SI International Reports Record Financial Results for Fourth Quarter and Full Fiscal Year 2005
23 February 2006
SI International, Inc. (Nasdaq: SINT), an information technology and network solutions (IT) company, today announced record financial results for its fourth quarter and fiscal year ended December 31, 2005. Revenue for the fourth quarter of fiscal year 2005 (FY05) increased 67 percent and net income increased by 73 percent as compared to the fourth quarter of the prior year. FY05 revenue increased by 52 percent, and net income increased by 56 percent as compared to FY04. The Company's FY05 results were driven by organic growth in high-priority Federal government assignments in the key areas of: Federal IT modernization, defense transformation, homeland defense, and mission-critical outsourcing; as well as the acquisition of Bridge Technology Corporation (Bridge) in December 2004 and of Shenandoah Electronic Intelligence, Inc. (SEI) in February 2005.
Fourth Quarter, FY05 Financial Results
Revenue for the fourth quarter of FY05 was $116.4 million, an increase of 67 percent over fourth quarter FY04 revenue of $69.6 million. Federal government contract revenue, which represented 98 percent of fourth quarter FY05 total revenue, grew by 68 percent to $114.3 million from $67.9 million for the fourth quarter of FY04. This strong fourth quarter revenue was primarily the result of new task orders, the expansion of work on current mission-critical information technology and network solutions contracts, and projects added from the Bridge and SEI acquisitions.
Income from operations for the fourth quarter of FY05 was $9.9 million, an increase of 77 percent over operating income of $5.6 million reported a year earlier. Operating margin for the fourth quarter of FY05 was 8.5 percent, as compared to 8.1 percent for the fourth quarter of FY04. Net income for the fourth quarter of FY05 was $5.1 million or $0.43 per diluted share, an increase of 73 percent over fourth quarter FY04 net income of $3.0 million or $0.26 per diluted share.
Backlog as of December 31, 2005 was $854 million, including $191 million in funded backlog and $663 million in unfunded backlog. Funded backlog is up 53 percent from the $125 million reported at the year end of 2004. Days Sales Outstanding (DSOs) were 79 days at the end of the fourth quarter FY05. "Our DSO performance reflects the impact of the Continuing Resolution on the 2006 Federal budget. These receivables have been collected in early 2006 and we continue to expect 75 days going forward," said Ted Dunn, Executive Vice President and Chief Financial Officer.
"We are extremely pleased with our record results for the fourth quarter and feel that we are well positioned for a very successful 2006," said Brad Antle, SI International's President and CEO. "We believe our continued double-digit revenue growth provides tangible evidence that we are strategically aligned with those areas of the federal government that have urgent, high-priority needs -- protecting the homeland, transforming the military to counter emerging global threats, and fostering information sharing among agencies."
Full FY05 Financial Results
For the fiscal year ended December 31, 2005, revenue increased 52 percent to $397.9 million, compared to $262.3 million for FY04. Income from operations for FY05 was $34.0 million, an increase of 64 percent over operating income of $20.7 million reported for FY04. Operating margin for FY05 was 8.5 percent, up 60 basis points, as compared to 7.9 percent for FY04. Net income for FY05 was $16.9 million or $1.45 per diluted share, an increase of 56 percent, as compared to a $10.9 million or $1.14 per diluted share for FY04.
Federal government contract revenue, which represented 98 percent of FY05 total revenue, grew by 54 percent to $390.3 million from $253.4 million for FY04. As of December 31, 2005, SI International had a solid balance sheet with $34.0 million in cash and marketable securities, and $101.5 million in debt.
FY05 Business Highlights
During 2005, SI International increased backlog by $541 million. Of this total, $173 million was added to backlog in the fourth quarter of FY05. Major business highlights during the year include:
In the area of Defense Transformation:
* Received a $20 million military satellite communications contract
supporting the Air Force Space Command;
* Selected to provide training support for implementation of Department
of Defense's National Security Personnel System (NSPS) with first phase
valued at $1.9 million;
* Won an $11.5 million Global Positioning System modernization contract
from the Air Force Space Command;
* Awarded $5 million in task orders to provide IPv6 transition support to
Department of Defense and US Army;
* Won a new multi-million dollar contract supporting the National
Security Agency with program management and software engineering;
* Awarded a new multi-million dollar contract to provide training support
to NSA;
* Designed and implemented a net-centric approach to enterprise
architecture that integrates three views -- operational, systems, and
technical and currently using this technique on 10 engagements;
* Completed communications technology support for U.S. Northern Command's
new Joint Operations Center.
