Mike Smith - Director, Investor Relations and Corporate Development Chuck Prow - President and Chief Executive Officer Matt Klein - Senior Vice President and Chief Financial Officer.

Brian Ruttenbur - Drexel Hamilton Joe DeNardi - Stifel Ben Klieve - NOBLE Capital Markets.

Greetings, and welcome to the Vectrus Second Quarter 2018 Earnings Conference Call and Webcast. Today's call is being recorded. And my name is Michelle, and I'll be your operator for today's call. At this time, all participants have been placed in a listen-only mode and the floor will be open for questions following the presentation.

[Operator Instructions] And now, I'll pass of the call over to your host, Mike Smith, Director of Investor Relations and Corporate Development at Vectrus. Thank you. You may begin..

Thank you. Good afternoon, everyone. Welcome to the Vectrus second quarter 2018 earnings conference call. Joining us today are Chuck Prow, President and Chief Executive Officer; and Matt Klein, 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 statement 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. We assume no obligation to update our forward-looking statements.

At this time, I'd 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. I am pleased to report a strong second quarter across the board. Revenue increased 24% year-over-year. Our operating margin improved 50 basis points year-over-year.

Importantly, we won two new firm fixed-price maintenance contracts in Europe and North America valued at over $125 million. This brings our year-to-date new business wins in 2018 to over $250 million.

I'd like to thank our team of over 7,000 global employees for their execution in the quarter and our clients for their continued confidence in our business to support their missions. Award activity was solid in the second quarter, and we saw a continued expansion in our current contracts with modifications and extensions that totaled $165 million.

Additionally, we were awarded new business valued in excess of $125 million that extends over the next several years. Specifically, during the quarter, we were awarded an $84 million, 7-year firm fixed-price contract to provide base maintenance support services at Sheppard Air Force Base in Texas.

Sheppard Air Force Base was activated on October 17, 1941, and is the largest and most diverse training base in the Air Education and Training Command, or AETC. This is an important win for Vectrus and importantly represents the third contract we have secured with AETC.

Our team has done a great job differentiating our offering and delivering innovative and cost-effective solutions with this important client. In total, within the past 18 months, Vectrus had won facility support service of contract with AETC valued in excess of $450 million.

We continue to make excellent progress expanding our presence with the Air Force, and currently are a trusted provider of facilities and logistic services to the Air Force in 9 countries. Our momentum with this client is becoming visible on our financial results.

Through the first half of 2018, our Air Force revenue has increased approximately 80%, compared to the prior year and does not include any contribution from the recent Sheppard win.

It is also worth noting that this success is further helping to balance our client portfolio and through the first half of 2018, the Air Force comprised 20% of our total revenue, compared to 13% in the prior period. I am proud of our recent progress and look forward to further broadening our relationship with the Air Force.

One of Vectrus' core competencies is our ability to rapidly respond anywhere across the world in challenging, austere environments to meet our clients' mission requirements. Our global presence in 21 countries and 177 locations is a unique characteristic and differentiator that provide established foothold from which we can grow.

For example, during the second quarter, our team was successful in further positioning Vectrus as the leading provider of facility services in Germany, while expanding our scope of work in the United States European Command, or EUCOM, to a $43 million, 5-year firm fixed-price contract to provide installation maintenance services at U.S.

Army Garrison Stuttgart. One of the key reasons for this win was our ability to leverage our existing position and a rich history of being a trusted provider of services in Germany that dates back almost 40 years. Stuttgart had approximately 23,000 community members and is, importantly, headquarters for EUCOM and the United States Africa Command.

This is a great example of how we are leveraging our global presence in order to generate organic growth. There are significant requirements and hurdles to operating across the globe, and we pride ourselves on being able to provide continuous side-by-side support to our clients, no matter where they are.

Our ability to generate future win is reliant upon our business development and sales efforts. And as you can see from our recent awards, the investments and changes we have made over the past year are paying dividends.

Currently, with over $1.4 billion in bids submitted awaiting award and a pipeline of identified opportunities of $8 billion that we plan to bid on in the next 12 months, our prospects remain solid. Again, this is all new business to Vectrus.

Additionally, we continue to see significant opportunity for future growth, particularly given our differentiated services and platform. We are making excellent progress infusing technology into our facilities and logistics programs.

As we continue to fuse technological capabilities into our civil engineering, energy management, water management and supply chain processes, to name a few, and the agility and efficiency by which we support our clients operational mission continues to improve.

