Vectrus Announces Strong First Quarter 2021 Results

COLORADO SPRINGS, Colo., May 11, 2021 /PRNewswire/ — Vectrus, Inc. (NYSE:VEC) announced first quarter 2021 financial results. …

COLORADO SPRINGS, Colo., May 11, 2021 /PRNewswire/ — Vectrus, Inc. (NYSE:VEC) announced first quarter 2021 financial results.

«Vectrus reported strong first quarter results driven by the continued momentum in the execution of our strategy,» said Chuck Prow, Chief Executive Officer of Vectrus.

«During the quarter, revenue grew 23% year-over-year, with organic growth of 4%,» said Prow. «Revenue growth was driven by our recent acquisitions, continued phase-in of LOGCAP V, as well as the progress made in executing growth in our core programs.  Additionally, adjusted EBITDA margin increased 60 basis points year-over-year.»

«Our growth-related activities and efforts to make Vectrus the premier converged infrastructure company continue to experience positive momentum,» said Prow.  «During the quarter Vectrus was awarded the CBRN integrated defense prime OTA contract, which was based on our well-known capabilities in sensor integration, Internet of Things, and perimeter security solutions. The award is valued at $19 million over two years and extends Vectrus’ IoT, machine learning and data analytics offerings. This effort is co-sponsored between the DoD and Department of Homeland Security and provides sensor integration as well as data integration and analysis related to threat detection domestically. This program brings our digitally integrated solutions, that were originally deployed overseas, to the U.S. to support protection of the Homeland. We are pleased to have been selected for such an important mission and look forward to the opportunity to bring our unique and differentiated solutions utilized by the DoD to a new client and market. This work is illustrative of how Vectrus is building capabilities and inserting technology to deliver a more integrated and comprehensive suite of solutions in support of the converged infrastructure market.»

Prow continued, «We are also continuing to execute our IDIQ portfolio by leveraging our converged solutions, geographic footprint, and ability to provide complex mission-critical IT services. During the quarter, we won a $22 million five-year task order under the Army’s ITES-3S IDIQ to provide enterprise IT services to the U.S. Army Corp of Engineers across Europe. This is an important win for Vectrus which leverages the more than 30 years of experience we have in providing a full range of operations and maintenance, IT support and supply services with our Army OPMAS-E contract in Europe. This task order provides Vectrus with an opportunity to grow its’ presence in support of the 37,000 U.S. Army Corp of Engineers civilians and soldiers that are delivering vital engineering services in over 130 countries worldwide.»

«Last quarter we completed two strategic acquisitions that added key clients, capabilities, and accelerated our converged infrastructure strategy,» said Prow. «The integration of these acquisitions is well underway and on track with our plan. We remain excited about the talent, combined capabilities, and opportunities for accelerated growth.»

«Regarding LOGCAP V, we continue to phase-in and anticipate being at full operational capability in Iraq by June,» said Prow. «In terms of INDOPACOM, the phase-in process remains elongated due to base access restrictions associated with COVID-19; but we continue to anticipate phase-in later this year with full operational capability in early 2022.»

First Quarter 2021 Results

First quarter 2021 revenue of $434.0 million was up $82.3 million dollars year on year or 23.4% as compared to the same period last year.  Revenue grew by $68.9 million year on year as a result of the companies’ two acquisitions on December 31, 2020 and grew $13.4 million organically. 

Operating income was $16.5 million or 3.8% margin in the first quarter of 2021.  Adjusted operating income1 was $19.1 million or 4.4% margin.

EBITDA1 was $20.5 million or 4.7% margin and Adjusted EBITDA1 was $20.7 million or 4.8% margin for the first quarter of 2021. Margin improved by 60 basis points for both EBITDA and Adjusted EBITDA due to the company’s two acquisitions and improved operating performance.

Fully diluted EPS for the first quarter of 2021 was $1.02 as compared to $0.74 cents in the same period last year. Adjusted diluted EPS1, which adds back amortization of acquired intangible assets, was $1.20 for the quarter, as compared to $0.82 cents in the prior year.  The improvement in EPS is due to the company’s two acquisitions, improved operating performance, and lower tax expense.

