Engility Reports Second Quarter 2015 Results

- Second quarter 2015 revenue of $575 million and adjusted diluted EPS of $0.51

- Adjusted operating margin of 9.1% and adjusted EBITDA margin of 10.2%

- Achieving acquisition synergies ahead of schedule

- Increasing GAAP diluted EPS and adjusted diluted EPS guidance ranges; narrowing revenue and adjusted EBITDA ranges

Aug 06, 2015, 16:05 ET from Engility Holdings, Inc.

CHANTILLY, Va., Aug. 6, 2015 /PRNewswire/ -- Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the second quarter ended June 30, 2015.

Second Quarter 2015 Results

For the second quarter of 2015, the Company reported total revenue of $575 million. GAAP operating income was $38 million and GAAP operating margin was 6.6%. GAAP net income attributable to Engility was $13 million, or $0.35 per diluted share, which includes a non-cash tax benefit of approximately $11 million. Cash flow from operating activities was $17 million, which reflects the impact of $24 million of various acquisition and integration-related payments in the quarter.

Adjusted operating income was $52 million and adjusted operating margin was 9.1%. Adjusted net income attributable to Engility was $19 million, or $0.51 per diluted share. Adjusted EBITDA was $59 million and adjusted EBITDA margin was 10.2%.

Engility's adjusted results for net income, operating margin and EBITDA exclude $4 million of TASC acquisition and integration costs. Adjusted operating margin and adjusted net income also exclude $11 million of amortization of intangible asset expenses associated with the TASC and DRC acquisitions. Information about the Company's use of non-GAAP financial information is provided below under "Non-GAAP Measures."

"Our results for the quarter were solid; profitability exceeded our expectations and our funded order book-to-bill ratio remained healthy," said Tony Smeraglinolo, President and CEO of Engility. "Our TASC integration efforts also are progressing well, as we are realizing cost synergies ahead of schedule and continue to win new business. Our recent win with the U.S. Air Force represents Engility's largest take-away success in our brief history. This win is consistent with our stated strategy of pursing larger competitive opportunities and enabling our customers to realize considerable value from our cost efficiencies and technical expertise. While procurement and contract award delays continue, our proposal activity is strong and the amount of submitted bids awaiting adjudication continues to increase, providing optimism for our growth prospects."

Key Performance Indicators for the Second Quarter of 2015

  • Contract funded orders were $546 million and funded backlog was $909 million.
  • Funded order book-to-bill ratio was 0.95x.
  • Days sales outstanding (DSO), net of advanced payments, was 60 days.

Significant Second Quarter 2015 Awards

  • Awarded a $67 million contract to provide systems engineering and integration for the U.S. Air Force Global Positioning Systems (GPS) Directorate, the agency responsible for ensuring the space-based satellite navigation system is operational. The contract has a two-year base period and four-and-a-half option years that if exercised, total more than $200 million. Under this contract, TASC, an Engility company, will provide a broad range of technical, procurement and engineering assistance to the Air Force Directorate.
  • Awarded a $35 million contract to continue providing radar engineering, software support and logistics services for the Naval Surface Warfare Center - Port Hueneme Division. This award, which is follow-on work to a TASC contract, has a cumulative value of $53 million if all options are exercised.
  • Awarded a $14 million contract by the U.S. Agency for International Development (USAID) to provide specialized technical assistance in Tanzania. Engility will help the Tanzanian government fight illegal wildlife trade and increase tourism and related business activities in the country.
  • Awarded an $8 million contract to provide specialized technical consulting to support USAID's program to build sustainable energy futures for Eastern Europe countries, the Balkans and the Caucasus. Under this contract, Engility will provide technical assistance to help these countries develop and use clean energy technology that will sustain economic growth and reduce poverty by promoting the transition to low-carbon economies. This transition will help reduce greenhouse gas emissions.

