SOURCE: Vangent, Inc.
Vangent, Inc. Announces Third Quarter 2009 Financial Results
Government Group Drives Quarter-Over-Quarter Revenue Growth of 12%
ARLINGTON, VA--(Marketwire - November 10, 2009) - Vangent, Inc., a leading global provider of information management and strategic business process services, today announced its third quarter 2009 financial results.
Quarter-to-Quarter Comparison
Vangent reported revenue of $149.4 million for the quarter ended September 26, 2009, an increase of $16.0 million or 12.0% compared to $133.4 million in the year ago period.
The increase in total revenue reflects a $17.8 million or 16% increase in revenue for the Government Group, primarily attributable to new contract awards with the U.S. Department of Defense's Military Health System, a new contract with the U.S. Department of Transportation and a new contract to support the U.S. Department of Education's National Student Aid Data System.
Offsetting the increase in Government Group revenue was a 7% decline in International Group revenue to $17.0 million in the third quarter ending September 26, 2009 due to continuing fluctuations in foreign currency exchange rates, a contract termination in Venezuela and lower volume with contracts in Canada.
Human Capital Group revenue grew 8% to $7.7 million for the quarter ended September 26, 2009. The increase in revenue is due to the ongoing success of Vangent's contract with the U.S. Air Force to modernize the Royal Saudi Air Force's learning infrastructure in the Kingdom of Saudi Arabia, offset by lower volumes of the Group's assessment products and training services.
Operating income was $5.1 million for the quarter ended September 26, 2009 compared to $10.7 million for the quarter ended September 27, 2008. The decrease in operating income was primarily due to start-up costs and lower than expected volume on a contract with Mexico's Social Security agency as well as higher costs on various fixed price contracts in the Government Group. In addition, operating losses in the Human Capital Group reflect the adverse impact of lower revenue from higher margin assessment products and training services due to reductions in customer hiring patterns as a result of the continuing economic downturn.
Vangent reported a net loss of $5.3 million for the three months ended September 26, 2009 compared with a net loss of $0.4 million in the prior year quarter. Adjusted EBITDA was $13.8 million for the third quarter of 2009, compared with $20.3 million for the prior year quarter. The reduction in Adjusted EBITDA was primarily attributable to the decrease in operating income.
Contract Awards and Backlog
New business awards during the third calendar quarter of 2009, which totaled $111.6 million, included:
-- Data management contract with the U.S. Department of Transportation in
support of the Car Allowance Rebate System (CARS), a key initiative of the
Obama Administration's stimulus package, valued at $8.8 million. In less
than a month, Vangent processed over 400,000 "Cash for Clunkers" vouchers
from car dealerships across the country which represented over half of the
national processing volume;
-- Operations and Project Management contract for the U.S. Department of
Education's Federal Student Aid division to support the National Student
Aid Data System as a subcontractor to BriefCase Systems Development valued
at $19 million;
-- Single Sign-On and Context Management contract with the Military
Health System valued at $20 million;
-- New Contract Management System for Tricare Management Activity valued
at $6.9 million; and
-- Additional business related to Vangent's work on the Traumatic Brain
Injury & Behavioral Health contract valued at $6.4 million.
Vangent's total contract backlog, which is the amount of revenue the Company expects to realize over the remaining term of the contracts, including the base period and all option years, totaled $2.2 billion at September 26, 2009, representing a 32% increase from December 31, 2008. The increase in total contract backlog is attributable to new business wins in Vangent's Government Group.
"Vangent delivered strong revenue performance this quarter with solid overall growth in the Government Group," said Mac Curtis, President and Chief Executive Officer of Vangent. "We were particularly pleased with the continuing growth of our Military Health business which has grown to over $165 million in two years. Our solid performance with our important CMS customer led to a key win this quarter with the Department of Transportation to support the Cash for Clunkers program. The Government Group's strong revenue performance was dampened by lower than expected volume on our contract in Mexico, as well as the impact of the continuing economic downturn on the Human Capital Group. We are focused on efforts to turn around our contract with Mexico's Social Security agency and strategies to continue the diversification of our Human Capital portfolio."
