MANT - Earnings call transcript Q1 2022 | Mantech International Corp

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Operator

Good afternoon, ladies and gentlemen, and welcome to the ManTech First Quarter Fiscal Year 2022 Earnings Conference Call. [Operator Instructions]. I would now like to turn the conference over to Stephen Vather, Vice President, Corporate Development and Investor Relations. Please go ahead, sir.

Stephen Vather

Welcome, everyone. ManTech's call. on participating for first quarter Thanks

Joining and and President; is Kevin Matt Chairman, CEO Phillips, our Judy our me COO. today Tait, Bjornaas, our CFO;

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

we which discussion Factors full and and risks These latest a of in financial will discuss statement We factors for on For of be should a made the forward-looking some any other update filings. XX-K substitute we for the performance and these to investors. undertake refer provide section GAAP Form to call, no our measures, SEC useful non-GAAP uncertainties, information in measures or please other as evaluated not entitled measures. this obligation call. Risk isolation today's believe non-GAAP On our

can the the discussed over in Kevin. this call me earnings non-GAAP first that, call a of quarter You on our hand release. to measures With reconciliation find let

Kevin Phillips

afternoon, I'm start good you and Stephen, ManTech's today's to call. Thank Thanks, joining pleased the for year. everyone. healthy with

the necessary priorities and to more our has Our the balance threat appropriations appropriations environment escalated particularly to invasion people. funding 'XX The against The decisively Ukrainian a at passage return disruptions point our first and on incrementally customers FY expectations meaningfully. has and execute for call, with optimistic enacted, to on consistent are about quarter last as the execution market After Russian their results critical our execution the our be which a devastating improving us the unique reason business results Since were demonstrated comes revenue, QX unprovoked flow levels. unleashed global of clear impact on solid the provides clarity above to the year. environment of our cautiously XXXX, bookings. EBITDA, give cash in

us receiving heartfelt defense goes are The to warfare. months the to full-spectrum been provided by on request of intelligence request. budget capabilities over of evident The national in is residential for The 'XX humanitarian for strategic calls 'XX overwhelming at increases represent defense and pivot turning 'XX support over behind $XXX respectively. have is near-peer US those national in levels, FY cyber of and affected. core the and remains FY the which of who reinforces recently support, funding intelligence, enacted near-peer this few and last necessity and our the All out saddened X% for Russian expanding to The in ManTech $XX security. crisis threats focus which countering strengthening threats X% aggression FY sympathy domains priorities bipartisan the billion and billion

market. growth within risk with the us. government appears The seem than to offer well cleared some proposed Afghanistan more long-term Data be these to from customers tailwinds customers the with Afghanistan, better X to for to Navy, believe signals importantly the respect demand strong offer the cyber cautious capabilities. beginning After differentiated top pandemic digital Pandemic with behind the market from behavior environment clarity. the even the line rapid extraordinary We at last underlying positioned Resolution, Continuing are More and Edge whether automation. shoots ManTech numbers enduring been national systems has our modernization, for demand the is from last meet and highly and to challenges cyber, over and security solutions business. departure of the areas our constraints adjudicate and from federal and work, intelligence our for the quarters, to across classified green the priorities budget current our community and Furthermore, intelligence the are

While it trends performance. to favorable are early, our be tailwinds should and all these of is

in team, and and skilled on recruiting a progress growth we highly and As are focused retaining highly a strong talent. delivering to cleared continued making return organic

it of Judy to to and Now I'll cover over our turn financial QX details the performance outlook.

Judith Bjornaas

adjusted in growth of foundation recent We acquisitions. delivered bolstered reflecting ahead to is was our million Margins better-than-expected contributions expectations compared excellent $XXX Kevin. and the higher the both execution. was the to ahead year, setting were and to strong contributions revenue amortization acquisitions. direct $XX EPS quarter ODCs. X% and EBITDA X.X%, expectations $XX in QX due of figures of year-over-year. were down Net uptick XXXX over to start by QX from revenue Thanks, diluted by Adjusted Resulting performance X% growth up QX throughout driven was labor came XXXX. from and income $X.XX, also for quarter was QX which continued our driven was margin compared of was was EPS was were intangible QX both our XXXX. for million XXXX. expense EBITDA flat net million, steady $X.XX, up income by execution an XXXX. Furthermore, from of the program recent QX million, diluted for Revenue X% $XX

was quarter the in rate tax XX%. effective Our

of by days times the operations statements. sheet the $XX was in showed net X to million sheet $XX X.X fourth XXXX. from flow of and cash strong Cash At debt. an of quarter, dollars from flow end, which the and represented the quarter was now balance in balance XX quarter improvement a million days, driven income DSO Turning million cash $XXX and

