Engility Reports Second Quarter 2018 Results
CHANTILLY, Va., Aug. 1, 2018 /PRNewswire/ -- Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the second quarter ended June 29, 2018.
CEO Commentary
"Our second quarter revenue, profitability and cash flow results exceeded our expectations," said Lynn Dugle, Chairman, President and CEO of Engility. "We posted solid results across our business, and our success is being driven by our ability to effectively reposition Engility into higher-end markets, deliver customer-focused solutions, and upgrade our talent and performance levels. We have had a strong start to the year and we continue to target organic revenue growth in 2019."
Second Quarter 2018 Results
Total revenue for the second quarter of 2018 was $489 million. GAAP operating income was $36 million and GAAP operating margin was 7.3%. GAAP net income attributable to Engility was $12 million, or $0.32 per diluted share, after recording $12 million of income taxes and non-core operating costs, which reduced net income by $0.32 per diluted share. Cash taxes paid in the second quarter of 2018 were $0.2 million. EBITDA was $46 million and EBITDA margin was 9.5%.
Adjusted operating income was $43 million and adjusted operating margin was 8.8%. Adjusted EBITDA was $47 million and adjusted EBITDA margin was 9.7%.
Information about the Company's use of non-GAAP financial information is provided below under "Non-GAAP Measures" and in the non-GAAP reconciliation tables included herein.
Key Performance Indicators
-- Book-to-bill ratio for the second quarter of 2018 was 1.0x on net
bookings of $487 million. Trailing twelve-month book-to-bill ratio was
0.9x on net bookings of $1.65 billion.
-- Total estimated contract value at the end of the second quarter of 2018
was $3.4 billion, consistent with the value at the end of the first
quarter of 2018.
-- Days sales outstanding, net of advanced payments, were 57 days at the
end of the second quarter of 2018, compared to 58 days at the end of the
second quarter of 2017.
-- Cash flow generated from operating activities for the second quarter of
2018 was $47 million, compared to $37 million for the second quarter of
2017.
-- During the second quarter of 2018, the company made total debt payments
of $25 million. Total debt payments for the first half of 2018 were $45
million.
Key Second Quarter 2018 Contract Awards
-- Awarded a $90 million SeaPort-e(®) task order to provide software
engineering and production support to the U.S. Navy's tactical afloat
and submarine local area networks. The Tactical Network Technical and
Production Support task order was awarded by Space and Naval Warfare
Systems Center Atlantic.
-- Awarded a $41 million SeaPort-e task order to provide on-site command
and control expertise, training and integrated logistics support to the
U.S. Marine Corps' core command and control programs.
-- Won a prime position on the Africa Contingency Operations Training and
Assistance program. Under this multi-award Indefinite Delivery
Indefinite Quantity vehicle with a ceiling value of $600 million,
Engility will help train and equip African partner nations in their
internationally mandated peacekeeping efforts.
Fiscal Year 2018 Guidance
The company is reiterating the fiscal year 2018 guidance it issued on May 2, 2018, based on Engility's financial results for the first half 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 (2) $160 million - $170 million
Operating Cash Flow $100 million - $110 million
------------------- --------------------------
(1) 2018 GAAP diluted EPS guidance
includes approximately $4 million
of acquisition, restructuring and
legal and settlement expenses, $2
million of debt refinancing-
related expenses, and $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.
(2) 2018 EBITDA guidance includes
approximately $4 million of
acquisition, restructuring and
legal and settlement expenses.
Conference Call Information
Engility will host a conference call today, August 1, 2018, at 8:30 a.m. ET to discuss the financial results for its second quarter 2018.
Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at www.engility.com. Listeners also may access a slide presentation on the website, which summarizes the company's second 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 passcode 3989289.
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 August 8, 2018 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering passcode 3989289.
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 (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: Investor Relations:
Scott Fazekas Dave Spille
Engility Holdings, Inc. Engility Holdings, Inc.
