U.S. Markets open in 8 hrs 38 mins

Vectrus Announces Strong First Quarter 2020 Results

- Q1 revenue +8% Y/Y to $352 million; Organic revenue(1) +4% Y/Y

- Q1 diluted EPS of $0.74; Adjusted diluted EPS(1) of $0.75, +9% Y/Y

- Won position on $6.4 billion AFCAP V IDIQ contract

- Backlog grew 48% sequentially to $4.1 billion providing visibility in 2020 and beyond

- Reiterating 2020 guidance, actively monitoring COVID-19 response and LOGCAP V phase in schedule

COLORADO SPRINGS, Colo., May 12, 2020 /PRNewswire/ -- Vectrus, Inc. (NYSE:VEC) announced first quarter 2020 financial results for the quarter ended April 3, 2020.

Vectrus Logo.

"Vectrus provides critical infrastructure support services globally for a variety of national security missions. This core competency combined with our backlog of long-term contracts with the U.S. government creates operating and financial resiliency, with predictable free cash flow, that is foundational to our business model," said Chuck Prow, president and chief executive officer. "Our first quarter revenue grew 8% with minimal impact from COVID-19, and adjusted EBITDA margin expanded year-over-year. Additionally, our growth focused campaigns continue to drive results as we recorded wins with the Army, Navy and Air Force, including a position on the AFCAP V $6.4 billion IDIQ contract vehicle. Our response to the COVID-19 pandemic has been measured, deliberate and client centric, keeping our clients, employees and partners safe while executing consistently on our programs. We are proud of the contributions our teams are making to support our men and women on the front lines at such a difficult time."

First Quarter 2020 Results

First quarter 2020 revenue of $351.7 million increased $25.8 million or 8% compared to first quarter 2019. The company saw increased revenue across all geographic regions with revenue growth of 15% in Europe, 14% in the United States, and 5% in the Middle East. Organic revenue growth was 4% in the first quarter 2020.

For the first quarter 2020, operating income was $12.5 million or 3.5% margin. EBITDA1 was $14.5 million or 4.1% margin for the first quarter 2020, compared to $11.8 million or 3.6% margin in the first quarter 2019. Adjusted EBITDA1 was $14.6 million or 4.2% margin for the first quarter 2020, compared to $12.8 million or 3.9% margin in the first quarter 2019.

First quarter 2020 diluted EPS was $0.74 compared to $0.62 in the first quarter 2019. Adjusted diluted EPS1 for the first quarter 2020 was $0.75. The company's effective tax rate in the first quarter 2020 was 19.6%, compared to 19.8% in the first quarter 2019. On an adjusted basis diluted EPS grew 8.7% in the first quarter 2020.

"I'm pleased to announce that we were able to post strong top and bottom-line growth despite COVID-19, which reinforces the resiliency of our business," said Susan Lynch, senior vice president and chief financial officer. "We estimate that COVID-19 impacted first quarter 2020 revenue and earnings per share by $2.2 million and $0.02, respectively."

Net cash provided by operating activities for the quarter ended April 3, 2020 was $1.1 million, compared to net cash used by operating activities of $6.4 million in the first quarter of 2019. Days sales outstanding (DSO) was 66 days in the first quarter of 2020.

Net debt at April 3, 2020 was $37.8 million, essentially unchanged from 2019 year-end, equating to a 0.5x net debt to consolidated EBITDA1 ratio. Total debt at April 3, 2020 was $184.0 million, up $110.0 million from $74.0 million at March 29, 2019. Cash at quarter-end was $146.2 million. At the onset of the COVID-19 pandemic, the company preemptively drew $115 million on its revolver to mitigate any liquidity issues that might have arisen as a result of the pandemic. The company has subsequently repaid approximately $60 million of borrowings under its revolver. As of April 3, 2020, total consolidated indebtedness to consolidated EBITDA1 (total leverage ratio) was 2.6x.

Total backlog in the quarter ended April 3, 2020 was $4.1 billion and funded backlog was $1.1 billion.  The trailing twelve-month book-to-bill was 1.5x as of April 3, 2020.

