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8-K - FORM 8-K - NCI, Inc.d918740d8k.htm

Exhibit 99.1

 

LOGO

11730 Plaza America, Suite 700

Reston, VA 20190

News Release

 

Investor Contact Media Contact
Lawrence Delaney, Jr. Joelle Shreves
Investor Relations Counsel Director of Marketing & Corporate Communications
(714) 734-5142 (703) 707-6904

NCI Reports First Quarter 2015 Financial and Operating Results

 

    First quarter revenue of $81 million at upper end of guidance range;

 

    EPS of $0.18 exceeds high end of guidance;

 

    NCI issues guidance for second quarter of 2015 and updates previously issued guidance for full fiscal year.

RESTON, VA, April 29, 2015 – NCI, Inc. (NASDAQ: NCIT), a leading provider of information technology (IT) and professional services and solutions to U.S. Federal Government agencies, today announced its financial and operating results for the first quarter ended March 31, 2015.

First quarter 2015 revenue was near the high end of management’s guidance range issued last quarter. Diluted earnings per share (EPS) exceeded the high end of guidance by $0.02.

First Quarter 2015 Results

For the three months ended March 31, 2015, revenue of $81.0 million reflected a decrease of 9.1%, or $8.1 million, from the same period a year ago. This decrease in revenue is principally due to lower material pass-throughs and revenue from certain NCI contracts that were transitioned to small business set-aside contracts. Other factors included reductions in staffing and scope of work on certain contracts, including NCI’s PEO Soldier program. The decrease was partially offset by revenues derived under contracts from our Computech acquisition.

NCI’s PEO Soldier contract accounted for $8.4 million, or 10.3% of revenue, in the first quarter of 2015, down $1.8 million from $10.2 million, or 11.4% of revenue, in the first quarter of 2014.

 

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Earnings before interest, taxes, depreciation and amortization (EBITDA)1 for the quarter was $6.5 million, or 8.0% of revenue, compared with $3.7 million, or 4.1% of revenue, in 2014. EBITDA and EBITDA margin for the first quarter of 2015 improved primarily due to a greater proportion of revenue derived from NCI direct labor, lower stock compensation expense higher-margin revenue provided by the acquisition of Computech, and the receipt of certain award fees, partially offset by higher business development costs and acquisition and intergration related expenses.

Operating income for the first quarter of 2015 was $4.4 million compared with $2.2 million for the first quarter of 2014. Operating margin for the first quarter of 2015 was 5.5% compared with 2.5% for the first quarter of 2014. Operating income and margin increased as a result of the factors affecting EBITDA and EBITDA margin, partially offset by amortization of purchased intangibles from the Computech acquisition.

Net income for the first quarter of 2015 was $2.4 million compared with $1.2 million for the first quarter of 2014. Net income increased due to the factors affecting operating income, partially offset by higher interest expense associated with borrowings to fund the Computech acquisition and a higher income tax rate. Diluted EPS for the first quarter of 2015 was $0.18 compared with $0.09 for the first quarter of 2014.

 

1  NCI believes that information concerning EBITDA enhances overall understanding of its current financial performance, especially the enhanced margins and profitability of the company after its acquisition of Computech, Inc. on January 1, 2015. NCI computes EBITDA, which is a non-GAAP financial measure, as reflected in the reconciliation table below.

 

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Days sales outstanding (DSO) was 59 days at March 31, 2015, compared with 65 days at December 31, 2014. The sequential decrease in DSO resulted primarily from the timing of receipts in the quarter and lower DSO from Computech.

Cash flow provided by operating activities for the first quarter of 2015 was $6.2 million. Capital expenditures were $0.3 million, resulting in free cash flow of $6.0 million, or 2.5 times net income.

NCI reported total backlog at March 31, 2015, of $401 million, of which $180 million was funded, compared with total backlog at December 31, 2014, of $410 million, of which $184 million was funded. Net bookings for the first quarter were $38 million, equating to 0.5 times revenue.

Special Cash Dividend

As previously disclosed, NCI’s Board of Directors declared a special cash dividend of $0.12 per share payable March 13, 2015, to shareholders of record at the close of business on February 25, 2015. The aggregate amount of payment made in connection with this special dividend was approximately $1.6 million.

Management’s Outlook

Based on the company’s current contract backlog and management’s estimate of future tasking and contract awards, NCI is issuing guidance for its second quarter and updating guidance for full fiscal year 2015. The table below represents management’s current expectations about future financial performance based on information available at this time:

 

    Second Quarter
Fiscal Year 2015 Ending
June 30, 2015
      Fiscal Year
Ending
December 31, 2015

Revenue

  $80 million–$86 million     $324 million–$346 million

Diluted EPS

  $0.18–$0.20     $0.72–$0.80

Diluted projected share count

  13.6 million     13.6 million

 

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“NCI began 2015 with solid operating performance and profitability, with first quarter revenue near the high end of guidance and EPS exceeding the high end of the range we issued on last quarter’s call. We benefited from higher-margin Computech revenue in the first quarter of 2015, along with a greater component of revenue derived from direct labor,” said NCI’s chairman and CEO, Charles K. Narang. “We continue to expect that needle-moving awards later in 2015 will help NCI reach its goal of returning to organic growth.”

