FALLS CHURCH, Va., March 11, 2021 (GLOBE NEWSWIRE) -- PAE Incorporated (NASDAQ: PAE, PAEWW) today announced fourth-quarter and full year 2020 financial and operating results.

CEO Commentary

PAE President and CEO John Heller said, “We delivered strong organic year-over-year revenue growth of 7.4% (before the impact of acquisitions) and profitability that exceeded expectations for the quarter. Despite the challenges presented by the pandemic in 2020, we successfully executed against our objectives of increasing profit margins, lowering our cost of debt and completing strategic, accretive acquisitions. We have favorable tailwinds entering 2021 with recent flagship contract wins, including positions on the Global Support Strategy 2.0 and MEGA V IDIQ contracts, along with the anticipated successful integrations of CENTRA and Metis.”

COVID-19 Financial Impact

We estimate the fourth-quarter negative impact from the COVID-19 pandemic to be approximately $62.1 million of revenue and an immaterial net impact to adjusted EBITDA and cash flow provided by operations. These impacts were primarily driven by disruptions to logistics operations and by limitations on the ability of PAE employees and subcontractors to access facilities to perform on customer contracts. Since the onset of the COVID-19 pandemic, PAE has operated as an essential business, continuing to support our customers in a resilient market.

Fourth-Quarter 2020 Results

Revenues for the quarter of $787.8 million increased $90.7 million, or 13.0%, compared to the prior year period. The increase was attributable to $39.2 million of revenue from recent acquisitions and by a net increase of $113.6 million from a change in contract volume, non-labor revenue and new business, including COVID relief opportunities, which increase was partially offset by a negative $62.1 million impact from the COVID-19 pandemic, of which approximately $42.7 million was non-labor and $19.4 million was labor. The Global Mission Services and National Security Solutions segments’ revenues increased by approximately $60.2 million and $30.5 million, respectively.

Operating income for the quarter was $20.5 million, compared with an operating loss of $3.2 million in the prior year period. The increase resulted from higher revenue volume in the current period, improved program performance and lower selling, general and administrative expenses as a percentage of revenue.

The net loss attributed to PAE for the quarter was $6.1 million, or $0.07 per diluted share, compared with a net loss of approximately $14.6 million, or $0.69 per diluted share in the prior year period. The improvement in net loss for the fourth quarter of 2020, was primarily driven by factors driving the increase in operating income.

Adjusted EBITDA for the quarter was $44.0 million, or 5.6% of revenue, compared to $37.5 million, or 5.4% of revenue, in the prior year period. Excluding the contributions from the recent acquisitions, PAE generated $41.3 million of adjusted EBITDA. Adjusted EBITDA and margins increased due to higher revenue volume, improved program performance and lower selling, general and administrative expenses as a percentage of revenue.

Global Mission Services
GMS revenues for the quarter of $593.8 million increased $60.2 million, or 11.3%, compared to the prior year period. The increase was attributable to a $115.7 million net increase in contract volume, non-labor revenue and new business including COVID-19 relief opportunities, which increase was partially offset by a $55.5 million impact from the COVID-19 pandemic, of which approximately $39.4 million was non-labor and $16.1 million was labor.

GMS operating income for the quarter was $4.5 million, compared to $15.4 million in the prior-year period. The decline was driven by higher selling, general and administrative expense, which decrease was partially offset by higher revenue volume and an increase in consolidated venture income.

GMS adjusted operating income² for the quarter was $28.2 million, or 4.8% of revenue, compared to $33.5 million, or an operating margin of 6.3% of revenue, in the prior year period. GMS adjusted operating income and margins² declined due to higher selling, general and administrative expense, which decrease was partially offset by higher revenue volume.

National Security Solutions
NSS revenues for the quarter of $194.0 million increased $30.5 million, or 18.7%, compared to the prior year period. The increase was attributable to $39.2 million of revenue from recent acquisitions and by a net increase of $2.1 million from change in contract volume and new business, which increase was partially offset by a $6.6 million impact from the COVID-19 pandemic, of which approximately $3.3 million was non-labor and $3.3 million was labor.

NSS operating income for the quarter was $4.3 million, compared to an operating loss of $13.7 million in the prior year period. The increase resulted from higher revenue volume, improved program performance and lower selling, general and administrative expense.