"Backlog grew 48% sequentially to a record $4.1 billion and drove a 1.5x trailing twelve-month book-to-bill ratio," said Lynch. "The size of our backlog is an attractive attribute of our business, representing 2.7 times the midpoint of our 2020 full year revenue guidance, providing visibility into the remainder of the year and beyond."

Reiterating 2020 Guidance

Vectrus is reiterating its full-year 2020 guidance while actively monitoring COVID-19 response and LOGCAP V phase in schedule.

There was minimal impact to revenue and operating income in the first quarter of 2020 due to COVID-19. The pandemic is estimated to have approximately a $20-25 million impact on revenue and a corresponding impact on operating income in the second quarter of 2020. The company continues to work with its clients with regard to its COVID-19 response and LOGCAP V phase in schedule and is maintaining its current guidance range.

In addition, guidance assumes capital expenditures of $7.0 million, depreciation and amortization of $8.4 million, mandatory debt payments of $6.5 million, interest expense of $5.6 million, tax rate of 23 percent, and weighted average diluted shares outstanding of 11.8 million at December 31, 2020.

$ millions, except for EBITDA margins and per share amounts

2020 Guidance

2020
Mid

Revenue

$1,475

to

$1,525

$1,500

EBITDA Margin*

4.6%

to

4.8%

4.7%

Diluted Earnings Per Share*

$3.48

to

$3.81

$3.67

Net Cash Provided by Operating Activities

$45.0

to

$55.0

$50.0


* EBITDA margin, Diluted Earnings Per Share, and Net Cash Provided by Operating Activities excludes any potential unusual or special one-time items

The Company notes that forward-looking statements 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.

First Quarter 2020 Conference Call

Management will conduct a conference call with analysts and investors at 4:30 p.m. ET on Tuesday, May 12, 2020. U.S.-based participants may dial in to the conference call at 877-407-0792, while international participants may dial 201-689-8263. For all other listeners, a live webcast of the conference call will be available on the Vectrus Investor Relations website at http://investors.vectrus.com. An accompanying slide presentation will also be available on the Vectrus Investor Relations website.

A replay of the conference call will be posted on the Vectrus website shortly after completion of the call and will be available for one year. A telephonic replay will also be available through May 26, 2020 at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13703070.

Footnotes:


1 See "Key Performance Indicators and Non-GAAP Financial Measures" for reconciliation.

About Vectrus

Vectrus is a leading provider of global service solutions with a history in the services market that dates back more than 70 years. The company provides facility and base operations; supply chain and logistics services; information technology mission support; and engineering and digital technology services primarily 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 its clients' mission success. Vectrus is headquartered in Colorado Springs, Colo., and includes about 7,200 employees spanning 148 locations in 26 countries and territories across four continents. In 2019, Vectrus generated sales of $1.4 billion. To learn about career opportunities at Vectrus, visit www.vectrus.com/careers. For more information, visit the company's website at www.vectrus.com or connect with Vectrus on Facebook, Twitter, and LinkedIn.

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, all of the statements and items listed in the table in "2020 Guidance" above and other assumptions contained therein for purposes of such guidance, other statements about our 2020 performance outlook, five-year growth plan, revenue, DSO's, contract opportunities, the potential impact of COVID-19, 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," "goal" 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.

These forward-looking statements are not guarantees of future performance, conditions or results, and involve a number of known and unknown risks, uncertainties, assumptions and other important factors, many of which are outside our management's control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. 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.

