Vectrus Announces Solid First Quarter Results
Vectrus, Inc. (NYSE:VEC) reported a 5.2% year-over-year revenue increase in Q1 2022, totaling $456.5 million. Operating income was $5.2 million, with adjusted EBITDA at $18.2 million (4.0% margin). Despite challenges from military withdrawals, the company expanded its work with Army, Navy, and National Security clients. Fully diluted EPS fell to $0.24 from $1.02 a year prior. Cash used in operations increased to $26.4 million. Net debt reduced to $96.8 million. Vectrus reiterated its full-year guidance for 2022.
- Revenue increased by 5.2% year-over-year to $456.5 million.
- Secured key contracts supporting the Army and Navy, enhancing client diversification.
- Total backlog as of April 1, 2022, was $4.5 billion, approximately 2.5x estimated 2022 revenue.
- Fully diluted EPS dropped to $0.24 from $1.02 in the prior year.
- Operating income margin was only 1.1%, impacted by M&A expenses and amortization costs.
- Cash used in operating activities increased to $26.4 million due to tax repayments and merger costs.
- Q1 revenue +
5.2% Y/Y to$456.5 million - Operating income of
$5.2 million ; Adjusted EBITDA margin1 of4.0% - Q1 fully diluted EPS of
$0.24 ; Adjusted diluted EPS1 of$1.01 - Several key wins expand and solidify work with Army, Navy, and National Security clients
- Reiterating revenue and adjusted diluted EPS1 guidance
COLORADO SPRINGS, Colo., May 10, 2022 /PRNewswire/ -- Vectrus, Inc. (NYSE:VEC) announced first quarter 2022 financial results.
"Vectrus reported solid first quarter results driven by the continued expansion into LOGCAP V and our focus on diversification to new clients and markets," said Chuck Prow, Chief Executive Officer of Vectrus.
"During the quarter, revenue grew
"Notably, late in the first quarter Vectrus was awarded a strategically important task order to provide support for the U.S. Air Force in Europe as part of the European Deterrence Initiative," said Prow. "While currently small in value, this contingency task is providing mission critical services to our Air Force client in Europe. This effort exemplifies our global positioning and rapid response capabilities supporting our clients' most challenging and important missions."
Prow continued, "Adjusted EBITDA for the quarter was
"We are continuing our positive momentum working with the Navy and during the first quarter were selected to complete the final phases of application development for the 5G Naval Base Coronado Smart Warehouse, which is demonstrative of our ability to provide converged solutions and operational technologies to clients," said Prow. "We were also recently awarded the follow-on contract for Spectrum Management with the Navy valued at
Prow continued, "Vectrus has worked diligently over the past several years to expand its presence with national security clients and, during the first quarter our teams were successful in securing several wins that enhance our footprint in the intelligence community."
Prow concluded, "Our first quarter results demonstrate Vectrus' realization and execution of our strategy to strengthen and grow the business through outstanding program execution, capability expansion, and diversification of our geographic and client footprint."
First Quarter 2022 Results
First quarter 2022 revenue of
Adjusted operating income1 was
Fully diluted EPS for the first quarter of 2022 was
Cash used in operating activities through April 1, 2022, was
Net debt on April 1, 2022, was
Total backlog as of April 1, 2022, was
2022 Guidance
Lynch continued, "In light of our solid first quarter performance, we are reiterating our full-year 2022 guidance ranges for revenue and adjusted EBITDA, adjusted diluted EPS, and net cash provided by operating activities, excluding M&A related activities."
Due to the merger activities with Vertex, the company is not providing GAAP guidance or a reconciliation of forward-looking measures including adjusted diluted EPS to GAAP diluted EPS or adjusted EBITDA margin to GAAP net income due to the difficulty in forecasting the transaction timing and quantifying certain amounts that are necessary for such reconciliation. Reconciliations to the closest corresponding U.S. GAAP measures are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures. The variability of such charges could potentially have a significant impact on our future U.S. GAAP financial results.
