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Edited Transcript of MANT earnings conference call or presentation 31-Jul-19 9:00pm GMT

Q2 2019 ManTech International Corp Earnings Call

FAIRFAX Aug 6, 2019 (Thomson StreetEvents) -- Edited Transcript of ManTech International Corp earnings conference call or presentation Wednesday, July 31, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Judith L. Bjornaas

ManTech International Corporation - Executive VP & CFO

* Kevin M. Phillips

ManTech International Corporation - President, CEO & Director

* Matthew A. Tait

ManTech International Corporation - President of Mission Solutions & Services Group

* Richard J. Wagner

ManTech International Corporation - Group President of Mission, Cyber & Intelligence Solutions Group

* Stephen Vather

ManTech International Corporation - Executive Director of Corporate Development

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Conference Call Participants

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* Brian David Kinstlinger

Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst

* Gautam J. Khanna

Cowen and Company, LLC, Research Division - MD and Senior Analyst

* Jonathan G. Ladewig

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Justin Micahel Donati

Wells Fargo Securities, LLC, Research Division - Associate Analyst

* Matthew Higgins Sharpe

Morgan Stanley, Research Division - Equity Analyst

* Robert Michael Spingarn

Crédit Suisse AG, Research Division - Aerospace and Defense Analyst

* Tobey O'Brien Sommer

SunTrust Robinson Humphrey, Inc., Research Division - MD

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Presentation

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Operator [1]

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Ladies and gentlemen, good afternoon, and welcome to the ManTech Second 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 Stephen Vather, Vice President, Corporate Development and Investor Relations.

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Stephen Vather, ManTech International Corporation - Executive Director of Corporate Development [2]

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Welcome, everyone. Thanks for participating on ManTech's second quarter call. On today's call, we have Kevin Phillips, President and CEO; Judy Bjornaas, Executive Vice President and CFO; as well as Matt Tait and Rick Wagner, our 2 Group Presidents.

During this call, we will make statements that do not address historical facts, and thus are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to factors that could cause actual results to differ materially from the anticipated results. For a full discussion of these factors and other risks and uncertainties, please refer to the section entitled Risk Factors in our latest Form 10-K and our other SEC filings. We undertake no obligation to update any of the forward-looking statements made on this call.

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

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [3]

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Good afternoon, everyone. I'm pleased with ManTech's strong performance in the second quarter. We delivered another quarter of healthy organic revenue growth, improved profitability and remarkable cash flow. Additionally, business development efforts continue to generate strong new business awards and retention of recompetes. Our people first and foremost, combined with our differentiated capabilities, innovation and reputation for strong program delivery are the steadfast drivers behind this success.

Our energy remains focused on ways to attract, train and retain talent necessary to meet customer mission requirements. We continue to make concerted efforts to invest in our workforce with a particular focus on the rescaling towards areas of robust demand.

Despite a very competitive labor market, we are seeing a strong ability to attract talent to ManTech. Furthermore, an increasing percentage of new hires or referrals from our own employees. This, coupled with the accolades we have received from a number of well-recognized institutions, demonstrates our position as an employer of choice within the industry. I'm pleased to report that, collectively, all of these efforts are increasing the speed and security of bringing talent and support to our customer's mission.

ManTech is well positioned where customer demand is exhibiting strong and sustained growth. In the quarter, we won $657 million of contract awards, resulting in a book-to-bill of 1.2x. Contract awards drove total backlog to increase 11% year-over-year to $8.6 billion, and funded backlog grew 15% to $1.5 billion. Matt and Rick will go into further details on our contract awards, but I wanted to highlight a couple of key statistics in our bookings.

First, over 50% of the awards in the quarter represent new work for ManTech. Nearly 60% of the awards were for cyber and IT and approximately 2/3 of the awards came from classified customers. What is clear from those statistics is that demand for our differentiated solutions and innovation is evident across the federal market and our customer set.

Long term, customer appetite for technology modernization, full-spectrum cyber, agile development and digital engineering solutions remains healthy. As a result, our opportunity pipeline remains well over $20 billion. That said, in the quarter, proposal submissions were lighter than expected due to timing of near-term opportunities, many of which have started to be released in this current quarter. We continue to see strong near-term opportunities and expect a strong level of proposal submissions similar to that of last year's levels.

