Kratos Acquires Southern Research Engineering Division Adding Unique Capabilities in Hypersonic, Ballistic Missile, Space and ISR Areas

Research, News, and Market Data on Kratos Defense & Security Solutions

SAN DIEGO, May 24, 2022 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a leading National Security Solutions provider, announced today that it has acquired the Birmingham, Alabama based Engineering Division of Southern Research for approximately $80 million, subject to reduction based on working capital, including $75 million in cash and $5 million in shares of Kratos common stock. Southern Research’s Engineering Division (SRE) is the market leader in assisting customers in the development, modeling and deployment of advanced materials for extreme environments, including hypersonic, space, missile, missile defense, strategic deterrence, propulsion systems, and energy applications. SRE also specializes in Intelligence Surveillance and Reconnaissance (ISR) sensor development, electromechanical systems design and integration, aerospace engineering, materials engineering, artificial intelligence and machine learning, directed energy, RF systems design and integration, advanced manufacturing, and computational sciences.

Approximately 25 percent of the SRE purchase price was paid for the one-of-a-kind, unique 54-acre campus, with 102,000 square feet of laboratory, material assessment, technology, prototype development, secure, and other facilities, and the machinery and equipment needed to perform the core, sole source test and evaluation analysis and extreme environment characterization of materials for Hypersonic, Missile Defense, Strategic Deterrent, Space-related and other Systems. The balance of the purchase price represents approximately 1.6 times SRE’s historical, trailing twelve-month revenue, which includes approximately $15 million in annual ISR and other unique product development initiatives that are currently in development and expected to transition to production. The acquisition establishes Kratos SRE, a new business unit within Kratos’ Defense and Rocket Support Services Division.

The acquisition brings to Kratos a team of approximately 140 engineers, technicians and program support professionals, substantially all of which hold national security clearances. This dedicated group of professionals strengthens Kratos’ Hypersonic and Missile System-related capabilities by virtue of its market-leading advanced materials testing and evaluation capabilities and experience. The SRE group plays a unique and critical role in assisting the U.S. Government and defense industry contractors to characterize and select strategic materials for certain applications. SRE is also used widely by the space community for launch, re-entry and other vehicles, systems, and capabilities. “Kratos is the perfect home for my engineering team,” said Michael Johns, former Southern Research Vice President of Engineering and new Kratos SRE Senior Vice President. “From Hypersonics to ISR applications, Kratos brings tremendous synergies across all of our technical platforms. We have long been the leader in understanding materials in extreme environments for applications including Hypersonics, and as a result of this acquisition by Kratos, we can carry those programs all the way through flight testing and beyond, substantially increasing our total addressable market opportunity.”

Dave Carter, President of Kratos’ Defense & Rocket Support Services Division, said, “Kratos continues to lean forward to develop and acquire capabilities and solutions that expand our ability to support a diverse range of national security customers. We are very excited about the technical capabilities and synergies gained through this acquisition. Kratos SRE will continue to provide independent, unbiased laboratory and ground testing evaluation for unique and critical materials, and we will be working to expand Kratos SRE’s testing and technology maturation offerings to include affordable live fire tests using Kratos’ family of proven subscale launch vehicles. I am confident that our similar cultures and values will enable a smooth transition and lead to collaborative business opportunities with the Navy and other customers. Establishing Kratos SRE as our Advanced Concepts group demonstrates our commitment to Alabama and the growing aerospace and defense community in Birmingham.”

Eric DeMarco, Kratos’ President and CEO, said, “The acquisition of SRE enhances Kratos’ position related to the anticipated significant future funding increases for the recapitalization of Strategic Weapon Systems, including Hypersonic, Space, Strategic Deterrence, Propulsion and Missile Defense Systems. A priority of Kratos’ strategic thesis is being the market leader, and Mike and his team clearly satisfy that requirement. Once integrated with Kratos, based on recent program awards, funding under the Department of Defense’s recently approved 2022, and anticipated 2023, budget, and prospective customer acceptance of certain SRE products in development that are nearing completion, we expect an up and to the right future year-over-year organic growth trajectory for the business beginning in 2023.”

DC Advisory served as exclusive financial advisor and Maynard, Cooper & Gale, P.C. served as outside legal counsel to Southern Research in this transaction.

About Kratos
Defense & Security Solutions
Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information, go to www.KratosDefense.com.

Notice
Regarding Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made based on the current beliefs, expectations, and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the U.S. Securities and Exchange Commission by Kratos.

Press
Contact:
Yolanda White
858-812-7302 Direct

Investor
Information:
877-934-4687

investor@kratosdefense.com

Kratos Defense, Minn-Dak Farmers Cooperative Partner to Deploy Self-Driving Trucks to Address Workforce Challenges and Improve the Supply Chain

Research, News, and Market Data on Kratos Defense & Security Solutions

SAN DIEGO, 
May 19, 2022 (GLOBE NEWSWIRE) — 
Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a leading National Security Solutions provider, announced today that it has teamed with the 
Minn-Dak Farmers Cooperative (MDFC) to launch self-driving trucks, easing the truck driver shortage burden using Kratos Autonomous Systems to ensure integrity of the agriculture supply chain as a critical national security concern.

Kratos Unmanned Systems’ core competency is affordable, disruptive, unmanned systems-related technology and products for aerial drones, surface vessels, ground-based vehicles, and related command, control, autonomy, and artificial intelligence.

