ManTech the dealmaker: Size doesn't matter

Serial acquirer looks for strategic fit over scale

ManTech International seemingly will not budge from its self-described “fairly contrary” strategy for acquisitions amid investor speculation over more government services transactions to come in the market at-large.

In its second quarter earnings call Wednesday, President and Chief Operating Officer Kevin Phillips reiterated ManTech’s strategy of not making acquisitions “just for the sake of getting bigger” in terms of sales.

But although ManTech “cannot time when acquisitions come out,” Phillips told analysts on the call the Herndon, Va.-based company does “have a stronger appetite” to look at potential deals “as they come through” with federal government funding fully in place through the end of September.

“With more certainty in the budget environment, we'll have more comfort if the acquisitions come along in terms of executing because we look to follow customer budgets and their priorities in decision-making process in acquisitions,” Phillips said.

Even without acquisitions, all signs for ManTech show that this year will be its second consecutive year of growth after four years of declines.  ManTech – no. 30 on our 2017 Washington Technology Top 100 ranking -- reiterated its top-line guidance Wednesday of $1.65-$1.7 billion in revenue, which indicates 5-percent growth at the midpoint.

The second quarter gave ManTech $499 million in total awards and a 1.2 book-to-bill ratio to register its ninth straight three-month period of that number being above one. That shows ManTech continues to grow its backlog faster than it draws down and recognizes revenue.

And the second half shows “very robust proposal activity” with “strong award activity” anticipated in the third quarter, Phillips said on the call.

Second quarter revenue grew 3.1 percent from the prior year period to $413.7 million and first half sales climbed 5 percent to $832 million. The second quarter sales barely missed Wall Street’s forecast of $418.6 million but earnings of $0.40 topped analyst expectations of $0.38.

In WT’s Top 100 conversation with Phillips, he stated ManTech’s premise as “we don’t need the scale in order to compete” but placed higher value on past performance and customer access. Phillips cited ManTech’s acquisition of Oceans Edge as an example of one that added a new customer in the form of U.S. Cyber Command.

That deal fulfills one aspect of ManTech’s mantra that deals must bring new technologies and new customers in new locations as he described then. 

In the Thursday call, Phillips told investors overall government services market is seeing more businesses showing interest in finding an acquirer, which is “a good thing for our industry at large as well as ManTech.”

“But I wouldn't say that it's going to be any different than any other year,” he added. “I just think that more companies are looking at the market and seeing a greater opportunity to exit if that was their plan and get a return.”

ManTech has long prioritized acquisitions for capital deployment with 52 purchases made since its 1968 launch, 27 since its 2002 initial public offering and 12 over the past five years.

The company has the means for more. As of the second quarter’s end on June 30, ManTech has $108 million in cash and no debt on its balance sheet. The contractor also has access to $480.7 million in borrowings from its revolving credit facility, according to its second quarter regulatory filing.

The company did offer a glimpse into 2018 Wednesday as almost 30 percent of its revenue will be up for recompete then, Chief Financial Officer Judith Bjornaas said in the earnings call. Government IT contractors typically have between 15-20 percent of their sales profile up for recompete each year.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.

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