I'll be remiss if I did not also mention that the nearly 25% of our business that was related to supporting our client networks and communication missions, it is also piloting the infusion of important new cognitive, robotic, and artificial intelligent capabilities to improve the resiliency and reliability of our support missions.

Combined, this makes Vectrus one of a kind, with over 124 competencies in facilities and logistics and a 70-year legacy in providing IT and Network Communication services, which include capabilities such as agile software development, communications, network and cybersecurity, sensor integration and fusion, electromagnetic effects, spectrum management and border and perimeter surveillance.

Overall, we believe this differentiated set of capabilities positions Vectrus to be an innovator and global leader in the convergence of our clients physical and digital infrastructure. Regarding the converged infrastructure market, the Army believes today's military base could look very different in 20 years. We strongly concur.

Additionally, recent commentary from the Army leaders suggest that the Army is planning smart city technology pilots as a move towards the installation of the future. This anticipated that the Army will evolve the way in which it gathers and integrates information from existing infrastructure.

This reflects our overall strategy and emerging capabilities to enable the converged market and it's exactly where Vectrus is positioning our business. Regarding the LOGCAP V competition, bids are currently under evaluation, and we continue to feel positive about our prospects.

Our capabilities and services strongly align with our clients' requirement and the emerging operational environment.

We believe our proposal offers the client a differentiated and unique solution, supported by our over 70 years of experience, providing rapid response capabilities anywhere across the world and support of our clients' contingency mission requirements.

As a reminder, there is expected to be up to 6 indefinite delivery, indefinite quantity contract awards and the government continues to anticipate making an award in the fourth quarter of 2018.

As we have stated in the past, our client has incorporated our current Kuwait-Base operations and Security Support Services contract, also known as K-BOSSS, which is our largest program as a task order in the LOGCAP V competition.

As a reminder, our K-BOSSS contract currently runs through December of 2018 with a potential option to extend in the March of 2019. Retaining the K-BOSSS contract will require a seat on the LOGCAP V vehicle and winning the associated CENTCOM task.

It is worth noting that today, Vectrus is the largest services provider to the DoD in the CENTCOM area of operation, and we incumbered on the largest CENTCOM task order under the current LOGCAP V construct. It is worth emphasizing that our work for the Department of Defense in the Middle East or CENTCOM extends well beyond K-BOSSS.

In order to provide a sense of our Middle East footprint, during the second quarter, Vectrus generated revenue of roughly $220 million in the Middle East. We believe that Vectrus winning the CENTCOM area of operation will provide significant continuity and mission assurance to the DoD. Finally, I would like to share some great news regarding K-BOSSS.

We just received our latest contractor performance assessment report from our Army client, and I’m happy to announce that we received the highest possible ratings across all evaluated areas. It's a highly complex program, and I'd like to congratulate our team for providing our client with another outstanding year of performance.

Again, we continue to remain positive regarding our prospects on LOGCAP V and look forward to the Army's award announcement. Please turn to Slide 4. Growth remains front and center for Vectrus, and our new business wins are demonstrative of that.

In addition to several large extensions and contract modifications on our existing programs, so far in 2018, Vectrus has secured new business wins valued at more than $250 million. Importantly, about $240 million or 92% of these wins will extend into 2023 or beyond, providing solid, long-term revenue streams.

While these recent wins are a great achievement and aid revenue visibility, we believe that it could have a significant opportunity to generate higher margins for Vectrus as almost 60% of the value are for contracts that are fixed price in nature.

By comparison, and as you can see from the bottom of Slide 4, 24% of the revenue was associated with fixed-price contracts in the second quarter of 2018. As a reminder, the transition to fixed-price contracts from cost-type contracts is one component of how Vectrus will increase its margin profile over time.

However, under fixed-price contracts, we shift the risk for top performance from the government to the contractor, given the potential for higher margin is dependent upon what level the performance can be achieved.

The success of fixed-price contracts is heavily contingent on the contract phase in, and we are working diligently and investing to ensure our new fixed-price programs have a foundation that incorporates the most successful attributes of our current programs with the ability to the application of technologies that I've previously discussed and lean principles to generate better client outcomes and improve margins over time.

The first half of 2018 has yielded solid results, with an improved program performance, the advancement of our enterprise-wide improvement program, known as Enterprise Vectrus, and significant new business wins that provide revenue visibility, as well as potential for future margin expansion.

