PAE Incorporated (“PAE” or the “Company”) (NASDAQ: PAE, PAEWW)
today announced second-quarter 2020 financial and operating
results.
CEO Commentary
“I am very pleased with our financial and
operating performance, despite headwinds from COVID-19.
Fundamentally, the core business is performing as we
expected, and contract award win rates are consistent with our
plan. Revenue, excluding impacts from COVID-19, is in line
with our expectations, and profitability and cash flow exceeded
expectations,” said PAE President and Chief Executive Officer John
Heller. "I want to thank our dedicated workforce, partners and
customers who continue to drive business performance and mission
success amidst the pandemic.”
COVID-19 Financial Impact
We estimate the second-quarter impact from the
COVID-19 pandemic to be approximately $58.5 million of revenue and
an immaterial net impact to adjusted EBITDA and free cash flow.
These impacts were primarily driven by disruptions to logistics
operations and PAE employees and subcontractors unable to access
facilities to perform on customer contracts. Since the onset
of the COVID-19 pandemic, PAE has operated as an essential
business, continuing to operate and support our customers in a
resilient market.
Second-Quarter 2020 Results
Revenues for the quarter of $643.3 million
decreased $52.3 million, or 7.5%, compared to the prior year
period. The decrease was attributable to a $58.5 million impact
from COVID-19, of which approximately $40.4 million was non-labor
and $18.1 million was labor, which decrease was partially offset by
a $6.2 million net increase in contract volume and new business
programs. The Global Mission Services (“GMS”) and National Security
Solutions (“NSS”) segments revenue decreased by approximately $18.2
million and $34.1 million, respectively.
Operating income for the quarter was $34.3
million, compared with operating income of $26.2 million in the
prior year period. The increase resulted from lower Selling,
General and Administrative (“SG&A”) expenses and increased
volume on higher margin programs, which increase was partially
offset by lower revenue volume.
The net income attributed to PAE for the quarter
was $16.0 million, or $0.17 per diluted share, compared with net
income of approximately $2.7 million, or $0.13 per diluted share in
the prior year period. The improvement in net income for the second
quarter of 2020, was primarily driven by factors driving the
increase in operating income and lower interest expense, which was
driven by a reduction in debt year over year.
Adjusted EBITDA for the quarter was $48.4
million, or 7.5% of revenue, compared to $39.5 million, or 5.7% of
revenue, in the prior year period. Adjusted EBITDA and margins
benefited by factors driving the increase in operating income.
Global Mission ServicesGMS revenues for the
quarter of $507.9 million decreased $18.2 million, or 3.5%,
compared to the prior year period. The decrease was attributable to
a $40.7 million impact from COVID-19, of which approximately $29.7
million was non-labor and $11.0 million was labor, partially offset
by a $22.5 million net increase in contract volume and new business
programs.
GMS operating income for the quarter was $31.5
million, compared to $25.3 million, in the prior-year period.
The improvement was driven by increased volume on higher margin
programs partially offset by lower revenue volume.
GMS adjusted operating income2 for the quarter
was $37.4 million, or 7.4% of revenue, compared to $30.7 million,
or 5.8% of revenue, in the prior year period. GMS adjusted
operating income and margins2 benefited by factors driving the
increase in GMS operating income.
National Security SolutionsNSS revenues for the
quarter of $135.4 million decreased $34.1 million, or 20.1%,
compared to the prior year period. The decrease was attributable to
an $17.8 million impact from COVID-19, of which approximately $11.0
million was non-labor and $6.8 million was labor, and by a $16.3
million decrease from small business set-aside re-compete losses,
net of new business wins.
NSS operating income for the quarter was $7.7
million, compared to $4.0 million in the prior year period. The
increase was driven by lower SG&A expenses and increased volume
on higher margin programs, partially offset by lower revenue
volume.
NSS adjusted operating income3 for the quarter
was $11.0 million, or 8.1% of revenue, compared to $8.8 million, or
5.2% of revenue, in the prior year period. NSS adjusted
operating income and margins benefited by factors driving the
increase in NSS operating income.
Cash Flow Summary
Net cash provided by operating activities for
the quarter of $44.7 million, increased by $12.1 million over the
prior year period, primarily as a result of an increase in accounts
payable and accrued salaries, offset by reduced cash
collections.
As of June 28, 2020, PAE had cash and cash
equivalents totaling $138.5 million and had no outstanding
borrowings on its asset-based revolving loan credit facility.
Business Development Highlights and
Contract Awards
Net bookings totaled $521 million in the second
quarter and $2.6 billion over the trailing 12 months, representing
a book to bill ratio of 0.8x and 1.0x for the second quarter and
trailing 12 months, respectively. The net bookings were
comprised of comparable percentages of new business, contract
extensions and recompete awards. Net bookings exclude the
previously announced $1.3 billion U.S. Customs and Border
Protection award previously protested.
