Press Release

Engility Reports Second Quarter 2018 Results
- Revenue of $489 million, a $12 million increase from the first quarter of 2018
- GAAP net income attributable to Engility of $12 million, or $0.32 per diluted share, after recording $12 million of income taxes and non-core operating costs, which reduced net income by $0.32 per diluted share
- EBITDA of $46 million, or 9.5% of revenue, and adjusted EBITDA of $47 million, or 9.7% of revenue
- Second quarter 2018 book-to-bill ratio of 1.0x

CHANTILLY, Va., Aug. 1, 2018 /PRNewswire/ -- Engility Holdings, Inc. (NYSE: EGL) today announced financial results for the second quarter ended June 29, 2018.

CEO Commentary

"Our second quarter revenue, profitability and cash flow results exceeded our expectations," said Lynn Dugle, Chairman, President and CEO of Engility. "We posted solid results across our business, and our success is being driven by our ability to effectively reposition Engility into higher-end markets, deliver customer-focused solutions, and upgrade our talent and performance levels. We have had a strong start to the year and we continue to target organic revenue growth in 2019."

Second Quarter 2018 Results

Total revenue for the second quarter of 2018 was $489 million. GAAP operating income was $36 million and GAAP operating margin was 7.3%. GAAP net income attributable to Engility was $12 million, or $0.32 per diluted share, after recording $12 million of income taxes and non-core operating costs, which reduced net income by $0.32 per diluted share. Cash taxes paid in the second quarter of 2018 were $0.2 million. EBITDA was $46 million and EBITDA margin was 9.5%.

Adjusted operating income was $43 million and adjusted operating margin was 8.8%. Adjusted EBITDA was $47 million and adjusted EBITDA margin was 9.7%.

Information about the Company's use of non-GAAP financial information is provided below under "Non-GAAP Measures" and in the non-GAAP reconciliation tables included herein.

Key Performance Indicators

  • Book-to-bill ratio for the second quarter of 2018 was 1.0x on net bookings of $487 million. Trailing twelve-month book-to-bill ratio was 0.9x on net bookings of $1.65 billion.
  • Total estimated contract value at the end of the second quarter of 2018 was $3.4 billion, consistent with the value at the end of the first quarter of 2018.
  • Days sales outstanding, net of advanced payments, were 57 days at the end of the second quarter of 2018, compared to 58 days at the end of the second quarter of 2017.
  • Cash flow generated from operating activities for the second quarter of 2018 was $47 million, compared to $37 million for the second quarter of 2017.
  • During the second quarter of 2018, the company made total debt payments of $25 million. Total debt payments for the first half of 2018 were $45 million.

Key Second Quarter 2018 Contract Awards

  • Awarded a $90 million SeaPort-e® task order to provide software engineering and production support to the U.S. Navy's tactical afloat and submarine local area networks. The Tactical Network Technical and Production Support task order was awarded by Space and Naval Warfare Systems Center Atlantic.
  • Awarded a $41 million SeaPort-e task order to provide on-site command and control expertise, training and integrated logistics support to the U.S. Marine Corps' core command and control programs.
  • Won a prime position on the Africa Contingency Operations Training and Assistance program. Under this multi-award Indefinite Delivery Indefinite Quantity vehicle with a ceiling value of $600 million, Engility will help train and equip African partner nations in their internationally mandated peacekeeping efforts.

Fiscal Year 2018 Guidance

The company is reiterating the fiscal year 2018 guidance it issued on May 2, 2018, based on Engility's financial results for the first half of 2018 and its current outlook for the remainder of 2018. The table below summarizes the company's fiscal year 2018 guidance.


Fiscal Year 2018 Guidance

Revenue

$1.83 billion - $1.91 billion

GAAP Diluted EPS (1)

$0.81 - $0.91

EBITDA (2)

$160 million - $170 million

Operating Cash Flow

$100 million - $110 million



(1) 

2018 GAAP diluted EPS guidance includes approximately $4 million of acquisition, restructuring and legal and settlement expenses, $2 million of debt refinancing-related expenses, and $25 million of amortization expense related to intangible assets acquired by the company. It also assumes diluted weighted-average outstanding shares of approximately 38 million and a full-year effective tax rate of approximately 25 percent.

