Vectrus, Inc. (VEC) Misses Q1 EPS by 13c, Revenues Miss; Offers FY19 EPS/Revenue Mid-Point Guidance Below Consensus

Vectrus, Inc. (NYSE: VEC) reported Q1 EPS of $0.62, $0.13 worse than the analyst estimate of $0.75. Revenue for the quarter came in at $326 million versus the consensus estimate of $328.12 million.

"Vectrus is off to a solid start to the year, with continued strength in bookings, organic growth and margin expansion, solidifying our 5-year path to $2.5 billion in revenue with 7% EBITDA margin," said Chuck Prow, president and chief executive officer. "Earnings per share in the quarter grew 15% year-over-year on the strength of a 60 basis point expansion in EBITDA margin1 and revenue growth of 2%. We achieved this growth while incurring transaction costs associated with our M&A activities, including the acquisition of certain mission IT contracts, and while phasing in new business won in 2018. Our wins in the quarter yielded continued growth in backlog and further diversified our portfolio. Based on our current momentum, we expect bookings for the full-year 2019 to remain strong. Finally, we were honored to receive a seat on the LOGCAP V contract and both the CENTCOM and INDOPACOM task orders. This award solidifies our position and revenue base in CENTCOM and expands our presence in the Indo-Pacific region. With a solid balance sheet and having validated our strategy to transform Vectrus into a higher value, differentiated platform, we are positioned to continue execution on our organic and inorganic growth strategy. The combination of new contracts won to date and the LOGCAP V awards positions us to deliver double-digit revenue growth in 2020, assuming normal protest cycles."

"Our first quarter results demonstrate the increasing power of Vectrus' strategy and operating model, driving revenue growth and profitability expansion even while investing in new contract startups and absorbing M&A transaction costs. While we expect these contract startups will put pressure on first-half 2019 profit, we remain confident in our full-year 2019 guidance," said Bill Noon, acting chief financial officer of Vectrus. "Our backlog is growing through new wins and re-competes, demonstrated by year-over-year and sequential improvements. Additionally, our award momentum has continued into the second quarter with year-to-date wins totaling $2.2 billion, including contracts under protest. With a strong balance sheet in place to support the execution of our strategic plan and uncertainty removed from our revenue outlook, we are off to a solid start in 2019."

GUIDANCE:

Vectrus, Inc. sees FY2019 EPS of $3.07-$3.51, versus the consensus of $3.38. Vectrus, Inc. sees FY2019 revenue of $1.3-1.33 billion, versus the consensus of $1.32 billion.

Mr. Prow continued, "Our primary focus for 2019 is strategic execution of our growth and performance improvement initiatives. Our contract wins and strong momentum in backlog support continued sustained growth. The CENTCOM and INDOPACOM task orders will give Vectrus a presence across all 24 time zones and provide a ten-year platform for organic growth. Additionally, our solid balance sheet, combined with revenue certainty from the LOGCAP V award, positions Vectrus to pursue inorganic growth opportunities."

Mr. Prow concluded, "Execution of our performance improvement activities, known as Enterprise Vectrus, remains a priority and continues to mature. Enterprise Vectrus encompasses several initiatives focused on process improvement, technology insertion, supply chain and program performance enhancements. Central to our margin expansion strategy are: focused execution of Enterprise Vectrus; volume growth; shaping our contract and client mix; and technology insertion. In our mission to support our servicemen and women in their critical duties around the world, Vectrus continues to advance our capabilities and our competitive profile to further differentiate the company as an innovator in the emerging converged infrastructure market."

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