Exhibit 99.1
For Information Contact:
Maureen Crystal
Tel: 703.707.6777
E-mail: mcrystal@nciinc.com
NCI, Inc. Reports Second Quarter 2006 Financial Results
| · | Revenues of $48 million in-line with targeted range |
| · | EPS of $0.15 at top-end of targeted range |
| · | Good flow of new task orders on TEIS & NETCENTS GWAC contracts |
RESTON, Va. -- BUSINESS WIRE - August 1, 2006 -- NCI, Inc. (NASDAQ:NCIT), a provider of information technology services and solutions to U.S. federal government agencies, announced today results for the second quarter 2006. The table below is a summary of our financial results:
| | Q2: 2006 | 1H: 2006 |
| Revenues | $47.9 million | $93.9 million |
| Operating income | $3.2 million | $5.8 million |
| Operating margin | 6.6% | 6.2% |
| Net income | $2.0 million | $3.7 million |
| Diluted EPS (GAAP) | $0.15 | $0.28 |
Reported Results
For the second quarter of 2006, NCI reported revenues of $47.9 million compared to $47.5 million for the second quarter of 2005. Operating income for the second quarter of 2006 was $3.2 million, compared to $3.1 million for the second quarter of 2005. Operating margin of 6.6% for the second quarter of 2006 was even with the operating margin for the same period in 2005. Net income for the second quarter was $2.0 million, compared to $2.6 million for the same period in 2005. Diluted earnings per share for the second quarter was $0.15 per share, compared to $0.34 per share for the comparable period in 2005. The effective tax rate for the second quarter of 2006 was 39.1%. Diluted shares outstanding for the second quarter of 2006 were 13.5 million shares compared to 7.6 million shares for the second quarter of 2005. As a comparison to the prior year, on a pro forma basis, giving effect to the revocation of the Company’s S corporation filing status and utilizing an effective income tax rate of 38.9%, pro forma net income was $1.7 million, diluted shares outstanding were 7.2 million, and earnings per share was $0.23 per share for the second quarter of 2005.
For the first six months of 2006, NCI reported revenues of $93.9 million, essentially even with the first six months of 2005. Operating income for the first six months of 2006 was $5.8 million, or an operating margin of 6.2%, compared to $5.6 million, or an operating margin of 6.0%, for the first six months of 2005. Net income for the first six months of 2006 was $3.7 million, compared to $4.7 million for the same period in 2005. Diluted earnings per share for the first six months of 2006 was $0.28 per share, compared to $0.62 per share for the comparable period in 2005. Diluted shares outstanding for the first six months of 2006 were 13.5 million shares compared to 7.6 million shares for the same period in 2005. As a comparison to the prior year, on a pro forma basis, giving effect to the revocation of the Company’s S corporation filing status and utilizing an effective income tax rate of 38.9%, pro forma net income was $3.0 million, diluted shares outstanding were 7.2 million, and earnings per share was $0.41 per share for the first six months 2005.
Business Highlights
NCI’s president, Michael Solley, stated, “During the quarter we were awarded an $18.6 million task order under our NETCENTS contract through the Air Force’s F-22 System Program Office. Under this task order NCI will provide specialized computer systems needed to support F-22 operations in the field. In addition to this award, we continued to see new task orders under our TEIS and NETCENTS GWAC contract vehicles”
Key Metrics
NCI’s reported total backlog for the second quarter of 2006 of $545 million, of which $71 million was funded backlog. This compares to total backlog of $525 million at the end of the second quarter of 2005, including $63 million in funded backlog. During the second quarter of 2006, approximately 70% of revenue was from prime contracts. Time-and-materials contracts accounted for 45% of revenue, cost-plus contracts accounted for 29%, and fixed-price contracts accounted for 26% of revenue for the second quarter of 2006. Our customer mix for the second quarter of 2006 reflects approximately 79% from the Department of Defense and Intelligence customers and approximately 21% from federal civilian agencies. Days sales outstanding in accounts receivable, or DSO, for the quarter was 82 days.