In the area of Homeland Defense:
* Acquired SEI, which deepened SI International's presence within the
Department of Homeland Security;
* Developed an electronic port security solution for US Coast Guard to
meet DHS re-arrival notification requirements;
* Won a new task to support DHS' destruction of 5 million immigration
cards over a 1 year period.
In the area of Mission-Critical Outsourcing:
* Awarded an $18 million contract to provide call center support services
for the Thrift Saving Plan for federal employees;
* Won a total of 8 task orders under our HRsolutions contract vehicle.
In the area of Federal IT Modernization:
* Awarded $50 million Department of Treasury Office of the Comptroller of
the Currency contract vehicle for information technology project
management and development support services.
Business Outlook
On February 9, 2006, SI International issued the following guidance ranges for the first quarter and full fiscal year 2006 based on the Company's current backlog and management's estimate as to future tasking and contract awards. This guidance assumes the Zen Technology acquisition will close by the end of the first quarter 2006. 2006 earnings guidance includes the effect of stock option expense in accordance with FAS 123 (R), Share-Based Payment.
Q1 2006 Full Year 2006
Revenue $101 - $105 million $470 - $476 million
Net Income $4.1 - $4.3 million $19.5 - $20.0 million
Diluted Earnings Per Share $0.35 - $0.37 $1.63 - $1.67
Diluted Share Equivalents 11.85 million 11.95 million
Conference Call
SI International has scheduled a conference call to discuss its results and business outlook for 10 AM EST, today, February 21, 2006. Participating in the conference call will be SI International's President and CEO, Brad Antle and Executive Vice President and CFO, Ted Dunn. A question and answer session will be included to further discuss the results and the Company's future performance expectations. Interested parties should contact Alan Hill at 703-234-6854 for dial-in information.
The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of SI International's web site, http://www.si-intl.com. A replay of the webcast will be available on the SI International web site beginning two hours after the conclusion of the conference call. In addition, a replay of the conference is available by telephone beginning on Tuesday, February 21, 2006 at 12:00 PM ET through Tuesday, February 28, 2006 at 5:00 PM ET by calling 1-888-286-8010 and entering the conference passcode 61597858.
About SI International: SI International, a member of the Russell 2000 index, is a provider of information technology and network solutions (IT) primarily to the Federal government. The Company combines technology and industry expertise to provide a full spectrum of state-of-the-practice solutions and services, from design and development to documentation and operations, to assist clients in achieving their missions. SI International is ranked as the 49th largest Federal Prime IT Contractor by Washington Technology and has over 4,000 employees. More information about SI International can be found at http://www.si-intl.com.
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 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 involve a number of risks and uncertainties, which are described in SI International's filings with the Securities and Exchange Commission. The actual results of SI International may differ materially from those indicated by these forward- looking statements as a result of various risks and uncertainties. These include the following risks and uncertainties that relate specifically to the Zen Technology acquisition: (i) the risk that the Zen Technology acquisition will not be consummated, including as a result of the failure of any of the conditions precedent set forth in the acquisition agreement; (ii) the ability to obtain government approvals required for closing the Zen Technology acquisition; (iii) the risk that the Zen Technology businesses will not be integrated successfully into SI International; (iv) the risk that the expected benefits of the acquisition may not be realized, including the realization of accretive effects from the acquisition, the strengthening of relationships with key clients, and cross-selling opportunities; and (v) SI International's increased indebtedness after the acquisition. Other risks and uncertainties that may affect the actual results include: differences between authorized amounts and amounts received by the SI International under government contracts; failure of government customers or prime contractors to exercise options under contracts; changes in federal government (or other applicable) procurement laws, regulations, policies and budgets; SI International's ability to attract and retain qualified personnel; and the important factors discussed in the Risk Factors section of the annual report on Form 10-K filed by SI International with the Securities and Exchange Commission and available directly from the Commission at http://www.sec.gov. SI International undertakes no obligations to revise or update any forward-looking statements in order to reflect events or circumstances that may arise after the date of this release.
Contact: Alan Hill
SI International, Inc.
