Greetings, ladies and gentlemen. Thank you for joining us for the Vectrus Second Quarter 2021 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Jen, and I will be your operator for today's call. At this time, all participants have been placed in a listen-only mode. Following management's presentation, I will open up the call for a Q&A session. And now I'll pass the call over to your host, Mike Smith, Vice President of Treasury, Corporate Development and Investor Relations at Vectrus.

Thank you. Good afternoon, everyone. Welcome to the Vectrus second quarter 2021 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'd like to point out that we will be discussing and reporting adjusted non-GAAP metrics, including adjusted EBITDA and margin, adjusted net income and adjusted diluted earnings per share. The definition of these non-GAAP measures can be found in our presentation materials, press release and Form 10-Q. At this time, I would like to turn the call over to Chuck Prow.

Thank you, Mike, and good afternoon, everyone. Thank you for joining us on the call today. Please turn to Slide 3. I am pleased to announce that our business continues to advance on all fronts, resulting in a very solid second quarter. This success wouldn't be possible without the innovation and dedication of our employees who stand with our clients across the globe in support of their most critical missions. We continue to build on our first quarter momentum with revenue increasing 40% year-over-year to $471 million, an all-time high for Vectrus. We grew organically by 21% driven by new business, base expansion and phase-ins. Our topline strength was matched by a significant increase in EBITDA margin to 5.6%. The combination of increased revenue and strong margin performance in the quarter yielded adjusted diluted earnings per share of $1.52. In the second quarter, we were issued a LOGCAP V task order to support a major client exercise in INDOPACOM, known as Defender Pacific 21. This exercise is illustrative of the rapid response and quick turnaround requirements that we expect to see over the next decade under the LOGCAP V contract. We expect our momentum in the Pacific to continue to grow as we phase in the Kwajalein task order and become fully operational in mid-2022. Additionally, we achieved two major milestones during the second quarter, successfully transitioning both Iraq and Kuwait task orders and reaching full operational capability. I'd like to thank our team for their significant contributions in challenging environments to ensure client success. We look forward to serving as the Army's preferred source for logistics and base operations support and sustainment services in CENTCOM over the next several years. We ended the quarter with total backlog of approximately $5 billion, and pro forma backlog of $5.3 billion. With regard to our OMDAC-SWACA recompete win, our client have lifted the stop work order and we have started performing on the new contract. The OMDAC-SWACA award is included in our total backlog. One protest in the Court of Federal Claims remains on OMDAC-SWACA. Because of our strong year-to-date results and backlog, we are increasing our 2021 revenue and EPS guidance. Please turn to Slide 4. Vectrus continues to execute a strategic framework, which is driving improved performance and growth across the business and positioning us to lead in the converged market. Our momentum is being advanced by our growth and capital allocation model, which is focused on investing in organic growth, targeted M&A and developing and inserting operational technologies aligned with our strategy. The growth generated from this dimension of our model leverages our Enterprise Vectrus performance improvement initiatives which are increasing value by automating our core program and support processes, cost efficiencies, supply chain and technical enhancements to modernize our programs and support functions. The foundational aspect of this framework that catalyzes and connects all of our efforts together is our team and cultural development initiatives. The people of Vectrus have been and continue to be pivotal to our success. We utilize our leadership development framework to grow this talent base. Additionally, Vectrus' value-based culture is tightly coupled with our demonstrated focus on corporate social responsibility, diversity, equity and inclusion. Vectrus is a majority minority company with approximately 60% of our workforce representing people of color. Vectrus Diversity, Equity and Inclusion Council, Employee Resource Groups and DE&I town halls and leadership summits for our employees are essential to our culture and management system. These components of our value system and strategic framework are enabling Vectrus to deliver on our strategy's three core elements: enhance the foundation, expand the portfolio and add more value, which are transforming Vectrus into a larger scale, higher value and differentiated platform. Please turn to Slide 5. Our second quarter results demonstrate Vectrus' increasing position and significant opportunity in the Pacific region. During the quarter, our INDOPACOM revenue grew meaningfully as we increased our operations and supported mission requirements in the region. Our revenue in INDOPACOM now comprises 6% of our total revenues. Additionally, we believe the longer-term opportunity for Vectrus to expand and grow in the region remains strong as our prime position under LOGCAP V enables us to support the Army throughout the full range of operations in the region over the next 10 years. Furthermore, we have strategically invested to bolster and increase our core set of capabilities in INDOPACOM