Outlook
The table below summarizes the guidance ranges for the third quarter of 2006 and our updated guidance for the full year 2006. Earnings per share data are based on an effective C corporation tax rate of approximately 39.1%. This outlook does not reflect the impact of any future acquisitions.
| | 3rd Quarter 2006 | Full Year 2006 |
| Revenue | $51 million - $55 million | $200 million - $210 million |
| Diluted Earnings Per Share | $0.14 - $0.16 | $0.60 - $0.65 |
Conference Call Information
NCI, Inc.’s executive management will hold a conference call today at 5 p.m. EDT, to discuss second quarter 2006 results and answer questions. Interested parties may access the call by dialing (877) 704-5380 (domestic) or (913) 312-1294 (international). The confirmation code for the live call is 2143655. The conference call will be Webcast (listen only) simultaneously via the Internet at www.nciinc.com.
A replay of the call will be available beginning at 9 p.m. today and will remain available for a two-week period. To access the replay, call (888) 203-1112 (domestic) or (719) 457-0820 (international). The confirmation code for the replay is 2143655. A replay webcast will also be available on NCI, Inc.’s website shortly after the conclusion of the call.
About NCI, Inc.:
NCI, Inc., a Delaware holding company, through its subsidiary NCI Information Systems, Inc., is a leading provider of information technology services and solutions to U.S. federal government agencies. As an ISO 9001 certified company, NCI’s award-winning expertise encompasses areas critical to its customers’ mission objectives including enterprise systems management, information assurance, network engineering, and systems development and integration. Headquartered in Reston, Virginia, NCI has approximately 1,400 employees and 50 locations worldwide. For more information, visit our website at www.nciinc.com, or e-mail mcrystal@nciinc.com.
Forward-Looking Statement: Statements and assumptions made in this press release, which do not address historical facts, constitute "forward-looking" statements that NCI believes to be within the definition in the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties, many of which are outside of our control. Words such as "may,” "will,” "intends,” "should,” "expects,” "plans,” "projects,” "anticipates,” "believes,” "estimates,” "predicts,” "potential,” "continue,” or "opportunity," or the negative of these terms or words of similar import are intended to identify forward-looking statements.
Such statements are subject to factors that could cause actual results to differ materially from anticipated results. The factors that could cause actual results to differ materially from those anticipated include, but are not limited to, the following: regional and national economic conditions in the United States, including conditions that result from terrorist activities or war; changes in interest rates; currency fluctuations; failure to achieve contract awards in connection with recompetes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new products and/or services; continued funding of U.S. Government or other public sector projects, based on a change in spending patterns, or in the event of a priority need for funds, such as homeland security, turmoil in the Middle East, the war on terrorism or rebuilding Iraq; government contract procurement (such as bid protest, small business set asides, etc.) and termination risks; individual business decisions of our clients; the financial condition of our clients; paradigm shifts in technology; competitive factors such as pricing pressures and competition to hire and retain employees (particularly those with security clearances); our ability to complete and implement acquisitions appropriate to achievement of our strategic plans; material changes in laws or regulations applicable to our businesses, particularly legislation affecting (i) government contracts for services, (ii) outsourcing of activities that have been performed by the government, (iii) delays related to agency specific funding freezes, (iv) competition for task orders under Government Wide Acquisition Contracts (GWACS) and/or schedule contracts with the General Services Administration; and (v) expensing of stock options; and our own ability to achieve the objectives of near term or long range business plans. These and other risk factors are more fully discussed in the section entitled "Risks Factors" in NCI's Form 10-K filed with the Securities and Exchange Commission on March 30, 2006, and from time to time, in other filings with the commission such as our Form 8-K and Form 10-Q.
The forward-looking statements included in this news release are only made as of the date of this news release and NCI undertakes no obligation to publicly update any of the forward-looking statements made herein, whether as a result of new information, subsequent events or circumstances, changes in expectations or otherwise.
NCI, Inc.
