PAE Incorporated (“PAE” or the “Company”) (NASDAQ: PAE, PAEWW)
today announced third-quarter 2021 financial and operating results.
CEO Commentary
PAE Interim President and CEO Charlie Peiffer
said, “We demonstrated resilience, delivering strong adjusted
EBITDA and margins with solid cash flow generation, despite a $69
million negative revenue impact from the Afghanistan demobilization
during the quarter. Moreover, we were pleased with our contract
award activity, delivering a 1.7x book-to-bill in the third
quarter, excluding the backlog de-obligations associated with the
Afghanistan demobilization.”
Third-Quarter 2021 Results
Revenues for the quarter of $689.5 million
increased $23.3 million, or 3.5%, compared to the prior year
period. The increase was attributable to recent acquisitions and a
net increase in program volume and new business, partially offset
by an impact of $69.1 million from the Afghanistan
demobilization.
Operating income for the quarter was $26.0
million, compared with operating income of $28.5 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 $29.8 million, or $0.31 per diluted share, compared with net
income of approximately $15.3 million, or $0.16 per diluted share
in the prior year period. The improvement in net income for the
third 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 $50.8 million, or 7.4% of revenue, compared to $46.2
million, or 6.9% of revenue, in the prior year period. Adjusted
EBITDA and margins increased due to higher revenue volume and
improved program performance.
Global Mission ServicesGMS revenues for the
quarter of $448.1 million decreased $73.3 million, or about 14.1%,
compared to the prior year period. The decrease was attributable to
a $59.9 million impact from the Afghanistan demobilization and a
$13.4 million reduction in contract volume, net of new business
revenue.
GMS operating income for the quarter was $20.5
million, compared to $31.4 million in the prior-year period. The
decrease was driven by higher selling, general and administrative
expenses and lower revenue volume.
GMS adjusted operating income2 for the quarter
was $28.5 million, or 6.4% of revenue, compared to $35.7 million,
or an operating margin of 6.8% 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
and lower revenue volume.
National Security SolutionsNSS revenues for the
quarter of $241.4 million increased $96.5 million, or 66.6%,
compared to the prior year period. The increase was attributable to
recent acquisitions and increases in contract volume on existing
programs, partially offset by a $9.2 million decrease from the
Afghanistan demobilization.
NSS operating income for the quarter was $13.1
million, compared to $5.7 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 $22.3 million, or 9.2% of revenue, compared to $10.5 million,
or 7.3% 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 provided by operating activities for
the quarter of $56.3 million increased $19.7 million over the prior
year period, driven primarily by higher cash collections and
increases in customer advances and billings in excess of costs in
the current period.
As of September 26, 2021, PAE had cash and cash
equivalents totaling $157.3 million and had no outstanding
borrowings on its senior secured revolving credit facility.
Business Development Highlights and
Contract Awards
Net bookings totaled $1.1 billion in the third
quarter and $2.7 billion over the trailing 12 months, representing
a book to bill ratio of 1.7x and 0.9x for the third quarter and
trailing 12 months, respectively, excluding the backlog
de-obligations associated with the Afghanistan demobilization.
Notable third quarter awards received
include:
Notable New Business Awards:
- Kirtland Air Force
Base: GMS was awarded a task order valued at approximately
$84 million to support helicopter maintenance for training missions
with the Air Education and Training Command at Kirtland Air Force
Base in Albuquerque, New Mexico.
- DIA SIA 3 SB: DRI
Predictive Analysis: NSS was awarded an approximate $16
million contract providing analytic teams with cross-functional
expertise including all-source intelligence analysis.
Notable Recompete Awards:
- NASA Johnson Space Center: GMS was awarded a
contract by the National Aeronautics and Space Administration,
valued at $402 million if all options are exercised, to provide a
wide range of facility support services at Lyndon B. Johnson Space
Center.
