MANT - Earnings call transcript Q3 2019 | Mantech International Corp

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Operator

Ladies and gentlemen, good afternoon, and welcome to the ManTech Third Quarter Fiscal Year 2019 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Stephen Vather, Vice President, Corporate Development and Investor Relations.

Stephen Vather

Welcome, everyone. Thanks for participating in ManTech’s third quarter call. two have President President as and and Wagner, we Bjornaas, CEO; Matt call, Rick Vice Executive CFO; our today’s Kevin and Phillips, Judy Tait On Presidents. Group as well

facts, results harbor are we of call, actual XXXX. Reform could differ made that address forward-looking make During subject the from that the and the Private cause this are safe will thus to Act statements to of materially do factors These statements results. to not forward-looking historical provisions pursuant Litigation statements Securities anticipated

any risks For uncertainties, entitled on made of a latest other obligation full these of discussion call. in this update We Factors refer factors Form section the and the forward-looking filings. other and our no SEC and statements to XX-K our please undertake Risk to

let that, With to over hand call me Kevin. the

Kevin Phillips

share Good you with that afternoon, ManTech excited I’m another quarter. everyone. to exceptional delivered

labor as we robust Our and position of accelerating organic recompetes. market exhibited as revenue new direct our contract maintained our to also flow. by and employees. well growth through dedicated cash retention continue ManTech’s development awards demonstrate business financial a as These of as driven momentum differentiated series and profitability In results well talented improved results QX,

on briefly provide me current Let an the update environment. budget

operating customer cyber, mission and systems ManTech the remains CR, FY and to negotiates finer a operations details the analytics on budget under November XX appropriation. CR Congress spending as operating XXXX and with with provides two-year mission. solely resolution under and focus XXXX security are support. a customers We on through their is priorities deal aligned in a modernization, of continuing extend the potential their IT to particularly of priorities, enacted them visibility with Despite for agency-level and our well allowing

to drove in total X.X $X.X which Our strategic awards backlog will solutions sought-after record times. $X.X book-to-bill $X.X billion the contract represents increase funded backlog a and of our a in billion Rick additional XX% coupled differentiated provide on in with and quarter, highly to awards Contract contract drove the XX% call. and innovative Matt later alignment grew details the year-over-year to billion. awards

our are highlights on few quick bookings. Here a

the First, ManTech. new awards represent work of the for XX% in quarter approximately

were Second, IT, in XX% missions over for of continue support working XX of years. heart core that the of operation awards finally, our mission came customer’s and honored cyber. are mission customers. said, from nearly have defense enterprise awards the And the for the security we and we half All at as to

for procuring continuing customers efforts towards the key constraint. innovation. our are Our speed industry, with need their talent and Within for our remains

contract ManTech’s robust see demonstrates to Our billion-plus after both our to market. a $X awards healthy grow strong billion quarter. opportunity $XX even I’m proposals position and pipeline figure outstanding pleased industry

accelerated in we have As to submission first the track year. from on year. last half volume proposal submissions a proposal we anticipated, did of remain as the QX We similar

inventory the forward the need challenges within new analyst community. the analysts intelligence community. security growth acquired a we automation I’m intelligence provider quarter, strong analytics and of will data developing national and addition analysis to be our executed continue address plan We markets in pleased to the assurance, and acquisitions. to solutions for through the to Group, and is invest In geospatial HXM stated look There with leading a the NGA. services strategic support by to to across on team

element a for in integral on our to Before I our and key I for important company turn the as a customers. work is issue Security call an to Judy, the ManTech. to customers we want is over operational touch do

industrial base. initiatives developed year, beginning these their across chain supply and and and risks on new last policies rollout customers the the cyber of Over our are have the managing government

for a We customers are and interests. a to to partner to best committed partner bear our to talent national are bring technology trusted the who being looking U.S. and those for

Now Judy details our will discuss the outlook. and and specifics financial of performance Judy?