At quarter end, we had over $4 billion in proposals outstanding even after a solid awards quarter. We are seeing awards occur at a reasonable pace, but somewhat choppy from a timing perspective.

Our focus remains steadfast on capitalizing on an opportunity-rich market by delivering thoughtful solutions and levering to our broad portfolio of differentiated capabilities across the federal market.

Now to the current budget environment. Last week, the administration and Congress announced the agreement of a new 2-year budget deal known as the Bipartisan Budget Act of 2019. The deal sets national defense spending for government fiscal year 2020 at $738 billion, representing a 3% growth from the prior year. Federal civilian or non-defense spending was set at approximately $632 billion, representing over 4% growth year-over-year. We are encouraged by these developments, but with too much left in the current fiscal year, remain vigilant on the timing and passage of the appropriations bill. We believe that it is likely that a short, continuing resolution may be required to sort out and finalize the details.

Before I turn the call over to Judy, I want to call your attention to the recent announcement of adding Peter LaMontagne to our Board of Directors. Peter currently serves as the CEO of Quantum Spatial and previously served as the CEO of Novetta Solutions and Paradigm Solutions. He began his career in government services at ManTech, serving in several capacities to include as a corporate officer in the early 2000s. I'm excited to have Peter on the Board, and there's no doubt we will benefit from his energy and expertise.

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

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [4]

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Thanks, Kevin. The results exceeded our expectations in the quarter, and we are pleased with the team's focused execution. Revenue for the second quarter was $537 million, up 9% compared to the second quarter of 2018. Revenue growth in the quarter was evenly split between organic and acquisition revenue. Direct labor also kept pace with our top line growth.

For the quarter, prime contracts represented 89% of our revenues. Contract mix was approximately 69% cost-plus, 20% fixed price and 11% time and materials.

Operating income for the quarter of $33.3 million was up 18% from the second quarter of 2018. Quarterly operating margin was 6.2%, a 40 basis point improvement year-over-year. Margins in the quarter benefited from lower-than-expected indirect costs, strong award fees, as well as some onetime items.

Net income was $24.2 million and diluted earnings per share was $0.60 for the quarter, up 22% and 20% year-over-year, respectively. These increases were driven by our revenue growth and improved margins.

Now on to the balance sheet and cash flow statements. Our balance sheet at quarter end showed $6 million in cash and $44 million of debt. During the quarter, we generated $76 million of cash from operations or 3.1x net income. My thanks to the team and their dedicated efforts to drive DSO to 66 days in the quarter, which represents a 4-day improvement sequentially.

Cash collections are now fully recovered from the impact of the government shutdown in Q1. Lastly, the Board has authorized us to maintain our current quarterly dividend level of $0.27 per share to be paid in September.

Now on to our revised 2019 outlook. Compared to our previously communicated guidance, we are maintaining the range on revenue while narrowing the range for net income and diluted earnings per share. Expected revenues continue to range between $2.13 billion and $2.21 billion, which represents a 9% to 13% total growth compared to 2018. The revenue range maintains a 7% organic growth rate at the midpoint of guidance.

We continue to have high visibility for the balance of the year. Achieving the higher end of the revenue range will be contingent on the timing and pace of material procurements, as well as the timing and ramp of our recent and any new contract awards.

As for profitability, we are on track to deliver our targeted margin improvement of 10 basis points for the year and expect an operating margin of 5.9% for 2019. Embedded in the margin guidance is an expectation that second half margins will be moderated by an increased level of ODCs, incremental bid and proposal spend as well as increased fringe in the fourth quarter.

At the bottom line, we are increasing our net income guidance to between $91.6 million and $95 million, and diluted earnings per share of $2.28 to $2.36.

Built into our guidance are a full year effective tax rate of 25.7% and a fully diluted share count of 40.2 million shares.

Now to cash flow items. We still expect capital expenditures for the year to be up to 3% of revenue. This was to support our managed services contract, internal infrastructure investments, as well as facility improvements and expansion in support of our recent contract awards.

Related depreciation and amortization is expected to be approximately 2.5% of revenue for 2019. We are nudging up our cash flow from operations estimate to be between 1.5x and 1.8x net income for the full year.