CONTACT:

Vectrus
Mike Smith, CFA
719-637-5773
michael.smith@vectrus.com

 

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)




Three Months Ended



April 3,


March 29,

(In thousands, except per share data)


2020


2019

Revenue


$

351,734



$

325,906


Cost of revenue


319,693



295,596


Selling, general, and administrative expenses


19,558



19,919


Operating income


12,483



10,391


Interest expense, net


(1,703)



(1,575)


Income from operations before income taxes


10,780



8,816


Income tax expense


2,112



1,742


Net income


$

8,668



$

7,074







Earnings per share





Basic


$

0.75



$

0.63


Diluted


$

0.74



$

0.62


Weighted average common shares outstanding - basic


11,545



11,292


Weighted average common shares outstanding - diluted


11,745



11,399


 

VECTRUS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS




April 3,


December 31,

(In thousands, except share information)


2020


2019

Assets


(unaudited)



Current assets





Cash


$

146,172



$

35,318


Receivables


263,601



269,144


Costs incurred in excess of billings





Other current assets


21,212



16,154


Total current assets


430,985



320,616


Property, plant, and equipment, net


18,540



18,844


Goodwill


261,983



261,983


Intangible assets, net


13,911



14,926


Right-of-use assets


12,390



14,654


Other non-current assets


5,789



5,366


Total non-current assets


312,613



315,773


Total Assets


$

743,598



$

636,389


Liabilities and Shareholders' Equity





Current liabilities





Accounts payable


$

147,364



$

148,015


Compensation and other employee benefits


42,131



53,155


Short-term debt


122,000



6,500


Other accrued liabilities


39,331



37,409


Total current liabilities


350,826



245,079


Long-term debt, net


61,139



63,041


Deferred tax liability


47,294



49,407


Other non-current liabilities


20,096



19,997


Total non-current liabilities


128,529



132,445


Total liabilities


479,355



377,524


Shareholders' Equity





Preferred stock; $0.01 par value; 10,000,000 shares
authorized; No shares issued and outstanding





Common stock; $0.01 par value; 100,000,000
shares authorized; 11,587,719 and 11,523,691
shares issued and outstanding as of April 3, 2020
and December 31, 2019, respectively


116



115


Additional paid in capital


78,690



78,757


Retained earnings


193,743



185,075


Parent company equity





Accumulated other comprehensive loss


(8,306)



(5,082)


Total shareholders' equity


264,243



258,865


Total Liabilities and Shareholders' Equity


$

743,598



$

636,389


 

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Three Months Ended



April 3,


March 29,

(In thousands)


2020


2019

Operating activities





Net income


$

8,668



$

7,074


Adjustments to reconcile net income to net cash provided by (used in) operating activities:





Depreciation expense


996



788


Amortization of intangible assets


1,015



571


Loss on disposal of property, plant, and equipment





Stock-based compensation


2,367



1,462


Amortization of debt issuance costs


99



99


Changes in assets and liabilities:





Receivables


3,942



(12,650)


Other assets


(5,715)



94


Accounts payable


(162)



(11,366)


Deferred taxes


(1,522)



(1,090)


Compensation and other employee benefits


(9,733)



6,724


Other liabilities


1,181



1,909


Net cash provided by (used in) operating activities


1,136



(6,386)


Investing activities





Purchases of capital assets and intangibles


(917)



(9,886)


Net cash used in investing activities


(917)



(9,886)


Financing activities





Proceeds from issuance of long-term debt





Repayments of long-term debt


(1,500)



(1,000)


Proceeds from revolver


144,000



48,000


Repayments of revolver


(29,000)



(48,000)


Proceeds from exercise of stock options


1



602


Payments of employee withholding taxes on share-based compensation


(1,787)



(683)


Net cash provided by (used in) financing activities


111,713



(1,081)


Exchange rate effect on cash


(1,080)



(618)


Net change in cash


110,853



(17,970)


Cash-beginning of year


35,318



66,145


Cash-end of period


$

146,171



$

48,174


Supplemental disclosure of cash flow information:





Interest paid


$

1,469



$

988


Income taxes paid (refunded)


$

36



$

(296)


Non-cash investing activities:





Purchase of capital assets on account


$

(606)



$

(966)


Purchase of capital assets on account


$



$

1,128


Key Performance Indicators and Non-GAAP Measures

The primary financial performance measures we use to manage our business and monitor results of operations are revenue trends and operating income trends. Management believes that these financial performance measures are the primary drivers for our earnings and net cash from operating activities. Management evaluates its contracts and business performance by focusing on revenue, operating income and operating margin. Operating income represents revenue less both cost of revenue and selling, general and administrative (SG&A) expenses. Cost of revenue consists of labor, subcontracting costs, materials, and an allocation of indirect costs, which includes service center transaction costs. SG&A expenses consist of indirect labor costs (including wages and salaries for executives and administrative personnel), bid and proposal expenses and other general and administrative expenses not allocated to cost of revenue. We define operating margin as operating income divided by revenue.

