SOURCE: Vangent

May 14, 2008 08:00 ET

Vangent Announces First Quarter 2008 Results

ARLINGTON, VA--(Marketwire - May 14, 2008) - Vangent, Inc., a leading global provider of information management and strategic business process outsourcing services, today announced its first quarter 2008 results.

"We are pleased with Vangent's performance during the first quarter of 2008, exemplified by our impressive growth in revenue and Adjusted EBITDA. On a quarter-over-quarter basis, revenue grew 29% and Credit Agreement Adjusted EBITDA climbed 32%," stated Mac Curtis, President and Chief Executive Officer of Vangent. "We continue to solidify our leadership standing in the industry and are well positioned for the remainder of the year."

Financial Summary
(Dollars in Millions)
Unaudited

                                                       Three Months Ended
                                                      --------------------
                                                      March 31,  March 29,
                                                        2007       2008
                                                      ---------  ---------
Revenue                                               $  111.3   $  143.5

Net Loss                                             ($    8.8) ($    2.4)

Adjusted EBITDA                                       $   11.9   $   19.8

Credit Agreement Adjusted EBITDA                      $   15.0   $   19.8

Long-Term Debt                                        $  440.0   $  422.7

Cash and Cash Equivalents                             $   18.9   $   22.5

Contract Backlog                                      $1,985.1   $1,880.7

Firm Contract Backlog                                 $  393.0   $  521.1

A reconciliation between certain non-GAAP financial measures and reported financial results is provided as an attachment to this press release.

Q1 2008 Results Conference Call: Will take place on May 14, 2008 at 2:00 pm EDT. Interested parties may call (888) 694-4702 and request the "Vangent Q1 Financial Results Conference Call," conference ID # 46956797.

Audio Replay: A replay of the earnings call can be heard after 5 p.m. on May 14, 2008 until May 21, 2008. To hear the replay, dial (800) 642-1687 and enter the same conference ID # 46956797. For interested parties outside the U.S. and Canada, dial (706) 645-9291 and enter the same conference ID #.

Vangent's first quarter 2008 financials and quarterly report on Form 10Q, including the Management Discussion and Analysis, will be made available on the company's website at www.vangent.com following the completion of the Vangent Q1 2008 Results Conference Call.

About Vangent, Inc.

With over 5,000 employees worldwide, Vangent, Inc. is a global provider of Consulting, Systems Integration, Human Capital Management and Strategic Business Process Outsourcing services to the U.S. federal and international governments, higher education institutions and corporations. Clients include the Centers for Medicare & Medicaid Services, the U.S. Departments of Defense, Education, Health and Human Services, Justice and Labor; and the U.S. Office of Personnel Management; as well as Fortune 500 companies.

Headquartered in Arlington, Virginia, the Company has offices throughout the U.S. and in the U.K., Canada, Mexico, Venezuela and Argentina.

Forward-Looking Statements

This press release contains forward-looking statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. Words such as, but not limited to, "believe," "expect," "anticipate," "estimate," "intend," "plan," "targets," "projects," "likely," "will," "would," "could" and similar expressions or phrases identify forward-looking statements. All forward-looking statements involve risks and uncertainties. The occurrence of the events described, and the achievement of the expected results, depend on many events, some or all of which are not predictable or within our control. In light of these risks and uncertainties, expected results or other anticipated events or circumstances discussed in this press release might not occur. We undertake no obligation, and specifically decline any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Operations
(in thousands)
(unaudited)

                                     Predecessor
                                       Entity         Successor Entity
                                     -----------  ------------------------
                                       Period       Period       Three
                                      January 1   February 15    Months
                                         to           to         Ended
                                     February 14,  March 31,    March 29,
                                         2007         2007        2008
                                     -----------  -----------  -----------
Revenue                              $    58,833  $    52,462  $   143,475
Cost of revenue                           48,187       47,401      117,166
                                     -----------  -----------  -----------
Gross profit                              10,646        5,061       26,309
General and administrative expenses        9,383        5,494       13,784
Selling and marketing expenses             1,940        2,305        4,131
                                     -----------  -----------  -----------
Operating income (loss)                     (677)      (2,738)       8,394
Interest expense                              34        4,765        9,218
Interest income                              (44)           -         (268)
                                     -----------  -----------  -----------
Loss before income taxes                    (667)      (7,503)        (556)
Provision (benefit) for income taxes        (292)         952        1,868
                                     -----------  -----------  -----------
Net loss                             $      (375) $    (8,455) $    (2,424)
                                     ===========  ===========  ===========










Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

                                                    December 31, March 29,
                                                       2007        2008
                                                    ----------- -----------
Assets
Current assets:
  Cash and cash equivalents                         $    26,093 $    22,500
  Trade receivables, net                                112,292     122,463
  Other receivables and prepaid items                    15,470      19,876
                                                    ----------- -----------
Total current assets                                    153,855     164,839
Property and equipment, net                              27,579      25,985
Goodwill and intangible assets, net                     499,900     494,665
Deferred debt financing costs and other                  12,734      12,117
                                                    ----------- -----------
Total assets                                        $   694,068 $   697,606
                                                    =========== ===========