$ millions, except for EBITDA margins and per share amounts | 2021 | 2022 Guidance | 2022 Mid-Point | 2022 Mid-Point vs | ||
Revenue | to | 3.1 % | ||||
Adjusted EBITDA Margin | 4.7 % | 4.5 % | to | 4.6 % | (10) bps | |
Adjusted Diluted Earnings Per Share | to | (0.6) % | ||||
Net Cash Provided by Operating Activities | to | (15.6) % | ||||
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 2022 Conference Call
Management will conduct a conference call with analysts and investors at 4:30 p.m. ET on Tuesday, May 10, 2022. U.S.-based participants may dial in to the conference call at 844-825-9789, while international participants may dial 412-317-5180. A live webcast of the conference call as well as an accompanying slide presentation will be available on the Vectrus Investor Relations website at https://app.webinar.net/b4KdmrqJ7En.
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 24, 2022, at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 10166668.
Footnotes:
1 See "Key Performance Indicators and Non-GAAP Financial Measures" for reconciliation.
About Vectrus
For more than 70 years, Vectrus has provided critical mission support for our customers' toughest operational challenges. As a high-performing organization with exceptional talent, deep domain knowledge, a history of long-term customer relationships, and groundbreaking technical expertise, we deliver innovative, mission-matched solutions for our military and government customers worldwide. Whether it's base operations support, supply chain and logistics, IT mission support, engineering and digital integration, security, or maintenance, repair and overhaul, our customers count on us for on-target solutions that increase efficiency, reduce costs, improve readiness, and strengthen national security. Vectrus is headquartered in Colorado Springs, Colo., and includes about 8,100 employees spanning 205 locations in 28 countries. In 2021, Vectrus generated sales of
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 the statements and items listed in the table in "2022 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.
VECTRUS, INC. | ||||||||||
Three Months Ended | ||||||||||
April 1, | April 2, | |||||||||
(In thousands, except per share data) | 2022 | 2021 | ||||||||
Revenue | $ 456,471 | $ 434,004 | ||||||||
Cost of revenue | 419,275 | 393,648 | ||||||||
Selling, general, and administrative expenses | 31,959 | 23,823 | ||||||||
Operating income | 5,237 | 16,533 | ||||||||
Interest expense, net | (1,681) | (1,932) | ||||||||
Income from operations before income taxes | 3,556 | 14,601 | ||||||||
Income tax expense | 701 | 2,553 | ||||||||
Net income | $ 2,855 | $ 12,048 | ||||||||
Earnings per share | ||||||||||
Basic | $ 0.24 | $ 1.03 | ||||||||
Diluted | $ 0.24 | $ 1.02 | ||||||||
Weighted average common shares outstanding – basic | 11,759 | 11,648 | ||||||||
Weighted average common shares outstanding – diluted | 11,902 | 11,827 | ||||||||
VECTRUS, INC. | ||||
April 1, | December 31, | |||
(In thousands, except per share information) | 2022 | 2021 | ||
Assets | ||||
Current assets | ||||
Cash and cash equivalents | $ 22,999 | $ 38,513 | ||
Receivables | 377,571 | 348,605 | ||
Prepaid expenses | 25,923 | 21,160 | ||
Other current assets | 11,083 | 15,062 | ||
Total current assets | 437,576 | 423,340 | ||
Property, plant, and equipment, net | 24,049 | 23,758 | ||
Goodwill | 321,734 | 321,734 | ||
Intangible assets, net | 64,281 | 66,582 | ||
Right-of-use assets | 42,074 | 43,651 | ||
Other non-current assets | 9,876 | 10,394 | ||