- USAID Bureau for Humanitarian Assistance: GMS
was awarded a task order, valued at approximately $178 million, to
provide comprehensive support services including the administration
of grants, cooperative and interagency agreements, the recruitment
and administration of U.S. Personal Services Contracts, field and
information support services, staff training and support for
capacity-building activities.
- USPS Los Angeles Mail Transport Equipment Service
Center: NSS was awarded a contract, valued at
approximately $64 million, to include the processing and management
of mail transport equipment used to enclose and transport mail.
MTESCs throughout the United States manage and ship transport
equipment to USPS and USPS customer facilities.
Notable IDIQ Awards:
- USAID Global
Architect-Engineer Services III: GMS won a seat on the
7-year, $800 million Global Architect-Engineer Services III
contract by the United States Agency for International Development
to support infrastructure activities for the agency’s Bureau for
Development, Democracy and Innovation.
The Company’s backlog at the end of the quarter
was $7.5 billion, which reflects approximately $0.4 billion of
de-obligations associated with the Afghanistan demobilization.
Approximately $801 million of the Company’s backlog was funded at
the end of the quarter.
Subsequent Events
On October 25, 2021, PAE Incorporated (the
“Company”) entered into an Agreement and Plan of Merger (the
“Amentum Merger Agreement”) with Amentum Government Services
Holdings LLC (“Parent” or “Amentum”) and Pinnacle Virginia Merger
Sub Inc. and an indirect wholly-owned subsidiary of Parent (“Merger
Sub”), providing for the merger of Merger Sub with and into the
Company (the “Merger”), with the Company continuing as the
surviving company of the Merger and an indirect wholly-owned
subsidiary of Parent (the “Surviving Corporation”). Pursuant to the
terms and conditions set forth in the Amentum Merger Agreement, at
the effective time of the merger (the “Effective Time”), each share
of Class A common stock par value $0.0001 of the Company
outstanding as of immediately prior to the Effective Time will
automatically be canceled, extinguished and converted into the
right to receive an amount equal to $10.05 in cash per share, net
any applicable withholding and without interest. The Amentum Merger
Agreement prohibits the Company and its advisors and
representatives from soliciting, encouraging, providing information
or entering into discussions concerning proposals relating to
alternative business combination transactions, subject to certain
limited exceptions. However, during the period beginning on October
25, 2021 and continuing until November 29, 2021 (the “Go-Shop
Period”), the Company is permitted to take such actions with
respect to certain competing acquisition proposals. At the end of
the Go-Shop Period, the Company will cease such activities and will
be subject to customary “no shop” restrictions on its ability to
solicit third party proposals relating to competing acquisition
proposals or to provide information to and engage in discussions
with certain third parties. In the event the Amentum Merger
Agreement is terminated by the Company in certain circumstances,
the Company may be required to pay a termination fee of either
$15.0 million or $30.0 million (including in order to
enter into a definitive agreement with respect to a Company
Superior Proposal) to the Parent. The termination rights of the
parties to the Amentum Merger Agreement are subject to certain
notice, cure and other rights.
Cancellation of Earnings Conference Call
and Suspension of Guidance
As a result of the announced transaction with
Amentum, PAE has cancelled its earnings conference call previously
scheduled for today, November 4, 2021. In addition, the Company is
suspending its financial guidance for the full year 2021 as a
result of the pending transaction.