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

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Matthew A. Tait, ManTech International Corporation - President of Mission Solutions & Services Group [5]

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Thanks, Judy. I am pleased to report that MSS retained several recompetes in the quarter. We won a 5-year contract totaling $92 million with the Army CECOM software engineering center to provide software engineering and sustainment support to tactical communication systems. ManTech also retained its position on a $325 million multi-award IDIQ with the Department of Homeland Security to continue providing the Science & Technology Directorate with scientific, technical and programmatic support.

Also in Q2, we opened a cyber center in Orlando to deliver advanced cyber capability for current and future requirements from Army PEO STRI. ManTech was awarded a 3-year OTA for $21 million with the Army for continued development of the Persistent Cyber Training Environment for next-generation cyber warriors.

Lastly, I am pleased to welcome John Boyle to the team. John joins us to lead business development efforts for the MSS group, which spans the defense and federal civilian markets. He has deep knowledge of our customers and an extensive record of driving growth. I look forward to working with him closely to capitalize on the strong market opportunity. Rick, over to you.

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Richard J. Wagner, ManTech International Corporation - Group President of Mission, Cyber & Intelligence Solutions Group [6]

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Thanks, Matt. I am pleased to report that MCIS also had a great quarter. We won a new 7-year, $279 million contract with an agency of the Department of Defense to provide cyber and enterprise IT services. We continue to see very strong demand for our cyber capabilities with existing and new customers, particularly with cyber command, given a number of recent awards. This $279 million award, along with MSS' cyber OTA win continues to demonstrate the differentiation of ManTech's compelling cyber solutions offering.

Additionally in the quarter, we won over $150 million of primarily sole source contract awards to deliver cyber, IT, systems engineering and mission operation solutions to a variety of intelligence community customers.

On the operational front, our focus remains steadfast on ramping our recent contract awards and execution excellence across our programs. We remain on schedule in ramping our large Department of Defense agency contract that was won in mid-2018.

In summary, ManTech is well positioned to continue maximizing value for our customers, employees and shareholders. We remain focused on capitalizing on the strong market opportunity that remains in front of us.

With that, we are ready to take your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Tobey Sommer with SunTrust.

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Tobey O'Brien Sommer, SunTrust Robinson Humphrey, Inc., Research Division - MD [2]

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I think you mentioned the award activities, some things got pushed out a little bit. Could you comment about your expectations for the final federal fiscal quarter, where we're in, in the pace of award activities?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [3]

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Yes. It's Kevin. I'll go for the second half of the year. So I mentioned that we're expecting a strong proposal volume for the full year similar to prior year and that is what we basically communicated for the year. That loads it into the second half a little bit more than originally expected. Now most of the work that we're doing going after this year is new. And there's a lot of certainty about those opportunities, but the timing shifted just a little bit. So we expect between the third and the fourth quarter a heavy proposal volume throughout the balance of the year.

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Tobey O'Brien Sommer, SunTrust Robinson Humphrey, Inc., Research Division - MD [4]

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And with respect to the potential for a CR, is that -- the fact that we're coming off -- to your budget, we have a spending agreement, is there -- does it represent the same kind of bogeyman that it has in the past? Or would a CR for a period of time kind of not be as big an obstacle to contract awards, et cetera?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [5]

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Yes. Well, I'll say that the agreement that was negotiated is actually really, really good news. That's how we view that. Because it does clear through a lot of the sequestration issues, and it provides a continuity of normal procurement order. When we're talking time lines here, this is a matter of a month, maybe 2. It's just getting the markups complete. So we see this as a very minimal issue. It's just a lot to get done in September that might bleed over into October.

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Tobey O'Brien Sommer, SunTrust Robinson Humphrey, Inc., Research Division - MD [6]

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Could you give us a comment on your expectations to be able to leverage your services in the Kforce acquisition that you consummated recently? And how long it might take before you get some tangible results from those efforts?

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Matthew A. Tait, ManTech International Corporation - President of Mission Solutions & Services Group [7]

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So this is Matt. So the integration with KGS is going well. Culturally, it's a great fit. They also have a lot of veterans just like us. So very much focused on the mission. And we do anticipate us to meet the business case that we put forth around the KGS integration. So we are excited about the T4NG focus for us, and the pipeline that we see coming.

