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Versar, Inc., (NYSE-MKT: VSR) headquartered in Springfield, Virginia, is a global project management company providing sustainable value oriented solutions to government and commercial clients in construction management, environmental services, and professional services space. The company has been one of the forefront innovators in Technical Services employing approximately 600 full time employees.
On March 21st 2017, Versar announced that its long-term joint venture (JV) with Johnson Controls Federal Systems (JCFS) was awarded Worldwide Engineering & Construction (WE&C) Indefinite Delivery Indefinite Quantity (IDIQ) contract by Air Force Installation Contracting Agency. The WE&C contract ceiling is $950 million over a five year base period and three additional one-year option periods. Individual task orders will be competed among the eleven selected firms.
The Company has been quite aggressive in the recent past & has signed multiple mandates, including $1.4 million Task Order (from Environmental Protection Agency) to provide technical expertise that will review and evaluate pesticide human exposure data, $2.3 million task order for work at MacDill Air Force Base amongst others.
Gross revenue for third quarter of fiscal year 2016 was $4.2 million, a decrease of 18% compared to $5.2 million during third quarter of last fiscal year. Versar reported a gross loss of $0.3 million, compared to gross profit of $0.4 million during third quarter of last fiscal year. The company will release its 4Q16 financial results press release before the market opens on March 28, 2017.
The company’s stock has unsurprisingly found strength in the recent past. Versar reported increase in the stock price backed by these announcements laying foundation for revenue visibility and business growth.
About the Company:
Versar, Inc. is a global project management company based in the Washington, DC metropolitan area, with 22 locations around the world. Over last 4 decades, Versar has provided technical and management support to federal, state, and local government clients as well as to industries worldwide, delivering construction management, environmental sciences and engineering infrastructure solutions. Versar offers tailored and secure solutions in harsh environments providing clients with comprehensive engineering and construction management, environmental and professional services.
Major divisions:
Major Brands of the company:
Versar Security Systems, LLC is supporting the physical security needs of federal government and DoD customers. It offers specialized expertise designing and implementing integrated security solutions under national program vehicles.
VersarPPS is into design, production and operation of PPE for hazardous environments including Nuclear, Chemical and Biological protection. The VersarPPS range incorporates a broad range of products, with a comprehensive range of accessories, and is supplied to Fire, Police, and Health services, industrial customers and worldwide aid agencies.
Recent developments:
On March 21, 2017 – Versar announced that its long-term joint venture (JV) with Johnson Controls Federal Systems (JCFS) was awarded the Worldwide Engineering & Construction (WE&C) Indefinite Delivery Indefinite Quantity (IDIQ) contract by the Air Force Installation Contracting Agency (AFICA) in support of the Air Force Civil Engineering Center (AFCEC). The WE&C contract ceiling is $950 million over a five year base period and three additional one-year option periods. Individual task orders will be competed among the eleven selected firms.
The contract includes full range of construction, engineering and design-build for new facilities, and repair, renovation, and/or restoration for existing facilities and infrastructure. Task order locations will primarily be outside the 48 contiguous United States (OCONUS) and will include sites in remote, austere, and high risk/contingency areas. Examples of such projects include, but are not limited to, airfield paving projects, renovation of historic structures, Sensitive Compartmented Information Facility (SCIF) or related security facilities, non-standard or unique structures, and design-build projects involving specialized Anti-Terrorism/Force Protection requirements.
As per management, JV now holds both contracts (Sustainment, Restoration, & Modernization (SRM) Acquisition Task Order Contract – SATOC and WE&C) that AFICA uses to support the Air Force’s built infrastructure requirements. Coupled with engineering and environmental contracts.
Versar is uniquely positioned to support the Air Force across their entire asset management program. The management is bullish about continuing long-term relationship with JCFS to provide AFICA the expertise and dedication to critical projects throughout the world.
Furthermore, during March 2017, Versar also announced that the Environmental Protection Agency (EPA) has awarded it a $1.4 million Task Order to provide technical expertise that will review and evaluate pesticide human exposure data.
Risk Factors & Key Stock Influences:
The company’s ability to execute the current order book without any singificant cost and time overrun. As per last reported financials, it recorded a drop in its funded backlog to $158 million from $179 million.
Versar’s liquidity is plagued by continued negative cash flows/profitability and large incremental working capital requirement. In fact, due to its high debt burden & inadequate financial flexibility, it faced multiple breaches of covenants under its loan agreement. Failure to comply with these covenants constitutes a default under the Loan Agreement.
If the Company faces such breaches again in future or if it is unable to identify alternative sources of funding, due to Company’s negative cash flow from operations and accumulated deficit, there would be substantial doubt about its ability to continue as a going concern.
Company has a material weakness in its internal controls over financial reporting as a result of failure to properly identify triggering factors for an impairment analysis. While it has developed and is implementing a remediation plan, If it is not able to properly remediate the identified material weakness, Vensar may not be able to identify errors in financial statements on a timely basis, which could have a material adverse effect on our financial condition and results of operations.
Earnings Review:
Gross revenue for the third quarter of fiscal year 2016 was $4.2 million, a decrease of 18% compared to $5.2 million during third quarter of last fiscal year.
Profitability:
Gross loss for the third quarter of fiscal year 2016 was $0.3 million, compared to gross profit of $0.4 million in the third quarter of the last fiscal year. This decrease is a direct result of the decline in revenue due to the loss of task orders.
Cash Flow & Balance Sheet:
Company’s working capital as of April 1, 2016 was approximately $8.7 million compared to working capital at June 26, 2015 of $23.1 million. Versar’s ability to maintain liquidity and financial flexibility will remain an extremely critical challenge for the company.
Stock Performance:
On Wednesday, March 22nd, 2017, VSR shares increased by 1.29% to $1.57 on an average volume of 234,127.00 shares exchanging hands. Market capitalization is $21.30 million. The current RSI is 33.33.
In the past 52 weeks, shares of VSR have traded as low as $0.90 and as high as $3.25.
At $1.57, shares of VSR are trading above their 50-day moving above their average (MA) at $1.47 and below their 200-day MA at $3.11
The present support and resistance levels for the stock are at $1.45 & $1.65 respectively.
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