Overall, we are taking actions that will help us realize our long-term strategic and financial goals to be an innovator and leader in the converged infrastructure market, with $2.5 billion in revenue and 7% EBITDA margins by 2023. Now, I like to turn the call over to Matt.

He will go through our financial results and then we will open the call for questions..

Thank you, Chuck. Good afternoon, everyone. Please turn to Slide 5. Our second quarter financial results were solid with revenue of $321 million, up $62 million or 24% year-over-year when compared to the second quarter of 2017.

Importantly, excluding the revenue from SENTEL, our second quarter revenue grew 12% year-over-year due to growth in the Vectrus base business. Operating margin in the second quarter was 4% and diluted earnings per share were $0.81. Days sales outstanding for the second quarter of 2018 was 60 days, a 1-day improvement from the same period of 2017.

Our growth efforts and investments over the past year have resulted in a 17% increase in total backlog, which now stands at $3.3 billion. Our total backlog provides solid visibility into the future and continues to offer a significant opportunity to apply innovation and enterprise-wide improvement initiatives to an expanding business base.

As a reminder, in January, we acquired SENTEL Corporation for $36 million. And I am pleased to report that the integration remains on schedule and will likely be completed in the third quarter.

Furthermore, our year-to-date transaction and integration costs associated with the acquisition are trending below our estimates and total $1.7 million year-to-date.

While the integration is still ongoing, we believe that, in total, transaction and integration costs associated with the acquisition will be below our original $3 million full-year estimate. Additionally, we are assessing the potential reimbursement of some of these expenses, which may be reimbursable under Federal Acquisition Regulations.

As of June 29, 2018, our leverage ratio was 1.44x, which is well below our covenant level of 3.0x. Total debt at the end of the quarter was $77 million and our cash balance increased to $41 million, resulting in $36 million of net debt.

Our financial position remains strong, and we continue to focus on deploying capital prudently on efforts that support our growth path. As we have discussed on prior calls, part of our margin improvement is expected to come from the advancement of our enterprise performance improvement imperatives known as Enterprise Vectrus.

We have made great progress operationalizing Enterprise Vectrus through the establishment of regional service center, which leverages our global presence, enhances our client support and ultimately lowers costs. Our regionalized service center is fully operational and is already having a positive impact on our business operations.

Please turn to Slide 6. On Slide 6, I will be discussing our financial results for the 3 and 6 months ended June 29, 2018. In the second quarter of 2018, revenue was $321.1 million, up $61.8 million or 24%, as compared to the second quarter of 2017. The increase in revenue was attributed to growth from our U.S. programs of $38.5 million.

We also saw growth in our European programs of $12.9 million, and expansion in our Middle East programs of $10.4 million. During the second quarter, our K-BOSSS contract contributed $130.6 million to revenue or 40.7% of total revenue.

Operating income for the three-months ended June 29, 2018, was $13 million or 4% operating margin, representing an increase of $3.8 million or 41.2% as compared to the three-months ended June 30, 2017. This growth was primarily due to increases of $2.4 million from our Middle East programs, $1.2 million from our U.S.

programs, and $0.2 million from our European programs. EBITDA for the three-months ended June 29, 2018 was $13.8 million or 4.3% margin, representing an increase of $4.2 million or 44%, as compared to the prior year period.

I'd like to point out that we incurred one-time acquisition and integration costs related to SENTEL acquisition of $0.5 million in the second quarter. EBITDA excluding SENTEL integration costs was $14.3 million or 4.5% margin.

During the second quarter of 2018, we recorded net favorable cumulative adjustments to operating income of $3.7 million, compared to $2.2 million in the same period of 2017. There are many factors that drive contract performance, including program execution, contract modifications and scope changes.

Cumulative catch-up adjustments can be positive or negative are a normal part of this business and our guidance contemplates this reality. Interest expense for the second quarter of 2018 was $1.1 million, which was $70,000 higher, compared to the same period of 2017.

Net income for the second quarter of 2018 was $9.2 million, compared to $5.5 million in the second quarter of 2017. The effective tax rate in the second quarter of 2018 was 22.5%, compared to 32.9% in the second quarter of 2017. The 2018 tax rate is lower, primarily due to the Tax Cuts and Jobs Act legislation.

The diluted earnings per share for the second quarter of 2018 were $0.81, 65% higher, compared to the diluted earnings per share of $0.49 in the second quarter of 2017. Diluted earnings per share adjusted for nonrecurring transaction-related expenditures were $0.84.