703-234-6854
alan.hill@si-intl.com
SI International, Inc. and Subsidiaries
Consolidated Statements of Operations
(amounts in thousands, except per share data)
Three Months Ended Twelve Months Ended
----------------------- ----------------------
December December December December
31, 25, 31, 25,
2005 2004 2005 2004
Unaudited Unaudited Unaudited
----------- ----------- ----------- ----------
Revenue $116,444 $69,596 $397,919 $262,306
Costs and expenses:
Direct costs 72,537 45,339 246,481 166,774
Indirect costs 32,783 17,943 113,015 71,917
Depreciation and
amortization 575 527 2,161 2,231
Amortization of
intangible assets 612 171 2,292 648
----------- ----------- ----------- ----------
Total operating
expenses 106,507 63,980 363,949 241,570
----------- ----------- ----------- ----------
Income from operations 9,937 5,616 33,970 20,736
Other income (expense) 33 61 12 (1)
Interest expense 1,657 796 6,103 2,760
----------- ----------- ----------- ----------
Income before provision
for income taxes 8,313 4,881 27,879 17,975
Provision for income
taxes 3,214 1,926 10,942 7,098
----------- ----------- ----------- ----------
Net income $5,099 $2,955 $16,937 $10,877
=========== =========== =========== ==========
Earnings per common
share:
Basic net income
per common share $0.45 $0.27 $1.51 $1.20
=========== =========== =========== ==========
Diluted net income
per common share $0.43 $0.26 $1.45 $1.14
=========== =========== =========== ==========
Basic weighted-average
shares outstanding 11,308 10,749 11,185 9,041
=========== =========== =========== ==========
Diluted weighted-average
shares outstanding 11,780 11,325 11,690 9,507
=========== =========== =========== ==========
EBITDA(1) $11,124 $6,314 $38,423 $23,615
Notes: (1) EBITDA is defined as GAAP net income (loss) plus other expense
(income), interest expense, income taxes, and depreciation and
amortization.
EBITDA as calculated by us may be calculated differently than EBITDA
for other companies. 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.
Reconciliation of Net Income to EBITDA is as follows:
Three Months Ended Twelve Months Ended
----------------------- ----------------------
December December December December
31, 25, 31, 25,
2005 2004 2005 2004
----------- ----------- ----------- ----------
Net Income $5,099 $2,955 $16,937 $10,877
Other expense (income) (33) (61) (12) 1
Interest expense 1,657 796 6,103 2,760
Provision for income
taxes 3,214 1,926 10,942 7,098
Depreciation 575 527 2,161 2,231
Amortization 612 171 2,292 648
----------------------- ----------------------
EBITDA $11,124 $6,314 $38,423 $23,615
SI International, Inc.
Revenue Segmentation Data (unaudited)
(In thousands)
-----------------------------------------------------
Three months ended
-----------------------------------------------------
Dec. 31, 2005 Dec. 25, 2004 Growth
$ % $ % $ %
Core federal
government 114,319 98.2 % 67,941 97.6 % 46,378 68.3 %
Commercial and
other 2,125 1.8 % 1,655 2.4 % 470 28.4 %
-----------------------------------------------------
Total revenue 116,444 100.0 % 69,596 100.0 % 46,848 67.3 %
Prime contracts 90,097 77.4 % 56,516 81.2 % 33,581 59.4 %
Subcontracts 26,347 22.6 % 13,080 18.8 % 13,267 101.4 %
-----------------------------------------------------
Total revenue 116,444 100.0 % 69,596 100.0 % 46,848 67.3 %
Cost reimbursable 38,330 32.9 % 25,313 36.4 % 13,017 51.4 %
Time and
materials 47,227 40.6 % 30,016 43.1 % 17,211 57.3 %
Fixed price 30,887 26.5 % 14,267 20.5 % 16,620 116.5 %
-----------------------------------------------------
Total revenue 116,444 100.0 % 69,596 100.0 % 46,848 67.3 %
Department of
Defense 55,587 47.7 % 38,327 55.1 % 17,260 45.0 %
Federal civilian
agencies 58,732 50.5 % 29,614 42.5 % 29,118 98.3 %
Commercial entities 2,125 1.8 % 1,655 2.4 % 470 28.4 %
-----------------------------------------------------
Total revenue 116,444 100.0 % 69,596 100.0 % 46,848 67.3 %
-----------------------------------------------------
Twelve months ended
-----------------------------------------------------
Dec. 31, 2005 Dec. 25, 2004 Growth
$ % $ % $ %
Core federal
government 390,327 98.1 % 253,426 96.6 % 136,901 54.0 %
Commercial and
other 7,592 1.9 % 8,880 3.4 % (1,288)(14.5 %)
-----------------------------------------------------
Total revenue 397,919 100.0 % 262,306 100.0 % 135,613 51.7 %
Prime contracts 299,968 75.4 % 211,450 80.6 % 88,518 41.9 %
Subcontracts 97,951 24.6 % 50,856 19.4 % 47,095 92.6 %
-----------------------------------------------------
Total revenue 397,919 100.0 % 262,306 100.0 % 135,613 51.7 %
Cost reimbursable 119,245 30.0 % 81,500 31.1 % 37,745 45.3 %
Time & materials 174,523 43.8 % 121,410 46.3 % 53,113 43.7 %
Fixed price 104,151 26.2 % 59,396 22.6 % 44,755 75.3 %