We manage the nature and amount of costs at the program level, which forms the basis for estimating our total costs and profitability. This is consistent with our approach for managing our business, which begins with management's assessing the bidding opportunity for each contract and then managing contract profitability throughout the performance period.

In addition to the key performance measures discussed above, we consider adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, and organic revenue to be useful to management and investors in evaluating our operating performance, and to provide a tool for evaluating our ongoing operations. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. We provide this information to our investors in our earnings releases, presentations and other disclosures.

Adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, and organic revenue, however, are not measures of financial performance under GAAP and should not be considered a substitute for operating income, operating margin, net income and diluted earnings per share as determined in accordance with GAAP.  Definitions and reconciliations of these items are provided below.

  • Adjusted operating income is defined as operating income, adjusted to exclude items that may include, but are not limited to significant charges or credits that impact current results but are not related to our ongoing operations and unusual and infrequent non-operating items, M&A transaction and LOGCAP V pre-operational legal costs that impact current results but are not related to our ongoing operations.
  • Adjusted operating margin is defined as adjusted operating income divided by revenue.
  • Adjusted net income is defined as net income, adjusted to exclude items that may include, but are not limited to, significant charges or credits that impact current results but are not related to our ongoing operations and unusual and infrequent non-operating items.
  • Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted average diluted common shares outstanding.
  • EBITDA is defined as operating income, adjusted to exclude depreciation and amortization.
  • Adjusted EBITDA is defined as EBITDA, adjusted to exclude items that may include, but are not limited to significant charges or credits that impact current results but are not related to our ongoing operations and unusual and infrequent non-operating items, M&A transaction and LOGCAP V pre-operational legal costs that impact current results but are not related to our ongoing operations.
  • EBITDA margin is defined as EBITDA divided by revenue.
  • Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue.
  • Organic revenue is defined as Revenue, adjusted to exclude revenue from acquired companies.

 

Adjusted Net Income,
Adjusted Diluted Earnings
Per Share (Non-GAAP Measures)









(In thousands, except per share data)


Three

Months

Ended

April 3,

2020 As

Reported


M&A

Related

Costs1


LOGCAP V

Pre-

Operational

Legal

Costs2


Three

Months

Ended

April 3,

2020 As

Reported –

Adjusted










Revenue


$

351,734



$





$

351,734











Operating income


$

12,483





$

141



$

12,624


Operating margin


3.5

%






3.6

%










Interest expense, net


$

(1,703)



$



$



$

(1,703)











Income from operations before income taxes


$

10,780



$



$

141



$

10,921











Income tax expense


$

2,112



$



$

28



$

2,140


Income tax rate


19.6

%






19.6

%










Net income


$

8,668



$



$

113



$

8,781











Weighted average common shares outstanding, diluted


11,745







11,745











Diluted earnings per share


$

0.74







$

0.75











EBITDA (Non-GAAP Measures)









(in thousands)


Three

Months

Ended

April 3,

2020 As

Reported


M&A

Related

Costs1


LOGCAP V

Pre-

Operational

Legal

Costs2


Three

Months

Ended

April 3,

2020 As

Reported –

Adjusted

Operating Income


$

12,483





$

141



$

12,624











Add:









Depreciation and amortization


$

2,011



$



$



$

2,011











EBITDA


$

14,494



$



$

141



$

14,635


EBITDA Margin


4.1

%






4.2

%










1 2020 Costs related to M&A and Integration of acquisitions

2 2020 LOGCAP V Pre-Operational legal cost


Adjusted Net Income,
Adjusted Diluted Earnings Per
Share (Non-GAAP Measures)