Now I'd like to discuss the year-to-date 2018 financial results reflective on the lower part of Slide 6. Year-to-date, 2018 revenue was $641.6 million, an increase of $92.3 million or 16.8% as compared to the same period of 2017. The growth in revenue was attributed to increased activity from our U.S.

programs of $72.3 million, of which $53.3 million was related to the acquisition of SENTEL, and from our European programs of $23.6 million, partially offset by a decrease of $3.6 million from our Middle East programs. During the first half of 2018, our K-BOSSS contract contributed $258.4 million or 40.3% of total revenue.

Year-to-date 2018 operating income was $21.7 million or 3.4% operating margin, representing an increase of $0.8 million or 3.9%, compared to the prior year period. Year-to-date 2018 EBITDA was $23.3 million or 3.6% EBITDA margin, an increase of $1.6 million or 8%, compared to the prior year period.

Year-to-date EBITDA, excluding SENTEL integration cost was $25 million or 3.9% margin. Net favorable cumulative adjustments to operating income for year-to-date 2018 and year-to-date 2017 were $6.6 million and $4.9 million, respectively.

Net income for the six-months ended June 29, 2018, was $15.3 million, an increase of $3.2 million or 26.2%, compared to the same period of 2017. The increase was due to a higher operating income of $0.8 million and lower tax expense of $2.5 million.

Year-to-date 2018 diluted earnings per share were $1.35, 24% higher, compared to the diluted earnings per share of $1.09 for the same period of 2017. The earnings growth is due to the increase in revenue, higher operating income, lower tax expense, partially offset by higher interest expense and increased shares outstanding in 2018.

Year-to-date 2018 net cash provided by operating activities was $4.2 million, which is $1.6 million lower, compared to the same period in 2017. This is an incremental improvement of $15.8 million from first quarter of 2018. Please turn to Slide 7. For the second quarter of 2018, total backlog was $3.3 billion.

Funded backlog as of the second quarter was $951 million. Total backlog includes both funded and unfunded backlog and represents firm orders and potential options on multi-year contracts. Our contracts are multi-year contracts and the right to exercise an option period is at the sole discretion of the U.S.

government or the prime contractor when we are a subcontractor. Total backlog excludes potential orders under indefinite delivery and indefinite quantity contracts and contracts under protests. Please turn to Slide 8, where I will discuss 2018 guidance assumptions.

We have made solid progress in the first half of 2018, and as such we are reaffirming our full-year 2018 guidance. For 2018, we continue to expect revenue to be in the range of $1.215 billion to $1.285 billion, with a midpoint of $1.25 billion. Operating margin is still expected to be in the range of 3.6% to 4%, with a midpoint of 3.8%.

Our 2018 midpoint includes approximately $2 million of estimated transaction costs associated with the SENTEL acquisition. We're tracking better than our original estimate of $3 million to effective cost management and efficiencies realized integrating a similar business.

As Chuck mentioned, we have been successful winning significant new business that is primarily firm fixed-price and could yield opportunity for future margin expansion over time. As a reminder, firm fixed-price contracts, by their nature, generally have margin profiles that build over time as efficiencies are gained.

The phase-in period associated with our wins in the first half of the year, which will be occurring over the next two quarters, is of critical importance for strong program performance. We are investing to ensure a solid foundation, seamless transition and improved outcomes for our clients.

As we have stated in the past, this investment can result in lower operating margins at the beginning of a contract and traditionally improve over time. Net income will be in the range of $30.9 million to $36.9 million. Diluted earnings per share are still expected to be in the range of $2.71 to $3.23.

The midpoint of diluted earnings per share is $2.97. The range for diluted EPS assumes an estimated 11.4 million weighted average diluted shares outstanding. 2018 net cash provided by operating activities is expected to be in the range of $35 million to $39 million.

Our capital expenditures for 2018 are still expected to be approximately $9 million, which is above our historical average, due to a few internal investments. Depreciation and amortization is expected to be $4.2 million in 2018, which includes about $2 million of intangible asset amortization from the acquisition of SENTEL.

2018 mandatory debt payments are expected to be $4 million. Interest expense is forecasted at $4.3 million, and we currently estimate a 22% tax rate for the full-year of 2018. Now, I'd like to turn the call over for questions..

Thank you. [Operator Instructions] Our first question comes from the line of Brian Ruttenbur with Drexel Hamilton. Please proceed with your question..