(703) 984-5068 (703) 984-6120
Scott.Fazekas@engility.com Dave.Spille@engility.com
-------------------------- ------------------------
ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended Six Months Ended
------------------ ----------------
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017
Revenue $488,514 $494,671 $965,074 $979,886
Costs and expenses
Cost of revenue 413,166 422,999 825,188 838,022
Selling, general and administrative
expenses 39,811 37,711 76,886 74,217
Total costs and expenses 452,977 460,710 902,074 912,239
------- ------- ------- -------
Operating income 35,537 33,961 63,000 67,647
Interest expense, net 17,161 18,529 36,539 39,450
Other income, net (108) (66) (250) (59)
---- --- ---- ---
Income before provision for income
taxes 18,484 15,498 26,711 28,256
Provision for income taxes 4,728 6,050 6,367 11,060
----- ----- ----- ------
Net income 13,756 9,448 20,344 17,196
Less: Net income attributable to non-
controlling interest 1,829 1,817 1,928 2,632
----- ----- ----- -----
Net income attributable to Engility $11,927 $7,631 $18,416 $14,564
======= ====== ======= =======
Earnings per share attributable to
Engility
Basic $0.32 $0.21 $0.50 $0.40
Diluted $0.32 $0.20 $0.49 $0.39
Weighted average number of shares
outstanding
Basic 36,964 36,808 36,909 36,817
Diluted 37,611 37,290 37,640 37,332
ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(in thousands)
June 29, December 31,
2018 2017
Assets:
Current assets:
Cash and cash equivalents $39,523 $41,890
Accounts receivables, net 83,910 108,100
Unbilled receivables 250,725 222,994
Other current assets 20,265 19,681
------ ------
Total current assets 394,423 392,665
Property, plant and equipment, net 45,356 44,006
Goodwill 1,071,371 1,071,371
Identifiable intangible assets, net 345,167 361,410
Deferred tax assets 142,046 150,535
Other assets 5,521 6,021
----- -----
Total assets $2,003,884 $2,026,008
========== ==========
Liabilities and Equity:
Current liabilities:
Current portion of long-term debt $25,260 $26,947
Accounts payable, trade 46,658 52,954
Accrued employment costs 81,074 77,545
Accrued expenses 80,490 74,856
Advance payments and billings in excess
of costs incurred 26,135 30,380
Income tax liabilities 253 548
Other current liabilities 23,006 26,688
------ ------
Total current liabilities 282,876 289,918
Long-term debt 899,662 938,687
Income tax liabilities 60,934 62,219
Other liabilities 59,738 59,079
------ ------
Total liabilities 1,303,210 1,349,903
--------- ---------
Equity:
Preferred stock, par value $0.01 per
share, 25,000 shares authorized, - -
none issued or outstanding as of June
29, 2018 or December 31, 2017
Common stock, par value $0.01 per share,
175,000 shares authorized, 370 368
36,968 and 36,822 shares issued and
outstanding as of
June 29, 2018 and December 31, 2017,
respectively
Additional paid-in capital 1,249,123 1,244,940
Accumulated deficit (556,433) (576,019)
Accumulated other comprehensive loss (2,254) (3,805)
------ ------
Total equity attributable to Engility 690,806 665,484
Non-controlling interest 9,868 10,621
----- ------
Total equity 700,674 676,105
------- -------
Total liabilities and equity $2,003,884 $2,026,008
========== ==========
ENGILITY HOLDINGS, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Six Months Ended
----------------
June 29, 2018 June 30, 2017
Operating activities:
Net income $20,344 $17,196
Share-based compensation 6,210 3,736
Depreciation and amortization 21,740 21,971
Loss (gain) on sale of property,
plant and equipment 18 (497)
Loss on extinguishment of debt 253 -
Amortization of bank debt fees 4,155 4,294
Deferred income taxes 7,423 11,841
Excess tax deduction on share-
based compensation 108 (218)
Changes in operating assets and
liabilities:
Receivables 1,942 (17,665)
Other assets (5,120) 5,948
Accounts payable, trade (7,143) 10,134
Accrued employment costs 3,529 (18,826)
Accrued expenses 3,868 (1,771)
Advance payments and billings in
excess of costs incurred (4,245) 555
Other liabilities (443) (12,066)
---- -------
Net cash provided by operating
activities 52,639 24,632
Investing activities:
Proceeds (payments) 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 (3,277) (2,575)
------ ------
Net cash provided by (used in)
investing activities (5,177) 23,332
Financing activities:
Repayment of long-term debt (45,076) (59,373)
Gross borrowings from revolving
credit facility 123,000 224,000
Gross repayments of revolving
credit facility (123,000) (224,000)
Debt issuance costs (45) -
Payment of employee withholding
taxes on share-based
compensation (2,027) (1,260)
Dividends paid - (407)
Distributions to non-controlling
interest member (2,681) (4,638)
------ ------
Net cash used in financing
activities (49,829) (65,678)
-------
Net change in cash and cash
equivalents (2,367) (17,714)
Cash and cash equivalents,
beginning of period 41,890 48,236
------ ------
Cash and cash equivalents, end of
period $39,523 $30,522
======= =======
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, and refinancing-related expenses. 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.