$X.XX The a $XX authorized of maintaining us deployment our million cash QX, of shareholders. front, to capital share continue Board in On we current cash per to dividend paid to return has steady in distributed dividends be in the June.

and we be capital sheet level. comfort targets tracking and next remains Our priority, the remains few our quarters. M&A actionable balance potential preferred as that our flexible within deployment well are leverage could over

our guidance previously communicated reiterating across al guidance, to Moving we're measures. on

from is on representing billion, contribution to to from $X.X modes largely revenue X% backlog Just of X% as recompetes the XXXX, balance come from our billion growth XX% $X.X refresh we with new business. expect as smaller to midpoint, At you the a and to add-ons, our expectations year-over-year. well guidance our for coming revenue approximately

continue quarter in awards. the securing be to should contribution We slight up quarter as well through we chip fulsome wins revenue enjoy risk year of contract away won the as from in the year even more extensions. as to for quarter to half step balance recently begin the at revenue The of multi-year with a recompete trajectory the second relatively

to margin EBITDA guidance continues and of margins, our For assume X.X%.

enjoyed spending nonrecurring normalization tailwinds the and As excludes in a XXXX. reminder, XXXX indirect margins assumes of

EPS XX.X our fully to income $X.XX our count These approximately range million to continue the bottom diluted we with assume adjusted line, of million, $XXX.X Turning still ranges net an $X.XX. adjusted and of in tax share diluted expect to $XXX.X a rate million effective XX.X% to of to shares. of be

is expenditures Finally, from be expected expected cash the year. for at of to flow be to million X.X% operations with revenue still capital least $XXX

Now operational Matt quarter. the to I'll over to call and the turn cover highlights the business in development

Matthew Tait

the the cyber business, contract contracts booked several awards with in operations approximately quarter Thank a driven you, line the supporting classified of full-spectrum which $XXX the capabilities new for solutions. accounted Bookings book-to-bill and X.Xx. quarter. X/X awards million in new the resulting in Notable awards were approximately customers Judy. in quarter, quarter of large in In we include

specific comment on the our nature a over While renewed belief market I capitalize the demand awards is cannot that cyber moment has of terms. long position what this to continued the further, ManTech backstops differentiated on

defense around model-based acquiring a award engineering further won officially we the system now In Navy new navy, squarely combined of integration of to quarter, number of the customer digital us market. relationships leveraging showcase strength This in we and to Gryphon. of engineering the folk breadth Additionally completed contract are only which with Gryphon long-term QX, capabilities across the our provides thesis a a capabilities OTA our our the new avenue customers. and reinforces the

was Our was and QX backlog billion, billion. total backlog $X.X exiting funded $XX.X

$X We which our to environment billion and incrementally exited business an continuing pipeline proposal a the begin opportunity normalization. to outstanding, and approximately proposals The in for improving the with prosecute of year. has new mix opportunities. awards had aggressively quarter We recompete further solid healthy are with is submissions

we restrictions welcome seeing are us. and look interactions, in we are Overall, reaccelerating pandemic with to our change date growth both environment forward our intelligence lifting, a as in customers pleased market to performance. for invite face-to-face progress we the With core market the a

proposition We customers are ManTech's firmly positioning and confident talent in and value to alike.

customers performance operational you delivering remains through our attracting for and well remarks. excellence back focus to talent. on as as Kevin, for retaining driving closing steadfast Our strong

Kevin Phillips

for employees trusting our With prided take enduring Thanks, thank advance the Matt. ourselves to XX our best their customers customers. genuinely our I for closing, doing are we years, ready our for on and questions. in commitment is what missions. of your now have In critical and nation interest over thank we ManTech that, to their

Operator

Instructions]. [Operator

first coming Now Tobey from Securities. Truist line question Sommer the with of

Tobey Sommer

growth wondering and maybe nuance was into then that dovetail quarter rate describe that in improvement cadence. factors if the in could I in of drove guidance the and of kind the annual implied you in growth the any the of sort

Judith Bjornaas

Sure.

and not about XX% had And we as the really change the in of saw, guidance. we DL So left would the then moving I did to quarter strong you say was the beat. ODC

in just early that to and a expect as would ODCs in step we up of business So then in up. the second to ramp half dip QX starts slight a year the new slight overcome came the

Tobey Sommer

would curious, at seeing some terms over the as both How quarters. may follow-up, M&A what be as valuations? for you of next and quality mentioned you're you was I market several characterize the And well something looking that my acquisitions in

Judith Bjornaas

Yes.

of there. the a really activity XXXX. still there's now think some heavy level is I out little market slow right The in companies given good

of to are has I meaningfully. things I going that valuations, we be we'll implying And but aware right but because probably to have half drop we're that of are what happens the been don't interested valuations quiet So in, see so it's to coming that's think see now, going it year. opportunities anything second and

Operator

is from with Gautam the of line Our coming next Khanna question Cowen.

