Constellis FY15 Q4 Investor Deck
2015 Q4 Investor’s Call March 3, 2016
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
1
Introduction The following discussion and analysis of the Company’s financial condition and results of operations contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. In addition, the following discussion includes references to non-GAAP measures.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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Agenda Executive Summary Opening Comments Financial Performance Operational Performance
Constellis – Consolidated Pro Forma Earnings Q4 2015 Pro Forma Earnings Results 2015 Actuals Business Update Liquidity Summary
Constellis – Government Earnings (not including Olive Group and EI) Business Update Q4 2015 Pro Forma Earnings Results 2015 Actuals
Constellis – Commercial Earnings (Olive Group and EI) Business Update Q4 Pro Forma Earnings Results 2015 Actuals
2016 Outlook Questions Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
3
Executive Summary Financial Performance • • •
• • •
Financial results as presented are unaudited; audited financial statements will be circulated once completed by April 30, 2016. FY15 Q4 revenue was $12M (4.6%) below EAC due primarily to the delay in an infrastructure project that is now expected to occur in FY16. FY15 Q4 profitability was impacted by the delay in an infrastructure project mentioned above, as well as onetime cost overruns from contract close-outs, retention bonuses required to maintain full manning in Iraq, and penalties for late delivery of contract vehicles to Shell. Constellis enters FY16 positioned for growth, driven by a stable contract base, recent new business wins and material new revenue opportunities. Integration and cost-reduction initiatives initiated in Q3 FY15 are largely complete with significant reductions flowing through to SG&A in Q4; pro forma adjustments for synergies are no longer material in Q4. Capital expenditures for FY15 were $23M ($1M higher, or 4.5%, as compared to EAC). • •
CAPEX spend supports recent contract wins in our Commercial business. Positive developments with recently launched refurbished vehicle program will significantly reduce CAPEX in FY16.
Operational Performance • • • •
Government: Significant new contract wins in FY15 Q4 & FY16 Q1 will provide growth in the coming year and beyond. Commercial: New contract awards have been secured but will not begin to be realized until 2016; bid and proposal volumes remain strong despite headwinds in the oil & gas markets. Next phase of business optimization planning is underway; significant cost-reduction and efficiency programs will yield additional cost savings in FY16. Training operations are back to historical margin levels after management change-out and cost containment strategies have been implemented.
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Consolidated Pro Forma Earnings - UNAUDITED
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Consolidated Pro Forma Earnings - UNAUDITED Q4 2015 EAC Total Revenue
Q4 2015 Actual
Variance
$265.7
$253.5
($12.2)
56.1
48.7
(7.4)
21.1%
19.2%
SG&A Depreciation and Amortization Total Indirect Expense
21.7 6.9 28.5
21.8 7.3 29.2
0.2 0.5 0.6
Operating Income
27.5
19.5
(8.0)
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
13.0 0.0 4.2 (0.5) 10.8
13.1 0.0 0.0 0.3 6.1
0.1 0.0 (4.2) 0.8 (4.7)
EBITDA % Margin
37.6 14.2%
29.5 10.7%
(8.1)
Total Adjustments Pro Forma Adjusted EBITDA % Margin
4.5 $42.2 15.9%
9.2 $38.7 15.3%
4.6 ($3.5)
Total Gross Profit
Total Gross Margin
Constellis Proprietary Information
•
Negative variance in actual Revenue vs. EAC is primarily due to the delay of an infrastructure project worth $12M, which is now expected to occur in 2016.
•
Gross Profit variance due to the above mentioned infrastructure project delay as well as one-time cost overruns associated with demobilization of the Helmand contract, retention bonuses required to sustain full manning in Iraq, and pension expense for NSPS.
•
SG&A expense was on plan, which included significant cost reduction due to efficiency initiatives implemented by new leadership in Q3/Q4 and synergies realized from the Olive Group acquisition/integration.
•
Increase in Adjustments due to one-time costs incurred relating to the demobilization of Helmand, retention bonuses in Iraq, and temporary staffing and recruiting fees incurred as part of the management team changeout. Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016 our Financial Statements will be recast to align Financial Statement Categories.