Liquidity, Cash Flow and Balance Sheet Information
Total long-term debt at September 26, 2009 was $420.4 and cash and cash equivalents were $32.1 million. Net cash provided by operating activities was $23.0 million for the nine months ended September 26, 2009, compared to cash provided by operating activities of $10.9 million in the year ago period. Vangent's total liquidity, which includes $50.0 million available under its revolving credit facility, was $82.1 million.
Q3 2009 Financial Results Conference Call: Will take place on Tuesday, November 10, 2009 at 11:00 am ET. Interested parties may call (877) 874-1568 and request the "Vangent Third Quarter 2009 Financial Results Conference Call," conference ID #1337498.
Audio Replay: A replay of the earnings call can be heard after 2:00 p.m. on November 10, 2009 until November 24, 2009. To hear the replay, dial (888) 203-1112 and enter the same conference ID #1337498. For interested parties outside the U.S. and Canada, dial (719) 457-0820 and enter the same conference ID #.
Vangent's third quarter 2009 financial statements including the Management Discussion and Analysis will be made available on the company's website at www.vangent.com in connection with Vangent Q3 2009 Financial Results Conference Call.
About Vangent, Inc.
With over 7,000 employees worldwide, Vangent, Inc. is a global provider of Consulting, Systems Integration, Human Capital Management and Strategic Business Process services to the U.S. federal and international governments, higher education institutions and corporations. Clients include the Centers for Medicare & Medicaid Services, the U.S. Departments of Defense, Education, Health and Human Services, Justice, Labor, State and the U.S. Office of Personnel Management, as well as Fortune 500 companies. Headquartered in Arlington, Virginia, the company has offices throughout the U.S. and in the U.K., Canada, Mexico, Venezuela and Argentina.
Forward-Looking Statements
This press release contains forward-looking statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "projects," "likely," "will," "would," "could" and similar expressions or phrases identify forward-looking statements. All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Vangent, Inc.
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)
Three Months Ended Nine Months Ended
--------------------- ---------------------
September September September September
26, 2009 27, 2008 26, 2009 27, 2008
--------- --------- --------- ---------
Revenue $ 149,393 $ 133,391 $ 427,875 $ 400,800
Cost of revenue 128,567 106,470 362,742 329,570
--------- --------- --------- ---------
Gross profit 20,826 26,921 65,133 71,230
General and administrative
expenses 10,803 12,445 31,638 38,702
Selling and marketing
expenses 4,967 3,757 13,849 11,963
--------- --------- --------- ---------
Operating income 5,056 10,719 19,646 20,565
Interest expense and other,
net 8,676 8,534 25,542 26,261
--------- --------- --------- ---------
Income (loss) before income
taxes (3,620) 2,185 (5,896) (5,696)
Provision for income taxes 1,647 2,632 4,519 5,728
--------- --------- --------- ---------
Net loss $ (5,267) $ (447) $ (10,415) $ (11,424)
========= ========= ========= =========
Statements of Operations
Data as a Percent of
Revenue
Revenue 100.0% 100.0% 100.0% 100.0%
Cost of revenue 86.1 79.8 84.8 82.2
--------- --------- --------- ---------
Gross profit margin 13.9 20.2 15.2 17.8
General and administrative
expenses 7.2 9.4 7.4 9.7
Selling and marketing
expenses 3.3 2.8 3.2 3.0
--------- --------- --------- ---------
Operating income margin 3.4 8.0 4.6 5.1
Interest expense and other,
net 5.8 6.4 6.0 6.5
--------- --------- --------- ---------
Income (loss) before income
taxes (2.4) 1.6 (1.4) (1.4)
Provision for income taxes 1.1 1.9 1.0 1.5
--------- --------- --------- ---------
Net loss (3.5)% (0.3)% (2.4)% (2.9)%
========= ========= ========= =========
Vangent, Inc.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
September 26, December 31,
2009 2008
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 32,078 $ 21,134
Trade receivables, net 122,267 129,859
Prepaid expenses and other assets 19,848 12,413
------------ ------------
Total current assets 174,193 163,406
Property and equipment, net 29,959 27,152
Goodwill and intangible assets, net 448,870 464,865
