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For Release | ||
October 24, 2018 | ||
1:15 p.m. PDT |
• | Revenues were $906.4 million, up 35.9 percent (10.5 percent on a pro forma basis) over the third quarter of 2017. Pro forma assumes the acquisition of ECS occurred at the beginning of 2017. |
• | Net income was $49.2 million ($0.93 per diluted share), up from $34.9 million ($0.66 per diluted share) in the third quarter of 2017. |
• | Adjusted Net Income (a non-GAAP measure) was $68.7 million ($1.30 per diluted share), up from $44.1 million ($0.83 per diluted share) in the third quarter of 2017. |
• | Adjusted EBITDA (a non-GAAP measure) was $112.9 million (12.4 percent of revenues), up from $83.4 million (12.5 percent of revenues) in the third quarter of 2017. |
• | Cash flows from operating activities were $92.1 million, up from $54.6 million in the third quarter of 2017. |
• | Free cash flow (a non-GAAP measure) was $84.6 million, or 9.3 percent of revenues. |
• | During the quarter, paid down $88.0 million of debt and the leverage ratio (a non-GAAP measure) was 2.89 to 1 at September 30, 2018, down from 3.2 to 1 at June 30, 2018. Since the closing of the ECS acquisition on April 2, 2018 through September 30, 2018, repaid $221.0 million of debt. |
• | During the quarter, ECS secured $306.4 million in new awards, which are included in its $1.5 billion contract backlog as of September 30, 2018. |
• | Book-to-bill ratio (a non-GAAP measure) for ECS for the quarter was 1.7 to 1. Book-to-bill ratio was calculated as the sum of the change in total contract backlog during the quarter plus revenues for the quarter, divided by revenues for the quarter. |
• | Revenues of $905.0 million to $915.0 million |
• | Gross margin of 29.5 percent to 30.0 percent |
• | SG&A expenses (excludes amortization of intangible assets) of $178.7 million to $181.2 million (includes $7.0 million in depreciation and $9.1 million in stock-based compensation expense) |
• | Amortization of intangible assets of $18.6 million |
• | Interest expense of $14.4 million |
• | Effective tax rate of 26.0 percent (before any excess tax benefits related to stock-based compensation) |
• | Net income of $40.9 million to $44.6 million |
• | Earnings per diluted share of $0.77 to $0.84 |
• | Diluted shares outstanding of 53.3 million |
• | Adjusted EBITDA(1) (a non-GAAP measure) of $107.0 million to $112.0 million |
• | Adjusted Net Income (a non-GAAP measure) of $59.2 million to $62.9 million |
• | Adjusted Net Income per diluted share(2) (a non-GAAP measure) of $1.11 to $1.18 |
(1) | Depreciation of $2.6 million included in costs of services related to an ECS project and depreciation of $7.0 million included in SG&A expenses are added back in the determination of Adjusted EBITDA. |
(2) | Does not include the “Cash Tax Savings on Indefinite-lived Intangible Assets.” These savings total $6.8 million each quarter, or $0.13 per diluted share, and represent the economic value of the tax deduction that we receive from the amortization of goodwill and trademarks. |
Three Months Ended | Nine Months Ended | ||||||||||||||||||
September 30, | June 30, | September 30, | |||||||||||||||||
2018 | 2017 | 2018 | 2018 | 2017 | |||||||||||||||
Revenues | $ | 906,449 | $ | 667,048 | $ | 878,509 | $ | 2,470,131 | $ | 1,946,889 | |||||||||
Costs of services | 636,277 | 448,733 | 614,663 | 1,718,376 | 1,317,493 | ||||||||||||||
Gross profit | 270,172 | 218,315 | 263,846 | 751,755 | 629,396 | ||||||||||||||
Selling, general and administrative expenses | 177,335 | 149,197 | 179,616 | 521,395 | 440,446 | ||||||||||||||
Amortization of intangible assets | 18,540 | 8,248 | 18,548 | 44,689 | 25,011 | ||||||||||||||