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FY 2015 Q4 Financial Results Consolidated Pro Forma Earnings - UNAUDITED 2014 Pro Forma Total Revenue
Q1 2015 Actual
Q2 2015 Actual
Q3 2015 Actual
Q4 2015 Actual
2015 Actual
$1,026.3
$243.8
$255.3
$255.7
$253.5
$1,008.3
Total Gross Profit
231.9
59.6
54.4
48.9
48.7
211.6
Total Gross Margin
22.6%
24.5%
21.3%
19.1%
19.2%
21.0%
SG&A Depreciation and Amortization Total Indirect Expense
143.5 37.3 180.8
32.0 6.2 38.3
30.0 6.9 37.0
33.1 8.4 41.5
21.8 7.3 29.2
117.0 28.8 145.9
Operating Income
51.1
21.4
17.4
7.4
19.6
65.7
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
50.3 0.0 3.1 (0.4) (1.9)
5.7 0.0 3.7 (0.2) 12.1
10.6 7.1 4.1 (0.7) (3.7)
13.4 0.4 4.1 0.1 (10.5)
13.1 0.0 0.0 0.3 6.1
42.8 7.5 12.0 (0.4) 3.9
EBITDA % Margin
88.8 8.7%
30.4 12.5%
20.5 8.0%
18.1 7.1%
29.5 11.6%
98.5 9.8%
80.4 $169.2 16.5%
7.9 $38.3 15.7%
15.6 $36.1 14.1%
26.7 $44.7 17.5%
9.2 $38.7 15.3%
59.4 $157.9 15.7%
Total Adjustments Pro Forma Adjusted EBITDA % Margin Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
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FY 2015 Q4 Financial Results Consolidated Balance Sheet 12/31/15 (12/31/14 Excludes Olive Group) - UNAUDITED
Assets Cash A/R Net Inventory Prepaids & Other Current Total Current Assets PPE, Net Intangibles Goodwill Deposits & Other Long-Term Total Assets
12/31/15 $39.9 266.0 8.9 61.9 376.6
12/31/14 $7.1 207.1 5.9 39.2 259.3
109.0 175.6 241.2 12.6 $915.1
74.3 95.7 176.7 12.8 $618.8
Liabilities & Equity AP & Other Accrueds Accrued Compensation Current Portion Long-Term Debt Other Current Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Equity Total Liabilities & Equity
12/31/15 $149.6 28.6 0.2 1.2 179.5
12/31/14 $108.5 34.8 17.8 2.8 163.9
625.7 16.4 821.6 93.5 $915.1
282.5 25.2 471.6 147.2 $618.8
Assets •
Cash balance continues to be positively impacted by ongoing efforts to improve invoicing and collections.
•
Accounts Receivable increased vs. prior quarter due to an artificially low A/R at the end of Q3 due to DoS shutdown and early payment of invoices. Efforts continue to accelerate the billing process, reduce customer rejections and improve DSOs. •
•
As a result of these efforts, DSO was 91 days at 12/31/15 as compared to average DSO of 99 days in FY15.
Changes in Non-Current Assets primarily represent increases in accumulated depreciation of PPE and the continued amortization of Intangibles and Goodwill.
Liabilities & Equity •
Focus on extending DPO in line with DSO to maximize cash retention in line with pay-when-paid.
•
Increase in debt related to new capital structure in conjunction with acquisition of Olive Group in May 2015.
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Liquidity as of 12/31/2015
•
FY15 Q4 liquidity exceeded previous guidance despite deferral of $14.7M tax refund into FY16. Per latest guidance from the IRS, the tax refund is expected to be collected in April 2016.
•
As expected and discussed in Q3, the DoS payment office shutdown in December 2015 prevented Constellis from invoicing all DOS contracts for approximately one month, creating a gap in cash flow.
•
Over the course of 2015, Constellis Government unbilled balance was reduced from $95M to ~$70M (unbilled A/R represents delayed billings due to the requirement for a contract modification or a request for equitable adjustment from the customer; improved systems and procedures will reduce this balance significantly in FY16). Major achievements in reducing unbilled A/R in Q3/Q4 FY15 included: • • • • •
Collection of $6.9M related to Triple Canopy unbilled from 2011. Collection of several aged DBA balances. Billing of more than $5M of WPS Training revenue in situations where complicated funding reallocation was required. Invoicing of various cost-reimbursable items, including CFE and Travel costs. Collection of $1M of BESFS Housing from 2010.
•
As expected, interest payment of $22.5M and implementation of new DBA / insurance policies created liquidity reduction in Q4.
•
Ongoing headcount reductions and operational improvement initiatives are expected to positively impact 2016 cash flow.
•
DBA payments will continue to require monitoring; however, rapid collection practices have been implemented across Constellis to ensure quick return of cash.
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Government - UNAUDITED
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Business Update – Government Key Wins • • • • • • •
WPS II: positive developments on recompete and manning plus-ups on existing Task Orders. National Security: Cougar – Option Year 2 exercised and Silent Eagle – received extension. International Security: 5 separate contract awards for fixed site security in AFG; total value $57M. International Security: Security Management Program IDIQ Vehicle. Mission Support & International Security: DoS OBO CSMS IDIQ award. Mission Support: CN> IDIQ award. Training: General Atomics, CN>, Navy Mentor Support Services.
Key Opportunities • • • •
KBOSS recompete – the current contract was extended through late 2016; further delays expected that will extend into 2017. IDIQ’s: DOSCAP $5B, Afghanistan National Security Force $550M, AFRICAP DoS Africa Support $1.5B, DOS INL Air Wing $100M. Federal Protective Services – Reagan Building and DEA $250M over 5 years. Afghanistan security: numerous.
Business Environment •
Clear indications of DoD’s continued presence in Afghanistan. Increased requirements in Iraq have been slow to develop but show potential in 2016 and 2017. DoS continues to increase its presence in our core geographies with recent requests for plus-ups in manning in Iraq and AFG.
