NCI Announces Filing of 2016 Form 10-K and Completion of Internal Investigation

Company Reports Selected Fourth Quarter and 2016 Financial Results

Company to hold conference call on April 5, 2017, at 5 p.m. EDT to
further discuss 2016 financial results and issue guidance for the first
quarter and fiscal-year 2017

RESTON, Va.–(BUSINESS WIRE)–NCI, Inc. (NASDAQ: NCIT), a leading provider of information technology
and professional services and solutions to U.S. Federal Government
agencies, today announced the filing with the U.S. Securities and
Exchange Commission (SEC) of the company’s Annual Report on Form 10-K
for fiscal year 2016. In addition, as soon as reasonably practicable
following the filing of its Form 10-K, the company will file amendments
to its previously issued Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2016, June 30, 2016, and September 30,
2016, to reflect the restatements of the unaudited financial statements
for those periods for the effect of the previously announced
embezzlement of company funds by NCI’s former controller, and
reclassification of related cost of revenues and general and
administrative expenses to misappropriation loss.

As disclosed on January 23, 2017, NCI commenced an internal
investigation upon discovering that its former controller had been
embezzling money from the company. The company has now completed its
internal investigation into the facts and circumstances surrounding the
embezzlement by its former controller and has determined that the actual
amount of the embezzlement during the period from January 1, 2010,
through January 10, 2017, was approximately $19.4 million. The company
believes that its former controller acted alone and found no evidence
that any other NCI employee was aware of or colluded in the embezzlement
of company funds and found no evidence of any unlawful activity apart
from that associated with the former controller’s embezzlement of
company funds.

Selected Fourth Quarter and 2016 Financial Results

For the fourth quarter of 2016, NCI reported revenue of $77.5 million,
adjusted EBITDA (see below, “Non-GAAP Financial Measures) of $8.1
million, or 10.4% of revenue, and adjusted EPS (see below) of $0.23.

For 2016, NCI reported revenue of $322.4 million, adjusted EBITDA (see
below) of $31.1 million, or 9.7% of revenue, and adjusted EPS (see
below) of $1.01.

Conference Call Information

NCI will issue a detailed earnings release after market close on April
5, 2017, and conduct a conference call at 5 p.m. EDT on the same day to
discuss fourth-quarter and fiscal-year 2016 results and issue guidance
for first-quarter and fiscal-year 2017.

Analysts and institutional investors may listen to the conference call
by dialing (888) 298-3457 (United States/Canada) or (719) 457-2657
(international) with pass code 1582638. The conference call will be
provided simultaneously as a webcast through a link on the NCI website (www.nciinc.com).

A replay of the conference call will be available approximately two
hours after the conclusion of the call through April 12, 2017, by
dialing (844) 512-2921 (United States/Canada) or (412) 317-6671
(international) and entering pass code 1582638.

About NCI, Inc.:

NCI is a leading provider of enterprise solutions and services to U.S.
defense, intelligence, health and civilian government agencies. The
company has the expertise and proven track record to solve its
customers’ most important and complex mission challenges through
technology and innovation. NCI’s team of highly skilled professionals
focuses on delivering cost-effective solutions and services in the areas
of agile development and lean software O&M; cybersecurity and
information assurance; engineering and logistics; big data and data
analytics; IT infrastructure optimization and service management; and
health and program integrity. Headquartered in Reston, Virginia, NCI has
approximately 2,000 employees operating at more than 100 locations
worldwide. For more information, visit www.nciinc.com
or email investor@nciinc.com.
Like us on Facebook and follow us on Twitter (@nciinc_) and LinkedIn.

Forward Looking Statements

Portions of this press release may constitute “forward-looking
statements,” and assumptions underlying such forward-looking statements,
within the meaning of the Private Securities Litigation Reform Act of
1995 (the “PSLRA”). Any such forward-looking statements are made within
the “safe-harbor” protections of the PSLRA and should not be relied upon
as representing our views as of any subsequent date. We are under no
obligation to, and expressly disclaim any responsibility to, update or
alter these forward-looking statements, whether as a result of new
information, future events or otherwise. Forward-looking statements in
this filing include those regarding when the company intends to file
amendments to its Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 2016, June 30, 2016, and September 30, 2016. The
statements are based on the current beliefs and expectations of
management and as such are subject to significant risks and
uncertainties. Such forward-looking statements are based on information
available to us as of the date of this release and involve a number of
risks and uncertainties, some beyond our control, that could cause
actual results to differ materially from those anticipated by these
forward-looking statements. Such risks include the uncertainty
surrounding the timing of the filing of the company’s amendments to the
above-referenced Form 10-Qs. Additional information that could lead to
material changes in our performance is contained in our filings with the
Securities and Exchange Commission.

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures, including
adjusted EBITDA and adjusted EPS. NCI defines adjusted EBITDA to exclude
additional general and administrative costs associated with the
transition of named executive officers and the embezzlement of company
funds by NCI’s former controller. NCI defines adjusted earnings per
share to be diluted earnings per share excluding the impact of
additional general and administrative costs associated with the
transition of named executive officers and embezzled funds by its former
controller, including the tax effect thereon. The company believes this
information is useful in allowing management and investors to better
assess NCI’s comparable financial results. Non-GAAP financial measures
should not be considered in isolation from, or as a substitute for,
financial information presented in compliance with GAAP, and investors
should carefully evaluate the company’s financial results calculated in
accordance with GAAP and reconciliations to those financial statements.
In addition, non-GAAP financial measures as reported by the company may
not be comparable to similarly titled amounts reported by other
companies. As appropriate, the most directly comparable GAAP financial
measures and information reconciling these non-GAAP financial measures
to the company’s financial results prepared in accordance with GAAP are
included in this news release.

   
NCI, INC.
RECONCILIATION OF NON-GAAP OPERATING MEASURES

(UNAUDITED)

(in thousands, except per share data)

 
Three months ended December 31, Twelve months ended December 31,
2016   2015 2016   2015
 
GAAP operating income $ 2,825 $ 5,574 $ 16,808 $ 20,676
Depreciation and amortization   1,806       1,884     7,020       7,659  
EBITDA 4,631 7,458 23,828 28,335
Misappropriation loss 1,067 1,132 4,907 3,238
Uncertain tax position interest 631 631
Executive transition costs   1,750           1,750        
 
Adjusted EBITDA 8,079 8,590 31,116 31,573
Adjusted EBITDA margin 10.4 % 10.2 % 9.7 % 9.5 %
     
NCI, INC.
RECONCILIATION OF NON-GAAP OPERATING MEASURES

(UNAUDITED)

(in thousands, except per share data)

 
Three months ended December 31, Twelve months ended December 31,
2016   2015 2016   2015
 
GAAP net income $ 1,102 $ 3,550 $ 9,481 $ 12,172

Total adjustments1

3,448 1,132 7,288 3,238
Tax impact of adjustments  

(1,348

)

  (436 )    

(2,849

)

  (1,249 )
Adjusted net income 3,202 4,246 13,920 14,161
 
GAAP diluted earnings per share (EPS) 0.08 0.26 0.69 0.89
Diluted adjustments per common share 0.15 0.05 0.32 0.15
Adjusted diluted EPS 0.23 0.31 1.01 1.03
Shares used in computing adjusted diluted EPS 13,749 13,831 13,834 13,705
 

1See summary of adjustments in Table One

Contacts

NCI, Inc.
Investor Contact
Lawrence Delaney, Jr.
Investor
Relations Advisor
714-734-5142
or
Media Contact
Joelle
Shreves
Vice President, Marketing & Corporate Communications
703-707-6904