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; the announced transaction with Amentum; 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 66 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 share and per share
data)
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, |
|
September 27, |
|
September 26, |
|
September 27, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
$ |
689,514 |
|
|
|
$ |
666,240 |
|
|
|
$ |
2,185,279 |
|
|
|
$ |
1,926,795 |
|
|
Cost of revenues |
511,852 |
|
|
|
512,877 |
|
|
|
1,643,470 |
|
|
|
1,474,763 |
|
|
Selling, general and
administrative expenses |
140,170 |
|
|
|
119,168 |
|
|
|
428,237 |
|
|
|
361,945 |
|
|
Amortization of intangible
assets |
12,630 |
|
|
|
8,047 |
|
|
|
37,476 |
|
|
|
24,141 |
|
|
Total operating expenses |
664,652 |
|
|
|
640,092 |
|
|
|
2,109,183 |
|
|
|
1,860,849 |
|
|
Program profit |
24,862 |
|
|
|
26,148 |
|
|
|
76,096 |
|
|
|
65,946 |
|
|
Other operating income
net |
1,174 |
|
|
|
2,384 |
|
|
|
6,897 |
|
|
|
4,338 |
|
|
Operating income |
26,036 |
|
|
|
28,532 |
|
|
|
82,993 |
|
|
|
70,284 |
|
|
Interest expense, net |
(13,109 |
) |
|
|
(13,607 |
) |
|
|
(38,783 |
) |
|
|
(48,312 |
) |
|
Other income, net |
16,399 |
|
|
|
5,000 |
|
|
|
17,533 |
|
|
|
15,645 |
|
|
Income before income
taxes |
29,326 |
|
|
|
19,925 |
|
|
|
61,743 |
|
|
|
37,617 |
|
|
Expense (benefit) from income
taxes |
1,495 |
|
|
|
4,194 |
|
|
|
6,730 |
|
|
|
(1,582 |
) |
|
Net income |
27,831 |
|
|
|
15,731 |
|
|
|
55,013 |
|
|
|
39,199 |
|
|
Noncontrolling interest in
earnings of ventures |
(1,958 |
) |
|
|
413 |
|
|
|
(2,510 |
) |
|
|
1,344 |
|
|
Net income attributed to PAE
Incorporated |
$ |
29,789 |
|
|
|
$ |
15,318 |
|
|
|
$ |
57,523 |
|
|
|
$ |
37,855 |
|
|
|
|
|
|
|
|
|
|
Net income per share
attributed to PAE Incorporated: |
|
|
|
|
|
|
|
Basic |
$ |
0.32 |
|
|
|
$ |
0.17 |
|
|
|
$ |
0.62 |
|
|
|
$ |
0.47 |
|
|
Diluted |
$ |
0.31 |
|
|
|
$ |
0.16 |
|
|
|
$ |
0.60 |
|
|
|
$ |
0.46 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding |
|
|
|
|
|
|
|
Basic |
93,122,414 |
|
|
|
92,070,306 |
|
|
|
92,949,301 |
|
|
|
81,323,258 |
|
|
Diluted |
95,836,986 |
|
|
|
93,392,565 |
|
|
|
95,599,019 |
|
|
|
82,115,825 |
|
|
PAE IncorporatedCondensed Consolidated Balance
Sheets (Unaudited)(In thousands, except share and par value
amounts)
|
September 26, |
|
December 31, |
|
2021 |
|
2020 |
|
|
|
|
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
157,268 |
|
|
|
$ |
85,908 |
|
|
Accounts receivable, net |
524,707 |
|
|
|
585,511 |
|
|
Prepaid expenses and other
current assets |
63,043 |
|
|
|
61,607 |
|
|
Total current assets |
745,018 |
|
|
|
733,026 |
|
|
Property and equipment,
net |
36,600 |
|
|
|
27,615 |
|
|
Investments |
15,407 |
|
|
|
18,272 |
|
|
Goodwill |
593,171 |
|
|
|
590,668 |
|
|
Intangible assets, net |
220,734 |
|
|
|
258,210 |
|
|