Liquidity • •
Business has sufficient liquidity to fund our ongoing business needs as well as future growth requirements. Based off current run rates we expect to have > $80M in liquidity in 6 months and > $100M in 12 months.
Management • •
Restructuring of management team largely completed in Q3/Q4 FY15. Recent enhancements to leadership team include new VP of HR.
Constellis Proprietary Information
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FY 2015 Q4 Financial Results Pro Forma Government Earnings - UNAUDITED Q4 2015 EAC $205.8
Q4 2015 Actual $196.2
39.7 19.3%
32.3 16.5%
SG&A Depreciation and Amortization Total Indirect Expense
13.5 6.6 20.0
13.9 7.0 21.0
0.5 0.5 0.9
Operating Income
19.7
11.4
(8.3)
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
13.0 0.0 2.8 (0.4) 4.3
13.1 0.0 (2.4) 0.3 0.4
0.1 0.0 (5.2) 0.7 (3.9)
EBITDA % Margin
26.6 12.9%
18.1 9.2%
(8.5)
Total Adjustments Pro Forma Adjusted EBITDA % Margin
3.2 $29.9 14.5%
5.4 $23.5 12.0%
2.2 ($6.3)
Revenue Gross Profit Gross Margin
Constellis Proprietary Information
Variance ($9.6)
•
Negative variance in actual Revenue vs. EAC is primarily due to the delay of an infrastructure project worth $12M, which is now expected to occur in 2016.
•
Gross Profit variance due to the above mentioned infrastructure project delay as well as one-time cost overruns associated with demobilization of the Helmand contract, retention bonuses required to sustain manning in Iraq, and pension expense for NSPS.
•
SG&A expense was on plan, which included significant cost reduction due to efficiency initiatives implemented by new leadership in Q3/Q4.
•
Income tax expense is preliminary and will be adjusted upon review with auditors.
•
Increase in Adjustments due to onetime costs incurred relating to the demobilization of Helmand, retention bonuses in Iraq, and temporary staffing and recruiting fees incurred as part of the management team change-out.
(7.4)
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Government Earnings - UNAUDITED 2014 Pro Forma $755.8
Q1 2015 Actual $184.8
Q2 2015 Actual $197.4
Q3 2015 Actual $194.2
Q4 2015 Actual $196.2
2015 Actual $772.6
Gross Profit Gross Margin
148.8 19.7%
42.1 22.8%
37.7 19.1%
32.3 16.6%
32.3 16.5%
144.5 18.7%
SG&A Depreciation and Amortization Total Indirect Expense
98.1 25.3 123.4
17.7 5.6 23.4
17.1 6.3 23.5
24.0 8.1 32.1
13.9 7.0 21.0
72.8 27.0 99.9
25.4
18.7
14.3
0.2
11.4
44.6
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
47.2 0.0 2.3 (0.4) (23.6)
5.3 0.0 3.3 (0.3) 10.4
9.9 7.1 3.5 (0.6) (5.6)
13.5 0.4 1.1 0.1 (14.9)
13.1 0.0 (2.4) 0.3 0.4
41.8 7.5 5.5 (0.4) (9.7)
EBITDA % Margin
51.1 6.8%
24.6 13.3%
14.1 7.1%
7.8 4.0%
18.1 9.2%
64.6 8.4%
60.4 $111.5 14.8%
2.0 $26.6 14.4%
10.5 $24.5 12.4%
23.0 $30.7 15.8%
5.4 $23.5 12.0%
40.8 $105.4 13.6%
Revenue
Operating Income
Total Adjustments Pro Forma Adjusted EBITDA % Margin
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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Commercial – UNAUDITED
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Business Update – Commercial Key wins in Q4 •
Total contract value awarded in Q4 of $43M – this includes wins from blue-chip oil and gas and infrastructure clients and work for work FMS primes. The total value of contracts awarded in 2015 was $276M.
•
Exit orderbook at year end is $170M (which represents FY16 revenue from contracts in place, options & extensions from existing customers and contracts).
Key Opportunities •
Approximately $4B in proposals under evaluation of which approximately $200M down selected for award imminent with existing and new customers.
Business Environment •
Low oil prices translate into continued downward pressure on CAPEX and OPEX budgets in the Oil & Gas sector, resulting in some projects being delayed or cancelled. Clients are becoming increasingly sensitive to price and are looking to us to make reductions in our cost base and operating profiles to help them be more efficient.
•
These pressures are having an effect on our revenues, but there remains significant demand for our services in our core markets and significant new opportunities to win business.
•
From an EBITDA perspective, we are confident that due to our optimization programs and efficiencies gained through the scale of our integration we are able to continue to drive our operating costs down to maintain consistent levels of profitability.
•
We continue to work closely with our clients to ensure we are enabling them to continue to operate safely even as profiles are reduced and costs fall.
•
There was one significant event to report in Q4 from an HSE perspective during 5.4M man hours worked and 5.1M km driven.