Fiscal Year 2015 Guidance

We are updating the fiscal year 2015 financial guidance we issued on May 11, 2015 based on our financial results for the first six months of 2015 and our outlook for the remainder of the year. We are increasing our fiscal year 2015 GAAP diluted EPS and adjusted diluted EPS guidance ranges. We also are increasing the lower-end of our adjusted EBITDA guidance range and narrowing our revenue guidance range. The table below summarizes our fiscal year 2015 guidance and includes approximately 10 months of TASC's expected financial results since the acquisition closed on February 26, 2015.

Current Outlook for Fiscal Year 2015

Prior Outlook for Fiscal Year 2015

Revenue

$2.0 billion - $2.2 billion

$2.0 billion - $2.3 billion

GAAP Diluted EPS (1)

$0.15 - $0.50

($0.05) - $0.45

Adjusted Diluted EPS (1)

$2.05 - $2.50

$1.70 - $2.20

Adjusted EBITDA (1)

$205 million - $220 million

$190 million - $220 million

GAAP operating cash flow

$50 million - $60 million

$50 million - $60 million

(1) 2015 GAAP and adjusted diluted EPS guidance assumes weighted average outstanding shares of approximately 34 million. GAAP diluted EPS assumes an effective tax rate of approximately 25 percent for the last six months of 2015. Adjusted diluted EPS assumes 2015 net cash tax payments of approximately $5 million. Our adjusted diluted EPS and adjusted EBITDA guidance excludes approximately $70 million to $75 million of amortization of acquired intangible assets, and deal and integration costs associated with the TASC and DRC acquisitions.

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, Adjusted EBITDA Margin, Adjusted Income before Income Tax, Adjusted Net Income, and Adjusted Diluted EPS, 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 transaction and integration costs and amortization expenses related to our acquisitions of TASC and DRC, as well as restructuring and legal and settlement costs. 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.

CONFERENCE CALL INFORMATION

Engility will host a conference call at 5 P.M. ET on August 6, 2015, to discuss the financial results for our second quarter 2015.

Listeners may access a webcast of the live conference call from the Investor Relations section of the Company's website at http://www.EngilityCorp.com.  Listeners also may access a slide presentation on the website which summarizes our 2015 second quarter results and our fiscal year 2015 guidance. 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 (866) 300-6036 (domestic) or (412) 455-6216 (international) and entering pass code 82503886.

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 13, 2015 at (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering pass code 82503886.

ABOUT ENGILITY

Engility is a pure-play government services provider that delivers highly skilled personnel wherever, whenever they are needed in a cost-efficient manner. The Company proudly serves customers that span the federal services market including the Department of Defense, the Intelligence community, Space and Federal Civilian agencies. Headquartered in Chantilly, Virginia, Engility is a leading provider of specialized technical consulting, program and business support services, engineering and technology lifecycle support, information technology, modernization and sustainment, supply chain services and logistics management, and training and education for the U.S. Government. To learn more about Engility, please visit www.engilitycorp.com.

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, business plans, as well as the TASC transaction and its expected benefits and the timing of such benefits. 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, 2014, 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.engilitycorp.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:

Eric Ruff

Dave Spille

Engility Holdings, Inc.

Engility Holdings, Inc.

(703) 375-6463

(703) 375-4221

eric.ruff@engilitycorp.com

dave.spille@engilitycorp.com

 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 2015

June 30, 2014

Change

June 30, 2015

June 30, 2014

Change

Revenue

$

575,495

$

363,690

$

211,805

$

978,142

$

702,514

$

275,628

Costs and expenses

Cost of revenue

486,635

311,686

174,949

830,100

604,075

226,025

Selling, general and administrative expenses

51,036

28,892

22,144

109,915

55,642

54,273

Total costs and expenses

537,671

340,578

197,093

940,015

659,717

280,298

Operating income

37,824

23,112

14,712

38,127

42,797

(4,670)

Interest expense, net

30,734

3,139

27,595

49,328

6,196

43,132

Other income (expenses), net

56

47

9

29

47

(18)

Income (loss) before income taxes

7,146

20,020

(12,874)

(11,172)

36,648

(47,820)

Provision (benefit) for income taxes

(8,324)

7,528

(15,852)

(14,001)

14,339

(28,340)

