CHANTILLY, Va., May 21, 2020 /PRNewswire/ -- Perspecta Inc.
(NYSE:PRSP), a leading U.S. government services provider, today
announced financial results for the fourth quarter and fiscal year
ended March 31, 2020.
"We finished our fiscal year by delivering yet another quarter
of strong performance," said Mac
Curtis, president and chief executive officer, Perspecta.
"The health and safety of our dedicated employees is our top
priority while remaining focused on supporting our customers'
missions and driving value for our shareholders. I am incredibly
impressed by the resiliency, creativity and compassion of our
workforce. We rose to the COVID-19 challenge and continued to
deliver in new, safe and innovative ways. This led to results that
exceeded the high end of our revenue, earnings and free cash flow
conversion expectations. Our strong business development efforts
combined with this dedication ensure we are well positioned for
fiscal year 2021 and beyond."
Summary operating results (unaudited)
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in millions, except
margin and per share data)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Revenue
|
|
$
|
1,099
|
|
|
$
|
1,094
|
|
|
$
|
4,504
|
|
|
$
|
4,030
|
|
(Loss) income before
taxes
|
|
(884)
|
|
|
(13)
|
|
|
(730)
|
|
|
112
|
|
Operating
Margin
|
|
(80.4)
|
%
|
|
(1.2)
|
%
|
|
(16.2)
|
%
|
|
2.8
|
%
|
Net (loss)
income
|
|
(789)
|
|
|
(19)
|
|
|
(676)
|
|
|
72
|
|
Diluted (loss)
earnings per share (EPS)
|
|
(4.89)
|
|
|
(0.12)
|
|
|
(4.17)
|
|
|
0.44
|
|
|
|
|
|
|
|
|
|
|
Pro Forma and
Non-GAAP Measures*:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,099
|
|
|
$
|
1,094
|
|
|
$
|
4,504
|
|
|
$
|
4,274
|
|
Adjusted Net
Income
|
|
89
|
|
|
89
|
|
|
352
|
|
|
329
|
|
Adjusted
EBITDA
|
|
182
|
|
|
207
|
|
|
778
|
|
|
760
|
|
Adjusted EBITDA
Margin
|
|
16.6
|
%
|
|
18.9
|
%
|
|
17.3
|
%
|
|
17.8
|
%
|
Adjusted Diluted
EPS
|
|
0.55
|
|
|
0.54
|
|
|
2.16
|
|
|
2.00
|
|
|
|
|
|
|
|
|
|
|
* Amounts presented
under the heading "Pro Forma and Non-GAAP Measures" for the fiscal
year ended March 31, 2019 are presented on a pro forma basis as if
Perspecta was formed on April 1, 2017. Adjusted Net Income,
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Diluted EPS
are non-GAAP financial measures. Non-GAAP financial measures should
be considered in addition to, but not as a substitute for, the
information provided in accordance with GAAP. See Selected
Financial Data and Reconciliation of Non-GAAP Financial
Measures at the end of this press release for more
information.
|
On May 31, 2018, Perspecta became
an independent company through consummation of the spin-off by DXC
Technology Company (DXC) of its U.S. Public Sector Business (USPS)
and merger of USPS with Vencore Holding Corp. (Vencore HC) and KGS
Holding Corp. (KGS HC). To aid investors and analysts with
year-over-year comparisons, Perspecta presents pro forma financial
information that reflects the USPS, Vencore HC and KGS HC financial
information on a combined, pro forma basis as if the mergers had
taken place on April 1, 2017. In
addition, Perspecta provides adjusted, non-GAAP results that
exclude costs directly associated with the spin-off and mergers and
the ongoing integration process. The tables in "Selected Financial
Data and Reconciliation of Non-GAAP Financial Measures" at the end
of this press release present pro forma adjustments and provide
reconciliations from GAAP to non-GAAP results.
Fourth quarter summary results. Revenue for the
fourth quarter of fiscal year 2020 was $1.1
billion, up slightly compared to the fourth quarter of
fiscal year 2019, and down 2.4% compared to the third quarter of
fiscal year 2020. The decline in revenue compared to the third
quarter was primarily due to approximately $15 million in revenue recorded in the third
quarter that had been anticipated to occur in the fourth
quarter.
Loss before taxes for the fourth quarter of fiscal year 2020 was
$884 million, compared to
$13 million for the fourth quarter of
fiscal year 2019. The increase in loss before taxes is primarily
due to the $796 million non-cash,
pre-tax impairment charge related to goodwill and intangible assets
due to the U.S. Navy's decision not to award us the re-compete of
the Next Generation Enterprise Network (NGEN) contract.
Operating margin for the fourth quarter of fiscal year 2020
decreased from (1.2)% to (80.4)% year-over-year. Net loss was
$789 million, or $4.89 per diluted share.
Adjusted net income was $89
million for the fourth quarter of fiscal year 2020, which
was flat year-over-year. Adjusted earnings before interest, taxes,
depreciation and amortization (EBITDA) was $182 million for the fourth quarter of fiscal
year 2020, down 12% compared to adjusted EBITDA for the fourth
quarter of fiscal year 2019; adjusted EBITDA margin decreased from
18.9% to 16.6% over the same period. Adjusted diluted EPS for the
fourth quarter of fiscal year 2020 was $0.55, up 2% compared to adjusted diluted EPS for
the fourth quarter of fiscal year 2019.