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 Six Months Ended
------------------ ----------------
June 29, 2018 June 30, 2017 June 29, 2018 June 30, 2017
Net income $13,756 $9,448 $20,344 $17,196
Provision for income
taxes (1) 4,728 6,050 6,367 11,060
Other expenses (income),
net (108) (66) (250) (59)
Interest expense, net (2) 17,161 18,529 36,539 39,450
------ ------ ------ ------
Operating income 35,537 33,961 63,000 67,647
------ ------ ------ ------
Adjustments
Acquisition,
restructuring and legal
and 1,021 2,342 2,453 3,745
settlement expenses,
excluding amortization
Acquisition-related
intangible amortization 6,335 6,334 12,669 12,669
Loss (gain) on sale of
business and property, 15 73 18 (497)
plant and equipment, net
Total adjustments 7,371 8,749 15,140 15,917
----- ----- ------ ------
Adjusted operating income $42,908 $42,710 $78,140 $83,564
======= ======= ======= =======
Operating margin 7.3% 6.9% 6.5% 6.9%
Adjusted operating margin 8.8% 8.6% 8.1% 8.5%
(1) Cash paid for income taxes for the
three months ended June 29, 2018 and
June 30, 2017 was $231 and $185,
respectively, and for the six months
ended June 29, 2018 and June 30,
2017 was $482 and $388,
respectively.
(2) Interest expense, net, included
refinancing-related expenses of
$1,918 and $1,692 for the six months
ended June 29, 2018 and June 30,
2017, respectively.
Supplemental:
For the three months ended June 29,
2018 and June 30, 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 $12
million and $15 million,
respectively. For the six months
ended June 29, 2018 and June 30,
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 $22 million and $27 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 Six Months Ended
------------------ ----------------
June 29, 2018 June 30, 2017 June 29, 2018 June 30,
2017
Net income $13,756 $9,448 $20,344 $17,196
Interest, taxes, and depreciation
and
amortization
Interest expense 17,161 18,529 36,539 39,450
Provision for income taxes 4,728 6,050 6,367 11,060
Depreciation and amortization 10,603 11,110 21,740 21,971
------ ------ ------ ------
EBITDA 46,248 45,137 84,990 89,677
------ ------ ------ ------
Adjustments to EBITDA
Acquisition, restructuring and
legal and 1,021 2,342 2,453 3,745
settlement expenses, excluding
amortization
Loss (gain) on sale of business
and property, 15 73 18 (497)
plant and equipment, net
Adjusted EBITDA $47,284 $47,552 $87,461 $92,925
======= ======= ======= =======
EBITDA Margin 9.5% 9.1% 8.8% 9.2%
Adjusted EBITDA Margin 9.7% 9.6% 9.1% 9.5%
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SOURCE Engility Holdings, Inc.
