Peter Dameris to Step Down as CEO for Family Health Reasons
Ted Hanson Appointed CEO
CALABASAS, Calif.--(BUSINESS WIRE)--ASGN Incorporated (NYSE: ASGN), one of the foremost providers of IT and
professional services in the technology, digital, creative, engineering,
life sciences and government sectors, today reported financial results
for the quarter ended March 31, 2019.
Highlights
-
Revenues were $923.7 million, up 34.8 percent (10.7 percent on a pro
forma basis) over the first quarter of 2018. Pro forma assumes the
acquisition of ECS occurred at the beginning of 2017.
-
Net income was $34.9 million ($0.66 per diluted share), up from $29.1
million ($0.55 per diluted share) in the first quarter of 2018.
-
Adjusted Net Income (a non-GAAP measure) was $49.4 million ($0.93 per
diluted share), up from $44.0 million ($0.83 per diluted share) in the
first quarter of 2018.
-
Operating results included the following expenses totaling
approximately $3.6 million ($2.8 million after tax) that were not in
our previously-announced estimates: (i) acquisition and integration
expenses of $1.4 million ($1.0 million after tax), (ii) expense of
$1.4 million ($1.0 million after tax) related to the resolution of a
pay rate dispute on services provided in prior periods by Apex Systems
to a large systems integrator and (iii) an adjustment of approximately
$0.8 million for income taxes pertaining to 2018 estimates.
-
Adjusted EBITDA (a non-GAAP measure) was $97.1 million (10.5 percent
of revenues), up from $74.8 million (10.9 percent of revenues) in the
first quarter of 2018.
-
Cash flows from operating activities were $44.0 million and free cash
flow (a non-GAAP measure) was $36.5 million.
-
Our leverage ratio (a non-GAAP measure) was 2.65 to 1 at March 31,
2019, down from 2.69 to 1 at December 31, 2018.
-
Acquired DHA Group, Inc. ("DHA") on January 25, 2019, for $46.0
million in cash. DHA is a provider of IT services to the FBI and other
federal customers and is included in the ECS Segment.
-
During the quarter, the ECS contract backlog increased by $329.9
million to $1.8 billion at quarter end. This increase included new
contract awards of $255.7 million and contract backlog added from the
DHA acquisition of $244.0 million.
-
Book-to-bill ratio (a non-GAAP measure) for ECS for the quarter was
1.5 to 1. Book-to-bill ratio was calculated as the sum of the change
in total contract backlog (excluding the acquired DHA backlog) during
the quarter plus revenues for the quarter, divided by revenues for the
quarter.
Management Commentary
"We are pleased with our solid operating performance during the
quarter," commented Peter Dameris, CEO of ASGN. "Our growth in the
quarter reflected the strong demand in the end markets we serve and the
continued increase in adoption of our shared services delivery model. We
believe that our business model, operational execution and sharp focus
on growing our value-added service offerings position us to continue to
grow above market rates."
First Quarter 2019 Financial Results
Revenues were $923.7 million, up 34.8 percent year-over-year on a
reported basis and 10.7 percent on a pro forma basis, which assumes the
acquisition of ECS occurred at the beginning of 2017. Revenues for the
quarter included $10.0 million from DHA, from the date of its
acquisition on January 25, 2019. Pro forma results do not include the
pre-acquisition results of DHA due to its size. As previously announced,
DHA generated approximately $50.0 million in revenues in 2018 and is
expected to grow approximately 20 percent year-over-year in 2019.
Excluding the contribution from DHA in the quarter, revenues were up 9.5
percent year-over-year on a pro forma basis on one fewer "Billable Day".
Adjusting for the difference in "Billable Days" and changes in foreign
currency exchange rates, the growth rate would have been 2.0 percentage
points higher.
Assignment revenues for our Apex and Oxford segments totaled $721.6
million, up 11.0 percent year-over-year. Permanent placement revenues,
for both segments combined, were $34.1 million (3.7 percent of
consolidated revenues) compared with $34.9 million (4.2 percent of pro
forma consolidated revenues) in the first quarter of 2018. Revenues for
the quarter also included $168.0 million in revenues from our ECS
Segment.
Our largest segment, Apex, accounted for 65.6 percent of total revenues
and grew 12.5 percent year-over-year. Our Oxford Segment accounted for
16.2 percent of total revenues and was up 2.0 percent year-over-year.
Our ECS Segment accounted for 18.2 percent of total revenues and was up
12.7 percent year-over-year. The year-over-year increase included a
$10.0 million contribution from DHA. Excluding the contribution from
DHA, the ECS Segment year-over-year growth rate was 6.0 percent.