The collaboration between Kratos and MDFC, one of America’s largest sugarbeet shareholder/grower cooperatives, was fostered by 
Grand Farm
, a non-profit group focused on facilitating agriculture technology innovation headquartered in 
North Dakota
 and combines Kratos’ innovative unmanned system technologies, with Minn-Dak’s agriculture and transportation expertise. The retrofitted solution adapts “Leader/Follower” truck platooning for hauling harvested sugarbeets between piling stations and the granulated sugar processing plant in 
Wahpeton, North Dakota.

A photo accompanying this announcement is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/61a93c9f-9c56-41bc-a8b1-96df7f26c5c2

Maynard Factor,
VP of Business Development for the Kratos Unmanned Systems Division, said, “We are excited to collaborate with 
Minn-Dak to deploy driverless trucks within their sugarbeet harvest operations. Kratos develops and fields transformative, affordable systems, platforms, and products for national security, and ensuring the agriculture supply chain using driverless technology directly aligns with our core company objectives. Our focus here is on the niche, short-haul trucking routes where Kratos’ technology is available today that can solve driver shortage issues impacting agriculture hauling capacity and, therefore, the supply chain. Sugarbeet growers have been early adopters of emerging agriculture technologies, implementing now-commonplace innovations such as transitioning from rail to trucks and using GPS-guided farm equipment. We see driverless technology as a similar innovation for enhancing critical farm-related operations. Additionally, as the world advances and unmanned vehicle systems continue to solve a multitude of workforce, cost, and safety challenges, we are committed to being a significant solution provider across the spectrum of this large and growing market area.”

Self-driving truck deployments can augment the existing workforce as a tool for either increasing haul capacity to keep up with growing demand or maintaining existing haul capacity when qualified drivers are unavailable. Significant effort, cost, and planning is required to ensure haul capacity meets national harvest quotas. Over 50,000 trucks a day can be deployed during peak sugarbeet harvesting season, and the Kratos Leader/Follower platoon is an enabling technology that the agriculture industry can now use for optimizing allocation of available labor to bolster the supply chain.

Mike Metzger,
Minn-Dak Farmers Co-Op VP of Agriculture, said, “Minn-Dak is beyond excited to be partnering with Kratos Defense as we both take the next step towards implementing Kratos’ Leader/Follower technology. Our Cooperative’s goal is to take this technology to the next level by incorporating it into our commercial truck fleet that brings the sugarbeets from receiving stations to our factory for processing. It’s no secret that there is a gross shortage of commercially licensed truck drivers, especially in rural areas like ours. The deployment of driverless vehicle technology will undoubtedly help alleviate these labor shortages and improve the overall safety and efficiency of our fleet.”

Retrofitting driverless technology is an ideal solution for organizations like 
Minn-Dak that already have an existing fleet and logistics operations. It enables them to use their harvest trucks without having to invest in brand new “purpose-built” robotic vehicles. Additionally, the Kratos Leader/Follower platoon offers several advantages to logistics managers who can now pair available truck drivers with driverless trucks to enhance hauling productivity. The paired trucks offer greater efficiency and fuel savings while reducing recruitment costs and overall stress on the drivers, recruiters, and farmers by solving the driver shortage challenge. Additionally, the integration of the technology into the agriculture supply chain offers strategic workforce development opportunities.

About Kratos
Defense & Security Solutions
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms and systems for United States National Security related customers, allies and commercial enterprises. Kratos is changing the way breakthrough technology for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training, combat systems and next generation turbo jet and turbo fan engine development. For more information, please visit www.KratosDefense.com.

About Minn-Dak
Farmers Cooperative
Minn-Dak Farmers Cooperative (MDFC or 
Minn-Dak) was the nation’s first farmer-owned sugarbeet cooperative and is headquartered in 
Wahpeton, a city in the southeast corner of North Dakota, in the heart of the 
Red River Valley. The Cooperative is owned by approximately 500 Shareholders/Growers who collectively grow just over 100,000 acres of sugarbeets and is part of the domestic sweetener industry. 
Minn-Dak has proudly been in business since 1972 and processes its sugarbeets into sugar as well as products the likes of molasses and beet pulp pellets (used in animal feed). 
Minn-Dak’s products are then marketed through agents worldwide. Major customers include industrial users, including confectioners, breakfast-cereal manufacturers, and bakeries. For more information, please visit www.mdf.coop.

Notice Regarding Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Kratos and are subject to significant risks and uncertainty. Investors are cautioned not to place undue reliance on any such forward-looking statements. All such forward-looking statements speak only as of the date they are made, and Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended 
December 26, 2021, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the 
SEC by Kratos.

Press Contact: Yolanda White 858-812-7302 Direct

Investor Information:
877-934-4687

investor@kratosdefense.com

Tuesday, May 17, 2022

CoreCivic, Inc. (CXW)
The New Day Has Begun; Announces $150 Million Share Repurchase Authorization

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

Repurchase Authorization. According to an 8-K filed yesterday, on May 12, 2022, the Board of Directors of CoreCivic Inc. approved a share repurchase program authorizing the Company to repurchase up to $150 million of the Company’s common stock. The authorization is above our projected $100 million plan and represents approximately 11% of Monday’s closing market capitalization.