Judy Bjornaas

quarter pleased QX our our revenue surpassed with organic. year-over-year expectations, the was now in Kevin. continued Thanks, quarter of an $XXX the growth. diligence. top are integral growth XX%. team’s we Approximately and the results stood line representing labor in million, the of growth Direct two-thirds The component of the accelerating at was

cost year-over-year. and results efficient Margins expected performance, That not fees some quarter as XX% business primarily by margin award from plus, a of income driven onetime improvement for XX% in the contract management these quarter prime X.X%, in and were items. of contract price of million excellent operating quarter, and grew said, XXXX. approximately was the are as quarter of quarter fixed-price the fourth our XX% to third basis point contracts the or revenue, the was all Quarterly time represented materials. XX% For and Operating same mix well degree. fixed factors manner impact XX% $XX.X of XX strong the

Net share margins. increases year-over-year, income growth These and were and $XX.X and was diluted per respectively. $X.XX up by the driven for earnings XX% XX% improved quarter, million, revenue were our

million the showed cash looking of at debt. to sheet sheet balance flow and statements, quarter-end $XX million Now cash and in balance our $XX

DSO and net cash $XXX to My their or to the a During operations year-over-year. income. the XX-day in a efforts XX exceptional million we from team the quarter, quarter, times X.X drive days to represents dedicated improvement which record generated an of thanks

of authorized maintain paid Lastly, to us $X.XX December. the in share Board dividend our per be to quarterly current has

diluted the the revenue, guidance, for we share. Now looking narrowing net and range income outlook. Compared earnings revised to XXXX tightening previously and per our on while raising our to range communicated are

XX% $X.XX and XX% growth which billion $X.XX billion, represents expect We total range to to or compared XXXX. revenue between

guidance organic rate The midpoint our revenue of indicates X% growth year-over-year. an

the up key guidance. material revenue of of awards recent ramp variability the and balance the of We have drivers visibility contract The are year. excellent our for procurements on level the in

business, path on Despite growth. performance top our guidance recompetes years cautiously XXXX compared on duration of nature puts and specific competitive line, offer the are for recent our a increased and sustained awards optimistic to strong being recompetes extended contract premature and level new in is winning the given of it potential to CR. recent While of good we market retaining the the us

Now moving margins. to

increase operating and particularly of the revised price XXXX, XX year-over-year. the X.X% seasonal guidance for programs increase year for investments, and basis for of margin and and margins bid balance a Our execution trends. point program reflect improvement continued Operating new an in investments, proposal

and would XXXX to goals accomplish XX also basis but XX XX well of guidance executing are ahead XXXX basis improvement the delivery of of points. our margin points, this We of achieving plan targeted only our new not accelerates

result, XXXX As the our to improvement given a targeted constraints we of mix. expect margin gradual be contract cost-plus more

guidance XXXX will QX providing on We our more be posts call. on

to At diluted per and guidance and $XX.X $X.XX the XX.X% share our of are share tax diluted guidance income are Built year net between of narrowing into line, we million million increasing range count our XX.X of earnings to and full bottom a million and fully $XX.X $X.XX. be shares. rate effective

Now to cash flow items.

revenue, from income on we times cash and X.X XXXX and between Our expectations X.X% are the expenditures of net strong performance operations Based and at X.X and unchanged increasing cash remain for year-to-date, the the capital flow amortization our times for to for X% respectively. estimate full collection be depreciation year.

Defense will businesses. Federal Civilian and Now Matt our to speak

Matt Tait

an awards of to Judy. excellent quarter. pleased our different I report contract Within new a five-year our base. we diverse had We MSS Thanks, defense won won number programs. across business, three am customer

support. intelligence mission First, analysis cyber to Activity a million Marine provide with $XXX operations IT, the effort and Corps Intelligence