Gross profit was $263.9 million, up $19.5 million year-over-year on a
pro forma basis. Gross margin was 28.6 percent, compared with 29.3
percent in the first quarter of 2018 on a pro forma basis. The
year-over-year change in gross margin resulted from (i) a lower mix of
permanent placement revenues (3.7 percent of revenues, down from 4.2
percent in the first quarter of 2018) (ii) a slightly lower contract
gross margin mainly related to changes in business mix and (iii) the
inclusion of DHA, which lowered consolidated gross margin by
approximately 17 basis points.
Selling, general and administrative (“SG&A”) expenses were $187.4
million (20.3 percent of revenues), compared with $164.4 million (24.0
percent of revenues) in the first quarter of 2018. SG&A expenses for the
quarter included (i) acquisition, integration and strategic planning
expenses of $1.4 million (compared with $9.8 million in the first
quarter of 2018) and (ii) expense of $1.4 million ($1.0 million after
tax) related to the resolution of a pay rate dispute on services
provided in prior periods by Apex Systems to a large systems integrator.
These two items were not included in previously-announced guidance
estimates.
Amortization of intangible assets was $13.8 million, up from $7.6
million in the first quarter of 2018. This increase is related to the
identifiable intangible assets from the ECS and DHA acquisitions.
Interest expense was $14.5 million, compared with $6.6 million in the
first quarter of 2018. The year-over-year increase in interest expense
related to borrowings to fund the ECS acquisition in April 2018.
Interest expense for the quarter was comprised of (i) $13.0 million of
interest on the credit facility and (ii) $1.5 million of amortization of
deferred loan costs.
The effective tax rate for the quarter was 27.7 percent, which was above
the previously-announced guidance estimate of 26.5 percent. This rate
variance primarily related to changes in estimates for the effects of
tax reform on income taxes for 2018, partially offset by excess tax
benefits on stock-based compensation, which were not included in our
guidance estimates.
Net income was $34.9 million ($0.66 per diluted share), up from $29.1
million ($0.55 per diluted share) in the first quarter of 2018. Adjusted
Net Income (a non-GAAP measure) was $49.4 million ($0.93 per diluted
share), up from $44.0 million ($0.83 per diluted share) in the first
quarter of 2018.
Adjusted EBITDA (a non-GAAP measure) was $97.1 million (10.5 percent of
revenues), up from $74.8 million (10.9 percent of revenues) in the first
quarter of 2018. Reconciliations between GAAP and non-GAAP measures are
included in this release.
Cash flows from operating activities were $44.0 million and free cash
flow (a non-GAAP measure) was $36.5 million. At March 31, 2019, leverage
ratio (a non-GAAP measure) was 2.65 to 1, down from 2.69 to 1 at
December 31, 2018.
Second Quarter 2019 Financial Estimates
ASGN is providing financial estimates for the second quarter of 2019.
These estimates do not include any acquisition, integration or strategic
planning expenses and assume no deterioration in the markets that ASGN
serves. These estimates also assume no significant change in foreign
exchange rates. Reconciliations of estimated net income to the estimated
non-GAAP measures are included in this release.
-
Revenues of $967.0 million to $977.0 million
-
Gross margin of 29.3 percent to 29.7 percent
-
SG&A expenses (excludes amortization of intangible assets) of $190.1
million to $191.9 million (includes $7.6 million in depreciation and
$10.2 million in stock-based compensation expense)
-
Amortization of intangible assets of $13.0 million
-
Interest expense of $14.0 million
-
Effective tax rate of 26.7 percent (before any excess tax benefits
related to stock-based compensation)
-
Net income of $48.6 million to $52.3 million
-
Earnings per diluted share of $0.91 to $0.98
-
Diluted shares outstanding of 53.4 million
-
Adjusted EBITDA(1) (a non-GAAP measure) of $113.7 million
to $118.7 million
-
Adjusted Net Income (a non-GAAP measure) of $61.3 million to $65.0
million
-
Adjusted Net Income per diluted share(2) (a non-GAAP
measure) of $1.15 to $1.22
_______________
|
(1)
|
|
|
Depreciation of $2.6 million included in costs of services related
to an ECS project and depreciation of $7.6 million included in SG&A
expenses are added back in the determination of Adjusted EBITDA.
|
|
(2)
|
|
|
Does not include the “Cash Tax Savings on Indefinite-lived
Intangible Assets.” These savings total $7.0 million each quarter,
or $0.13 per diluted share, and represent the economic value of the
tax deduction that we receive from the amortization of goodwill and
trademarks.
|
|
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|
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|
The financial estimates above are based on the Company's estimate of
“Billable Days”, which are Business Days (calendar days for the period
less weekends and holidays) adjusted for other factors, such as the day
of the week a holiday occurs, additional time taken off around holidays,
year-end client furloughs and inclement weather. For the second quarter,
the number of "Billable Days" is estimated to be 64, which is the same
number as the second quarter of 2018. Our revenues estimates imply
year-over-year growth of 10.1 to 11.2 percent on a reported basis.
