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Stanley Reports 44 Percent Revenue Growth and Record Profitability for Third Quarter Fiscal Year 2008
ARLINGTON, Va., Jan. 31 /PRNewswire-FirstCall/ --
Quarterly Highlights:
-- Revenue increases 44% overall, 34% organic(1), to $147.1 million;
-- Q3 operating margin a record 8.3%;
-- Diluted EPS of $0.29; and
-- Earnings guidance increased for Fiscal Year 2008.
Stanley, Inc. (NYSE: SXE) , a leading provider of systems integration and professional services to the U.S. federal government, today reported financial and operating results for the third quarter of fiscal year 2008 ended December 31, 2007. Stanley's third quarter fiscal year 2008 revenue was lower than the company's prior revenue guidance, primarily due to a delay in lower-margin pass-through revenue previously expected to be recognized in the third quarter, which will now be recognized in the fourth quarter. As a result, Stanley's third-quarter operating margin rose to a record 8.3 percent. Earnings per share also increased, to a record $0.29, which matched the high- end of the company's prior EPS guidance. Third Quarter Fiscal Year 2008 Results: Revenue for the third quarter ended December 31, 2007 was $147.1 million, an increase of 44 percent over year-ago third-quarter revenue of $102.0 million. Organic revenue growth was 34 percent. Year-over-year revenue growth for the third quarter resulted primarily from growth in passport services, expansion of systems integration work under the U.S. Navy SPAWAR Corporate Production contract, increased work supporting U.S. Army RESET programs, growth in various IT programs supporting the U.S. Marine Corps, and revenue from the Techrizon acquisition. EBITDA(2) was $14.0 million for the quarter, an increase of 59 percent over EBITDA of $8.8 million in the year-ago quarter. EBITDA margin for the third quarter increased to 9.5 percent from 8.6 percent a year earlier due primarily to the lower pass-through revenue noted above, a greater proportion of more profitable time-and-material contracts, as opposed to cost-plus-fee contracts, and continued efficiencies realized in the company's general and administrative infrastructure on a higher revenue base. Operating income was $12.2 million, an increase of 297 percent from $3.1 million in the same quarter of last fiscal year. Operating margin increased to 8.3 percent from 3.0 percent in the third quarter of fiscal 2007, due primarily to the $4.2 million of accelerated amortization of deferred compensation related to the company's initial public offering in the year-ago quarter. Operating margin further improved due to the factors improving EBITDA as well as depreciation and amortization representing a lower percentage of revenues. Net income for the quarter was $6.8 million, or $0.29 per diluted share, versus $1.3 million, or $0.06 per diluted share, a year ago. The primary reasons for the increase in net income were the factors affecting operating income, lower interest expense and a slightly lower effective income tax rate. Contract backlog at December 31, 2007 was approximately $1.3 billion, down 5 percent from September 30, 2007, and up 22 percent from December 31, 2006. Operating Highlights: -- Third-quarter bookings totaled $84.4 million, equating to a quarterly book-to-bill ratio of 0.6:1. -- Among the new business awards and additional tasking in the third quarter of fiscal year 2008:
-- GSA Alliant, a $50 billion Government-wide Acquisition Contract
(GWAC) with a five-year base and one five-year option period;
-- A $43.2 million, six-month extension of the company's contract for
the provision of passport services supporting the U.S. Department of
State, Bureau of Consular Affairs;
-- A $7.4 million, 10-month contract modification to provide worldwide
field service engineering support for the Advanced Field Artillery
Tactical Data System; and
-- Authorization to proceed to build and manage operations of the
Tucson Passport Center.
-- Stanley initiated operations on multiple, previously announced new
contracts during the third quarter including the $225 million, three-
year contract with U.S. Citizenship and Immigration Services (USCIS),
Department of Homeland Security; the $17 million, five-year contract to
provide sustainment, support, and enhancement for the Marine Corps
Recruiting Information Support System; and the $8 million, five-year
contract to provide network operations support for the Marine Corps
Recruiting Command.
