PAE (NASDAQ: PAE, PAEWW), a global leader in delivering smart
solutions to the U.S. government and its allies, today announced
that its subsidiary has entered into a definitive agreement to
acquire Metis Solutions Corporation, a leading provider of
intelligence analysis, operational and tactical training and
program management, for approximately $92 million in cash. This
represents a transaction multiple of approximately 9.7x CY2020
adjusted EBITDA, adjusted for estimated annual cost synergies.
PAE President and CEO John Heller commented:
“This acquisition expands and builds scale in
intelligence analysis, training and program support, all of which
are well-funded market areas of the U.S. government and our allied
nations. Moreover, the acquisition of Metis is expected to be
accretive to adjusted EBITDA margins and free cash flow.
Additionally, in combination with CENTRA Technology, PAE will have
significant breadth and depth across the Intelligence and National
Security communities in capability and customer access.”
Metis is a leading provider of intelligence
analysis, operational and tactical training and program management
focused on supporting intelligence community, national security and
defense customers. Headquartered in Arlington, Virginia, Metis has
more than 450 employees, a majority of whom have top secret
clearances with subject matter expertise across a broad range of
critical national security issues.
“We are excited to join PAE and its heritage of
service. Our shared cultures of service excellence and innovation
make this a compelling combination. Together, we will pursue
exciting new revenue opportunities,” said Christopher Wynes, Metis
president and CEO. “Joining together with PAE will help accelerate
growth in our intelligence and national security business and
enable us to pursue a broader customer base across more
markets.”
Strategic and Financial Benefits of the
Acquisition
- Breadth of Contract
Vehicles: The transaction brings
more than eight strategic indefinite delivery, indefinite quantity
contract vehicles, representing more than $60 billion of ceiling
value that is expected to improve PAE’s business development
pipeline in terms of number, size and win-rate percentage of
opportunities.
- Broadens Offerings
and Capabilities: Expands
and builds scale in PAE’s intelligence analysis, training and
program support business areas. These market areas are all
well-funded by the U.S. government and our allied nations.
- Expands
Whitespace Opportunity:
Strategically positions PAE with new customers across the
intelligence and defense communities.
- Attractive Financial
Profile: Metis’
current financial profile, coupled with expected cost synergies, is
expected to be accretive to organic revenue growth, adjusted EBITDA
margins and free cash flow per share.
Financing and Approvals
The transaction has been unanimously approved by
the boards of directors of both PAE and Metis. It is expected to
close this quarter. PAE expects to fund the purchase price of
approximately $92 million with cash on hand and utilization of its
delayed draw term loan.
PAE is reiterating its fiscal year 2020
financial outlook provided on November 5th, 2020. The 2020
financial outlook does not incorporate anticipated financial
results of CENTRA or Metis.
Advisors
Crowell & Moring LLP acted as legal advisor
to PAE in connection with the transaction.
Miles & Stockbridge P.C. acted as legal
advisor and Raymond James & Associates, Inc. acted as financial
advisor to Metis in connection with the transaction.
Conference Call and Webcast
PAE will host a conference call and webcast,
November 16, 2020, at 8 a.m. ET and will post an investor
presentation to its website. Management will review details of the
acquisition, followed by a question-and-answer session. Listeners
and other interested parties will be able to access a presentation
summarizing the transaction on the PAE Investor Relations
website.
Interested parties are invited to join the
webcast from the PAE Investor Relations website. Due to the
COVID-19 pandemic, teleconference providers globally are
experiencing significant increases in conference call volume. As
such, PAE 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 2168537. The international dial-in access
number is (614) 999-9188.
PAE will post an archive of the webcast
following the call on the PAE Investor Relations website.
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.
Forward-Looking Statements
This press release contains 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 our expectations
and projections regarding the acquisition of Metis Solutions
Corporation, PAE’s possible or assumed future results of
operations, financial results, backlog, estimation of resources for
contracts, strategy for and management of growth, needs for
additional capital, risks related to government contracting
generally, including failures to properly manage projects and
subcontractors, susceptibility to claims, litigation and other
disputes, and risks related to public health crises. 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.
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.
Non-GAAP Financial Measures
PAE Incorporated (the “Company”) uses adjusted EBITDA, adjusted
EBITDA margin and free cash flow 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 excludes
certain amounts included in EBITDA. Adjusted EBITDA margin is
calculated as adjusted EBITDA divided by revenues expressed as a
percentage. Free cash flow is defined as cash flow provided by
operating activities less capital expenditures.
PAE believes that the use of these non-GAAP financial measures
provides an additional tool for investors to use in evaluating the
acquisition by PAE of Metis Solutions Corporation and the projected
future operating and financial results of PAE. The non-GAAP
financial measures provided in this press release are
forward-looking.
PAE is not providing a quantitative reconciliation of adjusted
EBITDA or adjusted EBITDA margin 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.
Use of Projections
This press release contains projections with
respect to the Company and Metis Solutions Corporation. The
Company’s independent auditors have not audited, reviewed,
compiled, or performed any procedures with respect to the
projections for the purpose of their inclusion in this press
release, and accordingly, did not express an opinion or provide any
other form of assurance with respect thereto for the purpose of
this press release. These projections should not be relied upon as
being necessarily indicative of future results.
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
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