Common million Ground a Second, CECOM provide $XXX sustainment effort to Army’s System. and software the with engineering Distributed Army on

lastly, customers. systems UAS a And recompete demonstrate These supporting and totaling test sensors on to we development platforms. ManTech a Air contract the and with awards of modernize $XX million Naval Command to the research services core that is help Systems missions trusted evaluation and partner our retained provide

our business contract mission. the data we five-year, scientific to Navy’s through also federal new within In enjoyed force services in won Bureau technical effort several $XX analytics of and a support provide and health protection the Medicine success Surgery We of health million awards. quarter,

year $XX cyber cloud provide million, Agency. secured IT to Additionally, we services migration effort Defense a Health full to the and modernization,

IT how you. well-being health of leveraged underscore market. cyber the and being contract awards awards national in health war are recent These capabilities and the the security and Furthermore, our federal for federal commitment exemplify recent fighters the ManTech’s entire our analytics, to across supporting differentiated over mission, modernization active Rick, includes which veterans.

Rick Wagner

community customers Thanks, through Matt. a our customer. a operation as and I’m in we maintained cyber support our another MCIS sole result recompetes intelligence quarter, the In solid key figure ManTech’s on cyber had an to well. pleased continue demand program security to quarter source retention solutions. for Strong community with expansions intelligence mission and win report across that

a our Not IDIQ Management worth included position Technical noting, $XXX certainly Analytical multi-award won and Air in Development the on Secretary a the of but contract. million and Force we bookings, contract, Services provide national complex Concepts, services as we challenges. the and analytics areas applied mission advanced On and help of IT, solve as in technologies this security well solutions to emerging will on

mentioned the relationships The leveraging analytics HXM Group. in new solutions acquisition nearly market. Earlier, the am recent customer bring ManTech I capabilities, XXX our Kevin of family are who pleased to the our integration employees we complete, August. and joined is skilled to highly and to welcome combined intelligence

talent the talent company. remains retaining a and focus goes very This talent providing ManTech and customers hand-in-hand quickly capabilities innovative to across core focus solutions. our Moving arena. program with accelerating execution. the in us cyber for our best skilled with particularly the recent consistent for for Recruiting focused base highly deliver growth demand our our to awards customer of to meet ramping on our am and I this

generation expanding program. as Our rigorous building well on employees is cyber of as a existing talent cyber in key internship the warriors training centered next efforts to

solution prioritizing for work summary, position delivering am is reliable that and to investing of differentiated reputation ManTech’s training our their new for employees development in development the innovative a national proven report attracting in of mission, investing our and employees. in I successful supporting In competitive clear in result and a customers market the our talents company. and and pleased security has critical

to some of ready We to we strategy. are that your look take our And to execute growth-focused forward continue questions. with

Operator

Instructions] and Gautam Khanna comes Company. Cowen Thank from you. [Operator first Our question from

open. Your line is

Gautam Khanna

Thanks, Yes. guys.

Kevin Phillips

Hey.

Gautam Khanna

don’t overestimate if was in wondering the could just net as one, forward. we so quarter, I you we quantify were one-timers that move favorable the the Judy, Hi.

Judy Bjornaas

think, its fee, the some Yes, some EAC the adjustments. items threw and items regular onetime fee just up of award I of of the more timing like award its

less fee quarter. quarter and the rest it’s to happened probably items of profit say in a same just collide all would the onetime I half that is So normal items from the of than in the

Gautam Khanna

And in contribution revenue guidance? helpful. of what in terms year that’s HXM assumptions this for revised then Okay, are your the

Judy Bjornaas

not big Very a in swing They’re the performance. or little. impact XXXX

Gautam Khanna

the of rate run revenue annual the on metrics acquisition? any given you Have Okay.

Judy Bjornaas

Yes.