Matthew Tait

you. Gautam, we can't hear

Operator

Subin line Stifel. question come of Next with the from Bert

Bert Subin

changed first drawdown how has to had changed my the how your customer in I'm exposure guess curious just that's you continue it expect from year? and past I you I Middle here. the obviously changing question, So appreciate how East,

Matthew Tait

mean the our still I are we're and and think exposure it's staying positions intelligence that defense macro bit the within still industry I customer franchise for with. is a us -- large, steady. the

see any there. macro so appreciable -- anything And change we don't

Bert Subin

didn't then Okay. during I don't XQ? during I hear know say basis what you revenue put was another performed you how the I remarks, Or a this your on Judy, And quarter? your can say prepared guess, in if, way, growth can Gryphon organic but

Judith Bjornaas

Yes.

in digits QX I year mentioned in that. is our as the to call, line negative on with So is full last the for expected mid-single growth be organic

Operator

Our with next line Bank question of Mora Mariana from America. the of coming

Mariana Mora

question to my So going is be.

You mentioned How like how defense FY higher in and both recently we see line? the budget are fast can the request. encouraging the prepared impact remarks top spending your 'XX the appropriated

Kevin Phillips

It's Kevin.

that. me Let on comment briefly

So look, it's to going choppy. be

positive, I timing very the how to The and FY think directionally, of but there. very move. funding actual about right is to we the uncertain 'XX execution We're procurements have that move. decisions but They're is view pretty is now. the optimistic starting that, see

that, do want you comments to have any with So you Matt, add? other

Matthew Tait

the couple I'd -- a feels the fully that woods. of things close speed really progress. right, in like intelligence say, still seeing that's gotten we're in normal of side, submissions, yet incremental especially in But -- think again the positive of of, of to area. adjudication area to lot think on not is terms back that up A I terms has in they're improvement, I that

so encouraged And seen by far. so we're what we've

Mariana Mora

Perfect.

also follow-up my is to that. then So related

or far improvement the And you some And environment. that you mentioned second changed color around has please us give in so and You how the quarter? in work that? Could saw some adjudication what quarter? improved

Matthew Tait

sure. Yes,

the we really So crystal don't you line happy QX. quarter, seasonally the ball what a covered as that bookings prediction are CR especially to quarterlys, have a softer view with quarter would of majority had while in we in the really you that's with on and a we first the give the

heard billion the outstanding, healthy expected have in we with adjudications with over and $X that right, proposals so next of recompete remarks, you of the several the new a that And mix business. much as quarters. is in And

obviously, being we view. the about we're conservative terms trends, but of in still excited how So

Operator

from coming Sommer with Tobey question line next of Securities. Our Truist the

Tobey Sommer

the the look budget all budget question of considering catalyze? months of award in ask budget relative medium-term of smoothness 'XX, have I wanted with to war broad and if we growth the tentative of year's took relative fiscal it on process to a any do view this this kind expectations of more Russia-Ukraine sort your into inflation X that process? that federal about you As and impact we juxtapose

Matthew Tait

So portfolio. not us, applicable as you for near-peer it part threats potential really speak meaningful think We the mission of is I when a and are given view more growth EUCOM opportunity about for the Ukraine, support those a sets. the to of our capabilities that focus

say the of situation, that's that's kind context I'd terrible Ukraine. view So a of that how obviously. I mean within we

I'll And there. so from our additional to we macro the there, the Kevin of over but it got a obviously out in to he's pass go that -- And budget folks terms comments hearts perspective, involved environment, if now. any

Kevin Phillips

defense more see intelligence. bipartisan shift countering Matt. in Thanks, the budget the support Look, directionally, Yes. in you Ukraine, supporting of can federal drive for and terms China,

foreseeable future. that, I the to that's for think stay likely

plays take pretty our plays to of see to how worse, money where just you like we terms on the industry, numbers, positioned. is positioned view not Again, how final the the think we're better, takeaway. the well is to need of I of which of we're the key them business. shift all Now in where see directionally, all But and upside environment But to for out? that our a I it think in those longer-term getting industry provide

Tobey Sommer

tailwinds and should improve, being prior better at the think anything that thing? as the profitability Right. margins than inflation, growth of the incremental labor over as the of in that had couple have years last we And terms of of respect does different of occurred given as might profitability sort incremental is well about periods of you margin growth, organic when headwinds with in to company, kind there rates

Judith Bjornaas

Yes.

committed new I think improvement this of from the our baseline. XX of point years to next to over XX in still couple we're basis kind XXXX margins

Tobey Sommer

those with even variables. So

Okay.