Program Details. Repurchases of the Company’s outstanding common stock may be made at management’s discretion from time to time in the open market, through privately negotiated transactions, or otherwise. The share repurchase program has no time limit and does not obligate the Company to purchase any particular amount of its common stock….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Monday, May 16, 2022

CoreCivic, Inc. (CXW)
Time Has Come Today

CoreCivic is a diversified, government-solutions company with the scale and experience needed to solve tough government challenges in flexible, cost-effective ways. We provide a broad range of solutions to government partners that serve the public good through high-quality corrections and detention management, a network of residential and non-residential alternatives to incarceration to help address America’s recidivism crisis, and government real estate solutions. We are the nation’s largest owner of partnership correctional, detention and residential reentry facilities, and believe we are the largest private owner of real estate used by government agencies in the United States. We have been a flexible and dependable partner for government for nearly 40 years. Our employees are driven by a deep sense of service, high standards of professionalism and a responsibility to help government better the public good. Learn more at www.corecivic.com.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

A New Credit Facility….Friday, CoreCivic reported it had entered into a New Credit Agreement effectively replacing the Company’s existing senior secured credit facilities. As of March 31st, CoreCivic had $167.5 million due April 2023 under its Term Loan A and $124 million due December 2024 under its Term Loan B outstanding under the old facility. Management indicated the possibility of repaying the Term Loan A out of existing cash once a new facility was in place.

…Equals Time for a Stock Buyback. Management has stated on numerous occasions that once a new credit facility was in place, authorization for a stock buyback program would be submitted to the Board. Given where the stock is currently trading and the strong, stable cash flow generation of the business, we believe the Board will grant such request. We believe a program in the $100 million range, or about 7.5% of the current market cap, would send a strong signal to the market….

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Thursday, May 12, 2022

Vectrus (VEC)
Solid First Quarter Results Set the Table for 2022

For more than 70 years, Vectrus has provided critical mission support for our customers’ toughest operational challenges. As a high-performing organization with exceptional talent, deep domain knowledge, a history of long-term customer relationships, and groundbreaking technical expertise, we deliver innovative, mission-matched solutions for our military and government customers worldwide. Whether it’s base operations support, supply chain and logistics, IT mission support, engineering and digital integration, security, or maintenance, repair and overhaul, our customers count on us for on-target solutions that increase efficiency, reduce costs, improve readiness, and strengthen national security. Vectrus is headquartered in Colorado Springs, Colo., and includes about 8,100 employees spanning 205 locations in 28 countries. In 2021, Vectrus generated sales of $1.8 billion. For more information, visit the company’s website at www.vectrus.com or connect with Vectrus on Facebook, Twitter, and LinkedIn.

Joe Gomes, Senior Research Analyst, Noble Capital Markets, Inc.

Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.

Refer to the full report for the price target, fundamental analysis, and rating.

1Q22 Results. Revenue of $456.5 million was up 5.2% y-o-y and above our $427 million estimate, with the revenue beat due to the pull forward of some business. Adjusted EBITDA margin of 4% continued to be impacted by the phase-in of new awards and pass through content. Adjusted EPS in the quarter was $1.01 versus $1.20. We had estimated $0.77.

Kwajalein. Vectrus was able to transition to full operational control of Kwajalein a full six weeks from original expectations. Not only did this add to first quarter results, but several of the functions being provided are additive to the Company’s core O&M offerings and will provide a path to pursue adjacent and expanded opportunities with clients in the future.…

This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).

*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision. 

Comtech Promotes Timothy Jenkins to President of its Safety & Security Technologies Product Group

Research, News, and Market Data on Comtech Telecommunications

Jenkins to succeed Kent Hellebust, who is retiring end of
May

MELVILLE, N.Y.–(BUSINESS WIRE)–May 12, 2022– May 12, 2022– Comtech Telecommunications Corp. (NASDAQ: CMTL), a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies, today announced that Timothy Jenkins will become President of its Safety and Security Technologies product group, effective as of June 1, 2022.

Jenkins has been with Comtech for over three years, joining the company through its 2019 acquisition of the state and local government next-generation 911 business from General Dynamics Information Technology, Inc. Most recently, he has served as Group Vice President and General Manager within the Safety and Security Technologies organization, leading the implementation of next-generation 911 capabilities for customers across the United States. Jenkins has been involved in the public safety and 911 industry for over 28 years, serving in leadership positions at Ameritech and SBC Communications (subsequently acquired by AT&T) and Intrado.

Kent Hellebust, the current President of Comtech’s Safety and Security Technologies product group, will be retiring as of May 31, 2022, after serving in the role since April 2018. This culminates Hellebust’s decade of service at Comtech after joining in January 2012 and holding a variety of leadership roles related to the 911 business.

Mike Porcelain, Comtech President and CEO, commented, “Tim has played a key role in the growth and development of our next-generation 911 product line. He has been an invaluable contributor to the organization, leading customer operations and support. I look forward to Tim’s continued leadership and contributions to Comtech as he assumes the role of President.”

“We want to thank Kent for his outstanding leadership, significant contributions and dedicated commitment to Comtech throughout his distinguished career. Kent has worked diligently to lead, support and grow our next-generation 911 product line throughout his time at Comtech. We wish Kent the very best as he retires and moves into the next chapter.”