since 2018. Today, Vectrus provides several key solutions that are aligned to support the growing requirements of our clients. One of these solutions is the integrated electronic security and protection of critical assets and installations. Vectrus is the exclusive provider of C3 integrated network security systems for the U.S. bases across Korea. Vectrus is also the exclusive provider of security design and C3 network solutions supporting and protecting the foreign military sales F-35 program in Japan. Additionally, under our fleet systems engineering team, FSET program, Vectrus provides specialized IT systems engineering and communication support to forward deploy Naval forces in Japan and throughout the region. Our FSET teams help ensure the readiness of U.S. naval ships and continuity of Navy C4I Systems in the event of a systems malfunction, attack, cyber-attack and other system impacting incidents. Through our engineering and digital integration solutions, today Vectrus is integrating CBRN sensors, force protection assets, and other data sources as part of an IoT solution at certain INDOPACOM installations that will provide early warning and enhance situational awareness of potential threats. Vectrus has a legacy providing multi-functional logistics and sustainment level maintenance of vehicles and prepositioned stock. We also provide full spectrum MRO services for legacy and next-generation aircraft. Currently, in INDOPACOM, we are providing maintenance of the C-130 aircraft in Japan, in addition to maintenance and readiness support services for ground vehicles in the region. We believe the requirement for these services will expand and Vectrus remains positioned to support our client requirements. Vectrus' facility and operations and maintenance services are critical to the expected future growth in INDOPACOM. Our converged infrastructure solution supports all DoD clients and today are providing operations support services at several locations in the Pacific. This aspect of our business will increase as we complete the transition and ramp-up of enduring operations at the Kwajalein Atoll, which is currently planned to reach full operational capability in mid-2022. In summary, Vectrus is well positioned in the Pacific to support our clients' requirements as well as the DoD's intent to improve faster in the region. Please turn to Slide 6. We continue to deliver our strategy to diversify our client portfolio, win new business and improve operational performance by aggressively leveraging technology. Our Navy growth campaign continues to expand as we combine our capabilities to deliver innovative technology-based solutions while improving mission effectiveness. The results of this campaign are seen in our financial results with Navy revenue increasing 288% year-over-year driven by organic wins and M&A. The Navy now comprises 12% of our total revenue versus 4% last year. During the second quarter, we were awarded a position on the Navy's Worldwide Expeditionary Multiple Award IDIQ Contract for WEXMAC. The contract provides worldwide expeditionary supplies and services to support humanitarian and disaster relief, military exercises and contingencies in 22 geographic regions. This award builds on our position under the Naval Global Contingency Services contract which has been an instrumental part of our Navy campaign. While the contract is currently under protest, we plan to utilize this vehicle as another route to access some important clients. In aggregate, based on the demand from our clients and opportunities in our pipeline, we expect our work with the Navy to expand over the next several years. Please turn to Slide 7. Our acquisitions of Zenetex and HHB remain on track and have resulted in a more capable and diverse company. Our combined pipeline of future opportunities continues to expand as our teams are leveraging joint capabilities, past performance and client intimacy. We are building on Zenetex's foreign military sales capabilities and continue to see future growth in this area, especially as the company was just awarded a contract to provide support services to the State of Kuwait. We believe that over time, the higher margin FMS market will increase as an overall percentage of Vectrus' total revenue. As you can see on this slide, our acquisition strategy has resulted in a significantly enhanced company from a capability and client perspective. In 2018, we materially expanded our sensor integration, Internet of Things and perimeter security solutions. In 2019, we acquired a leading provider of integrated electronic security systems. In late 2020, we introduced Zenetex and HHB allowing us to deliver a more integrated and comprehensive suite of solutions to our clients globally. Our balance sheet remains strong and we continue to pursue inorganic activities that will increase the diversity of our portfolio, expand margins and make Vectrus a premier provider of converged solutions. Please turn to Slide 8. In terms of our new business pipeline, Vectrus remains well positioned to grow organically and win its fair share of over $11 billion in new opportunities we have in our pipeline. It's important to note that recompetes are not included in this amount. I'd like to point out that given the velocity of the LOGCAP V task, our pipeline does not reflect these potential opportunities. As an example, the pipeline does not reflect recent activity in support of the emerging Afghan refugee situation, but we are actively engaged in discussions requiring potential roles in support of the situation. Now, I would like to turn the call over to our Chief Financial Officer, Susan Lynch, for a review of the financials.