Gautam Khanna

Okay.

outstanding color the of of terms characterize the adjudication sort a looks like light maybe and pipeline Are expecting the as with In there of seasonally $X case? QX billion Any what could bids, QX we QX? helpful. to be would you respect

Kevin Phillips

Yes. back ended submitted bit Gautam, and a think have strong I in year. the of I mentioned, we this the it’s amount year of half little proposals a as second

well pushing they that and how So really between federal proposal quarter going predict, this QX and all for us is for to and timeline they’re QX QX. to as heavy. they but it adjudicate be the QX government when as The between is volume QX hard to sending of

on much suggest would QX based that impact the in of growth QX. going to be might So –it the major in thrive happening I fact between and that is outlook in volume terms not that XXXX it’s

Gautam Khanna

mentioned Okay. up of lumpier carry out And due for rebid? ones, sort of recompetes call Thanks. bit binary pickup the me, percentage could may you for And any significant concentration? that that is sales ones risk year. if a the What kind one are to next their last of more you

Judy Bjornaas

in be past But view to as XXXX moderating better the major February. work some starting recompete, we’ll So when think the give there’s some our we true of a continued said I And recompetes. no XX% to in think to extensions. have that’s we’re we’ve impact up guidance XX% for I that on even looks see

Gautam Khanna

Thank much guys. you very

Judy Bjornaas

Thank you.

Kevin Phillips

Thank you.

Operator

you. Thank

from Edward Wells comes question next Caso Our Fargo. of

open. line Your is

Justin Donati

Any for Justin Kind submitted on side? Donati announced in pipeline about Caso. on contracts the you can be on large deal Ed piggybacking here Hi, work near-term? could that, the talk your that this large is of new

Kevin Phillips

for puzzles, heavy. excited large consistently the now Look, to for And that. and again. and Kevin, compete we more we’re small able It’s is are larger bids very about flow

of have the of adjudications. strong do we set reflects successful and some in course include routine the after see in out going proposals So timeline, ones are larger are the to opportunities how But $X we’re we a there. billion again large ones the of we’ll outstanding against that

a within I give it’s submit. healthy can’t pipeline our I but of well So you mix as say as our scale good timing, would

Justin Donati

then strong is next is And you in Appreciate any given into that, mentioned But growth pretty that. comments up year. forward in XXXX, here pulling risk strong of the set looking your there some the really revenue?

Judy Bjornaas

sure mean that. by you Not what

Justin Donati

started that programs some earlier, anything that? Just like

Kevin Phillips

that No. nothing we’re about we This is is pulled There’s as the we When year, Everything for that. entered path actually forward Kevin. early. projected. on

nothing quickly more expected ramp our frankly. is than moving in awards or current pipeline, So up

Justin Donati

All right. Thank you.

Kevin Phillips

thank you. Yes,

Operator

Thank Instructions] Tobey you. question from Our Sommer next SunTrust. [Operator comes of

open. is line Your

Tobey Sommer

and CR. to by Thanks. think continued the sufficient new significant you in do a was I bids Kevin, be even I the that and activity the your would you represent CR if some have awards is growth? customers made comments curious, drive cadence about potentially impacted of starts of bids, any

Kevin Phillips

important we look bet year XXXX how to this been clear and after pretty on were at to be continue we’re this likely But awarded. important. of is budget it’s frankly itself, our we’re be deal uncertainty that think note that majority and The that I underlying FY bidding the into CR work and going strong. through I the CR do to will going against year, will if XXXX performance the process

the nothing impact of are there that I awards have company. annual does that in than suggest significantly through through, it of still course, as starts, cleared occurring. impact they recall, CRs long-term more likelihood timing are the obligation you to that clear of may it once would Of may these but new that the outlook the and have And so year, to work they would

Operator

you. Thank

Tobey Sommer

Yes. Can I ask another question?

Kevin Phillips

Sure.

Tobey Sommer

if describe been around and business sure positioning would and wasn’t of kind Kevin, of company’s the transformation activity you customers? I’d your Sorry, moved on. digital how cloud

Kevin Phillips

Sure.

our platforms critical and customers are their help help to them aspects. future that So, a we we mission-focused company with migrate

are We’re level help moving an AI our environments in to environments investing it’s going that from from the standpoint. environments, our frankly allow a are standpoint, to companies excited at And platforms. customers and fee-based multiple right also lot cloud customers to that use that commercial security cloud a

So part migration. we’re It’s excited. customers’ of normal our frankly a

provide comment on to and going let any Matt I’m Rick that.