Operating income | 74,297 | 60,870 | 65,682 | 185,671 | 163,939 | ||||||||||||||
Interest expense | (14,606 | ) | (7,099 | ) | (20,573 | ) | (41,724 | ) | (21,667 | ) | |||||||||
Income before income taxes | 59,691 | 53,771 | 45,109 | 143,947 | 142,272 | ||||||||||||||
Provision for income taxes | 10,474 | 18,892 | 11,508 | 31,889 | 51,775 | ||||||||||||||
Income from continuing operations | 49,217 | 34,879 | 33,601 | 112,058 | 90,497 | ||||||||||||||
Loss from discontinued operations, net of tax | (45 | ) | (23 | ) | (40 | ) | (233 | ) | (153 | ) | |||||||||
Net income | $ | 49,172 | $ | 34,856 | $ | 33,561 | $ | 111,825 | $ | 90,344 | |||||||||
Per share income from continuing operations and net income: | |||||||||||||||||||
Basic | $ | 0.94 | $ | 0.66 | $ | 0.64 | $ | 2.14 | $ | 1.72 | |||||||||
Diluted | $ | 0.93 | $ | 0.66 | $ | 0.63 | $ | 2.11 | $ | 1.70 | |||||||||
Number of shares and share equivalents used to calculate earnings per share: | |||||||||||||||||||
Basic | 52,362 | 52,500 | 52,305 | 52,282 | 52,660 | ||||||||||||||
Diluted | 53,034 | 53,173 | 53,010 | 52,990 | 53,319 | ||||||||||||||
Reported | Pro Forma | ||||||||||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | Three Months Ended | Nine Months Ended | ||||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | ||||||||||||||||||||||||||||||
2018 | 2017 | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 | ||||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||||
Apex: | |||||||||||||||||||||||||||||||||
Assignment | $ | 575.2 | $ | 506.4 | $ | 1,653.8 | $ | 1,469.0 | $ | 575.2 | $ | 506.4 | $ | 1,653.8 | $ | 1,469.0 | |||||||||||||||||
Permanent placement | 14.4 | 11.1 | 41.9 | 33.5 | 14.4 | 11.1 | 41.9 | 33.5 | |||||||||||||||||||||||||
589.6 | 517.5 | 1,695.7 | 1,502.5 | 589.6 | 517.5 | 1,695.7 | 1,502.5 | ||||||||||||||||||||||||||
Oxford: | |||||||||||||||||||||||||||||||||
Assignment | 130.4 | 128.0 | 386.1 | 379.9 | 130.4 | 128.0 | 386.1 | 379.9 | |||||||||||||||||||||||||
Permanent placement | 22.4 | 21.6 | 69.2 | 64.5 | 22.4 | 21.6 | 69.2 | 64.5 | |||||||||||||||||||||||||
152.8 | 149.6 | 455.3 | 444.4 | 152.8 | 149.6 | 455.3 | 444.4 | ||||||||||||||||||||||||||
ECS | 164.0 | — | 319.1 | — | 164.0 | 153.1 | 468.2 | 435.0 | |||||||||||||||||||||||||
Consolidated: | |||||||||||||||||||||||||||||||||
Assignment | 705.6 | 634.4 | 2,039.9 | 1,848.9 | 705.6 | 634.4 | 2,039.9 | 1,848.9 | |||||||||||||||||||||||||
Permanent placement | 36.8 | 32.7 | 111.1 | 98.0 | 36.8 | 32.7 | 111.1 | 98.0 | |||||||||||||||||||||||||
ECS | 164.0 | — | 319.1 | — | 164.0 | 153.1 | 468.2 | 435.0 | |||||||||||||||||||||||||
$ | 906.4 | $ | 667.1 | $ | 2,470.1 | $ | 1,946.9 | $ | 906.4 | $ | 820.2 | $ | 2,619.2 | $ | 2,381.9 | ||||||||||||||||||
Percentage of total revenues: | |||||||||||||||||||||||||||||||||
Apex | 65.1 | % | 77.6 | % | 68.6 | % | 77.2 | % | 65.1 | % | 63.1 | % | 64.7 | % | 63.1 | % | |||||||||||||||||
Oxford | 16.8 | % | 22.4 | % | 18.4 | % | 22.8 | % | 16.8 | % | 18.2 | % | 17.4 | % | 18.7 | % | |||||||||||||||||
ECS | 18.1 | % | — | % | 13.0 | % | — | % | 18.1 | % | 18.7 | % | 17.9 | % | 18.2 | % | |||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Assignment | 77.8 | % | 95.1 | % | 82.5 | % | 95.0 | % | 77.8 | % | 77.3 | % | 77.9 | % | 77.7 | % | |||||||||||||||||
Permanent placement | 4.1 | % | 4.9 | % | 4.5 | % | 5.0 | % | 4.1 | % | 4.0 | % | 4.2 | % | 4.1 | % | |||||||||||||||||
ECS | 18.1 | % | — | % | 13.0 | % | — | % | 18.1 | % | 18.7 | % | 17.9 | % | 18.2 | % | |||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Domestic | 95.7 | % | 94.8 | % | 95.3 | % | 95.0 | % | 95.7 | % | 95.8 | % | 95.5 | % | 95.9 | % | |||||||||||||||||