Notable second quarter awards received
include:
Notable New Business Award:
- Marine Corps Air Station
Iwakuni, Japan: PAE’s GMS segment was awarded a $25
million, 4-year contract with the U.S. Navy to support systems
maintenance, testing and installation at the Marine Corps Air
Station Iwakuni, Japan.
- Georgia World Congress
Center: PAE’s GMS segment was awarded a $21.5 million
contract by the Georgia Emergency Management and Homeland Security
Agency to mobilize the Georgia World Congress Center in Atlanta as
an Alternative Care Site to provide treatment for COVID-19
patients.
- DTRA CTRIC III:
PAE’s NSS segment was awarded a $16.6 million, three-year contract
with a national security customer providing counter-threat
solutions.
Notable Recompete Awards:
- Eglin Air Force
Base: PAE’s GMS segment was awarded a $158 million,
seven-year contract with the U.S. Air Force to manage aircraft and
equipment maintenance supporting 96th Test Wing missions at Eglin
Air Force Base, Florida. The contract provides the potential to
expand the scope of the previous contract to include new aircraft
platforms.
Notable IDIQ Awards:
- AFCAP V:
PAE-Perini, a joint venture among PAE and Perini Management
Services, Inc., was awarded one of eight positions on the Air Force
Contract Augmentation Program IDIQ vehicle, also known as AFCAP V,
with a combined ceiling value of $6.4 billion.
- Aircraft Maintenance
Enterprise Solution: Subsequent to the end of the
quarter, PAE also won a seat on the $14 billion multiple-award,
IDIQ contract for Aircraft Maintenance Enterprise Solution -- a
strategic sourcing vehicle for Air Force-wide contracted aircraft
maintenance. PAE is one of eight awardees on the contract
vehicle.
The Company’s backlog at the end of the quarter
was $6.3 billion, of which $1.2 billion was
funded.
2020 Financial Outlook
As a result of the Company's financial results
for the first six months of 2020 and its updated outlook for the
remainder of the year, the Company is revising its fiscal year 2020
guidance as follows:
- Revenues of $2,600 million to $2,700 million, down from
previous guidance of $2,750 million to $2,850 million;
- Adjusted EBITDA of $172 million to $178 million, narrowed from
previous guidance of $170 million to $178 million; and,
- Free Cash Flow of at least $100 million, unchanged from
previous guidance.
“Due to COVID-19 impacts on our logistics
operations, certain labor-driven Training and Business Process
Outsourcing programs and delays in new business awards caused by
COVID-19, we are lowering revenue guidance for the year. However,
we are maintaining and narrowing our Adjusted EBITDA outlook driven
by increased profitability on existing business and a shift in
revenue mix toward higher margin labor revenue. Furthermore,
we are also reiterating our free cash flow guidance,” said PAE
Executive Vice President and Chief Financial Officer Charlie
Peiffer.
Adjusted EBITDA is a non-GAAP financial measure.
The Company is not providing a quantitative reconciliation of
adjusted EBITDA in its 2020 financial guidance in reliance on the
“unreasonable efforts” exception for forward-looking non-GAAP
measures set forth in SEC rules because certain financial
information, the probable significance of which cannot be
determined, is not available and cannot be reasonably estimated
without unreasonable effort and expense. In this regard, the
Company does not provide a reconciliation of forward-looking
adjusted EBITDA (non-GAAP) to GAAP net income, due to the inherent
difficulty in forecasting and quantifying certain amounts that are
necessary for such reconciliation. Because certain deductions for
non-GAAP exclusions used to calculate projected net income may vary
significantly based on actual events, the Company is not able to
forecast on a GAAP basis with reasonable certainty all deductions
needed in order to provide a GAAP calculation of projected net
income at this time. The amounts of these deductions may be
material and, therefore, could result in projected GAAP net income
being materially less than is indicated by estimated adjusted
EBITDA (non-GAAP). In addition, the Company does not provide
a reconciliation of forward-looking free cash flow (non-GAAP) to
GAAP cash flows provided by operating activities and GAAP cash used
in investing activities, due to the inherent difficulty in
forecasting and quantifying certain amounts that are necessary for
such reconciliation. Because certain line items used to calculate
projected cash flows provided by operating activities and cash used
in investing activities may vary significantly based on actual
events, the Company is not able to forecast on a GAAP basis with
reasonable certainty all line items needed in order to provide a
GAAP calculation of projected free cash flow at this time.