Fiscal year summary results. Revenue for fiscal
year 2020 was $4.5 billion, an
increase of 12% compared to fiscal year 2019, and an increase of 5%
compared to pro forma revenue of fiscal year 2019. The increase
compared to prior year was driven by net growth on existing
contracts and new business wins.
Loss before taxes for fiscal year 2020 was $730 million, compared to income before taxes of
$112 million for fiscal year 2019.
The decline is primarily due to the $796
million non-cash, pre-tax impairment charge related to
goodwill and intangible assets due to the U.S. Navy's decision not
to award us the re-compete of the NGEN contract.
Operating margin for fiscal year 2020 decreased from 2.8% to
(16.2)% year-over-year. Net loss was $676
million, or $4.17 per diluted
share.
Adjusted net income was $352
million for fiscal year 2020, which was up 7% compared to
pro forma adjusted net income for fiscal year 2019. Adjusted EBITDA
was $778 million for fiscal year
2020, up 2% compared to pro forma adjusted EBITDA for fiscal year
2019; adjusted EBITDA margin decreased from pro forma 17.8% to
17.3% over the same period. Adjusted diluted EPS for fiscal year
2020 was $2.16, up 8% compared to pro
forma adjusted diluted EPS for fiscal year 2019.
Segment operating results (unaudited)
For the three months ended March 31, 2020, Defense and
Intelligence segment revenue of $759
million increased 3% compared to revenue for the same period
of the prior year, primarily due to new business wins and growth on
existing programs. Civilian and Health Care segment revenue of
$340 million decreased by 4% compared
to revenue for the same period of the prior year due to the end of
the NASA Agency Consolidated End-User Services (ACES)
contract and other program wind downs.
Defense and Intelligence adjusted segment profit margin for the
fourth quarter of fiscal year 2020 decreased to 13.7% from 14.9% in
the fourth quarter of fiscal year 2019. Civilian and Health Care
adjusted segment profit margin for the fourth quarter of fiscal
year 2020 decreased to 12.1% from 13.8% in the fourth quarter of
fiscal year 2019. Total adjusted segment profit for the fourth
quarter of fiscal year 2020 decreased to $145 million from $159
million in the fourth quarter of fiscal year 2019, and
depreciation and amortization excluding acquisition-related
intangibles amortization decreased $11
million.
For the fiscal year ended March 31, 2020, Defense and
Intelligence segment revenue of $3.1
billion increased 10% as compared to pro forma segment
revenue from the prior year, primarily due to new business wins and
growth on existing programs. Civilian and Health Care segment
revenue of $1.4 billion decreased by
4% as compared to pro forma segment revenue from the prior year due
to the end of the NASA ACES contract and other program wind
downs.
Defense and Intelligence adjusted segment profit margin for
fiscal year 2020 increased to 14.7% from pro forma 13.6% in fiscal
year 2019. Civilian and Health Care adjusted segment profit margin
for fiscal year 2020 decreased to 11.0% from pro forma 14.4% in
fiscal year 2019. Total adjusted segment profit for fiscal year
2020 increased to $610 million from
pro forma adjusted segment profit of $592
million in fiscal year 2019.
Cash management and capital deployment
Perspecta generated $186 million
of net cash provided by operating activities in the fourth quarter
of fiscal year 2020. Quarterly adjusted free cash flow was
$179 million, or 201% of adjusted net
income. During the quarter, Perspecta used $24 million to make required debt payments and
returned $30 million to shareholders,
including $10 million as part of its
regular quarterly cash dividend program and $20 million in share repurchases.
For fiscal year 2020, Perspecta generated $626 million of net cash provided by operating
activities and $542 million of
adjusted free cash flow, or 154% of adjusted net income. During the
year, Perspecta used $93 million to
make required debt payments and returned $103 million to shareholders, including
$38 million in dividends and
$65 million in share repurchases.
As of March 31, 2020, Perspecta had $147
million in cash and cash equivalents, $700 million of undrawn capacity in its revolving
credit facility, and $2.6 billion in
total debt, including $247 million in
finance lease obligations.
On May 21, 2020 the Perspecta Board of Directors declared
that Perspecta will pay a cash dividend of $0.07 per common share payable on July 15,
2020 to common shareholders of record at the close of business on
June 11, 2020. Payment of future quarterly dividends is
subject to Board approval.
Contract awards
Contract awards (bookings) totaled $1.2
billion in the fourth quarter of fiscal year 2020,
representing a book-to-bill ratio of 1.1x. New business awards
constituted approximately 56% of the total awards in the fourth
quarter. Book-to-bill exceeded 1.0x for each of the last three
quarters and totaled 1.4x for fiscal year 2020. Included in the
quarterly bookings were the following single-award prime
contracts:
- United States Department of Labor Contract. Perspecta
was awarded a prime contract from the U.S. Department of Labor,
Office of the Assistant Secretary for Administration and
Management, Office of the Chief Information Officer for operations
and maintenance support of the enterprise general support system.
The program, which represents new work for the company, has a
one-year base period with six one-year option periods and a
potential value of $277 million.
- United States Department of Housing and Urban Development
Contract. Perspecta has been awarded the U.S. Department of
Housing and Urban Development Data Center Services program from the
Office of the Chief Information Officer's Infrastructure and
Operations Office. The program, which represents new work for the
company, was awarded under the General Services Administration
IT-70 contract vehicle. It has a one-year base period with four
one-year option periods and a potential value of $134 million.
