May 17, 2007

Research Associate:Ruchika Banka, M.Fin.

Editor: Christopher Jones, CFA

Senior Editor: Ian Madsen, CFA; ; 1-800-767-3771, x9417

11 N. Canal Street, Suite1101Chicago, IL60606

ManTech International
/ (MANT-NASDAQ) / $32.12

Note:This report contains substantially new material. Subsequent reports will have changes highlighted.

Reason for Report: 1Q07 Results (Previous: 4Q06 & FY06 Results, March 8)

Recent Events

On May 7, 2007, ManTech International Corporation completed its acquisition of SRS Technologies, Inc. ("SRS"). SRS provides high-end, mission-critical, advanced technology systems engineering and Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) services and solutions.

The acquisition was consummated pursuant to an Agreement and Plan of Merger, dated April 6, 2007 (the "Merger Agreement"), by and among ManTech, SRS, certain shareholders of SRS, Quicksilver Acquisition Corp., a newly formed and wholly owned subsidiary of the ("Merger Sub"), and certain persons acting as a representative for the shareholders of SRS ("Shareholder Representative"). Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into SRS, with SRS continuing as the surviving corporation and the wholly owned subsidiary (the "Merger").

On February 23, 2007, MANT completed the divesture of its wholly-owned subsidiary MSM Security Services, LLC (Limited Liability Company) to MSM Holdings, for $3.0 million in cash. MSM Holdings LLC is solely owned by George J. Pedersen, ManTech's Chairman and Chief Executive Officer.

On February 13, 2007, MANT announced that it has received a contract of $89.9 million from a Department of Defense group to support its interagency anti-terrorism missions, including research and development. The competitively awarded contract has a seven-year period of performance under which ManTech will work with DoD to identify requirements and develop solutions to promote rapid identification of the current and future combat terrorism needs of over 50 federal organizations.

On January 12, 2007, ManTech International Corporation announced that it has received a contract to provide engineering services in support of ship signature, measurement and silencing programs for the NavalSurfaceWarfareCenter, Carderock Division (NSWCCD). The five-year task order, issued under the SeaPort Enhanced multiple award contracts, has a total potential value of $49.0 million for ManTech.

Overview

ManTech International Corporation(MANT) based in Fairfax, Virginia, was founded in 1968 and provides technologies and solutions for mission-critical national security programs for the Intelligence Community; the Departments of Defense, State, Homeland Security, and Justice; the Space Community; and other US federal government customers. ManTech's expertise includes systems engineering, systems integration, technology and software development, enterprise security architecture, information assurance, intelligence operations support, network and critical infrastructure protection, information technology, communications integration, and engineering support. The company supports the advanced telecommunications systems that are used in Operation Iraqi Freedom and in other parts of the world; provides physical and cyber security to protect US embassies all over the world; has developed a secure collaborative communications system for the US Department of Homeland Security (DHS); and is helping the Department of Justice's US Marshals Service deploy a common office automation system. For more information about the company, please visit its website at

On May 01, 2007, MANT reported results for 1Q07 with EPS from continuing operations of $0.39 and revenue of $294.3 million, vis-à-vis consensus estimate of $0.41 and $291.3 million, respectively, and management’s guidance of $0.40-$0.42 and $285.0-$295.0 million, correspondingly. The growth was primarily a result of the solid execution of the business strategy to focus on the high-end defense and intelligence markets in support of national security. Management issued 2Q07 revenue guidance in the $310.0-$320.0 million range, yielding EPS from continuing operations of $0.43-$0.45.

Key Positive Arguments / Key Negative Arguments
  • A healthy balance sheetwith no debt and increased in cash flow have enhanced the liquidity position of the company, and provides MANT with theability to make more acquisitions.
  • MANT enjoys a steady stream of revenue as most of its business is focusedon supporting themissions of the military and intelligence agencies. Analysts feel this should help the company to outperform the market through 2008.
  • MANT’s management is focused on growing the company faster and increasing the number of employees as seen in 4Q06. Thiswill help the topline growth of the company.
/
  • The company’s business is highly dependent upon obtaining and maintaining required security clearances.
  • ManTech has recently completed several acquisitions. Unsuccessful integrationof these operations could adversely affect the company’s long-term growth and operating performance.
  • Many MANT competitors have substantially greater resources.Analysts believe competition from larger players in the space could derail the company’s growth prospects.
  • A significant change in the Federal Government’s budgetary priorities that the company does not support will affect its business.

