PAE Incorporated (“PAE” or the “Company”) (NASDAQ: PAE,
PAEWW) today announced second-quarter 2021 financial and operating
results.
CEO Commentary
PAE Interim President and CEO Charlie Peiffer said,
“We delivered strong adjusted EBITDA and margins with solid revenue
performance in the quarter. We started to see a pickup in contract
awards activity, which provides the foundation for revenue growth
heading into the second half of the year.”
Second-Quarter 2021 Results
Revenues for the quarter of $747.2 million
increased $103.9 million, or 16.2%, compared to the prior year
period. The increase was attributable to $93.1 million of revenue
from recent acquisitions and by a $10.8 million net increase from
new business awards and other changes in contract volume. The
Global Mission Services and National Security Solutions segments’
revenues increased by approximately $3.5 million and $100.4
million, respectively.
Operating income for the quarter was $30.8 million,
compared with operating income of $34.3 million in the prior year
period. The decrease resulted from higher selling, general and
administrative expenses and increased amortization of intangible
assets, which decrease was partially offset by higher revenue
volume.
The net income attributed to PAE for the quarter
was $14.4 million, or $0.15 per diluted share, compared with a net
loss of approximately $3.4 million, or $(0.04) per diluted share in
the prior year period. The improvement in net income for the second
quarter of 2021 was primarily driven by changes in fair value of
the warrants, which increase was partially offset by the factors
impacting operating income. Adjusted EBITDA for the
quarter was $53.3 million, or 7.1% of revenue, compared to $48.4
million, or 7.5% of revenue, in the prior year period. Adjusted
EBITDA increased due to higher revenue volume while margins
declined due primarily to higher selling, general and
administrative expenses in the current period.
Global Mission ServicesGMS revenues for the quarter
of $511.3 million increased $3.5 million, or about 1.0%, compared
to the prior year period. The increase was attributable to new
business awards, which increase was partially offset by reductions
in contract volume on certain programs.
GMS operating income for the quarter was $28.7
million, compared to $31.5 million in the prior-year period. The
decrease was driven by higher selling, general and administrative
expenses which was partially offset by higher revenue volume.
GMS adjusted operating income2 for the quarter was
$34.6 million, or 6.8% of revenue, compared to $37.4 million, or an
operating margin of 7.4% of revenue, in the prior year period. The
reduction in GMS adjusted operating income and margins2 was driven
by higher selling, general and administrative expenses, which
decrease was partially offset by higher revenue volume.
National Security SolutionsNSS revenues for the
quarter of $235.9 million increased $100.4 million, or 74.1%,
compared to the prior year period. The increase was attributable to
$93.1 million of revenue from recent acquisitions and a $7.4
million increase from in contract volume.
NSS operating income for the quarter was $9.2
million, compared to $7.7 million in the prior year period. The
increase resulted from higher revenue volume and improved program
performance, which increase was partially offset by higher selling,
general and administrative expenses.
NSS adjusted operating income3 for the quarter was
$18.7 million, or 7.9% of revenue, compared to $11.0 million, or
8.1% of revenue, in the prior year period. The variances in NSS
adjusted operating income and margins3 were driven by the increase
in revenue volume and program performance, which increases were
partially offset by higher selling, general and administrative
expenses.
Cash Flow Summary
Net cash used in operating activities for the
quarter of $11.9 million decreased $56.5 million over the prior
year period, primarily as a result of lower comparable cash
collections due to timing of customer payments, partially offset by
customer advances and billings in excess of costs and net income
growth.
As of June 27, 2021, PAE had cash and cash
equivalents totaling $94.7 million and had no outstanding
borrowings on its senior secured revolving credit facility.
Business Development Highlights and
Contract Awards
Net bookings totaled $731 million in the second
quarter and $2.9 billion over the trailing 12 months, representing
a book to bill ratio of 1.0x for both the second quarter and
trailing 12 months.
Notable second quarter awards received include:
Notable New Business Awards:
- DIA SIA 3 task
order: Edge Analytic Solutions, LLC, a joint venture
between NSS and Prescient Edge Corporation, was awarded a task
order, of which, approximately $65 million is attributable to NSS,
to provide counter and human intelligence support services to a
national security customer.
