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Vectrus Announces First Quarter 2017 Results

- First quarter 2017 revenue $290.1 million and operating margin 4.0 percent

- Total contract awards exceeded $800 million in the quarter

- K-BOSSS extended through March 2018 with potential to March 2019

- Successfully awarded Maxwell BOS and OPMAS-E re-competes in the quarter

- Increased 2017 guidance for revenue, net income, diluted EPS, and net cash provided by operating activities

Company Release - 5/9/2017 4:10 PM ET

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.

Vectrus Logo.

"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) 
2017 Guidance


(Updated) 
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 EPS1

$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 value; 100,000,000 shares authorized; 10,943,290 and 10,894,924 shares issued and outstanding


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




 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/vectrus-announces-first-quarter-2017-results-300454238.html

SOURCE Vectrus, Inc.