About Comtech

Comtech Telecommunications Corp. is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers around the world. Headquartered in Melville, New York and with a passion for customer success, Comtech designs, produces and markets advanced and secure wireless solutions. For more information, please visit www.comtechtel.com (and preview its new website at www.comtech.com).

Forward-Looking
Statements

Certain information in this press release contains statements that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company’s Securities and Exchange Commission filings identify many such risks and uncertainties. Any forward-looking information in this press release is qualified in its entirety by the risks and uncertainties described in such Securities and Exchange Commission filings.

PCMTL

View source version on businesswire.com: https://www.businesswire.com/news/home/20220511006088/en/

Investor
Relations
Robert Samuels
631-962-7102

robert.samuels@comtech.com

Source: Comtech Telecommunications Corp.

Comtech Appoints Ken Peterman to Board of Directors

Research, News, and Market Data on Comtech Telecommunications

Defense Industry Veteran Peterman Adds Deep Satellite and US
Government Experience

MELVILLE, N.Y.–(BUSINESS WIRE)–May 10, 2022– May 10, 2022–Comtech Telecommunications Corp. (NASDAQ: CMTL), a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies, announced today that it had appointed seasoned satellite executive Ken Peterman to Comtech’s Board of Directors. Ken will join the Board’s Science and Technology Committee.

“This is a significant and pivotal time for Comtech, as we strive to be the global leader in Failsafe Communications. Ken’s expertise in satellite technology and decades of experience with U.S. government contracting speaks for itself, providing an impeccable foundation from a strategic, executive leadership and governance perspective. He is a remarkable individual with a unique skillset, and I am delighted to welcome him to our Board,” said Michael Porcelain, President and CEO of Comtech.

An award-winning global executive leader, Peterman’s accomplished career spans over forty years in the defense segment, accumulating credentials across a wide array of markets and both commercial and government satellite systems. He has augmented a strategic landscape in tactical and satellite communications, cybersecurity, and C4 defense technology sectors through tenures at the President/CEO and VP/GM level of top defense companies including Viasat, ITT/Exelis, Collins Aerospace, Raytheon and SpyGlass Group. Most recently, as President at Viasat Government Systems, Peterman led a world-class satellite communications, mobile networking and cybersecurity portfolio. At Raytheon, he developed a $1B/year Tactical Defense Electronics Systems Division with market-leading performance. While at ITT/Exelis, he led major restructuring actions across twelve states plus the U.K. (with sales of ~$1.3B/yr), improving resource utilization and reducing infrastructure to align with emerging market and budget realities while creating double-digit growth.

“This is a key time for Comtech, and I am deeply focused on helping the Company grow and compete in the global marketplace. I am thrilled to join the Board and help steer Comtech into a new era of commercial success and shareholder value,” commented Ken Peterman.

About Comtech
Comtech Telecommunications Corp. is a leading global provider of next-generation 911 emergency systems and secure wireless communications technologies to commercial and government customers around the world. Headquartered in Melville, New York and with a passion for customer success, Comtech designs, produces and markets advanced and secure wireless solutions. For more information, please visit www.comtechtel.com (and preview its new website at www.comtech.com).

Forward-Looking
Statements
Certain information in this press release contains statements that are forward-looking in nature and involve certain significant risks and uncertainties. Actual results could differ materially from such forward-looking information. The Company’s Securities and Exchange Commission filings identify many such risks and uncertainties. Any forward-looking information in this press release is qualified in its entirety by the risks and uncertainties described in such Securities and Exchange Commission filings.

PCMTL

View source version on businesswire.com: https://www.businesswire.com/news/home/20220509006118/en/

Comtech
Investor Relations
Robert Samuels
robert.samuels@comtech.com
(631) 962-7102

Source: Comtech Telecommunications Corp.

Vectrus Announces Solid First Quarter Results

Research, News, and Market Data on Vectrus

Company Release – 5/10/2022

• Q1 revenue +5.2% Y/Y to $456.5 million
• Operating income of $5.2 million; Adjusted EBITDA margin¹ of 4.0%
• Q1 fully diluted EPS of $0.24; Adjusted diluted EPS¹ of $1.01
• Several key wins expand and solidify work with Army, Navy, and National Security clients
• Reiterating revenue and adjusted diluted EPS¹ guidance

COLORADO SPRINGS, Colo., May 10, 2022 /PRNewswire/ — Vectrus, Inc. (NYSE:VEC) announced first quarter 2022 financial results.

“Vectrus reported solid first quarter results driven by the continued expansion into LOGCAP V and our focus on diversification to new clients and markets,” said Chuck Prow, Chief Executive Officer of Vectrus.

“During the quarter, revenue grew 5% year-over-year and 9% sequentially to $456 million. Revenue growth was driven by the continued phase-in of LOGCAP V, high op-tempo in the regions we operate in support of ongoing world affairs, as well as the progress made in executing growth in our core programs,” said Prow.  “With a continued focus on the needs of our clients, the Vectrus team supported several important missions during the quarter, including assisting the DoD with the establishment of a water supply system and water remediation efforts in Hawaii.  In addition, we demonstrated our ability to transition quickly and recently became fully operational on LOGCAP V Kwajalein, approximately a month and a half ahead of schedule. We also leveraged our process-oriented phase in system and in a short period of time, achieved full operations at Ft. Benning following our December 2021 $250 million award.  We are proud of this achievement and look forward to providing world class maintenance, transportation, and supply services for the US Army’s Maneuver Training Center over the next five years.”