- Contract Field Teams’
Maintenance Service Contract: GMS was awarded an
approximate $30 million task order on the Contract Field Teams’
Maintenance Services Contract for aviation maintenance and
logistics, which supports the U.S. Army’s 1106th Theater Aviation
Sustainment Maintenance Group in Fresno, California.
Notable Recompete Awards:
- Naval Expeditionary Forensics and Biometrics:
NSS was awarded a contract, valued at approximately $95 million, to
provide support to U.S. Navy efforts related to forensics and
biometrics requirements.
Notable IDIQ Awards:
- Naval Facilities
Engineering Systems Command Far East: GMS was awarded a
single award, indefinite delivery, indefinite quantity contract
valued at approximately $74 million by Naval Facilities Engineering
Systems Command Far East for base operating support services at
Marine Corps Air Station Iwakuni, Japan.
- U.S. Air Force Engineering
Assessment, Procurement, Integration and Contractor Logistics
Support: GMS won a seat on the 10-year, $950 million
Engineering Assessment, Procurement, Integration and Contractor
Logistics Support contract to support foreign military sales
transactions focused on engineering, sustainment and
integration-based solutions for intelligence, surveillance and
reconnaissance platforms.
The Company’s backlog at the end of the quarter was
$7.4 billion, of which approximately $1.2 billion was funded.
Following the end of the second quarter, GMS was
awarded an approximately $402 million contract by the National
Aeronautics and Space Administration to provide a wide range of
facility support services at Lyndon B. Johnson Space Center in
Houston, Texas. This award was subsequently protested by a
competitor, and the protest is currently pending at the Government
Accountability Office.
2021 Financial Outlook
PAE is reiterating the fiscal 2021 guidance it
issued on March 11, 2021, based on the Company's financial results
for the first six months of 2021 and its current outlook for the
remainder of the year. The table below summarizes the Company's
2021 financial guidance:
Revenue: |
$3,050 million
- $3,150 million |
Adjusted EBITDA: |
$205 million - $215 million |
Cash flow provided by operations: |
At least $120 million |
Adjusted EBITDA is a non-GAAP financial measure.
The Company is not providing a quantitative reconciliation of
adjusted EBITDA in its 2021 financial guidance in reliance on the
“unreasonable efforts” exception for forward-looking non-GAAP
measures set forth in Securities and Exchange Commission 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 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 actual GAAP net income
being materially less than is indicated by estimated adjusted
EBITDA (non-GAAP). Due to the uncertainty of estimates and
assumptions used in preparing forward-looking non-GAAP measures,
actual results could differ materially from these non-GAAP
financial projections.
Conference Call Information
As previously announced, PAE will host a conference
call and webcast today, August 5, 2021, at 8 a.m. ET. Management
will review the Company's second-quarter 2021 financial results,
followed by a question-and-answer session. Listeners will be able
to access a presentation summarizing the second-quarter 2021
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 2767504. 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” within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and
Section 21E of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) as defined in the Private Securities Litigation
Reform Act of 1995. These forward-looking statements relate to
management’s assumptions, expectations, projections, intentions
and/or beliefs about future events or occurrences, and 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, risks related to
integration of acquisitions, 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. Some
factors that could cause actual results to differ include a loss of
contracts with the U.S. federal government or its agencies or other
state, local or foreign governments or agencies, including as a
result of a reduction in government spending; service failures or
failures to properly manage projects; issues that damage our
professional reputation; disruptions in or changes to prices
relating to our supply chain, including as a result of difficulties
in the supplier qualification process; failures on the part of our
subcontractors or joint venture partners to perform their
contractual obligations; failures to maintain strong relationships
with other contractors; the impact of a negative audit or other
investigation; failure to comply with numerous laws and regulations
regarding procurement, anti-bribery and organizational conflicts of
interest; inability to comply with the laws and other security
requirements governing access to classified information; inability
to share information from classified contracts with investors;
impact of implementing various data privacy and cybersecurity laws;
costs and liabilities arising under various environmental laws and
regulations; various claims, litigation and other disputes that
could be resolved against PAE; delays, contract terminations or
cancellations caused by competitors’ protests of major contract
awards received by us; risks related to mergers and acquisitions,
including our ability to realize the benefits of any such
transactions in a manner consistent with our expectations and
integration risks; risks from operating internationally; the
effects of COVID-19 and other pandemics or health epidemics,
including disruptions to our workforce and the impact on government
spending; disruptions caused by natural or environmental disasters,
terrorist activities or other events outside our control; issues
arising from cybersecurity threats or intellectual property
infringement claims; the loss of members of senior management; the
inability to attract, train or retain employees with the requisite
skills, experience and security clearances; the impact of the
expiration of our collective bargaining agreements; and other risks
and uncertainties described under the heading “Risk Factors” and
elsewhere in our reports filed with the Securities and Exchange
Commission (“SEC”).