- NGEN EUH Extension. Perspecta received a four-month,
$62 million extension to the current
NGEN contract with the U.S. Department of the Navy to continue
providing end-user hardware services. With this extension,
Perspecta will deliver various end-user hardware services through
July 2020, providing additional time
for the orderly transition of those services to the NGEN-R End User
Hardware (EUH) contract.
- Centers for Medicaid and Medicare Services Contract.
Perspecta received a follow-on task order award to continue work on
the Centers for Medicare & Medicaid Services Virtual Data
Center Prime contract to host and improve efficiency of Medicare
Part A and Part B Common Working File claims processing. The task
order has a one-year base period plus four one-year option periods
and a potential value of $36
million.
Perspecta's backlog of signed business orders at the end of the
fourth quarter of fiscal year 2020 was $13.3
billion; funded backlog at the end of the fourth quarter was
$2.0 billion.
Forward guidance
The table below introduces fiscal year 2021 guidance ranges for
revenue, adjusted EBITDA margin, adjusted diluted EPS, and adjusted
free cash flow conversion (as a percentage of adjusted net income).
The table below provides information about the estimated financial
impact of the network component of the existing NGEN contract (NGEN
SMIT), for which we are under contract through December 31, 2020. All forward-looking non-GAAP
measures exclude estimates for amortization of intangible assets;
stock-based compensation expenses; restructuring,
separation, transaction and integration-related costs;
mark-to-market changes associated with pension and other
post-retirement benefit plans; and other non-recurring items.
Perspecta is unable to provide a reconciliation of non-GAAP
guidance measures to corresponding GAAP measures on a
forward-looking basis without unreasonable effort due to the
overall high variability and low visibility of most of the excluded
items. Material changes to any one of these items could have a
significant effect on future GAAP results.
Measure
|
Fiscal Year
2021
|
NGEN SMIT
Information
|
|
Guidance
|
Estimated NGEN
SMIT
Impact
|
Perspecta excluding
Estimated
NGEN SMIT Impact
|
Revenue
(millions)
|
$4,260 -
$4,410
|
~ $600
|
~ $3,660 -
$3,810
|
Adjusted EBITDA
Margin
|
15.0% -
16.0%
|
~ 0.5%
|
~ 15.5% -
16.5%
|
Adjusted Diluted
EPS
|
$1.90 -
$2.03
|
~ $0.30
|
~ $1.60 -
$1.73
|
Adjusted Free
Cash
Flow Conversion
|
100+%
|
~ 100%
|
~ 100%+
|
John Kavanaugh, Perspecta CFO,
commented, "We are pleased to have exceeded all of our financial
targets in fiscal year 2020. We continue to demonstrate a
consistent track record of execution. Our fiscal year 2021 guidance
reflects our expectations of continuing to deliver on our
commitments."
Due to the mission-critical nature of the majority of our
business, substantially all of the services we provide to our
government customers have been considered essential services, which
has allowed them to continue. Therefore, the overall impact of the
COVID-19 pandemic on our results of operations and liquidity were
immaterial in the fourth quarter of fiscal year 2020. However, we
have experienced and expect to continue to experience certain
disruptions in our operations and impact to our workforce and
subcontractor workforce due to illness, quarantines,
shelter-in-place orders, closures of our facilities, closures of
our customers' facilities and other restrictions or government
actions in connection with the COVID-19 pandemic. We continue to
monitor the situation, to assess further possible implications to
our operations, supply chain and customers, and to take actions in
an effort to mitigate adverse consequences. Our fiscal year 2021
guidance above accounts for a potential impact of the COVID-19
pandemic of approximately $75 million
in revenue and $20 million in
operating income.
Conference call
Perspecta executive management will hold a conference call on
May 21, 2020, at 5 p.m. Eastern
to discuss the financial results and outlook and answer questions.
Analysts and investors may participate on the conference call by
dialing 888-348-3873 (domestic), 855-669-9657 (Canada), or 412-902-4234 (international). The
conference call will be webcast simultaneously through a link on
the Investor Relations section of the Perspecta website. A replay
of the conference call will be available on the Investor Relations
section of the Perspecta website approximately two hours after the
conclusion of the call.
About Perspecta Inc.
At Perspecta, we question, we seek and we solve. Perspecta
brings a diverse set of capabilities to our U.S. government
customers in defense, intelligence, civilian, health care and state
and local markets. Our 270+ issued, licensed and pending patents
are more than just pieces of paper, they tell the story of our
innovation. With offerings in mission services, digital
transformation and enterprise operations, our team of nearly 14,000
engineers, analysts, investigators and architects work tirelessly
to not only execute the mission, but build and support the backbone
that enables it. Perspecta was formed to take on big challenges. We
are an engine for growth and success and we enable our customers to
build a better nation. For more information about Perspecta, visit
perspecta.com.
Forward-looking statements
All statements and assumptions in this press release that do not
directly and exclusively relate to historical facts could be deemed
"forward-looking statements." Forward-looking statements are often
identified by the use of words such as "anticipates," "believes,"
"estimates," "expects," "may," "could," "should," "forecast,"
"goal," "intends," "objective," "plans," "projects," "strategy,"
"target" and "will" and similar words and terms or variations of
such. These statements represent current intentions, expectations,
beliefs or projections, and no assurance can be given that the
results described in such statements will be achieved.
