V2x, Inc. · NYSE:VVX
V2x — Vectrus — Investor Presentation (September 2014)
44 slides from V2x's investor presentation, Sep 19, 2014
Slide 1: Vectrus Investor Presentation
VECTRUS INVESTOR PRESENTATION SEPTEMBER 19, 2014
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 (THE “ACT”): CERTAIN MATERIAL PRESENTED HEREIN INCLUDES FORWARD-LOOKING STATEMENTS INTENDED TO QUALIFY FOR THE SAFE HARBOR FROM LIABILITY ESTABLISHED BY THE ACT. THESE FORWARD-LOOKING STATEMENTS IN
Slide 3: Transaction Overview
TRANSACTION OVERVIEW DISTRIBUTING COMPANY Exelis Inc. (NYSE:XLS) DISTRIBUTED COMPANY Vectrus, Inc. TICKER VEC EXCHANGE NYSE DISTRIBUTION RATIO 18 shares of Exelis : 1 share of Vectrus EXPECTED VEC SHARES O/S 10.46M CAPITAL STRUCTURE $140M Term Loan A with a $75M Revolving Credit facility KEY DATES •
Slide 4: Agenda
AGENDA Opening Remarks – Cindy Frothingham, Vectrus Director of Investor Relations Introduction – Dave Melcher, Exelis CEO and President Corporate Overview – Ken Hunzeker, Vectrus CEO Business Strategy – Ted Wright, Vectrus COO Customers and Programs – Chuck Anderson, Vectrus SVP of Programs Busines
Slide 5: Introduction
INTRODUCTION DAVE MELCHER – EXELIS CHIEF EXECUTIVE OFFICER AND PRESIDENT
Slide 6: Corporate Overview
CORPORATE OVERVIEW KEN HUNZEKER – VECTRUS CHIEF EXECUTIVE OFFICER
Slide 7: Vectrus: True to Your Mission
VECTRUS: TRUE TO YOUR MISSION Our Vision Our Mission Be the customer’s first choice and most We deliver large-scale IT, logistics, and trusted partner. infrastructure services to enable customer success. Page 7
Slide 8: Experienced Leadership Team
EXPERIENCED LEADERSHIP TEAM • Joined company in 2010 Ken Hunzeker • President, Mission Systems Chief Executive • Vice President for Government Relations, ITT Defense and Information Solutions Officer • Lieutenant General (Ret.), U.S. Army • Deputy Commander, United States Forces — Iraq • Joined comp
Slide 9: Vectrus Overview
VECTRUS OVERVIEW Our Legacy Vectrus Today Proven 50+ year history of deploying resources • Leading provider of: rapidly and with precision to support the mission – Infrastructure asset management success of our customers – Information technology and network Founded as ITT Renamed ITT Vectrus Spins c
Slide 10: Investment Highlights
INVESTMENT HIGHLIGHTS • > $1B business supporting customers’ mission Strong Core Business • Long-term foundational contracts with $2.4B in backlog (1) • Accomplished management team Enduring Customer • More than 50-year legacy supporting customers’ key missions Relationships • Recent expansion into
Slide 11: Vectrus Value Proposition
VECTRUS VALUE PROPOSITION Customer Focus – Deep understanding of customer needs • Successful program execution True to customers’ • Enables client mission success missions Performance Excellence – Vectrus performs on contracts • Historically have received high award fees Customer satisfaction • Curr
Slide 12: Market Dynamics
MARKET DYNAMICS • Vectrus-provided services remain critical to government outsourcing efforts • Balance between performance, cost and schedule remains a priority for the customer • U.S. global reach requires extensive international experience • Expeditionary capability remains critical to support U.
