DynCorp International. Delta Tucker Holdings, Inc. Parent of DynCorp International, Inc. Third Quarter 2015 Earnings Presentation November 6, 2015

Transcription

1 DynCorp International Delta Tucker Holdings, Inc. Parent of DynCorp International, Inc. Third Quarter 2015 Earnings Presentation November 6, 2015

2 Forward-Looking Statements and Non-GAAP Measures This presentation includes forward-looking statements about the Company s future business and financial performance, plans, goals, beliefs, or expectations. All of these forward-looking statements are based on estimates and assumptions made by the Company s management that, although believed by the Company to be reasonable, are inherently uncertain. Forward-looking statements involve risks and uncertainties, including, but not limited to, our substantial level of indebtedness; the outcome of any litigation, government investigation, audit or other regulatory matters; award fee determination; termination or modification of key contracts; changes in the demand for services; acts of war or terrorist activities; changes in significant operating expenses; and other economic, competitive, governmental, political and technological factors outside of the Company s control. These risks and uncertainties may cause the Company s business, strategy or actual results or events to differ materially from the statements made herein. All forward looking statements included in this presentation are based upon information presently available. The Company undertakes no obligation to update or revise any forward-looking statement it makes to reflect events or circumstances after the date of this presentation or to reflect the occurrence of unanticipated events. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under the caption Risk Factors and Forward-Looking Statements detailed from time to time in our reports filed with the SEC. This presentation includes non-gaap financial measures, including Adjusted EBITDA, that are different from financial measures calculated in accordance with GAAP and may be different from non-gaap calculations made by other companies. Management believes these non-gaap financial measures are useful in evaluating operating performance and are regularly used by investors, lenders and other interested parties in reviewing the Company. For a reconciliation of these non-gaap financial measures to the most comparable GAAP financial measures, see the earnings press release dated November 6, 2015, filed with the SEC on Current Report on Form 8-K and posted on our website. 2

3 Q3 Executive Summary Initial Observations Our People are Dedicated to their Missions and Customers 2015 Department of the Army Tier I Supplier Continuous Improvement Culture Spending Conservative; Awards Continue to Slide; Competitive Environment Maturing our BD Team/Process/Execution Continue to Manage Cost Structure Refinance Activities INL Re-compete Update Key Financial Results Revenue of $480 Million Adjusted EBITDA of $26.7 Million Adjusted EBITDA Margin of 5.6% 3

4 ($ Billions) Policy and Budget $800 $700 $600 DEPARTMENT OF DEFENSE Afghanistan Post-2016 Footprint 5,500 Troops & 4 Bases Reviewing Current Iraq & Syria Strategy $500 $400 $300 $200 $100 $- FY12 FY13 FY14 FY15 FY16 BBA* FY17 BBA* FY18 FY19 Totals $645 $577 $581 $560 $607 $610 $583 $591 OCO $115 $82 $85 $64 $59 $59 $27 $27 Base $530 $495 $496 $496 $548 $551 $556 $564 Base OCO BCA Levels *Includes DOE 2015 Bipartisan Budget Agreement (BBA) 2015 BBA Increases Base Security and Non-Security Spending Caps Equally Base = $25B in FY16 & $15B in FY17 OCO = $8B in FY16 & $8B in FY17 $607B New Security CAP for FY16 $548B & $59B OCO $33B Total Increase for Security $5B Below President s Request Avoids Sequestration and Adds Certainty 4

5 Operational Highlights 5

6 Highlights DynAviation Key Wins and Developments 12 Month Extension of Services for INL Air Wing ($312M) Notified INL Air Wing Proposal Back in Competitive Range Re-awarded CAL FIRE with increased scope ($155M) Contract Modifications to Core Business New Business In Evaluation Over $3 Billion in Proposals Awaiting Award $726 Million Expected to Award in Q4 Performance Indicators Contractor Performance Assessment Reports High Award Fees 6

7 Highlights DynLogistics Key Wins and Developments Taji Land Depot Maintenance ($139M) LOGCAP IV Geographic Combatant Command ($77M) IDIQ Wins: o Enhanced Solutions for the Information Technology Enterprise o SOCOM-Wide Mission Support Modifications and Extensions to Core Business New Business In Evaluation $1.3 Billion in Proposals Awaiting Award $440 Million Expected to Award in Q4 Performance Indicators Contractor Performance Assessment Reports Higher Award Fees 7

8 Financial Review 8

9 Q Results $millions Q vs Revenue $479.8M ($60.5M) (11.2%) Adjusted EBITDA $26.7M ($2.1M) (7.2%) Adjusted EBITDA Margin 5.6% 24 bps vs. Q Total Backlog $2,795M ($536M) (16.1%) Q3 Highlights INL CFT LOGCAP IV AFRICAP ANA/ANP T34/44/6 ACAS/LMS/Security UAE AMMROC NSAWC JPATS T6 Revenue INL T34/44/6 JPATS T6 CNTPO AFRICAP LOGCAP IV AFCAP III MD530 ANA/ANP UAE AMMROC Adjusted EBITDA 9