Matt Tait

a a where I’d capabilities staying part to IT go company, plays say we we’re heading from market Yes. that as your we question. overall perspective, trends so the mission into that into regards as analytics, liked and of we, how within cyberspace, adult we’re that as in the that

Rick Wagner

I very uniquely I in that that would guess, that add expertise our in well fiber positions us work area. to

Tobey Sommer

say medium-term? of do business of some if cloud of Is you is forth, is semantically, to not, you – out a digital elements it And meaningful kind of it you transformation in now? were the if sort so parse and the part be and would expect to contracts

Kevin Phillips

We look at IT. IT, secured cyber IT and enterprise enterprise mission

cloud directives. support currently have national those migration and on it just based of policy All have or cloud activity some will in

long-term. that movement into So we environment expect continued do

Tobey Sommer

ask or from that range helpful. we X% about sort the about organic, rough would modeling inorganic. my make thinking You right, dollar so could XXXX? question, is I math some of four for acquisitions guidance revenue What annual need even for a be points but is about don’t figure, If be a would carryover of if contribution if should Judy,

Judy Bjornaas

that it from it’s meaningful that, set. to expect expand as but HXM a and inorganic itself, And we the not And of KGS acquisition to a It’s bought component on because the for we was completed of In and XXXX the I vehicles then at QX. start got contributor. XXXX. reason a meaningful not we is within very customer with right small said obviously,

Operator

you. Thank

Alliance of question Partners. Global next Brian comes Our from Kinstlinger

open. is line Your

Brian Kinstlinger

Hi, much great. questions. for my Thanks taking so

than quarter. you expect fourth guys? they awards going You the in XXXX the $XXX first million added to more will are during I’m programs majority curious, the if you period for these new quarter? ramp the began? be Or already of in half stronger Have ramp

Kevin Phillips

be are will it Most starting slowly. I of think a off them mix.

through the won’t call. do have we they real Customers until And it right working quarterly – good when next that for will now. – sense so probably probably we’re of a

Brian Kinstlinger

Okay. that mentioned and of XXXX, XXXX right. if same you’re that Then in submitted in you XXXX be will you’ll have XXXX, proposals said than similar. amount expecting the I

sizable growth, going and I’m and obviously, to You one sustain significant least X% making order should curious we made you’re at submissions organically. XXXX, acquisition to are there? going about in in you’ll be expect investments increase some

Kevin Phillips

business forward and expected healthy. that the they’ve that estimates of are or proposal the remains level It is moving the Our customers submit and just we going that. amount timeline stated dependent executing or It’s and of in next pipeline very on year. around on healthy,

see going year is continued think on and sizable of federal set growth. opportunities to year So, XXXX we much it How very actually executes against or for for help be that’ll dependent us is these strong we’re we that for RFP. on timeline, ourselves a the next broadly, more government year this situate last much competing

Brian Kinstlinger

I related last showed going as to I’m XXXX win new both trends have, based in XXXX. curious Great. forward. how to I you’re any rates question curious much in the about I’m there XXXX, understand guess think I’m proposing, if change versus that opportunities than trying how recompete to has have material been on business in

Kevin Phillips

few paid So towards years, the for answer and focused to generally, been we’ve creating technologies. win overall that on, be frankly, increased has in more solutions off, rates. I technical future And much very using we’ve think innovation and the to we’ve capabilities, and mentioned customer last able seen talent and strong provide bringing

well think we So environment, that can’t will investments off. that have and that, fairly in the sustain the that the guarantee we’ve rate just been I but game and paid ups doing itself, win

the fairly far with this year. pleased so we’re outcome So

Brian Kinstlinger

Great. Thank you.