-- Stanley ranked 84th on FORTUNE magazine's 11th annual "100 Best Companies to Work For" list. This was the company's second consecutive ranking, advancing 16 slots on the 2008 list. Nine-Month Fiscal Year 2008 Results: For the nine months ended December 31, 2007, revenue increased 47 percent to $430.8 million compared with $292.8 million for the same period in the prior fiscal year. Organic revenue growth for the first nine months of fiscal year 2008 was 37 percent. EBITDA for the nine-month period ended December 31, 2007 increased 56 percent to $39.1 million compared with $25.0 million for the first nine months of fiscal year 2007. EBITDA margin for the first nine months of fiscal year 2008 was 9.1 percent, up from 8.6 percent for the same period a year earlier due primarily to a greater proportion of more profitable time-and-material and fixed-price contracts, as opposed to cost-plus-fee contracts, and continued efficiencies realized in the company's general and administrative infrastructure on a higher revenue base. Operating income for the first nine months of fiscal year 2008 was $33.9 million, an increase of 111 percent over operating income of $16.0 million reported a year earlier. Operating margin for the first nine months of fiscal year 2008 was 7.9 percent compared with 5.5 percent in the first nine months of fiscal year 2007. Operating margin increased year-over-year primarily due to the $4.2 million of accelerated amortization of deferred compensation related to the company's initial public offering in the prior year. Operating margin further improved as a result of the factors improving EBITDA as well as depreciation and amortization representing a lower percentage of revenues. Net income for the first nine months of fiscal year 2008 was $18.5 million compared with net income for the same period last year of $6.2 million. The primary reasons for the increase in nine-month net income were the factors affecting operating income, lower interest expense and a slightly lower effective income tax rate. Diluted earnings per share for the first nine months of fiscal year 2008 were $0.79 compared with diluted earnings per share of $0.34 for the first nine months of fiscal year 2007. Cash flow provided by operations for the nine months ended December 31, 2007 was $3.3 million, up $2.6 million from the $0.7 million provided by operations for the six months ended September 30, 2007. DSO for the quarter was 86 days, up from 77 days for the second quarter of fiscal year 2008. The increase in DSO was primarily the result of delayed payments of significant receivables from two customers due to the restructuring of their payment processing systems. Management's Outlook: Based on the company's current backlog and management's estimate of future tasking and contract awards, Stanley is issuing guidance for the fourth quarter of fiscal year 2008 and updating guidance for the full fiscal year. The table below presents management's current expectations about financial performance for the fourth quarter and full fiscal year, based on information available at this time:
Fourth Quarter Fiscal
Year 2008 Ending Fiscal Year 2008 Ending
March 31, 2008 March 31, 2008
Revenue $164 - $174 million $595 million - $605 million
Diluted EPS $0.30 - $0.32 $1.09 - $1.11
Diluted share
count 23.6 - 23.7 million 23.4 - 23.5 million
"Stanley enjoyed record profitably on lower-than-expected revenue in the third quarter of fiscal year 2008," said Phil Nolan, Stanley's chairman, president and CEO. "A variety of factors affected the timing of revenue recognition in the third quarter; however, we are positioned to deliver a strong fourth quarter as pass-through revenue is projected to return to historic levels and growth will continue to drive the top-line in the areas of passport services, Army equipment RESET and support for USCIS. "For the remainder of our fiscal year, Stanley will focus on winning major recompeted contracts as well as managing the ramp-up of contracts awarded earlier in our current fiscal year. We are also well positioned to compete on new contracts currently included in our qualified pipeline. The factors driving growth this year will continue to generate solid revenue visibility, significant organic growth and favorable margins and support the increase in the midpoint of our FY08 EPS guidance." As previously announced, Stanley will conduct a conference call today at 5:00 p.m. EST to discuss fiscal third quarter 2008 results. To obtain the dial-in number, please contact Rashida Gofney at (703) 310-3209. The conference call will be broadcast simultaneously on the Investor Relations page of the company's website, www.stanleyassociates.com. Investors are advised to log on to the website at least 15 minutes prior to the call to register, download and install any necessary audio software. An archive of the webcast will be available for one week following the live event. About Stanley Stanley (NYSE: SXE) is a provider of information technology services and solutions to U.S. defense and federal civilian government agencies. Stanley offers its customers systems integration solutions and expertise to support their mission-essential needs at any stage of program, product development or business lifecycle through five service areas: systems engineering, enterprise integration, operational logistics, business process outsourcing, and advanced engineering and technology. Headquartered in Arlington, Va., the company has approximately 3,500 employees at over 100 locations in the U.S. and worldwide. In 2008 and 2007, Stanley was recognized by FORTUNE magazine as one of the "100 Best Companies to Work For." Please visit www.stanleyassociates.com for more information. The above-referenced statements may contain forward-looking statements that are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Expressions of future goals, financial information or reporting, and similar expressions reflecting something other than historical fact, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward- looking statements may involve a number of risks and uncertainties, which are described in the company's filings with the Securities and Exchange Commission. These risks and uncertainties include: changes in federal government procurement laws, regulations, policies and budgets; risks relating to contract performance; changes in the competitive environment (including as a result of bid protests); and the other factors discussed in the company's Annual Report on Form 10-K for the year ended March 31, 2007, as filed with the SEC on June 1, 2007 and the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007, as filed on August 9, 2007. The risk factors set forth in the Form 10-K and Form 10-Q under the caption "Risk Factors" are specifically incorporated by reference into this press release. All forward-looking statements are based on current plans, expectations, and beliefs and speak only as of the date of such statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(1) Organic revenue growth, as presented, measures revenue growth
adjusted for the impact of acquisitions. Stanley believes that this
non-GAAP financial measure provides useful information because it
allows investors to better assess the underlying growth rate of the
company's existing business. This non-GAAP financial measure should
not be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. Please see the
reconciliation table at the end of this release.