10 DynAviation $millions Q vs Revenue $316.3M $23.1M 7.9% Adjusted EBITDA $10.4M ($16.0M) (60.7%) Adjusted EBITDA Margin 3.3% (572 bps) vs. Q Total Backlog $1,749M ($536M) (23.5%) Q3 Highlights INL CFT T34/44/6 NSAWC JPATS T6 UAE AMMROC Revenue Adjusted EBITDA INL JPATS T6 T34/44/6 CNTPO UAE AMMROC MD530 AFM RASM & TASM INL JPATS T6 COMBS T34/44/6 IMSS SANG Total Backlog 10

11 DynLogistics $millions Q vs Revenue $163.2M ($84.6M) (34.2%) Adjusted EBITDA $18.6M $15.3M 463.3% Adjusted EBITDA Margin 11.4% 1,009 bps vs. Q Total Backlog $1,046M $0 0.0% Q3 Highlights ACAS/LMS/Security ANA/ANP LOGCAP IV AFRICAP Revenue AFRICAP LOGCAP IV AFCAP III ANA/ANP Adjusted EBITDA Operations Support AFCAP III Vehicle Maintenance ANA/ANP LOGCAP IV Total Backlog 11

12 Financial Review Q3 Miscellaneous Items Working Capital (1) of $236.2 Million Down ($5.3) Million from Year-end; 12.1% of Revenue DSO at 77 Days Decrease of 3 Days from Year-end Free Cash Flow ($28.7) Million YTD Q3 Free Cash Flow of ($12.8) Million Current Net Debt Position of $576.7 Million Balance Sheet Cash Position of $65.5 Million No Revolver Borrowings Outstanding At Quarter-end (1) Working Capital = Accounts Receivable + Inventory + Work in Progress Accounts Payable Accrued Payroll and Employee Cost 12

13 2015 Financial Guidance Revised Full Year 2015 Outlook Expected Revenue $1.89 Billion to $1.93 Billion Expected Adjusted EBITDA $90.0 Million to $93.0 Million Excluding Operational Efficiencies 4Q 2015 Outlook Revenue Expected to be Flat Sequentially Margins Expected to be In Line with YTD Performance at 4.9% Working to Address Secured Credit Facility Maturity Debt Reduction is Dependent on the Resolution of Certain Outstanding Receivables 13

14 Q & A 14

15 Appendix 15

16 Unaudited Condensed Consolidated Statement of Operations (Amounts in thousands) Three Months Ended Nine Months Ended September 25, 2015 September 26, 2014 September 25, 2015 September 26, 2014 Revenue $ 479,808 $ 540,327 $ 1,437,000 $ 1,744,052 Cost of services (427,529 ) (510,965 ) (1,290,880) (1,606,045) Selling, general and administrative expenses (35,237 ) (44,192 ) (107,920) (110,277) Depreciation and amortization expense (9,039 ) (12,094 ) (25,587) (35,621) Earnings from equity method investees ,918 Impairment of goodwill, intangibles and long lived assets (6,690 ) (50,955 ) (93,485) (142,714) Operating income (loss) 1,319 (77,727 ) (80,741) (140,687) Interest expense (17,201 ) (17,237 ) (50,429) (53,438) Loss on early extinguishment of debt (242 ) (862) Interest income Other income, net ,675 3,314 Loss before income taxes (15,790 ) (94,182 ) (129,434) (191,522) Benefit for income taxes ,160 10,025 39,028 Net loss (15,250 ) (71,022 ) (119,409) (152,494) Noncontrolling interests (499 ) (492 ) (1,227) (1,857) Net loss attributable to DTH, Inc. $ (15,749) $ (71,514) $ (120,636) $ (154,351) Benefit for income taxes (540 ) (23,160 ) (10,025) (39,028) Interest expense, net of interest income 17,182 17,169 50,368 53,287 Depreciation and amortization (1) 9,479 12,328 27,626 36,328 EBITDA (2) $ 10,372 $ (65,177) $ (52,667) $ (103,764) Non-recurring or unusual gains or losses or income or expenses (3) 13,202 87, , ,910 Employee non-cash compensation, severance, and retention expense (4) 2,575 5,137 6,237 7,934 Management fees (5) 1, ,052 1,424 Other (6) (445 ) 1,111 (931) 1,565 Adjusted EBITDA $ 26,712 $ 28,777 $ 70,143 $ 93,069 (1) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in our unaudited condensed consolidated statements of operations. (2) We define EBITDA as GAAP net loss attributable to DTH, Inc. adjusted for interest, taxes, depreciation and amortization. We believe these non-gaap financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. (3) Includes the impairment of certain intangibles and assets held for sale of $6.7 million in the third quarter of 2015, the impairment of goodwill within the Aviation reporting unit in the second quarter of 2015 and the impairment of goodwill within the LSS and Aviation reporting units in 2014, a one-time charge related to a certain contract of $35 million as defined in the Fourth Amendment to the Senior Credit Facility in 2014, as well as certain unusual income and expense items, as defined in the Indenture and Senior Credit Facility. (4) Includes post-employment benefit expense related to severance in accordance with ASC Compensation, relocation expenses and share based compensation expense. (5) Includes Cerberus Operations and Advisory Company management fees. (6) Includes changes due to fluctuations in foreign exchange rates, earnings from affiliates not received in cash, costs incurred pursuant to ASC Business Combination and other immaterial items. 16