Foreign | 4.3 | % | 5.2 | % | 4.7 | % | 5.0 | % | 4.3 | % | 4.2 | % | 4.5 | % | 4.1 | % | |||||||||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||||||||||||
Gross profit: | |||||||||||||||||||||||||||||||||
Apex | $ | 177.8 | $ | 155.7 | $ | 506.1 | $ | 445.9 | $ | 177.8 | $ | 155.7 | $ | 506.1 | $ | 445.9 | |||||||||||||||||
Oxford | 62.7 | 62.6 | 187.3 | 183.5 | 62.7 | 62.6 | 187.3 | 183.5 | |||||||||||||||||||||||||
ECS | 29.6 | — | 58.3 | — | 29.6 | 27.9 | 85.0 | 84.8 | |||||||||||||||||||||||||
Consolidated | $ | 270.1 | $ | 218.3 | $ | 751.7 | $ | 629.4 | $ | 270.1 | $ | 246.2 | $ | 778.4 | $ | 714.2 | |||||||||||||||||
Gross margin: | |||||||||||||||||||||||||||||||||
Apex | 30.2 | % | 30.1 | % | 29.8 | % | 29.7 | % | 30.2 | % | 30.1 | % | 29.8 | % | 29.7 | % | |||||||||||||||||
Oxford | 41.1 | % | 41.8 | % | 41.1 | % | 41.3 | % | 41.1 | % | 41.8 | % | 41.1 | % | 41.3 | % | |||||||||||||||||
ECS | 18.1 | % | — | % | 18.3 | % | — | % | 18.1 | % | 18.2 | % | 18.1 | % | 19.5 | % | |||||||||||||||||
Consolidated | 29.8 | % | 32.7 | % | 30.4 | % | 32.3 | % | 29.8 | % | 30.0 | % | 29.7 | % | 30.0 | % | |||||||||||||||||
Three Months Ended | Nine Months Ended | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Cash provided by operating activities | $ | 92,082 | $ | 54,594 | $ | 223,561 | $ | 138,187 | |||||||
Capital expenditures | (7,500 | ) | (4,830 | ) | (22,093 | ) | (18,038 | ) | |||||||
Free cash flow (non-GAAP measure) | $ | 84,582 | $ | 49,764 | $ | 201,468 | $ | 120,149 | |||||||
Cash used in investing activities(1) | $ | (7,296 | ) | $ | (30,510 | ) | $ | (782,526 | ) | $ | (43,866 | ) | |||
Cash provided by (used in) financing activities(1) | $ | (88,466 | ) | $ | (15,525 | ) | $ | 564,017 | $ | (94,817 | ) | ||||
(1) | Investing and financing activities in 2018 included the ECS acquisition and related financing. |
2018 | 2017 | ||||||
(Unaudited) | |||||||
Cash and cash equivalents | $ | 40,888 | $ | 36,667 | |||
Accounts receivable, net | 572,864 | 428,536 | |||||
Total current assets | 646,599 | 499,523 | |||||
Goodwill and intangible assets, net | 1,923,193 | 1,246,861 | |||||
Total assets | 2,664,590 | 1,810,129 | |||||
Total current liabilities | 291,417 | 166,717 | |||||
Working capital | 355,182 | 332,806 | |||||
Long-term debt | 1,154,154 | 575,213 | |||||
Other long-term liabilities | 89,195 | 76,808 | |||||
Stockholders’ equity | 1,129,824 | 991,391 | |||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 49,172 | $ | 34,856 | $ | 111,825 | $ | 90,344 | ||||||||
Loss from discontinued operations, net of tax | 45 | 23 | 233 | 153 | ||||||||||||
Interest expense | 14,606 | 7,099 | 41,724 | 21,667 | ||||||||||||
Provision for income taxes | 10,474 | 18,892 | 31,889 | 51,775 | ||||||||||||
Depreciation | 9,759 | 6,403 | 26,609 | 18,482 | ||||||||||||
Amortization of intangible assets | 18,540 | 8,248 | 44,689 | 25,011 | ||||||||||||
EBITDA (non-GAAP measure) | 102,596 | 75,521 | 256,969 | 207,432 | ||||||||||||
Stock-based compensation | 8,619 | 6,382 | 22,380 | 17,943 | ||||||||||||
Acquisition, integration and strategic planning expenses | 1,636 | 1,480 | 14,866 | 3,115 | ||||||||||||
Adjusted EBITDA (non-GAAP measure) | $ | 112,851 | $ | 83,383 | $ | 294,215 | $ | 228,490 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Net income | $ | 49,172 | $ | 34,856 | $ | 111,825 | $ | 90,344 | ||||||||
Loss from discontinued operations, net of tax | 45 | 23 | 233 | 153 | ||||||||||||
Credit facility amendment expenses(1) | — | 804 | 6,159 | 2,728 | ||||||||||||
Acquisition, integration and strategic planning expenses | 1,636 | 1,480 | 14,866 | 3,115 | ||||||||||||