The financial estimates include the estimated results from DHA from its
date of acquisition on January 25, 2019. DHA is part of the ECS Segment
and due to its size, pre-acquisition results of DHA are not included in
ASGN's pro forma results. Because of its integration into ECS, separate
tracking and reporting of DHA results will not occur in future reporting
periods.
CEO Transition
ASGN also announced today that its Chief Executive Officer, Peter T.
Dameris, advised the Board of Directors that he will step down from his
role as CEO of the Company effective April 30, 2019. The Board has
appointed Theodore “Ted” S. Hanson, currently President of ASGN, to
serve as CEO. Mr. Dameris will continue as a member of the Company’s
Board and as an adviser to the Company.
Mr. Dameris told the Company his youngest son, who has been battling
acute myeloid leukemia for over a year, will require additional medical
treatment. After a successful stem cell transplant in August 2018, Mr.
Dameris’ son’s leukemia has returned, and the family is currently
assisting their son with aggressive medical treatment.
Mr. Dameris stated, “It has been my honor to guide this company and its
talented employees for the past 15 years. At this time, I must step back
so that I can devote all of my time and energy to what is most
important-my children’s health and my family’s welfare.
“For the past two years, I have worked closely with Ted to introduce him
to the analyst and investor community and he has played an integral role
in helping set the company’s strategy and long-term business objectives.
I have every confidence that this transition will be seamless and that
ASGN will continue to thrive under Ted’s leadership.”
Jeremy M. Jones, Chairman of the Board of Directors, stated, “Peter has
fearlessly grown and tirelessly served this company for over 15 years,
and we will still benefit from his experience in his roles on the Board
and as an adviser to the Company.”
Mr. Jones continued, “We are fortunate to have a deep management team
that has been intimately involved in the development and execution of
our business strategy. ASGN’s work will continue uninterrupted under
Ted.”
Mr. Hanson joined ASGN as Chief Financial Officer of Apex Systems
following ASGN’s acquisition of Apex Systems in May 2012. In January
2014, he was promoted to the role of President of Apex Life Sciences,
LLC, in January 2016, he became an Executive Vice President of ASGN, and
in December 2016, he was promoted to President of ASGN. Mr. Hanson
joined Apex Systems in November 1998 as Corporate Controller and became
Chief Financial Officer in January 2001. Mr. Hanson holds a Bachelor of
Science degree from Virginia Tech University and a Master of Business
Administration degree from Virginia Commonwealth University.
Conference Call
ASGN will hold a conference call today at 5:00 p.m. EDT to review its
financial results for the first quarter. The dial-in number is
800-401-8436 (+1-612-332-0530 for callers outside the United States) and
the conference ID number is 466365. Participants should dial in ten
minutes before the call. The prepared remarks, supplemental materials,
and the webcast for this call can be accessed at asgn.com.
A replay of the conference call will be available beginning Wednesday,
April 24, 2019 at 7:00 p.m. EDT until midnight on Wednesday, May 8,
2019. The access number for the replay is 800-475-6701 (+1-320-365-3844
outside the United States) and the conference ID number is 466365.
About ASGN Incorporated
ASGN Incorporated (NYSE: ASGN) is one of the foremost providers of IT
and professional services in the technology, digital, creative,
engineering and life sciences fields across commercial and government
sectors. Operating through its Apex, Oxford and ECS segments, ASGN helps
leading corporate enterprises and government organizations develop,
implement and operate critical IT and business solutions through its
integrated offering of professional staffing and IT solutions.
Our mission as an organization is to be the most trusted partner for
companies seeking highly skilled human capital and integrated solutions
to fulfill their strategic and operational needs. ASGN was founded in
1985 and is headquartered in Calabasas, California. For more
information, visit us at asgn.com.
Reasons for Presentation of Non-GAAP Financial Measures
Statements in this release and the accompanying financial information
include non-GAAP financial measures. Such information is provided as
additional information, not as an alternative to our consolidated
financial statements presented in accordance with accounting principles
generally accepted in the United States ("GAAP"), and is intended to
enhance an overall understanding of our current financial performance.