(In thousands, except per share data)


Three

Months

Ended

March 29,

2019 As

Reported


M&A

Related

Costs1


LOGCAP V

Pre-

Operational

Legal

Costs2


Three

Months

Ended

March 28,

2019 As

Reported –

Adjusted










Revenue


$

325,906







$

325,906











Operating income


$

10,391



$

1,045



$



$

11,436


Operating margin


3.2

%






3.5

%










Interest expense, net


$

(1,575)



$



$



$

(1,575)











Income from operations before income taxes


$

8,816



$

1,045



$



$

9,861











Income tax expense


$

1,742



$

207



$



$

1,949


Income tax rate


19.8

%






19.8

%










Net income


$

7,074



$

838



$



$

7,912











Weighted average common shares outstanding, diluted


11,399







11,399











Diluted earnings per share


$

0.62







$

0.69











EBITDA (Non-GAAP Measures)









(in thousands)


Three

Months

Ended

March 29,

2019 As

Reported


M&A

Related

Costs1


LOGCAP V

Pre-

Operational

Legal

Costs2


Three

Months

Ended

March 29,

2019 As

Reported –

Adjusted

Operating Income


$

10,391



$

1,045



$



$

11,436











Add:









Depreciation and amortization


$

1,359



$



$



$

1,359











EBITDA


$

11,750



$

1,045



$



$

12,795


EBITDA Margin


3.6

%






3.9

%










1 2020 Costs related to M&A and Integration of acquisitions

2 2020 LOGCAP V Pre-Operational legal cost

 

(In thousands)


Three Months

Ended April 3,

2020 As

Reported


Three Months

Ended April 3,

2020 Advantor


Three Months

Ended April 3,

2020 As

Reported –

Organic








Revenue


$

351,734



$

11,186



$

340,548









(In thousands)


Three Months

Ended March

29, 2019 As

Reported


Three Months

Ended March

29, 2019

Advantor


Three Months

Ended March 29,

2019 As

Reported –

Organic








Revenue


$

325,906



$



$

325,906









Organic Revenue $ Increase






$

14,642


Organic Revenue % Increase






4.5

%

SUPPLEMENTAL INFORMATION

Revenue by client branch, contract type, contract relationship, and geographic region for the periods presented below was as follows:

Revenue by Client











Three Months Ended

(In thousands)


April 3, 2020


% of

Total


March 29, 2019


% of

Total

Army


247,555



70

%


226,692



69

%

Air Force


73,341



21

%


67,931



21

%

Navy


15,237



4

%


15,088



5

%

Other


15,601



5

%


16,195



5

%

Total revenue


$

351,734





$

325,906













Revenue by Contract Type





Three Months Ended

(In thousands)


April 3, 2020


% of

Total


March 29, 2019


% of

Total

Cost-plus and cost-reimbursable ¹


256,319



73

%


251,456



77

%

Firm-fixed-price


95,415



27

%


74,450



23

%

Total revenue


$

351,734





$

325,906




¹ Includes time and material contracts










Revenue by Contract Relationship











Three Months Ended

(In thousands)


April 3, 2020


% of

Total


March 29, 2019


% of

Total

Prime contractor


$

333,393



95

%


$

307,058



94

%

Subcontractor


18,341



5

%


18,848



6

%

Total revenue


$

351,734





$

325,906













Revenue by Geographic Region











Three Months Ended

(In thousands)


April 3, 2020


% of

Total


March 29, 2019


% of

Total

Middle East


$

237,937



68

%


226,416



69

%

United States


81,469



23

%


71,388



22

%

Europe


32,328



9

%


28,102



9

%

Total revenue


$

351,734





$

325,906




 

Cision

View original content to download multimedia:http://www.prnewswire.com/news-releases/vectrus-announces-strong-first-quarter-2020-results-301057963.html

SOURCE Vectrus, Inc.