NCI, Inc. (ticker: NCIT, exchange: NASDAQ Global Market (.O))
News Release -
29-Jul-2008
NCI, Inc. Reports Solid Second Quarter 2008 Financial Results
- Revenue up 44% to $96 million
- Organic growth of 10.3%
- Operating income up 52% to $7.3 million
- Operating margin of 7.6%
RESTON, Va.--(BUSINESS WIRE)--July 29, 2008--NCI, Inc.
(NASDAQ:NCIT), a provider of information technology (IT), engineering,
and professional services and solutions to U.S. federal government
agencies, announced today results for the second quarter of 2008. The
table below is a summary of our financial results:
Q2: 2008 YTD: 2008
----------------------------------------------------------------------
Revenue $96.3 million $187.8 million
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Operating income $7.3 million $13.9 million
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Operating margin 7.6% 7.4%
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Net income $4.1 million $7.7 million
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Diluted EPS (GAAP) $0.30 $0.57
----------------------------------------------------------------------
Reported Results
For the second quarter of 2008, NCI reported revenue of $96.3
million compared to $66.7 million for the second quarter of 2007. This
represents a growth rate of approximately 44%, and an organic revenue
growth rate of 10%. Operating income for the second quarter of 2008
was $7.3 million, compared to $4.8 million for the second quarter of
2007. Operating margin was 7.6% for the second quarter of 2008,
compared to 7.2% to the second quarter of 2007. Net income for the
second quarter was $4.1 million, compared to $3.0 million for the same
period in 2007. Diluted earnings per share for the second quarter were
$0.30, compared to $0.22 per share for the comparable period in 2007.
The effective tax rate for the second quarter of 2008 was 39.8%.
Diluted shares outstanding were approximately 13.6 million shares for
the second quarter of 2008 and approximately 13.5 million for the
second quarter of 2007.
For the first six months of 2008, NCI reported revenue of $187.8
million, compared to $131.0 million for the first six months of 2007.
This represents a growth rate of 43% and an organic growth rate of
13%. Operating income for the first six months of 2008 was $13.9
million, or an operating margin of 7.4%, compared to $9.5 million, or
an operating margin of 7.2%, for the first six months of 2007. Net
income for the first six months of 2008 was $7.7 million, compared to
$5.9 million for the same period in 2007. Diluted earnings per share
for the first six months of 2008 were $0.57 per share, compared to
$0.44 per share for the comparable period in 2007. Diluted shares
outstanding were approximately 13.6 million shares for the first half
of 2008 and approximately 13.5 million for the first half of 2007.
CEO Comments
Charles K. Narang, NCI's Chairman and CEO, said, "We are pleased
to report another solid quarter of improvements in our revenue,
operating margin and profitability. NCI remains on target with the
expectations previously outlined, and we believe that we are optimally
positioned to sustain strong organic growth for the foreseeable
future."
Business Highlights
NCI's President, Terry Glasgow, stated, "During the second quarter
we continued to aggressively execute our business strategy focused on
long term sustainable growth. Second quarter awards of $67 million,
combined with late first quarter awards of $146 million, fueled strong
revenue growth and provides excellent visibility into our full year
projections. New business activity for the second quarter was very
high, with pending new business awards totaling over $450 million at
the end of the second quarter."
Key Metrics
NCI reported total backlog for the second quarter of 2008 of $994
million, of which $156 million was funded backlog. This compares to
total backlog of $755 million at the end of the second quarter of
2007, including $137 million in funded backlog. During the second
quarter of 2008, approximately 83% of revenue was from prime
contracts. Time-and-materials contracts accounted for 47% of revenue,
cost-plus contracts accounted for 23% of revenue, and fixed-price
contracts accounted for 30% of revenue for the second quarter of 2008.
Our customer mix for the second quarter of 2008 reflects approximately
79% of revenue from the Department of Defense and Intelligence
customers, approximately 17% of revenue from federal civilian
agencies, and approximately 3.9% from commercial, state and local
entities.
Outlook
The table below summarizes the guidance ranges for the third
quarter and full year of 2008. This outlook does not reflect the
impact of any future acquisitions.