These terms might not be calculated in the same manner as, and thus
might not be comparable to, similarly titled measures reported by other
companies. The financial statement tables that accompany this press
release include a reconciliation of each non-GAAP financial measure to
the most directly comparable GAAP financial measure. Below is a
discussion of our non-GAAP financial measures.
Pro forma revenues and gross profit by segment are presented to provide
a more consistent basis for comparison between quarters. Pro forma was
prepared as if the April 2, 2018 acquisition of ECS had occurred at the
beginning of 2017. Although the pro forma segment data are considered
non-GAAP measures, they were calculated in the same manner as the
consolidated pro forma data, which are GAAP measures. Pro forma
information in this press release does not include pre-acquisition
information for DHA.
EBITDA (earnings before interest, taxes, depreciation and amortization
of intangible assets) and Adjusted EBITDA (EBITDA plus stock-based
compensation expense and, as applicable, acquisition, integration and
strategic planning expenses, write-off of loan costs and impairment
charges) are used to determine a portion of the compensation for some of
our executives and employees. Stock-based compensation expense is added
to arrive at Adjusted EBITDA because it is a non-cash expense. Write-off
of loan costs, acquisition, integration and strategic planning expenses
and impairment charges are added, as applicable, to arrive at Adjusted
EBITDA as they are not indicative of the performance of our core
business on an ongoing basis.
Non-GAAP net income (net income, less income (loss) from discontinued
operations, net of tax, plus, as applicable, write-off of loan costs,
credit facility amendment expenses, acquisition, integration and
strategic planning expenses, accretion of fair value discount on
contingent consideration, impairment charges, and the tax effect of
these items) provides a method for assessing our operating results in a
manner that is focused on the performance of our core business on an
ongoing basis. Adjusted Net Income (Non-GAAP net income plus
amortization of intangible assets, less income taxes on amortization for
financial reporting purposes not deductible for income tax purposes)
provides a method for assessing our operating results in a manner that
is focused on the performance of our core business on an ongoing basis,
adjusted for some of the cash flows associated with amortization of
intangible assets to more fully present the performance of our
acquisitions.
Constant currency information removes the effect of year-over-year
changes in foreign currency exchange rates. Constant currency
information is calculated using the foreign currency exchange rates from
the same period in the prior year.
Billable Days are Business Days (calendar days for the period less
weekends and holidays) adjusted for other factors, such as the day of
the week a holiday occurs, additional time taken off around holidays,
year-end client furloughs and inclement weather. In order to remove the
fluctuations caused by comparable periods having different billable
days, revenues on a Same Billable Days basis are calculated by taking
the current period average revenue per billable day, multiplied by the
number of billable days from the same period in the prior year.
The term Same Billable Days and Constant Currency basis means that the
impact of year-over-year changes in foreign currency exchange rates has
been removed from the Same Billable Days basis calculation.
Free cash flow is defined as net cash provided by (used in) operating
activities, less capital expenditures. Management believes this provides
useful information to investors about the amount of cash generated by
the business that can be used for strategic opportunities. Our leverage
ratio provides information about our compliance with loan covenants and
is calculated in accordance with our credit agreement, as filed with the
Securities and Exchange Commission ("SEC"), by dividing our total
indebtedness by trailing 12 months Adjusted EBITDA.
Reasons for Presentation of Operating Metrics and Supplemental
Information
Operating metrics are intended to enhance the overall understanding of
our business and our current financial performance. These operating
metrics might not be calculated in the same manner as, and thus might
not be comparable to, similarly titled metrics reported by other
companies. Contract backlog for our ECS segment represents the estimated
amount of future revenues to be recognized under negotiated contracts
and task orders. Book-to-bill ratio for our ECS segment is calculated as
the sum of the change in total backlog during the quarter plus revenues
for the quarter, divided by revenues for the quarter. The operating
metrics for the Apex and Oxford segments presented on this release are
calculated as follows: average number of staffing consultants are full
time equivalent staffing consultant headcount in the quarter; average
number of contract professionals and average number of customers are the
number of contract professionals employed each week and the number of
customers served each week, averaged for the quarter, respectively
(average is weighted by total number of hours billed per week); top 10
customers as a percentage of revenue are the 10 largest clients defined
by the revenue generated in the quarter, divided by total revenues in
the quarter; gross profit per staffing consultant is gross profit for
the quarter divided by the average number of staffing consultants;
average bill rate is total assignment revenue client billings in the
quarter divided by total hours billed in the quarter.