Conference Call Information
As previously announced, PAE will host a conference call and
webcast today, August 6, 2020, at 8a.m. ET. Management will
review the Company's second-quarter 2020 financial results,
followed by a question-and-answer session. Listeners will be able
to access a presentation summarizing the second-quarter 2020
results on the PAE Investor Relations website.
Interested parties are invited to join the webcast from the PAE
Investor Relations website and may register for an email reminder
using the “Events and Presentations” link. Due to the COVID-19
pandemic, teleconference providers globally are experiencing
significant increases in conference call volume. As such, the
Company recommends that parties participate by joining the webcast.
Alternatively, if the webcast is not practical, attendees may
listen to the conference call by dialing (855) 982-6676 and
entering conference ID 6993312. The international dial-in access
number is (614) 999-9188.
The Company will post an archive of the webcast following the
call on the PAE Investor Relations website.
Forward-Looking Statements
This press release may contain a number of “forward-looking
statements” as defined in the Private Securities Litigation Reform
Act of 1995. These forward-looking statements include, but are not
limited to, statements about PAE’s possible or assumed future
results of operations and cash flows, financial results, business
strategies, debt levels, competitive position, industry
environment, potential growth opportunities, potential impact of
COVID-19, effects of regulation, backlog, estimation of resources
for contracts, risks related to IDIQ contracts, strategy for and
management of growth, needs for additional capital, risks related
to U.S. government contracting generally, including congressional
approval of appropriations, and bid protests. These forward-looking
statements are based on PAE’s management’s current expectations,
estimates, projections and beliefs, as well as a number of
assumptions concerning future events. When used in this press
release, the words “estimates,” “projected,” “expects,”
“anticipates,” “forecasts,” “plans,” “intends,” “believes,”
“seeks,” “may,” “will,” “should,” “future,” “propose” and
variations of these words or similar expressions (or the negative
versions of such words or expressions) are intended to identify
forward-looking statements.
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 PAE’s management’s control, that
could cause actual results to differ materially from the results
discussed in the forward-looking statements.
Forward-looking statements included in this release speak only
as of the date of this release. PAE does not undertake any
obligation to update its forward-looking statements to reflect
events or circumstances after the date of this release except as
may be required by the federal securities laws.
About PAE
For 65 years, PAE has tackled the world’s toughest challenges to
deliver agile and steadfast solutions to the U.S. government and
its allies. With a global workforce of approximately 20,000 on all
seven continents and in approximately 60 countries, PAE delivers a
broad range of operational support services to meet the critical
needs of our clients. Our headquarters is in Falls Church,
Virginia. Find us online at pae.com, on Facebook, Twitter and
LinkedIn.
For investor inquiries regarding PAE:
Mark ZindlerVice President Investor
RelationsPAE703-717-6017mark.zindler@pae.com
For media inquiries regarding PAE:
Terrence NowlinSenior Communications
ManagerPAE703-656-7423terrence.nowlin@pae.com
PAE IncorporatedCondensed Consolidated Statement
of Operations (Unaudited)(In thousands, except per share data)
|
Three Months Ended |
|
Six Months Ended |
|
June 28, |
|
June 30, |
|
June 28, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
$ |
643,303 |
|
|
$ |
695,607 |
|
|
$ |
1,260,556 |
|
|
$ |
1,369,091 |
|
Cost of revenues |
496,678 |
|
|