Net income

15,470

12,492

2,978

2,829

22,309

(19,480)

Less: Net income attributable to non-controlling interest

2,374

1,587

787

3,100

2,533

567

Net income (loss) attributable to Engility

$

13,096

$

10,905

$

2,191

$

(271)

$

19,776

$

(20,047)

Earnings (loss) per share attributable to Engility

Basic

$

0.36

$

0.64

$

(0.28)

$

(0.01)

$

1.16

$

(1.17)

Diluted

$

0.35

$

0.61

$

(0.26)

$

(0.01)

$

1.10

$

(1.11)

Weighted average number of shares outstanding

Basic

36,577

17,094

30,478

17,044

Diluted

37,009

18,023

30,478

17,959

 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)

As of

June 30, 2015

December 31, 2014

Assets:

Current assets:

Cash and cash equivalents

$

36,686

$

7,123

Receivables, net

422,202

286,403

Prepaid and deferred income taxes, current, net

38,313

296

Other current assets

35,852

27,488

Total current assets

533,053

321,310

Property, plant and equipment, net

37,379

19,839

Goodwill

1,382,140

644,554

Identifiable intangible assets, net

464,441

123,549

Deferred tax assets

172,706

4,793

Other assets

25,536

8,591

Total assets

$

2,615,255

$

1,122,636

Liabilities and Equity:

Current liabilities:

Current portion of long-term debt

$

8,447

$

13,750

Accounts payable, trade

66,750

49,121

Accrued employment costs

108,847

47,824

Accrued expenses

92,619

71,582

Advance payments and billings in excess of costs incurred

39,617

22,300

Deferred income taxes, current and income tax liabilities

267

9,810

Other current liabilities

43,269

21,098

Total current liabilities

359,816

235,485

Long-term debt

1,175,972

279,500

Income tax liabilities

69,796

79,713

Other liabilities

71,171

51,185

Total liabilities

1,676,755

645,883

Equity:

Preferred stock, par value $0.01 per share, 25,000 shares authorized, none issued or outstanding as of June 30, 2015 and December 31, 2014

Common stock, par value $0.01 per share, 175,000 shares authorized, 36,756 and 17,592 shares issued and outstanding as of June 30, 2015 and December 31, 2014, respectively

368

176

Additional paid in capital

1,230,659

770,764

Accumulated deficit

(295,814)

(295,543)

Accumulated other comprehensive income

(8,929)

(9,018)

Non-controlling interest

12,216

10,374

Total equity

938,500

476,753

Total liabilities and equity

$

2,615,255

$

1,122,636

 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Six Months Ended

June 30, 2015

June 30, 2014

Operating activities:

Net income

$

2,829

$

22,309

Share-based compensation

7,679

4,884

Depreciation and amortization

25,493

9,997

Amortization of bank debt fees

8,136

840

Deferred income taxes

13,965

(3,960)

Changes in operating assets and liabilities, excluding acquired amounts:

Receivables

13,241

26,811

Other assets

(3,977)

9,198

Accounts payable, trade

(19,964)

(8,987)

Accrued employment costs

(31,373)

(1,241)

Accrued expenses

(12,350)

(4,185)

Advance payments and billings in excess of costs incurred

(687)

1,264

Other liabilities

(33,219)

(13,497)

Net cash (used in) provided by operating activities

(30,227)

43,433

Investing activities:

Acquisitions, net of cash acquired

25,478

(207,250)

Capital expenditures

(2,550)

(1,637)

Net cash provided by (used in) investing activities

22,928

(208,887)

Financing activities:

Gross borrowings from issuance of long-term debt

585,000

75,000

Repayment of long-term debt

(339,445)

(6,875)

Gross borrowings from revolving credit facility

138,000

288,000

Repayments of revolving credit facility

(96,000)

(193,500)

Debt issuance costs

(42,425)

(1,106)

Equity issuance costs

(2,430)

Proceeds from share-based payment arrangements

279

1,309

Payment of employee withholding taxes on share-based compensation

(6,861)

(2,334)