Safe Harbor
Certain statements made in this news release are “forward-looking
statements” within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, and involve a high degree of risk and
uncertainty. Forward-looking statements include statements regarding our
anticipated financial and operating performance.
All statements in this release, other than those setting forth strictly
historical information, are forward-looking statements. Forward-looking
statements are not guarantees of future performance, and actual results
might differ materially. In particular, we make no assurances that the
estimates of revenues, gross margin, SG&A, amortization, effective tax
rate, net income, diluted shares outstanding, contract backlog,
book-to-bill ratio, Adjusted EBITDA, Adjusted Net Income, and related
per share amounts (as applicable) set forth above will be achieved.
Factors that could cause or contribute to such differences include
actual demand for our services, our ability to attract, train and retain
qualified staffing consultants, our ability to remain competitive in
obtaining and retaining clients, the availability of qualified contract
professionals, management of our growth, continued performance and
improvement of our enterprise-wide information systems, our ability to
manage our litigation matters, the successful integration of our
acquired subsidiaries, and other risks detailed from time to time in our
reports filed with the SEC, including our Annual Report on Form 10-K for
the year ended December 31, 2018, as filed with the SEC on March 1,
2019. We specifically disclaim any intention or duty to update any
forward-looking statements contained in this news release.
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SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
December 31,
|
|
|
|
2019
|
|
2018
|
|
2018
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
923.7
|
|
|
$
|
685.2
|
|
|
$
|
929.7
|
|
|
Costs of services
|
|
659.8
|
|
|
467.5
|
|
|
657.7
|
|
|
Gross profit
|
|
263.9
|
|
|
217.7
|
|
|
272.0
|
|
|
Selling, general and administrative expenses
|
|
187.4
|
|
|
164.4
|
|
|
183.6
|
|
|
Amortization of intangible assets
|
|
13.8
|
|
|
7.6
|
|
|
13.8
|
|
|
Operating income
|
|
62.7
|
|
|
45.7
|
|
|
74.6
|
|
|
Interest expense
|
|
(14.5
|
)
|
|
(6.6
|
)
|
|
(14.3
|
)
|
|
Income before income taxes
|
|
48.2
|
|
|
39.1
|
|
|
60.3
|
|
|
Provision for income taxes
|
|
13.3
|
|
|
9.9
|
|
|
14.3
|
|
|
Income from continuing operations
|
|
34.9
|
|
|
29.2
|
|
|
46.0
|
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
(0.1
|
)
|
|
(0.1
|
)
|
|
Net income
|
|
$
|
34.9
|
|
|
$
|
29.1
|
|
|
$
|
45.9
|
|
|
|
|
|
|
|
|
|
|
Per share income from continuing operations and net income:
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.66
|
|
|
$
|
0.56
|
|
|
$
|
0.88
|
|
|
Diluted
|
|
$
|
0.66
|
|
|
$
|
0.55
|
|
|
$
|
0.86
|
|
|
|
|
|
|
|
|
|
|
Number of shares and share equivalents
used to calculate earnings per share:
|
|
|
|
|
|
|
|
Basic
|
|
52.6
|
|
|
52.2
|
|
|
52.5
|
|
|
Diluted
|
|
53.2
|
|
|
52.8
|
|
|
53.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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SEGMENT FINANCIAL INFORMATION (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(Dollars in millions)
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|
|
|
|
|
|
|
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Reported
|
|
Pro Forma
|
|
|
|
Three Months Ended
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