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Operator [8]

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And our next question will come from the line of Matt Sharpe with Morgan Stanley.

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Matthew Higgins Sharpe, Morgan Stanley, Research Division - Equity Analyst [9]

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Nice quarter. I just wanted to touch on revenues here real quick. So the 9% year-over-year growth, maybe you could break that down between what was organic and how much KGS contributed for the quarter.

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [10]

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Yes. It was about half and half organic and inorganic.

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Matthew Higgins Sharpe, Morgan Stanley, Research Division - Equity Analyst [11]

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Okay. And then so based on the first 2 quarters, it appears the company has, I think it's about a 14% implied growth rate in the back half of the year to hit the midpoint of the guide. How should we think about the cadence? Are there any specific step functions or programs ramping up in the back half that make some uneven growth?

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [12]

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I think as you say, there is definitely going to be a step up in the second half. I think we start to see some of that definitely in Q3 as we start ramping the programs that we won in Q1 and Q2, particularly the contracts that Rick discussed. That will be -- how quickly that gets ramped will be a matter of how quickly clearance transfers can occur. So that's a driver as well as other new business. And then the large DoD-managed services contract that has the 18-months ramp, that continues to ramp over the course of the balance of the year. And then material procurements, we tend to see more of those in Q3 and Q4. And those, it's hard to predict exactly when they will come in.

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Matthew Higgins Sharpe, Morgan Stanley, Research Division - Equity Analyst [13]

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Got it. And then just on the pipeline. I was hoping that you guys might be able to just give a little bit of color around whether there's any needle movers in there over the next, say 6 to 12 months and anything we should be watching for?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [14]

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Yes. It's Kevin. There is some larger volume of work. Again, for the balance of this year, majority of that is new and there are some sizable activities in there. We can't guarantee that we'll win them all. So I think it will be better for us to wait and see how those play out and our ability to be successful on them as to what that means. But generally, over the last 2 years, if you look at our internal target of $100 million or above, we have more proposals. We expect to submit above $100 million than we did 2 years ago. And we're just excited about where are we in the market.

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Operator [15]

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

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Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD and Senior Analyst [16]

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Gautam Khanna here. Good quarter, first and foremost. Judy, you made a comment in your prepared remarks about some of the ODC activity picking up in the second half. But I just wanted to maybe disaggregate the 6.2% reported EBIT margin in the quarter. I mean was it kind of unusual in terms of -- it just seems like you're on pace to maybe do a little better than the guidance implies in terms of EBIT margin. Just (inaudible)

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [17]

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Yes, I think -- so there was definitely the couple of factors with that margin in Q2. A big driver, as I mentioned in the comments, was indirect rate coming in lighter than we expected, fringe was a little bit low. That will pick up, especially in Q4. That gets high as well as bid and proposal costs. It was a little bit lighter. As Kevin talked about, some things slipping into Q3, but now currently being worked. So indirect will definitely be higher in the second half than the first half. We did have a really strong award fee quarter, and then there was some onetime items, but I would say that's probably less than 1/3 of the differential.

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Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD and Senior Analyst [18]

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Okay. That's helpful. Very helpful. And speaking to the bid and proposal activity, do you anticipate Q3 will have a bit of a budget flush for bookings? Or are your expectations tapped down just given the slide to the right on some of the adjudication timing you've already seen?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [19]

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Gautam, in the majority of the customers, I think they are -- they're 2 years into a strong budget cycle and have continuity. So I think that the -- my general view is that the quarterly year-end flush may be on procurement, but less on awards. And then we still have to clear through the protest periods that they're cyclical. So I'm less focused on the timing within the quarters for the second half and what we accomplish in the second half.

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Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD and Senior Analyst [20]

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Okay. And then I was wondering if you could maybe comment on the M&A pipeline as it stands right now. Are you seeing anything of consequence that's closer at hand?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [21]

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There's a normal flow in M&A. At this time of the year, it kind of drops a little bit, but we're very excited about what's out there. And I would say that it's a normal flow. We are very selective about what we look for based on the market focus that we have, and I expect for the balance of this year that we'll still see a strong flow for opportunities to acquire.