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 more than 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 Incorporated Condensed Consolidated Statement
of Operations (Unaudited) (In thousands, except share and per
share data)
|
Three Months Ended |
|
Six Months Ended |
|
June 27, |
|
June 28, |
|
June 27, |
|
June 28, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
$ |
747,198 |
|
|
$ |
643,303 |
|
|
$ |
1,495,765 |
|
|
$ |
1,260,556 |
|
Cost of revenues |
564,952 |
|
|
496,678 |
|
|
1,131,618 |
|
|
961,886 |
|
Selling, general and
administrative expenses |
142,776 |
|
|
105,451 |
|
|
288,067 |
|
|
242,777 |
|
Amortization of intangible
assets |
12,631 |
|
|
8,047 |
|
|
24,846 |
|
|
16,094 |
|
Total operating expenses |
720,359 |
|
|
610,176 |
|
|
1,444,531 |
|
|
1,220,757 |
|
Program profit |
26,839 |
|
|
33,127 |
|
|
51,234 |
|
|
39,799 |
|
Other operating income
net |
3,922 |
|
|
1,168 |
|
|
5,723 |
|
|
1,954 |
|
Operating income |
30,761 |
|
|
34,295 |
|
|
56,957 |
|
|
41,753 |
|
Interest expense, net |
(13,160 |
) |
|
(13,757 |
) |
|
(25,674 |
) |
|
(34,705 |
) |
Other income, net |
(66 |
) |
|
(19,467 |
) |
|
1,134 |
|
|
10,645 |
|
Income before income
taxes |
17,535 |
|
|
1,071 |
|
|
32,417 |
|
|
17,693 |
|
Expense (benefit) from income
taxes |
2,626 |
|
|
3,752 |
|
|
5,235 |
|
|
(5,776 |
) |
Net income (loss) |
14,909 |
|
|
(2,681 |
) |
|
27,182 |
|
|
23,469 |
|
Noncontrolling interest in
earnings of ventures |
559 |
|
|
765 |
|
|
(552 |
) |
|
931 |
|
Net income (loss) attributed
to PAE Incorporated |
$ |
14,350 |
|
|
$ |
(3,446 |
) |
|
$ |
27,734 |
|
|
$ |
22,538 |
|
|
|
|
|
|
|
|
|
Net income (loss) per share
attributed to PAE Incorporated: |
|
|
|
|
|
|
|
Basic |
$ |
0.15 |
|
|
$ |
(0.04 |
) |
|
$ |
0.30 |
|
|
$ |
0.30 |
|
Diluted |
$ |
0.15 |
|
|
$ |
(0.04 |
) |
|
$ |
0.29 |
|
|
$ |
0.30 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding |
|
|
|
|
|
|
|
Basic |
93,097,652 |
|
|
92,044,098 |
|
|
92,860,800 |
|
|
75,890,028 |
|
Diluted |
95,511,269 |
|
|
92,787,379 |
|
|
95,193,549 |
|
|
76,273,931 |
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Balance
Sheets (Unaudited)(In thousands, except share and par value
amounts)
|
June 27, |
|
December 31, |
|
2021 |
|
2020 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
94,710 |
|
|
$ |
85,908 |
|
Accounts receivable, net |
605,060 |
|
|
585,511 |
|
Prepaid expenses and other
current assets |
63,367 |
|
|
61,607 |
|
Total current assets |
763,137 |
|
|
733,026 |
|
Property and equipment,
net |
38,229 |
|
|
27,615 |
|
Investments |
20,361 |
|
|
18,272 |
|
Goodwill |
593,171 |
|
|
590,668 |
|
Intangible assets, net |
233,364 |
|
|
258,210 |
|
Operating lease right-of-use
assets, net |
195,245 |
|
|
191,370 |
|
Other noncurrent assets |
12,938 |
|
|
10,209 |
|
Total assets |
$ |
1,856,445 |
|
|
$ |
1,829,370 |
|
Liabilities and stockholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
174,651 |
|
|
$ |
152,962 |
|
Accrued expenses |
118,918 |
|
|
114,222 |
|
Customer advances and billings
in excess of costs |