(2) 

2018 EBITDA guidance includes approximately $4 million of acquisition, restructuring and legal and settlement expenses. 

Conference Call Information

Engility will host a conference call today, August 1, 2018, at 8:30 a.m. ET to discuss the financial results for its second quarter 2018.

Listeners may access a webcast of the live conference call from the Investor Relations section of the company's website at www.engility.com. Listeners also may access a slide presentation on the website, which summarizes the company's second quarter 2018 results. Listeners should go to the website at least 15 minutes before the live event to download and install any necessary audio software.

Listeners also may participate in the conference call by dialing (888) 655-5029 (domestic) or (503) 343-6026 (international) and entering passcode 3989289.

A replay will be available on the company's website approximately two hours after the conference call and continuing for one year. A telephonic replay also will be available through August 8, 2018 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and entering passcode 3989289.

About Engility

Engility (NYSE: EGL), a $2 billion technology leader, has thousands of employees around the world working to make a difference. Our history of delivering results for the defense, federal civilian, intelligence and space industries spans more than 60 years. We provide leading-edge solutions and services on Earth, in space and across cyber by leveraging expertise in systems engineering & integration, high performance computing, cybersecurity, readiness & training, enterprise modernization and mission operations support.  To learn more about us, please visit www.engility.com and connect with us on Facebook, LinkedIn and Twitter.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding Engility's future prospects, projected financial results, estimated integration costs and acquisition related amortization expenses and business plans. Words such as "may," "will," "should," "likely," "anticipates," "expects," "intends," "plans," "projects," "believes," "estimates" and similar expressions are also used to identify these forward-looking statements. These statements are based on the current beliefs and expectations of Engility's management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. Factors that could cause Engility's actual results to differ materially from those described in the forward-looking statements can be found under the heading "Risk Factors" included in our Annual Report on Form 10-K for the year ended December 31, 2017, and more recent documents that have been filed with the Securities and Exchange Commission (SEC) and are available on the investor relations section of Engility's website (www.engility.com) and on the SEC's website (www.sec.gov). Forward-looking statements are made only as of the date hereof, and we undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, historical information should not be considered as an indicator of future performance.

Media:

Scott Fazekas

Engility Holdings, Inc.

(703) 984-5068

Scott.Fazekas@engility.com      

Investor Relations:

Dave Spille

Engility Holdings, Inc.

(703) 984-6120

Dave.Spille@engility.com


 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)











Three Months Ended



Six Months Ended




June 29, 2018



June 30, 2017



June 29, 2018



June 30, 2017


Revenue


$

488,514



$

494,671



$

965,074



$

979,886


Costs and expenses

















Cost of revenue



413,166




422,999




825,188




838,022


Selling, general and administrative expenses



39,811




37,711




76,886




74,217


Total costs and expenses



452,977




460,710




902,074




912,239


Operating income



35,537




33,961




63,000




67,647


Interest expense, net



17,161




18,529




36,539




39,450


Other income, net



(108)




(66)




(250)




(59)


Income before provision for income taxes



18,484




15,498




26,711




28,256


Provision for income taxes



4,728




6,050




6,367




11,060


Net income



13,756




9,448




20,344




17,196


Less: Net income attributable to non-controlling interest



1,829




1,817




1,928




2,632


Net income attributable to Engility


$

11,927



$

7,631



$

18,416



$

14,564



















Earnings per share attributable to Engility

















Basic


$

0.32



$

0.21



$

0.50



$

0.40


Diluted


$

0.32



$

0.20



$

0.49



$

0.39



















Weighted average number of shares outstanding

















Basic



36,964




36,808




36,909




36,817


Diluted



37,611




37,290




37,640




37,332




















 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(in thousands)










June 29,



December 31,




2018



2017


Assets:









Current assets:









Cash and cash equivalents


$

39,523



$

41,890


Accounts receivables, net



83,910




108,100


Unbilled receivables



250,725




222,994


Other current assets



20,265




19,681


Total current assets



394,423




392,665


Property, plant and equipment, net



45,356




44,006


Goodwill



1,071,371




1,071,371


Identifiable intangible assets, net



345,167




361,410


Deferred tax assets



142,046




150,535


Other assets



5,521




6,021


Total assets


$

2,003,884



$

2,026,008


Liabilities and Equity:









