Vectrus touts clear vision for a 5G strategy

Vectrus’ push to be a leading provider of tech-enabled and converged infrastructure provider to the government includes 5G and the company sees that technology trend increasingly being embedded into client expectations.

During last year’s fourth quarter, Vectrus was awarded a three-year prime contract to help the Navy develop a 5G-enabled “smart warehouse” at its Naval Base Coronado in California and is part of the team chosen to implement a 5G testbed at a Marine Corps logistics warehouse in Georgia.

On Vectrus’ fourth quarter earnings call with investors Tuesday, CEO Chuck Prow said that pair of projects can be broken out into two tracks when it comes to 5G and the smarter infrastructure resulting out of it.

Track one is in the base operations and supply chain line of work that Prow said is moving more in the direction of converged infrastructure with IT tools at the center. Those projects are examples of some federal customers increasingly thinking that way, he said.

“Our clients are going to expect us to operate facilities and supply chains in a much more instrumented and predictive way,” Prow told analysts. “We think that we will continue to insert this technology into our current projects and then into new proposals at an expedited rate over the next couple of three years.”

Track number two Prow brought up is how agencies will shape their contract into “much more pointed and/or tactical procurements focused on different types of facilities and supply chains” that Vectrus sees itself better-positioned for.

“New channels will begin to emerge and we see that now in our pipeline, as well as the way we actually operate and propose our traditional markets, they are going to continue to change,” Prow said. “There's no going back because 5G enables more efficient, more effective operations.”

Vectrus’ most recent three acquisitions also “really further our access to these new channels,” Prow added.

The deal for Advantor in 2019 brought to Vectrus a suite of electronic security products designed to help users gain real-time monitoring and control functions for physical facilities. After that, Vectrus acquired Zenetex and HHB Systems in quick succession late last year to bolster offerings in IT-enabled asset management.

In the meantime, Vectrus like every other company in the government market continues to navigate a world where the coronavirus pandemic is affecting its business. Host country and base access restrictions resulted in a $63 million hit to revenue last year, including $26 million in the fourth quarter alone.

Revenue for all of 2020 climbed 1 percent year-over-year to $1.4 billion, while fourth quarter sales were down 2.7 percent from the same period in 2019 to $355.3 million. The COVID-19 headwinds amounted to a 4.6-percent impact on the top line.

Vectrus sees this year’s sales in the range of $1.645 billion-to-$1.715 billion that would indicate growth of between 18 and 23 percent. The company also sees improvement on the bottom line from last year’s 4 percent to a range of 4.6-to-5 percent adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortization).

The process to distribute and give vaccines will play a significant role in how those COVID-related headwinds and restrictions lift, Prow said. Particularly in the regions where Vectrus is the main contractor for the Army’s LOGCAP V global logistics program.

“We have intentionally put what we think to be conservative guidance with regard to revenue because the reality with regard to COVID, and the headwinds associated with COVID particularly in (the Indo-Pacific Command region) are still a bit uncertain,” Prow said. “And you saw today (Tuesday), the president just announced some good news on vaccines.”