88,903 |
|
|
106,475 |
|
Salaries, benefits and payroll
taxes |
145,905 |
|
|
145,186 |
|
Accrued taxes |
11,689 |
|
|
15,582 |
|
Current portion of long-term
debt, net |
6,611 |
|
|
5,961 |
|
Operating lease liabilities,
current portion |
47,257 |
|
|
46,756 |
|
Other current liabilities |
39,615 |
|
|
45,037 |
|
Total current liabilities |
633,549 |
|
|
632,181 |
|
Deferred income taxes,
net |
10,324 |
|
|
4,389 |
|
Long-term debt, net |
863,893 |
|
|
860,306 |
|
Long-term operating lease
liabilities |
150,824 |
|
|
145,569 |
|
Warrant liability |
49,333 |
|
|
50,467 |
|
Other long-term
liabilities |
31,932 |
|
|
30,273 |
|
Total liabilities |
1,739,855 |
|
|
1,723,185 |
|
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; 93,069,815 and
92,040,654 shares issued and outstanding as of June 27, 2021 and
December 31, 2020, respectively |
9 |
|
|
9 |
|
Additional paid-in
capital |
170,245 |
|
|
188,685 |
|
Accumulated deficit |
(88,887 |
) |
|
(116,621 |
) |
Accumulated other
comprehensive loss |
1,510 |
|
|
1,876 |
|
Total PAE Incorporated stockholders' equity |
82,877 |
|
|
73,949 |
|
Noncontrolling interests |
33,713 |
|
|
32,236 |
|
Total liabilities and stockholders' equity |
$ |
1,856,445 |
|
|
$ |
1,829,370 |
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited) (In thousands)
|
Three Months Ended |
|
June 27, |
|
June 28, |
|
2021 |
|
2020 |
Operating
activities |
|
|
|
Net income (loss) |
$ |
14,909 |
|
|
$ |
(2,681 |
) |
Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
2,479 |
|
|
2,489 |
|
Amortization of intangible assets |
12,631 |
|
|
8,047 |
|
Amortization of debt issuance cost |
795 |
|
|
1,758 |
|
Stock-based compensation |
2,355 |
|
|
3,700 |
|
Net undistributed income from unconsolidated ventures |
(4,157 |
) |
|
(1,076 |
) |
Deferred income taxes, net |
3,739 |
|
|
(4,214 |
) |
Change in fair value of warranty liability |
67 |
|
|
19,467 |
|
Other non-cash activities, net |
(670 |
) |
|
134 |
|
Changes in operating assets and liabilities, net: |
|
|
|
Accounts receivable, net |
(42,685 |
) |
|
(11,262 |
) |
Accounts payable |
(3,199 |
) |
|
(15,130 |
) |
Accrued expenses |
(2,333 |
) |
|
10,137 |
|
Customer advances and billings in excess of costs |
14,705 |
|
|
1,059 |
|
Salaries, benefits and payroll taxes |
(12,951 |
) |
|
25,617 |
|
Prepaid expenses and other current assets |
5,645 |
|
|
738 |
|
Other current and noncurrent liabilities |
11,160 |
|
|
(556 |
) |
Investments |
3,384 |
|
|
951 |
|
Other noncurrent assets |
(14,236 |
) |
|
6,871 |
|
Accrued taxes |
(3,497 |
) |
|
(1,374 |
) |
Net cash (used in) provided by operating activities |
(11,859 |
) |
|
44,675 |
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(11,966 |
) |
|
(1,193 |
) |
Proceeds from sales of
property |
9 |
|
|
— |
|
Acquisition of Metis Solutions
Corporation, net of acquired cash |
(521 |
) |
|
— |
|
Acquisition of CENTRA
Technology Inc, net of acquired cash |
(1,441 |
) |
|
— |
|
Acquisition of noncontrolling
interest |
(8 |
) |
|
— |
|
Other investing activities,
net |
(1 |
) |
|
37 |
|
