Q1 2020 Earnings Call
And profitability and robust cash flow. We also won $4 billion of contract awards with approximately 60% of that for presenting new business per se.
These results are an excellent start to our fiscal 2020.
In addition, we continue to invest for future growth leveraging our distinctive M&A program. We recently closed on three acquisitions that enhance our capabilities for our mission customers.
I'll provide more background these acquisitions shortly.
As a result of these acquisitions, we are raising our guidance for fiscal year, 2020, which Tom will discuss in more detail.
Slide five please.
Like to take a moment to remind you of the way we talk about our business, which we introduced at our recent Investor day. When we talk about what CAC does you will hear forwards enterprise mission expertise and technology.
We serve two types of customers enterprise in mission for enterprise customers, we provide expertise and technology that enabled the internal operations of an agency examples of that our IP infrastructure financial HR and supply chain systems and support agencies in the clearance process. This.
Provides for a $130 billion of our addressable market and is consistently growing.
Permission customers, we provided expertise and technology that directly enable the execution of an agencies primary function or mission.
Examples of those are solutions and domain areas such as space C is our cyber and electronic warfare, driving a $90 billion addressable market and growing at more rapid pace.
I encourage you to review our Investor day presentations on our website in the Investor Relations section to better appreciate the more fulsome discussion that we shared in mid September .
Slide six please.
We are seeing healthy demand trends.
Information.
Based on our strong past performance Onrad slimmer program for United States Army Hips Army safety I will consolidate hundreds of legacy applications and deliver an interoperable solution to improve HR services and transform how the navy recruits trains and manages personnel.
We also won a five year $443 million mission expertise contract to assist the US army encountering emerging commercial based threats, including unmanned aircraft systems and Ibds.
This recompete win also included expanded scope that doubles the size of the opportunity highlighting our differentiated expertise and record performance with this customer and their mission.
In addition, we won a five year $438 million mission technology contract to support the United States Airforce Research laboratory with the multi domain integration, our geo spatial and signals intelligence and operations across air space in Cyberspace. This is largely new work to see.
Which has since led to additional awards with the same customer.
Slide seven please.
You've heard as previously discussed the three pillars of our strategy when new business drive operational excellence and deploy capital for growth.
Our record contract awards demonstrate our success in winning new business and our strong financial performance is indicative of driving operational excellence.
We also continue to deploy capital to drive future for growth.
Through our distinctive M&A program, which remains our top priority for capital development.
Capital deployment, we continue to pursue high quality innovative companies that fill capability gaps and drive further differentiation in our customers most critical investment areas.
As I mentioned earlier, we closed on three acquisitions over the last week next century, Linda's strays shielding indeed three.
Next century is a mission technology company that delivers advanced geospatial mapping predictive analytics data fusion and machine learning to the intelligence community and the Department of Defense. This acquisition provides additional growth to our strong business base of high value technology offerings.
The industry ceiling is a mission technology company that delivers harden systems to protect equipment from electromagnetic interference a key growth aspect of a large single award III Q that we were awarded late last fiscal year.
Indeed, threeq is emission expertise company that provides applications development data analytics digital transformation and cyber security.
This acquisition is part of our UK operations and supports UK National Security defense customers a growth area for both our domestic and our UK operations.
Well on the topic of acquisitions.
Im extremely pleased with the performance to both LG SMS to Don as they both not only are driving the top and bottom line growth. We expected, but are investing ahead of customer needs to ensure we have the next generation technology offerings, our customers desire.
In addition to our M&A program, we continue to invest organically and our capabilities and technology assets, including key priority areas like signals intelligence electronic warfare, cyber and communications as well as business development as I mentioned last quarter throughout fiscal year 2020, we plan to invest a lot.
He was higher than previous years in internal R&D and business development. In addition, our strong contract wins are driving slightly higher capital spending to support that growth.
Our first quarter results include increased investments in those areas consistent with our strategy to invest ahead of customer demand.
Slide eight fleets.
Turning to the market environment, we remain encouraged by demand trends from a budget standpoint, the two year agreement signed back in August provides healthy spending levels for our customers in both government fiscal 20, and 21, particularly in areas aligned to see Sai capabilities.
Government fiscal year 2020 started under continuing resolution, which has an effect through November 20, onest in could extend longer as you know we start virtually every year under a CR and as in the past, we do not expect us to have an impact on our business.
And given our record backlog and strong contract awards, we remain confident in our ability to deliver on our financial commitments.
In closing our first quarter results were a great start to the year with increased organic growth strong profitability robust cash flow and record contract Awards. In addition, we are deploying our capital for accretive acquisitions that continue to position CAC for future growth.
We continue to execute our strategy and remain confident in our ability to deliver growth margin expansion and shareholder value.
With that I'll turn the call over to Tom.
