ManTech: Government Contracting Work Faces Possible Headwinds

Government solution provider ManTech International Corp. has found this year to be a good one for government contracting, but sees potential headwinds if there are delays in determining the next federal budget.

Kevin Phillips, ManTech president and CEO, told investors on Wednesday during the Fairfax, Va.-based solution provider's second quarter 2018 earnings conference call that his company saw exceptional performance during the quarter, which ended June 30.

"We maintained an impressive pace of organic growth, and were awarded a number of new contracts that put us in a solid position for continued growth," Phillips said.

[Related: Pentagon Unleashes $10B JEDI Cloud RFP With Single Award In Mind]

ManTech, which has a strong focus on mission-critical federal government IT requirements, including contracts with the Department of Defense, was pleased to see the U.S. Congress making meaningful headway on fiscal year 2019 defense appropriations, with draft markets generally in line with President Donald Trump's budget requests, Phillips said.

"However, there's a potential for fiscal 2019 to begin under a continuing resolution, which could have a slight impact on the timing of new contract awards for the industry," he said.

Overall, Phillips said, ManTech's portfolios, capabilities, and customers continue to be in line with budget priorities.

"We are seeing customers apply strong focus within the space and cyber domains with both policy and execution," he said. "These efforts feed more broadly towards supporting both national security and national defense strategies.

To support continued growth, ManTech's strategy in the past quarter was to make significant investments in improving the company's infrastructure, including investments in business development, engineering, and strategic acquisitions, as well as in systems and in personnel, Phillips said.

"I am pleased to say that our performance in the quarter, particularly around winning new contracts at scale in the enterprise IT and systems modernization area, is a result of that focused strategy," he said. "This is the continuation of a multi-year trend that we are experiencing across our business."

ManTech started it third fiscal quarter with the awarding of a new contract for worldwide enterprise IT support for an unnamed Department of Defense agency, with a value of $959 million over 10 years, Philips said. This followed the awarding of several smaller new contracts in the second quarter, he said.

Phillips, responding to an analyst's question about labor, said his company has been very successful in the last three quarters in hiring the people it needs for contract work, as well as being able to add new people to meet the requirements of new and existing contracts over time.

"That said, the market for the higher-end labor continues to be very tight," he said. "The timeline on [government agency] clearances is beginning to show some improvement. I'd say it's not material, but it's an improvement. And also note that our federal customers are very focused on this, and are doing some heavy lifting to make sure we have the ability to recruit talent to meet national security missions."

For the second fiscal quarter of 2018, ManTech reported revenue of $491 million, up from the $413.7 million the company reported for the second fiscal 2017 quarter.

The company also reported net income on a GAAP basis of $19.9 million, or 50 cents per share, up from last year's $15.6 million, or 40 cents per share.

The results beat analyst expectations on revenue, but were about 1 cent below analyst expectations for earnings, according to Seeking Alpha.

Looking forward, Chief Financial Officer Judith Bjornaas said ManTech increased and narrowed its range of revenue expectations, with revenue for all of fiscal 2018 expected to be in the range of $1.92 billion and $1.96 billion. Net income is expected to be in the range of $79.5 million and $82.6 million, while earnings per share is expected to be in the range of $1.99 and $2.07, Bjornaas said.