Forward-looking statements include, among other things, statements
with respect to our financial condition, results of operations,
cash flows, business strategies, prospects, guidance, share
repurchases, dividend payments, contract value, revenue
acceleration, profitability and revenue generation. Such statements
are subject to numerous assumptions, risks, uncertainties and other
factors that could cause actual results to differ materially from
those described in such statements, many of which are outside of
our control. Important factors that could cause actual results to
differ materially from those described in forward-looking
statements include, but are not limited to, (i) various risks
related to health epidemics, pandemics and similar outbreaks, such
as the COVID-19 pandemic, which may have material adverse effects
on our business, financial position, results of operations and/or
cash flows; (ii) any issue that compromises our relationships with
the U.S. federal government, or any state or local governments, or
damages our professional reputation; (iii) changes in the U.S.
federal, state and local governments' spending and mission
priorities that shift expenditures away from agencies or programs
that we support; (iv) any delay in completion of the U.S. federal
government's budget process; (v) failure to comply with numerous
laws, regulations and rules, including regarding procurement,
anti-bribery and organizational conflicts of interest; (vi) failure
by us or our employees to obtain and maintain necessary security
clearances or certifications; (vii) our ability to compete
effectively in the competitive bidding process and delays, contract
terminations or cancellations caused by competitors' protests of
major contract awards received by us; (viii) our ability to
accurately estimate or otherwise recover expenses, time and
resources for our contracts; (ix) problems or delays in the
development, delivery and transition of new products and services
or the enhancement of existing products and services to meet
customer needs and respond to emerging technological trends; (x)
failure of third parties to deliver on commitments under contracts
with us; (xi) misconduct or other improper activities from our
employees or subcontractors; (xii) delays, terminations, or
cancellations of our major contract awards, including as a result
of our competitors protesting such awards and the impact of the
U.S. Navy's decision not to award the NGEN SMIT contract to us;
(xiii) failure of our internal control over financial reporting to
detect fraud or other issues; (xiv) failure or disruptions to our
systems, due to cyber-attack, service interruptions or other
security threats; (xv) failure to be awarded task orders under our
indefinite delivery/indefinite quantity contracts; (xvi) changes in
government procurement, contract or other practices or the adoption
by the government of new laws, rules and regulations in a manner
adverse to us; and (xvii) uncertainty from the expected
discontinuance of LIBOR and transition to any other interest rate
benchmark; as well as the matters described in the "Cautionary
Statement Regarding Forward-Looking Statements" and "Risk Factors"
sections of Perspecta's Annual Report on Form 10-K for the year
ended March 31, 2020, as may be
updated or supplemented in our Quarterly Reports on Form 10-Q and
our other filings with the Securities and Exchange Commission,
which discuss these and other factors that could adversely affect
our results. Readers are cautioned not to place undue reliance on
such statements which speak only as of the date they are made. We
do not undertake any obligation to update or release any revisions
to any forward-looking statement or to report any events or
circumstances after the date of this press release or to reflect
the occurrence of unanticipated events except as required by
law.
Condensed
Consolidated Combined Statements of Operations
(preliminary and
unaudited)
|
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in millions, except
per share amounts)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Revenue
|
|
$
|
1,099
|
|
|
$
|
1,094
|
|
|
$
|
4,504
|
|
|
$
|
4,030
|
|
|
|
|
|
|
|
|
|
|
Costs of
services
|
|
853
|
|
|
817
|
|
|
3,460
|
|
|
3,043
|
|
Selling, general and
administrative
|
|
73
|
|
|
74
|
|
|
303
|
|
|
300
|
|
Depreciation and
amortization
|
|
91
|
|
|
116
|
|
|
374
|
|
|
330
|
|
Impairment
charges
|
|
796
|
|
|
—
|
|
|
796
|
|
|
—
|
|
Restructuring
costs
|
|
13
|
|
|
7
|
|
|
17
|
|
|
10
|
|
Separation,
transaction and integration-related costs
|
|