Current liabilities:









Current portion of long-term debt


$

25,260



$

26,947


Accounts payable, trade



46,658




52,954


Accrued employment costs



81,074




77,545


Accrued expenses



80,490




74,856


Advance payments and billings in excess of costs incurred



26,135




30,380


Income tax liabilities



253




548


Other current liabilities



23,006




26,688


Total current liabilities



282,876




289,918


Long-term debt



899,662




938,687


Income tax liabilities



60,934




62,219


Other liabilities



59,738




59,079


Total liabilities



1,303,210




1,349,903


Equity:









Preferred stock, par value $0.01 per share, 25,000 shares authorized,
  
none issued or outstanding as of June 29, 2018 or December 31, 2017







Common stock, par value $0.01 per share, 175,000 shares authorized,
  
36,968 and 36,822 shares issued and outstanding as of
  
June 29, 2018 and December 31, 2017, respectively



370




368


Additional paid-in capital



1,249,123




1,244,940


Accumulated deficit



(556,433)




(576,019)


Accumulated other comprehensive loss



(2,254)




(3,805)


Total equity attributable to Engility



690,806




665,484


Non-controlling interest



9,868




10,621


Total equity



700,674




676,105


Total liabilities and equity


$

2,003,884



$

2,026,008











 

 

ENGILITY HOLDINGS, INC.

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)







Six Months Ended




June 29, 2018



June 30, 2017


Operating activities:









Net income


$

20,344



$

17,196


Share-based compensation



6,210




3,736


Depreciation and amortization



21,740




21,971


Loss (gain) on sale of property, plant and equipment



18




(497)


Loss on extinguishment of debt



253





Amortization of bank debt fees



4,155




4,294


Deferred income taxes



7,423




11,841


Excess tax deduction on share-based compensation



108




(218)


Changes in operating assets and liabilities:









Receivables



1,942




(17,665)


Other assets



(5,120)




5,948


Accounts payable, trade



(7,143)




10,134


Accrued employment costs



3,529




(18,826)


Accrued expenses



3,868




(1,771)


Advance payments and billings in excess of costs incurred



(4,245)




555


Other liabilities



(443)




(12,066)


Net cash provided by operating activities



52,639




24,632


Investing activities:









Proceeds (payments) from sale of business, net of amount placed in escrow



(1,900)




23,005


Proceeds from sale of property, plant and equipment






2,902


Capital expenditures



(3,277)




(2,575)


Net cash provided by (used in) investing activities



(5,177)




23,332


Financing activities:









Repayment of long-term debt



(45,076)




(59,373)


Gross borrowings from revolving credit facility



123,000




224,000


Gross repayments of revolving credit facility



(123,000)




(224,000)


Debt issuance costs



(45)





Payment of employee withholding taxes on share-based compensation



(2,027)




(1,260)


Dividends paid






(407)


Distributions to non-controlling interest member



(2,681)




(4,638)


Net cash used in financing activities



(49,829)




(65,678)


Net change in cash and cash equivalents



(2,367)




(17,714)


Cash and cash equivalents, beginning of period



41,890




48,236


Cash and cash equivalents, end of period


$

39,523



$

30,522












 

 

Non-GAAP Measures

The tables under "Engility Holdings, Inc. Reconciliation of Non-GAAP Measures" present Adjusted Operating Income, Adjusted Operating Margin, Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin, reconciled to their most directly comparable GAAP measure. These financial measures are calculated and presented on the basis of methodologies other than in accordance with U.S. generally accepted accounting principles ("Non-GAAP Measures"). Engility has provided these Non-GAAP Measures to adjust for, among other things, the impact of amortization expenses related to our acquisitions of TASC, Inc. and Dynamics Research Corporation, costs associated with a loss or gain on the disposal or sale of property, plant and equipment, acquisition, restructuring and related expenses, legal and settlement costs, and refinancing-related expenses. These items have been adjusted because they are not considered core to the company's business or otherwise not considered operational or because these charges are non-cash or non-recurring. The company presents these Non-GAAP Measures because management believes that they are meaningful to understanding Engility's performance during the periods presented and the company's ongoing business. Non-GAAP Measures are not prepared in accordance with GAAP and therefore are not necessarily comparable to similarly titled metrics or the financial results of other companies. These Non-GAAP Measures should be considered a supplement to, not a substitute for, or superior to, the corresponding financial measures calculated in accordance with GAAP.

