Thank you for joining us for the Vectrus Fourth Quarter 2019 Earnings Conference Call and Webcast. Today's call is being recorded. My name is Daryl, and I'll be the 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. [Operator Instructions]And now, I'll pass the call over to your host, Mike Smith, Vice President of Investor Relations and Corporate Development at Vectrus.

Thank you. Good afternoon, everyone. Welcome to the Vectrus fourth quarter 2019 earnings conference call. Joining us today are Charles 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 material 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 would like to point out that we will be discussing and reporting adjusted non-GAAP metrics, including adjusted operating income and margin, adjusted EBITDA and margin, adjusted net income, and adjusted diluted earnings per share. The definition of these non-GAAP metrics can be found in our presentation materials, press release, and Form 10-K.At this time, I would like to turn the call over to Chuck Prow.

Thank you, Mike. Good afternoon, everyone. Thank you for joining us on the call today. Please turn to Slide 3. 2019 was a year of continued strategic and financial momentum for Vectrus, and we progressed toward our goal of making Vectrus the premier converged infrastructure company in our market. Our momentum is reflected in our results. Revenue grew 11% in the fourth quarter and 8% for the year, which was supported by a strong organic growth of 7% in the fourth quarter and 6% for the year. Organic growth was driven by expansion on our core program and continued Faison and performance of $350 million of new business won in 2018, and programs won in 2019.Importantly, through our continued focus on growth related programing capability enhancements, in 2019, we won approximately $1.2 billion of new business and protected our base by winning significant recompetes, which will drive revenue growth in 2020 and beyond. We continue to diversify our client portfolio and our revenue base by expanding our market share with the Navy and the Air Force, and added clients new to Vectrus, including the Department of State, and our first foreign military client, Japan's Ministry of Defense. As we anticipated, we also improved our profitability throughout the second half of 2019, as a recent new award phased in.Adjusted EBITDA margin expanded to 4.9% in the fourth quarter, the highest in our history. We grew fourth quarter adjusted EPS by 27%, and the full year by 6%. We achieved these results despite continued investment in our business, including preparation for LOGCAP V and the execution of our enterprise-wide performance improvement initiatives we refer to as Enterprise Vectrus. Enterprise Vectrus includes a series of program operations and business advisory related initiatives, which include the implementation of new systems, standardizing our core processes,…

Thanks, Charles, and good afternoon, everyone. Turn with me now to Slide 4 to discuss our fourth quarter results. Fourth quarter 2019 revenue was $365.3 million, up $35.7 million or 11% year-on-year. Organic revenue growth was 7% year-on-year, excluding the contribution from Advantor, which was acquired early in the third quarter. Total revenue growth resulted from an increase of $17.2 million from our Middle East programs, and an increase of $18.7 million from U.S. programs, partially driven by the acquisition of Advantor, which contributed $12.4 million. Our K-BOSSS contract contributed $127.1 million or 35% of total revenue in the fourth quarter.Operating income for the fourth quarter of 2019 with $15.6 million, or 4.3% margin compared to 3.8% in the fourth quarter of 2018. Adjusted operating income for the fourth quarter of 2019 was $16 million or 4.4% margin, compared to 3.8% in the fourth quarter of 2018. Adjusted operating income increased $3.4 million year-on-year due to an increase in revenue and improved program performance. Adjusted operating income was up $1 million sequentially or 7%, in line with our expectations for sequential improvements throughout the year. Fourth quarter 2019 interest expense with $1.7 million, up $207,000 year-on-year, reflecting the financing of the Advantor acquisition and short-term working capital requirements. Interest expense was down $248,000 on a sequential basis due to lower usage of our revolver.Adjusted EBITDA for the fourth quarter of 2019 was $18 million, up 29% from last year. Adjusted EBITDA margin was 4.9%, up 70 basis points from 4.3% last year, and up 30 basis points from the third quarter of 2019, which was in line with our expectations for sequential improvement. Net income for the fourth quarter of 2019 with $10.6 million, as compared to $6.1 million in the prior year. Last year's fourth quarter was positively impacted…