NSS adjusted operating income³ for the quarter was $15.7 million, or an operating margin of 8.1% of revenue, compared to $3.9 million, or 2.4% of revenue, in the prior year period. Excluding the contributions from the recent acquisitions, NSS generated $13.1 million of adjusted operating income. NSS adjusted operating income and margins increased due to higher revenue volume and improved program performance.

Full-Year 2020 Results

Revenues of approximately $2.7 billion for the fiscal year ended December 31, 2020 decreased by $49.3 million, or 1.8%, from the comparable period in 2019. The decrease was primarily attributable to a $187.4 million negative impact from the COVID-19 pandemic, of which approximately $124.5 million was non-labor and $62.9 million was labor, which decrease was partially offset by $39.2 million of revenue from recent acquisitions and a net increase of $98.9 million from an increase in contract volume and new business and COVID-19 relief opportunities. Revenue for the GMS and NSS segments decreased $19.3 million and $30.0 million, respectively.

Operating income for the year was $90.8 million, compared with operating income of $26.8 million in the prior year. The increase in operating income resulted from the loss on disposal of PAE ISR LLC assets in 2019 and improved program performance in the current period, which increase was partially offset by lower revenue volume and other operating income.

The net income attributed to PAE for 2020 was $15.3 million, or $0.18 per diluted share, compared with a net loss of $49.8 million, or $(2.36) per diluted share in 2019. The increase in net income for the fiscal year ended December 31, 2020 as compared to the fiscal year ended December 31, 2019 was driven primarily by the factors impacting operating income and lower interest expense, which was driven by a reduction in average debt balances year over year and lower interest rates.

Adjusted EBITDA for 2020 was $180.2 million, or an operating margin of 6.6% of revenue, compared with $166.7 million, or 6.0% of revenue, in 2019. Excluding the contributions from the recent acquisitions, PAE generated $177.6 million of adjusted EBITDA. The improvement was primarily attributable to improved program performance, which improvement was partially offset by lower revenue volume.

Global Mission Services
GMS revenues of $2.1 billion for fiscal year 2020 decreased $19.3 million, or 0.9%, compared to the prior year. The decrease was primarily attributable to a $147.1 million impact from the COVID-19 pandemic, of which approximately $104.6 million was non-labor and $42.5 million was labor, which decrease was partially offset by a $127.8 million net increase in contract volume, new business and COVID-19 relief opportunities.

GMS operating income of $80.1 million for fiscal year 2020 decreased by $12.3 million from the comparable period in 2019. The variance was driven by higher selling, general and administrative expenses and lower revenue volume, which decrease was partially offset by an increased consolidated venture income.

GMS adjusted operating income for fiscal year 2020 was $128.7 million, or an operating margin of 6.2% of revenue, compared to $126.1 million, or 6.0% of revenue, in the prior year. Adjusted operating income and margins increased over the prior year primarily due to improved program performance, which improvement was partially offset by lower revenue volume.

National Security Solutions
NSS revenues of $634.2 million for fiscal year 2020 decreased by $30.0 million, or 4.5%, from the comparable period in 2019. The decrease was primarily attributable to a $40.3 million impact from the COVID-19 pandemic, of which approximately $19.9 million was non-labor and $20.4 million was labor, and by a $28.9 million decrease from small business set aside re-compete losses, net of new business wins, which decrease was partially offset by $39.2 million of revenue from recent acquisitions.

NSS operating income of $22.1 million for the fiscal year ended December 31, 2020 increased by $59.0 million from the comparable period in 2019. The increase was primarily due to the loss on disposal of PAE ISR LLC assets in 2019 as well as improved program performance in the current period, which increase was partially offset by lower revenue volume.

NSS adjusted operating income for fiscal year 2020 was $51.6 million, or an operating margin of 8.1% of revenue, compared to $40.6 million, or 6.1% of revenue, in the prior year. Excluding the contributions from the recent acquisitions, NSS generated $48.9 million of adjusted operating income. Adjusted operating income and margin increased over the prior year primarily because of improved program performance, which improvement was partially offset by lower revenue volume.

Cash Flow Summary

Net cash provided by operating activities for the quarter of $8.7 million, increased $21.0 million over the prior year period, primarily as a result of increases in customer advances and billings in excess of costs and accrued expenses.