«Our first quarter results demonstrate that our strategic execution is resulting in a more capable and diverse company,» said Susan Lynch, Senior Vice President and Chief Financial Officer. «For example, our revenue with the Navy now comprises 13% of total revenue compared to 4% during the same time last year. Our geographic and contract mix have also diversified.»

Lynch continued, «We are very pleased with our first quarter operating performance, the contributions from our recent December 31, 2020 acquisitions, and our overall progress in becoming a higher value, growth-oriented platform. We expect to continue to derive synergies from our acquisitions on both the top and bottom line while achieving greater operational efficiencies from our new ERP systems.»   

Cash used in operating activities through April 2, 2021 was $21.7 million and was a result of timing and the strong cash performance in the fourth quarter of 2020.

Net debt at April 2, 2021 was $138.7 million, up $100.9 million from April 3, 2020 due to the acquisitions of Zenetex and HHB on December 31, 2020. Total debt at April 2, 2021 was $177.0 million, down $7 million from $184.0 million at April 3, 2020. Cash at quarter-end was $38.3 million. Total consolidated indebtedness to consolidated EBITDA1 (total leverage ratio) was 2.0x.

Total backlog as of April 2, 2021 was $4.5 billion and funded backlog was $0.9 billion. The trailing twelve-month book-to-bill was 0.8x as of April 2, 2021. 

Increasing 2021 Guidance Mid-Point

Lynch continued, «In light of our strong first quarter performance we are increasing the low-end of the guidance range.» Guidance for 2021 is as follows:

$ millions, except for EBITDA margins and per share amounts

Previous 2021 Guidance

Updated 2021 Guidance

Updated

2021

Mid-Point

Revenue

$1,645

to

$1,715

$1,680

to

$1,715

$1,698

Adjusted EBITDA Margin1

4.6%

to

5.0%

4.8%

to

5.0%

4.9%

Adjusted Diluted Earnings Per Share1

$4.25

to

$4.85

$4.55

to

$4.85

$4.70

Net Cash Provided by Operating Activities

$55.0

to

$65.0

$58.0

to

$65.0

$61.5

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 2021 Conference Call

Management will conduct a conference call with analysts and investors at 4:30 p.m. ET on Tuesday, May 11, 2021. 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 or https://www.webcaster4.com/Webcast/Page/1431/41306. 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 25, 2021, at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 13719138.

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 integration 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 9,200 employees spanning 206 locations in 27 countries. In 2020, 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 «2021 Guidance» above and other assumptions contained therein for purposes of such guidance, other statements about our 2021 performance outlook, five-year growth plan, revenue, DSO, 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. For a discussion  of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the U.S. 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.

CONTACT:

Vectrus

Mike Smith, CFA

719-637-5773

mike.smith@vectrus.com

 

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)




Three Months Ended




April 2,


April 3,


(In thousands, except per share data)


2021


2020


Revenue


$

434,004



$

351,734


Cost of revenue



393,648




319,693


Selling, general, and administrative expenses



23,823




19,558


Operating income



16,533




12,483


Interest expense, net



(1,932)




(1,703)


Income from operations before income taxes



14,601




10,780


Income tax expense



2,553




2,112


Net income


$

12,048



$

8,668








Earnings per share






Basic


$

1.03



$

0.75


Diluted


$

1.02



$

0.74


Weighted average common shares outstanding – basic



11,648




11,545


Weighted average common shares outstanding – diluted



11,827




11,745
































 

VECTRUS, INC. 

