VEC - Vectrus (VEC) - Working Through COVID

2Q20 Results. Vectrus posted solid top line in spite of COVID but the bottom line suffered from a number of items. Revenue of $336.1 million increased 1.3% year over year. COVID was a $22.3 million headwind. GAAP EPS was $0.09 versus $0.66. Adjusted EPS was $0.24 versus $0.74 last year. Second quarter 2020 adjusted EPS was impacted by $0.14 from COVID and $0.54 from a contract adjustment.Backlog and Book-to-Bill. Vectrus continued to win new contracts during the quarter, including three with the U.S. Navy valued at $554 million in aggregate. Backlog at quarter's end increased 18% y-o-y to $3.8 billion, Trailing twelve month book-to-bill was 1.4x. The pipeline remains robust with $1.1 billion of submitted bids and $9.5 billion of bids planned to be submitted over the next 12 months.Liquidity. Vectrus ended the quarter with $62.7 million of cash and $117.6 million of availability under its credit facility. Debt at the end of the second quarter was $7.5 million of short-term and $59.2 million of long-term. In the 1H20, the Company generated $34.4 million of CFFO and $32.2 million of FCF. CFFO for the 2H20 should be in the $15 million range.Updated Projections. Second half results will continue to be impacted by COVID, with an estimated $40 million revenue headwind and $0.13 of earnings. SG&A expenses are being aligned to the revised volume expectations. We have lowered our third quarter estimates to revenue of $340 million and EPS of $0.83 with $16 million of EBITDA. For the year, we are now at revenue of $1,400.8 million, EPS of $2.62, and $55.3 million of EBITDA.Maintaining Outperform. We are maintaining our Outperform rating and $62 twelve month price target. Given the clearing skies around LOGCAP V, the AFACP V contract position and the ongoing momentum in Vectrus's other businesses, we believe the Company's future prospects have become much brighter, once the pandemic passes. Read More >>