540,772 |
|
|
961,886 |
|
|
1,057,931 |
|
Selling, general and
administrative expenses |
105,451 |
|
|
126,438 |
|
|
242,777 |
|
|
261,474 |
|
Amortization of intangible
assets |
8,047 |
|
|
8,196 |
|
|
16,094 |
|
|
16,853 |
|
Total operating expenses |
610,176 |
|
|
675,406 |
|
|
1,220,757 |
|
|
1,336,258 |
|
Program profit |
33,127 |
|
|
20,201 |
|
|
39,799 |
|
|
32,833 |
|
Other income, net |
1,168 |
|
|
5,958 |
|
|
1,954 |
|
|
7,678 |
|
Operating income |
34,295 |
|
|
26,159 |
|
|
41,753 |
|
|
40,511 |
|
Interest expense, net |
(13,757 |
) |
|
(21,617 |
) |
|
(34,705 |
) |
|
(44,277 |
) |
Income (loss) before income
taxes |
20,538 |
|
|
4,542 |
|
|
7,048 |
|
|
(3,766 |
) |
Expense (benefit) from income
taxes |
3,752 |
|
|
1,153 |
|
|
(4,961 |
) |
|
(1,994 |
) |
Net income (loss) |
16,786 |
|
|
3,389 |
|
|
12,009 |
|
|
(1,772 |
) |
Noncontrolling interest in
earnings of ventures |
765 |
|
|
715 |
|
|
931 |
|
|
1,274 |
|
Net income (loss) attributed
to PAE Incorporated |
$ |
16,021 |
|
|
$ |
2,674 |
|
|
$ |
11,078 |
|
|
$ |
(3,046 |
) |
|
|
|
|
|
|
|
|
Net income (loss) per share attributed to PAE
Incorporated: |
|
|
|
|
|
|
|
Basic |
$ |
0.17 |
|
|
$ |
0.13 |
|
|
$ |
0.15 |
|
|
$ |
(0.14 |
) |
Diluted |
$ |
0.17 |
|
|
$ |
0.13 |
|
|
$ |
0.15 |
|
|
$ |
(0.14 |
) |
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
|
|
|
|
|
Basic |
92,044,098 |
|
|
21,127,823 |
|
|
75,890,028 |
|
|
21,127,823 |
|
Diluted |
92,787,379 |
|
|
21,127,823 |
|
|
76,273,931 |
|
|
21,127,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Balance
Sheets (Unaudited)(In thousands, except share and par value
amounts)
|
June 28, |
|
December 31, |
|
2020 |
|
2019 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
138,469 |
|
|
$ |
68,035 |
|
Accounts receivable, net |
432,185 |
|
|
442,180 |
|
Prepaid expenses and other
current assets |
45,676 |
|
|
43,549 |
|
Total current assets |
616,330 |
|
|
553,764 |
|
Property and equipment,
net |
26,841 |
|
|
30,404 |
|
Deferred income taxes,
net |
12,017 |
|
|
3,212 |
|
Investments |
17,848 |
|
|
17,925 |
|
Goodwill |
409,588 |
|
|
409,588 |
|
Intangible assets, net |
164,370 |
|
|
180,464 |
|
Operating lease right-of-use
assets, net |
154,375 |
|
|
162,184 |
|
Other noncurrent assets |
9,663 |
|
|
13,758 |
|
Total assets |
$ |
1,411,032 |
|
|
$ |
1,371,299 |
|
Liabilities and stockholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
107,154 |
|
|
$ |
124,661 |
|
Accrued expenses |
128,992 |
|
|
102,315 |
|
Customer advances and billings
in excess of costs |
70,695 |
|
|
51,439 |
|
Salaries, benefits and payroll
taxes |
135,177 |
|
|
130,633 |
|
Accrued taxes |
14,614 |
|
|
18,488 |
|
Current portion of long-term
debt, net |
22,969 |
|
|
22,007 |
|
Operating lease liabilities,
current portion |
38,946 |
|
|
36,997 |
|
Other current liabilities |
31,457 |
|
|
30,893 |
|
Total current liabilities |
550,004 |
|
|
517,433 |
|
Long-term debt, net |
589,828 |
|
|
727,930 |
|
Long-term operating lease
liabilities |
118,452 |
|
|
129,244 |
|
Other long-term
liabilities |
7,415 |
|
|
8,601 |
|
Total liabilities |
1,265,699 |
|
|
1,383,208 |
|
Stockholders' equity: |
|
|
|
Preferred stock, $0.0001 par
value per share, 1,000,000 shares authorized; no shares issued and
outstanding |
— |
|
|
— |
|
Common stock, $0.0001 par
value per share: 210,000,000 shares authorized; 92,040,654 and
21,127,823 shares issued and outstanding as of June 28, 2020 and
December 31, 2019, respectively |
9 |
|
|
2 |
|
Additional paid-in
capital |
245,815 |
|
|
101,743 |
|
Accumulated deficit |
(134,293 |
) |
|
(145,371 |
) |
Accumulated other
comprehensive loss |
(628 |
) |
|
(134 |
) |
Total PAE Incorporated stockholders' equity |
110,903 |
|
|
(43,760 |
) |
Noncontrolling interests |
34,430 |
|
|
31,851 |
|
Total liabilities and stockholders' equity |
$ |
1,411,032 |
|
|
$ |
1,371,299 |
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited) (In thousands)
|
Three Months Ended |
|
June 28, |