Yes. Thank you very much. First of all, good quarter. Next, the real questions are around K-BOSSS and LOGCAP. You mentioned that you had the highest rating possible.

How is that different from past ratings? Is it better? Or can you describe the rating other than highest rating possible in the history of your ratings?.

Brian, hi, this is Chuck.

How are you?.

Good Chuck..

We, for the last several quarters, at least, have received the highest possible scores. So, we're really pleased with, a, our performance and the longevity of that performance.

As we've mentioned in the call, we do expect to hear on the LOGCAP award in the fourth quarter of this year, and we've indicated several times together that we're really confident with our position..

Okay. And then moving on over to some housekeeping. Book-to-bill in the quarter, I didn't see that. It appears to be less than one.

Is that correct?.

Sure. So, coming off of a strong first quarter book-to-bill, second quarter we had $125 million of new, new – new business wins, and another $165 million of contract expansion. So, if you take a look at year-to-date book-to-bill, and you exclude SENTEL, our awards were $651 million, which is 1.1x.

That would imply the second quarter is about 0.9 book-to-bill..

Okay. And that 0.9 is an internal number.

With SENTEL, do you have like a quarter, kind of book-to-bill with SENTEL, roughly at 0.9?.

Our awards, including SENTEL for the quarter, were $292 million. And then SENTEL had about $30 million of sales. So that adjusts the award value to $262 million. I hope that helps..

Okay. And then you mentioned, you've got to pay down roughly $4 million of debt.

How much have you paid down so far this year?.

It's about a $1 million a quarter, so those are the minimum payments. And the way we structured the new debt agreement was really to minimize our mandatory payments upfront. And so, it's $4 million in 2018 and another $4.5 million next year. And right now, we're just intending to pay the mandatory payments and no voluntary payments..

a, pay down the rest of the debt; b, lever up and make acquisitions; c, buyback stock? Is there some kind of plan in place?.

Yes. There are plans in place. And I would like to say that we are continuously looking in the market for assets that not only meet our strategy, but could expand either our client footprint or capability set.

So, while we're obviously going to be cautious between now and K-BOSSS, we are actively looking at – we continue to look at assets in the market..

And just one other thing, is there a chance that this K-BOSSS LOGCAP gets pushed further to the right? Or is this pretty much the deadline of deadlines?.

If you've been around government contracting for a long time, you'd never say never in this business. I will tell you that it looks like we are trending toward a fourth quarter award.

The acquisition community seems confident in the way they talk about that award date and just kind of sensing my pulse on the marketplace, fourth quarter seems about right..

Okay. Thank you very much..

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

Hi, good afternoon everybody. Chuck, you talked a little bit about the converged infrastructure market opportunity. I'm wondering if you could just spend a little bit of time talking about that in more detail.

How you see that opportunities pooling up? Is any of your business currently considered converged infrastructure? And then if you had to take a guess, how much of the $2.5 billion you think you can get to in a few years comes from that market?.

Thanks for the question. We on all of our existing programs and essentially every bid that we're submitting include some form or fashion of a converged physical and digital capability. I'll give you, I guess, a very quick example like.

One of my first trips in the role, early in 2017, I went to Incirlik in Turkey, and one of the visits I took was to look at the water treatment facility throughout the base. I did that in a vehicle over about a 90-minute period of time, where we touched all the sensor infrastructure.

A few months ago, when I was at Incirlik, I took the same tour from an air-conditioned room with a screen that monitored all the sensor points along the water infrastructure. So, that's one example.

The next part of your question, we're not seeing and, quite frankly, we don't expect to see any pure-play converged infrastructure, at least, in the short-term. But I will tell you that in the IT aspect of our business, we are seeing an increasing number of opportunities around sensor integration, which really would be pure play.

So, the short answer is, we continue to see trending toward the converged infrastructure. We continue to see our Army client and Air Force clients, in particular, talking about their move to smart infrastructure, more resilient infrastructures. And we feel real confident with regard to the solutions that are emerging..

So, Chuck, would your argument be that, you're one of the only providers of that type of solution.

And so that gives you an advantage in some of these competitions if it's not going to be a pure-play opportunity?.

I wouldn't know whether we would have an advantage with that, but I will tell you it feels to me that we're early. It feels to me that our clients are being very receptive to the conversation. And I can't say with certainty this allows us to deliver with a higher degree of quality and a lower cost..