Slide 13: Afghanistan
AFGHANISTAN • Agility and positioning enabled Vectrus to DoD Base O&M Budget (1) win significant amount of work related to ($B) OCO funding in Afghanistan • Base business aligns with government spending priorities • Revenue from existing Afghanistan Vectrus’ Afghanistan Revenue programs projected to
Slide 14: Employees
EMPLOYEES Denotes Vectrus employee locations supporting customer requirements • Approximately 5,600 current global employees • 110 locations in 18 countries with over 75% of employees stationed abroad • Over 60% of program managers and 30% of employees reporting a military background Page 14
Slide 15: Business Strategy
BUSINESS STRATEGY TED WRIGHT – VECTRUS CHIEF OPERATING OFFICER
Slide 16: Core Capabilities
CORE CAPABILITIES Services Key Contracts • Infrastructure sustainment services including base • Kuwait Base Operations and Infrastructure maintenance, public works, civil Security Support Services engineering and minor • Maxwell Air Force Base Asset construction/renovations Operations Support Manage
Slide 17: Global Addressable Markets
GLOBAL ADDRESSABLE MARKETS Markets FY14 Estimated Comments Army Air Force • Large fragmented market both Infrastructure Navy domestically and overseas Asset $48B Other DoD • Significant opportunity to grow DOE Management and expand to new DoD Other Civil U.S.G. customers and new geographies Internat
Slide 18: Long-Term Strategy
LONG-TERM STRATEGY Enhance Solid Foundation Balance the Portfolio Provide More Value Continued Focus on the Expand the Diversity of Enhance and Extend Competitiveness of our Revenue Streams in Core Offerings to Increase Core Business Offerings through New Value Customers and Geographies • Continued
Slide 19: Customers and Programs
CUSTOMERS AND PROGRAMS CHUCK ANDERSON – VECTRUS SENIOR VICE PRESIDENT OF PROGRAMS
Slide 20: Customer Relationships
CUSTOMER RELATIONSHIPS Relationship Relationship Length Length Customer (Years) Customer (Years) U.S. Army Network U.S. Air Force Enterprise Technology 38+ 32+ Combat Command Command U.S. Army Materiel U.S. Air Force – 12+ 32+ Command Europe U.S. Air Force Air U.S. Army Europe 12+ Education & Traini
Slide 21: Kuwait Base Operations and Security Support Services
KUWAIT BASE OPERATIONS AND SECURITY SUPPORT SERVICES Locations DESCRIPTION Camps Arifjan, Virginia, and Buehring; Ali Al • K-BOSSS provides full-spectrum life support and Salem; Camp Patriot; base operations services including transportation, Airport and Seaport logistics, public works, information
Slide 22: Operations, Maintenance, and Defense of Army Communications
OPERATIONS, MAINTENANCE, AND DEFENSE OF ARMY COMMUNICATIONS DESCRIPTION Locations • OMDAC-SWACA provides network & systems Afghanistan, management, communications O&M, network Bahrain, Kuwait and defense and information assurance services to Qatar support U.S. Army, USARCENT, and USCENTCOM requireme
Slide 23: Army Prepositioned Stocks – Kuwait and Qatar
ARMY PREPOSITIONED STOCKS – KUWAIT AND QATAR Locations DESCRIPTION Arifjan, Kuwait and • APS5 KU and APS5 QT provides multifunctional Camp As Sayliyah, logistics - sustainment level maintenance, retail and Qatar wholesale supply, and multimodal transportation- in Customer support of Army units, thea
Slide 24: Maxwell Air Force Base Operations Support Services
MAXWELL AIR FORCE BASE OPERATIONS SUPPORT SERVICES DESCRIPTION Location • Services include facilities, communications and Maxwell Air Force information technology, custodial services, Base Montgomery, emergency management, energy management, AL engineering services, environmental, site maintenance,
Slide 25: Fleet Systems Engineering Team
FLEET SYSTEMS ENGINEERING TEAM DESCRIPTION Locations • FSET provides ashore and afloat fleet systems Worldwide Support with engineers in support of Navy networks and Complex Major Presence in Command, Control, Communications, Computer, Japan, Bahrain, Italy, Intelligence, Surveillance and Reconnaiss
Slide 26: Performance
PERFORMANCE Government Ratings (1) Government Documented Comments 93% Exceptional • “Senior leadership does not view Exelis as or Very Good simply a contractor, rather a mission partner willing to do what it takes to get the mission done.” • “The contractor continually provides 81% exceptional quali
Slide 27: Business Development
