Q3 2020 ManTech International Corp Earnings Call

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Talented people continue to show great resilience, and that's an unprecedented national and global backdrop brought on.

By that ongoing pandemic.

I want to thank the team for their unwavering commitment to our customers and emissions.

So I hope that Congress values the necessity of this coverage.

As a nation awaits for the final results of the election.

I would like to note that we expect either administration to focus on key areas such as Cantering your peer threats, bringing advanced technologies emissions across the government.

And shifting towards the use of technology and all future domains of conflict.

We are well aligned to provide are differentiated offering against the strategic national priorities.

Let me offer some brief thoughts on the business development print.

We experienced a healthy level of adjudication this quarter, which resulted in a 2.1 time spoke to bill.

Back towards Kevin discussed and that Matt will build on in a few minutes continues to translate into strong topline growth.

Our strong balance sheet and cash flow position provides us with great financial flexibility to invest for future organic growth.

Well, you enhancing M&A and to continue returning cash to shareholders. The key components of our capital allocation approach.

I would reemphasize that we have limited with reliance on this coverage at this time.

Shifting to the bottom line, we're expected adjusted net income between 131.6 million and 133.2 million and adjusted diluted EPS between $3.24 and $3.28.

Underlying these guidance ranges are an effective tax rate of 24.4% and a fully diluted share count of 40.6 million shares.

To identify and analyze threats to the homeland.

This is a marquee analytics program within the federal government and the award recognizes Manitex excellence in this capability area.

On the cyber front, we were awarded a $266 million new effort to assist in agency of the department of defense and developing a full spectrum cyber capabilities.

Also in the quarter the department of state meaningfully expanded an existing contract of ours to provide additional threat and risk analysis and technology and technical security countermeasure services to safeguard their personnel operating globally.

The unconventional environment with great resilience.

We remain on path to close out another strong year of financial performance.

Uhm.

Got them Kenna of Galvin Your line is open.

Hey.

If it is the Biden administration I'm, just curious does that.

Great opportunity or risks that we should be aware of.

So first off the the work that we're doing in terms of this is very high and predictive analytics.

And is.

Really focused on stopping bad things and bad people from coming over from across the border and so this is one of the if you talk about standalone analytics opportunities.

You extended your contract with the <unk> Air Force's space and missile systems launch enterprise.

Can you can you comment on like what services, you're providing for that contract and I guess, just our overall competitive positioning in that that area.

Let me briefly high level than a weird it over to Matt. So we do a lot of work in and around space within the deal would be in the intelligence community in different aspects.

We believe space like other.

Physical system components are going to be able to long term take advantage of the systems engineering aspects that we propose an approach.

And we're seeing that in space is no different.

Specific to programs I'll, let Matt speak to that.

Yeah. So some of the programs that you're talking about Louie you know those are ones, where we are actually conducting and supporting the launches right out in Vandenberg, California, and Cape Canaveral in Florida. We are doing model based system engineering work there and we also are working on the new launch entrant vehicles, though Spacex blue origin and all of those.

Our new launch vehicles, we actually work with the government and do model based system engineering work as well as some.

I'll, just say very interesting analytics work as a part of that in addition.

Sounds good thanks.

The aligned with the use of our priorities and that didn't grow faster or is on the addressable markets for the next call. It like five to 10 years.

Sure. So so we're focused on five main technology focus areas first than others, but I would put it into these categories. The first is cyber next.

We're developing the next generation of cyber capabilities full spectrum. The second one is eight what we call a cube in that automation artificial intelligence and analytics.

The third is intelligent systems engineering, which is around Motlagh actually the model based system engineering that I alluded to with some of the space launch work that we do but we are doing that at a multiple multitude of agency.

And then we also have mission in enterprise IP, that's a very large category, but thats where were doing a lot of of information technology and with a lot of different technologies woven and then data at the tactical edge. So you weren't at the tactical edge right now with our customers and we feel that we actually can bring technology.

When the phrase we use is bringing digital to the mission and a unique way that can actually.

Our.

Customers be more successful.

And the AOR is that there are any.

Great Thats helpful. Thank you very much.

Okay. Thank you.

Our next question is from Joseph Denardi of Stifel. Your line is open.

