Slide 1: Vectrus Fourth Quarter and Full Year 2014 Earnings Presentation
VECTRUS FOURTH QUARTER AND FULL YEAR 2014 EARNINGS PRESENTATION KEN HUNZEKER CHIEF EXECUTIVE OFFICER AND PRESIDENT MATT KLEIN SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER MARCH 17, 2014
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT Page 2 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE “ACT”): CERTAIN MATERIAL PRESENTED HEREIN INCLUDES FORWARD-LOOKING STATEMENTS INTENDED TO QUALIFY FOR THE SAFE HARBOR FROM LIABILITY ESTABLISHED BY THE ACT. THESE FORWARD-LOOKING STATEM
Slide 3: Q4 and Full Year 2014 Highlights
Q4 AND FULL YEAR 2014 HIGHLIGHTS Page 3 • Significant wins add $975 million to backlog • Free cash flow(1) finished strong at $39 million; cash provided by operating activities $43 million o Revenue $1,203 million, adjusted revenue(2) $1,172 million o Operating margin 3.2%; adjusted operating margin
Slide 4: CEO Overview
CEO OVERVIEW Page 4 • DoD budgetary environment Budgetary situation remains fluid; however, during the fiscal 2013 sequestration, we did not layoff or furlough any employees • Procurement environment Seeing movement in awards but protests are prevalent and lengthen the new business cycle • World
Slide 5: The Vectrus Environment
THE VECTRUS ENVIRONMENT Page 5 • Re-competes a focus in 2015 • Successful phase-ins are a 2015 priority o Three large contracts will phase-in o 2015 revenue from new program wins is estimated to be approx. $150 million o Annualized revenue run rate from new programs subsequent to 2015 is expected to
Slide 6: Revenue Mix Evolves with Strategy
$600 $800 $1,000 $1,200 $1,400 $1,600 2013 2014 2015E Re ve nu e Afghanistan Core Vectrus +10% -41% REVENUE MIX EVOLVES WITH STRATEGY ($M) Page 6 ($M) Afghanistan Contracts Revenue Mix Aligns to Strategy Army 85% Air Force 13% Navy 2% U.S. 17% Middle East 57% AFG 14% Europe 11% Other 1% 2015E Custom
Slide 7: 2014 Financial Results
2014 FINANCIAL RESULTS Page 7 $ millions, except Operating Margin Q4 2014 Q4 2013 vs. 2013 Funded Orders 177.7$ 155.7$ 22.0$ Revenue 285.8$ 327.1$ (41.3)$ Operating Income 8.1$ 25.2$ (17.1)$ Operating Margin 2.9% 7.7% (480) bps Diluted Earnings Per Share 0.31$ 1.54$ (1.23)$ Fourth Quarter 2014 $ mil
Slide 8: Adjusted Q4 2014 Financial Results
ADJUSTED Q4 2014 FINANCIAL RESULTS(1) Page 8 (1) Excludes historical results relating to TARS program which was retained by Exelis Inc. in connection with the spin-off and the impact of separation costs incurred to become a stand-alone public company. See Appendix for reconciliation. -9.7% REVENUE C
Slide 9: Adjusted FY 2014 Financial Results
ADJUSTED FY 2014 FINANCIAL RESULTS(1) Page 9 (1) Excludes historical results relating to TARS program which was retained by Exelis Inc. in connection with the spin-off and the impact of separation costs incurred to become a stand- alone public company. See Appendix for reconciliation. (2) Free cash
Slide 10: Backlog
BACKLOG(1) • Total Backlog(1) as of year ending December 31, 2014 of $2.9B (excludes Thule Base Maintenance contract award(2) until all protests are resolved) • December 31, 2014 backlog adjusted to include the Thule Base Maintenance contract award(2) of $3.3B Page 10 (2) (1) Total backlog represent
Slide 11: 2015 Assumptions
2015 ASSUMPTIONS Page 11 • Top line expected to stabilize o 2015 anticipated revenue composition: 65% Existing Business 21% Re-competes (decisions expected in Q4 2015) 14% Afghanistan contracts (includes expected declines) • New wins expected to generate approx. $150 million of partial year re
Slide 12: 2015 Guidance Summary
2015 GUIDANCE SUMMARY PAGE 12 (1) Excludes TARS program historical results and separation costs. See Appendix for reconciliation. (2) Guidance excludes the pretax impact of 2015 separation costs, in the amount of $500K. (3) Guidance excludes the impact of 2015 separation costs, net of taxes, in the
Slide 13: Vectrus Investment Highlights
VECTRUS INVESTMENT HIGHLIGHTS Page 13 Strong Core Business Enduring Customer Relationships Significant Market Opportunity Large Pipeline of Potential Opportunities and Sound Growth Strategy Solid Financial Position
Slide 14: Vectrus Fourth Quarter and Full Year 2014
VECTRUS FOURTH QUARTER AND FULL YEAR 2014 EARNINGS PRESENTATION MARCH 17, 2015
Slide 15: Appendix
ff APPENDIX \VECTRUS.
Slide 16: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES (CONT.) Page 16 The primary financial performance measures Vectrus uses to manage its business and monitor results of operations are revenue trends and operating income trends. In addition, we consider adjusted revenue, adjusted operating income, adjusted operatin
Slide 17: Reconciliation of Non-GAAP Measures (cont.)
RECONCILIATION OF NON-GAAP MEASURES (CONT.) Page 17 (In thousands) Adjusted Operating Income (Non-GAAP Measure) 2014 2013 2014 2013 Net income 3,331$ 16,163$ 22,812$ 84,392$ Income taxes 3,264 9,007 14,079 47,041 Interest income (expense) (1,554) 19 (1,526) 111 Income from operations 8,149 25,151 38
Slide 18: Reconciliation of Non-GAAP Measures (cont.)
RECONCILIATION OF NON-GAAP MEASURES (CONT.) Page 18 (In thousands) Free Cash Flow (Non-GAAP Measure) 2014 2013 Net cash provided by operating activities 42,979$ 92,792$ Subtract: Capital expenditures (3,847) (2,429) Free cash flow 39,132$ 90,363$ Year Ended December 31, (1) TARS program historical r