Vectrus Announces First Quarter 2017 Results
COLORADO SPRINGS, Colo., May 9, 2017 /PRNewswire/ -- Vectrus, Inc. (NYSE:VEC) announced first quarter 2017 financial results. For the first quarter, revenue was $290.1 million, operating income was $11.6 million, and diluted earnings per share were $0.60. Net cash provided by operating activities was $9.9 million in the first quarter 2017.
"We are off to a fast start in 2017, with a much improved operational and financial outlook," said Chuck Prow, president and chief executive officer of Vectrus. "During the quarter, we were awarded a one year extension and additional option periods on the Kuwait Base Operations and Security Support Services (K-BOSSS) contract, which could extend our performance on the contract through March 2019."
"I am also pleased to announce that we won all of our re-compete contracts scheduled to award in 2017," Prow continued. "We were awarded the Maxwell Base Operations Support (Maxwell BOS) and the Operations Maintenance and Supply Europe (OPMAS-E) re-compete contracts, which have seven and five year potential durations, respectively. Overall, recent new business and re-compete wins, contract modifications and extensions have propelled our total backlog to $2.9 billion; the highest level since being a stand-alone public company."
"Last quarter, we rolled out the foundation of a new strategy," explained Prow. "Albeit very early in our strategic execution, recent contract wins and extensions reinforce the market receptivity to our approach. Additionally, we are proceeding at a good pace deploying Enterprise Vectrus to coalesce our Vectrus Improvement Programs and other enterprise improvement initiatives into a single enterprise wide management system."
First Quarter 2017 Results
-- Revenue $290.1 million
-- Operating income $11.6 million
-- Operating margin 4.0%
-- Diluted earnings per share $0.60
First quarter 2017 revenue of $290.1 million decreased $20.6 million or 6.6 percent compared to the first quarter of 2016. The decrease in revenue is attributable to lower activity from our Afghanistan programs of $20.2 million and our European programs of $3.2 million, offset by increases of $2.4 million from our U.S. programs and $0.4 million from our Middle East programs.
Operating income was $11.6 million or 4.0 percent operating margin in the first quarter of 2017, compared to $11.8 million or 3.8 percent operating margin in the first quarter of 2016.
First quarter 2017 diluted earnings per share were $0.60 compared to $0.61 in the first quarter 2016.
First quarter 2017, net cash provided by operating activities was $9.9 million, an increase of $8.2 million compared to 2016. Days sales outstanding (DSO) was 54 days in the first quarter of 2017 compared to 57 days in the first quarter of 2016.
"Our team's dedicated focus on cash collections resulted in a significant year-over-year improvement in net cash provided by operating activities," said Matt Klein, chief financial officer of Vectrus. "We continuously evaluate our cash collection processes and procedures for further improvement and I am proud of what we have accomplished so far."
The Company ended the first quarter 2017 with a total debt balance of $81.5 million, which was down from $85.0 million at the end of 2016. As of March 31, 2017, the Company had a total consolidated indebtedness to consolidated EBITDA (total leverage ratio) of 1.61x to 1.00x.
The Company ended the first quarter 2017 with total backlog of $2.9 billion and funded backlog of $0.9 billion.
2017 Guidance
"We have updated 2017 guidance to reflect our outlook for the remainder of the year and expect annual revenue to be in the range of $990 million to $1,090 million, up from the previously guided range of $910 million to $1,010 million. Net income is now expected to be in the range of $18.7 million to $22.3 million, up from $17.0 million to $20.5 million. As a result, the range for diluted EPS changes to $1.68 to $2.00 per share, up from $1.53 to $1.83 per share. Net cash provided by operating activities is now expected to be in the range of $22 million to $28 million, up from $20 million to $26 million. Our operating margin guidance of 3.40 percent to 3.60 percent remains unchanged," said Klein.
2017 updated guidance details include:
$ millions, except for operating margin and per share amounts (Prior) (Updated)
2017 Guidance 2017 Guidance
Revenue $910 to $1,010 $990 to $1,090
Operating
Margin 3.40% to 3.60% 3.40% to 3.60%
Net Income $17.0 to $20.5 $18.7 to $22.3
Diluted
EPS(1) $1.53 to $1.83 $1.68 to $2.00
Net Cash
Provided by
Operating
Activities $20.0 to $26.0 $22.0 to $28.0
------------ ----- --- ----- ----- --- -----
The Company notes that forward-looking statements of future performance made in this release, including 2017 guidance, are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below.