Operating lease right-of-use
assets, net |
192,638 |
|
|
|
191,370 |
|
|
Other noncurrent assets |
14,928 |
|
|
|
10,209 |
|
|
Total assets |
$ |
1,818,496 |
|
|
|
$ |
1,829,370 |
|
|
Liabilities and stockholders'
equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
124,959 |
|
|
|
$ |
152,962 |
|
|
Accrued expenses |
107,446 |
|
|
|
114,222 |
|
|
Customer advances and billings
in excess of costs |
106,221 |
|
|
|
106,475 |
|
|
Salaries, benefits and payroll
taxes |
153,229 |
|
|
|
145,186 |
|
|
Accrued taxes |
12,132 |
|
|
|
15,582 |
|
|
Current portion of long-term
debt, net |
7,036 |
|
|
|
5,961 |
|
|
Operating lease liabilities,
current portion |
47,205 |
|
|
|
46,756 |
|
|
Other current liabilities |
38,559 |
|
|
|
45,037 |
|
|
Total current liabilities |
596,787 |
|
|
|
632,181 |
|
|
Deferred income taxes,
net |
11,006 |
|
|
|
4,389 |
|
|
Long-term debt, net |
865,016 |
|
|
|
860,306 |
|
|
Long-term operating lease
liabilities |
150,280 |
|
|
|
145,569 |
|
|
Warrant liability |
32,934 |
|
|
|
50,467 |
|
|
Other long-term
liabilities |
13,509 |
|
|
|
30,273 |
|
|
Total liabilities |
1,669,532 |
|
|
|
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; 93,115,801 and
92,040,654 shares issued and outstanding as of June 27, 2021 and
December 31, 2020, respectively |
9 |
|
|
|
9 |
|
|
Additional paid-in
capital |
171,807 |
|
|
|
188,685 |
|
|
Accumulated deficit |
(59,098 |
) |
|
|
(116,621 |
) |
|
Accumulated other
comprehensive loss |
1,230 |
|
|
|
1,876 |
|
|
Total PAE Incorporated stockholders' equity |
113,948 |
|
|
|
73,949 |
|
|
Noncontrolling interests |
35,016 |
|
|
|
32,236 |
|
|
Total liabilities and stockholders' equity |
$ |
1,818,496 |
|
|
|
$ |
1,829,370 |
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited)(In thousands)
|
Three Months Ended |
|
September 26, |
|
September 27, |
|
2021 |
|
2020 |
Operating
activities |
|
|
|
Net income |
$ |
27,831 |
|
|
|
$ |
15,731 |
|
|
Adjustments to reconcile net
loss to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
3,021 |
|
|
|
2,191 |
|
|
Amortization of intangible assets |
12,630 |
|
|
|
8,047 |
|
|
Amortization of debt issuance cost |
815 |
|
|
|
1,739 |
|
|
Stock-based compensation |
1,722 |
|
|
|
4,318 |
|
|
Net undistributed income from unconsolidated ventures |
(2,057 |
) |
|
|
(1,794 |
) |
|
Deferred income taxes, net |
692 |
|
|
|
2,066 |
|
|
Change in fair value of warranty liability |
(16,400 |
) |
|
|
(5,000 |
) |
|
Other non-cash activities, net |
(1,904 |
) |
|
|
(22 |
) |
|
Changes in operating assets and liabilities, net: |
|
|
|
Accounts receivable, net |
81,375 |
|
|
|
(13,084 |
) |
|
Accounts payable |
(50,033 |
) |
|
|
33,399 |
|
|
Accrued expenses |
(12,107 |
) |
|
|
(5,593 |
) |
|
Customer advances and billings in excess of costs |
17,315 |
|
|
|
(10,359 |
) |
|
Salaries, benefits and payroll taxes |
6,488 |
|