Consolidated Statements of Income
(in thousands, except per share data)
(unaudited)
| | | Three months ended June 30, | | Six months ended June 30, | |
| | | 2005 | | 2006 | | 2005 | | 2006 | |
| | | | | | | | | | |
| Revenue | | $ | 47,503 | | $ | 47,857 | | $ | 93,875 | | $ | 93,891 | |
| | | | | | | | | | | | | | |
| Operating costs and expenses: | | | | | | | | | | | | | |
Cost of revenue (exclusive of depreciation and amortization, shown separately below) | | | 40,104 | | | 41,096 | | | 79,671 | | | 80,566 | |
| General and administrative expense | | | 3,617 | | | 2,939 | | | 7,239 | | | 6,193 | |
| Depreciation and amortization | | | 403 | | | 406 | | | 801 | | | 816 | |
| Amortization of intangible assets | | | 267 | | | 242 | | | 539 | | | 488 | |
| Total operating costs and expenses | | | 44,391 | | | 44,683 | | | 88,250 | | | 88,063 | |
| Operating income | | | 3,112 | | | 3,174 | | | 5,625 | | | 5,828 | |
| Interest income | | | 18 | | | 208 | | | 26 | | | 325 | |
| Interest expense | | | (416 | ) | | (19 | ) | | (768 | ) | | (45 | ) |
| Income before income taxes | | | 2,714 | | | 3,363 | | | 4,883 | | | 6,108 | |
| Income tax expense | | | 118 | | | 1,316 | | | 220 | | | 2,391 | |
| Net income | | $ | 2,596 | | $ | 2,047 | | $ | 4,663 | | $ | 3,717 | |
| | | | | | | | | | | | | | |
| Earnings per common and common equivalent share: | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | |
| Weighted average shares outstanding | | | 6,779 | | | 13,328 | | | 6,779 | | | 13,328 | |
| Net income per share | | $ | 0.38 | | $ | 0.15 | | $ | 0.69 | | $ | 0.28 | |
| Diluted: | | | | | | | | | | | | | |
Weighted average shares and equivalent shares outstanding | | | 7,579 | | | 13,503 | | | 7,571 | | | 13,502 | |
| Net income per share | | $ | 0.34 | | $ | 0.15 | | $ | 0.62 | | $ | 0.28 | |
| Pro forma income tax information: | | | | | | | | | | | | | |
| Income before taxes | | $ | 2,714 | | | | | $ | 4,883 | | | | |
| Pro forma provision for income taxes | | | 1,056 | | | | | | 1,899 | | | | |
| Pro forma net income | | $ | 1,658 | | | | | $ | 2,984 | | | | |
| | | | | | | | | | | | | | |
| Pro forma earnings per common and common equivalent share: | | | | | | | | | | | | | |
| Basic: | | | | | | | | | | | | | |
| Weighted average shares outstanding | | | 6,779 | | | | | | 6,779 | | | | |
| Pro forma net income per share | | $ | 0.24 | | | | | $ | 0.44 | | | | |
| Diluted: | | | | | | | | | | | | | |
Weighted average shares and equivalent shares outstanding | | | 7,237 | | | | | | 7,230 | | | | |
| Pro forma net income per share | | $ | 0.23 | | | | | $ | 0.41 | | | | |
NCI, Inc.