Thanks, Chuck and good afternoon, everyone. Please turn to Slide 9. Our financial and operational strength demonstrated in the second quarter is representative of Vectrus' ability to generate solid growth and earnings power. Second quarter 2021 revenue grew 40% or approximately $135 million year-on-year to $471 million. Excluding the contribution from our two recent acquisitions of $64.4 million, organic revenue grew $70.4 million or 21%. Organic revenue was driven by our support of the Defender Pacific 21 exercise in INDOPACOM and ramp to full operational capability of LOGCAP V Iraq in the quarter. Adjusted EBITDA for the second quarter of 2021 was $26.6 million or 5.6% margin. Margin was driven by our acquisitions at the end of Q4 2020, our enterprise performance improvement initiatives, contract execution in the quarter, ability to convert cost-plus components of contracts to fixed price and our continued efforts to transform Vectrus into a higher margin business. Second quarter 2021 interest expense was $2.3 million, up approximately $1 million year-on-year due to the company's two acquisitions late last year. Diluted earnings per share for the second quarter of 2021 was $1.35. Adjusted EPS adding back the amortization from acquired intangible assets was $1.52. Relative to last year, the increase in diluted EPS was driven by the company's improved operating performance, two recent acquisitions, both of which were partially offset by higher interest expense and a higher effective tax rate. Operating cash flows for the quarter were $35.7 million and for the half $14 million. This compares to operating cash flows in the prior year of $20 million in the same quarter last year and $21 million for the half excluding the benefit of the CARES federal and payroll tax deferrals. In summary, our second quarter results demonstrate our ability to grow organically and execute on our strategy of inorganic growth, enabling the transformation of the company into a higher value platform. Please turn to Slide 10, our strategic execution and recent acquisitions have resulted in a more capable and diverse company. Navy revenue now represents 12% of total revenue compared to 4% during the same period last year and a growth of 288% year-over-year. Our organic growth and strategic acquisitions have also further diversified our geographic portfolio. In the second quarter, our revenue in INDOPACOM grew approximately $28 million year-on-year and now represents 6% of total revenue. Our target is focused on increasing our capabilities and presence in the region as well as the phase-in of LOGCAP V is now visible in our results. Our footprint in INDOPACOM will continue to increase as we ramp up the Kwajalein task order. Additionally, our U.S. based revenue composition grew to 31% of total revenue as compared to 25% at the same time last year, driven mainly by our two recent acquisitions. Please turn to Slide 11. Second quarter 2021 total backlog was approximately $5 billion compared to $3.8 billion in the second quarter of 2020. Total pro forma backlog was $5.3 billion and includes contract wins currently under protest. Funded backlog was $1.3 billion. Please note that OMDAC-SWACA is included in total backlog as Vectrus was given the notice to proceed on the new contract. The company's trailing 12-month pro forma book-to-bill was 1.5 times compared to 1.4 times in Q2 of 2020. Please turn to Slide 12. Cash at quarter end was approximately $69.8 million. Total debt was $175 million and net debt was $105.2 million. Both total and net debt were up from prior period due to the acquisitions of Zenetex and HHB on December 31, 2020. The company's total leverage ratio was 1.76 times, well below its covenant level of 3.5 times. We plan to utilize our strong balance sheet to enhance Vectrus' position in the market through the prudent deployment of capital that generates solid returns for shareholders. Please turn now to Slide 13. Given our strong first half performance, we are increasing our guidance for revenue and adjusted diluted EPS. Revenue guidance is $1.745 billion to $1.780 billion. The revised revenue guidance represents year-on-year growth of 25% to 28%. Adjusted diluted earnings per share guidance adding back amortization from acquired intangible assets is increasing to $4.76 to $5.07. This new range for EPS reflects year-on-year growth of 42% to 51%. The adjusted EBITDA margin range is unchanged at 4.8% to 5.0%. We expect net cash provided by operating activities to remain in the range of $58 million to $65 million due to the number and magnitude of new program ramps. I'd like to now open the call up to questions.