March 31,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Apex:
|
|
|
|
|
|
|
|
|
|
Assignment
|
|
$
|
592.2
|
|
|
$
|
524.9
|
|
|
$
|
592.2
|
|
|
$
|
524.9
|
|
|
Permanent placement
|
|
13.9
|
|
|
13.6
|
|
|
13.9
|
|
|
13.6
|
|
|
|
|
606.1
|
|
|
538.5
|
|
|
606.1
|
|
|
538.5
|
|
|
Oxford:
|
|
|
|
|
|
|
|
|
|
Assignment
|
|
129.4
|
|
|
125.4
|
|
|
129.4
|
|
|
125.4
|
|
|
Permanent placement
|
|
20.2
|
|
|
21.3
|
|
|
20.2
|
|
|
21.3
|
|
|
|
|
149.6
|
|
|
146.7
|
|
|
149.6
|
|
|
146.7
|
|
|
|
|
|
|
|
|
|
|
|
|
ECS
|
|
168.0
|
|
|
—
|
|
|
168.0
|
|
|
149.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated:
|
|
|
|
|
|
|
|
|
|
Assignment
|
|
721.6
|
|
|
650.3
|
|
|
721.6
|
|
|
650.3
|
|
|
Permanent placement
|
|
34.1
|
|
|
34.9
|
|
|
34.1
|
|
|
34.9
|
|
|
ECS
|
|
168.0
|
|
|
—
|
|
|
168.0
|
|
|
149.1
|
|
|
|
|
$
|
923.7
|
|
|
$
|
685.2
|
|
|
$
|
923.7
|
|
|
$
|
834.3
|
|
|
Percentage of total revenues:
|
|
|
|
|
|
|
|
|
|
Apex
|
|
65.6
|
%
|
|
78.6
|
%
|
|
65.6
|
%
|
|
64.5
|
%
|
|
Oxford
|
|
16.2
|
%
|
|
21.4
|
%
|
|
16.2
|
%
|
|
17.6
|
%
|
|
ECS
|
|
18.2
|
%
|
|
—
|
%
|
|
18.2
|
%
|
|
17.9
|
%
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Assignment
|
|
78.1
|
%
|
|
94.9
|
%
|
|
78.1
|
%
|
|
77.9
|
%
|
|
Permanent placement
|
|
3.7
|
%
|
|
5.1
|
%
|
|
3.7
|
%
|
|
4.2
|
%
|
|
ECS
|
|
18.2
|
%
|
|
—
|
%
|
|
18.2
|
%
|
|
17.9
|
%
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
95.4
|
%
|
|
94.5
|
%
|
|
95.4
|
%
|
|
95.5
|
%
|
|
Foreign
|
|
4.6
|
%
|
|
5.5
|
%
|
|
4.6
|
%
|
|
4.5
|
%
|
|
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
100.0
|
%
|
|
Gross profit:
|
|
|
|
|
|
|
|
|
|
Apex
|
|
$
|
175.4
|
|
|
$
|
158.6
|
|
|
$
|
175.4
|
|
|
$
|
158.6
|
|
|
Oxford
|
|
58.9
|
|
|
59.1
|
|
|
58.9
|
|
|
59.1
|
|
|
ECS
|
|
29.6
|
|
|
—
|
|
|
29.6
|
|
|
26.7
|
|
|
Consolidated
|
|
$
|
263.9
|
|
|
$
|
217.7
|
|
|
$
|
263.9
|
|
|
$
|
244.4
|
|
|
Gross margin:
|
|
|
|
|
|
|
|
|
|
Apex
|
|
28.9
|
%
|
|
29.5
|
%
|
|
28.9
|
%
|
|
29.5
|
%
|
|
Oxford
|
|
39.4
|
%
|
|
40.3
|
%
|
|
39.4
|
%
|
|
40.3
|
%
|
|
ECS
|
|
17.6
|
%
|
|
—
|
%
|
|
17.6
|
%
|
|
17.9
|
%
|
|
Consolidated
|
|
28.6
|
%
|
|
31.8
|
%
|
|
28.6
|
%
|
|
29.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED CASH FLOW INFORMATION (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Cash provided by operating activities
|
|
$
|
44.0
|
|
|
$
|
54.7
|
|
|
Capital expenditures
|
|
(7.5
|
)
|
|
(6.2
|
)
|
|
Free cash flow (non-GAAP measure)
|
|
$
|
36.5
|
|
|
$
|
48.5
|
|
|
|
|
|
|
|
|
Cash used in investing activities
|
|
$
|
(57.0
|
)
|
|
$
|
(6.2
|
)
|
|
Cash provided by (used in) financing activities
|
|
$
|
7.4
|
|
|
$
|
(7.7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED CONSOLIDATED BALANCE SHEET DATA (Unaudited)
AS OF MARCH 31, 2019 AND DECEMBER 31, 2018
(In millions)
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Cash and cash equivalents
|
|
$
|
35.6
|
|
|
$
|
41.8
|
|
Accounts receivable, net
|
|
618.7
|
|
|
613.8
|
|
Total current assets
|
|
691.4
|
|
|
686.3
|
|
Goodwill and intangible assets, net
|
|
1,938.9
|
|
|
1,909.8
|
|
Total assets
|
|
2,814.7
|
|
|
2,687.8
|
|
Total current liabilities
|
|
313.7
|
|
|
308.2
|
|
Working capital
|
|
377.7
|
|
|
378.1
|
|
Long-term debt
|
|
1,107.7
|
|
|
1,100.4
|
|
Stockholders’ equity
|
|
1,227.5
|
|
|
1,182.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO
ADJUSTED EBITDA (NON-GAAP MEASURE) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions)
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Net income
