Inc. website shortly after the conclusion of the call.

About NCI, Inc.:

NCI is a leading provider of information technology (IT), engineering, logistics, and professional services and solutions to U.S. Federal Government agencies. We have ISO 9001:2008 and other industry-leading and globally recognized certifications. NCI’s award-winning expertise encompasses areas critical to its customers’ mission objectives, including enterprise systems management; network engineering; cybersecurity and information assurance; software development and systems engineering; program management, acquisition, and lifecycle support; engineering and logistics; health IT/medical transformation; and training and simulation. The company is a member of the Russell 2000 and S&P Small Cap 600 indexes. Headquartered in Reston, Virginia, NCI has approximately 2,800 employees and more than 100 locations worldwide.

Forward-Looking Statement: Statements and assumptions made in this press release, which do not address historical facts, constitute "forward-looking” statements that NCI believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, many of which are outside of our control. Words such as "may,” "will,” "intends,” "should,” "expects,” "plans,” "projects,” "anticipates,” "believes,” "estimates,” "predicts,” "potential,” "continue,” or "opportunity,” or the negative of these terms or words of similar import are intended to identify forward-looking statements.

Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: our dependence on our contracts with Federal Government agencies, particularly within the U.S. Department of Defense, for substantially all of our revenue; continued funding of U.S. Government, based on a change in spending priorities, or in the event of a priority need for funds, such as homeland security, the war on terrorism or rebuilding Iraq; risk of contract performance or termination; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; adverse results of Federal Government audits of our government contracts; Government contract procurement (such as bid protest, small business set asides, etc.) and termination risks; competitive factors such as pricing pressures and competition to hire and retain employees (particularly those with security clearances); failure to successfully identify and integrate future acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions or to effectively integrate acquisitions appropriate to the achievement of our strategic plans; adverse results of U.S. Government audits of our Government contracts; economic conditions in the United States, including conditions that result from terrorist activities or war; material changes in laws or regulations applicable to our businesses, particularly legislation affecting (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, (iii) government contracts containing organizational conflict of interest (OCI) clauses, (iv) delays related to agency specific funding freezes, (v) competition for task orders under Government Wide Acquisition Contracts (GWACs), agency-specific IDIQ contracts and/or schedule contracts with the General Services Administration; and (vi) the Government’s "insourcing” of previously contracted support services and the realignment of funds to other non-defense related programs; impact of the current credit market conditions and our ability to replace our current credit facility on or before it expires on March 14, 2010 with rates currently assumed to be greater than the current rate structure; and (vi) our own ability to achieve the objectives of near-term or long-range business plans, including internal systems failures. These and other risk factors are more fully discussed in the section titled "Risks Factors” in NCI's Form 10-K filed with the Securities and Exchange Commission (SEC), and from time to time, in other filings with the SEC, such as our Forms 8-K and Forms 10-Q.

The forward-looking statements included in this news release are only made as of the date of this news release and NCI undertakes no obligation to publicly update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.