Note: MANT’s Fiscal Year ends on December 31.

Revenue

Revenue- FYE Dec 31 / 1Q07A / q/q %change / y/y %change / 2006A / 2007E / 2008E
TOTAL REVENUE / $294.3 / 1.2% / 6.9% / $1,137.2 / $1,357.9 / $1,528.9

According to the Zacks Digest average, 1Q07total revenue was$294.3 million (inline with the company report), up6.9% y/y and 1.2% q/q. This represents 5.9% organic revenue growth for the first quarter based on pro forma revenue for the first quarter 2006, which reflects $2.7 million in revenue generated by GRS Solutions. The growth was primarily a result of the solid execution of the business strategy to focus on the high-end defense and intelligence markets in support of national security.

Revenue from the Department of Defense, the Intelligence Community and Homeland Security related customers accounted for 94.1% of revenue for the first quarter of 2007. ManTech's time and materials contracts accounted for 66.1% of revenue, fixed-price contracts accounted for 10.4% of revenue and cost-plus contracts accounted for 23.5% of revenue.

According to one analyst (BB&T), MANT has significantly increased its business tied to domestic intelligence operation sand, more importantly; it has seen increased traction and commitments in international law enforcement operations.

Outlook

ManTech expects SRS to deliver $120.0 million in revenue for the remainder of 2007 and will be neutral to earnings per share for the remainder of 2007. The Company expects SRS to contribute $27.0 million in revenue for the remainder of the second quarter.

According to one firm (BB&T),with SRS moving into the mix, MANT’s opportunities to increase exposure to highly coveted customers at NGIA, NRO, and NSA has greatly expanded. MANT will be successful in cross-selling its full suite of products and services to these targeted agencies. Furthermore, new opportunities appear compelling, and the firm believes MANT will gain significant traction in the very near term.

Please refer to the Zacks Research Digest spreadsheet on MANT for detailed revenue breakdown and future estimates.

Margins

MARGINS - FYE Dec 31 / 1Q07A / q/q %change / y/y %change / 2006A / 2007E / 2008E
Gross / 16.1% / -0.7% / -1.1% / 17.0% / 16.8% / 16.9%
Operating / 7.3% / -0.5% / -1.4% / 8.0% / 7.7% / 7.9%
Pre tax / 7.4% / -0.9% / -1.0% / 8.0% / 7.5% / 7.6%
Net / 4.5% / -0.7% / -0.5% / 4.9% / 4.6% / 4.6%

According to the Zacks Digest average, gross margin in the quarter was 16.1% in 1Q07 (in line with the Company), downby 110.0 basis points y/y and 70.0 basis point q/q. The decline was impacted by an increase in bid/proposal activity and one-time benefit items. Subcontractors were 49.0% of direct costs which also contributed to a decline in gross margin.

According to the Zacks Digest average, operating margin was 7.3% in 1Q07 (in line with the Company), down by 140.0 basis points y/y and 50.0 basis points q/q.Margin deterioration stemmed from 1) one time fringe benefit expenses of $700k , and 2) higher than expected bid and proposal activity.

According to the Zacks Digest average, SG&A expense in the quarter was $24.6 million, up 14.4% y/y and2.0% q/q. Depreciation andamortization (D&A) expense in the quarter was $2.5 million, up 22.9% y/y and 6.3% q/q.

Outlook

Analysts believe the gross margin will stay low for the coming quarters based on the increased use of subcontractors to fulfill client demand.

One analyst (Citigroup) expects sequential improvement towards 7.8% in the near-term and projects a 2007 operating margin of 7.8%. In 2008, the firm expects only a 10.0 basis points improvement, based on the projection that countermine program will decline. If the program remains at its 2007 level, revenues and EPS could be higher but the margin lower.

Please refer to the Zacks Research Digest spreadsheet on MANT for details on margin estimates.

Earnings per share

PRO FORMA EPS - FYE Dec 31 / 1Q07A / 2Q07E / 3Q07E / 2006A / 2007E / 2008E
Zacks Consensus / $0.44 / $0.47 / $1.64 / $1.80 / $2.03
High Estimate / $0.41 / $0.48 / $0.50 / $1.65 / $1.94 / $2.15
Low Estimate / $0.39 / $0.43 / $0.45 / $1.62 / $1.76 / $1.91
Average Estimate / $0.39 / $0.44 / $0.47 / $1.64 / $1.80 / $2.03
AFTER FAS 123 (ESOE) / $0.43-$0.45 / $1.76-$1.84

As per the Zacks Digest average,proforma EPS was $0.39 in 1Q07 (in tandem with the Company’s report),down4.5% y/y and12.5% q/q.The Zacks Digest GAAP EPS for the quarter is $0.39, up 8.2% y/y but down5.3% q/q. EPS was negatively affected by a $700kcharge related to non-cash compensation and lower gross margins from reset work. Without the charge, the firm met consensus EPS.