Thank you. Our first question comes from Joe Gomes with NOBLE Capital. Please go ahead with your question.

Good afternoon, Chuck and Susan. Great quarter.

Thank you, Joe. How are you?

Thank you.

Doing well here. So I guess kind of the first question I just wanted to throw out there on the LOGCAP INDOPACOM, there had been some issues in the past, we're getting base access due to the COVID and now that we've got this Delta variant going around and making its name, are we seeing any additional increases in base access difficulties or are you that pretty much in the past?

We have people in the Marshall Islands and we've gone through some preliminary transitional activities. Currently, our communications with clients indicate that we are set to transition to full operational capability by mid-2022. As of now, we have not received any conflicting information. However, given the ongoing situation with COVID, we are closely monitoring developments on a daily basis.

I know this has been discussed in previous calls regarding staffing and inflation costs. Are you experiencing any challenges in ramping up your staff with the recent wins? Is inflation affecting your operations in any way? I appreciate any insight you can provide.

Yes. It is a competitive market, no doubt. And frankly in some of our business advisory functions that are more impacted by the current U.S. staffing situation is something that we're monitoring on a daily basis as well. Again, one of the benefits of having a cost-type contract portfolio being in the 70%-ish, we do have some protection in terms of labor costs. But at this point in time, predominantly for our iconic roles, while we are monitoring the situation very carefully we seem to be doing a good job making sure that open seats are full. But again, it's an environment like nothing we've had in the last handful of years, and that's something that we're watching closely. And by the way, I'd like to also add that we've deployed some new technology suites here over the last couple of quarters that are really making us I think a bit more agile which has helped the situation.

Yes. And Joe, I would just add even on some of our fixed-price programs that are covered by a collective bargaining agreement, the majority of those cases were able to recoup from our customer when those CBA or those negotiations occur, we're able to get reimbursed, even under the fixed price.

Okay, that's good knowledge. You talked some on the pipeline and the backlog, but if I'm looking from the first quarter to the second quarter, the pipeline seems to have shrunk a little bit from $12 billion to $11.4 billion, and I think even the backlog has shrunk a little bit. I just wondered if you could kind of add some more detail or color there as to what was going on quarter-to-quarter?

So, it's normal contractual movement. Honestly, we've had some successes, and I must say I'm very pleased with the shape of our new business pipeline and the diversity among our clients. The acquisitions we've made over the past couple of years have really expanded our capabilities, and I believe we have a much more diverse set of new bids in the pipeline now compared to just a few years ago. There's nearly $11 billion in our new business pipeline, which is very robust, and I continue to believe that our win rates are at least at market levels.

Okay. I have one more question before I jump back in queue. Regarding the guidance, I have two quick questions. You didn't increase the adjusted EBITDA margin guidance, and I believe it was 4.8% in the first quarter and 5.6% in the second quarter. First, why is there no increase in the adjusted EBITDA margin? Second, if I quickly calculate your mid-point guidance on revenue, it suggests that revenues in the second half of the year will be lower than in the first half. Historically, you have typically performed better in the second half than the first half. I’m looking for some additional detail or insight on this. Thank you.