26
|
|
|
22
|
|
|
85
|
|
|
106
|
|
Interest expense,
net
|
|
32
|
|
|
37
|
|
|
137
|
|
|
121
|
|
Other expense,
net
|
|
99
|
|
|
34
|
|
|
62
|
|
|
8
|
|
Total costs and
expenses
|
|
1,983
|
|
|
1,107
|
|
|
5,234
|
|
|
3,918
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before
taxes
|
|
(884)
|
|
|
(13)
|
|
|
(730)
|
|
|
112
|
|
Income tax expense
(benefit)
|
|
(95)
|
|
|
6
|
|
|
(54)
|
|
|
40
|
|
Net (loss)
income
|
|
$
|
(789)
|
|
|
$
|
(19)
|
|
|
$
|
(676)
|
|
|
$
|
72
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(4.89)
|
|
|
$
|
(0.12)
|
|
|
$
|
(4.17)
|
|
|
$
|
0.44
|
|
Diluted
|
|
$
|
(4.89)
|
|
|
$
|
(0.12)
|
|
|
$
|
(4.17)
|
|
|
$
|
0.44
|
|
Selected Condensed
Consolidated Combined Balance Sheet Data
(preliminary and
unaudited)
|
|
(in
millions)
|
|
March 31,
2020
|
|
March 31,
2019
|
ASSETS
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
147
|
|
|
$
|
88
|
|
Receivables,
net
|
|
513
|
|
|
484
|
|
Other
receivables
|
|
45
|
|
|
92
|
|
Prepaid
expenses
|
|
81
|
|
|
141
|
|
Other current
assets
|
|
101
|
|
|
73
|
|
Total current
assets
|
|
887
|
|
|
878
|
|
Property and
equipment, net
|
|
307
|
|
|
368
|
|
Goodwill
|
|
2,671
|
|
|
3,179
|
|
Intangible assets,
net
|
|
1,193
|
|
|
1,466
|
|
Other
assets
|
|
347
|
|
|
192
|
|
Total
assets
|
|
$
|
5,405
|
|
|
$
|
6,083
|
|
|
|
|
|
|
LIABILITIES and
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current maturities of
long-term debt
|
|
$
|
89
|
|
|
$
|
80
|
|
Current finance lease
obligations
|
|
111
|
|
|
137
|
|
Current operating
lease obligations
|
|
39
|
|
|
—
|
|
Accounts
payable
|
|
218
|
|
|
246
|
|
Accrued payroll and
related costs
|
|
142
|
|
|
91
|
|
Accrued
expenses
|
|
385
|
|
|
396
|
|
Other current
liabilities
|
|
73
|
|
|
64
|
|
Total current
liabilities
|
|
1,057
|
|
|
1,014
|
|
Long-term debt, net
of current maturities
|
|
2,283
|
|
|
2,297
|
|
Non-current finance
lease obligations
|
|
136
|
|
|
168
|
|
Deferred tax
liabilities
|
|
114
|
|
|
171
|
|
Other long-term
liabilities
|
|
458
|
|
|
271
|
|
Total
liabilities
|
|
4,048
|
|
|
3,921
|
|
Commitments and
contingencies
|
|
|
|
|
Total shareholders'
equity
|
|
1,357
|
|
|
2,162
|
|
Total liabilities and
shareholders' equity
|
|
$
|
5,405
|
|
|
$
|
6,083
|
|
Selected Condensed
Consolidated Combined Statements of Cash Flows
(preliminary and
unaudited)
|
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in
millions)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
Net (loss)
income
|
|
$
|
(789)
|
|
|
$
|
(19)
|
|
|
$
|
(676)
|
|
|
$
|
72
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
91
|
|
|
116
|
|
|
374
|
|
|
330
|
|
Impairment
charges
|
|
796
|
|
|
—
|
|
|
796
|
|
|
—
|
|
Net periodic benefit
cost
|
|
70
|
|
|
26
|
|
|
62
|
|
|
26
|
|
Share-based
compensation
|
|
2
|
|
|
4
|
|
|
23
|
|
|
11
|
|
Deferred income
taxes
|
|
(59)
|
|
|
25
|
|
|
(55)
|
|
|
8
|
|
Gain on sale or
disposal of assets, net
|
|
5
|
|
|
—
|
|
|
(18)
|
|
|
(25)
|
|
Restructuring
charges
|
|
13
|
|
|
7
|
|
|
17
|
|
|
10
|
|
Other non-cash
charges, net
|
|
5
|
|
|
17
|
|
|
12
|
|
|
1
|
|
Changes in assets and
liabilities, net of effects of acquisitions:
|
|
|
|
|
|
|
|
|
Receivables,
net
|
|
48
|
|
|
24
|
|
|
97
|
|
|
102
|
|
Prepaid expenses and
other current assets
|
|
25
|
|
|
(3)
|
|
|
63
|
|
|
(25)
|
|
Accounts payable,
accrued expenses and other current liabilities
|
|
34
|
|
|
5
|
|
|
14
|
|
|
(18)
|
|
Deferred revenue and
advanced contract payments
|
|
(11)
|
|
|
2
|
|
|
(35)
|
|
|
(11)
|
|
Income taxes payable
and liability
|
|
(40)
|
|
|
(42)
|
|
|
(46)
|
|
|
(22)
|
|
Accrued
restructuring
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
|
(4)
|
|
Other assets and
liabilities, net
|
|
(4)
|
|
|
8
|
|
|
(1)
|
|
|
7
|
|
Net cash provided by
operating activities
|
|
186
|
|
|
168
|
|
|
626
|
|
|
462
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Payments for
acquisitions, net of cash acquired
|
|
—
|
|
|
—
|
|
|
(265)
|
|
|
(312)
|
|
Extinguishment of
Vencore debt and related costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(994)
|
|
Proceeds from sale of
assets
|
|
—
|
|
|
—
|
|
|
77
|
|
|
25
|
|
Purchases of
property, equipment and software
|
|
(6)
|
|
|
(14)
|
|
|
(17)
|
|
|
(26)
|
|
Payments for
outsourcing contract costs
|
|
(1)
|
|
|
(4)
|
|
|
(5)
|
|
|
(11)
|
|
Net cash used in
investing activities
|
|
(7)
|
|
|
(18)
|
|
|
(210)
|
|
|
(1,318)
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Principal payments on
long-term debt
|
|
(24)
|
|
|
(88)
|
|
|
(93)
|
|
|
(170)
|
|
Proceeds from debt
issuance
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,500
