The company generated EPS of $0.57 vs. the $0.26 consensus with revenue increasing 20% yr/yr to $904.4 mln, also comfortably beating the $884.1 mln expectation.
Furthermore, Adj. EBITDA jumped by 43% yr/yr to $68 mln.
Click here to access PSN's earnings press release.
PSN operates at the crossroads of two strong markets: namely, defense and cyber security.
The U.S government has substantially ramped up defense spending, with the 2020 defense budget ballooning to a whopping $730 bln. According to the National Defense Strategy report, the reemergence of long-term strategic competition -- specifically in the areas of economics, military, technology, and aerospace -- has resulted in more global disorder and risk.
The underlying catalysts fueling growth for cyber security companies are well documented. Briefly, these include the increasing volume and sophistication of cyber-attacks, the ever-growing number of vulnerable endpoints due to the proliferation of mobile devices, the rise of cloud computing, and changing tactics by adversaries using more unconventional/clandestine tactics.
PSN has also bolstered its growth through acquisitions. For instance, this past January, it bought OGSystems for $300 mln. OGSystems is involved in developing geo-intelligence technology specifically for the U.S. Intelligence community. As an example, its systems are used to enable its intelligence customers to analyze objects and movements from 10K feet above ground.
Prior to that, in May 2018 the company bought Polaris Alpha Holdings, a signals intelligence and analytics provider for national security and U.S. federal customers.
These two acquisitions provided a meaningful boost to PSN's growth rates and improved profitability this quarter. Specifically, they added $122 mln in revenue and bumped its Federal Solutions segment to 47% of revenue from 39% in 1Q18.
The acquisitions also helped to push the company’s Adj. EBITDA margin higher by 120 bps to 7.5%.
Excluding OGSystems and Polaris Alpha, PSN's revenue was up 4% on an organic basis on growth from existing contracts.
Although PSN didn't provide specific financial guidance, the company appears confident about its prospects going forward. Its CEO, Chuck Harrington, commented that the company has had a great start to the year and that it is excited about its future due to the strength in its markets. The 35% growth in backlog to $8.6 bln is certainly supportive of that upbeat outlook.
Key Takeaways: PSN may not be garnering the attention of other high-flying IPOs like Beyond Meat (BYND), CrowdStrike (CRWD), or Chewy (CHWY), but its first quarter results show that it is one worth paying attention to.
The company is poised to benefit from rising spending in both the defense and cyber security markets. PSN also has well-established relationships with several U.S government customers, such as the Missile Defense Agency, creating a steadier stream of business.
Last, acquisitions have played a key role in its growth, and thanks to its solid balance sheet, PSN may be in position to make another splash in the M&A arena.