Kevin Phillips

welcome You’re

Operator

DeNardi Joe comes question next from Stifel. of Our

open. is line Your

Jon Ladewig

in of for little Kevin, prepared about that’s that an And by Jon Thanks, a remarks, more? for initiated talked on Joe. guys. the the opportunity bit cyber new on security effort Can kind ManTech? this Hey, Pentagon. you your elaborate been you this is is

Kevin Phillips

our supply and are them the cyber security on of Well, support federal that to chain to industry infrastructure, end the behalf protection there activities the Because government’s an on federal extension day, at of to and protect make sure government we’re systems. of the data responsibility. support needs critical

security And So it’s do dedicated stable the state government. at to you business do the for national say to a we future, and for if that. a we’ll minimum, we’re want be company,

does for the on meet award. federal much contract something in to long the we very see types most. is term, that to we do work the to customers do order activity what have works favorably for we’ll now, that. governance-driven It’s matters government it consider that On a as and we dependent how want Right of execute

Jon Ladewig

to labor pivoting help enterprise recruitment how to kind you the want and are If the the terms And the trends you it when you not, IT? there? Kind being destination get cyber Can with seeing be Thanks, technologists to of of over of about the retention? you where comes are talk market. and in the you’re in to going for you the who can marketplace

Rick Wagner

is Rick. This

So is highly and labor obviously, market skilled for extremely skilled competitive people. the highly still

lot We engines, have and into it’s equipment of paying off. investments put

this We’re year. having record recruiting

which is revenue can our You see in D&L, driving growth. it our

training to improve continue programs. our We

Very and We’re to this our growing well. within. as improve work right I’m side, and that pleased focused on people retention from on we on very those continue

Jon Ladewig

guys. Thanks, Okay.

Kevin Phillips

Even flat now. Judy can spell

We’re in a good shape.

Operator

Morgan question Stanley. comes Matt Sharpe of from next Our

open. is line Your

Matt Sharpe

for that thanks a hand. guys several quarters, we specifically, little job done cash my at afternoon bit you at When obviously, the wanted taking driving last I down. questions. have to look of DSO talk here dynamic nice just Good and the about a

last just off at Or driving what this XXs, in understand it’s this is, any it was late? company, sort it, keep think flow? maybe subdued levels there and it cash been XXs. could dynamic peel of call it you and I think opportunity just I Traditionally, the the high even has to support mid-XXs. there been and Is us layers quarter, back XX help

Judy Bjornaas

Yes.

in think been on we’ve I it. focused general, very

make that before on then getting kind we on in getting QX fiscal the we our things I in with built finance the some and government approved team faster, put end we’ve customers think side faster, – and the of year. to see new are push processes payments place a invoices the historically, government of

this think right staying it, going that we So last a been low so but the counting on target is benefited few now. it’s I’m to I level. definitely mid-XXs quarters probably at quarter, realistic be to from goal, not our probably we’ve this But long-term

Matt Sharpe

change competition. there starting late, bit. necessarily whole. out inherit more peers’ of environment cycle, the it. your to just maybe to are the uptick and then starting – aggressive any dynamic a competitive a started been budget me authority Has here budget from this seems we’re to the least industry a up protest point. on of question your of not seen at bit dynamics, And analysts and at Got to years your It flatten few a an that an sort of one is but in already to has or competitive as guys, you’ve you Obviously,

get I just right are what of to wanted guys seeing sense there now. So out you a

Matt Tait

think So is Matt. – I this

level environment. I think really from in are activity, perspective, just we a normal the hasn’t changed of protest really this that that seeing

growth and things, the focused in their other – is when talk in strategy those government budgets I putting money about areas is overall, and our you think from the areas. where

positioned that putting as actually the our well think well government aligned the forward. like where strategy future their we we for to – we And dollars. we’re So look feel is is so then

Matt Sharpe

Got it. Thanks.

Kevin Phillips

Thank you.

Stephen Vather

no questions appears time. that we it further Valerie, have this at

members will you ManTech. follow-up of our interest senior usual, participation be Thank your questions. for all on call today’s for in and team available your As any

Operator

for evening. participating. a you this conference. Ladies Have today’s and gentlemen, concludes Thank wonderful

disconnect. may now You

Mantech International (MANT) 30 Oct 192019 Q3 Earnings call transcript