|
|
Payments of debt
issuance costs
|
|
(1)
|
|
|
—
|
|
|
(4)
|
|
|
(46)
|
|
Proceeds from
revolving credit facility
|
|
25
|
|
|
—
|
|
|
200
|
|
|
50
|
|
Payments on revolving
credit facility
|
|
(25)
|
|
|
—
|
|
|
(150)
|
|
|
(50)
|
|
Payments on finance
lease obligations
|
|
(31)
|
|
|
(48)
|
|
|
(141)
|
|
|
(172)
|
|
Repurchases of common
stock
|
|
(20)
|
|
|
(16)
|
|
|
(66)
|
|
|
(59)
|
|
Repurchases of common
stock to satisfy tax withholding obligations
|
|
—
|
|
|
—
|
|
|
(2)
|
|
|
(1)
|
|
Dividend to
DXC
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(984)
|
|
Dividends paid to
Perspecta shareholders
|
|
(10)
|
|
|
(8)
|
|
|
(38)
|
|
|
(25)
|
|
Transfers to Parent,
net
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(88)
|
|
Net cash (used in)
provided by financing activities
|
|
(86)
|
|
|
(160)
|
|
|
(294)
|
|
|
955
|
|
Net change in cash
and cash equivalents, including restricted
|
|
93
|
|
|
(10)
|
|
|
122
|
|
|
99
|
|
Cash and cash
equivalents, including restricted, at beginning of
period
|
|
128
|
|
|
109
|
|
|
99
|
|
|
—
|
|
Cash and cash
equivalents, including restricted, at end of period
|
|
221
|
|
|
99
|
|
|
221
|
|
|
99
|
|
Less restricted cash
and cash equivalents included in other current assets
|
|
74
|
|
|
11
|
|
|
74
|
|
|
11
|
|
Cash and cash
equivalents at end of period
|
|
$
|
147
|
|
|
$
|
88
|
|
|
$
|
147
|
|
|
$
|
88
|
|
Selected Financial Data and Reconciliation of Non-GAAP
Financial Measures
To aid investors and analysts with year-over-year comparability
for the combined businesses of USPS, Vencore HC and KGS HC,
Perspecta is including certain pro forma financial information that
combines the stand-alone USPS and Vencore HC and KGS HC financial
information as if the acquisition had taken place on April 1, 2017. These pro forma results include
Vencore HC and KGS HC results for the period from April 1, 2018 to May 31,
2018 and assess the impact of interest, depreciation and
amortization, recurring elements of pension income, and other costs
as if the spin-off and mergers had occurred at the beginning of the
period. Perspecta is also including adjusted, non-GAAP results that
exclude costs directly associated with the spin-off and mergers and
the ongoing integration process.
The following tables present selected financial data, including
the reconciliation of non-GAAP financial measures to the most
directly comparable financial measures calculated and presented in
accordance with GAAP. Perspecta management believes that these
non-GAAP financial measures provide useful additional information
to investors regarding Perspecta's results of operations as they
provide another measure of Perspecta's profitability and ability to
service its debt and are considered important to financial analysts
covering Perspecta's industry.
These non-GAAP financial measures have limitations as an
analytical tool and should not be considered in isolation or as a
substitute for income from operations, net income, diluted EPS or
any other measure of financial performance reported in accordance
with GAAP. Perspecta's non-GAAP measures may be calculated
differently than similarly named measures reported by other
companies. In addition, using non-GAAP measures may have limited
value as they exclude certain items that may have a material impact
on reported financial results and cash flows. When analyzing
Perspecta's performance, it is important to evaluate each
adjustment in the reconciliation tables and use adjusted measures
in addition to, and not as an alternative to, GAAP measures.
Pro Forma Revenue (Unaudited)
|
|
Fiscal Year
Ended
|
(in
millions)
|
|
March 31,
2019
|
Revenue
|
|
$
|
4,030
|
|
Historical Vencore
revenue (a) (b)
|
|
244
|
|
Pro forma
revenue
|
|
$
|
4,274
|
|
|
|
Notes:
|
|
(a)
|
Revenue prior to the
May 31, 2018 mergers is from the most closely corresponding
reporting periods, which is April 1, 2018 to May 31, 2018 for
the fiscal year ended March 31, 2019.
|
(b)
|
In this and all
subsequent tables, financial data for "Vencore" includes the
combined results of Vencore HC and KGS HC.
|
|
|
|
|
|
|
Pro Forma and Adjusted EBITDA, Net Income, and Diluted EPS
(Unaudited)
Adjusted EBITDA excludes the following items: interest, taxes,
depreciation and amortization, restructuring, separation,
transaction and integration-related costs, mark-to-market
adjustments to the pension and other post-employment benefit
programs, stock-based compensation, and other non-recurring items.
Adjusted net income and adjusted diluted EPS also exclude
acquisition-related intangible amortization.