Operator

Gautam question Khanna next of Cowen. from with coming our And the line

Gautam Khanna

hear you Can me guys?

Kevin Phillips

you. Got Yes.

Gautam Khanna

Okay.

were that I about prepared the remarks Sorry I higher ODCs was mentioned was in maybe, there or forward expected, that than pull assume hoping earlier. Judy, a you little a something.

quantify And $XXX obviously, to Are X, you times to billion. that. your then the you wondering is if could you this get rate, of take on just million, Just sort $X.X QX this multiply seasonally any ODC think, run there is there just what things on better QX besides that are rolling Is thing based maybe anything dampening should ? off seasonality. rolling a off that's that I be, and point

Judith Bjornaas

Yes.

the ODCs. So I think beat the I mentioned about XX% from of

runoff but driver talked call, bit was we at beginning Department it running forward. that's expected rates. don't in we I did little I have any really than $XX the little of think about nominal. some roughly unexpected. it bit State And So really was I was of was year-end pull in -- QX, QX work I of there performance. just or think the of of it a a million not the of utilization think, new a then DL from, it's higher It higher was We of

Gautam Khanna

the the as in it or? did COVID was strong country you Did as bite first QX, was not In that January, was I'm -- surprised guys that whole in DL Okay. with quarter. [indiscernible]

Judith Bjornaas

we We I had January, bit a well. in of little but recovered beginning the think

people take so of and much impact. definitely first business in Our after kind wasn't back usual. January week but really the precautions It kind or as was of it good to an December, was of was

Gautam Khanna

it curious the of the customer you're... back conclude expect the DoD of I treasury? or mean you anything flush given and else? sends to some we it's be or of budget just to big they to where just late O&M passage the how that, And money kind have March a I'm use it a hey, dollars, for Okay. the of like lose should going QX ODCs do in just Or nature year budget

Kevin Phillips

Gautam, it's Kevin.

for that sporting. say on supporting think just that a be in them playing will our that little in obligating We're I way 'XX, how critical regular be we're it help would spent will responsive like we'll just I to needs the be to order, it support missions. all ready to any global and to funding customers focused start I looks hope a bit

Gautam Khanna

you I Can the calibrate. visibility months then And us Okay. XX% the remind recompete as you over about talked the mean, well? months, XX Just on lastly, just sales backlog. next, XX maybe and have of exposure guys to

Judith Bjornaas

Yes.

And the of is of loaded. year think the balance normal this the So year back-end it's I kind XX%. kind total really of of next year, that into XX%,

Gautam Khanna

X% sales are of And chunky there like worth recompetes? concentrated Anything any or...

Judith Bjornaas

are our greater No, X%. than contracts none of

Operator

of line with the from coming question Subin Stifel. next Bert Our

Bert Subin

the can how you CR the budget, Just what for runs follow-up. Are year actually saw similar planning into expecting in to were had we year? on one specify calendar to the you Kevin, well XXXX? you regards comments 'XX you're FY a making last

Kevin Phillips

to parts two Well, that.

appropriation the to and on I think well both side, conclusion movement the and aisle. more trying the there's rapid get authorization, towards in as decisions as of sides

Now and how preparedness of terms that plays out timing. in

I year, season. think against it quicker going will but overall be we the don't know it's play to this election how than

to play. have So say head, to time just but there's still that urgency in out. January see environment, getting December, more at done, going other be it's recognizing there's plays on but something would based I the global factors on it my how frame, we'll

Operator

Our line Bank Mora question of is Mariana America. coming next of with the from

Mariana Mora

it's you around hiring So us mind could the labor you giving some you don't for the moment? mind, market, if color in how

Matthew Tait

Sure. Yes.

think market. I So competitive it's a

pre-pandemic feel in to we is we're normals. we're what like future terms think back kind of of the I seeing

always the and other programs glassdoor say we competitive. been doing terms we're see the perspective, a again, hiring things solid the it's has ratings right, market, from I'd in that because like the In But all our of competitive. environment macro, are

big like market. of going So change. pre-pandemic it's just the to back a like view feels I a wouldn't It say there's

Operator

back Vather. turn Stephen this to I questions showing I'll call time. And the at over further am no

Stephen Vather

and Great. you and call Thanks, your ManTech. joining interest for today's for us Olivia, thank in on all

team you follow-up the will and Thank and usual, have. As might you, I have senior available any a for evening. be questions good

Operator

today's Ladies and does Thank this conference. evening. you have conclude for wonderful participation, gentlemen, a and your

now may disconnect. You

Mantech International (MANT) 8 May 222022 Q1 Earnings call transcript