|
|
6,665 |
|
|
Prepaid expenses and other current assets |
786 |
|
|
|
(1,277 |
) |
|
Other current and noncurrent liabilities |
(20,148 |
) |
|
|
5,171 |
|
|
Investments |
5,149 |
|
|
|
1,092 |
|
|
Other noncurrent assets |
661 |
|
|
|
(5,697 |
) |
|
Accrued taxes |
431 |
|
|
|
(1,057 |
) |
|
Net cash provided by operating activities |
56,267 |
|
|
|
36,536 |
|
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(5,177 |
) |
|
|
(1,031 |
) |
|
Proceeds from sales of
property |
4,964 |
|
|
|
— |
|
|
Other investing activities,
net |
2,403 |
|
|
|
(109 |
) |
|
Net cash provided by (used in) investing activities |
2,190 |
|
|
|
(1,140 |
) |
|
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
2,437 |
|
|
|
145 |
|
|
Borrowings on long-term
debt |
111,627 |
|
|
|
266 |
|
|
Repayments on long-term
debt |
(110,825 |
) |
|
|
(7,720 |
) |
|
Recapitalization from merger
with Gores Holdings III, Inc. |
— |
|
|
|
— |
|
|
Payment of underwriting and
transaction costs |
— |
|
|
|
— |
|
|
Stock-based compensation tax
withholding obligation |
(159 |
) |
|
|
— |
|
|
Other financing activities,
net |
825 |
|
|
|
— |
|
|
Net cash provided by (used in) financing activities |
3,905 |
|
|
|
(27,480 |
) |
|
Effect of exchange rate
changes on cash and cash equivalents |
196 |
|
|
|
(939 |
) |
|
Net increase in cash
and cash equivalents |
62,558 |
|
|
|
6,977 |
|
|
Cash and cash equivalents at
beginning of period |
94,710 |
|
|
|
138,469 |
|
|
Cash and cash
equivalents at end of period |
$ |
157,268 |
|
|
|
$ |
145,446 |
|
|
|
|
|
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
12,202 |
|
|
|
$ |
11,807 |
|
|
Cash paid for taxes |
$ |
2,070 |
|
|
|
$ |
2,508 |
|
|
PAE IncorporatedCondensed Consolidated Statements
of Cash Flows (Unaudited) (In thousands)
|
Nine Months Ended |
|
September 26, |
|
September 27, |
|
2021 |
|
2020 |
Operating
activities |
|
|
|
Net income |
$ |
55,013 |
|
|
|
$ |
39,199 |
|
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Depreciation of property and equipment |
7,768 |
|
|
|
7,263 |
|
|
Amortization of intangible assets |
37,476 |
|
|
|
24,141 |
|
|
Amortization of debt issuance cost |
2,387 |
|
|
|
9,560 |
|
|
Stock-based compensation |
6,347 |
|
|
|
8,018 |
|
|
Net undistributed income from unconsolidated ventures |
(8,625 |
) |
|
|
(3,533 |
) |
|
Deferred income taxes, net |
7,249 |
|
|
|
(12,044 |
) |
|
Change in fair value of Warrant liability |
(17,533 |
) |
|
|
(19,132 |
) |
|
Other non-cash activities, net |
(2,714 |
) |
|
|
382 |
|
|
Changes in operating assets
and liabilities, net of acquisitions: |
|
|
|
Accounts receivable, net |
61,375 |
|
|
|
(3,477 |
) |
|
Accounts payable |
(28,195 |
) |
|
|
15,852 |
|
|
Accrued expenses |
(7,105 |
) |
|
|
4,252 |
|
|
Customer advances and billings in excess of costs |
(256 |
) |
|
|
8,923 |
|
|
Salaries, benefits and payroll taxes |