Outlook

The Zacks consensus average is $1.80 for 2007 and $2.03 for 2008.

2007 forecasts (14 of them in total) range from $1.76 to $1.94; the average is $1.80.

2008 forecasts (14 of them in total) range from $1.91 to $2.15; the average is $2.03.

Some analysts (BB&T, Citigroup, Stephens) have raised their 2007 EPS estimates based on the strong 1Q07 results and high pass-through sales in Regional Logistics and Countermine contracts in 2007, and reflect the SRS acquisition.

Most of the analysts have reduced their EPS estimates for 2007 based on the low margins and the increase in the share count.

Please refer to the Zacks Research Digest spreadsheet on MANT for more extensive EPS figures.

Guidance

2Q07Guidance:

• Revenue of $310.0-320.0 million.

• EPS of $0.43-0.45

2007Guidance:

• Revenue of $1,270.0-1,310.0 million.

• Organic growth assumption moved up one percentage point to 11-14%

• Operating margin expected to be 7.8%, or slightly better

• EPS from continuing operations of $1.76-1.84.

SRS Acquisition:(Not Included in Current Guidance)

• MANT is to pay $195 million in cash, including $170 million borrowed on a new $300 million revolver

• FY07 revenue guidance is expected to increase by $120.0 million (remainder of year impact, not annual rate)

• FY07 EPS is expected to have a neutral impact.

• 2Q07 revenue guidance is expected to increase by $27.0 million.

Target Price

The Digest average target price is $38.55 ($0.15from the previous report; 17.9% up from the current price of $32.46).

Target prices for MANT range from $34.00 (RBC Cap., Wachovia) to $45.00 (BB&T). Elevenanalysts have quoted target prices for the company. The highest target price (BB&T) is based on 21x 2008 EPS.Thelowest target price provided by two analysts (RBC Cap., Wachovia) are based on 19xforward EPS estimate of $1.78, and 19-20x CY07 GAAP EPS estimate, respectively.

Of 14analysts covering the stock, 6 gave positive ratings, 7 gave neutral ratings and 1 has given a negative rating.

Rating Distribution
Positive / 42.9%
Neutral / 50.0%
Negative / 7.1%
Avg. Target Price / $38.55
Analyst w target/total# / 11/14

Risks to the target price include changes in the overall government spending policy or trends; appropriation delays; new competition within the company’s core market; contract renegotiations or cancellations; acquisition integration difficulties; or unforeseen litigation.

Metrics detailing with current management effectiveness are as follows:

Metric (TTM) / Company / S&P 500 / Industry
Return on Assets (ROA) / 9.37% / 8.09% / 14.06%
Return on Equity (ROE) / 12.27% / 20.43% / 24.72%
Return on Invested Capital (ROIC) / 12.02% / 11.99% / 20.33%

Please refer to Zacks Research Digest spreadsheet on MANT for further details on valuation.

Capital Structure/Solvency/Cash Flow/Governance/Other

The company reported a negative free cash flow of $13.7 million in 1Q07. The decline was due to several factors: 1) reductions in accrued salaries and expenses due to year-end bonus payouts and 401K plan expenditures, and 2) increase in ODC (other direct costs) flow on certain projects such as Countermine IED, which have ramped up over the last few quarters. DSO was 74 days in 1Q07, down from 86 days in 1Q06 due to improved collection processes implemented and executed throughout 2006. MANT has $34.1 million in cash versus $41.5 million in 4Q06 and has no debt on its balance sheet. However, MANT has obtained a new $300.0 million credit facility, and will borrow $170.0 million to fund its acquisition of SRS Technologies. The credit facility has an accordion feature that allows MANT to borrow up to $400.0 million.