-----------------------------------------------------
Total revenue 397,919 100.0 % 262,306 100.0 % 135,613 51.7 %
Department of
Defense 186,440 46.9 % 138,488 52.8 % 47,952 34.6 %
Federal civilian
agencies 203,887 51.2 % 114,938 43.8 % 88,949 77.4 %
Commercial entities 7,592 1.9 % 8,880 3.4 % (1,288)(14.5 %)
-----------------------------------------------------
Total revenue 397,919 100.0 % 262,306 100.0 % 135,613 51.7 %
SI International, Inc. and Subsidiaries
Consolidated Balance Sheets
(amounts in thousands, except share and per share data)
December December
31, 25,
2005 2004
----------- ----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $26,160 $3,754
Marketable securities 7,850 2,000
Accounts receivable, net 93,633 65,710
Deferred tax asset 422 2,740
Other current assets 6,276 3,503
----------- ----------
Total current assets 134,341 77,707
Property and equipment, net 5,908 4,971
Intangible assets, net 16,483 6,575
Other assets 5,655 2,142
Goodwill 173,308 120,712
----------- ----------
Total assets $335,695 $212,107
=========== ==========
Liabilities and stockholders' equity
Current liabilities:
Note Payable - Line of Credit $- $28,954
Current portion of long-term debt 1,000 -
Accounts payable 25,364 11,225
Accrued expenses and other current liabilities 29,660 15,314
Deferred revenue 14 289
Note payable - former owner of
acquired business 2,280 -
----------- ----------
Total current liabilities 58,318 55,782
----------- ----------
Long term debt, net of current portion 98,250 -
Note payable - former owner of acquired business - 2,280
Deferred income tax 5,221 5,046
Other long-term liabilities 6,037 3,929
Stockholders' equity:
Common stock -- $0.01 par value per share;
50,000,000 shares authorized; 11,341,222
and 11,047,533 shares issued and
outstanding as of December 31, 2005 and
December 25, 2004, respectively 114 111
Additional paid-in capital 133,843 128,192
Deferred compensation - (208)
Retained earnings 33,912 16,975
----------- ----------
Total stockholders' equity 167,869 145,070
----------- ----------
Total liabilities and stockholders' equity $335,695 $212,107
=========== ==========
SI International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(amounts in thousands)
Twelve Months Ended
December December
31, 25,
2005 2004
----------- ----------
Unaudited
Cash flows from operating activities:
Net income $16,937 $10,877
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,161 2,231
Amortization of intangible assets 2,292 648
Loss on disposal of fixed assets 56 14
Income tax benefit for stock option exercises 1,561 348
Stock-based compensation 611 132
Deferred income tax provision 2,493 1,686
Amortization of deferred financing costs 705 416
Non-cash loss due to early repayment of debt - 584
Changes in operating assets and liabilities,
net of effect of business acquisitions:
Accounts receivable, net (14,629) (16,096)
Other current assets (2,684) 116
Other assets (1,000) (668)
Accounts payable and accrued expenses 15,421 143
Deferred revenue (275) (3,686)
Other long term liabilities 2,950 1,600
----------- ----------
Net cash provided by (used in) operating
activities 26,599 (1,655)
Cash flows from investing activities:
Purchase of property and equipment (2,727) (1,225)
Proceeds from sale of marketable securities 36,200 11,000
Purchase of marketable securities (42,050) (2,050)
Former owner payable 8,041 -
Cash paid for acquisition of MATCOM International
Corp. (82) (64,918)
Cash paid for acquisition of Bridge Tech. Corp. (197) (29,472)
Cash paid for acquisition of Shenandoah Electronic
Intelligence, Inc., net of cash assumed (74,006) -
----------- ----------
Net cash used in investing activities (74,821) (86,665)
Cash flows from financing activities:
Proceeds from exercise of stock options 3,738 927
Proceeds from issuance of common stock, net of
offering costs (48) 51,239
Net (repayments) borrowings under line of credit (28,954) 28,954
Proceeds from long-term debt 100,000 30,000
Repayments of long-term debt (750) (30,000)
Payments of debt issuance fees (3,238) (1,202)
Repayments of capital lease obligations (120) (146)
----------- ----------
Net cash provided by financing activities 70,628 79,772
----------- ----------
Net change in cash and cash equivalents 22,406 (8,548)
Cash and cash equivalents, beginning of period 3,754 12,302
----------- ----------
Cash and cash equivalents, end of period $26,160 $3,754
=========== ==========
Supplemental disclosures of cash flow information:
Cash payments for interest $5,059 $1,857
Cash payments for income taxes $3,593 $6,181
Purchases of assets under capital lease $126 $289
Source: prnewswire
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