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Gautam J. Khanna, Cowen and Company, LLC, Research Division - MD and Senior Analyst [22]

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Okay. And just one last one, Kevin, just to put a finer point on your earlier comment. I think it was last quarter you thought maybe Q2, Q3, Q4 would have similar bookings. So would it be dramatically skewed one quarter to the next? Is that -- you're still feeling like December could actually be a pretty decent buck in the seasonal trend?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [23]

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Yes. I tend to think this upcoming Q4, just based on the time line of everything, is still going to maintain a healthy option or potential for success in the fourth quarter this year.

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Operator [24]

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And our next question will come from the line of Edward Caso with Wells Fargo.

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Justin Micahel Donati, Wells Fargo Securities, LLC, Research Division - Associate Analyst [25]

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It's Justin Donati on for Ed. Can you talk about the hiring environment and your plans maybe over the next 12 months? And have you seen any significant changes now that NBIB has reduced its backlog by about half?

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Richard J. Wagner, ManTech International Corporation - Group President of Mission, Cyber & Intelligence Solutions Group [26]

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Yes. This is Rick talking. I think the hiring environment is -- it still remains difficult in some of the areas that we're looking at, like cyber. But we're seeing very strong hiring across the board. And we're putting a lot of investment into that. I think there's probably 3 areas that are focused on mission, very much attracts people. In the recent investment in technology we've made around cloud, automation, analytics is really starting to draw people into the company. And the third piece is that we're investing a lot in our managers to create engagement with employees and that's starting to drive more employee referral. In terms of security clearances, they're reducing the backlog. I think it will still be a little bit of time before we see a major change in terms of the amount of people available through that bill, but they are making progress, and so that looks good.

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Justin Micahel Donati, Wells Fargo Securities, LLC, Research Division - Associate Analyst [27]

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I appreciate the color there. And then my one follow-up is given some of the new managed IT service contracts that you've taken on over the past 18 months here, are you getting higher margins on those to kind of offset the additional asset intensity?

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [28]

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Yes. I think we will, over the life of the contract. I think going into the contract, there's a lot more startup and making sure things are getting in the flow appropriately. So in the first year or so of those contracts, they tend to not be as profitable and then move towards higher margins over the life of the contract.

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Operator [29]

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And our next question will come from the line of Rob Spingarn from Crédit Suisse.

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Robert Michael Spingarn, Crédit Suisse AG, Research Division - Aerospace and Defense Analyst [30]

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I had a couple of questions. One for Kevin, one for Judy. Judy, maybe I'll start with you. Just on working capital, you gave your cash flow guidance. But what are some of the trends in working capital? And is there some opportunity on the DSOs long term? And then Kevin, for you I just wanted to get a sense of the latest on LPTA versus best value. Where do you see those trends heading these days?

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [31]

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Yes. So on your first question on working capital, I think given our current customer mix, I think mid-60s is probably the best that we can do near term. We are pleased with the improvements we made since the end of last year. And that really is the one thing that kind of drives the cash flow, is if DSO goes up or down a couple of days. But I would say our target right now is the mid-60s to low 70s, depending on where we are with the government budget cycle. We tend to see a little bit of a spike at the end of our calendar year, their first quarter as paperwork is still working through the system.

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [32]

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It's definitely a best value procurement environment right now. It is not an LPTA environment. People are looking for innovation, they are looking for solutions, they are looking for paths to provide the current technologies and that's in large part based on the national defense strategy and the mandate to do that. And I think that's a good time for our sector and an important feat for the government, and we're going to be fully supportive of that.

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Robert Michael Spingarn, Crédit Suisse AG, Research Division - Aerospace and Defense Analyst [33]

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Okay. And then just as a follow up to that, have you found that the environment, the competitive environment has been impacted at all by these big mergers that we've seen around you? So I'm not talking about the more strategic M&A that you've been doing, but these larger companies, or are they just going for giant contracts that doesn't really necessarily impact you?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [34]

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The customer and how they procure is what matters to us and being positioned to go after those things that we are worried about and making sure we can compete on the playing field. So for the majority of procurements out there, I think that we're in a good position to compete with other larger companies. If they do a super bundling of things, some of those may or may not be things that we would go after just based on the overall profile, but that's a very selective set of procurements. I don't see that as a restriction on us, by and large for our strategy or RFOs.