Net cash used in investing
activities |
(13,928 |
) |
|
(1,156 |
) |
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
— |
|
|
1,800 |
|
Borrowings on long-term
debt |
105,383 |
|
|
468 |
|
Repayments on long-term
debt |
(102,584 |
) |
|
(7,920 |
) |
Recapitalization from merger
with Gores Holdings III, Inc. |
— |
|
|
5 |
|
Payment of underwriting and
transaction costs |
— |
|
|
1 |
|
Other financing activities,
net |
(825 |
) |
|
(292 |
) |
Net cash used in financing activities |
1,974 |
|
|
(5,938 |
) |
Effect of exchange rate
changes on cash and cash equivalents |
373 |
|
|
1,098 |
|
Net (decrease)
increase in cash and cash equivalents |
(23,440 |
) |
|
38,679 |
|
Cash and cash equivalents at
beginning of period |
118,150 |
|
|
99,790 |
|
Cash and cash
equivalents at end of period |
$ |
94,710 |
|
|
$ |
138,469 |
|
|
|
|
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
15,869 |
|
|
$ |
12,378 |
|
Cash paid for taxes |
$ |
6,802 |
|
|
$ |
1,273 |
|
|
|
|
|
|
|
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited) (In thousands)
|
Six Months Ended |
|
June 27, |
|
June 28, |
|
2021 |
|
2020 |
Operating
activities |
|
|
|
Net income |
$ |
27,182 |
|
|
$ |
23,469 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
4,747 |
|
|
5,072 |
|
Amortization of intangible assets |
24,846 |
|
|
16,094 |
|
Amortization of debt issuance cost |
1,572 |
|
|
7,821 |
|
Stock-based compensation |
4,625 |
|
|
3,700 |
|
Net undistributed income from unconsolidated ventures |
(6,568 |
) |
|
(1,739 |
) |
Deferred income taxes, net |
6,557 |
|
|
(14,110 |
) |
Change in fair value of Warrant liability |
(1,133 |
) |
|
(14,132 |
) |
Other non-cash activities, net |
(810 |
) |
|
404 |
|
Changes in operating assets
and liabilities, net of acquisitions: |
|
|
|
Accounts receivable, net |
(20,000 |
) |
|
9,607 |
|
Accounts payable |
21,838 |
|
|
(17,547 |
) |
Accrued expenses |
5,002 |
|
|
9,845 |
|
Customer advances and billings in excess of costs |
(17,571 |
) |
|
19,282 |
|
Salaries, benefits and payroll taxes |
1,000 |
|
|
4,310 |
|
Prepaid expenses and other current assets |
(2,910 |
) |
|
(841 |
) |
Other current and noncurrent liabilities |
528 |
|
|
(5,101 |
) |
Investments |
4,758 |
|
|
1,701 |
|
Other noncurrent assets |
(6,237 |
) |
|
11,600 |
|
Accrued taxes |
(3,889 |
) |
|
(3,847 |
) |
Net cash provided by operating activities |
43,537 |
|
|
55,588 |
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(14,400 |
) |
|
(1,597 |
) |
Proceeds from sales of
property |
231 |
|
|
— |
|
Acquisition of Metis Solutions
Corporation, net of acquired cash |
(521 |
) |
|
— |
|
Acquisition of CENTRA
Technology Inc, net of acquired cash |
(1,441 |
) |
|
— |
|
Acquisition of noncontrolling
interest |
(14,308 |
) |
|
— |
|
Other investing activities,
net |
(373 |
) |
|
37 |
|
Net cash used in investing activities |
(30,812 |
) |
|
(1,560 |
) |
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
490 |
|
|
1,950 |
|
Borrowings on long-term
debt |
125,383 |
|
|
60,468 |
|
Repayments on long-term
debt |
(122,584 |
) |
|