Total non-current assets | 462,014 | 466,119 | ||
Total Assets | $ 899,590 | $ 889,459 | ||
Liabilities and Shareholders' Equity | ||||
Current liabilities | ||||
Accounts payable | $ 234,713 | $ 212,533 | ||
Compensation and other employee benefits | 59,059 | 80,284 | ||
Short-term debt | 10,400 | 10,400 | ||
Other accrued liabilities | 55,421 | 55,031 | ||
Total current liabilities | 359,593 | 358,248 | ||
Long-term debt, net | 108,392 | 94,246 | ||
Deferred tax liability | 32,620 | 32,214 | ||
Operating lease liability | 33,167 | 34,536 | ||
Other non-current liabilities | 11,643 | 20,128 | ||
Total non-current liabilities | 185,822 | 181,124 | ||
Total liabilities | 545,415 | 539,372 | ||
Commitments and contingencies (Note 10) | ||||
Shareholders' Equity | ||||
Preferred stock; | — | — | ||
Common stock; | 118 | 117 | ||
Additional paid in capital | 89,590 | 88,116 | ||
Retained earnings | 270,609 | 267,754 | ||
Accumulated other comprehensive loss | (6,142) | (5,900) | ||
Total shareholders' equity | 354,175 | 350,087 | ||
Total Liabilities and Shareholders' Equity | $ 899,590 | $ 889,459 | ||
VECTRUS, INC. | ||||||||
Three Months Ended | ||||||||
April 1, | April 2, | |||||||
(In thousands) | 2022 | 2021 | ||||||
Operating activities | ||||||||
Net income | $ 2,855 | $ 12,048 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation expense | 1,591 | 1,548 | ||||||
Amortization of intangible assets | 2,301 | 2,450 | ||||||
(Gain) Loss on disposal of property, plant, and equipment | (16) | 43 | ||||||
Stock-based compensation | 2,558 | 2,622 | ||||||
Amortization of debt issuance costs | 204 | 232 | ||||||
Changes in assets and liabilities: | ||||||||
Receivables | (29,898) | (46,544) | ||||||
Prepaid expenses | (4,849) | (3,137) | ||||||
Other assets | 4,520 | (648) | ||||||
Accounts payable | 22,693 | 42,054 | ||||||
Deferred taxes | — | 2,716 | ||||||
Compensation and other employee benefits | (21,138) | (22,818) | ||||||
Other liabilities | (7,202) | (12,295) | ||||||
Net cash used in operating activities | (26,381) | (21,729) | ||||||
Investing activities | ||||||||
Purchases of capital assets and intangibles | (2,195) | (2,611) | ||||||
Proceeds from the disposition of assets | 17 | — | ||||||
Net cash used in investing activities | (2,178) | (2,611) | ||||||
Financing activities | ||||||||
Repayments of long-term debt | (2,600) | (2,000) | ||||||
Proceeds from revolver | 217,000 | 110,000 | ||||||
Repayments of revolver | (200,000) | (110,000) | ||||||
Proceeds from exercise of stock options | — | 113 | ||||||
Payment of debt issuance costs | (458) | — | ||||||
Payments of employee withholding taxes on share-based compensation | (1,626) | (2,184) | ||||||
Net cash provided by (used in) financing activities | 12,316 | (4,071) | ||||||
Exchange rate effect on cash | 729 | (191) | ||||||
Net change in cash, cash equivalents and restricted cash | (15,514) | (28,602) | ||||||
Cash, cash equivalents and restricted cash-beginning of year | 38,513 | 68,727 | ||||||
Cash, cash equivalents and restricted cash-end of period | $ 22,999 | $ 40,125 | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ 1,513 | $ 1,371 | ||||||
Income taxes paid | $ 66 | $ (97) | ||||||
Purchase of capital assets on account | $ 5 | $ (132) | ||||||
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, integration and related costs, 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, integration and related costs, 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, integration and related costs, 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 | ||||||||||||||
