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By Nick Wakeman

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Nick Wakeman

Engility continues to face headwinds

A return to revenue growth for Engility continues to be a challenge as the company doesn’t expect positive gains for sales until 2019.

Part of that is the delays in the 2018 budget which has pushed back contract awards the company expects to capture, CEO and now chairman Lynn Dugle said in the company’s fourth quarter and year-end call with investors.

For all of 2017, Engility pulled in revenue of $1.9 billion compared to $2.1 billion for 2016. And fourth quarter sales were $464.9 million compared to $506.4 million for the same quarter in 2016.

“Our plan is to reduce the rate of revenue decline in 2018 and position the company for positive organic growth in 2019,” Dugle told analysts.

The company is projecting its 2018 revenue to be in the $1.83 billion-$1.91 billion range. The analyst consensus was $1.9 billion.

A few metrics point to the challenges ahead for Engility, including those for its bookings profile.

In the most recent quarter, the company only booked $179 million in contract awards for a book-to-bill ratio of 0.4. In other words, it didn’t win enough work in the quarter to maintain the current flow of revenue.

But for all of 2017, it posted awards of $1.93 billion for a book-to-bill ratio of 1.0.

In the fourth quarter alone Engility lost a large contract and had $500 million in awards delayed that were supposed to be awarded in the fourth quarter, Chief Financial Officer Wayne Rehberger said on the call.

Even though final federal appropriations for the rest of the current fiscal year is expected to be passed this month. The final budget will have an increase of $80 billion for defense but Dugle said it will take time for the dollars to be allocated.

“We continue to monitor the budget and government priorities to make sure we are well-positioned and can shape opportunities as they mature,” she said.

Space is of particular interest to Engility as the government increases investments there with a view of space as being the next battlefield.

Dugle said that over the last two years, Engility has “targeted new customers that are already experiencing growth, including NASA, the Missile Defense Agency and the (National Security Agency)."

She also said the company has made progress on three key strategic objectives: positioning for organic growth, attracting and retaining talent and strengthening the company's balance sheet.

Engility made $110 million in repayments last year on its debt, much of it incurred from the 2015 TASC acquisition. Rehberger said that "achieved our target" and that Engility expects to repay another $100 million this year.

Dugle also said Engility would be able to make another acquisition in the space or intelligence markets, two areas the company did report growth in last year. The TASC acquisition greatly bolstered Engility's footprints there.

While Dugle and Rehberger painted an optimistic picture, Wall Street didn’t have quite the same reaction as its shares have fallen almost 19 percent in Friday trade.

But Engility’s board of directors has showed its faith in Dugle and her strategy in naming her chairman on Thursday. She’s been CEO since March 2016 and joined Engility’s board in 2015 after her retirement from Raytheon.

Posted by Nick Wakeman on Mar 02, 2018 at 11:49 AM


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