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FY 2015 Q4 Financial Results Pro Forma Commercial Earnings - UNAUDITED Q4 2015 EAC $59.9
Q4 2015 Actual $57.3
Variance
16.3 27.3%
16.4 28.6%
0.0
SG&A Depreciation and Amortization Total Indirect Expense
8.2 0.3 8.5
7.9 0.3 8.2
(0.3) 0.0 (0.3)
Operating Income
7.8
8.2
0.3
0.0 0.0 1.4 (0.1) 6.5
0.0 0.0 2.4 0.0 5.8
0.0 0.0 1.0 0.1 (0.7)
EBITDA % Margin
11.0 18.3%
11.4 19.8%
0.4
Total Adjustments Pro Forma Adjusted EBITDA % Margin
1.3 $12.3 20.5%
3.8 $15.2 26.5%
2.5 $2.9
Revenue Gross Profit Gross Margin
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
Constellis Proprietary Information
($2.6)
•
FY15 Q4 Revenue decreased compared to EAC due to projects (Unaoil, BGC and PAE) demobilizing earlier than forecasted.
•
Increase in Q4 Adjustments vs. EAC due to adjustment for Shell penalties on late delivery of vehicles.
Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Commercial Earnings - UNAUDITED 2014 Pro Forma $270.5
Q1 2015 Actual $59.0
Q2 2015 Actual $57.9
Q3 2015 Actual $61.4
Q4 2015 Actual $57.3
2015 Actual $235.7
83.1 30.7%
17.5 29.7%
16.7 28.8%
16.6 27.0%
16.4 28.6%
67.1 28.5%
SG&A Depreciation and Amortization Total Indirect Expense
45.4 12.0 57.4
14.3 0.6 14.9
12.9 0.6 13.5
9.1 0.3 9.4
7.9 0.3 8.2
44.2 1.8 46.0
Operating Income
25.7
2.6
3.2
7.2
8.2
21.1
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
3.1 0.0 0.8 0.0 21.8
0.4 0.0 0.5 0.1 1.7
0.7 0.0 0.6 (0.1) 1.9
(0.1) 0.0 3.0 0.0 4.3
0.0 0.0 2.4 0.0 5.8
1.0 0.0 6.5 0.0 13.7
EBITDA % Margin
37.7 13.9%
5.8 9.8%
6.4 11.1%
10.4 16.9%
11.4 19.8%
33.9 14.4%
Total Adjustments Pro Forma Adjusted EBITDA % Margin
20.0 $57.7 21.3%
6.0 $11.8 19.9%
5.1 $11.5 19.9%
3.7 $14.1 22.9%
3.8 $15.2 26.5%
18.6 $52.5 22.3%
Revenue Gross Profit Gross Margin
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
•
Decrease in SG&A in 2015 due to synergies achieved from the acquisition of Olive Group in May 2015. Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
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Integration & Follow–on Optimization •
The actions required to implement the integration plan of Edinburgh International with Olive Group have largely been completed, with an estimated total cost savings of approximately $16M on an annualized basis; the impacts of these actions continue to flow through to reported results.
•
A follow-on optimization exercise has been launched to ensure that delivery across all areas of the business is as efficient as possible, and to identify and implement opportunities to leverage group synergies.
•
Potential cost savings from the next phase of business optimization is expected to exceed $6M; the majority of the benefits will impact the reported results in late Q1 or early Q2 of FY16.
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2016 Outlook
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2016 Outlook REVENUE •
Government business will benefit from a stable base of core contracts as well as growth from recent contract wins, plus-ups in manning, and pending awards. •
•
Expected revenue growth of 8-10% in FY16.
Commercial business faces challenges in end-markets, but bid and proposal volume remains strong as does the exit orderbook for existing contracts. •
Expected revenue growth of 5-7% in FY16.
AEBITDA •
As seen in Q4, normalizing adjustments are reducing as integration and cost savings have taken hold.
•
Additional cost reduction initiatives will enhance margins further in FY16, offsetting some potential margin pressure from cost-sensitive customers. •
Expected AEBITDA growth of 8-10% in FY16.
CAPEX •
Due to favorable results from vehicle refurbishing programs tested in FY15, CAPEX required to support new contracts in FY16 will be reduced significantly. •
Expected CAPEX reduced from $23M in FY15 to $4M in FY16.