($K, except per share data) | Three Months | M&A, | LOGCAP V | Amortization | Three Months | |||||||||
Revenue | $ 456,471 | $ — | $ — | $ — | $ 456,471 | |||||||||
Growth | 5.2 % | 5.2 % | ||||||||||||
Operating income | $ 5,237 | $ 9,068 | $ — | $ 2,301 | $ 16,606 | |||||||||
Operating margin | 1.1 % | 3.6 % | ||||||||||||
Interest expense, net | $ (1,681) | $ — | $ — | $ — | $ (1,681) | |||||||||
Income from operations before income taxes | $ 3,556 | $ 9,068 | $ — | $ 2,301 | $ 14,925 | |||||||||
Income tax expense | $ 701 | $ 1,787 | $ — | $ 453 | $ 2,941 | |||||||||
Income tax rate | 19.7 % | 19.7 % | ||||||||||||
Net income | $ 2,855 | $ 7,281 | $ — | $ 1,848 | $ 11,984 | |||||||||
Weighted average common shares outstanding, diluted | 11,902 | 11,902 | ||||||||||||
Diluted earnings per share | $ 0.24 | $ 0.61 | $ — | $ 0.16 | $ 1.01 | |||||||||
EBITDA (Non-GAAP Measures) | ||||||||||||||
($K) | Three Months | M&A, | LOGCAP V | Amortization | Three Months | |||||||||
Operating Income | $ 5,237 | $ 9,068 | $ — | $ 2,301 | $ 16,606 | |||||||||
Add: | ||||||||||||||
Depreciation and amortization | $ 3,892 | $ — | $ — | $ (2,301) | $ 1,591 | |||||||||
EBITDA | $ 9,129 | $ 9,068 | $ — | $ — | $ 18,197 | |||||||||
EBITDA Margin | 2.0 % | 4.0 % | ||||||||||||
Adjusted Net Income, Adjusted Diluted Earnings Per | ||||||||||||||
($K, except per share data) | Three Months As Reported | M&A, | LOGCAP V | Amortization | Three Months | |||||||||
Revenue | $ 434,004 | $ — | $ — | $ — | $ 434,004 | |||||||||
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) | ||||||||||||||
($K) | Three Months As Reported | M&A, | LOGCAP V | Amortization | Three Months | |||||||||
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 % | ||||||||||||
SUPPLEMENTAL INFORMATION
Revenue by client branch, contract type, contract relationship, and geographic region for the periods presented below was as follows:
Three Months Ended | ||||||||
April 1, | April 2, | |||||||
(In thousands) | 2022 | % | 2021 | % | ||||
Army | $ 280,113 | 61 % | $ 257,349 | 59 % | ||||
Air Force | 61,474 | 13 % | 78,170 | 18 % | ||||
Navy | 75,217 | 17 % | 56,427 | 13 % % | ||||
Other | 39,667 | 9 % | 42,058 | 10 % | ||||
Total revenue | $ 456,471 | $ 434,004 | ||||||
Revenue by Contract Type | ||||||||
Three Months Ended | ||||||||
April 1, | April 2, | |||||||
(In thousands) | 2022 | % | 2021 | % | ||||
Cost-plus and cost-reimbursable | $ 311,094 | 68 % | $ 290,230 | 67 % | ||||
Firm-fixed-price | 128,004 | 28 % | 128,757 | 30 % | ||||
Time and material | 17,373 | 4 % | 15,017 | 3 % | ||||
Total revenue | $ 456,471 | $ 434,004 | ||||||
Revenue by Contract Relationship | ||||||||
Three Months Ended | ||||||||
April 1, | April 2, | |||||||
(In thousands) | 2022 | % | 2021 | % | ||||
Prime contractor | $ 427,093 | 94 % | $ 403,262 | 93 % | ||||
Subcontractor | 29,378 | 6 % | 30,742 | 7 % | ||||
Total revenue | $ 456,471 | $ 434,004 | ||||||
Revenue by Geographic Region | ||||||||
Three Months Ended | ||||||||
April 1, | April 2, | |||||||
(In thousands) | 2022 | % | 2021 | % | ||||
Middle East | $ 235,754 | 52 % | $ 240,013 | 55 % | ||||
United States | 167,980 | 37 % | 149,811 | 35 % | ||||
Europe | 36,531 | 7 % | 40,623 | 9 % | ||||
Asia | 16,206 | 4 % | 3,557 | 1 % | ||||
Total revenue | $ 456,471 | $ 434,004 | ||||||
CONTACT:
Vectrus
Mike Smith, CFA
719-637-5773
michael.smith@vectrus.com
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SOURCE Vectrus, Inc.
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