|
June 30, |
|
2020 |
|
2019 |
Operating
activities |
|
|
|
Net loss |
$ |
16,786 |
|
|
$ |
3,388 |
|
Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
2,489 |
|
|
3,291 |
|
Amortization of intangible assets |
8,047 |
|
|
8,196 |
|
Amortization of debt issuance cost |
1,758 |
|
|
2,032 |
|
Stock-based compensation |
3,700 |
|
|
— |
|
Net undistributed income from unconsolidated ventures |
(1,076 |
) |
|
(884 |
) |
Deferred income taxes, net |
(4,214 |
) |
|
(812 |
) |
Other non-cash activities, net |
134 |
|
|
2,905 |
|
Changes in operating assets and liabilities, net: |
|
|
|
Accounts receivable, net |
(11,262 |
) |
|
49,764 |
|
Accounts payable |
(15,130 |
) |
|
(42,506 |
) |
Accrued expenses |
10,137 |
|
|
2,246 |
|
Customer advances and billings in excess of costs |
1,059 |
|
|
2,907 |
|
Salaries, benefits and payroll taxes |
25,617 |
|
|
16,546 |
|
Inventories, net |
1,073 |
|
|
(50 |
) |
Prepaid expenses and other current assets |
(335 |
) |
|
5,209 |
|
Other current and noncurrent liabilities |
(556 |
) |
|
(7,273 |
) |
Investments |
951 |
|
|
933 |
|
Other noncurrent assets |
6,871 |
|
|
(10,731 |
) |
Accrued taxes |
(1,374 |
) |
|
(2,601 |
) |
Net cash provided by operating activities |
44,675 |
|
|
32,560 |
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(1,193 |
) |
|
(2,016 |
) |
Other investing activities,
net |
37 |
|
|
2,039 |
|
Net cash used in investing activities |
(1,156 |
) |
|
23 |
|
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
1,800 |
|
|
4,050 |
|
Borrowings on long-term
debt |
468 |
|
|
51,431 |
|
Repayments on long-term
debt |
(7,920 |
) |
|
(73,883 |
) |
Payments of debt issuance
costs |
— |
|
|
— |
|
Recapitalization from merger
with Gores III |
5 |
|
|
— |
|
Payment of underwriting and
transaction costs |
1 |
|
|
— |
|
Distribution to selling
stockholders |
— |
|
|
— |
|
Other financing activities,
net |
— |
|
|
(742 |
) |
Net cash provided by (used in) financing activities |
(5,938 |
) |
|
(19,144 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
1,098 |
|
|
(747 |
) |
Net increase
(decrease) in cash and cash equivalents |
38,679 |
|
|
12,692 |
|
Cash and cash equivalents at
beginning of period |
99,790 |
|
|
42,545 |
|
Cash and cash
equivalents at end of period |
138,469 |
|
|
55,237 |
|
|
|
|
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
12,378 |
|
|
$ |
20,127 |
|
Cash paid for taxes |
$ |
(1,523 |
) |
|
$ |
2,289 |
|
Supplemental non-cash
financing activities |
|
|
|
Working capital adjustment
payable to Shay shareholders |
$ |
20,169 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited) (continued) (In thousands)
|
Six Months Ended |
|
June 28, |
|
June 30, |
|
2020 |
|
2019 |
Operating
activities |
|
|
|
Net loss |
$ |
12,009 |
|
|
$ |
(1,772 |
) |
Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
5,072 |
|
|
6,301 |
|
Amortization of intangible assets |
16,094 |
|
|
16,853 |
|
Amortization of debt issuance cost |
7,821 |
|
|
4,082 |
|
Stock-Based compensation |
3,700 |
|
|
— |
|
Net undistributed income from unconsolidated ventures |
(1,739 |
) |
|
(2,184 |
) |
Deferred income taxes, net |
(13,295 |
) |
|
(372 |
) |
Other non-cash activities, net |
404 |
|
|
3,324 |
|
Changes in operating assets and liabilities, net: |
|
|
|
Accounts receivable, net |
9,607 |
|
|
28,396 |
|
Accounts payable |
(17,547 |
) |
|
11,278 |
|
Accrued expenses |
6,358 |
|
|
(5,166 |
) |
Customer advances and billings in excess of costs |
19,282 |
|
|
26,297 |
|
Salaries, benefits and payroll taxes |
4,310 |
|
|
9,845 |
|
Inventories, net |
2,415 |
|
|
(2,051 |
) |
Prepaid expenses and other current assets |
(3,256 |
) |
|
(545 |
) |
Other current and noncurrent liabilities |
(5,101 |
) |
|
(9,580 |
) |
Investments |
1,701 |
|
|
1,769 |
|
Other noncurrent assets |
11,600 |
|
|
(9,951 |
) |
Accrued taxes |
(3,847 |
) |
|
(4,601 |
) |
Net cash provided by operating activities |
55,588 |
|
|
71,923 |
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(1,597 |