Thank you, Susan. Now let's move to Slide 9 to touch briefly on LOGCAP V. As you are aware in April of 2019 sector for the water to position on the LOGCAP V contract. The army $82 billion 10-year multiple award IDIQ contract. We won the CENTCOM and INDOPACOM AOR task orders which carried at an initial value of approximately $1.4 billion or 40% of the $3.5 billion total initial value of task orders awarded to all four winners. The contract has been under protest since the award in April. As I previously stated the Court of Federal Claims denied three of the four protests and we expect a ruling on the final protest in the coming days. Just yesterday, the court denied the remaining protester's request for a temporary refraining order through March 11. We continue to anticipate revenue from these task orders will occur in 2020. We are ready to proceed and deliver on these critical missions for the Army.Let's move to Slide 10 to discuss our organic growth. This table shows our update of contract wins from 2019 to date in the first quarter of 2020. Vectrus has received over $2.5 billion in award by adhering to our commitment to deliver exceptional program performance to our client and to our growth strategy of conducting targeted campaigns designed to communicate the value we deliver. Additionally, we continue to make significant investments in our growth focus talent and capabilities we continue to extend our differentiation in the marketplace and support our growth in 2020 and beyond. During the first quarter of 2020, our Navy growth campaign continued to pay off with few additional awards. First we were awarded an eight-year, $45 million contract to provide base operations support at the Naval Station facility in Deveselu, Romania.Deveselu is the first…

Thank you. [Operator Instructions] Our first question comes from the line of Joe Gomes of Noble Capital. Please proceed with your question.

Good afternoon, nice quarter and thanks for taking the question. My first question, just to circle back on LOGCAP for a moment; I think it was earlier this week or late last week the GAKO [ph] announced -- put out a release that at least one of -- I think it was floors arguments, let's say, they would have ruled that there was a case like -- I know it was for the KBR. One of the KBR -- against KBR; do you see that having any potential impact here allowing some of the other people that have been denied coming back again for another bite at the apple, so to speak, or do you think some of the recent rulings by the court has stopped all of that?

Yes. I'd feel a little careful here obviously but let me summarize the current state of play this way. So, we understand what that ruling was in floors case; that in essence moved into the next round which was a quarter Federal Claims. As we found out on the 21st three of the four cases at the Court of Federal Claims were dismissed. The one remaining case DynCore's [ph] case is due to be concluded kind of on or shortly after April 10. I guess a final point too and this literally happened while we were on the phone here today is that we were given a lifting of the stop work and an authorization to begin the transition planning aspects of the of the LOGCAP contract. So I would summarize by saying we're not completely out of the woods yet from the legal processes but we are certainly trending in a very positive way and we really look forward to beginning to work with the government and transition planning.

Okay, great, thanks for that. And I just -- I kind of wanted to look on the new business pipeline. You increased the amount of bids plan to submit to about $9.2 billion from a roughly $7.1 billion at the end of last quarter. Just trying to get a little more color on how did that expand so much on a quarterly basis?

Well, we are -- the proposal activity we have is a direct result of the campaign that we have been executing overtime. So, I really like the rate and pace of our organic growth-related activities. Now that -- as you know, it doesn't mean the government is going to award any quicker than they normally do, but we are seeing very important and good opportunities for us in the marketplace. The point that I would like to continue to make as well, which I guess further reinforces the point that I'm on here; is that other than the initially awarded task under LOGCAP, our pipeline essentially include essentially no additional work other than the five tasks we've already been awarded. So once the Army clears and is ready to continue to issue additional task against LOGCAP now, we see that as an additional demand stream that is going to be obviously, very favorable from our -- from a pipeline perspective.

