PAE saw strong growth in the last quarter thanks to strategic acquisitions but now it must navigate the impact of the troop drawdowns in Afghanistan.
One aspect of PAE’s work in Afghanistan is over but a second piece will continue amid the drawdown of U.S. forces there as the company continues on its strategy of further diversifying its business.
During PAE’s second quarter earnings call with investors, interim CEO and Chief Financial Officer Charles Peiffer said the company’s contract for vehicle maintenance and other logistics support to Afghanistan’s military ended in June.
That contract represented approximately 7 percent of this year’s revenue and was factored into its outlook for calendar 2021, Peiffer said.
Separately, PAE’s work for the State Department in Afghanistan accounts for 4 percent of revenue. Peiffer said the company’s current understanding is that business will not see any disruptions given diplomacy efforts will continue there.
Falls Church, Virginia-headquartered PAE held its financial guidance for this year at $3.05 billion-to-$3.15 billion in revenue and $205 million-$215 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).
Second quarter revenue of $747.2 million was 16.2-percent higher over the prior year period on contributions from last year’s acquisitions of Centra Technology and Metis Solutions. Adjusted EBITDA in the quarter of $53.3 million represented a year-over-year increase of approximately 10.1 percent.
The deals for Centra and Metis help show the direction PAE both has taken in recent years and is taking with respect to some of these “white space” markets that Peiffer highlighted: intelligence and analysis, training and logistics.
Couple that short list with examples of PAE’s historical core markets such as international development, foreign diplomacy, immigration services and supporting infrastructure outside the continental U.S.
Peiffer said PAE has thus undertaken a “front-end loading of our bid-and-proposal spending” because of how opportunities are accelerating in the first list of markets along with continued efforts on the second.
Some pandemic-related award delays across the intelligence community remain including one recompete for PAE, but Peiffer indicated the company sees promising signs that its push into that market is showing signs of fruition.
“We have some near-term opportunities that certainly line up with the core business,” Peiffer said. “There’s a good solid pipeline of intell work that has come about. In some cases, our competitors are reaching out to us (and) asking us to team with them, so I think that’s a sign that people see that PAE with the acquisitions is a much stronger competitor and someone to reckon with in the future.”
Along with maintaining the overall operational rhythm, PAE’s board of directors remains at work on the process to hire the company’s next permanent CEO in the wake of John Heller’s resignation in March. PAE’s global mission services segment also needs a new leader after its former president Charles Anderson then left the company in early July.
Peiffer said the company had planned for the CEO search-and-hire process to take between four and six months and believes it is on schedule.
Appointing the next CEO is priority number one before moving on to finding a new president for global mission services, one of two reportable PAE segments alongside national security solutions.
“I’d rather wait to ensure the CEO has an opportunity to put his or her thumbprint on the organization,” Peiffer said. “We have started to pull together slates to understand what’s possible both internally and externally, and so we’re working through that so we’ll be well-positioned to move out and start that process once it’s clear where we’re going with the CEO search and who winds up in that position.”
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