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Vectrus, Inc. (VEC) CEO Charles Prow on Q4 2020 Results - Earnings Call Transcript

Mar. 02, 2021 9:50 PM ETV2X, Inc. (VVX)1 Comment
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Vectrus, Inc. (VEC) Q4 2020 Earnings Conference Call March 2, 2021 4:30 PM ET

Company Participants

Michael Smith - Vice President of Corporate Development and Investor Relations

Charles Prow - President and Chief Executive Officer

Susan Lynch - Senior Vice President and Chief Financial Officer

Conference Call Participants

Joseph DeNardi - Stifel, Nicolaus & Company, Inc.

Joseph Gomes - NOBLE Capital Markets, Inc.


Thank you for joining us for Vectrus Fourth Quarter and Full-Year 2020 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Demmin, and I'll be the operator for today's call. At this time, all participants have been placed in a listen-only mode. Following the management’s presentation, I’ll open the call for Q&A session.

With that, I'd like to pass the call over to your host, Mike Smith, Vice President of Treasury, Investor Relations and Corporate Development at Vectrus. Thank you. You may begin.

Michael Smith

Thank you. Good afternoon, everyone. Welcome to the Vectrus fourth quarter and full-year 2020 earnings conference call. Joining us today are Chuck Prow, President and Chief Executive Officer; and Susan Lynch, Senior Vice President and Chief Financial Officer. Slides for today's presentation are available on our Investor Relations website, investors.vectrus.com.

Please turn to Slide 2. During today's presentation, management will be making forward-looking statements pursuant to the safe harbor provisions of the federal securities laws. Please review our safe harbor statements in our press release and presentation materials for a description of some of the factors that may cause actual results to differ materially from the results contemplated by these forward-looking statements. The Company assumes no obligation to update its forward-looking statements.

Additionally, I would like to point out that we will be discussing and reporting non-GAAP metrics, including adjusted operating income and margin, EBITDA and EBITDA margin, adjusted EBITDA and

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Comments (1)

* VEC offers the defensive nature of a govt-contractor business, coupled with a "re-opening/Covid" angle ($120 mm to $160 mm in deferred revenue--see transcript). Later this year, a major new contract should start to come online, providing good growth visibility into 2022
* For 2021, guidance implies organic revenue growth of 5%
* Higher margins for 2H21 and into 2022 (better mix)
* 2021 Street EBTIDA estimates appear very reasonable to conservative for the next few quarters and the year
* 2021 FCF/share should total around $4.5 to $5/share (low capital intensity business)
* Outside of two successful re-competed contracts this past year, no other contract represents more than 10% of revenue
* Net debt to EBITDA stands at a little less than 1.5x
* Valuation - cheap on a P/E (14.6x '21 and 12.1x '22), FCF/EV (7% on '21) and EV/EBITDA (9.7x '21 and 7.7x '22)
* Finally, is there interest in the company? New change of control provisions were disclosed in yesterday's 10K:

"On and effective February 24, 2021, the Compensation and Personnel Committee of the Board of Directors of the Company approved and adopted an amended and restated Special Senior Executive Severance Pay Plan (the “Amended Plan”). The Amended Plan (i) increases the multiples for two executive positions from 1.5x to 2x and adds an executive position entitled to severance; (ii) changes the timing of severance payments owed to an eligible recipient from installments over time to a single lump sum payment payable within 30 days following termination; (iii) amends the definitions of termination for “Good Reason,” to include any decrease in incentive compensation by a buyer, and termination for “Cause,” to eliminate discretion by a buyer; (iv) provides for the payment of the employer and employee portions of healthcare premiums for continuing health care coverage; and (v) makes certain other editorial edits." Source: VEC 10K
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