“Notably, late in the first quarter Vectrus was awarded a strategically important task order to provide support for the U.S. Air Force in Europe as part of the European Deterrence Initiative,” said Prow. “While currently small in value, this contingency task is providing mission critical services to our Air Force client in Europe. This effort exemplifies our global positioning and rapid response capabilities supporting our clients’ most challenging and important missions.”

Prow continued, “Adjusted EBITDA for the quarter was $18.2 million or 4.0% margin as we work through program efficiencies in the early phases of LOGCAP V implementation. Additionally, LOGCAP V is generating higher revenue volume with a greater amount of material and pass-through content that has a different margin complexion.”

“We are continuing our positive momentum working with the Navy and during the first quarter were selected to complete the final phases of application development for the 5G Naval Base Coronado Smart Warehouse, which is demonstrative of our ability to provide converged solutions and operational technologies to clients,” said Prow. “We were also recently awarded the follow-on contract for Spectrum Management with the Navy valued at $60 million. This award continues more than 30 years of support to the Navy in solving afloat electromagnetic interference and compatibility challenges for the fleet.  Furthermore, Vectrus won a position on a $250 million five-year IDIQ vehicle that provides rapid development, prototyping, and systems integration to the Navy, Joint, and coalition forces worldwide utilizing numerous platforms and integrated capabilities. Vectrus will focus on embarkable systems that include cyber hardening, new technology insertion and retrofit of existing systems. In addition, we won an effort as subcontractor performing electromagnetic test and evaluation engineering. These are key wins that demonstrate our capabilities in engineering and operational technology, and our commitment to delivering a more integrated and comprehensive suite of solutions in support of the converged environment,” Prow elaborated.

Prow continued, “Vectrus has worked diligently over the past several years to expand its presence with national security clients and, during the first quarter our teams were successful in securing several wins that enhance our footprint in the intelligence community.”  

Prow concluded, “Our first quarter results demonstrate Vectrus’ realization and execution of our strategy to strengthen and grow the business through outstanding program execution, capability expansion, and diversification of our geographic and client footprint.”

First Quarter 2022 Results

First quarter 2022 revenue of $456.5 million was up $22.5 million year-on-year.  “Revenue grew 5.2% year over year boosted by our transition to full operational capability on LOGCAP V programs in Iraq and Kuwait late last year, and Kwajalein this year. In addition, revenue benefitted from transitioning Ft Benning and volume associated with rapid response and contingency efforts,” said Susan Lynch, Senior Vice President and Chief Financial Officer. “This revenue growth was impressive given the headwinds associated with the withdrawal of the US military from Afghanistan,” added Lynch.  Operating income was $5.2 million or 1.1% margin.  This includes M&A and integration related expenses of $9.1 million and amortization of acquired intangible assets of $2.3 million which were incurred in the quarter.

Adjusted operating income¹ was $16.6 million or 3.6% margin.  Adjusted EBITDA¹ was $18.2 million or 4.0% margin as compared to $20.7 million or 4.8% in the prior year.  “The year-on-year margin change was influenced by the significant amount of revenue and contracts that are in the early stages of their lifecycle.  We believe margin on these contracts will improve over time as we apply our process improvement and Enterprise Vectrus initiatives. In addition, as we continue to support our LOGCAP V clients’ supply chain needs, we are experiencing an increase in material and pass-through content which carries a lower margin. In aggregate, on average and over time we expect to see improvement in the margin profile as we drive operational efficiencies and diversify into higher margin scopes of work,” said Lynch.

Fully diluted EPS for the first quarter of 2022 was $0.24 as compared to $1.02 in the prior year.  Fully diluted EPS in the quarter included the aforementioned M&A and integration related costs.  Adjusted diluted EPS¹ was $1.01 in the quarter as compared to $1.20 in the prior year. The change in adjusted diluted EPS
¹ was primarily due to the above-mentioned change in Adjusted EBITDA¹.

Cash used in operating activities through April 1, 2022, was $26.4 million, compared to net cash used in operating activities of $21.7 million through the first quarter of 2021. Cash used in operating activities was negatively impacted in the current quarter by an approximately $8.0 million repayment of CARES Act tax deferrals and $2 million of merger related payments.

Net debt on April 1, 2022, was $96.8 million, down $41.9 million from April 2, 2021.  Total debt on April 1, 2022, was $119.8 million, down $57.2 million from $177.0 million on April 2, 2021. Cash at quarter-end was $23.0 million.  Total consolidated indebtedness to consolidated EBITDA¹ (total leverage ratio) was 1.4x compared to 2.0x at the same time last year.

Total backlog as of April 1, 2022, was $4.5 billion representing almost 2.5x the company’s estimated 2022 revenue mid-point.  Funded backlog was $0.8 billion.  The trailing twelve-month book-to-bill was 1.0x as of April 1, 2022.

2022 Guidance

Lynch continued, “In light of our solid first quarter performance, we are reiterating our full-year 2022 guidance ranges for revenue and adjusted EBITDA, adjusted diluted EPS, and net cash provided by operating activities, excluding M&A related activities.”

