Higher interest expense more than offset strong operating earnings at Engility [EGL] in the first quarter, but the company narrowed its losses from a year ago, the company said on Thursday after the close of the stock markets.
The net loss was $3.2 million, 9 cents earnings per share (EPS), versus a loss of $13.4 million (55 cents EPS) a year ago, as interest expenses climbed nearly $11 million and taxes were also up substantially. Excluding $13 million in merger, integration and other costs associated with the acquisitions of the former companies TASC and DRC, adjusted net income was $9 million (24 cents EPS), which topped per share estimates by 4 cents.
Sales increased 30 percent to $522.8 million from $402.6 million a year ago driven by the acquisition of TASC. The company said that if TASC results were included for a full quarter a year ago, organic revenue would have been down nearly 8 percent.
Lynn Dugle, who joined the company as its new CEO on March 21, said on the earnings call that the “integration of TASC is essentially complete [and] we can now turn our full attention to not just the cost synergies of bringing the two companies together but the revenue synergies as well.”
Dugle, who led Raytheon’s [RTN] $6 billion Intelligence, Information and Services segment for six years before leaving the company in March 2015, said the integration of TASC “was among the most efficient I have ever seen” and that the cost savings exceeded expectations.
The company’s top priority is organic growth, and Dugle said, adding that the company needs to boost its win rate and orders with a focus on the intelligence, space and civil markets, which offer “significant contextual growth.” Most results here won’t happen until 2017, she said.
Dugle outlined two other strategic priorities for the company, including attracting, growing and retaining “critical talent,” and strengthening the balance sheet.
Orders were $396 million in the quarter, just 80 percent of sales, and Dugle said this “is not where it needs to be.” She said the company is making progress toward meeting its goal of bookings equal to or greater than sales this year, pointing to early second quarter awards from the Defense Threat Reduction Agency and Transportation Security Administration worth $338 million.
Commenting on customer spending trends, Dugle said that a number of the company’s clients are stepping away from lowest price technically acceptable award criteria in favor of value contracting, adding that this is a reaction to agencies that awarded low price contracts but then suffered from seeing the winners unable to properly staff the work and not complete work, which in turn impacts mission performance.
For the first time Engility disclosed its backlog, which stood at $2.9 billion at the end of the quarter, with $824 million funded.
Free cash flow was $15 million. Engility maintained its financial outlook for 2016.