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)




April 2,


December 31,

(In thousands, except share information)


2021


2020

Assets





Current assets





Cash and cash equivalents


$

38,347



$

66,949


Restricted cash


1,778



1,778


Receivables


359,182



314,959


Other current assets


27,319



24,702


Total current assets


426,626



408,388


Property, plant, and equipment, net


21,410



22,573


Goodwill


315,401



339,702


Intangible assets, net


71,254



48,105


Right-of-use assets


20,802



18,718


Other non-current assets


6,839



6,325


Total non-current assets


435,706



435,423


Total Assets


$

862,332



$

843,811


Liabilities and Shareholders’ Equity





Current liabilities





Accounts payable


$

197,447



$

159,586


Compensation and other employee benefits


56,349



79,568


Short-term debt


9,200



8,600


Other accrued liabilities


41,249



40,657


Total current liabilities


304,245



288,411


Long-term debt, net


166,383



168,751


Deferred tax liability


41,999



39,386


Other non-current liabilities


35,239



42,325


Total non-current liabilities


243,621



250,462


Total liabilities


547,866



538,873


Commitments and contingencies (Note 10)





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; 11,700,232 and 11,624,717 shares issued and

outstanding as of April 2, 2021 and December 31, 2020,

respectively                                      


117



116


Additional paid in capital


82,735



82,823


Retained earnings


234,074



222,026


Accumulated other comprehensive loss


(2,460)



(27)


Total shareholders’ equity


314,466



304,938


Total Liabilities and Shareholders’ Equity


$

862,332



$

843,811


 

VECTRUS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)




Three Months Ended



April 2,


April 3,

(In thousands)


2021


2020

Operating activities





Net income


$

12,048



$

8,668


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

Depreciation expense


1,548



996


Amortization of intangible assets


2,450



1,015


Loss on disposal of property, plant, and equipment


43




Stock-based compensation


2,622



2,367


Amortization of debt issuance costs


232



99


Changes in assets and liabilities:





Receivables


(46,544)



3,942


Other assets


(3,785)



(5,715)


Accounts payable


42,054



(162)


Deferred taxes


2,716



(1,522)


Compensation and other employee benefits


(22,818)



(9,733)


Other liabilities


(12,295)



1,182


Net cash (used in) provided by operating activities


(21,729)



1,137


Investing activities





Purchases of capital assets


(2,611)



(917)


Net cash (used in) investing activities


(2,611)



(917)


Financing activities





Repayments of long-term debt


(2,000)



(1,500)


Proceeds from revolver


110,000



144,000


Repayments of revolver


(110,000)



(29,000)


Proceeds from exercise of stock options


113



1


Payments of employee withholding taxes on share-based compensation


(2,184)



(1,787)


Net cash (used in) provided by financing activities


(4,071)



111,714


Exchange rate effect on cash


(191)



(1,080)


Net change in cash, cash equivalents and restricted cash


(28,602)



110,854


Cash, cash equivalents and restricted cash-beginning of year


68,727



35,318


Cash, cash equivalents and restricted cash-end of period


$

40,125



$

146,172







Supplemental disclosure of cash flow information:





Interest paid


$

1,371



$

1,469


Income taxes (refunded) paid


$

(97)



$

36


Purchase of capital assets on account


$

(132)



$

(606)


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, and unusual and infrequent non-operating items, such as M&A transaction and LOGCAP V pre-operational legal costs, and amortization of acquired intangible assets 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, and unusual and infrequent non-operating items, such as M&A transaction and LOGCAP V pre-operational legal costs, and amortization of acquired intangible assets that impact current results but are not related to our ongoing operations.
  • 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 and unusual and infrequent non-operating items, such as 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

2, 2021 As

Reported


M&A

Related

Costs


LOGCAP V

Pre-

Operational

Legal Costs


Amortization

of Acquired

Intangible

Assets


Three

Months

Ended April

2, 2021 As

Reported –

Adjusted












Revenue


$

434,004



$



$



$



$

433,004


Growth


23.4

%








23.4

%

Operating income


16,533





157



2,450



19,140


Operating margin


3.8

%








4.4

%












Interest expense, net


(1,932)









(1,932)













Income from operations before income taxes


$

14,601



$



$

157



$

2,450



$

17,208













Income tax expense


2,553





27



428



3,008


Income tax rate


17.5

%








17.5

%












Net income


$

12,048



$



$

130



$

2,022



$

14,200













Weighted average common shares outstanding, diluted


11,827









11,827













Diluted earnings per share


$

1.02



$



$

0.01



$

0.17



$

1.20













EBITDA (Non-GAAP Measures)











($ in thousands)