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in
millions)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Net income
(loss)
|
|
$
|
(789)
|
|
|
$
|
(19)
|
|
|
$
|
(676)
|
|
|
$
|
72
|
|
Income tax expense
(benefit)
|
|
(95)
|
|
|
6
|
|
|
(54)
|
|
|
40
|
|
Interest expense,
net
|
|
32
|
|
|
37
|
|
|
137
|
|
|
121
|
|
Depreciation and
amortization
|
|
91
|
|
|
116
|
|
|
374
|
|
|
330
|
|
EBITDA
|
|
(761)
|
|
|
140
|
|
|
(219)
|
|
|
563
|
|
Historical Vencore
(a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
Effects of Spin-Off
and Mergers
|
|
—
|
|
|
(4)
|
|
|
—
|
|
|
3
|
|
Impairment
charges
|
|
796
|
|
|
—
|
|
|
796
|
|
|
—
|
|
Restructuring
costs
|
|
13
|
|
|
7
|
|
|
17
|
|
|
10
|
|
Separation,
transaction and integration-related costs
|
|
26
|
|
|
22
|
|
|
85
|
|
|
106
|
|
Pension actuarial and
settlement losses
|
|
72
|
|
|
35
|
|
|
72
|
|
|
35
|
|
Share-based
compensation
|
|
2
|
|
|
4
|
|
|
23
|
|
|
11
|
|
Gain on sale of
assets
|
|
—
|
|
|
—
|
|
|
(33)
|
|
|
—
|
|
Separation related
cost
|
|
34
|
|
|
3
|
|
|
37
|
|
|
3
|
|
Adjusted
EBITDA
|
|
182
|
|
|
207
|
|
|
778
|
|
|
760
|
|
Adjusted EBITDA
margin (b)
|
|
16.6
|
%
|
|
18.9
|
%
|
|
17.3
|
%
|
|
17.8
|
%
|
Depreciation and
amortization (c)
|
|
(91)
|
|
|
(116)
|
|
|
(374)
|
|
|
(342)
|
|
Amortization of
acquired intangibles (c)
|
|
54
|
|
|
68
|
|
|
206
|
|
|
174
|
|
Interest expense,
net
|
|
(32)
|
|
|
(37)
|
|
|
(137)
|
|
|
(141)
|
|
Adjusted earnings
before taxes
|
|
113
|
|
|
122
|
|
|
473
|
|
|
451
|
|
Income tax expense
(d)
|
|
24
|
|
|
33
|
|
|
121
|
|
|
122
|
|
Adjusted net
income
|
|
$
|
89
|
|
|
$
|
89
|
|
|
$
|
352
|
|
|
$
|
329
|
|
Adjusted diluted
EPS (e)
|
|
$
|
0.55
|
|
|
$
|
0.54
|
|
|
$
|
2.16
|
|
|
$
|
2.00
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
|
(a)
|
Represents pro forma
results associated with Vencore HC and KGS HC for the period from
April 1, 2018 to May 31, 2018.
|
(b)
|
Adjusted EBITDA
margin is calculated as the ratio of adjusted EBITDA to revenue for
both quarters ended March 31, 2020 and 2019, and fiscal year ended
March 31, 2020. Pro forma adjusted EBITDA margin is calculated as
the ratio of pro forma adjusted EBITDA to pro forma revenue for the
fiscal year ended March 31, 2019.
|
(c)
|
Represents pro forma
depreciation and amortization and pro forma amortization of
acquired intangibles during the fiscal year ended March 31, 2019,
updated for the final valuation of intangibles.
|
(d)
|
Represents income tax
expense utilizing an adjusted effective tax rate that adjusts for
non-GAAP measures including: transaction costs, integration costs,
and tax add backs for non-deductible prior-merger goodwill
amortization. Adjusted effective tax rates are approximately 21%
and 27% for the quarters ended March 31, 2020 and 2019, and
approximately 26% and 27% for fiscal years ended March 31, 2020 and
2019.
|
(e)
|
Represents adjusted
net income divided by the weighted-average common shares on a
diluted basis of 162.29 and 164.82 million for the quarters ended
March 31, 2020 and 2019, respectively, and adjusted net income
divided by the weighted-average common shares on a diluted basis of
162.72 and 164.82 million for the fiscal years ended March 31, 2020
and 2019, respectively.
|
Adjusted Free Cash Flow (Unaudited)
Perspecta defines adjusted free cash flow as net cash provided
by operating activities less purchases of property, equipment and
software, and adjusted for certain items, such as (i) payments on
finance lease obligations, (ii) business acquisitions,
dispositions, and investments, (iii) restructuring payments, (iv)
payments on separation, transaction and integration-related costs,
(v) the impact arising from the initial sale of accounts
receivables under the Master Accounts Receivable Purchase
Agreement, and (vi) other non-recurring payments.
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in
millions)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Net cash provided by
operating activities
|
|
$
|
186
|
|
|
$
|
168
|
|
|
$
|
626
|
|
|
$
|
462
|
|
Historical Vencore
(a)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
Purchases of
property, equipment and software
|
|
(6)
|
|
|
(14)
|
|
|
(17)
|
|
|
(26)
|
|
Payments on finance
lease obligations
|
|
(31)
|
|
|
(48)
|
|
|
(141)
|
|
|
(172)
|
|
Payments on
restructuring, transaction and integration-related costs
|
|
30
|
|
|
30
|
|
|
91
|
|
|
142
|
|
Initial sale of
qualifying receivables
|
|
—
|
|
|
—
|
|
|
(17)
|
|
|
—
|
|
Adjusted free cash
flow
|
|
$
|
179
|
|
|
$
|
136
|
|
|
$
|
542
|
|
|
$
|
420
|
|
|
|
Notes:
|
(a)
|
Results for the
fiscal year ended March 31, 2019 are pro forma, representing
results associated with Vencore HC and KGS HC for the period from
April 1, 2018 to May 31, 2018.