Deferred debt financing costs and other 8,997 10,851
------------ ------------
Total assets $ 662,019 $ 666,274
============ ============
Liabilities and Stockholder's Equity
Current liabilities:
Current portion of long-term debt $ 594 $ -
Accounts payable and accrued liabilities 75,993 73,172
Accrued interest payable 2,510 8,304
Other current liabilities 7,711 6,657
------------ ------------
Total current liabilities 86,808 88,133
Long-term debt, net of current portion 419,772 420,366
Other liabilities 17,229 13,138
------------ ------------
Total liabilities 523,809 521,637
------------ ------------
Stockholder's equity 138,210 144,637
------------ ------------
Total liabilities and stockholder's equity $ 662,019 $ 666,274
============ ============
Vangent, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
------------------------
September September
26, 2009 27, 2008
----------- -----------
Cash flows from operating activities
Net loss $ (10,415) $ (11,424)
Depreciation and amortization 24,955 26,326
Equity-based compensation expense 776 839
Deferred income taxes 5,054 4,889
Net changes in operating assets and liabilities:
Trade receivables 8,238 574
Prepaid expenses and other assets (4,053) 3,011
Accounts payable and other liabilities (1,519) (13,273)
----------- -----------
Net cash provided by operating activities 23,036 10,942
----------- -----------
Cash flows from investing activities
Acquisition, net of cash acquired - (3,892)
Capital expenditures (12,193) (6,796)
----------- -----------
Net cash used in investing activities (12,193) (10,688)
----------- -----------
Cash flows from financing activities
Repayment of senior secured term loan - (7,834)
Capital lease payments (264) (205)
----------- -----------
Net cash used in financing activities (264) (8,039)
Effect of exchange rate changes on cash and cash
equivalents 365 (217)
----------- -----------
Net increase (decrease) in cash and cash
equivalents 10,944 (8,002)
Cash and cash equivalents, beginning of period 21,134 26,093
----------- -----------
Cash and cash equivalents, end of period $ 32,078 $ 18,091
=========== ===========
Vangent, Inc.
Reconciliation of GAAP to Non-GAAP Measures
(in thousands)
(unaudited)
Twelve
Three Months Ended Nine Months Ended Months
-------------------- -------------------- Ended
September September September September September
26, 2009 27, 2008 26, 2009 27, 2008 26, 2009
--------- --------- --------- --------- ---------
Net loss $ (5,267) $ (447) $ (10,415) $ (11,424) $ (25,498)
Provision for income
taxes 1,647 2,632 4,519 5,728 4,345
Interest expense,
net 8,476 8,534 25,342 26,261 34,293
Depreciation and
amortization 8,176 8,960 24,955 26,326 33,228
--------- --------- --------- --------- ---------
EBITDA (a) 13,032 19,679 44,401 46,891 46,368
Goodwill impairment
charge $ - $ - $ - $ - $ 16,751
Equity-based
compensation
expense 266 248 776 839 990
Net transition and
contract settlement
costs 132 87 392 3,419 1,529
Management fee and
expenses 316 285 974 872 1,266
Other 33 - 487 131 971
--------- --------- --------- --------- ---------
Adjusted EBITDA (b) $ 13,779 $ 20,299 $ 47,030 $ 52,152 $ 67,875
========= ========= ========= ========= =========
(a) EBITDA is defined as net income (loss) before interest, income taxes,
and depreciation and amortization. Management uses this measure as an
indicator of operating performance. EBITDA is not an indicator of
financial performance under generally accepted accounting principles
("GAAP") or a measure of liquidity and may not be comparable to
similarly captioned information reported by other companies. In
addition, it should not be considered as an alternative to, or more
meaningful than, income (loss) before income taxes, cash flows from
operating activities, or other traditional indicators of operating
performance.
(b) Adjusted EBITDA is a financial measure used to calculate the leverage
ratio, a financial covenant under the Company's senior secured credit
facility. Adjusted EBITDA is adjusted to exclude unusual and
non-recurring items including (i) noncash goodwill impairment charge,
(ii) equity-based compensation expense, (iii) non-recurring contract
settlement costs, and (iv) certain costs resulting from our separation
from Pearson plc net of certain overhead and infrastructure costs.