) |
|
(5,633 |
) |
Other investing activities,
net |
37 |
|
|
2,042 |
|
Net cash used in investing activities |
(1,560 |
) |
|
(3,591 |
) |
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
1,950 |
|
|
5,400 |
|
Borrowings on long-term
debt |
60,468 |
|
|
69,319 |
|
Repayments on long-term
debt |
(204,464 |
) |
|
(136,821 |
) |
Payments of debt issuance
costs |
(964 |
) |
|
— |
|
Recapitalization from merger
with Gores III |
605,713 |
|
|
— |
|
Payment of underwriting and
transaction costs |
(27,267 |
) |
|
— |
|
Distribution to selling
stockholders |
(419,548 |
) |
|
— |
|
Other financial activities,
net |
(292 |
) |
|
(742 |
) |
Net cash provided by (used in) financing activities |
15,596 |
|
|
(62,844 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
810 |
|
|
(1,205 |
) |
Net increase
(decrease) in cash and cash equivalents |
70,434 |
|
|
4,283 |
|
Cash and cash equivalents at
beginning of period |
68,035 |
|
|
50,954 |
|
Cash and cash
equivalents at end of period |
$ |
138,469 |
|
|
$ |
55,237 |
|
|
|
|
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
23,278 |
|
|
$ |
39,538 |
|
Cash paid for taxes |
$ |
2,796 |
|
|
$ |
4,897 |
|
Supplemental non-cash
financing activities |
|
|
|
Working capital adjustment
payable to Shay shareholders |
$ |
20,169 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
PAE INCORPORATEDSEGMENT DATA(Amounts in
thousands)
|
Three Months Ended |
|
Six Months Ended |
|
June 28, |
|
June 30, |
|
June 28, |
|
June 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues |
|
|
|
|
|
|
|
GMS |
$ |
507,854 |
|
|
$ |
526,025 |
|
|
$ |
965,298 |
|
|
$ |
1,030,504 |
|
NSS |
135,449 |
|
|
169,582 |
|
|
295,258 |
|
|
338,587 |
|
Consolidated revenues |
$ |
643,303 |
|
|
$ |
695,607 |
|
|
$ |
1,260,556 |
|
|
$ |
1,369,091 |
|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
|
|
|
|
|
GMS |
$ |
31,537 |
|
|
$ |
25,276 |
|
|
$ |
44,140 |
|
|
$ |
51,067 |
|
NSS |
7,725 |
|
|
3,974 |
|
|
12,092 |
|
|
3,187 |
|
Corporate |
(4,967 |
) |
|
(3,091 |
) |
|
(14,479 |
) |
|
(13,743 |
) |
Consolidated operating
income |
$ |
34,295 |
|
|
$ |
26,159 |
|
|
$ |
41,753 |
|
|
$ |
40,511 |
|
|
|
|
|
|
|
|
|
Amortization of intangible
assets |
|
|
|
|
|
|
|
GMS |
$ |
4,115 |
|
|
$ |
4,140 |
|
|
$ |
8,231 |
|
|
$ |
8,399 |
|
NSS |
3,932 |
|
|
4,056 |
|
|
7,863 |
|
|
8,454 |
|
Consolidated amortization of
intangible assets |
$ |
8,047 |
|
|
$ |
8,196 |
|
|
$ |
16,094 |
|
|
$ |
16,853 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAE INCORPORATEDBACKLOG(Amounts in thousands)
|
As of |
|
As of |
|
June 28, |
|
December 31, |
|
2020 |
|
2019 |
Global Mission Services: |
|
|
|
Funded backlog |
$ |
970,554 |
|
|
$ |
1,173,196 |
|
Unfunded backlog |
3,771,073 |
|
|
3,393,081 |
|
Total GMS backlog |
$ |
4,741,627 |
|
|
$ |
4,566,277 |
|
|
|
|
|
National Security
Solutions: |
|
|
|
Funded backlog |
$ |
270,065 |
|
|
$ |
311,214 |
|
Unfunded backlog |
1,253,905 |
|
|
1,474,309 |
|
Total NSS backlog |
$ |
1,523,970 |
|
|
$ |
1,785,523 |
|
|
|
|
|
Total: |
|
|
|
Funded backlog |
$ |
1,240,619 |
|
|
$ |
1,484,410 |
|
Unfunded backlog |
5,024,978 |
|
|
4,867,390 |
|
Total backlog |
$ |
6,265,597 |
|
|
$ |
6,351,800 |
|
|
|
|
|
|
|
|
|
Backlog represents the estimated amount of
future revenues to be recognized under negotiated contracts and
task orders as work is performed and excludes contract awards which
have been protested by competitors until the protest is resolved in
our favor. PAE segregates backlog into two categories, funded
backlog and unfunded backlog.
Funded backlog refers to the value on contracts
for which funding is appropriated less revenues previously
recognized on these contracts.
Unfunded backlog represents the estimated future
revenues to be earned from negotiated contracts for which funding
has not been appropriated or authorized, and unexercised priced
contract options. Unfunded 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.