BUSINESS DEVELOPMENT JANET OLIVER – VECTRUS SENIOR VICE PRESIDENT OF BUSINESS DEVELOPMENT
Slide 28: Vectrus Business Development
VECTRUS BUSINESS DEVELOPMENT • Centralized Business Development organization creates efficiency, consistency and alignment with strategic plan • Regional offices positioned to remain close to target customers and support centralized strategy • $8.8B in contract wins in the last 5 years • Healthy pip
Slide 29: Large Opportunity for Growth
LARGE OPPORTUNITY FOR GROWTH APPROX. $25B 3-YEAR NEW BUSINESS • Approx. $25B 3-year new IDENTIFIED PIPELINE business identified pipeline – $10B qualified – $1.5B currently under Identified evaluation (expect to award in the next 6-12 months) – IDIQ prime contracts carry Qualified no value in pipelin
Slide 30: Portfolio Transformation
PORTFOLIO TRANSFORMATION Strategic 2014E Revenue Mix Future Revenue Mix Intent Balance Service Lines Diversify Client Base Balance Geographies Page 30
Slide 31: Major Competitors
MAJOR COMPETITORS Infrastructure Asset IT and Network Logistics and Supply Management Communication Chain Management Page 31
Slide 32: Recent Contract Wins
RECENT CONTRACT WINS Date Period of Value of Awarded Customer Program Performance Award U.S. Air September Turkey/Spain Base Maintenance Forces 7 years $458M 2014(1) Contract Europe U.S. Army Corps of Engineers U.S. Army August Enterprise Information Corps of 5 years $517M 2014(2) Management/Informa
Slide 33: Financial Overview
FINANCIAL OVERVIEW MATT KLEIN – VECTRUS CHIEF FINANCIAL OFFICER
Slide 34: Financial Overview
FINANCIAL OVERVIEW • > $1B business supporting customers’ mission critical programs • Substantial pipeline of new business opportunities aligned with strategy • Backlog of $2.4B provides significant revenue visibility(1) • Highly scalable and controllable cost structure • Strong cash flow generation
Slide 35: Financial Performance
FINANCIAL PERFORMANCE Revenue Adjusted Revenue (1) • Historical revenues include Middle East and Afghanistan contract wins • Key strategy to broaden customer base and geographic footprint • Revenue $1.1B - $1.2B 2014E (2) Income Adjusted Operating Income and Margin (1) • Strong operating margin in 2
Slide 36: Backlog Drives Predictability
BACKLOG DRIVES PREDICTABILITY (1) ($B) • Funded backlog four to six months in advance of work • 2013 Book-to-Bill(2) = 1.2; 2014 YTD June = 0.8 • Funded backlog excludes K-BOSSS funding of $445M received in Q3 2014 • Backlog excludes ACE-IT(3) & Turkey/Spain contract wins of $975M in Q3 2014 (1) Tot
Slide 37: Organizational Cost Trends
ORGANIZATIONAL COST TRENDS (1) Scalable Cost Structure Cost Trends • Direct costs flex with Centralized • Leveraging technology to Data Centers program & competitive centralize data centers requirements Middle East Office • Centralizing transaction • Low fixed costs to run Consolidation services to
Slide 38: Capital Structure and Cash Flow
CAPITAL STRUCTURE AND CASH FLOW Capital Summary Cash Flow Commentary • Credit Facility • Predictable cash flows $140M 5-year Term Loan A • Low receivables and inventory risk $75M revolving line of credit • Continued focus on working capital • Assumed $25M for letters of credit under a $35M sublimit
Slide 39: Summary
SUMMARY KEN HUNZEKER – VECTRUS CHIEF EXECUTIVE OFFICER
Slide 40: Vectrus
VECTRUS
Slide 41: Appendix
APPENDIX
Slide 42: Reconciliation of Non-GAAP Measures
RECONCILIATION OF NON-GAAP MEASURES The primary financial performance measures Vectrus uses to manage its business and monitor results of operations are revenue trends and operating income trends. In addition, we consider adjusted revenue and adjusted operating income to be useful to management and
Slide 43: Acronym Chart
ACRONYM CHART Army Corps of Engineers Enterprise Information IT Information Technology ACE-IT Management / Information Technology Kaiserslautern TMC Kaiserslautern Total Maintenance Contract AFB Air Force Base K-BOSSS Kuwait Base Operations Support and Security Services Afghan National Security Forc
Slide 44: Board of Directors
BOARD OF DIRECTORS Name Background Name Background • Director, Accudyne Industries • Chairman of the Board, Meadowkirk Retreat • Chair, Comp. Committee & Audit Committee Center Member, UIL Holdings Louis Giuliano • Chair, Comp. Committee & Nominating • Former Chairman, U.S. Post Office Board of Chai