7,488 |
|
|
|
10,975 |
|
|
Prepaid expenses and other current assets |
(2,124 |
) |
|
|
(2,118 |
) |
|
Other current and noncurrent liabilities |
(19,620 |
) |
|
|
71 |
|
|
Investments |
9,907 |
|
|
|
2,793 |
|
|
Other noncurrent assets |
(5,576 |
) |
|
|
5,903 |
|
|
Accrued taxes |
(3,458 |
) |
|
|
(4,904 |
) |
|
Net cash provided by operating activities |
99,804 |
|
|
|
92,124 |
|
|
Investing
activities |
|
|
|
Expenditures for property and
equipment |
(19,577 |
) |
|
|
(2,628 |
) |
|
Proceeds from sales of
property |
5,195 |
|
|
|
— |
|
|
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 |
2,030 |
|
|
|
(72 |
) |
|
Net cash used in investing activities |
(28,622 |
) |
|
|
(2,700 |
) |
|
Financing
activities |
|
|
|
Net contributions from
noncontrolling interests |
2,927 |
|
|
|
2,095 |
|
|
Borrowings on long-term
debt |
237,010 |
|
|
|
60,734 |
|
|
Repayments on long-term
debt |
(233,409 |
) |
|
|
(212,184 |
) |
|
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 |
— |
|
|
|
(439,719 |
) |
|
Stock-based compensation tax
withholding obligation |
(5,818 |
) |
|
|
— |
|
|
|
— |
|
|
|
(292 |
) |
|
Net cash provided by (used in) financing activities |
710 |
|
|
|
(11,884 |
) |
|
Effect of exchange rate
changes on cash and cash equivalents |
(532 |
) |
|
|
(129 |
) |
|
Net increase in cash
and cash equivalents |
71,360 |
|
|
|
77,411 |
|
|
Cash and cash equivalents at
beginning of period |
85,908 |
|
|
|
68,035 |
|
|
Cash and cash
equivalents at end of period |
$ |
157,268 |
|
|
|
$ |
145,446 |
|
|
Supplemental cash flow
information |
|
|
|
Cash paid for interest |
$ |
40,048 |
|
|
|
$ |
35,085 |
|
|
Cash paid for taxes |
$ |
9,343 |
|
|
|
$ |
5,304 |
|
|
PAE INCORPORATEDSEGMENT DATA(in thousands)
|
Three Months Ended |
|
Nine Months Ended |
|
September 26, |
|
September 27, |
|
September 26, |
|
September 27, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenues |
|
|
|
|
|
|
|
GMS |
$ |
448,078 |
|
|
|
$ |
521,346 |
|
|
|
$ |
1,480,982 |
|
|
|
$ |
1,486,643 |
|
|
NSS |
241,436 |
|
|
|
144,894 |
|
|
|
704,297 |
|
|
|
440,152 |
|
|
Consolidated revenues |
$ |
689,514 |
|
|
|
$ |
666,240 |
|
|
|
$ |
2,185,279 |
|
|
|
$ |
1,926,795 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
GMS |
$ |
20,459 |
|
|
|
$ |
31,401 |
|
|
|
$ |
73,673 |
|
|
|
$ |
75,541 |
|
|
NSS |
13,091 |
|
|
|
5,679 |
|
|
|
33,729 |
|
|
|
17,770 |
|
|
Corporate |
(7,514 |
) |
|
|
(8,548 |
) |
|
|
(24,409 |
) |
|
|
(23,027 |
) |
|
Consolidated operating
income |
$ |
26,036 |
|
|
|
$ |
28,532 |
|
|
|
$ |
82,993 |
|
|
|
$ |
70,284 |
|
|
|
|
|
|
|
|
|
|
Amortization of intangible
assets |
|
|
|
|
|
|
|
GMS |
$ |
4,161 |
|
|
|
$ |
4,115 |
|
|
|
$ |
12,483 |
|
|
|
$ |
12,346 |
|
|
NSS |
8,469 |
|
|
|
3,932 |
|
|
|
24,993 |
|
|
|
11,795 |
|
|
Consolidated amortization of
intangible assets |
$ |
12,630 |
|
|
|
$ |
8,047 |
|
|
|
$ |