“We continued to add opportunities to our qualified pipeline in the first quarter, and we expect to submit aggregate bids well in excess of $2 billion in 2015,” said NCI’s president, Brian J. Clark. “We’re currently responding to numerous long-awaited RFPs for awards that fit squarely into NCI’s core capabilities. A successful outcome of even one of these procurements would further validate our business development investments and restructuring efforts as well as reinforce a solid growth foundation for the company.”

Conference Call Information

As previously announced, NCI will conduct a conference call today at 4:30 p.m. EST to discuss first quarter 2015 results and issue guidance for the second quarter and fiscal year 2015.

Analysts and institutional investors may listen to the conference call by dialing (888) 468-2440 (United States/Canada) or (719) 325-2448 (international) with pass code 8065198. The conference call will be provided simultaneously as a webcast through a link on the NCI website (www.nciinc.com).

A replay of the conference call will be available approximately two hours after the conclusion of the call through May 6, 2015, by dialing (877) 870-5176 (United States/Canada) or (858) 384-5517 (international) and entering pass code 8065198.

About NCI, Inc.:

NCI is a leading provider of enterprise solutions and services to U.S. defense, intelligence, health care and civilian government agencies. The company has the expertise and proven track record to solve its customers’ most important and complex mission challenges through technology and

 

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innovation. NCI’s team of highly skilled professionals focuses on delivering cost-effective solutions and services in the areas of agile software application and systems development/integration; cybersecurity and information assurance; engineering and logistics support; enterprise information management and advanced analytics; cloud computing and IT infrastructure optimization; health IT and medical support; IT service management; and modeling, simulation and training. Headquartered in Reston, Virginia, NCI has more than 1,800 employees operating at more than 100 locations worldwide. NCI: Trust. Integrity. Performance. For more information, visit www.nciinc.com or email investor@nciinc.com. Like us on Facebook and follow us on Twitter (@nciinc_) and LinkedIn.

 

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Forward-Looking Statement: Statements and assumptions made in this press release that do not address historical facts constitute “forward-looking” statements that NCI believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, many of which are outside of our control. Words such as “may,” “will,” “intends,” “should,” “expects,” “plans,” “projects,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” or “opportunity,” or the negative of these terms or words of similar import are intended to identify forward-looking statements.

Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: our dependence on our contracts with Federal Government agencies, particularly within the U.S. Department of Defense, for substantially all of our revenue; a reduction in the overall U.S. Defense budget, volatility in spending authorizations for Defense- and Intelligence-related programs by the U.S. Federal Government or a shift in spending to programs in areas where we do not currently provide services; Federal Government shutdowns (such as that which occurred during the Federal Government’s 1996 and 2014 fiscal years), other delays in the Federal Government appropriations process, or budgetary cuts resulting from Congressional committee recommendations or automatic sequestration under the Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012 and the Consolidated Appropriations Act of 2014), risk of contract performance or termination; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; adverse results of Federal Government audits of our government contracts; Government contract procurement (such as bid protest, small business set asides, etc.) and termination risks; competitive factors such as pricing pressures and competition to hire and retain employees (particularly those with security clearances); Federal Government agencies awarding contracts on a technically acceptable/lowest cost basis in order to reduce expenditures; failure to successfully identify and integrate future acquired companies or businesses into our operations or to realize any accretive or synergistic effects from such acquisitions or to effectively integrate acquisitions appropriate to the achievement of our strategic plans; economic conditions in the United States, including conditions that result from terrorist activities or war; material changes in laws or regulations applicable to our businesses, particularly legislation affecting (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, (iii) government contracts containing organizational conflict of interest (OCI) clauses, (iv) delays related to agency specific funding freezes, (v) competition for task orders under Government Wide Acquisition Contracts (GWACs), agency-specific Indefinite Delivery/Indefinite Quantity (IDIQ) contracts and/or schedule contracts with the General Services Administration; and (vi) our own ability to achieve the objectives of near-term or long-range business plans, including internal systems failures. These and other risk factors are more fully discussed in the section titled “Risk Factors” in NCI’s Form 10-K filed with the Securities and Exchange Commission (SEC), and from time to time, in other filings with the SEC, such as our Forms 8-K and Forms 10-Q.

Any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, or share repurchases, and any statements of the plans, strategies and objectives of management for future operations, the execution of cost reduction programs, and restructuring and integration plans are also subject to factors that could cause actual results to differ materially from anticipated results.

The forward-looking statements included in this news release are only made as of the date of this news release, and NCI undertakes no obligation to publicly update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances, or changes in expectations or otherwise.