Thanks, Good evening everybody.

Kevin or Matt sorry, if you've addressed this already but as the dollar value of your pipeline extended pretty meaningfully quarter over quarter to 30 billion.

Sure in some areas, where traditionally people did not see us competing.

It also customers are expanding scope on contracts, we have in areas that have the highest demand. So it's a mix of all of us.

But I would say market share is based on mission needs and where where they get to the talent the capability.

Okay, Okay, and if I could just sneak one last in certain for Judy just the cash strengthen the year is that the new baseline that you can continue to grow in a loss of 21 are there kind of a payroll tax headwinds or other concern.

Durations that than that tougher and as you want to.

By and large Idns junior answer as well that would be helpful. Thank you.

Yes the.

You know it was a really strong quarter with the DS sales that we really don't have a lot of unusual cash items on that flow through and said that he is now really is the driver I.

I'd love to say, we can sustain 54 days, but [noise].

That that seems given our our customer and some of the issues. They sometimes go through seems a little.

Hughes and hiring and on boarding talent for some of their intelligence program.

Curious what your experience has been on that front and kind of how you view the hiring environment more broadly.

So I think for us, it's a competitive market but.

I mean, I don't think it's changed from our perspective, we we've been able to hire and recruit in this cobot environment no.

No different than we've been able to recruit in the past so I wouldn't say that it's gotten harder or more difficult, it's still competitive, but we're obviously up for the challenge.

I will add that the ability to can you tell us clear did slow down during covert and I think thats picking back up so our industry did see a little bit of a delay on new entrants into the clear community.

Okay last question from me.

The company has a pretty significant presence in the intelligence community.

Given some of the disruption related co video I was wondering if you've seen any momentum to do things in a manner. That's more friendly to your business I know in the past there have been some pushes to expedite the clearance backlog and kind of narrowing the scope of classified activities.

So for our industry not just mantech there are more moves afoot to make.

Make sure people are working safely onsite where appropriate to have secured facilities that contractor facilities to help with expansion in mitigation.

And where appropriate.

To have select worked on it.

In an unclassified environment. So those things are all being considered.

But in terms of how it plays out long term I think we'll have to see Matt you thinking nothing significant.

Okay got it thanks, so much.

Our next question is from Robert Spingarn of Credit Suisse. Your line is open.

Scott on for Rob.

Judy just just following up on Joe's question can you clarify how much benefit the payroll tax holiday, it's expected to be this year.

He asked me, we actually decided not to take advantage of that were getting paid by a customer style email us.

Good citizens of the country, we decided you know not to have to take advantage of that and not just continuing into paying our payroll taxes.

Okay, Great and then I think in your remarks, you brought down the Capex guide to the low end of the prior range just curious if that's a.

Push out of spends that while they next year's capex spend levels or if that's just coming in below budget.

We just said we came in a little low in Q3 on Q1 and two are a little bit more elevated. So I think you know Q4, we expect to get more normalized and then Dominion says. It's a 2021 you know I think that that's that's a good long term.

Number for right now.

Got it and then Kevin one for you you know one thing we hear about other services companies, you know khaki or line doses, they're talking quite a bit about getting more involved in the hardware space.

To drive margins higher and it's certainly niche low volume hardware solutions that thereafter, but it's nonetheless, its product revenue and it carries good margin just curious if that's a focus for you at all or is your.

Margin expansion strategy, a little bit more socgen also thank you we're.

We're still focused on solutions and services, we have a good capabilities and supporting the government where appropriate in a more license sales were little delivery basis.

I don't think we're prepared to go win into a hardware business right now and not be taking the best available. That's that's already in in market by by being prioritizing prioritizing room specific assets and inventory.

Yeah, I think we're sticking with our customers the solution differentiation, we bring is to be being that honest broker would not have any any.

Any allegiances elsewhere has a proven a great strength right.

Okay makes sense certainly seeing the growth numbers. Thank you.

Again, if you have a question at this time. Please press the Star then one key on your Touchtone telephone.

Yeah.

[noise] [noise] right looks like we have no further questions. So thank you all for your participation on todays call and your interest in Mantech as usual members of our senior team will be available for any follow up questions have a good evening and please stay safe.

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

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