Three

Months

Ended April

2, 2021 As

Reported


M&A

Related

Costs


LOGCAP V

Pre-

Operational

Legal Costs


Amortization

of Acquired

Intangible

Assets


Three

Months

Ended April

2, 2021 As

Reported –

Adjusted

Operating Income


$

16,533



$



$

157



$

2,450



$

19,140













Add:











Depreciation and amortization


3,998







(2,450)



1,548













EBITDA


$

20,531



$



$

157



$



$

20,688


EBITDA Margin


4.7

%








4.8

%


 

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

Costs


LOGCAP V

Pre-

Operational

Legal Costs


Amortization

of Acquired

Intangible

Assets


Three

Months

Ended April

3, 2020 As

Reported –

Adjusted












Revenue


$

351,734



$



$



$



$

351,734













Operating income


$

12,483



$



$

141



$

1,015



$

13,639


Operating margin


3.5

%








3.9

%












Interest expense, net


$

(1,703)



$



$



$



$

(1,703)













Income from operations before income taxes


$

10,780



$



$

141



$

1,015



$

11,936













Income tax expense


$

2,112



$



$

28



$

171



$

2,311


Income tax rate


19.6

%








19.4

%












Net income


$

8,668



$



$

113



$

844



$

9,625













Weighted average common shares outstanding, diluted


11,745









11,745













Diluted earnings per share


$

0.74



$



$

0.01



$

0.07



$

0.82













EBITDA (Non-GAAP Measures)











($ in thousands)


Three

Months

Ended April

3, 2020 As

Reported


M&A

Related

Costs


LOGCAP V

Pre-

Operational

Legal Costs


Amortization

of Acquired

Intangible

Assets


Three

Months

Ended April

3, 2020 As

Reported –

Adjusted

Operating Income


$

12,483



$



$

141



$

1,015



$

13,639













Add:











Depreciation and amortization


$

2,011



$



$



$

(1,015)



$

996













EBITDA


$

14,494



$



$

141



$



$

14,635


EBITDA Margin


4.1

%








4.2

%













 

($ In thousands)


Three Months

Ended April 2,

2021 As

Reported


Three Months

Ended April 2,

2021 Zenetex &

HHB


Three Months

Ended April 2,

2021 As Reported

– Organic








Revenue


$

434,004



$

68,869



$

365,135









($ In thousands)


Three Months

Ended April 3,

2020 As

Reported


Three Months

Ended April 3,

2020 Zenetex &

HHB


Three Months

Ended April 3,

2020 As Reported

– Organic








Revenue


$

351,734



$



$

351,734









Organic Revenue $






$

13,401


Organic Revenue %






3.8

%

 

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




April 2.




April 3,




(In thousands)


2021


%


2020


%


Army


$

257,349



59

%


$

247,555



70

%


Air Force


78,170



18

%


73,341



21

%


Navy


56,427



13

%


15,237



4

%


Other


42,058



10

%


15,601



5

%


Total revenue


$

434,004





$

351,734















Revenue by Contract Type












Three Months Ended




April 2,




April 3,




(In thousands)


2021


%


2020


%


Cost-plus and cost-reimbursable ¹


$

305,247



70

%


$

256,319



73

%


Firm-fixed-price


128,757



30

%


95,415



27

%


Total revenue


$

434,004





$

351,734















¹ Includes time and material contracts


















Revenue by Contract Relationship












Three Months Ended




April 2,




April 3,




(In thousands)


2021


%


2020


%


Prime contractor


$

403,262



93

%


$

333,393



95

%


Subcontractor


30,742



7

%


18,341



5

%


Total revenue


$

434,004





$

351,734















Revenue by Geographic Region












Three Months Ended




April 2,




April 3,




(In thousands)


2021


%


2020


%


Middle East


$

241,813



56

%


$

237,937



68

%


United States


151,582



35

%


81,469



23

%


Europe


40,609



9

%


32,328



9

%


Total revenue


$

434,004





$

351,734















 

Cision View original content to download multimedia:http://www.prnewswire.com/news-releases/vectrus-announces-strong-first-quarter-2021-results-301289110.html

SOURCE Vectrus, Inc.