|
|
$
|
34.9
|
|
|
$
|
29.1
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
0.1
|
|
Interest expense
|
|
14.5
|
|
|
6.6
|
|
Provision for income taxes
|
|
13.3
|
|
|
9.9
|
|
Depreciation
|
|
9.7
|
|
|
6.8
|
|
Amortization of intangible assets
|
|
13.8
|
|
|
7.6
|
|
EBITDA (non-GAAP measure)
|
|
$
|
86.2
|
|
|
$
|
60.1
|
|
Stock-based compensation
|
|
9.5
|
|
|
4.9
|
|
Acquisition, integration and strategic planning expenses
|
|
1.4
|
|
|
9.8
|
|
Adjusted EBITDA (non-GAAP measure)
|
|
$
|
97.1
|
|
|
$
|
74.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF NET INCOME TO
ADJUSTED NET INCOME (NON-GAAP MEASURE) (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2019 AND 2018
(In millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Net income
|
|
$
|
34.9
|
|
|
$
|
29.1
|
|
|
Loss from discontinued operations, net of tax
|
|
—
|
|
|
0.1
|
|
|
Credit facility amendment expenses(1)
|
|
—
|
|
|
0.3
|
|
|
Acquisition, integration and strategic planning expenses
|
|
1.4
|
|
|
9.8
|
|
|
Tax effect on adjustments
|
|
(0.4
|
)
|
|
(2.6
|
)
|
|
Non-GAAP net income
|
|
35.9
|
|
|
36.7
|
|
|
Amortization of intangible assets
|
|
13.8
|
|
|
7.6
|
|
|
Income taxes on amortization for financial reporting purposes not
deductible for income tax purposes
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
Adjusted Net Income (non-GAAP measure)(2)
|
|
$
|
49.4
|
|
|
$
|
44.0
|
|
|
|
|
|
|
|
|
Per diluted share:
|
|
|
|
|
|
Net income
|
|
$
|
0.66
|
|
|
$
|
0.55
|
|
|
Adjustments
|
|
0.27
|
|
|
0.28
|
|
|
Adjusted Net Income (non-GAAP measure)(2)
|
|
$
|
0.93
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding
(diluted)
|
|
53.2
|
|
|
52.8
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
During the first quarter of 2018 we incurred costs of $0.3 million
related to the amendment to our credit facility to fund the
acquisition of ECS.
|
|
(2)
|
|
|
Does not include the “Cash Tax Savings on Indefinite-lived
Intangible Assets.” These savings total $7.0 million per quarter
(approximately $0.13 per diluted share) and represent the economic
value of the tax deduction that we receive from the amortization of
goodwill and trademarks.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECS SEGMENT SUPPLEMENTAL INFORMATION (Unaudited)
MIX OF REVENUES BY CONTRACT TYPE
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Q1 2019
|
|
Q1 2018
|
|
Q4 2018
|
|
Firm-fixed-price
|
|
25.8
|
%
|
|
30.1
|
%
|
|
23.1
|
%
|
|
Time and materials
|
|
36.5
|
%
|
|
33.0
|
%
|
|
30.1
|
%
|
|
Cost-plus-fixed-fee
|
|
37.7
|
%
|
|
36.9
|
%
|
|
46.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MIX OF REVENUES BY CUSTOMER
|
|
|
|
|
|
Q1 2019
|
|
Q1 2018
|
|
Q4 2018
|
|
Department of Defense and Intelligence Agencies
|
|
57.2
|
%
|
|
59.3
|
%
|
|
65.5
|
%
|
|
Federal Civilian
|
|
35.8
|
%
|
|
34.5
|
%
|
|
27.2
|
%
|
|
Commercial and Other
|
|
7.0
|
%
|
|
6.2
|
%
|
|
7.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTRACT BACKLOG
(2)
(In millions)
|
|
|
|
|
|
March 31, 2019(5)
|
|
December 31, 2018
|
|
Funded Contract Backlog(3)
|
|
$
|
458.6
|
|
|
$
|
350.0
|
|
Negotiated Unfunded Contract Backlog(4)
|
|
1,317.9
|
|
|
1,096.6
|
|
Contract Backlog
|
|
$
|
1,776.5
|
|
|
$
|
1,446.6
|
|
|
|
|
|
|
|
|
|
|
Information for the periods prior to the April 2, 2018 ECS
acquisition is presented on a pro forma basis, which assumes ECS was
acquired at the beginning of 2017. Pro forma information does not
include pre-acquisition information for DHA.
