CSRA Announces Fourth Quarter and Fiscal Year 2017 Financial Results

May 25, 2017

FALLS CHURCH, Va., May 24, 2017 — CSRA Inc. (NYSE: CSRA), a leading provider of next-generation IT solutions and professional services to government organizations, today announced financial results for the fourth quarter of fiscal year 2017, which ended March 31, 2017.

“In fiscal year 2017, we built a strong foundation for the future through robust business development success, differentiated technical offerings, and strong financial management,” said Larry Prior, CSRA president and CEO. “We ended the year on a high note, as our fourth quarter revenue, adjusted EBITDA, and adjusted EPS met or exceeded consensus estimates, and we booked $1.3 billion in awards. Our book-to-bill ratio of 1.1x marked the ninth straight quarter with bookings at or above revenue. This success gives us confidence that we will achieve organic revenue growth in fiscal year 2018 while also maintaining strong profitability and free cash flow. I am also pleased to announce that we will soon make our first acquisition as a public company. NES Associates will bring us strong competitive advantage in a number of large, near-term IT network opportunities—another example of how we live our tagline, ‘Think Next. Now.'”

Summary Operating Results (Unaudited)

(Dollars in millions, except per share data)

Three Months Ended

Fiscal Years Ended

March 31, 2017

April 1, 2016

March 31, 2017

April 1, 2016(a)

Revenue

$

1,254

$

1,290

$

4,993

$

4,250

Operating income (loss)

$

90

$

(76)

$

622

$

187

Net income (loss) attributable to CSRA common stockholders

$

37

$

(72)

$

304

$

87

GAAP diluted EPS

$

0.22

$

(0.44)

$

1.84

$

0.53

Adjusted revenue

$

1,254

$

1,290

$

4,993

$

5,198

Adjusted EBITDA

$

207

$

197

$

792

$

787

Adjusted diluted EPS

$

0.49

$

0.46

$

1.91

$

1.74

Note: All quarterly and adjusted figures are unaudited; refer to “Reconciliation of Non-GAAP Financial Measures” at the end of this news release for a more detailed discussion of management’s use of non-GAAP measures and for reconciliations to GAAP financial measures.

(a) For the fiscal year ended April 1, 2016, adjusted revenue, adjusted EBITDA, and adjusted diluted EPS are pro forma measures.

Revenue for the fourth quarter of fiscal year 2017 was $1.25 billion, up 3 percent compared to the third quarter of fiscal year 2017 (sequentially). Quarterly revenue was down 3 percent compared to the fourth quarter of fiscal year 2016 (year-over-year), the lowest such decline since the Company was formed in November 2015. Revenue for fiscal year 2017 was $5.0 billion, down 4 percent compared to adjusted revenue for fiscal year 2016.

Operating income for the fourth quarter of fiscal year 2017 of $90 million (7.2% operating margin), includes $61 million of expense related to the amendment of the Intellectual Property Matters Agreement (the “Original IPMA” and, as amended, the “IPMA”) with Computer Sciences Corporation (now known as DXC Technology) (“CSC”) and another $5 million of other separation, merger, and integration costs; $16 million of pension and other post-retirement benefit (“OPEB”) plans mark-to-market expense; $20 million of other pension benefits; as well as $11 million of amortization from acquisition-related intangible assets. Adjusted EBITDA, which excludes these items, was $207 million for the fourth quarter, up 5 percent year-over-year. The adjusted EBITDA margin of 16.5% matched the highest in the last three years (including pro forma results), driven by strong contract performance and disciplined cost management. Adjusted EBITDA for fiscal year 2017 was $792 million, which was up 1 percent compared to fiscal year 2016, reflected a margin of 15.9%, an improvement of 80 basis points compared to the prior fiscal year.

Net income attributable to CSRA shareholders for the fourth quarter of fiscal year 2017 was $37 million, or $0.22 per share, compared to a loss of $72 million, or $0.44 per share in the fourth quarter of fiscal year 2016. Adjusted diluted EPS was $0.49 for the quarter and $1.91 for the fiscal year, up 7 percent and 10 percent, respectively, from the comparable periods in fiscal year 2016.

The adjusted results reflect the methodology laid out in the Company’s Form 8-K filing on April 10, 2017. Compared to the previously reported measures, adjusted EBITDA excludes all costs and benefits associated with the defined benefit plans, and adjusted EPS excludes all costs and benefits associated with the defined benefit plans as well as amortization of acquisition-related intangible assets. Prior year amounts have been revised to conform to the current year presentation.

Cash Management and Capital Deployment

For the fourth quarter of fiscal year 2017, operating cash flow was $50 million, and free cash flow was $62 million. Operating cash flow included $61 million associated with the payment to CSC in connection with the signing of the IPMA; this payment is not included in free cash flow, which excludes non-recurring separation-related payments. The remaining $4 million from the $65 million IPMA payment is included in investing cash flow and captured on the balance sheet as a software asset.