This year, we're fortunate to have a significant number of new contracts coming into our portfolio. For the first time, LOGCAP is fully underway, allowing us to introduce quicker program implementations. In looking at 2021, we successfully shifted some of that new revenue to the left. We are phasing out certain programs that are now being integrated into LOGCAP and other areas. It’s primarily a timing issue. We expect to see our full year margins increase from 4% in 2020 to about 4.9% in 2021 at the midpoint. Our efforts to enhance the profitability of our business are progressing well. At the midpoint of our revenue projections, that indicates a 26% increase for the year, with organic growth approaching 10% within that figure. While the timing differs from previous years, it reflects our success in securing new programs and transitioning away from older ones as we move past COVID. Susan, do you have anything to add?

Just maybe two things. So I think, Chuck, in your prepared remarks, you mentioned something about the velocity of the task orders and that's kind of what we saw in the second quarter. So in some respects that pulled forward some revenue out of Q3. We also have the drawdown in Afghanistan that we're covering in our outlook, and a number of program completions. And I think you are aware of the OMDAC-SWACA recompete and the pricing reset that goes along with that. And so, as Chuck said, I think with our outlook, we're looking at a 26.5% growth at the midpoint, which we're ecstatic about and the high single-digit growth rate on our organic is, I think, a really good news story for us, and then increasing by 90 basis points, our adjusted EBITDA margin is just, you know, we couldn't be more pleased.

Thank you for the detailed information. I found your insights very valuable and appreciate you addressing my questions. It was a strong quarter, and I’m excited for what lies ahead in the second half of the year. Thank you.

Appreciate it. Thanks for the questions.

Thank you. Our next question comes from the line of Robert Conners with Stifel. Please proceed with your question.

Hey, guys. Rob here for Joe DeNardi at Stifel. Congrats on the quarter.

Thank you.

The contributions from INDOPACOM are still at relatively small levels, representing 6% of revenues and growing approximately $28 million year-over-year. Can you provide any insights on the long-term potential for INDOPACOM? I noticed in the press release there was mention of an increase in activity, particularly in one of the islands in the Marshall Islands. What are some of the long-term opportunities there?

Yes, sure. We devoted quite a bit of time to INDOPACOM in our prepared remarks. We couldn't be more pleased with our positioning both from a delivery perspective and a contract vehicle perspective. The Kwajalein base, which is the base that you referred to in the Marshall Islands, is actually a nuclear mission and that task was a part of the original LOGCAP win unfortunately. Because of COVID, the transition has been delayed. But again, I had mentioned in my prepared remarks, we're on the island, we've been through transition planning, we're in constant dialog with our client. And to this day as we speak today, the transition to full operational capability should be scheduled for the May-ish timeframe, I think I said the mid-2022 timeframe. So again we are very pleased with our positioning. The exercise that we talked about in the prepared remarks is a type of exercise that we should see on a regular basis in the areas of operations that we are responsible for which would include both CENTCOM and INDOPACOM. So a long-winded answer to your question. There are a lot of moving pieces, most of them very favorable in the INDOPACOM region and we'll continue to see that geography progressing as a percent of our total revenue over the next year or two.

Thank you. I have two questions that are somewhat related. First, regarding the EBITDA margin guidance which has increased by 90 basis points year-over-year, could you provide some qualitative insights into how much of this increase is attributable to M&A versus organic growth, as well as any additional context on this?

We are not going to discuss the specific profit profiles of individual acquisitions, but I can say that the acquisitions we made at the end of last year have added value, and this will serve as a model for our ongoing capital deployment strategy. We will maintain our focus on technology-enabled acquisitions that enhance our overall portfolio. A significant portion of the margin increase for 2021 will be linked to our Enterprise Vectrus activities, where we are continuing to automate our business advisory functions to support our projects, along with exceptional performance from our delivery teams year-over-year. The base operations business is margin-sensitive, but our teams are making excellent progress in implementing new capabilities and techniques, moving towards more automated processes instead of relying on manual methods. This shift is reflected in the margin expansion we are projecting for the remainder of 2021.

Okay, great. Thanks for taking my questions and congrats on a good quarter.

Thank you very much. I appreciate it.

Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to Chuck Prow for closing comments.

Thank you very much and thank you to everyone who joined the call today. Again we're pleased with the results of the second quarter and we look forward to updating you with the results of the third quarter in October. We'll talk to you soon. Thanks.

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.