Consolidated Balance Sheets
(in thousands, except per share data)
| | | As of December 31, 2005 | | As of June 30, 2006 | |
Assets | | | | (unaudited) | |
| Current assets: | | | | | |
| Cash and cash equivalents | | $ | 12,323 | | $ | 17,031 | |
| Accounts receivable, net | | | 46,611 | | | 42,926 | |
| Deferred tax asset, net | | | 4,570 | | | 3,179 | |
| Prepaid expenses and other current assets | | | 669 | | | 779 | |
| Total current assets | | | 64,173 | | | 63,915 | |
| Property and equipment, net | | | 6,031 | | | 5,545 | |
| Other assets | | | 558 | | | 783 | |
| Deferred tax asset, net | | | 494 | | | 460 | |
| Intangible assets, net | | | 1,338 | | | 850 | |
| Goodwill | | | 17,427 | | | 17,427 | |
| Total assets | | $ | 90,021 | | $ | 88,980 | |
| | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | |
| Current liabilities: | | | | | | | |
| Accounts payable | | $ | 8,854 | | $ | 10,484 | |
| Accrued salaries and benefits | | | 9,416 | | | 8,488 | |
| Other accrued expenses/liabilities | | | 2,936 | | | 3,928 | |
| Deferred revenue | | | 1,012 | | | 566 | |
| Distributions payable | | | 5,866 | | | — | |
| Total current liabilities | | | 28,084 | | | 23,466 | |
| Other liabilities | | | 4,766 | | | 4,568 | |
| Total liabilities | | | 32,850 | | | 28,034 | |
| Stockholders’ equity: | | | | | | | |
Class A common stock, $0.019 par value—37,500,000 shares authorized; 7,027,760 shares issued and outstanding | | | 134 | | | 134 | |
Class B common stock, $0.019 par value—12,500,000 shares authorized; 6,300,000 shares issued and outstanding | | | 120 | | | 120 | |
| Additional paid-in capital | | | 57,658 | | | 57,581 | |
| Deferred compensation | | | (741 | ) | | (606 | ) |
| Retained earnings | | | — | | | 3,717 | |
| Total stockholders’ equity | | | 57,171 | | | 60,946 | |
| Total liabilities and stockholders’ equity | | $ | 90,021 | | $ | 88,980 | |
NCI, Inc.
Statement of Cash Flows
(in thousands, except per share data)
(unaudited)
| | | Six months ended June 30, | |
| | 2005 | | 2006 | |
Cash flows from operating activities | | | | | |
| Net income | | $ | 4,663 | | $ | 3,717 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
| Depreciation and amortization | | | 1,340 | | | 1,304 | |
| Decrease in cash surrender value of life insurance | | | 334 | | | — | |
| (Gain) loss on sale and disposal of property and equipment | | | 1 | | | (1 | ) |
| Stock-based compensation expense | | | 373 | | | 57 | |
| Deferred income tax benefit | | | — | | | 1,426 | |
| Changes in operating assets and liabilities: | | | | | | | |
| Accounts receivable, net | | | (474 | ) | | 3,685 | |
| Prepaid expenses and other assets | | | (323 | ) | | (336 | ) |
| Accounts payable | | | 1,144 | | | 1,630 | |
| Accrued expenses/other current liabilities | | | 1,300 | | | (385 | ) |
| Deferred rent | | | (165 | ) | | (203 | ) |
| Net cash provided by operating activities | | | 8,193 | | | 10,894 | |
Cash flows from investing activities | | | | | | | |
| Purchase of property and equipment | | | (1,080 | ) | | (177 | ) |
| Proceeds from sale of property and equipment | | | 4 | | | 4 | |
| Cash paid for purchase of SES | | | (1,919 | ) | | — | |
| Net cash used in investing activities | | | (2,995 | ) | | (173 | ) |
Cash flows from financing activities | | | | | | | |
| Payments on line of credit, net | | | (708 | ) | | — | |
| Repayments on term loan | | | (1,400 | ) | | — | |
| Principal payments under capital lease obligations | | | (139 | ) | | (147 | ) |
| Distributions to stockholders | | | (2,978 | ) | | (5,866 | ) |
| Net cash (used in) provided by financing activities | | | (5,225 | ) | | (6,013 | ) |
| Net change in cash and cash equivalents | | | (27 | ) | | 4,708 | |
| Cash and cash equivalents, beginning of year | | | 40 | | | 12,323 | |
| Cash and cash equivalents, end of period | | $ | 13 | | $ | 17,031 | |
Supplemental disclosure of cash flow information | | | | | | | |
| Cash paid during the period for: | | | | | | | |
| Interest | | $ | 769 | | $ | 45 | |
| Income taxes | | $ | 191 | | $ | 26 | |
Supplemental disclosure of noncash activities: | | | | | | | |
| Equipment acquired under capital leases | | $ | 70 | | $ | 156 | |