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Operator [35]

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And our next question will come from the line of Joe DeNardi with Stifel.

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Jonathan G. Ladewig, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [36]

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This is Jon on for Joe. I just want to say a good quarter. And when you think about growth in the various markets, where are you kind of seeing the most growth? And how does ManTech's capabilities align to that growth?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [37]

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Let me -- Kevin. I'll say something and [add] others say in -- weigh in. So I'll start with cyber as a domain of conflict. It is a growth area because of the maturation of that and the concerns within the federal government around that. So that's pretty straightforward based on the national defense strategy and where things are headed. Within that, our focus on cyber is now an important factor of [alike] things IT. And so that's the benefit and you see that in some of the things that we've spoken about. And with that, I'll hand it over to Rick and Matt at this point.

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Richard J. Wagner, ManTech International Corporation - Group President of Mission, Cyber & Intelligence Solutions Group [38]

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Yes, I think in the intelligence community, obviously cyber is a big portion of our growth there, but also IT monetization as they move to the cloud and as they work towards automation, that's creating a lot of additional opportunity for us as well.

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Matthew A. Tait, ManTech International Corporation - President of Mission Solutions & Services Group [39]

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And I would say as a national security focused company, right, the area is where the budgets are aligning right in our strength. So when we talk about things like Bringing Digital to the Mission in ways that others are not, we're seeing that alignment right in the budget.

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Jonathan G. Ladewig, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [40]

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Okay. And given there's -- the focus of IT in cyber modernization and the broader macro trends in the federal government, where should we kind of focus our attention for ManTech to perhaps outperform your peers? Is it going to be in the civilian side in cyber? Where is the real opportunity for ManTech to kind of leverage its really strong capabilities, better than some of its peers in the government service industry?

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Kevin M. Phillips, ManTech International Corporation - President, CEO & Director [41]

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There are a lot of opportunities out there, so we're very excited about where we are on the market. In terms of whether we outperform or not, I think that's all based on how well we position ourselves collectively and go after the market in each opportunity. So I just think that the market is positive for those of us in our sector and where we're focused right now. And we certainly hope to be competitive in all that we do.

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Operator [42]

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And our next question will come from the line of Brian Kinstlinger with Alliance Global.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [43]

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Just one question. I was hoping you could comment on revenue guidance. I was a bit surprised that it wasn't adjusted, given the 2Q bookings were lighter than you expected. And it sounds like 3Q will be solid on procurement, but also again lighter on bookings, which means you're not ramping some of the work you may have thought. So maybe talk about how confident you are at the midpoint. It sounded to me the high point is not what you're thinking, but it's still an acceleration to 8.5% organic growth. So maybe you can talk about how confident you are with that.

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [44]

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Yes. I think we have really high confidence. I think we've got -- at the midpoint, more than 90% of that is already in backlog. So it really is just a matter of -- like I said, the program that Rick talked about, how quickly those people get on board. We did win some other new programs in Q2. The new business that we do have out there, as Kevin mentioned, it's a very light recompete year from us -- for us. So the bookings that we expect for the balance of the year I think will continue to be essentially 50-plus percent new work that will add growth. So to me, I think at the lower end, very, very solid, and then it becomes the ramp and the materials to get above -- to get to the upper end.

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Brian David Kinstlinger, Alliance Global Partners, Research Division - Head of TMT Research, MD & Senior Technology Analyst [45]

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Great. Just one follow-up, if you don't mind. You've talked about the materials and ODCs. Does that typically come out of backlog? Or is there often times where we won't see that in backlog?

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Judith L. Bjornaas, ManTech International Corporation - Executive VP & CFO [46]

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For the most part, it's in backlog.

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Stephen Vather, ManTech International Corporation - Executive Director of Corporate Development [47]

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Brian, it appears that we have no further questions at this time. As usual, members of our senior team will be available for any follow-up questions.

Thank you all for your participation on today's call and your interest in ManTech.

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Operator [48]

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

You may now disconnect.