3rd Quarter 2008 Full Year 2008
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Revenue $96 million - $100 million $385 million - $395 million
----------------------------------------------------------------------
Diluted
Earnings Per
Share $0.29 - $0.31 $1.16 - $1.22
----------------------------------------------------------------------
Conference Call Information
NCI, Inc.'s executive management will hold a conference call today
at 5 p.m. EDT, to discuss second quarter 2008 results and answer
questions. Interested parties may access the call by dialing (877)
704-5380 (domestic) or (913) 312-1294 (international). The
confirmation code for the live call is 6284697. The conference call
will be webcast (listen only) simultaneously via the Internet at
www.nciinc.com.
A replay of the call will be available beginning at 8 p.m. EDT
today and will remain available for a two-week period. To access the
replay, call (888) 203-1112 (domestic) or (719) 457-0820
(international). The confirmation code for the replay is 6284697. A
replay webcast will also be available on NCI, Inc.'s website shortly
after the conclusion of the call.
About NCI, Inc.:
NCI is a leading provider of information technology (IT),
engineering, and professional services and solutions to U.S. Federal
Government agencies. As an ISO 9001:2000-certified company, NCI's
award-winning expertise encompasses areas critical to its customers'
mission objectives, including enterprise systems management; network
engineering; information assurance; systems engineering and
integration; program management, acquisition, and lifecycle support;
engineering and logistics; medical transformation/health IT; and
distance learning and training solutions. NCI is a member of the
Russell 3000 index. Headquartered in Reston, Virginia, NCI has
approximately 2,300 employees and nearly 100 locations worldwide.
Forward-Looking Statement: Statements and assumptions made in this
press release, which do not address historical facts, constitute
"forward-looking" statements that NCI believes to be within the
definition in the Private Securities Litigation Reform Act of 1995 and
involve risks and uncertainties, many of which are outside of our
control. Words such as "may," "will," "intends," "should," "expects,"
"plans," "projects," "anticipates," "believes," "estimates,"
"predicts," "potential," "continue," or "opportunity," or the negative
of these terms or words of similar import are intended to identify
forward-looking statements.
Such statements are subject to factors that could cause actual
results to differ materially from anticipated results. The factors
that could cause actual results to differ materially from those
anticipated include, but are not limited to, the following: our
dependence on our contracts with federal government agencies,
particularly within the U.S. Department of Defense, for substantially
all of our revenue; continued funding of U.S. Government, based on a
change in spending patterns, or in the event of a priority need for
funds, such as homeland security, the war on terrorism or rebuilding
Iraq; risk of contract performance or termination; failure to achieve
contract awards in connection with recompetes for present business
and/or competition for new business; government contract procurement
(such as bid protest, small business set asides, etc.) and termination
risks; competitive factors such as pricing pressures and competition
to hire and retain employees (particularly those with security
clearances); failure to successfully integrate existing or future
acquired companies or businesses into our operations or to realize any
accretive or synergistic effects from such acquisitions; failure to
identify, execute and effectively integrate acquisitions appropriate
to the achievement of our strategic plans; adverse results of U.S.
government audits of our government contracts; economic conditions in
the United States, including conditions that result from terrorist
activities or war; material changes in laws or regulations applicable
to our businesses, particularly legislation affecting (i) government
contracts for services, (ii) outsourcing of activities that have been
performed by the government, (iii) delays related to agency specific
funding freezes, (iv) competition for task orders under Government
Wide Acquisition Contracts (GWACS) and/or schedule contracts with the
General Services Administration; and (v) expensing of stock options;
and our own ability to achieve the objectives of near term or long
range business plans.
These and other risk factors are more fully discussed in the
section entitled "Risks Factors" in NCI's Form 10-K filed with the
Securities and Exchange Commission (SEC) for the period ended December
31, 2007, and from time to time, in other filings with the SEC such as
our Forms 8-K and Forms 10-Q.
The forward-looking statements included in this news release are
only made as of the date of this news release and NCI undertakes no
obligation to publicly update any of the forward-looking statements
made herein, whether as a result of new information, subsequent events
or circumstances, changes in expectations or otherwise.