(204,464 |
) |
Payment of debt issuance
costs |
— |
|
|
(964 |
) |
Recapitalization from merger
with Gores Holdings III, Inc. |
— |
|
|
605,713 |
|
Payment of underwriting and
transaction costs |
— |
|
|
(27,267 |
) |
Distribution to selling
stockholders |
— |
|
|
(419,548 |
) |
Stock-based compensation tax
withholding obligation |
(5,659 |
) |
|
— |
|
|
(825 |
) |
|
(292 |
) |
Net cash (used in) provided by financing activities |
(3,195 |
) |
|
15,596 |
|
Effect of exchange rate
changes on cash and cash equivalents |
(728 |
) |
|
810 |
|
Net increase in cash
and cash equivalents |
8,802 |
|
|
70,434 |
|
Cash and cash equivalents at
beginning of period |
85,908 |
|
|
68,035 |
|
Cash and cash
equivalents at end of period |
$ |
94,710 |
|
|
$ |
138,469 |
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
27,846 |
|
|
$ |
23,278 |
|
Cash paid for taxes |
$ |
7,273 |
|
|
$ |
2,796 |
|
|
|
|
|
|
|
|
|
PAE INCORPORATED SEGMENT DATA (in
thousands)
|
Three Months Ended |
|
Six Months Ended |
|
June 27, |
|
June 28, |
|
June 27, |
|
June 28, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
|
|
|
|
|
|
|
GMS |
$ |
511,343 |
|
|
$ |
507,854 |
|
|
$ |
1,032,904 |
|
|
$ |
965,298 |
|
NSS |
235,855 |
|
|
135,449 |
|
|
462,861 |
|
|
295,258 |
|
Consolidated revenues |
$ |
747,198 |
|
|
$ |
643,303 |
|
|
$ |
1,495,765 |
|
|
$ |
1,260,556 |
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
GMS |
$ |
28,700 |
|
|
$ |
31,537 |
|
|
$ |
53,214 |
|
|
$ |
44,140 |
|
NSS |
9,248 |
|
|
7,725 |
|
|
20,638 |
|
|
12,092 |
|
Corporate |
(7,187 |
) |
|
(4,967 |
) |
|
(16,895 |
) |
|
(14,479 |
) |
Consolidated operating
income |
$ |
30,761 |
|
|
$ |
34,295 |
|
|
$ |
56,957 |
|
|
$ |
41,753 |
|
|
|
|
|
|
|
|
|
Amortization of intangible
assets |
|
|
|
|
|
|
|
GMS |
$ |
4,161 |
|
|
$ |
4,115 |
|
|
$ |
8,322 |
|
|
$ |
8,231 |
|
NSS |
8,470 |
|
|
3,932 |
|
|
16,524 |
|
|
7,863 |
|
Consolidated amortization of
intangible assets |
$ |
12,631 |
|
|
$ |
8,047 |
|
|
$ |
24,846 |
|
|
$ |
16,094 |
|
|
|
|
|
|
|
|
|
PAE INCORPORATED BACKLOG (in thousands)
|
As of |
|
As of |
|
June 27, |
|
December 31, |
|
2021 |
|
2020 |
Global Mission Services: |
|
|
|
Funded backlog |
$ |
498,080 |
|
|
$ |
946,711 |
|
Unfunded backlog |
4,215,995 |
|
|
4,445,442 |
|
Total GMS backlog |
$ |
4,714,075 |
|
|
$ |
5,392,153 |
|
|
|
|
|
National Security
Solutions: |
|
|
|
Funded backlog |
$ |
678,799 |
|
|
$ |
476,618 |
|
Unfunded backlog |
2,050,131 |
|
|
2,046,634 |
|
Total NSS backlog |
$ |
2,728,930 |
|
|
$ |
2,523,252 |
|
|
|
|
|
Total: |
|
|
|
Funded backlog |
$ |
1,176,879 |
|
|
$ |
1,423,329 |
|
Unfunded backlog |
6,266,126 |
|
|
6,492,076 |
|
Total backlog |
$ |
7,443,005 |
|
|
$ |
7,915,405 |
|
|
|
|
|
|
|
|
|
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 contracts, U.S. General
Services Administration 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 2021 and 2020, the Company’s net income was
impacted by certain events, as described in the footnotes to the
reconciliation tables, 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.