Non-GAAP Financial Measures
The Company uses EBITDA, adjusted EBITDA,
adjusted EBITDA margin, adjusted operating income per segment and
adjusted operating income margin per segment as supplemental
non-GAAP measures of performance. PAE defines EBITDA as net income
excluding (i) interest expense, (ii) provision for or benefit from
income taxes and (iii) depreciation and amortization.
Adjusted EBITDA and adjusted operating income per segment exclude
certain amounts included in EBITDA as provided in the
reconciliations provided herein. Adjusted EBITDA is equal to the
sum of adjusted operating income for each segment. Adjusted EBITDA
margin is calculated as adjusted EBITDA divided by revenues
expressed as a percentage and adjusted operating income margin is
calculated as adjusted operating income divided by revenues
expressed as a percentage.
For 2020 and 2019, the Company’s net income was
impacted by certain events that do not reflect the cost of our
operations and which may affect the period-over-period assessment
of operating results. The non-GAAP financial measures demonstrate
the impact of these events.
During 2019 substantially all the assets of PAE
ISR LLC (“ISR”) were sold. The Company believes that it is
helpful for investors to be able to evaluate the performance of
PAE’s underlying business based on excluding ISR’s operations
during the year. To calculate the loss, adjusted EBITDA and
adjusted operating income without ISR, the Company removed ISR from
its revenue and loss metrics for the second quarter of 2019.
These non-GAAP measures of performance are used
by management to conduct and evaluate its business during its
regular review of operating results for the periods
presented. Management and the Company’s Board utilize these
non-GAAP measures to make decisions about the use of the Company’s
resources, analyze performance between periods, develop internal
projections and measure management performance. PAE believes these
non-GAAP measures are useful to investors in evaluating the
Company’s ongoing operating and financial results and understanding
how such results compare with the Company’s historical
performance.
In addition to the above non-GAAP financial
measures, the Company has included backlog, net bookings, and
book-to-bill ratio in this release. Backlog is an operational
measure representing the estimated amount of future revenues to be
recognized under negotiated contracts and task orders as work is
performed and excludes contract awards which have been protested by
competitors until the protest is resolved in our favor. Net
bookings are an operational measure representing the change in
backlog between reporting periods plus reported revenue for the
period and book-to-bill ratio is an operational measure
representing net bookings divided by reported revenues for the same
period. We believe backlog, net bookings and book-to-bill ratio are
useful metrics for investors because they are an important measure
of business development performance and revenue growth. These
metrics are used by management to conduct and evaluate its business
during its regular review of operating results for the periods
presented.
Reconciliation of GAAP net income to Adjusted EBITDA, a
non-GAAP Measure - Company |
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 28, |
|
June 30, |
|
|
|
2020 |
|
2019 |
|
Change |
Net (loss) income attributed to PAE Incorporated |
$ |
16,021 |
|
|
$ |
2,674 |
|
|
$ |
13,347 |
|
Interest expense, net |
13,757 |
|
|
21,617 |
|
|
(7,860 |
) |
Provision for taxes |
3,752 |
|
|
1,153 |
|
|
2,599 |
|
Depreciation and
amortization |
10,536 |
|
|
11,487 |
|
|
(951 |
) |
M&A costs |
(752 |
) |
|
948 |
|
|
(1,700 |
) |
Disposal of assets |
— |
|
|
5,003 |
|
|
(5,003 |
) |
Non-core expenses (1) |
1,195 |
|
|
1,214 |
|
|
(19 |
) |
Non-cash items (2) |
— |
|
|
(4,494 |
) |
|
4,494 |
|
Forward loss accruals (3) |
— |
|
|
(1,823 |
) |
|
1,823 |
|
Sponsor fees (4) |
— |
|
|
1,250 |
|
|
(1,250 |
) |
Equity based compensation
(5) |
3,519 |
|
|
— |
|
|
3,519 |
|
Other (6) |
371 |
|
|
421 |
|
|
(50 |
) |
Adjusted EBITDA |
$ |
48,399 |
|
|
$ |
39,450 |
|
|
$ |
8,949 |
|
Adjusted EBITDA margin |
7.5 |
% |
|
5.7 |
% |
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP operating income to
adjusted operating income, a non-GAAP Measure -
GMS |
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 28, |