17 Unaudited Adjusted EBITDA by Segment (Amounts in thousands) For the three months ended September 25, 2015 For the three months ended September 26, 2014 Headquarters/ Others DynAviation DynLogistics Consolidated Headquarters/ Others DynAviation DynLogistics Consolidated Operating (loss) income $ (11,344 ) $ (4,137) $ 16,800 $ 1,319 $ (14,245) $ (65,282) $ 1,800 $ (77,727) Depreciation and amortization expense (1) 8, ,479 11, ,328 Loss on early extinguishment of debt (242) (242) Noncontrolling interests (499 ) (499 ) (492 ) (492) Other income (loss), net 1,217 (1,147 ) EBITDA (2) $ (1,713 ) $ (4,793) $ 16,878 $ 10,372 $ (2,265) $ (64,775) $ 1,863 $ (65,177) Non-recurring or unusual gains or losses or income or expenses (3) (404) 13, , , ,001 Employee non-cash compensation, severance, and retention expense (4) 184 1, , , ,137 Management fees (5) , Other (6) (509 ) 66 (2 ) (445 ) ,111 Adjusted EBITDA $ (2,292 ) $ 10,356 $ 18,648 $ 26,712 $ (895) $ 26,361 $ 3,311 $ 28,777 (1) Amount includes certain depreciation and amortization amounts which are classified as Cost of services in our unaudited condensed consolidated statements of operations. (2) We define EBITDA as GAAP net loss attributable to DTH, Inc. adjusted for interest, taxes, depreciation and amortization. We believe these non-gaap financial measures are useful in evaluating operating performance and are regularly used by security analysts, institutional investors and other interested parties in reviewing the Company. Non-GAAP financial measures are not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of the performance of other companies. (3) Includes the impairment of certain intangibles and assets held for sale of $6.7 million in the third quarter of 2015, the impairment of goodwill within the Aviation reporting unit in 2014, a one-time charge related to a certain contract of $35 million as defined in the Fourth Amendment to the Senior Credit Facility in 2014, as well as certain unusual income and expense items, as defined in the Indenture and Senior Credit Facility. (4) Includes post-employment benefit expense related to severance in accordance with ASC Compensation, relocation expenses and share based compensation expense. (5) Includes Cerberus Operations and Advisory Company management fees. (6) Includes changes due to fluctuations in foreign exchange rates, earnings from affiliates not received in cash, costs incurred pursuant to ASC Business Combination and other immaterial items. 17

18 Unaudited Condensed Consolidated Balance Sheets (Amounts in thousands) September 25, 2015 December 31, 2014 ASSETS Current assets: Cash and cash equivalents $ 65,549 $ 94,004 Restricted cash 1, Accounts receivable, net of allowances of $16,466 and $4,736, respectively 423, ,496 Other current assets 53,262 74,200 Assets held for sale 12,385 Total current assets 556, ,407 Non-current assets 239, ,080 Total assets $ 796,230 $ 982,487 LIABILITIES AND EQUITY Current portion of long-term debt $ 187,272 $ Total current liabilities, less current portion of long-term debt 342, ,180 Long-term debt 455, ,272 Other long-term liabilities 7,838 11,312 Total deficit attributable to Delta Tucker Holdings, Inc. (202,306) (82,766) Noncontrolling interests 5,684 5,489 Total deficit (196,622) (77,277) Total liabilities and deficit $ 796,230 $ 982,487 18

19 Unaudited Condensed Statement Cash Flow (Amounts in thousands) Cash Flow Information: Net cash used in operating activities Net cash used in investing activities Net cash used in financing activities For the nine months ended September 25, 2015 September 26, 2014 $ (25,518) $ (17,721) (944) (5,302) (1,993) (94,465) Net cash used in operating activities Less: Purchase of property and equipment, net Proceeds from sale of property, plant and equipment Less: Purchase of software Free cash flow (25,518) (17,721) (2,680) (7,129) (998) (1,101) $ (28,718) $ (25,907) 19