Due to the merger activities with Vertex, the company is not providing GAAP guidance or a reconciliation of forward-looking measures including adjusted diluted EPS to GAAP diluted EPS or adjusted EBITDA margin to GAAP net income due to the difficulty in forecasting the transaction timing and quantifying certain amounts that are necessary for such reconciliation.  Reconciliations to the closest corresponding U.S. GAAP measures are not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures. The variability of such charges could potentially have a significant impact on our future U.S. GAAP financial results.

 

$ millions, except for EBITDA margins and per share amounts	2021 Actual	2022 Guidance			2022 Mid-Point	2022 Mid-Point vs 2021
Revenue	$1,784	$1,820	to	$1,860	$1,840	3.1 %
Adjusted EBITDA Margin	4.7 %	4.5 %	to	4.7%	4.6 %	(10) bps
Adjusted Diluted Earnings Per Share	$4.77	$4.57	to	$4.93	$4.74	(0.6) %
Net Cash Provided by Operating Activities	$61.3	$50.00	to	$53.50	$51.75	(15.6) %

 

Forward-looking statements are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below. 

First Quarter 2022 Conference Call

Management will conduct a conference call with analysts and investors at 4:30 p.m. ET on Tuesday, May 10, 2022. U.S.-based participants may dial in to the conference call at 844-825-9789, while international participants may dial 412-317-5180. A live webcast of the conference call as well as an accompanying slide presentation will be available on the Vectrus Investor Relations website at https://app.webinar.net/b4KdmrqJ7En.

A replay of the conference call will be posted on the Vectrus website shortly after completion of the call and will be available for one year. A telephonic replay will also be available through May 24, 2022, at 844-512-2921 (domestic) or 412-317-6671 (international) with passcode 10166668.    

Footnotes:

¹ See “Key Performance Indicators and Non-GAAP Financial Measures” for reconciliation.

About Vectrus

For more than 70 years, Vectrus has provided critical mission support for our customers’ toughest operational challenges. As a high-performing organization with exceptional talent, deep domain knowledge, a history of long-term customer relationships, and groundbreaking technical expertise, we deliver innovative, mission-matched solutions for our military and government customers worldwide. Whether it’s base operations support, supply chain and logistics, IT mission support, engineering and digital integration, security, or maintenance, repair and overhaul, our customers count on us for on-target solutions that increase efficiency, reduce costs, improve readiness, and strengthen national security. Vectrus is headquartered in Colorado Springs, Colo., and includes about 8,100 employees spanning 205 locations in 28 countries. In 2021, Vectrus generated sales of $1.8 billion. For more information, visit the company’s website at www.vectrus.com or connect with Vectrus on Facebook, Twitter, and LinkedIn.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include, but are not limited to, all the statements and items listed in the table in “2022 Guidance” above and other assumptions contained therein for purposes of such guidance, other statements about our 2021 performance outlook, five-year growth plan, revenue, DSO, contract opportunities, the potential impact of COVID-19, and any discussion of future operating or financial performance.

Whenever used, words such as “may,” “are considering,” “will,” “likely,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “could,” “potential,” “continue,” “goal” or similar terminology are forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management.

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 our management’s control, that could cause actual results to differ materially from the results discussed in the forward-looking statements. For a discussion of some of the risks and important factors that could cause actual results to differ from such forward-looking statements, see the risks and other factors detailed from time to time our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other filings with the U.S. Securities and Exchange Commission.

We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

VECTRUS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
						Three Months Ended
						April 1,				April 2,
(In thousands, except per share data)						2022				2021
Revenue						$      456,471				$      434,004
Cost of revenue						419,275				393,648
Selling, general, and administrative expenses						31,959				23,823
Operating income						5,237				16,533
Interest expense, net						(1,681)				(1,932)
Income from operations before income taxes						3,556				14,601
Income tax expense						701				2,553
Net income						$          2,855				$        12,048
Earnings per share
Basic						$            0.24				$            1.03
Diluted						$            0.24				$            1.02
Weighted average common shares outstanding – basic						11,759				11,648
Weighted average common shares outstanding – diluted						11,902				11,827

 

 

VECTRUS, INC.  CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
		April 1,		December 31,
(In thousands, except per share information)		2022		2021
Assets
Current assets
Cash and cash equivalents		$                   22,999		$                   38,513
Receivables		377,571		348,605
Prepaid expenses		25,923		21,160
Other current assets		11,083		15,062
Total current assets		437,576		423,340
Property, plant, and equipment, net		24,049		23,758
Goodwill		321,734		321,734
Intangible assets, net		64,281		66,582
Right-of-use assets		42,074		43,651
Other non-current assets		9,876		10,394
Total non-current assets		462,014		466,119
Total Assets		$                 899,590		$                 889,459
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable		$                 234,713		$                 212,533
Compensation and other employee benefits		59,059		80,284
Short-term debt		10,400		10,400
Other accrued liabilities		55,421		55,031
Total current liabilities		359,593		358,248
Long-term debt, net		108,392		94,246
Deferred tax liability		32,620		32,214
Operating lease liability		33,167		34,536
Other non-current liabilities		11,643		20,128
Total non-current liabilities		185,822		181,124
Total liabilities		545,415		539,372
Commitments and contingencies (Note 10)
Shareholders’ Equity
Preferred stock; $0.01 par value; 10,000,000 shares authorized; No shares issued and outstanding		—		—
Common stock; $0.01 par value; 100,000 shares authorized; 11,805 and 11,738 shares issued and outstanding      as of April 1, 2022 and December 31, 2021, respectively		118		117
Additional paid in capital		89,590		88,116
Retained earnings		270,609		267,754
Accumulated other comprehensive loss		(6,142)		(5,900)
Total shareholders’ equity		354,175		350,087
Total Liabilities and Shareholders’ Equity		$                 899,590		$                 889,459