|
June 30, |
|
|
|
2020 |
|
2019 |
|
Change |
Operating income |
$ |
31,537 |
|
|
$ |
25,276 |
|
|
$ |
6,261 |
|
Corp operating loss allocation
(7) |
(3,918 |
) |
|
(2,353 |
) |
|
(1,565 |
) |
Corporate NCI allocation |
(804 |
) |
|
(814 |
) |
|
10 |
|
Depreciation and
amortization |
6,057 |
|
|
6,749 |
|
|
(692 |
) |
M&A costs |
553 |
|
|
636 |
|
|
(83 |
) |
Disposal of assets |
— |
|
|
— |
|
|
— |
|
Non-core expenses (1) |
943 |
|
|
718 |
|
|
225 |
|
Non-cash items (2) |
— |
|
|
299 |
|
|
(299 |
) |
Forward loss accruals (3) |
— |
|
|
(1,074 |
) |
|
1,074 |
|
Sponsor fees (4) |
— |
|
|
945 |
|
|
(945 |
) |
Equity based compensation
(5) |
2,777 |
|
|
— |
|
|
2,777 |
|
Other (6) |
293 |
|
|
287 |
|
|
6 |
|
Adjusted operating income |
$ |
37,438 |
|
|
$ |
30,669 |
|
|
$ |
6,769 |
|
Adjusted operating income
margin |
7.4 |
% |
|
5.8 |
% |
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP operating income to adjusted
operating income, a non-GAAP Measure - NSS |
(in thousands) |
|
|
|
|
|
|
Three Months Ended |
|
|
|
June 28, |
|
June 30, |
|
|
|
2020 |
|
2019 |
|
Change |
Operating income |
7,725 |
|
|
3,974 |
|
|
$ |
3,751 |
|
Corp operating loss allocation
(7) |
(1,048 |
) |
|
(737 |
) |
|
(311 |
) |
Corporate NCI allocation |
39 |
|
|
99 |
|
|
(60 |
) |
Depreciation and
amortization |
4,479 |
|
|
4,739 |
|
|
(260 |
) |
M&A costs |
(1,305 |
) |
|
312 |
|
|
(1,617 |
) |
Disposal of assets |
— |
|
|
5,003 |
|
|
(5,003 |
) |
Non-core expenses (1) |
252 |
|
|
496 |
|
|
(244 |
) |
Non-cash items (2) |
— |
|
|
(4,793 |
) |
|
4,793 |
|
Forward loss accruals (3) |
— |
|
|
(745 |
) |
|
745 |
|
Sponsor fees (4) |
— |
|
|
305 |
|
|
(305 |
) |
Equity based compensation
(5) |
743 |
|
|
— |
|
|
743 |
|
Other (6) |
78 |
|
|
133 |
|
|
(55 |
) |
Adjusted operating income |
$ |
10,963 |
|
|
$ |
8,786 |
|
|
$ |
2,177 |
|
Adjusted operating income
margin |
8.1 |
% |
|
5.2 |
% |
|
|
|
|
|
|
|
|
|
|
(1) Non-core expenses include certain
professional fees, gain/loss on disposal of fixed assets,
settlements and certain severance costs.(2) Non-cash items include
idle facilities charges for facilities the Company no longer
occupies, pension curtailment costs and unrealized FX
gains/losses.(3) Forward loss accruals include adjustments related
to future expected losses recognized in the current period.(4)
Sponsor fees include management fees and out of pocket expenses
paid to the Company’s former private equity sponsor for general
management, transactional, financial and other corporate advisory
services.(5) Equity based compensation reflects costs associated
with the issuance of restricted and performance shares to PAE
employees and independent directors.(6) Other costs include
adjustments related to adjustments to offset capitalized internal
labor and state income taxes that were not captured in reported
income tax expense.(7) Corporate operating loss allocation includes
certain selling, general and administrative, depreciation and
amortization costs that cannot be assigned to a specific segment;
this cost is allocated based on proportionate segment revenues for
the period in which the cost is incurred.
_______________1 Adjusted EBITDA and Adjusted
EBITDA margin are non-GAAP financial measures. A
reconciliation of adjusted EBITDA and adjusted EBITDA margin to
their most directly comparable GAAP financial measure, net income
(loss), and a discussion of Adjusted EBITDA, Adjusted EBITDA
margins and other non-GAAP financial measures, is contained in the
“Non-GAAP Financial Measures” section of this release.2 GMS
adjusted operating income and adjusted operating income margin are
non-GAAP financial measures. A reconciliation of GMS adjusted
operating income and adjusted operating income margin to their most
directly comparable GAAP financial measure, GMS operating income
(loss), is contained in the “Non-GAAP Financial Measures” section
of this release.3 NSS adjusted operating income and adjusted
operating income margin are non-GAAP financial measures. A
reconciliation of NSS adjusted operating income and adjusted
operating income margin to their most directly comparable GAAP
financial measure, NSS operating income (loss), is contained in the
“Non-GAAP Financial Measures” section of this release.
PAE (NASDAQ:PAE)
Historical Stock Chart
From Jun 2024 to Jul 2024
PAE (NASDAQ:PAE)
Historical Stock Chart
From Jul 2023 to Jul 2024