LIQUIDITY •
Increase from $42M to greater than $100M. •
Primary drivers of the increase include: cash from operations, transaction related tax refund $14M, DBA collections $10M, unbilled AR $10M, and closed contract collections $9M
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Questions
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Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
1
Introduction The following discussion and analysis of the Company’s financial condition and results of operations contains “forward-looking statements” that reflect our future plans, estimates, beliefs and expected performance. We caution that assumptions, expectations, projections, intentions, or beliefs about future events may, and often do, vary from actual results and the differences can be material. In addition, the following discussion includes references to non-GAAP measures.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
2
Agenda Executive Summary Opening Comments Financial Performance Operational Performance
Constellis – Consolidated Pro Forma Earnings Q4 2015 Pro Forma Earnings Results 2015 Actuals Business Update Liquidity Summary
Constellis – Government Earnings (not including Olive Group and EI) Business Update Q4 2015 Pro Forma Earnings Results 2015 Actuals
Constellis – Commercial Earnings (Olive Group and EI) Business Update Q4 Pro Forma Earnings Results 2015 Actuals
2016 Outlook Questions Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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Executive Summary Financial Performance • • •
• • •
Financial results as presented are unaudited; audited financial statements will be circulated once completed by April 30, 2016. FY15 Q4 revenue was $12M (4.6%) below EAC due primarily to the delay in an infrastructure project that is now expected to occur in FY16. FY15 Q4 profitability was impacted by the delay in an infrastructure project mentioned above, as well as onetime cost overruns from contract close-outs, retention bonuses required to maintain full manning in Iraq, and penalties for late delivery of contract vehicles to Shell. Constellis enters FY16 positioned for growth, driven by a stable contract base, recent new business wins and material new revenue opportunities. Integration and cost-reduction initiatives initiated in Q3 FY15 are largely complete with significant reductions flowing through to SG&A in Q4; pro forma adjustments for synergies are no longer material in Q4. Capital expenditures for FY15 were $23M ($1M higher, or 4.5%, as compared to EAC). • •
CAPEX spend supports recent contract wins in our Commercial business. Positive developments with recently launched refurbished vehicle program will significantly reduce CAPEX in FY16.
Operational Performance • • • •
Government: Significant new contract wins in FY15 Q4 & FY16 Q1 will provide growth in the coming year and beyond. Commercial: New contract awards have been secured but will not begin to be realized until 2016; bid and proposal volumes remain strong despite headwinds in the oil & gas markets. Next phase of business optimization planning is underway; significant cost-reduction and efficiency programs will yield additional cost savings in FY16. Training operations are back to historical margin levels after management change-out and cost containment strategies have been implemented.
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Consolidated Pro Forma Earnings - UNAUDITED
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FY 2015 Q4 Financial Results Consolidated Pro Forma Earnings - UNAUDITED Q4 2015 EAC Total Revenue
Q4 2015 Actual
Variance
$265.7
$253.5
($12.2)
56.1
48.7
(7.4)
21.1%
19.2%
SG&A Depreciation and Amortization Total Indirect Expense
21.7 6.9 28.5
21.8 7.3 29.2
0.2 0.5 0.6
Operating Income
27.5
19.5
(8.0)
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
13.0 0.0 4.2 (0.5) 10.8
13.1 0.0 0.0 0.3 6.1
0.1 0.0 (4.2) 0.8 (4.7)
EBITDA % Margin
37.6 14.2%
29.5 10.7%
(8.1)
Total Adjustments Pro Forma Adjusted EBITDA % Margin
4.5 $42.2 15.9%
9.2 $38.7 15.3%
4.6 ($3.5)
Total Gross Profit
Total Gross Margin
Constellis Proprietary Information
•
Negative variance in actual Revenue vs. EAC is primarily due to the delay of an infrastructure project worth $12M, which is now expected to occur in 2016.
•
Gross Profit variance due to the above mentioned infrastructure project delay as well as one-time cost overruns associated with demobilization of the Helmand contract, retention bonuses required to sustain full manning in Iraq, and pension expense for NSPS.
•
SG&A expense was on plan, which included significant cost reduction due to efficiency initiatives implemented by new leadership in Q3/Q4 and synergies realized from the Olive Group acquisition/integration.
•
Increase in Adjustments due to one-time costs incurred relating to the demobilization of Helmand, retention bonuses in Iraq, and temporary staffing and recruiting fees incurred as part of the management team changeout. Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016 our Financial Statements will be recast to align Financial Statement Categories.