37,476 |
|
|
|
$ |
24,141 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PAE INCORPORATEDBACKLOG(in thousands)
|
As of |
|
As of |
|
September 26, |
|
December 31, |
|
2021 |
|
2020 |
Global Mission Services: |
|
|
|
Funded backlog |
$ |
387,927 |
|
|
$ |
946,711 |
|
Unfunded backlog |
4,496,641 |
|
|
4,445,442 |
|
Total GMS backlog |
$ |
4,884,568 |
|
|
$ |
5,392,153 |
|
|
|
|
|
National Security
Solutions: |
|
|
|
Funded backlog |
$ |
412,866 |
|
|
$ |
476,618 |
|
Unfunded backlog |
2,238,612 |
|
|
2,046,634 |
|
Total NSS backlog |
$ |
2,651,478 |
|
|
$ |
2,523,252 |
|
|
|
|
|
Total: |
|
|
|
Funded backlog |
$ |
800,793 |
|
|
$ |
1,423,329 |
|
Unfunded backlog |
6,735,253 |
|
|
6,492,076 |
|
Total backlog |
$ |
7,536,046 |
|
|
$ |
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 |
|
|
|
Nine Months Ended |
|
|
|
September 26, |
|
September 27, |
|
|
|
September 26, |
|
September 27, |
|
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Net income attributed to PAE
Incorporated |
$ |
29,789 |
|
|
|
$ |
15,318 |
|
|
|
$ |
14,471 |
|
|
$ |
57,523 |
|
|
|
$ |
37,855 |
|
|
|
$ |
19,668 |
|
|
Interest expense, net |
13,109 |
|
|
|
13,607 |
|
|
|
(498 |
) |
|
38,783 |
|
|
|
48,312 |
|
|
|
(9,529 |
) |
|
Provision for taxes |
1,495 |
|
|
|
4,194 |
|
|
|
(2,699 |
) |
|
6,730 |
|
|
|
(1,582 |
) |
|
|
8,312 |
|
|
Depreciation and
amortization |
15,651 |
|
|
|
10,239 |
|
|
|
5,412 |
|
|
45,244 |
|
|
|
31,405 |
|
|
|
13,839 |
|
|
M&A and Integration
costs |
4,416 |
|
|
|
2,642 |
|
|
|
1,774 |
|
|
8,864 |
|
|
|
25,870 |
|
|
|
(17,006 |
) |
|
Disposal of assets |
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Non-core expenses (1) |
768 |
|
|
|
464 |
|
|
|
304 |
|
|
2,302 |
|
|
|
1,917 |
|
|
|
385 |
|
|
Non-cash items (2) |
— |
|
|
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Equity based compensation
(3) |
1,194 |
|
|
|
4,039 |
|
|
|
(2,845 |
) |
|
6,750 |
|
|
|
7,558 |
|
|
|
(808 |
) |
|
Other (4) |
(15,620 |
) |
|
|
(4,295 |
) |
|
|
(11,325 |
) |
|
(15,054 |
) |
|
|
(15,083 |
) |
|
|
29 |
|
|
Adjusted EBITDA |
$ |
50,802 |
|
|
|
$ |
46,208 |
|
|
|
$ |
4,594 |
|
|
$ |
151,142 |
|
|
|
$ |
136,251 |
|
|
|
$ |
14,890 |
|
|
Adjusted EBITDA margin |
7.4 |
|
% |
|
6.9 |
|
% |
|
|
|
6.9 |
|
% |
|
7.1 |
|
% |
|
|
Reconciliation of GAAP operating income to
adjusted operating income, a non-GAAP Measure -
GMS |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
September 26, |
|
September 27, |
|
|
|
September 26, |
|
September 27, |
|
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Operating income |
$ |
20,459 |
|
|
|
$ |
31,401 |
|
|
|
$ |
(10,942 |
) |
|
|
$ |
73,673 |
|
|
|
$ |
75,541 |
|
|
|
$ |
(1,868 |
) |
|
Corp operating loss allocation
(5) |
(4,883 |
) |
|
|
(6,689 |
) |
|
|
1,806 |
|
|
|
(18,176 |
) |
|
|
(17,656 |
) |
|
|
(520 |
) |
|
Corp other income (loss)
allocation (6) |