 

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NCI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

(in thousands, except per share data)

 

     Three months ended March 31,  
     2015      2014  

Revenue

   $ 80,968       $ 89,084   

Operating expenses:

     

Cost of revenue

     67,602         78,003   

General and administrative expenses

     6,629         7,399   

Depreciation and amortization

     2,089         1,449   

Acquisition and integration related expenses

     230         —     
  

 

 

    

 

 

 

Total operating expenses

  76,550      86,851   
  

 

 

    

 

 

 

Operating income

  4,418      2,233   

Interest expense, net

  238      126   
  

 

 

    

 

 

 

Income before income taxes

  4,180      2,107   

Provision for income taxes

  1,775      866   
  

 

 

    

 

 

 

Net income

$ 2,405    $ 1,241   
  

 

 

    

 

 

 

Earnings per share:

Basic:

Weighted average shares outstanding

  12,968      12,846   

Net income per share

$ 0.19    $ 0.10   
  

 

 

    

 

 

 

Diluted:

Weighted average shares outstanding

  13,601      13,367   

Net income per share

$ 0.18    $ 0.09   
  

 

 

    

 

 

 

 

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NCI, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except par values)

 

     As of
March 31,
2015
    As of
December 31,
2014
 

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 706      $ 25,819   

Accounts receivable, net

     53,000        52,856   

Deferred tax assets, net

     3,942        3,950   

Prepaid expenses and other current assets

     5,772        3,382   
  

 

 

   

 

 

 

Total current assets

  63,420      86,007   

Property and equipment, net

  6,780      7,371   

Other assets

  1,753      1,748   

Deferred tax assets, net

  37,774      37,839   

Intangible assets, net

  22,299      3,719   

Goodwill

  33,706      —     
  

 

 

   

 

 

 

Total assets

$ 165,732    $ 136,684   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable

$ 15,519    $ 15,646   

Accrued salaries and benefits

  15,769      16,481   

Deferred revenue

  3,884      3,226   

Other accrued expenses

  5,541      4,653   
  

 

 

   

 

 

 

Total current liabilities

  40,713      40,006   
  

 

 

   

 

 

 

Long-term debt

  27,000      —     

Other long-term liabilities

  2,899      2,901   
  

 

 

   

 

 

 

Total liabilities

  70,612      42,907   
  

 

 

   

 

 

 

Stockholders’ equity:

Class A common stock, $0.019 par value—37,500 shares authorized; 9,240 shares issued and 8,323 shares outstanding as of March 31, 2015, and 9,223 shares issued and 8,306 shares outstanding as of December 31, 2014

  176      175   

Class B common stock, $0.019 par value—12,500 shares authorized; 4,700 shares issued and outstanding as of March 31, 2015 and December 31, 2014

  89      89   

Additional paid-in capital

  74,903      74,406   

Treasury stock at cost—917 shares of Class A common stock as of March 31, 2015 and December 31, 2014

  (8,331   (8,331

Retained earnings

  28,283      27,438   
  

 

 

   

 

 

 

Total stockholders’ equity

  95,120      93,777   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

$ 165,732    $ 136,684   
  

 

 

   

 

 

 

 

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NCI, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 

     Three months ended March 31,  
     2015     2014  

Cash flows from operating activities:

    

Net income

   $ 2,405      $ 1,241   

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     2,089        1,449   

Share-based compensation

     370        1,943   

Deferred income taxes

     73        43   

Changes in operating assets and liabilities: (net of businesses acquired)

    

Accounts receivable, net

     5,242        (3,138

Prepaid expenses and other assets

     691        (1,805

Accounts payable

     (1,035     3,494   

Accrued expenses and other liabilities

     (3,606     (2,129
  

 

 

   

 

 

 

Net cash provided by operating activities

  6,229      1,098   
  

 

 

   

 

 

 

Cash flows from investing activities:

Purchases of property and equipment

  (251   (93

Cash paid for acquisition, net of cash acquired

  (56,657   —    
  

 

 

   

 

 

 

Net cash used in investing activities

  (56,908   (93
  

 

 

   

 

 

 

Cash flows from financing activities:

Borrowings under credit facility

  72,340      29,559   

Repayments on credit facility

  (45,340   (30,559

Proceeds from exercise of stock options

  127      136   

Dividends paid

  (1,561   —    
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

  25,566      (864
  

 

 

   

 

 

 

Net change in cash and cash equivalents

  (25,113   141   

Cash and cash equivalents, beginning of period

  25,819      50   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

$ 706    $ 191   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest

$ 211    $ 106   
  

 

 

   

 

 

 

Income taxes

$ 541    $ 843   
  

 

 

   

 

 

 

Non-cash investing and finance activities during the period for:

Leasehold improvements acquired under tenant improvement funds

  —       706   
  

 

 

   

 

 

 

 

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NCI, INC.

EBITDA Reconciliation Table

(UNAUDITED)

(in thousands)

 

     Three months ended March 31,  
     2015     2014  

Operating income

     4,418        2,233   

Depreciation and amortization

     2,089        1,449   
  

 

 

   

 

 

 

EBITDA

  6,507      3,682   

EBITDA margin

  8.0   4.1

# # #

 

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