Thank you Johnny and good morning, everyone. Please turn to slide number set a nine.
Our first quarter revenue with $1.4 billion, 17% greater than last year with 5.6% organic growth.
Organic growth in the quarter with a bit higher than expected driven by around $220 million of low margin pass through material purchases, which occurred earlier than anticipated.
Net income for the quarter was $68 million consistent with our expectations in our annual plan, but lower than last year recall that in the first quarter of last year, we realized a onetime pretax profit benefit of $12 million associated with product sales occurring earlier in the year than effected.
In addition, the effective tax rate in first quarter of last year with the low 13% as result of the tax benefits associated with stock vesting versus this quarter as effective tax rate up about 18.5%.
No comparable applied for these factors, we rely modest first quarter 2020 different growth consistent with expectations.
The lgf in math about acquisitions continued horrible financially inline with our expectations generating approximately $18 million of adjusted EBITDA in the first quarter.
Slide 10 place.
We continue to generate strong cash flow with $115 million of operating cash flow in the first quarter, excluding our our purchases facility it increase at 38% over last year.
Days sales outstanding excluding the facility with a low 59 days or 53 days, including the benefited the facility.
We ended the first quarter with net debt to trailing 12 month adjusted EBITDA at 3.0 times.
Including the $105 million that incremental debt to finance the three acquisition John discussed pro forma net debt to trailing 12 month. Adjusted EBITDA is expected to be around 3.3 times that the ended December leaving ample debt capacity to fund additional acquisition.
Slide 11 plays we are raising our fiscal 20 guidance to incorporate these recent acquisitions.
Cumulatively, we expect them to at around $50 million to our fiscal 2000 revenue in $3 million to net income in New York, We have increased our guidance accordingly.
All three acquisitions fit well from a strategic perspective in are expected to grow into double digit.
Deliver adjusted EBITDA margins in the mid teens in produced positive present values in aggregate, we painted bit less than 8.5 time next month EBITDA for these company.
Given the acquisition our improvement to DSL in our strong cash flow performance in the first quarter, we're raising our fiscal 2000 guided for cash flow from operations by $20 million to be at least $420 million.
At the same time, we expect higher capital spending due to investments in facilities to support growth from new business wins, we now expect fiscal 2000 capex to be between 70 and $75 million.
To help with your modeling let me give you some color on the second quarter fiscal 20.
In aggregate, we expect the three recent acquisitions June contributor bottom $10 million to second quarter revenue, but are not material to net income without considering the partial quarter in associated transaction costs.
We expect second quarter net income to be consistent with levels a year ago.
The positive impact of the Lgf in math to Dot acquisition and organic growth are offset by the expected decline in profitability. A one large recompete that moved from time in materials at very favorable rates to cost plus during the quarter. This was fully expected in included in our initial up by 20.
Plan and our guidance.
Slide 12, please our forward indicators remain healthy.
As John mentioned first quarter with record per contract awards coming in at $4 billion in contributing to a book to Bill a 2.3 time on a trailing 12 month basis.
This continued to drive backlog growth now at a record $19.5 billion I'll close to 50% year over year.
We also have better visibility into fiscal 20 than we discussed on the fourth quarter 2019 earnings call.
At the midpoint of the guidance, we now expect 94% of our revenue will come from existing contracts, 4% from re compete in 2% from new business.
Our pipeline reinvest metrics remain strong we submitted bids pending award at $7.5 billion with over 80% of that for new businesses Cdti.
And we expect to submitted another 13.6 billion dollars' worth of bids during the remainder of the December and Mark quarter with over 70 of that 70% of that for new business to see CPI.
Let me note that these pipeline metrics now exclude estimated value through multiple award I'd like to contract. This is consistent with our practice of booking zero value for EMEA accuse upon contract award in will be our practice going forward.
With that I'll turn the call back over to John .
Thank you Tom let's go to slide 13.
In closing I'm very pleased with our first quarter performance and start to the fiscal year. The CVI team continues to successfully execute on every element of our strategy.
We are delivering increasing organic growth by winning significant new business, we're delivering healthy profitability by driving operational excellence and we're positioning this company for continued growth by deploying capital for strategic acquisitions that are accretive and enhance our capabilities.
Our performance gives me great confidence in our ability to deliver on our commitments in fiscal year 20 and beyond.
None of this happens without the talent innovation and commitment of our employees I'm incredibly proud of the exquisitely expertise and technology, we deliver to our enterprise emission customers and I. Thank all of you for that.
With that Allison, let's open the call up for questions.
Thank you Sir.
I will now begin the question and answer session to ask a question you May Press Star then one on your touched 10 fan.
We are using a speakerphone please pick up your handset before pressing the Keith.
If at any time in your question has been addressed and you would like to withdraw your question. Please.