Excess tax deduction on share-based compensation

5,103

1,642

Dividends paid

(203,101)

Distributions to non-controlling interest member

(1,258)

(2,994)

Net cash provided by financing activities

36,862

159,142

Net change in cash and cash equivalents

29,563

(6,312)

Cash and cash equivalents, beginning of period

7,123

29,003

Cash and cash equivalents, end of period

$

36,686

$

22,691

 

 

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 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Operating income

$

37,824

$

23,112

$

38,127

$

42,797

Adjustments

Acquisition and integration-related expenses excluding amortization

3,708

4,480

27,593

6,623

Acquisition-related intangible amortization

10,794

1,683

15,172

2,805

Legal and settlement costs

230

154

230

14,502

6,393

42,919

9,658

Adjusted operating income

$

52,326

$

29,505

$

81,046

$

52,455

Operating margin

6.6

%

6.4

%

3.9

%

6.1

%

Adjusted operating margin

9.1

%

8.1

%

8.3

%

7.5

%

 

 

ENGILITY HOLDINGS, INC.

Adjusted Earnings Per Share

(in thousands, except per share data)

Three Months Ended

Six Months Ended

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

GAAP net income (loss) attributable to Engility

$

13,096

$

10,905

$

(271)

$

19,776

Net income attributable to non-controlling interest

2,374

1,587

3,100

2,533

GAAP net income

15,470

12,492

2,829

22,309

Provision (benefit) for income taxes

(8,324)

7,528

(14,001)

14,339

Income tax rate

(116.5)%

37.6

%

125.3

%

39.1

%

GAAP income (loss) before taxes

7,146

20,020

(11,172)

36,648

Adjustments

Acquisition and integration-related expenses excluding amortization

3,708

4,480

27,593

6,623

Acquisition-related intangible amortization

10,794

1,683

15,172

2,805

Legal and settlement costs

230

154

230

Bank fees previously capitalized and included in interest expense

4,602

Total adjustments

14,502

6,393

47,521

9,658

Adjusted income before income tax

21,648

26,413

36,349

46,306

Adjusted provision for income taxes

9,932

18,046

Cash paid for income taxes

358

4,248

Adjusted income tax rate

1.7

%

37.6

%

11.7

%

39.0

%

Adjusted net income

21,290

16,481

32,101

28,260

Less: Net income attributable to non-controlling interest

2,374

1,587

3,100

2,533

Adjusted net income attributable to Engility

$

18,916

$

14,894

$

29,001

$

25,727

Adjusted diluted earnings per share attributable to Engility

$

0.51

$

0.83

$

0.93

$

1.43

GAAP diluted earnings (loss) per share attributable to Engility

$

0.35

$

0.61

$

(0.01)

$

1.10

Diluted weighted average number of shares outstanding - Adjusted

37,009

18,023

31,030

17,959

Diluted weighted average number of shares outstanding - GAAP

37,009

18,023

30,478

17,959

 

 

ENGILITY HOLDINGS, INC.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA

(dollars in thousands)

Three Months Ended

Six Months Ended

June 30, 2015

June 30, 2014

June 30, 2015

June 30, 2014

Net income (loss)

$

15,470

$

12,492

$

2,829

$

22,309

Interest, taxes, and depreciation and amortization

Interest expense

30,734

3,139

49,328

6,196

Provision (benefit) for income taxes

(8,324)

7,528

(14,001)

14,339

Depreciation and amortization

17,036

5,354

25,493

9,997

EBITDA

54,916

28,513

63,649

52,841

Adjustments to EBITDA

Acquisition and integration-related expenses excluding amortization

3,708

4,480

27,593

6,623

Legal and settlement costs

230

154

230

3,708

4,710

27,747

6,853

Adjusted EBITDA

$

58,624

$

33,223

$

91,396

$

59,694

EBITDA margin

9.5

%

7.8

%

6.5

%

7.5

%

Adjusted EBITDA margin

10.2

%

9.1

%

9.3

%

8.5

%

 

 

SOURCE Engility Holdings, Inc.



RELATED LINKS

http://www.engilitycorp.com