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Consolidated Pro Forma Earnings - UNAUDITED 2014 Pro Forma Total Revenue
Q1 2015 Actual
Q2 2015 Actual
Q3 2015 Actual
Q4 2015 Actual
2015 Actual
$1,026.3
$243.8
$255.3
$255.7
$253.5
$1,008.3
Total Gross Profit
231.9
59.6
54.4
48.9
48.7
211.6
Total Gross Margin
22.6%
24.5%
21.3%
19.1%
19.2%
21.0%
SG&A Depreciation and Amortization Total Indirect Expense
143.5 37.3 180.8
32.0 6.2 38.3
30.0 6.9 37.0
33.1 8.4 41.5
21.8 7.3 29.2
117.0 28.8 145.9
Operating Income
51.1
21.4
17.4
7.4
19.6
65.7
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
50.3 0.0 3.1 (0.4) (1.9)
5.7 0.0 3.7 (0.2) 12.1
10.6 7.1 4.1 (0.7) (3.7)
13.4 0.4 4.1 0.1 (10.5)
13.1 0.0 0.0 0.3 6.1
42.8 7.5 12.0 (0.4) 3.9
EBITDA % Margin
88.8 8.7%
30.4 12.5%
20.5 8.0%
18.1 7.1%
29.5 11.6%
98.5 9.8%
80.4 $169.2 16.5%
7.9 $38.3 15.7%
15.6 $36.1 14.1%
26.7 $44.7 17.5%
9.2 $38.7 15.3%
59.4 $157.9 15.7%
Total Adjustments Pro Forma Adjusted EBITDA % Margin Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
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FY 2015 Q4 Financial Results Consolidated Balance Sheet 12/31/15 (12/31/14 Excludes Olive Group) - UNAUDITED
Assets Cash A/R Net Inventory Prepaids & Other Current Total Current Assets PPE, Net Intangibles Goodwill Deposits & Other Long-Term Total Assets
12/31/15 $39.9 266.0 8.9 61.9 376.6
12/31/14 $7.1 207.1 5.9 39.2 259.3
109.0 175.6 241.2 12.6 $915.1
74.3 95.7 176.7 12.8 $618.8
Liabilities & Equity AP & Other Accrueds Accrued Compensation Current Portion Long-Term Debt Other Current Liabilities Total Current Liabilities Long-Term Debt Other Long-Term Liabilities Total Liabilities Total Equity Total Liabilities & Equity
12/31/15 $149.6 28.6 0.2 1.2 179.5
12/31/14 $108.5 34.8 17.8 2.8 163.9
625.7 16.4 821.6 93.5 $915.1
282.5 25.2 471.6 147.2 $618.8
Assets •
Cash balance continues to be positively impacted by ongoing efforts to improve invoicing and collections.
•
Accounts Receivable increased vs. prior quarter due to an artificially low A/R at the end of Q3 due to DoS shutdown and early payment of invoices. Efforts continue to accelerate the billing process, reduce customer rejections and improve DSOs. •
•
As a result of these efforts, DSO was 91 days at 12/31/15 as compared to average DSO of 99 days in FY15.
Changes in Non-Current Assets primarily represent increases in accumulated depreciation of PPE and the continued amortization of Intangibles and Goodwill.
Liabilities & Equity •
Focus on extending DPO in line with DSO to maximize cash retention in line with pay-when-paid.
•
Increase in debt related to new capital structure in conjunction with acquisition of Olive Group in May 2015.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
8
Liquidity as of 12/31/2015
•
FY15 Q4 liquidity exceeded previous guidance despite deferral of $14.7M tax refund into FY16. Per latest guidance from the IRS, the tax refund is expected to be collected in April 2016.
•
As expected and discussed in Q3, the DoS payment office shutdown in December 2015 prevented Constellis from invoicing all DOS contracts for approximately one month, creating a gap in cash flow.
•
Over the course of 2015, Constellis Government unbilled balance was reduced from $95M to ~$70M (unbilled A/R represents delayed billings due to the requirement for a contract modification or a request for equitable adjustment from the customer; improved systems and procedures will reduce this balance significantly in FY16). Major achievements in reducing unbilled A/R in Q3/Q4 FY15 included: • • • • •
Collection of $6.9M related to Triple Canopy unbilled from 2011. Collection of several aged DBA balances. Billing of more than $5M of WPS Training revenue in situations where complicated funding reallocation was required. Invoicing of various cost-reimbursable items, including CFE and Travel costs. Collection of $1M of BESFS Housing from 2010.
•
As expected, interest payment of $22.5M and implementation of new DBA / insurance policies created liquidity reduction in Q4.
•
Ongoing headcount reductions and operational improvement initiatives are expected to positively impact 2016 cash flow.
•
DBA payments will continue to require monitoring; however, rapid collection practices have been implemented across Constellis to ensure quick return of cash.
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February 25, 2016- Business Confidential UNAUDITED
9
Government - UNAUDITED
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
10
Business Update – Government Key Wins • • • • • • •
WPS II: positive developments on recompete and manning plus-ups on existing Task Orders. National Security: Cougar – Option Year 2 exercised and Silent Eagle – received extension. International Security: 5 separate contract awards for fixed site security in AFG; total value $57M. International Security: Security Management Program IDIQ Vehicle. Mission Support & International Security: DoS OBO CSMS IDIQ award. Mission Support: CN> IDIQ award. Training: General Atomics, CN>, Navy Mentor Support Services.
Key Opportunities • • • •
KBOSS recompete – the current contract was extended through late 2016; further delays expected that will extend into 2017. IDIQ’s: DOSCAP $5B, Afghanistan National Security Force $550M, AFRICAP DoS Africa Support $1.5B, DOS INL Air Wing $100M. Federal Protective Services – Reagan Building and DEA $250M over 5 years. Afghanistan security: numerous.
Business Environment •
Clear indications of DoD’s continued presence in Afghanistan. Increased requirements in Iraq have been slow to develop but show potential in 2016 and 2017. DoS continues to increase its presence in our core geographies with recent requests for plus-ups in manning in Iraq and AFG.
Liquidity • •
Business has sufficient liquidity to fund our ongoing business needs as well as future growth requirements. Based off current run rates we expect to have > $80M in liquidity in 6 months and > $100M in 12 months.