During the fourth quarter, the Company used $20 million to pay down debt and returned $16 million to shareholders as part of its regular quarterly cash dividend program. The Board of Directors declared that the Company will pay a cash dividend of $0.10 per share on July 12, 2017 to all common shareholders of record as of June 15, 2017. As of March 31, 2017, the Company had $126 million in cash and cash equivalents and $2.6 billion in debt (excluding capital lease obligations).

After the close of the quarter, the Company signed a definitive agreement to acquire the Alexandria, VA-based network engineering firm NES Associates, LLC, a leading provider of telecommunications, infrastructure, and application architecture and implementation services to Defense and other government customers. The transaction is expected to close in the first half of fiscal year 2018, and is subject to regulatory approval and customary closing conditions.

Business Development

Bookings totaled $1.3 billion in the fourth quarter, representing a book-to-bill ratio of 1.1x. The fourth quarter marked the ninth consecutive quarter with a book-to-bill ratio of 1.0x or higher. Bookings for the fiscal year totaled $6.9 billion, representing a book-to-bill ratio of 1.4x.

Included in the quarterly bookings were several particularly important single-award prime contracts:

  • Enterprise IT Support for the Environmental Protection Agency (EPA). Under a $266 million, five-year contract, CSRA will provide a full range of services to develop and operate the EPA’s infrastructure and application platforms. Services delivered under this new contract for CSRA include: data center management, application hosting, application deployment and maintenance, geospatial service support, network security, cybersecurity, cloud computing, continuity of operations (COOP) services, enterprise identity and access management (EIAM), and active directory (AD).
  • Program Executive Office (PEO) Aircraft Carriers Support. CSRA secured a five-year, $61 million recompete to provide a full range of acquisition program support services to PEO Aircraft Carriers, including the design, development, construction, modernization, and life cycle management of aircraft carriers for the Navy. CSRA has supported PEO Aircraft Carriers for over 25 years.
  • Administrative Office of U.S. Courts (AOUSC) IT Security Support. The AOUSC awarded CSRA a new $57 million, four-year contract to secure the Courts’ IT assets. Under this task order, CSRA will provide highly-specialized security services, such as security engineering, penetration testing, security assessments, and training.
  • EPA High Performance Computing (HPC) Support. CSRA secured a new five-year, $58 million contract to provision, maintain, and support the EPA’s HPC environment, as well as its scientific visualization hardware and software. CSRA’s support of computational modeling and simulation tools will allow the EPA to solve complex research problems quickly and in a cost-effective manner to guide decisions and better protect human health and the environment.
  • Department of the Navy Chief of Information (CHINFO) Support. Under a five-year, $39 million contract, CSRA will continue to provide the Navy support to its worldwide public communication and media support services program.

The Company’s backlog of signed business orders at the end of fourth quarter of fiscal year 2017 was $15.2 billion, of which $2.4 billion was funded.

Forward Guidance

Based on the substantial momentum from its business development success, the Company is initiating guidance ranges that anticipate organic growth in revenue and free cash flow and robust performance in adjusted EBITDA and adjusted diluted EPS. The Company elects to provide ranges for certain metrics that are not prepared and presented in accordance with GAAP because it cannot make reliable estimates of key items that would be necessary to provide guidance for its GAAP operating and cash flow measures, including pension and OPEB mark-to-market adjustments and the initial sale associated with any changes to its receivables purchase agreement.

Metric

Fiscal Year 2018

Revenue (millions)

$5,000 – $5,200

Adjusted EBITDA (millions)

$770 – $800

Adjusted Diluted Earnings per Share

$1.88 – $2.00

Free Cash Flow (millions)

$330 – $380

The fiscal year 2018 adjusted EBITDA and adjusted diluted EPS guidance is based on the same definitions used in this press release and described fully in the company’s Form 8-K filed with the Securities and Exchange Commission on April 10, 2017.

CSRA Chief Financial Officer Dave Keffer commented, “I am pleased to post such strong earnings growth in the quarter and the year, underscoring CSRA’s commitment to long-term earnings growth. We expect to grow revenue in fiscal year 2018 in line with our long-term model. Our pending acquisition is a great example of the disciplined growth we are able to pursue, consistent with our balanced, long-term approach to capital allocation, as our balance sheet continues to evolve. After aggressively paying down debt, we look to add in acquisitions and opportunistic share repurchases to accelerate growth and drive shareholder value.”

About CSRA Inc.

CSRA (NYSE: CSRA) solves our nation’s hardest mission problems as a bridge from mission and enterprise IT to Next Gen, from government to technology partners, and from agency to agency.  CSRA is tomorrow’s thinking, today. For our customers, our partners, and ultimately, all the people our mission touches, CSRA is realizing the promise of technology to change the world through next-generation thinking and meaningful results. CSRA is driving towards achieving sustainable, industry-leading organic growth across federal and state/local markets through customer intimacy, rapid innovation and outcome-based experience. CSRA has approximately 18,500 employees and is headquartered in Falls Church, Virginia. To learn more about CSRA, visit www.csra.com. Think Next. Now.


Source: CSRA

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