- Diluted EPS of $0.39 (GAAP) and $0.51 (Adjusted) reflect continued strong profitability
- Robust book-to-bill ratios of 1.0x for the quarter and 1.3x for the trailing twelve months build the foundation for future growth
- Operating cash flow of $156 million enabled $98 million of debt paydown
CSRA Inc. (NYSE:CSRA), a leading provider of nextgeneration IT solutions and professional services to government organizations, today announced financial results for the first quarter of fiscal year 2017, which ended July 1, 2016.
"We began fiscal year 2017 with strong profitability and positive business development performance," said Larry Prior, CSRA president and CEO. "We generated significant cash that enabled us to lower our debt and strengthen our balance sheet. We are making significant progress on our mission to drive growth, both through accelerated proposal submissions and expanded collaboration with next generation technology providers. As our market turns positive, CSRA is well positioned to benefit from our strategic investments in growth."
GAAP revenue for the first quarter of fiscal year 2017 was $1.25 billion, up 31 percent compared to the first quarter of fiscal year 2016 as a result of the merger with SRA International, Inc. Revenue for the quarter was down 5 percent compared to pro forma revenue in the first quarter of fiscal year 2016, which reflects the SRA merger as if it had occurred at the beginning of that period. The pro forma revenue decline was primarily driven by reductions in the Logistics Modernization Program for the U.S. Army, as well as a lower overall volume of direct material and other direct cost purchases.
The GAAP net income of $68 million, or $0.39 per share, includes $16 million of amortization of SRA contract backlog and $13 million of other pre-tax merger and integration costs. Adjusted EBITDA for the quarter was $218 million, up 4 percent from pro forma adjusted EBITDA in the first quarter of fiscal year 2016, as adjusted EBITDA margin increased from 15.9 percent to 17.4 percent. The year-over-year improvement in pro forma adjusted EBITDA was driven primarily by cost synergies realized from the SRA merger. Adjusted diluted earnings per share for the quarter were $0.51, unchanged from the first quarter of fiscal year 2016, which included a gain of $0.06 from the sale of Welkin. Excluding the divestiture, pro forma adjusted diluted EPS increased 12 percent from the year-ago quarter.
Cash Management and Capital Deployment
Operating Cash Flow for the quarter was $156 million, helped in part by incorporating SRA into the company's accounts receivable purchase facility, which increased operating cash flow by $46 million. As a result of the strong cash flow, the company aggressively executed on its balanced capital deployment program and deployed $98 million to pay down debt and $18 million to pay dividends. Excluding the impact of the receivables purchase facility, free cash flow during the quarter was $67 million. As of July 1, 2016, the company had $133 million in cash and cash equivalents and $2.7 billion in debt.
The company paid a cash dividend of $0.10 per share on July 11, 2016, as part of its regular quarterly cash dividend program. The Board of Directors declared that the company will pay its next cash dividend of $0.10 per share on October 4, 2016, to all common stockholders of record as of August 31, 2016.
Bookings totaled $1.3 billion in the first quarter, representing a book-to-bill ratio of 1.0x. The first quarter marked the sixth consecutive quarter with a pro forma book-to-bill ratio of 1.0x or higher. Pro forma bookings for the trailing twelve-month period totaled $6.6 billion, representing a pro forma book-to-bill ratio of 1.3x.
Included in the quarterly bookings were several particularly important single-award prime contracts:
Congressionally Directed Medical Research Program (CDMRP)
The U.S. Army Medical Research Acquisition Activity awarded CSRA a single-award indefinite delivery, indefinite quantity (IDIQ) contract valued up to $180 million over five years to provide scientific, information technology and administrative solutions for the CDMRP. CSRA will support the receipt and scientific evaluation of more than $1 billion in grants.
New York Health-Insurance Exchange (NYHIX)
The New York State Department of Health awarded CSRA a one-year, $127 million extension of its contract to enhance, operate, and maintain the healthinsurance exchange implemented under the Affordable Care Act.
Maryland Coordinated Highways Action Response Team (CHART)
Under a ten-year, $56 million contract, CSRA will provide IT engineering and software development support to improve the state's collection and dissemination of roadway and traffic information, enabling proactive management of Maryland's ground transportation system.
Telecommunication and Information Systems Command (TISCOM)
Technology Enterprise Support Services (TESS). The U.S. Coast Guard awarded CSRA the five-year, $55 million TESS contract to provide enterprise IT services and responsive technical support to TISCOM. On this new award, CSRA will lead the development and deployment of the U.S. Coast Guard's IT infrastructure both onshore and afloat and evaluate and implement emerging technologies to support current and future missions.
In addition, the company won several large multiple-award, IDIQ contracts that are not included in bookings, but support future growth, including:
Strategic Partners Acquisition Readiness Contract
The Centers for Medicare and Medicaid Services (CMS) awarded CSRA a prime position on its potential 10-year, $25 billion SPARC vehicle. CMS intends to use SPARC as its primary mechanism to acquire IT services and will make the vehicle available to all operational divisions of the Department of Health and Human Services (HHS).
The company's backlog of signed business orders at the end of first quarter of fiscal year 2017 was $15.1 billion, of which $3.0 billion was funded. Total backlog increased 5 percent compared to the pro forma backlog at the end of the first quarter of fiscal year 2016.
The company is maintaining its previously announced guidance ranges for revenue, adjusted EBITDA, adjusted diluted earnings per share, and free cash flow for fiscal year 2017 as specified in the table below. The company elects to provide ranges for certain metrics not in accordance with GAAP because it cannot make reasonable estimates of key elements, including pension mark-to-market adjustments and integration expenses.
|Metric||Fiscal Year 2017|
|Adjusted Diluted Earnings per Share||$1.91-$2.04|
|Free Cash Flow (millions)||$300-$350|
The fiscal year 2017 adjusted EBITDA and diluted EPS guidance assumes pension income of $96 million, consistent with $24 million recorded in the first quarter of fiscal year 2017. The company affirms its long-term model of average compound annual growth in revenue of 2 percent to 3 percent and average compound annual growth in adjusted EPS of 8 percent to 10 percent.CSRA Chief Financial Officer Dave Keffer commented, "I am pleased that we are able to drive improved profitability while investing heavily in the organic growth engine of the company. With a robust volume of submitted proposals and strong positioning on upcoming next generation IT and critical mission support opportunities, we look forward to accelerating new business wins while maintaining our industry leading profitability and strong cash generation."
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 over 18,000 employees and is headquartered in Falls Church, Virginia. To learn more about CSRA, visit www.csra.com. Think Next. Now.
All statements in this press release and in all future press releases that do not directly and exclusively relate to historical facts constitute "forward-looking statements" within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements represent CSRA's intentions, plans, expectations and beliefs, including statements about the effects of the program on our business and our ability to enhance mission capabilities of our customers. The forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside the control of CSRA. These factors could cause actual results to differ materially from forward-looking statements. For a written description of these factors, see the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in CSRA's most recent Annual Report on Form 10-K and any updating information in subsequent SEC filings. CSRA disclaims any intention or obligation to update these forward-looking statements whether as a result of subsequent event or otherwise.