 

 

VECTRUS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
				Three Months Ended
				April 1,			April 2,
(In thousands)				2022			2021
Operating activities
Net income				$                2,855			$              12,048
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense				1,591			1,548
Amortization of intangible assets				2,301			2,450
(Gain) Loss on disposal of property, plant, and equipment				(16)			43
Stock-based compensation				2,558			2,622
Amortization of debt issuance costs				204			232
Changes in assets and liabilities:
Receivables				(29,898)			(46,544)
Prepaid expenses				(4,849)			(3,137)
Other assets				4,520			(648)
Accounts payable				22,693			42,054
Deferred taxes				—			2,716
Compensation and other employee benefits				(21,138)			(22,818)
Other liabilities				(7,202)			(12,295)
Net cash used in operating activities				(26,381)			(21,729)
Investing activities
Purchases of capital assets and intangibles				(2,195)			(2,611)
Proceeds from the disposition of assets				17			—
Net cash used in investing activities				(2,178)			(2,611)
Financing activities
Repayments of long-term debt				(2,600)			(2,000)
Proceeds from revolver				217,000			110,000
Repayments of revolver				(200,000)			(110,000)
Proceeds from exercise of stock options				—			113
Payment of debt issuance costs				(458)			—
Payments of employee withholding taxes on share-based compensation				(1,626)			(2,184)
Net cash provided by (used in) financing activities				12,316			(4,071)
Exchange rate effect on cash				729			(191)
Net change in cash, cash equivalents and restricted cash				(15,514)			(28,602)
Cash, cash equivalents and restricted cash-beginning of year				38,513			68,727
Cash, cash equivalents and restricted cash-end of period				$              22,999			$              40,125
Supplemental disclosure of cash flow information:
Interest paid				$                1,513			$                1,371
Income taxes paid				$                     66			$                    (97)
Purchase of capital assets on account				$                       5			$                  (132)

 

Key Performance Indicators and Non-GAAP Measures

The primary financial performance measures we use to manage our business and monitor results of operations are revenue trends and operating income trends. Management believes that these financial performance measures are the primary drivers for our earnings and net cash from operating activities. Management evaluates its contracts and business performance by focusing on revenue, operating income, and operating margin. Operating income represents revenue less both cost of revenue and selling, general and administrative (SG&A) expenses. Cost of revenue consists of labor, subcontracting costs, materials, and an allocation of indirect costs, which includes service center transaction costs. SG&A expenses consist of indirect labor costs (including wages and salaries for executives and administrative personnel), bid and proposal expenses and other general and administrative expenses not allocated to cost of revenue. We define operating margin as operating income divided by revenue.

We manage the nature and amount of costs at the program level, which forms the basis for estimating our total costs and profitability. This is consistent with our approach for managing our business, which begins with management’s assessing the bidding opportunity for each contract and then managing contract profitability throughout the performance period.

In addition to the key performance measures discussed above, we consider adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, and organic revenue to be useful to management and investors in evaluating our operating performance, and to provide a tool for evaluating our ongoing operations. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives. We provide this information to our investors in our earnings releases, presentations, and other disclosures.

Adjusted operating income, adjusted operating margin, adjusted net income, adjusted diluted earnings per share, EBITDA, adjusted EBITDA, EBITDA margin, adjusted EBITDA margin, and organic revenue, however, are not measures of financial performance under GAAP and should not be considered a substitute for operating income, operating margin, net income, and diluted earnings per share as determined in accordance with GAAP.  Definitions and reconciliations of these items are provided below.

• Adjusted operating income is defined as operating income, adjusted to exclude items that may include, but are not limited to significant charges or credits, and unusual and infrequent non-operating items, such as M&A, integration and related costs, LOGCAP V pre-operational legal costs, and amortization of acquired intangible assets that impact current results but are not related to our ongoing operations.
• Adjusted operating margin is defined as adjusted operating income divided by revenue.
• Adjusted net income is defined as net income, adjusted to exclude items that may include, but are not limited to, significant charges or credits, and unusual and infrequent non-operating items, such as M&A, integration and related costs, LOGCAP V pre-operational legal costs, and amortization of acquired intangible assets that impact current results but are not related to our ongoing operations.
• Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted average diluted common shares outstanding.
• EBITDA is defined as operating income, adjusted to exclude depreciation and amortization.
• Adjusted EBITDA is defined as EBITDA, adjusted to exclude items that may include, but are not limited to, significant charges or credits and unusual and infrequent non-operating items, such as M&A, integration and related costs, LOGCAP V pre-operational legal costs that impact current results but are not related to our ongoing operations.
• EBITDA margin is defined as EBITDA divided by revenue.
• Adjusted EBITDA margin is defined as Adjusted EBITDA divided by revenue.
• Organic revenue is defined as revenue, adjusted to exclude revenue from acquired companies.