Liabilities and Stockholder's Equity
Current liabilities:
  Current portion of long-term debt                 $     7,325 $     2,309
  Accounts payable and accrued expenses                  63,248      80,248
  Accrued interest                                        8,547       3,499
  Other                                                   5,296       4,374
                                                    ----------- -----------
Total current liabilities                                84,416      90,430
Long-term debt, net of current portion                  420,875     420,366
Other liabilities                                         8,488      11,260
                                                    ----------- -----------
Total liabilities                                       513,779     522,056
Stockholder's equity                                    180,289     175,550
                                                    ----------- -----------
Total liabilities and stockholder's equity          $   694,068 $   697,606
                                                    =========== ===========










Vangent, Inc. (formerly Pearson Government Solutions Business)
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)

                                     Predecessor
                                       Entity        Successor Entity
                                     -----------  ------------------------
                                       Period       Period        Three
                                      January 1   February 15     Months
                                         to           to          Ended
                                     February 14,   March 31,    March 29,
                                         2007         2007         2008
                                     -----------  -----------  -----------
Cash flows from operating activities
Net loss                             $      (375) $    (8,455) $    (2,424)
Depreciation and amortization              2,369        3,891        8,419
Equity-based compensation expense          1,477            -          247
Deferred income taxes                        (19)         778        1,523
Net change in operating assets and
 liabilities, net of effect of
 acquisition                             (22,348)       8,645       (4,209)
                                     -----------  -----------  -----------
Net cash (used in) provided by
 operating activities                    (18,896)       4,859        3,556
                                     -----------  -----------  -----------

Cash flows from investing activities
Acquisition, net of cash acquired              -     (615,206)           -
Capital expenditures                      (3,727)        (297)      (1,570)
                                     -----------  -----------  -----------
Net cash used in investing
 activities                               (3,727)    (615,503)      (1,570)
                                     -----------  -----------  -----------

Cash flows from financing activities
Proceeds from issuance of common
 stock                                         -      203,466            -
Proceeds from issuance of long term
 debt, net of repayments                       -      440,000       (5,525)
Debt financing costs                           -      (14,013)           -
Investment from parent and other          13,271            -          (74)
                                     -----------  -----------  -----------
Net cash provided by (used in)
 financing activities                     13,271      629,453       (5,599)
Effect of exchange rate changes on
 cash and cash equivalents                  (166)          42           20
                                     -----------  -----------  -----------
Net (decrease) increase in cash and
 cash equivalents                         (9,518)      18,851       (3,593)
Cash and cash equivalents, beginning
 of period                                11,713            -       26,093
                                     -----------  -----------  -----------
Cash and cash equivalents, end of
 period                              $     2,195  $    18,851  $    22,500
                                     ===========  ===========  ===========









Vangent, Inc. (formerly Pearson Government Solutions Business)
Reconciliation of GAAP to Non-GAAP Measures
(in thousands)
(unaudited)


                                                                   Twelve
                                                                   Months
                                            Three Months Ended     Ended
                                           --------------------  ---------
                                           March 31,  March 29,  March 29,
                                             2007       2008       2008
                                           ---------  ---------  ---------

Net loss                                   $  (8,830) $  (2,424) $ (16,018)
Provision for income taxes                       659      1,868      7,413
Interest expense, net                          4,756      8,950     37,627
Depreciation and amortization                  5,955      8,419     34,358
                                           ---------  ---------  ---------
EBITDA                                         2,540     16,813     63,380

Equity-based compensation expense              1,477        247      1,156
TSA adjustment                                 1,139         20        209
Net transition and contract settlement
 costs                                         6,478      2,416     13,438
Management fee                                   250        281        945
                                           ---------  ---------  ---------
Adjusted EBITDA                               11,884     19,777     79,128

CMS contract normalization                     3,113          -      2,704
TSA adjustment                                    11         19        102
                                           ---------  ---------  ---------
Credit Agreement Adjusted EBITDA           $  15,008  $  19,796  $  81,934
                                           =========  =========  =========

EBITDA is defined as net income (loss) before interest, income taxes, and depreciation and amortization. Management uses this measure as an indicator of operating performance. EBITDA is not an indicator of financial performance under generally accepted accounting principles, or a measure of liquidity and may not be comparable to similarly captioned information reported by other companies. In addition, it should not be considered as an alternative to, or more meaningful than, income (loss) before income taxes, cash flows from operating activities, or other traditional indicators of operating performance.

Adjusted EBITDA is adjusted to exclude (i) equity-based compensation expense, (ii) non-recurring contract settlement costs, (iii) legal expenses payable by Pearson in connection with an investigation into a contract awarded to NCS Pearson, Inc. by the Transportation Security Administration in 2002 and all potential reserves related to the potential settlement of such claim, and (iv) certain costs resulting from our separation from Pearson plc net of certain overhead and infrastructure costs.

Credit Agreement Adjusted EBITDA is adjusted to normalize the operating income of a certain HHS contract and to exclude TSA related expenses.

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