(2) EBITDA is a non-GAAP measure that is defined as GAAP net income
(loss) plus other expense (income), interest expense, income taxes,
and depreciation and amortization. We have provided EBITDA because we
believe it is a commonly used measure of financial performance in
comparable companies and is provided to help investors evaluate
companies on a consistent basis, as well as to enhance an
understanding of our operating results. EBITDA should not be
construed as either an alternative to net income as an indicator of
our operating performance or as an alternative to cash flows as a
measure of liquidity. Please refer to the table at the end of this
release that reconciles GAAP net income to EBITDA.
Condensed Consolidated Statements of Income
(unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
December 31, December 31,
2006 2007 2006 2007
Revenue $ 102,023 $ 147,083 $ 292,769 $ 430,803
Operating costs
and expenses:
Cost of revenues 86,686 123,660 248,106 363,538
Selling, general
and administrative 6,540 9,431 19,619 28,181
Amortization of
deferred
compensation 4,361 62 4,964 205
Depreciation and
amortization 1,353 1,694 4,047 5,005
Total operating
costs & expenses 98,940 134,847 276,736 396,929
Operating income 3,083 12,236 16,033 33,874
Other income (expense):
Other income (expense) 95 10 (450) 16
Interest expense
- net (1,040) (919) (5,219) (3,120)
Total other
expenses (945) (909) (5,669) (3,104)
Income before taxes 2,138 11,327 10,364 30,770
Provision for
income taxes (878) (4,576) (4,198) (12,320)
Net income $ 1,260 $ 6,751 $ 6,166 $ 18,450
Earnings per share:
Basic $ 0.06 $ 0.31 $ 0.38 $ 0.84
Diluted $ 0.06 $ 0.29 $ 0.34 $ 0.79
Weighted average
shares:
Basic 19,637 22,129 16,238 22,021
Diluted 21,676 23,552 18,216 23,340
Selected Consolidated Balance Sheet Data
(unaudited)
(in thousands)
As of
As of December 31,
March 31, 2007 2007
Cash $12,736 $-
Accounts receivable - net $110,029 $146,512
Line of credit $- $16,816
Current portion of long-term debt $1,000 $1,000
Long-term debt - net of current
portion $36,750 $35,750
Stockholders' equity $134,152 $157,079
Organic Growth Reconciliation
(unaudited)
(in thousands)
Three Months Ended
December 31,
2006 2007 Percent Growth
Total revenue, as reported $102,023 $147,083 44%
Plus: Revenue from acquired
companies for the comparable
prior year period 7,367 -
Organic Revenue $109,390 $147,083 34%
Nine Months Ended
December 31,
2006 2007 Percent Growth
Total revenue, as reported $292,769 $430,803 47%
Plus: Revenue from acquired
companies for the comparable
prior year period 22,261 -
Organic Revenue $315,030 $430,803 37%
EBITDA Reconciliation
(unaudited)
(in thousands)
Three Months Ended Nine Months Ended
December 31, December 31,
2006 2007 2006 2007
Net income $1,260 $6,751 $6,166 $18,450
Provision for
income taxes 878 4,576 4,198 12,320
Interest expense
- net 1,040 919 5,219 3,120
Other (income)
expense (95) (10) 450 (16)
Depreciation and
amortization 1,353 1,694 4,047 5,005
Amortization of
deferred
compensation 4,361 62 4,964 205
EBITDA $8,797 $13,992 $25,044 $39,084
Revenue $102,023 $147,083 $292,769 $430,803
EBITDA Margin 8.6% 9.5% 8.6% 9.1%
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