Okay. Thanks on that one. And one last one and I'll let someone else ask some questions. When you talk about the strategic M&A to expand the client's capabilities, I wonder if you could kind of give us a little more -- drilldown a little more to that as to what exactly are you guys looking at? Are there specific areas that you feel the company needs to expand it's capabilities? And -- I mean, we're kind of like, where is the focus or is it more as opposed to a rifle shot more of shotgun looking at -- I would say a much broader space of client assets and capabilities?

Yes. I would answer your question based upon the two acquisitions we've done in the past. So, the acquisition of SENTEL introduced a new client, the intelligence community, and a new set of capabilities, IT capabilities around operational technology and spectrum management. Advantor, as you know, was all about deepening and broadening our operational technology solutions capabilities; so there are other assets in the marketplace today that will allow us to expand wider than our existing client footprint, and there are countless new technologies that will be additive to our operational technology portfolio.

Okay, great. Thank you very much. And again, congratulations on the quarter and the year.

Appreciate it. Good talking to you.

Our next set of questions comes from the line of Joe DeNardi of Stifel. Please proceed with your question.

Thanks, guys. This is John on for Joe, good quarter.

Thank you.

So I guess the first question I have kind of pertains to the Army, do you guys mind updating us on how the Army's is thinking about it's supply and logistics management? And specifically, has the hold around the boss [ph] work kind of been lifted? And are they starting to get some proposals out there for you guys to pursue?

So the Expeditionary Army, the Army essentially outside of the continental US is largely enabled by LOGCAP V because as you know, LOGCAP V unlike LOGCAP IV is both, for enduring as well as expeditionary emissions. So, I would believe that once we move past the protest process which it appears like were there; I would expect to see significant new activities around the army logistics and supply chains, from our perspective, particularly into the INDOPACOM AOR. If you are student of all this, which I know you are, there have been several articles written to that effect here over the last six to nine months. So I really like the op tempo of not only the army, all of the services; I think this whole notion of the installations of the future and how do we digitize supply chains from both, a security and efficiency perspective is right in line to the capabilities that we have been building and the messages that we have been sending to our clients.

Good. One of the things that's been coming up, especially in the news a lot has been obviously the coronavirus. Given your footprint in the Middle East, how are your customers responding to that? And how is that affecting Vectrus's work there in the year?

It's a complicated as you know, subject. We as Vectrus and the Department of Defense as an institution have dealt with pandemics in the past. We've been working with our clients in terms of our procedures and as a provider to the military, we worked very hard to keep our restrictions of travel in our preparedness in line, not only to the areas of responsibility we have but really down to the country and base level. So sufficed to say, the number one priority is the safety of our people and that is jointly with the operational readiness that has a military provider we have to have. So it's complicated, we have people working 24/7 around the clock, and we are in more than daily, probably hourly conversations with our clients to this effect.

Okay, that's good. Then I guess the last kind of part, and just one more pivot again this time is talking about the awards environment; we've just kind of touch base around the Army. But can you kind of talk about how the Navy and the Air Force is approaching 2019 awards? Are they looking to get this stuff into on contract faster? Any color on that would be greatly appreciated. And then, I'll…

Fast and government contracting is always relative, I'll process my statements with that. But, if I look at our $9 billion plus of pipeline, we are as balanced across the services as well as to our other strategic clients such as the intelligence community and the Department of State and we ever have been. The rate and pace by which awards happen are always very difficult to predict as you know, but I will say is that this whole notion of the installations of the future, the digitization of infrastructures and trying to drive more efficiency out of the current O&M dollars are pervasive across our government clients. So again, we like how that direction is really playing to the capabilities and messages that we have been projecting into the marketplace now for two or three years.

[Operator Instructions] We have reached the end of the question-and-answer session. I will now turn the call back over to Chuck Prow for any closing remarks.

Very good. We appreciate everybody's time and attention today, and we look forward to updating you on our progress in the next quarter's call. Thank you very much.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.