With respect to our "Fiscal Year 2018 Guidance" above, reconciliation of EBITDA guidance to the closest corresponding GAAP measure on a forward-looking basis is not available without unreasonable efforts. We are unable to reconcile EBITDA to net income due to our inability to predict certain non-cash items included in net income, including taxes and timing of potential restructuring charges. The disclosure of such reconciliations may imply to our investors a degree of precision in our calculations that is not possible. For the same reasons, the company is unable to address the probable significance of the unavailable information.

 

ENGILITY HOLDINGS, INC.
RECONCILIATION OF NON-GAAP MEASURES

The following tables set forth a reconciliation of each of these Non-GAAP Measures to the most directly comparable GAAP measure for the periods presented.

 

Adjusted Operating Income and Adjusted Operating Margin

(dollars in thousands)










Three Months Ended



Six Months Ended




June 29, 2018



June 30, 2017



June 29, 2018



June 30, 2017


Net income


$

13,756



$

9,448



$

20,344



$

17,196


Provision for income taxes (1)



4,728




6,050




6,367




11,060


Other expenses (income), net



(108)




(66)




(250)




(59)


Interest expense, net (2)



17,161




18,529




36,539




39,450


Operating income



35,537




33,961




63,000




67,647



















Adjustments

















Acquisition, restructuring and legal and
  
settlement expenses, excluding amortization



1,021




2,342




2,453




3,745


Acquisition-related intangible amortization



6,335




6,334




12,669




12,669


Loss (gain) on sale of business and property,
  
plant and equipment, net



15




73




18




(497)


Total adjustments



7,371




8,749




15,140




15,917


Adjusted operating income


$

42,908



$

42,710



$

78,140



$

83,564



















Operating margin



7.3

%



6.9

%



6.5

%



6.9

%

Adjusted operating margin



8.8

%



8.6

%



8.1

%



8.5

%




















(1)

Cash paid for income taxes for the three months ended June 29, 2018 and June 30, 2017 was $231 and $185, respectively, and for the six months ended June 29, 2018 and June 30, 2017 was $482 and $388, respectively.



(2)

Interest expense, net, included refinancing-related expenses of $1,918 and $1,692 for the six months ended June 29, 2018 and June 30, 2017, respectively.




Supplemental:




For the three months ended June 29, 2018 and June 30, 2017, the impacts to GAAP net income attributable to Engility from the provision for income taxes and the adjustments noted in the above table were $12 million and $15 million, respectively. For the six months ended June 29, 2018 and June 30, 2017, the impacts to GAAP net income attributable to Engility from the provision for income taxes and the adjustments noted in the above table were $22 million and $27 million, respectively. These results have not been adjusted for cash taxes paid or refinancing-related expenses as noted in footnote 1 and footnote 2, respectively.

 

 

ENGILITY HOLDINGS, INC.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) and Adjusted EBITDA

(dollars in thousands)










Three Months Ended



Six Months Ended




June 29, 2018



June 30, 2017



June 29, 2018



June 30, 2017


Net income


$

13,756



$

9,448



$

20,344



$

17,196



















Interest, taxes, and depreciation and

   amortization

















Interest expense



17,161




18,529




36,539




39,450


Provision for income taxes



4,728




6,050




6,367




11,060


Depreciation and amortization



10,603




11,110




21,740




21,971


EBITDA



46,248




45,137




84,990




89,677



















Adjustments to EBITDA

















Acquisition, restructuring and legal and
   settlement expenses, excluding amortization



1,021




2,342




2,453




3,745


Loss (gain) on sale of business and property,
   plant and equipment, net



15




73




18




(497)


Adjusted EBITDA


$

47,284



$

47,552



$

87,461



$

92,925



















EBITDA Margin



9.5

%



9.1

%



8.8

%



9.2

%

Adjusted EBITDA Margin



9.7

%



9.6

%



9.1

%



9.5

%


















 

(PRNewsfoto/Engility Holdings, Inc.)

 

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SOURCE Engility Holdings, Inc.