|
Segment Operating Results (Unaudited)
Perspecta delivers IT, mission, and operations-related services
across the U.S. federal government through two reportable
segments—Defense and Intelligence, which provides services to the
U.S. Department of Defense (DoD), intelligence community, branches
of the U.S. Armed Forces, and other DoD agencies; and Civilian and
Health Care, which provides services to the Departments of Homeland
Security, Justice, and Health and Human Services, as well as other
federal civilian and state and local government agencies. The
following tables summarize reportable segment profit and
reconciliation of reportable segment profit to income before
taxes:
Selected Segment
Measures (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
|
March 31,
2020
|
|
March 31,
2019
|
(in
millions)
|
|
Defense and
Intelligence
|
|
Civilian and
Health Care
|
|
Total
|
|
Defense and
Intelligence
|
|
Civilian and
Health Care
|
|
Total
|
Revenue
|
|
$
|
759
|
|
|
$
|
340
|
|
|
$
|
1,099
|
|
|
$
|
739
|
|
|
$
|
355
|
|
|
$
|
1,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
98
|
|
|
$
|
40
|
|
|
$
|
138
|
|
|
$
|
107
|
|
|
$
|
48
|
|
|
$
|
155
|
|
Non-GAAP adjustments
(a)
|
|
6
|
|
|
1
|
|
|
7
|
|
|
3
|
|
|
1
|
|
|
4
|
|
Adjusted segment
profit
|
|
$
|
104
|
|
|
$
|
41
|
|
|
$
|
145
|
|
|
$
|
110
|
|
|
$
|
49
|
|
|
$
|
159
|
|
Segment profit
margin
|
|
12.9
|
%
|
|
11.8
|
%
|
|
12.6
|
%
|
|
14.5
|
%
|
|
13.5
|
%
|
|
14.2
|
%
|
Adjusted segment
profit margin
|
|
13.7
|
%
|
|
12.1
|
%
|
|
13.2
|
%
|
|
14.9
|
%
|
|
13.8
|
%
|
|
14.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years
Ended
|
|
|
March 31,
2020
|
|
March 31,
2019
|
(in
millions)
|
|
Defense and
Intelligence
|
|
Civilian and
Health Care
|
|
Total
|
|
Defense and
Intelligence
|
|
Civilian and
Health Care
|
|
Total
|
Revenue
|
|
$
|
3,101
|
|
|
$
|
1,403
|
|
|
$
|
4,504
|
|
|
$
|
2,587
|
|
|
$
|
1,443
|
|
|
$
|
4,030
|
|
Add: Historical
Vencore
|
|
—
|
|
|
—
|
|
|
—
|
|
|
230
|
|
|
14
|
|
|
244
|
|
Adjusted revenue
(b)
|
|
$
|
3,101
|
|
|
$
|
1,403
|
|
|
$
|
4,504
|
|
|
$
|
2,817
|
|
|
$
|
1,457
|
|
|
$
|
4,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment
profit
|
|
$
|
444
|
|
|
$
|
152
|
|
|
$
|
596
|
|
|
$
|
331
|
|
|
$
|
196
|
|
|
$
|
527
|
|
Non-GAAP adjustments
(a)
|
|
11
|
|
|
3
|
|
|
14
|
|
|
51
|
|
|
14
|
|
|
65
|
|
Adjusted segment
profit
|
|
$
|
455
|
|
|
$
|
155
|
|
|
$
|
610
|
|
|
$
|
382
|
|
|
$
|
210
|
|
|
$
|
592
|
|
Segment profit
margin
|
|
14.3
|
%
|
|
10.8
|
%
|
|
13.2
|
%
|
|
12.8
|
%
|
|
13.6
|
%
|
|
13.1
|
%
|
Adjusted segment
profit margin
|
|
14.7
|
%
|
|
11.0
|
%
|
|
13.5
|
%
|
|
13.6
|
%
|
|
14.4
|
%
|
|
13.9
|
%
|
|
Notes:
|
(a)
|
Non-GAAP adjustments
include non-operating net periodic pension benefit, and certain
separation-related and other costs.
|
(b)
|
Adjusted results
represent non-GAAP financial measures, and it should be considered
in addition to, but not as substitute for, the information provided
in accordance with GAAP. Note that amounts for the fiscal year
ended March 31, 2019 are pro forma and that results for the fiscal
year ended March 31, 2020 are GAAP measures.
|
Reconciliation of
Reportable Segment Profit to Income Before Taxes
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Fiscal Years
Ended
|
(in
millions)
|
|
March 31,
2020
|
|
March 31,
2019
|
|
March 31,
2020
|
|
March 31,
2019
|
Total profit for
reportable segments
|
|
$
|
138
|
|
|
$
|
155
|
|
|
$
|
596
|
|
|
$
|
527
|
|
Not allocated to
segments:
|
|
|
|
|
|
|
|
|
Share-based
compensation
|
|
(2)
|
|
|
(4)
|
|
|
(23)
|
|
|
(11)
|
|
Amortization of
acquired intangible assets
|
|
(54)
|
|
|
(68)
|
|
|
(206)
|
|
|
(165)
|
|
Impairment
charges
|
|
(796)
|
|
|
—
|
|
|
(796)
|
|
|
—
|
|
Restructuring
costs
|
|
(13)
|
|
|
(3)
|
|
|
(17)
|
|
|
(4)
|
|
Separation,
transaction and integration-related costs
|
|
(26)
|
|
|
(22)
|
|
|
(85)
|
|
|
(106)
|
|
Interest expense,
net
|
|
(32)
|
|
|
(37)
|
|
|
(137)
|
|
|
(121)
|
|
Other unallocated,
net
|
|
(99)
|
|
|
(34)
|
|
|
(62)
|
|
|
(8)
|
|
(Loss) income before
taxes
|
|
$
|
(884)
|
|
|
$
|
(13)
|
|
|
$
|
(730)
|
|
|
$
|
112
|
|
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SOURCE Perspecta Inc.