 

Adjusted Net Income, Adjusted Diluted Earnings Per Share (Non-GAAP Measures)
($K, except per share data)		Three Months Ended April 1, 2022, As Reported		M&A, Integration and Related Costs		LOGCAP V Pre-Operational Legal Costs		Amortization of Acquired Intangible Assets			Three Months Ended April 1, 2022 – Adjusted
Revenue		$         456,471		$                       —		$                     —		$                     —			$        456,471
Growth		5.2 %									5.2    %
Operating income		$             5,237		$                  9,068		$                     —		$               2,301			$          16,606
Operating margin		1.1 %									3.6 %
Interest expense, net		$            (1,681)		$                       —		$                     —		$                     —			$           (1,681)
Income from operations before income taxes		$             3,556		$                  9,068		$                     —		$               2,301			$          14,925
Income tax expense		$                701		$                  1,787		$                     —		$                  453			$            2,941
Income tax rate		19.7 %									19.7 %
Net income		$             2,855		$                  7,281		$                     —		$               1,848			$          11,984
Weighted average common shares outstanding, diluted		11,902									11,902
Diluted earnings per share		$               0.24		$                    0.61		$                     —		$                 0.16			$              1.01
EBITDA (Non-GAAP Measures)
($K)		Three Months Ended April 1, 2022, As Reported		M&A, Integration and Related Costs		LOGCAP V Pre-Operational Legal Costs		Amortization of Acquired Intangible Assets			Three Months Ended April 1, 2022 – Adjusted
Operating Income		$            5,237		$                  9,068		$                     —		$               2,301			$         16,606
Add:
Depreciation and amortization		$            3,892		$                       —		$                     —		$              (2,301)			$           1,591
EBITDA		$            9,129		$                  9,068		$                     —		$                     —			$         18,197
EBITDA Margin		2.0 %									4.0 %

 

 

Adjusted Net Income, Adjusted Diluted Earnings Per Share (Non-GAAP Measures)
($K, except per share data)		Three Months Ended April 2, 2021 As Reported		M&A, Integration and Related Costs		LOGCAP V Pre-Operational Legal Costs		Amortization of Acquired Intangible Assets			Three Months Ended April 2, 2021 – Adjusted
Revenue		$        434,004		$                     —		$                     —		$                     —			$       434,004
Operating income		$          16,533		$                     —		$                   157		$                2,450			$         19,140
Operating margin		3.8 %									4.4 %
Interest expense, net		$           (1,932)		$                     —		$                     —		$                      —			$          (1,932)
Income from operations before income taxes		$          14,601		$                     —		$                   157		$                2,450			$         17,208
Income tax expense		$            2,553		$                     —		$                     27		$                   428			$           3,008
Income tax rate		17.5 %									17.5 %
Net income		$          12,048		$                     —		$                   130		$                2,022			$         14,200
Weighted average common shares outstanding, diluted		11,827									11,827
Diluted earnings per share		$              1.02		$                     —		$                 0.01		$                  0.17			$             1.20
EBITDA (Non-GAAP Measures)
($K)		Three Months Ended April 2, 2021 As Reported		M&A, Integration and Related Costs		LOGCAP V Pre-Operational Legal Costs		Amortization of Acquired Intangible Assets			Three Months Ended April 2, 2021 – Adjusted
Operating Income		$          16,533		$                     —		$                   157		$                2,450			$         19,140
Add:
Depreciation and amortization		$            3,998		$                     —		$                      —		$               (2,450)			$           1,548
EBITDA		$          20,531		$                     —		$                   157		$                      —			$         20,688
EBITDA Margin		4.7 %									4.8 %

 

SUPPLEMENTAL INFORMATION

Revenue by client branch, contract type, contract relationship, and geographic region for the periods presented below was as follows: 

		Three Months Ended
		April 1,				April 2,
(In thousands)		2022		%		2021		%
Army		$    280,113		61 %		$    257,349		59 %
Air Force		61,474		13 %		78,170		18 %
Navy		75,217		17 %		56,427		13 % %
Other		39,667		9 %		42,058		10 %
Total revenue		$    456,471				$    434,004
Revenue by Contract Type
		Three Months Ended
		April 1,				April 2,
(In thousands)		2022		%		2021		%
Cost-plus and cost-reimbursable		$    311,094		68 %		$    290,230		67 %
Firm-fixed-price		128,004		28 %		128,757		30 %
Time and material		17,373		4 %		15,017		3 %
Total revenue		$    456,471				$    434,004
Revenue by Contract Relationship
		Three Months Ended
		April 1,				April 2,
(In thousands)		2022		%		2021		%
Prime contractor		$    427,093		94 %		$    403,262		93 %
Subcontractor		29,378		6 %		30,742		7 %
Total revenue		$    456,471				$    434,004
Revenue by Geographic Region
		Three Months Ended
		April 1,				April 2,
(In thousands)		2022		%		2021		%
Middle East		$    235,754		52 %		$    240,013		55 %
United States		167,980		37 %		149,811		35 %
Europe		36,531		7 %		40,623		9 %
Asia		16,206		4 %		3,557		1 %
Total revenue		$    456,471				$    434,004

 

CONTACT:

Vectrus
Mike Smith, CFA
719-637-5773

michael.smith@vectrus.com

 

 

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/vectrus-announces-solid-first-quarter-results-301544306.html

SOURCE Vectrus, Inc.