Tax effect on adjustments | (427 | ) | (891 | ) | (5,487 | ) | (2,279 | ) | ||||||||
Non-GAAP net income | 50,426 | 36,272 | 127,596 | 94,061 | ||||||||||||
Amortization of intangible assets | 18,540 | 8,248 | 44,689 | 25,011 | ||||||||||||
Income taxes on amortization for financial reporting purposes not deductible for income tax purposes | (269 | ) | (405 | ) | (807 | ) | (1,217 | ) | ||||||||
Adjusted Net Income (non-GAAP measure)(2) | $ | 68,697 | $ | 44,115 | $ | 171,478 | $ | 117,855 | ||||||||
Per diluted share: | ||||||||||||||||
Net income | $ | 0.93 | $ | 0.66 | $ | 2.11 | $ | 1.70 | ||||||||
Adjustments | 0.37 | 0.17 | 1.13 | 0.51 | ||||||||||||
Adjusted Net Income (non-GAAP measure)(2) | $ | 1.30 | $ | 0.83 | $ | 3.24 | $ | 2.21 | ||||||||
Weighted average common and common equivalent shares outstanding (diluted) | 53,034 | 53,173 | 52,990 | 53,319 | ||||||||||||
(1) | During the nine months ended September 30, 2018 we incurred $22.5 million in fees related to the amendment to our credit facility to fund the acquisition of ECS, of which $6.2 million were expensed as incurred and included in interest expense. The remaining $16.3 million fees were capitalized and are being amortized over the term of the credit facility. During the nine months ended September 30, 2017 we amended our credit facility and incurred $3.3 million in fees, of which $2.7 million were expensed as incurred and included in interest expense, while the remaining were capitalized and are being amortized over the term of the credit facility. |
(2) | Does not include the “Cash Tax Savings on Indefinite-lived Intangible Assets.” These savings total $6.8 million per quarter (approximately $0.13 per diluted share) and represent the economic value of the tax deduction that we receive from the amortization of goodwill and trademarks. |
Q3 2018 | Q2 2018 | Q3 2017 | ||||||||||
Average number of staffing consultants: | ||||||||||||
Apex | 1,660 | 1,532 | 1,567 | |||||||||
Oxford | 929 | 929 | 925 | |||||||||
Average number of customers: | ||||||||||||
Apex | 3,751 | 3,666 | 3,530 | |||||||||
Oxford | 992 | 1,002 | 1,048 | |||||||||
Average number of contract professionals(1): | ||||||||||||
Apex | 20,464 | 19,536 | 18,236 | |||||||||
Oxford | 2,989 | 2,913 | 2,896 | |||||||||
Top 10 customers as a percentage of revenues: | ||||||||||||
Apex | 24.0 | % | 23.9 | % | 26.7 | % | ||||||
Oxford | 12.1 | % | 11.9 | % | 11.3 | % | ||||||
Average bill rate: | ||||||||||||
Apex | $ | 59.89 | $ | 59.53 | $ | 58.16 | ||||||
Oxford | $ | 100.91 | $ | 101.51 | $ | 100.78 | ||||||
Gross profit per staffing consultant: | ||||||||||||
Apex | $ | 107,000 | $ | 111,000 | $ | 99,000 | ||||||
Oxford | $ | 68,000 | $ | 71,000 | $ | 68,000 |
(1) | Average number of contract professionals placed on assignment each week that are considered our employees; this number does not include employees of our subcontractors. |
Q3 2018 | Q2 2018 | Q3 2017 | ||||||||
Firm-fixed-price | 29.4 | % | 28.8 | % | 31.6 | % | ||||
Time and materials | 25.7 | % | 31.6 | % | 30.4 | % | ||||
Cost-plus-fixed-fee | 44.9 | % | 39.6 | % | 38.0 | % |
Q3 2018 | Q2 2018 | Q3 2017 | ||||||||
Department of Defense and Intelligence Agencies | 62.0 | % | 61.6 | % | 61.4 | % | ||||
Federal Civilian | 32.0 | % | 32.9 | % | 34.3 | % | ||||
Commercial and Other | 6.0 | % | 5.5 | % | 4.3 | % |
September 30, 2018 | June 30, 2018 | ||||||||
Funded Contract Backlog(3) | $ | 365.1 | $ | 278.2 | |||||
Negotiated Unfunded Contract Backlog(4) | 1,163.7 | 1,137.2 | |||||||
Contract Backlog | $ | 1,528.8 | $ | 1,415.4 |