Okay. And then – sorry, just enough on K-BOSSS.

When you look at the solicitation for LOGCAP and compare that to, I guess, the process where K-BOSSS didn't go your way before, were there factors that position you better for this than previously, like is cost less important, is best performance more important? Just any color there in terms of what gives you confidence going into it..

I mean, the confidence is, first and foremost, around our continued performance. I do feel that we have a real momentum in the marketplace in terms of winning new business, which makes me feel that we have the pricing components of our markets pretty well understood.

So, between those two factors, I feel – again, I feel it's confident you can feel about a government award before you know the answer..

Okay. And Matt, just on the leverage, and I guess, your banks' kind of appreciation for this binary event towards the end of the year.

I mean, should we expect – are there going to be any surprises if this doesn't go your way in terms of – from leverage standpoint or anything or balance sheet standpoint, anything like that?.

No. We renegotiated the credit facility last fall, and we have long-term relationships with our banks. They are the same banks and J.P. Morgan is our lead bank, same banks that were with us from the spend, so they understand the business and the binary event of K-BOSSS. And the covenant levels contemplate the business reality of what could happen.

I will say, there is no trigger event that our covenants come down lower than what we've described in our filings. So, everyone understands the implications and believe, as we do, the strategy is strong. And recent events, we won $250 million of new business. Time helps us.

As the solicitation continues on, we'll win new business and fill that gap if it goes in the negative direction. So, there's no concerns from our banking partners..

Great.

And then, Matt, just any other recompetes of size that we should be aware of next year?.

The only other material contract that we have in the portfolio and we disclosed is the OMDAC-SWACA contract. And right now, we're on contract through November. And the full service -- or the RFP is not due until 2019, so that will kind of go out through next year and play out like a normal recompete. Other than that, everything else is normal..

Thank you very much..

Thank you. [Operator Instructions] Our next question comes from the line of Ben Klieve with NOBLE Capital Markets. Please proceed with your question..

Thank you. Couple of questions from me. First of all, on the revenue guidance. Through one half of the year, you're certainly trending towards the high end of that range. Wondering if you could talk about the variability in that guidance that remains.

What would cause the high end versus the low end at this point?.

Sure. So, we're real pleased with the performance so far, $642 million year-to-date is a good place to be with significant growth in the second quarter. The midpoint of $1.25 billion implies that the second half of the year comes down slightly.

We do have some transition on certain contracts, so we are ramping up three contracts this year that will contribute into the fourth quarter of the year. So, to your question, midpoint is solid, I believe, at this point.

The upper end of the range is really how fast can we get these contracts on boarded and do we see any additional contract awards related to the new business on those contracts. On the downside, on the lower end of the range, at this point, it's very unlikely that we would see the downside of the range.

It would have to be a change in service that has not occurred yet. And then a rapid deployment or descope. And that's why I said, at this point being this late in the year that, that outcome is probably unlikely. So, we're at, really, the midpoint or above..

Okay, perfect. Thank you. And then a couple of questions regarding the pipeline and bookings here. I'm curious if – how do you view the pending announcement of LOGCAP V impacting the pace of award adjudication.

I mean, has this kind of slowed down the award phase through the first half of the year? Do you expect, as you get closer, that there will be any change to the pace? And how is that dynamic playing out?.

What we are experiencing in the marketplace today is really the second full-year budget stability and that's evident. Our clients feel that they have a stable platform by which they can make decisions, while we see funding leveling off in 2020. But we do expect to see a stable funding and budget environment.

So, all of that together provide both the contract community and the acquisition community confidence. I'll tell you that one of the awards that we announced in the first quarter was the Kuwait DFAC opportunity, which is essentially out of the same contracting command as LOGCAP. So, we were very pleased with the rate and pace to that acquisition.

We're obviously very pleased with the outcome of that acquisition. So, a long-winded answer to your question, maybe, but it feels to me like the contracting community has a good rate and pace behind it. Obviously, we want to get the outcome we're looking for at the end of the year on LOGCAP, and we'll move from there..

Okay. Very good. Appreciate the color. That’s all from me..

Thanks, Ben..

Thank you. There are no further questions. At this time, I would like to turn the call back over to Mr. Chuck Prow for any closing remarks..

Thank you very much, Michelle. And thanks to everybody who joined the call today. We enjoyed ourselves, and we look forward to updating you on our progress this time next quarter. Have a good day..

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