Management • •
Restructuring of management team largely completed in Q3/Q4 FY15. Recent enhancements to leadership team include new VP of HR.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Government Earnings - UNAUDITED Q4 2015 EAC $205.8
Q4 2015 Actual $196.2
39.7 19.3%
32.3 16.5%
SG&A Depreciation and Amortization Total Indirect Expense
13.5 6.6 20.0
13.9 7.0 21.0
0.5 0.5 0.9
Operating Income
19.7
11.4
(8.3)
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
13.0 0.0 2.8 (0.4) 4.3
13.1 0.0 (2.4) 0.3 0.4
0.1 0.0 (5.2) 0.7 (3.9)
EBITDA % Margin
26.6 12.9%
18.1 9.2%
(8.5)
Total Adjustments Pro Forma Adjusted EBITDA % Margin
3.2 $29.9 14.5%
5.4 $23.5 12.0%
2.2 ($6.3)
Revenue Gross Profit Gross Margin
Constellis Proprietary Information
Variance ($9.6)
•
Negative variance in actual Revenue vs. EAC is primarily due to the delay of an infrastructure project worth $12M, which is now expected to occur in 2016.
•
Gross Profit variance due to the above mentioned infrastructure project delay as well as one-time cost overruns associated with demobilization of the Helmand contract, retention bonuses required to sustain manning in Iraq, and pension expense for NSPS.
•
SG&A expense was on plan, which included significant cost reduction due to efficiency initiatives implemented by new leadership in Q3/Q4.
•
Income tax expense is preliminary and will be adjusted upon review with auditors.
•
Increase in Adjustments due to onetime costs incurred relating to the demobilization of Helmand, retention bonuses in Iraq, and temporary staffing and recruiting fees incurred as part of the management team change-out.
(7.4)
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Government Earnings - UNAUDITED 2014 Pro Forma $755.8
Q1 2015 Actual $184.8
Q2 2015 Actual $197.4
Q3 2015 Actual $194.2
Q4 2015 Actual $196.2
2015 Actual $772.6
Gross Profit Gross Margin
148.8 19.7%
42.1 22.8%
37.7 19.1%
32.3 16.6%
32.3 16.5%
144.5 18.7%
SG&A Depreciation and Amortization Total Indirect Expense
98.1 25.3 123.4
17.7 5.6 23.4
17.1 6.3 23.5
24.0 8.1 32.1
13.9 7.0 21.0
72.8 27.0 99.9
25.4
18.7
14.3
0.2
11.4
44.6
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
47.2 0.0 2.3 (0.4) (23.6)
5.3 0.0 3.3 (0.3) 10.4
9.9 7.1 3.5 (0.6) (5.6)
13.5 0.4 1.1 0.1 (14.9)
13.1 0.0 (2.4) 0.3 0.4
41.8 7.5 5.5 (0.4) (9.7)
EBITDA % Margin
51.1 6.8%
24.6 13.3%
14.1 7.1%
7.8 4.0%
18.1 9.2%
64.6 8.4%
60.4 $111.5 14.8%
2.0 $26.6 14.4%
10.5 $24.5 12.4%
23.0 $30.7 15.8%
5.4 $23.5 12.0%
40.8 $105.4 13.6%
Revenue
Operating Income
Total Adjustments Pro Forma Adjusted EBITDA % Margin
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
13
Commercial – UNAUDITED
February 25, 2016- Business Confidential UNAUDITED Constellis Proprietary Information
14
Business Update – Commercial Key wins in Q4 •
Total contract value awarded in Q4 of $43M – this includes wins from blue-chip oil and gas and infrastructure clients and work for work FMS primes. The total value of contracts awarded in 2015 was $276M.
•
Exit orderbook at year end is $170M (which represents FY16 revenue from contracts in place, options & extensions from existing customers and contracts).
Key Opportunities •
Approximately $4B in proposals under evaluation of which approximately $200M down selected for award imminent with existing and new customers.
Business Environment •
Low oil prices translate into continued downward pressure on CAPEX and OPEX budgets in the Oil & Gas sector, resulting in some projects being delayed or cancelled. Clients are becoming increasingly sensitive to price and are looking to us to make reductions in our cost base and operating profiles to help them be more efficient.
•
These pressures are having an effect on our revenues, but there remains significant demand for our services in our core markets and significant new opportunities to win business.
•
From an EBITDA perspective, we are confident that due to our optimization programs and efficiencies gained through the scale of our integration we are able to continue to drive our operating costs down to maintain consistent levels of profitability.
•
We continue to work closely with our clients to ensure we are enabling them to continue to operate safely even as profiles are reduced and costs fall.