Investor Call
Management representatives will conduct an investor briefing and conference call at 5 p.m. EDT on Tuesday, May 9, 2017.
U.S.-based participants may dial into the conference call at 877-407-0792, while international participants may dial 201-689-8263. For all other listeners, a live webcast of the briefing and conference call will be available on the Vectrus Investor Relations website at http://investors.vectrus.com.
A replay of the briefing will be posted on the Vectrus website shortly after completion of the call, and will remain available for one year. A telephonic replay will also be available through May 23, 2017, at 844-512-2921 (domestic) or 412-317-6671 (international) with pass code 13660908.
Footnotes:
(1) 2017 EPS guidance is calculated using the estimated weighted average diluted common shares outstanding for the year ending December 31, 2017 of 11.1 million.
About Vectrus
Vectrus is a leading, global government services company with a history in the services market that dates back more than 70 years. The company provides facility and logistics services and information technology and network communication services to U.S. government customers around the world. Vectrus is differentiated by operational excellence, superior program performance, a history of long-term customer relationships, and a strong commitment to their mission success. Vectrus is headquartered in Colorado Springs, Colo., and includes about 5,600 employees spanning 143 locations in 18 countries. In 2016, Vectrus generated sales of $1.2 billion. For more information, visit our website at www.vectrus.com or connect with us on Facebook, Twitter, LinkedIn, and YouTube.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the "Act"): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include, but are not limited to, statements in 2017 Guidance above about our revenue, operating margin, net income, EPS and net cash provided by operating activities for 2017 and other assumptions contained therein for purposes of such guidance, debt payments, expense savings, contract opportunities, bids and awards, collections, business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as "may," "are considering," "will," "likely," "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," "target," "could," "potential," "continue," or similar terminology are forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, our historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to: our dependence on a few large contracts for a significant portion of our revenue; competition in our industry; our ability to submit proposals for and/or win potential opportunities in our pipeline; our ability to retain and renew our existing contracts; protests of new awards; our international operations, including the economic, political and social conditions in the countries in which we conduct our businesses; changes in U.S. government military operations, including its operations in Afghanistan; changes in, or delays in the completion of, U.S. or international government budgets; government regulations and compliance therewith, including changes to the Department of Defense procurement process; changes in technology; intellectual property matters; governmental investigations, reviews, audits and cost adjustments; contingencies related to actual or alleged environmental contamination, claims and concerns; our success in expanding our geographic footprint or broadening our customer base, markets and capabilities; our ability to realize the full amounts reflected in our backlog; our maintaining our good relationship with the U.S. government; impairment of goodwill; our performance of our contracts and our ability to control costs; our level of indebtedness; our compliance with the terms of our credit agreement; subcontractor and employee performance and conduct; our teaming arrangements with other contractors; economic and capital markets conditions; any future acquisitions, investments or joint ventures; our ability to retain and recruit qualified personnel; our maintenance of safe work sites and equipment; our compliance with applicable environmental health and safety regulations; our ability to maintain required security clearances; any disputes with labor unions; costs of outcome of any legal proceedings; security breaches and other disruptions to our information technology and operations; changes in our tax provisions or exposure to additional income tax liabilities; changes in U.S. generally accepted accounting principles; accounting estimates made in connection with our contracts; our exposure to interest rate risk; our compliance with public company accounting and financial reporting requirements; timing of payments by the U.S. government; risks and uncertainties relating to the spin-off from our former parent; and other factors set forth in Part I, Item 1A, - "Risk Factors," and elsewhere in our 2016 Annual Report on Form 10-K and described from time to time in our future reports filed with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
VECTRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three months ended
March 31, April 1,
(In thousands, except per share
data) 2017 2016
------------------------------- ---- ----
Revenue $290,063 $310,682
Cost of revenue 264,701 283,711
Selling, general and
administrative expenses 13,713 15,160
------ ------
Operating income 11,649 11,811
Interest (expense) income, net (1,134) (1,312)
------ ------
Income from operations before
income taxes 10,515 10,499
Income tax expense 3,847 3,910
Net income $6,668 $6,589
====== ======
Earnings per share
Basic $0.61 $0.62
Diluted $0.60 $0.61
Weighted average common shares
outstanding -basic 10,909 10,628
Weighted average common shares
outstanding -diluted 11,075 10,856
VECTRUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31,
(In thousands,
except share
information) 2017 2016
-------------- ---- ----
Assets (unaudited)
Current assets
Cash $53,689 $47,651
Receivables 164,901 172,072
Costs incurred
in excess of
billings 12,624 11,002
Other current
assets 7,478 13,412
Total current
assets 238,692 244,137
------- -------
Property,
plant, and
equipment,
net 2,679 3,061
Goodwill 216,930 216,930
Other non-
current
assets 1,314 1,177
Total non-
current
assets 220,923 221,168
------- -------
Total Assets $459,615 $465,305
======== ========
Liabilities
and
Shareholders'
Equity
Current
liabilities
Accounts
payable $95,649 $118,055
Billings in
excess of
costs 3,835 1,421
Compensation
and other
employee
benefits 47,049 34,917
Short-term
debt 17,500 15,750
Other accrued
liabilities 18,473 17,693
Total current
liabilities 182,506 187,836
------- -------
Long-term
debt, net 62,786 67,842
Deferred tax
liability 87,285 89,667
Other non-
current
liabilities 2,307 2,559
Total non-
current
liabilities 152,378 160,068
Total
liabilities 334,884 347,904
------- -------
Commitments
and
contingencies
Shareholders'
Equity
Preferred
stock; $0.01
par value;
10,000,000
shares
authorized;
No shares
issued and
outstanding - -
Common stock;
$0.01 par outstanding
value;
100,000,000
shares
authorized;
10,943,290
and
10,894,924
shares issued
and 109 109
Additional
paid in
capital 64,406 63,910
Retained
earnings 64,586 57,959
Accumulated
other
comprehensive
loss (4,370) (4,577)
------ ------
Total
shareholders'
equity 124,731 117,401
------- -------
Total
Liabilities
and
Shareholders'
Equity $459,615 $465,305
======== ========
VECTRUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended
March 31, April 1,
(In thousands) 2017 2016
------------- ---- ----
Operating activities
Net income $6,668 $6,589
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization
expense 407 605
Loss on disposal of property,
plant, and equipment - 277
Stock-based compensation 1,086 1,713
Amortization of debt issuance
costs 194 228
Changes in assets and
liabilities:
Receivables 7,441 17,709
Other assets 4,202 147
Accounts payable (22,599) (36,832)
Billings in excess of costs 2,415 1,094
Deferred taxes (2,506) (1,103)
Compensation and other employee
benefits 12,059 11,687
Other liabilities 547 (429)
Net cash provided by operating
activities 9,914 1,685
----- -----
Investing activities
Purchases of capital assets (24) (31)
Proceeds from the disposition of
assets - 111
Net cash (used in) provided by
investing activities (24) 80
--- ---
Financing activities
Repayments of long-term debt (3,500) (3,500)
Proceeds from revolver 18,000 59,000
Repayments of revolver (18,000) (59,000)
Proceeds from exercise of stock
options 50 -
Payments of employee withholding
taxes on share-based
compensation (577) (627)
Net cash used in financing
activities (4,027) (4,127)
------ ------
Exchange rate effect on cash 175 989
--- ---
Net change in cash 6,038 (1,373)
Cash-beginning of year 47,651 39,995
Cash-end of period $53,689 $38,622
======= =======
Supplemental Disclosure of Cash
Flow Information:
Interest paid $1,036 $1,408
------ ------
Income taxes paid $161 $2,320
==== ======
SUPPLEMENTAL INFORMATION
Revenue by military branch for the periods presented below was as follows:
Three Months Ended
March 31, April 1,
(In thousands) 2017 2016
-------------
Military branch Revenue % of Total Revenue % of Total
------- ---------- ------- ----------
Army $252,162 87% $263,052 85%
Navy 4,932 2% 4,799 1%
Air Force 32,969 11% 42,831 14%
Total Revenue $290,063 $310,682
======== ========
Three Months Ended
March 31, April 1,
(in thousands) 2017 2016
-------------
Contract type Revenue % of Total Revenue % of Total
------- ---------- ------- ----------
Firm-Fixed-Price $71,806 25% $78,040 25%
Cost-Plus and Cost
Reimbursable (1) 218,257 75% 232,642 75%
Total Revenue $290,063 $310,682
======== ========
(1) Includes time and
material contracts
Three Months Ended
March 31, April 1,
(In thousands) 2017 2016
-------------
Contract Relationship Revenue % of Total Revenue % of Total
------- ---------- ------- ----------
Prime Contractor $285,033 98% $285,644 92%
Sub Contractor 5,030 2% 25,038 8%
Total Revenue $290,063 $310,682
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SOURCE Vectrus, Inc.