|
|
|
|
(1)
|
|
|
|
Firm-fixed-price ("FFP") contracts provide for a fixed price for
specified products, systems and/or services. Time and materials
("T&M") contracts provide for payments based on fixed hourly rates
for each direct labor hour expended and reimbursements for allowable
material costs and out-of-pocket expenses. Cost-plus-fixed-fee
("CPFF") contracts provide for reimbursement of direct contract
costs and allowable and allocable indirect costs, plus the
negotiated profit margin or fee.
|
|
(2)
|
|
|
|
Contract backlog represents the estimated amount of future revenues
to be recognized under negotiated contracts and task orders as work
is performed. Contract backlog excludes awards which have been
protested by competitors until the protest is resolved in our favor.
Contract backlog is segregated into two categories, funded contract
backlog and negotiated unfunded contract backlog.
|
|
(3)
|
|
|
|
Funded contract backlog for contracts with U.S. government agencies
primarily represents contracts for which funding has been formally
awarded less revenues previously recognized on these contracts, and
does not include the unfunded portion of contracts where funding is
incrementally awarded or authorized by the U.S. government even
though the contract may call for performance over a number of years.
Funded contract backlog for contracts with non-government agencies
represents the estimated value of contracts, which may cover
multiple future years, less revenues previously recognized on these
contracts.
|
|
(4)
|
|
|
|
Negotiated unfunded contract backlog represents the estimated future
revenues to be earned from negotiated contract awards for which
funding has not been awarded or authorized, and unexercised priced
contract options. Negotiated unfunded contract backlog does not
include any estimate of future potential task orders expected to be
awarded under indefinite delivery, indefinite quantity (IDIQ), U.S.
General Services Administration (GSA) schedules or other master
agreement contract vehicles.
|
|
(5)
|
|
|
|
March 31, 2019 includes $23.0 million funded contract backlog and
$212.0 million negotiated unfunded contract backlog from DHA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCIAL ESTIMATES FOR Q2 2019
RECONCILIATION OF ESTIMATED NET INCOME TO ESTIMATED NON-GAAP
MEASURES
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
Net income(1)(2)
|
|
$
|
48.6
|
|
|
$
|
52.3
|
|
|
Interest expense
|
|
14.0
|
|
|
14.0
|
|
|
Provision for income taxes(2)
|
|
17.7
|
|
|
19.0
|
|
|
Depreciation(3)
|
|
10.2
|
|
|
10.2
|
|
|
Amortization of intangible assets
|
|
13.0
|
|
|
13.0
|
|
|
EBITDA (non-GAAP measure)
|
|
103.5
|
|
|
108.5
|
|
|
Stock-based compensation
|
|
10.2
|
|
|
10.2
|
|
|
Adjusted EBITDA (non-GAAP measure)
|
|
$
|
113.7
|
|
|
$
|
118.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Low
|
|
High
|
|
Net income(1)(2)
|
|
$
|
48.6
|
|
|
$
|
52.3
|
|
|
Amortization of intangible assets
|
|
13.0
|
|
|
13.0
|
|
|
Income taxes on amortization for financial reporting purposes not
deductible for income tax purposes
|
|
(0.3
|
)
|
|
(0.3
|
)
|
|
Adjusted Net Income (non-GAAP measure)(4)
|
|
$
|
61.3
|
|
|
$
|
65.0
|
|
|
|
|
|
|
|
|
Per diluted share:
|
|
|
|
|
|
Net income
|
|
$
|
0.91
|
|
|
$
|
0.98
|
|
|
Adjustments
|
|
0.24
|
|
|
0.24
|
|
|
Adjusted Net Income (non-GAAP measure)(4)
|
|
$
|
1.15
|
|
|
$
|
1.22
|
|
|
|
|
|
|
|
|
Weighted average common and common equivalent shares outstanding
(diluted)
|
|
53.4
|
|
|
53.4
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
|
These estimates do not include acquisition, integration, or
strategic planning expenses.
|
|
(2)
|
|
|
|
These estimates do not include excess tax benefits related to
stock-based compensation.
|
|
(3)
|
|
|
|
Composed of $2.6 million of depreciation included in costs of
services related to an ECS project and $7.6 million of depreciation
included in SG&A expenses.
|
|
(4)
|
|
|
|
Does not include the “Cash Tax Savings on Indefinite-lived
Intangible Assets.” These savings total $7.0 million per quarter
($0.13 per diluted share) and represent the economic value of the
tax deduction that we receive from the amortization of goodwill and
trademarks.
|
Contact:
Ed Pierce
Chief Financial Officer
818-878-7900