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 |
|
|
|
Six Months Ended |
|
|
|
June 27, |
|
June 28, |
|
|
|
June 27, |
|
June 28, |
|
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Net income (loss) attributed to PAE Incorporated |
$ |
14,350 |
|
|
$ |
(3,446 |
) |
|
|
$ |
17,796 |
|
|
$ |
27,734 |
|
|
$ |
22,538 |
|
|
|
$ |
5,196 |
|
Interest expense, net |
13,160 |
|
|
13,757 |
|
|
|
(597 |
) |
|
25,674 |
|
|
34,705 |
|
|
|
(9,031 |
) |
Provision for taxes |
2,626 |
|
|
3,752 |
|
|
|
(1,126 |
) |
|
5,235 |
|
|
(5,776 |
) |
|
|
11,011 |
|
Depreciation and
amortization |
15,110 |
|
|
10,536 |
|
|
|
4,574 |
|
|
29,593 |
|
|
21,166 |
|
|
|
8,427 |
|
M&A and Integration
costs |
2,615 |
|
|
(752 |
) |
|
|
3,367 |
|
|
4,448 |
|
|
23,228 |
|
|
|
(18,780 |
) |
Disposal of assets |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
Non-core expenses (1) |
468 |
|
|
1,195 |
|
|
|
(727 |
) |
|
1,534 |
|
|
1,453 |
|
|
|
81 |
|
Non-cash items (2) |
— |
|
|
— |
|
|
|
— |
|
|
— |
|
|
— |
|
|
|
— |
|
Equity based compensation
(3) |
3,624 |
|
|
3,519 |
|
|
|
105 |
|
|
5,555 |
|
|
3,519 |
|
|
|
2,036 |
|
Other (4) |
1,357 |
|
|
19,838 |
|
|
|
(18,481 |
) |
|
566 |
|
|
(10,788 |
) |
|
|
11,354 |
|
Adjusted EBITDA |
$ |
53,310 |
|
|
$ |
48,399 |
|
|
|
$ |
4,911 |
|
|
$ |
100,339 |
|
|
$ |
90,045 |
|
|
|
$ |
10,294 |
|
Adjusted EBITDA margin |
7.1 |
% |
|
7.5 |
|
% |
|
|
|
6.7 |
% |
|
7.1 |
|
% |
|
|
Reconciliation of GAAP operating income to
adjusted operating income, a non-GAAP Measure -
GMS |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 27, |
|
June 28, |
|
|
|
June 27, |
|
June 28, |
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
2021 |
|
|
2020 |
|
|
Change |
Operating income |
$ |
28,700 |
|
|
|
$ |
31,537 |
|
|
|
$ |
(2,837 |
) |
|
$ |
53,214 |
|
|
|
$ |
44,140 |
|
|
|
$ |
9,074 |
|
Corp operating loss allocation
(5) |
(5,619 |
) |
|
|
(3,918 |
) |
|
|
(1,701 |
) |
|
(13,293 |
) |
|
|
(10,968 |
) |
|
|
(2,325 |
) |
Corp other income (loss)
allocation (6) |
(52 |
) |
|
|
(15,359 |
) |
|
|
15,307 |
|
|
896 |
|
|
|
6,958 |
|
|
|
(6,062 |
) |
Corporate NCI allocation |
(492 |
) |
|
|
(804 |
) |
|
|
312 |
|
|
433 |
|
|
|
(1,026 |
) |
|
|
1,459 |
|
Depreciation and
amortization |
6,104 |
|
|
|
6,057 |
|
|
|
47 |
|
|
11,966 |
|
|
|
12,208 |
|
|
|
(242 |
) |
M&A and Integration
costs |
2,044 |
|
|
|
553 |
|
|
|
1,491 |
|
|
3,493 |
|
|
|
16,465 |
|
|
|
(12,972 |
) |
Disposal of assets |
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-core expenses (1) |
366 |
|
|
|
943 |
|
|
|
(577 |
) |
|
1,209 |
|
|
|
1,134 |
|
|
|
75 |
|
Equity based compensation
(3) |
2,833 |
|
|
|
2,777 |
|
|
|
56 |
|
|
4,360 |
|
|
|
2,777 |
|
|
|
1,583 |
|
Other (4) |
710 |
|
|
|
15,652 |
|
|
|