•
There was one significant event to report in Q4 from an HSE perspective during 5.4M man hours worked and 5.1M km driven.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Commercial Earnings - UNAUDITED Q4 2015 EAC $59.9
Q4 2015 Actual $57.3
Variance
16.3 27.3%
16.4 28.6%
0.0
SG&A Depreciation and Amortization Total Indirect Expense
8.2 0.3 8.5
7.9 0.3 8.2
(0.3) 0.0 (0.3)
Operating Income
7.8
8.2
0.3
0.0 0.0 1.4 (0.1) 6.5
0.0 0.0 2.4 0.0 5.8
0.0 0.0 1.0 0.1 (0.7)
EBITDA % Margin
11.0 18.3%
11.4 19.8%
0.4
Total Adjustments Pro Forma Adjusted EBITDA % Margin
1.3 $12.3 20.5%
3.8 $15.2 26.5%
2.5 $2.9
Revenue Gross Profit Gross Margin
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
Constellis Proprietary Information
($2.6)
•
FY15 Q4 Revenue decreased compared to EAC due to projects (Unaoil, BGC and PAE) demobilizing earlier than forecasted.
•
Increase in Q4 Adjustments vs. EAC due to adjustment for Shell penalties on late delivery of vehicles.
Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
February 25, 2016- Business Confidential UNAUDITED
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FY 2015 Q4 Financial Results Pro Forma Commercial Earnings - UNAUDITED 2014 Pro Forma $270.5
Q1 2015 Actual $59.0
Q2 2015 Actual $57.9
Q3 2015 Actual $61.4
Q4 2015 Actual $57.3
2015 Actual $235.7
83.1 30.7%
17.5 29.7%
16.7 28.8%
16.6 27.0%
16.4 28.6%
67.1 28.5%
SG&A Depreciation and Amortization Total Indirect Expense
45.4 12.0 57.4
14.3 0.6 14.9
12.9 0.6 13.5
9.1 0.3 9.4
7.9 0.3 8.2
44.2 1.8 46.0
Operating Income
25.7
2.6
3.2
7.2
8.2
21.1
Interest Expense Loss on Extinguishment of Debt Income Tax Expense Other (income) expense Net Income (Loss)
3.1 0.0 0.8 0.0 21.8
0.4 0.0 0.5 0.1 1.7
0.7 0.0 0.6 (0.1) 1.9
(0.1) 0.0 3.0 0.0 4.3
0.0 0.0 2.4 0.0 5.8
1.0 0.0 6.5 0.0 13.7
EBITDA % Margin
37.7 13.9%
5.8 9.8%
6.4 11.1%
10.4 16.9%
11.4 19.8%
33.9 14.4%
Total Adjustments Pro Forma Adjusted EBITDA % Margin
20.0 $57.7 21.3%
6.0 $11.8 19.9%
5.1 $11.5 19.9%
3.7 $14.1 22.9%
3.8 $15.2 26.5%
18.6 $52.5 22.3%
Revenue Gross Profit Gross Margin
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
•
Decrease in SG&A in 2015 due to synergies achieved from the acquisition of Olive Group in May 2015. Note: OG/EI allocates its Overhead as a part of its SG&A. In addition, OG/EI allocates Depreciation associated with Direct projects in its Cost of Goods Sold. In our GAAP Financial Statements, Overhead is classified as Cost of Goods Sold and Deprecation is classified as Indirect Cost. In FY2016, our Financial Statements will be recast to align Financial Statement Categories.
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Integration & Follow–on Optimization •
The actions required to implement the integration plan of Edinburgh International with Olive Group have largely been completed, with an estimated total cost savings of approximately $16M on an annualized basis; the impacts of these actions continue to flow through to reported results.
•
A follow-on optimization exercise has been launched to ensure that delivery across all areas of the business is as efficient as possible, and to identify and implement opportunities to leverage group synergies.
•
Potential cost savings from the next phase of business optimization is expected to exceed $6M; the majority of the benefits will impact the reported results in late Q1 or early Q2 of FY16.
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
18
2016 Outlook
February 25, 2016- Business Confidential UNAUDITED Constellis Proprietary Information
19
2016 Outlook REVENUE •
Government business will benefit from a stable base of core contracts as well as growth from recent contract wins, plus-ups in manning, and pending awards. •
•
Expected revenue growth of 8-10% in FY16.
Commercial business faces challenges in end-markets, but bid and proposal volume remains strong as does the exit orderbook for existing contracts. •
Expected revenue growth of 5-7% in FY16.
AEBITDA •
As seen in Q4, normalizing adjustments are reducing as integration and cost savings have taken hold.
•
Additional cost reduction initiatives will enhance margins further in FY16, offsetting some potential margin pressure from cost-sensitive customers. •
Expected AEBITDA growth of 8-10% in FY16.
CAPEX •
Due to favorable results from vehicle refurbishing programs tested in FY15, CAPEX required to support new contracts in FY16 will be reduced significantly. •
Expected CAPEX reduced from $23M in FY15 to $4M in FY16.
LIQUIDITY •
Increase from $42M to greater than $100M. •
Primary drivers of the increase include: cash from operations, transaction related tax refund $14M, DBA collections $10M, unbilled AR $10M, and closed contract collections $9M
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
20
Questions
Constellis Proprietary Information
February 25, 2016- Business Confidential UNAUDITED
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