Net cash provided by operating activities for fiscal year 2020 decreased by $15.8 million from the comparable period in 2019, primarily as a result of lower cash collections and a decrease in accounts payable, partially offset by net income growth and increases in customer advances and billings in excess of cost and accrued salaries.

During the fourth quarter, the Company refinanced its existing credit facilities and entered into new senior secured credit facilities. The new credit agreements established a $740.0 million term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, a $150.0 million delayed draw term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, and a $175.0 million senior secured revolving credit facility maturing in October 2025 priced at LIBOR plus a spread of 1.8% to 2.3%.

As of December 31, 2020, PAE had cash and cash equivalents totaling $85.9 million and had no outstanding borrowings on its senior secured revolving credit facility.

Business Development Highlights and Contract Awards

Net bookings totaled $526 million in the fourth quarter and $3.1 billion over the trailing 12 months (“TTM”), representing a book to bill ratio of 0.7x and 1.2x for the fourth quarter and TTM, respectively.

Notable fourth quarter awards received include:

Notable New Business Awards:

• Naval Aviation Maintenance Center for Excellence at Naval Air Station Lemoore: PAE’s GMS segment was awarded a task order, valued at $96 million to improve the readiness of F/A-18E/F fighter jets under Strike Fighter Wing Pacific.

Notable Recompete Award:

• U.S. Postal Service: PAE’s NSS segment was awarded an approximate $93 million contract to support the U.S. Postal Service at its Philadelphia, Pennsylvania Mail Transport Equipment Service Center.

Notable IDIQ Awards:

• Department of State Global Support Strategy 2.0: PAE’s NSS segment was selected as one of three prime contractors on the $3.3 billion multiple-award, IDIQ contract for providing integrated business process solutions to assist with the worldwide processing of non-immigrant and immigrant visa applications.
• MEGA V: PAE’s NSS segment was awarded a seat on the U.S. Department of Justice MEGA V Automated Litigation Support Services IDIQ contract. MEGA V supports Department of Justice attorneys throughout the course of litigation across all eight of the agency’s litigating divisions with a wide range of professional services.
• AFICA Air Force Helicopter Organizational and Intermediate Maintenance: PAE’s GMS segment was awarded a position on the U.S. Air Force Rotary Wing Maintenance Contract Consolidation IDIQ contract vehicle, which has a ceiling value of $835 million and a 10-year period of performance.
• USAFE-AFAFRICA: PAE’s GMS segment was awarded a single-award IDIQ contract with a ceiling value of $98 million to provide electronic warfare operations training and infrastructure maintenance support for the U.S. Air Forces in Europe & Air Forces Africa. PAE was also awarded a five-year, €46 million new task order on the contract to operate and maintain USAFE-AFAFRICA's electronic warfare range systems infrastructure in Germany and provide mobile training operations throughout Europe and Africa.

The Company’s backlog at the end of the quarter was $7.9 billion, of which approximately $1.4 billion was funded.

2021 Financial Outlook

The table below summarizes the Company’s fiscal year 2021 guidance.

Adjusted EBITDA is a non-GAAP financial measure. The Company is not providing a quantitative reconciliation of adjusted EBITDA in its 2021 financial guidance in reliance on the “unreasonable efforts” exception for forward-looking non-GAAP measures set forth in Securities and Exchange Commission rules because certain financial information, the probable significance of which cannot be determined, is not available and cannot be reasonably estimated without unreasonable effort and expense. In this regard, the Company does not provide a reconciliation of forward-looking adjusted EBITDA (non-GAAP) to GAAP net income, due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income may vary significantly based on actual events, the Company is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income at this time. The amounts of these deductions may be material and, therefore, could result in actual GAAP net income being materially less than is indicated by estimated adjusted EBITDA (non-GAAP). Due to the uncertainty of estimates and assumptions used in preparing forward-looking non-GAAP measures, actual results could differ materially from these non-GAAP financial projections.

About PAE

For over 65 years, PAE has tackled the world’s toughest challenges to deliver agile and steadfast solutions to the U.S. government and its allies. With a global workforce of approximately 20,000 on all seven continents and in approximately 60 countries, PAE delivers a broad range of operational support services to meet the critical needs of our clients. Our headquarters is in Falls Church, Virginia. Find us online at pae.com, on Facebook, Twitter and LinkedIn.