NCI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(amounts in thousands, except per share data)
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Revenue $ 96,337 $ 66,703 $187,838 $130,994
Operating costs and expenses:
Cost of revenue (exclusive
of depreciation and
amortization, shown
separately below) 82,571 58,237 161,915 113,746
General and administrative
expense 5,461 3,078 10,207 6,658
Depreciation and
amortization 489 356 970 726
Amortization of intangible
assets 483 217 806 400
--------- --------- --------- ---------
Total operating costs and
expenses 89,004 61,888 173,898 121,530
--------- --------- --------- ---------
Operating income 7,333 4,815 13,940 9,464
Interest income 20 212 74 354
Interest expense (603) (58) (1,186) (82)
--------- --------- --------- ---------
Income before income taxes 6,750 4,969 12,828 9,736
Income tax expense 2,684 1,961 5,131 3,843
--------- --------- --------- ---------
Net income $ 4,066 $ 3,008 $ 7,697 $ 5,893
========= ========= ========= =========
Earnings per common and common
equivalent share:
Basic:
Weighted average shares
outstanding 13,353 13,328 13,353 13,328
Net income per share $ 0.30 $ 0.23 $ 0.58 $ 0.44
========= ========= ========= =========
Diluted:
Weighted average shares and
equivalent shares
outstanding 13,616 13,524 13,588 13,516
Net income per share $ 0.30 $ 0.22 $ 0.57 $ 0.44
========= ========= ========= =========
NCI, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per share data)
As of As of
June 30, December 31,
2008 2007
-------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,061 $ 109
Accounts receivable, net 93,480 88,493
Deferred tax assets 2,024 1,890
Prepaid expenses and other current assets 3,067 1,244
------------ ------------
Total current assets 99,632 91,736
Property and equipment, net 5,003 5,120
Other assets 907 930
Deferred tax assets, net -- 20
Intangible assets, net 8,946 5,448
Goodwill 87,740 75,492
------------ ------------
Total assets $ 202,228 $ 178,746
============ ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 29,377 $ 30,803
Accrued salaries and benefits 14,307 12,572
Other accrued expenses/liabilities 6,448 6,641
Deferred revenue 3,140 2,215
Current portion of long-term debt -- 942
------------ ------------
Total current liabilities 53,272 53,173
Long-term debt 57,000 42,000
Other liabilities 157 217
Deferred tax liabilities, net 666 --
Deferred rent 2,838 3,115
------------ ------------
Total liabilities 113,933 98,505
------------ ------------
Stockholders' equity:
Class A common stock, $0.019 par value--
37,500,000 shares authorized; 8,153,416
shares issued and outstanding as of June
30, 2008 and December 31, 2007 155 155
Class B common stock, $0.019 par value--
12,500,000 shares authorized; 5,200,000
shares issued and outstanding as of June
30, 2008 and December 31, 2007 99 99
Additional paid-in capital 58,514 58,157
Retained earnings 29,527 21,830
------------ ------------
Total stockholders' equity 88,295 80,241
------------ ------------
Total liabilities and stockholders' equity $ 202,228 $ 178,746
============ ============
NCI, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(amounts in thousands)
Six months ended June 30,
-------------------------
2008 2007
------------ ------------
Cash flows from operating activities
Net income $ 7,697 $ 5,893
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 1,776 1,126
(Gain) on sale and disposal of property
and equipment (11) --
Non-cash stock compensation expense 356 154
Deferred income taxes 552 (77)
Changes in operating assets and
liabilities:
Accounts receivable, net (4,987) 7,776
Prepaid expenses and other assets (1,798) 915
Accounts payable (1,426) (3,774)
Accrued expenses/other current
liabilities 2,105 1,682
Deferred rent (262) (232)
------------ ------------
Net cash provided by operating activities 4,002 13,463
------------ ------------
Cash flows from investing activities
Purchase of property and equipment (847) (443)
Proceeds from sale of property and
equipment 11 --
Cash paid for acquisitions, net of cash
received (16,191) (73,146)
------------ ------------
Net cash used in investing activities (17,027) (73,589)
------------ ------------
Cash flows from financing activities
Proceeds from line of credit, net 14,058 55,000
Principal payments under capital lease
obligations (81) (124)
------------ ------------
Net cash provided by (used in) financing
activities 13,977 54,876
------------ ------------
Net change in cash and cash equivalents 952 (5,250)
Cash and cash equivalents, beginning of year 109 13,930
------------ ------------
Cash and cash equivalents, end of period $ 1,061 $ 8,680
============ ============
Supplemental disclosure of cash flow
information
Cash paid during the period for:
Interest $ 1,186 $ 82
============ ============
Income taxes $ 5,186 $ 3,645
============ ============
CONTACT: NCI, Inc., Reston
Maureen Crystal, 703-707-6777
E-mail: mcrystal@nciinc.com
SOURCE: NCI, Inc.
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NCI, Inc.
