PR Newswire | May 11, 2021 04:05PM EDT

05/11 15:05 CDT

Vectrus Announces Strong First Quarter 2021 Results- Revenue of $434 million up 23% yr/yr- Adjusted EBITDA margin1 of 4.8%, an increase of 60 bps yr/yr- First quarter fully diluted EPS of $1.02; Adjusted diluted EPS1 adding back acquisition related amortization, increased 46% yr/yr to $1.20- Integration and performance of recent acquisitions on track- Increasing low-end and mid-point of 2021 guidance COLORADO SPRINGS, Colo., May 11, 2021

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:

Updated $ millions, except for EBITDA margins and per share amountsPrevious 2021 GuidanceUpdated 2021 Guidance2021 Mid-Point

Revenue $1,645 to $1,715 $1,680 to $1,715 $1,698

Adjusted EBITDA Margin^1 4.6% to 5.0% 4.8% to 5.0% 4.9%

Adjusted Diluted Earnings Per Share^1 $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:

VectrusMike Smith, CFA719-637-5773mike.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 117 116 outstanding as of April 2, 2021 and December 31, 2020, respectively

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(2,184) (1,787) compensation

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 (28,602) 110,854 cash

Cash, cash equivalents and restricted cash-beginning 68,727 35,318 of year

Cash, cash equivalents and restricted cash-end of $40,125 $146,172period



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)

Three Three Months M&A LOGCAP V AmortizationMonths ($ in thousands, except per share data) Ended AprilRelatedPre- of Acquired Ended April 2, 2021 As Costs OperationalIntangible 2, 2021 As Reported Legal CostsAssets 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, diluted11,827 11,827



Diluted earnings per share $1.02 $ - $ 0.01 $0.17 $1.20



EBITDA (Non-GAAP Measures)

Three Three Months M&A LOGCAP V AmortizationMonths ($ in thousands) Ended AprilRelatedPre- of Acquired Ended April 2, 2021 As Costs OperationalIntangible 2, 2021 As Reported Legal CostsAssets 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)

Three Three Months M&A LOGCAP V AmortizationMonths ($ in thousands, except per share data) Ended AprilRelatedPre- of Acquired Ended April 3, 2020 As Costs OperationalIntangible 3, 2020 As Reported Legal CostsAssets 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, diluted11,745 11,745



Diluted earnings per share $0.74 $- $0.01 $0.07 $0.82



EBITDA (Non-GAAP Measures)

Three Three Months M&A LOGCAP V AmortizationMonths ($ in thousands) Ended AprilRelatedPre- of Acquired Ended April 3, 2020 As Costs OperationalIntangible 3, 2020 As Reported Legal CostsAssets 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 %





Three Months Three Months Three Months Ended April 2, Ended April 2, Ended April 2, ($ In thousands) 2021 As 2021 Zenetex & Reported HHB 2021 As Reported - Organic



Revenue $ 434,004 $ 68,869 $365,135



Three Months Three Months Three Months ($ In thousands) Ended April 3, Ended April 3, Ended April 3, 2020 As 2020 Zenetex & 2020 As Reported Reported HHB - 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 $257,34959%$247,55570%

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$305,24770%$256,31973%

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 $403,26293%$333,39395%

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 $241,81356%$237,93768%

United States 151,582 35%81,469 23%

Europe 40,609 9 %32,328 9 %

Total revenue $434,004 $351,734



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SOURCE Vectrus, Inc.