10,657 |
|
|
|
3,913 |
|
|
|
6,744 |
|
|
|
11,554 |
|
|
|
10,870 |
|
|
|
684 |
|
|
Corporate NCI allocation |
1,958 |
|
|
|
(471 |
) |
|
|
2,429 |
|
|
|
2,391 |
|
|
|
(1,498 |
) |
|
|
3,889 |
|
|
Depreciation and
amortization |
6,291 |
|
|
|
5,880 |
|
|
|
411 |
|
|
|
18,256 |
|
|
|
18,088 |
|
|
|
168 |
|
|
M&A and Integration
costs |
2,870 |
|
|
|
1,482 |
|
|
|
1,388 |
|
|
|
6,363 |
|
|
|
17,948 |
|
|
|
(11,585 |
) |
|
Disposal of assets |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Non-core expenses (1) |
499 |
|
|
|
363 |
|
|
|
136 |
|
|
|
1,708 |
|
|
|
1,497 |
|
|
|
211 |
|
|
Equity based compensation
(3) |
776 |
|
|
|
3,161 |
|
|
|
(2,385 |
) |
|
|
5,136 |
|
|
|
5,937 |
|
|
|
(801 |
) |
|
Other (4) |
(10,151 |
) |
|
|
(3,361 |
) |
|
|
(6,790 |
) |
|
|
(10,066 |
) |
|
|
(10,297 |
) |
|
|
231 |
|
|
Adjusted operating income |
$ |
28,476 |
|
|
|
$ |
35,679 |
|
|
|
$ |
(7,203 |
) |
|
|
$ |
90,839 |
|
|
|
$ |
100,430 |
|
|
|
$ |
(9,591 |
) |
|
Adjusted operating income
margin |
6.4 |
% |
|
|
6.8 |
% |
|
|
|
6.1 |
% |
|
6.8 |
% |
|
|
Reconciliation of GAAP operating income to adjusted
operating income, a non-GAAP Measure - NSS |
|
|
|
|
|
|
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
|
September 26, |
|
September 27, |
|
|
|
September 26, |
|
September 27, |
|
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Operating income |
$ |
13,091 |
|
|
|
$ |
5,678 |
|
|
|
$ |
7,413 |
|
|
|
$ |
33,729 |
|
|
|
$ |
17,770 |
|
|
|
$ |
15,959 |
|
|
Corp operating loss allocation
(5) |
(2,631 |
) |
|
|
(1,859 |
) |
|
|
(772 |
) |
|
|
(6,234 |
) |
|
|
(5,370 |
) |
|
|
(864 |
) |
|
Corp other income (loss)
allocation (6) |
5,743 |
|
|
|
1,087 |
|
|
|
4,656 |
|
|
|
5,979 |
|
|
|
4,776 |
|
|
|
1,203 |
|
|
Corporate NCI allocation |
— |
|
|
|
58 |
|
|
|
(58 |
) |
|
|
119 |
|
|
|
154 |
|
|
|
(35 |
) |
|
Depreciation and
amortization |
9,361 |
|
|
|
4,359 |
|
|
|
5,002 |
|
|
|
26,988 |
|
|
|
13,317 |
|
|
|
13,671 |
|
|
M&A and Integration
costs |
1,546 |
|
|
|
1,160 |
|
|
|
386 |
|
|
|
2,501 |
|
|
|
7,923 |
|
|
|
(5,422 |
) |
|
Disposal of assets |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Non-core expenses (1) |
269 |
|
|
|
101 |
|
|
|
168 |
|
|
|
594 |
|
|
|
420 |
|
|
|
174 |
|
|
Non-cash items (2) |
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Equity based compensation
(3) |
418 |
|
|
|
878 |
|
|
|
(460 |
) |
|
|
1,614 |
|
|
|
1,621 |
|
|
|
(7 |
) |
|
Other (4) |
(5,470 |
) |
|
|
(934 |
) |
|
|
(4,536 |
) |
|
|
(4,989 |
) |
|
|
(4,786 |
) |
|
|
(203 |
) |
|
Adjusted operating income |
$ |
22,327 |
|
|
|
$ |
10,528 |
|
|
|
$ |
11,799 |
|
|
|
$ |
60,301 |
|
|
|
$ |
35,825 |
|
|
|
$ |
24,476 |
|
|
Adjusted operating income
margin |
9.2 |
% |
|
7.3 |
% |
|
|
|
8.6 |
% |
|
8.1 |
% |
|
|
(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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