(14,942 |
) |
|
85 |
|
|
|
(6,936 |
) |
|
|
7,021 |
|
Adjusted operating income |
$ |
34,594 |
|
|
|
$ |
37,438 |
|
|
|
$ |
(2,844 |
) |
|
$ |
62,363 |
|
|
|
$ |
64,752 |
|
|
|
$ |
(2,389 |
) |
Adjusted operating income
margin |
6.8 |
|
% |
|
7.4 |
|
% |
|
|
|
|
|
6.0 |
|
% |
|
6.7 |
|
% |
|
|
Reconciliation of GAAP operating income to adjusted
operating income, a non-GAAP Measure - NSS |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Six Months Ended |
|
|
|
June 27, |
|
June 28, |
|
|
|
June 27, |
|
June 28, |
|
|
|
2021 |
|
|
2020 |
|
|
Change |
|
2021 |
|
|
2020 |
|
|
Change |
Operating income |
$ |
9,248 |
|
|
|
$ |
7,725 |
|
|
|
$ |
1,523 |
|
|
$ |
20,638 |
|
|
|
$ |
12,092 |
|
|
|
$ |
8,546 |
|
Corp operating loss allocation
(5) |
(1,569 |
) |
|
|
(1,048 |
) |
|
|
(521 |
) |
|
(3,603 |
) |
|
|
(3,511 |
) |
|
|
(92 |
) |
Corp other income (loss)
allocation (6) |
(15 |
) |
|
|
(4,108 |
) |
|
|
4,093 |
|
|
237 |
|
|
|
3,688 |
|
|
|
(3,451 |
) |
Corporate NCI allocation |
(67 |
) |
|
|
39 |
|
|
|
(106 |
) |
|
119 |
|
|
|
95 |
|
|
|
24 |
|
Depreciation and
amortization |
9,006 |
|
|
|
4,479 |
|
|
|
4,527 |
|
|
17,627 |
|
|
|
8,958 |
|
|
|
8,669 |
|
M&A and Integration
costs |
571 |
|
|
|
(1,305 |
) |
|
|
1,876 |
|
|
955 |
|
|
|
6,762 |
|
|
|
(5,807 |
) |
Disposal of assets |
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Non-core expenses (1) |
102 |
|
|
|
252 |
|
|
|
(150 |
) |
|
326 |
|
|
|
319 |
|
|
|
7 |
|
Non-cash items (2) |
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Equity based compensation
(3) |
791 |
|
|
|
743 |
|
|
|
48 |
|
|
1,196 |
|
|
|
743 |
|
|
|
453 |
|
Other (4) |
647 |
|
|
|
4,187 |
|
|
|
(3,540 |
) |
|
481 |
|
|
|
(3,852 |
) |
|
|
4,333 |
|
Adjusted operating income |
$ |
18,714 |
|
|
|
$ |
10,964 |
|
|
|
$ |
7,750 |
|
|
$ |
37,976 |
|
|
|
$ |
25,294 |
|
|
|
$ |
12,682 |
|
Adjusted operating income
margin |
7.9 |
|
% |
|
8.1 |
|
% |
|
|
|
8.2 |
|
% |
|
8.6 |
|
% |
|
|
(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) Equity based compensation reflects costs
associated with the issuance of restricted stock units and
performance-based restricted stock units to PAE employees and
independent directors.
(4) Other costs include adjustments to offset
capitalized internal labor, state income taxes that were not
captured in reported income tax expense and warrant-related
expenses.
(5) 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.
(6) Corporate other income (loss) allocation
includes changes in the fair value of the warrants and transaction
expenses allocated to the warrants.
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 margin 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.
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