Backlog

MANT reported total backlog of $2,940.0 million in 1Q07, up by 31.0% y/y and 2.0% q/q.Funded backlog increased to $767.0 million,up 48.0% y/y and 23.0% q/q, which focuses on MANT’s strong positioning in mission-critical service offerings that support DoD operations in Iraq and Afghanistan. Bookings were a healthy $300.0 millionin1Q07. More importantly, the book-to-bill ratio was very strong at 1.5in 1Q07. In addition, the company does not include large indefinite delivery/indefinite quantity (ID/IQ) contracts into the bookings metric. Combined with a growing funded backlog, healthy new awards activity suggests that the fundamentals here remain intact moving forward. This level of order flow from new and current contracts positions the company for a strong ramp in 2007 and FY08, and would continue to assist MANT in reporting strong internal growth. Additionally, the company has bids with above $140.0 million in its bid and proposal pipeline. Considering MANT’s strong win rate in the past, one analyst (BB&T) believes the company could win a good proportion of these bids,and further solidify its position in the intelligence marketplace.

New Revolving Credit Facility

In conjunction with the acquisition of SRS, the Company completed a new five-year $300.0 million revolving credit facility on April 30, 2007 and expects to borrow approximately $170.0 million in connection with the completion of the SRS transaction. The facility has an accordion feature to accommodate an additional $100.0 million of borrowings, resulting in $400.0 million of total borrowing capacity. The credit facility is led by Bank of America. The new facility provides ample flexibility to fund ManTech's growth both organically and through future acquisitions.

Hiring

Recruitment and retention of IT personnel who hold the necessary security clearances will likely remain one ofthe greatest challenges to growth in the Federal IT space. The number of open positions at Mantech increased to 600 from 400 in 4Q06, despite adding 140 net employees so far this year. The company's annualized turnover remained stable at 20% in 1Q07. Finally, it has been noted that the acquisition of SRS will add approximately 800 new employees to Mantech's workforce.

Most of the analysts believe that hiring and retention are critical to the company's growth in the future.ManTech continues to invest in business development on this front. In particular, the company's long-term plan is todiversify geographically, given that over 50% of its workforce is currently based in North Virginia.

SRS Acquisition

The acquisition of SRS was completed on May 07, 2007. MANT paid an initial purchase price of $195.0 million in cash (the "Purchase Price") pursuant to the Merger. A portion of the Purchase Price was used to pay for certain transaction costs incurred by SRS in connection with the Merger. The Purchase Price was adjusted at closing based on an estimation of SRS's working capital on the closing date. This adjustment resulted in an additional payment by ManTech of approximately $2.9 million to the shareholders of SRS at closing.

MSM Divestiture

The divestiture of MSM Security Services, LLC was completed on February 23, 2007 to MSM Holdings for $3.0 million in cash. MSM Holdings LLC is solely owned by George J. Pedersen, ManTech's Chairman and Chief Executive Officer. The company recorded a loss of $13.9 million in 2005-06 because of the divestiture.

Potentially Severe Problems

There are none other than those discussed in other sections of this report.

Long-Term Growth

The long-term growth rates for MANT range between 8.2% (RBC Cap.) and 20.0% (AG Edwards, Benchmark). The Digest average long-term growth is 14.5%.

On a longer-term basis, analysts believe the company is well positioned to exceed the projected long-term growth rates. The company benefits from its strong relationships with various government agencies. Analysts believe the company would grow through both organic and external (acquisitions) means. Its topline growth is highly correlated to the DoD’s security budget that is allocated on an annual basis, and also to various military and private sector contract wins. Hence, some analysts are concerned as the outlook for the U.S. government’s defense budget has deteriorated andcould trend lower going forward. However, they expect the company to mitigate the risk inherent in bidding on government contracts by continuing to make strategic acquisitions, which would be accretive to the bottomline.

According to one analyst (AG Edwards),with an under-leveraged balance sheet, low valuation, and leading backlog growth figures, MANT is well positioned for solid growth into 2008 and beyond.

Upcoming Event

On August 01, 2007, MANT is expected to announce2Q07 earnings.

Individual Analyst Opinions

POSITIVE RATINGS

Benchmark – Buy ($40.00 – target price): 05/02/07. INVESTMENT SUMMARY: The firm believes that the company’s fundamentals and positioning will continue to insulate the company from the funding environment especially relative to its peers.

BB&T – Buy ($45.00 – target price): 05/08/07. The firm reiterated its Buy rating and raised the target price from $44.00 to $45.00. INVESTMENT SUMMARY: The firmopines that the company’s strong internal growth forecast is an important component of the firm’s valuation moving forward. It also believes that MANT remains well positioned given MANT’s niche product offerings in the domestic and international intelligence market, which remains protected by high barriers of entry and long customer relationships.