(1) | Firm-fixed-price ("FFP") contracts provide for a fixed price for specified products, systems and/or services. Time and materials ("T&M") contracts provide for payments based on fixed hourly rates for each direct labor hour expended and reimbursements for allowable material costs and out-of-pocket expenses. Cost-plus-fixed-fee ("CPFF") contracts provide for reimbursement of our direct contract costs and allowable and allocable indirect costs, plus the negotiated profit margin or fee. |
(2) | Contract backlog represents the estimated amount of future revenues to be recognized under negotiated contracts and task orders as work is performed. Contract backlog excludes awards which have been protested by competitors until the protest is resolved in our favor. ECS segregates contract backlog into two categories, funded contract backlog and negotiated unfunded contract backlog. |
(3) | Funded contract backlog for contracts with U.S. government agencies primarily represents contracts for which funding has been formally awarded less revenues previously recognized on these contracts, and does not include the unfunded portion of contracts where funding is incrementally awarded or authorized by the U.S. government even though the contract may call for performance over a number of years. Funded contract backlog for contracts with non-government agencies represents the estimated value of contracts which may cover multiple future years, less revenues previously recognized on these contracts. |
(4) | Negotiated unfunded contract backlog represents the estimated future revenues to be earned from negotiated contract awards for which funding has not been awarded or authorized, and unexercised priced contract options. Negotiated unfunded contract backlog does not include any estimate of future potential task orders expected to be awarded under indefinite delivery, indefinite quantity (IDIQ), U.S. General Services Administration (GSA) schedules or other master agreement contract vehicles. |
Low | High | ||||||||
Net income(1)(2) | $ | 40.9 | $ | 44.6 | |||||
Interest expense | 14.4 | 14.4 | |||||||
Provision for income taxes(2) | 14.4 | 15.7 | |||||||
Depreciation(3) | 9.6 | 9.6 | |||||||
Amortization of intangible assets | 18.6 | 18.6 | |||||||
EBITDA (non-GAAP measure) | 97.9 | 102.9 | |||||||
Stock-based compensation | 9.1 | 9.1 | |||||||
Adjusted EBITDA (non-GAAP measure) | $ | 107.0 | $ | 112.0 |
Low | High | ||||||||
Net income(1)(2) | $ | 40.9 | $ | 44.6 | |||||
Amortization of intangible assets | 18.6 | 18.6 | |||||||
Income taxes on amortization for financial reporting purposes not deductible for income tax purposes | (0.3 | ) | (0.3 | ) | |||||
Adjusted Net Income (non-GAAP measure)(4) | $ | 59.2 | $ | 62.9 | |||||
Per diluted share: | |||||||||
Net income | $ | 0.77 | $ | 0.84 | |||||
Adjustments | 0.34 | 0.34 | |||||||
Adjusted Net Income (non-GAAP measure)(4) | $ | 1.11 | $ | 1.18 | |||||
Weighted average common and common equivalent shares outstanding (diluted) | 53.3 | 53.3 |
(1) | These estimates do not include acquisition, integration, or strategic planning expenses. |
(2) | These estimates do not include excess tax benefits related to stock-based compensation. |
(3) | Composed of $2.6 million of depreciation included in costs of services related to an ECS project and $7.0 million of depreciation included in SG&A expenses. |
(4) | Does not include the “Cash Tax Savings on Indefinite-lived Intangible Assets.” These savings total $6.8 million per quarter ($0.13 per diluted share) and represent the economic value of the tax deduction that we receive from the amortization of goodwill and trademarks. |
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