Please press Star then Tim.
As a courtesy we please ask that you limit yourself to one question in a single follow up.
Further questions you may reenter the question Q.
We have a pause momentarily to assemble roster.
Our first question today will come from Gavin Parsons of Goldman Sachs. Please go ahead.
Hey, good morning, everyone.
Good morning, Kevin.
Guys bookings have been really strong so what do you need to do to make sure that converts into faster revenue growth do you need to make sure that you can hire extend footprint or is that more on the customer to exercise unfunded those ceilings.
Yes, Kevin Thanks, Yes, its of other as its very true that we've we're coming off another a quarter actually is our fifth quarter of a consistently.
Higher award levels.
Yodle, others Theres a lot of Theres a few items here one is.
And probably most importantly is trust to manage the ramp up periods of our both the expertise and the technology jobs that we have been winning.
Whereas we're extremely precise pleased with the record contract awards.
The ramp up time do vary by our different programs I thought I'd take just a moment to walk through that because like all of US see we've had tremendous awards and really trying to be more predictive of when that revenue without revenue shows up.
On the expert expertise side.
Most most times if those are takeaway programs will pickup the incumbent employees and that does support a quicker ramp up period, but then transition timelines very somewhere in the one to three month range.
If you look at our technology programs, we need time for our facility build outs lab and other material purchases.
And.
Really building out program and in for the structure. So as ramp up times can be anywhere between three and six months. So once we've received the award were very focused on how quickly can we ramp up our hiring clearly one element of it.
But we are traditionally looking at all the job requisitions for jobs that we have submitted all of our job requisitions are submitted when we spent our bid so our fine recruiting team is out there looking for candidate fire to award. So it's really a combination of what what type of busy.
As we've we've just one managing and ramp up period, and then making certain we have the right talent.
Okay, that's great.
And so on the higher R&D spend I R&D spend I.
I think in the past you've mentioned the customers willing to pay more for technologically differentiated R&D.
So can you talk about whether or not you see that as having a higher IR than it has in the past and if you could talk about the customer attitude towards retaining IP that bigger.
Yes.
So yes, we are clearly spending more in R&D and have been in bidding proposal money and a new element with the acquisition I should say new by a stronger element of our investment strategy is in the independent R&D spending.
And I'm going to start talking about this in some of the different quadrants that that we support from our Investor day, we're going to continue to invest in our enterprise Tech.
Areas, such as cloud migration agile software development developed development visualization tools.
That are really second to non and I say that only because thats, what our customer comments on it's clear that debt during and her team.
Have really moved more intelligence applications to the sea to what they've U.S. cloud in the next five companies combined so we're going to continue to invest in anything agile as.
As well as in our power distinctive visualization tools.
We continue to in invest in signals Intel electronic warfare communications cyber things that you've heard we talk about in the past.
Now specifically on the on the in the independent R&D and intellectual property.
Those are really driven by our Justin Master Don is our business model really as you mentioned rely on an independent R&D, where were designed and creating technology base intellectual property. We've had a great track record frankly for those technologies and those investments that are focused on intellectual property, we like to do those ahead of customer.
Lead we actually do that by being well informed by our customers and also keeping a very good eye on where this marketplace is headed.
We truly we've had great success in turning the intellectual property into additional awards and one of those areas are multiuse devices that where a customer could download software and that can do the mission that that customer needs. So all in all really focused investments.
Customers very supportive of that of of this model and in some of our preliminary meetings have been asking for us to continue to invest more there because they can see of future needs that will take great use of our and of our intellectual property.
And Kevin Let me just added a couple things if I could up.
LG us in particular has started as masterful job in the passage ensuring that they own the intellectual property on the habit exclusive rights to a variety of technologies in number of patents in so that is becomes an asset of CCR, which is very positive and you mentioned the internal rates of return Indian IR day on.
This is a benefit you kind of in our in the science trying to forecast the profitability be such investment, but there was very robust prophecies head of business cases before the company commits Monday July R&D trying to kind of rack and stack in prior tried different opportunities all with the goal all of what is the.
His sales and revenue opportunities for these particular projects not science project, but very much tied to our very.
Well defined and opportunities.
And our next question today will come from Jon Raviv of Citi. Please go ahead.
Hey, thanks, everyone and good morning.
Our next on the Capex can you guys give us a little more on on where it seems that is it fair to say that 20 is tracking to your highest capital intensity as a percentage in sales in history.
Yeah, John Thanks showed the questions like.
The Capex spending is actually a nice high class of issue for us to talk about.
Factor into our guidance a level of capex, but we often have startup costs.
Of some form with our new Con contracts. This is something that we remain keenly managed we actually look at each and every program and we perform a bottoms up basis.
But then with some of our wins since we win those jobs, our customers make changes to things like work locations the mountains space.
And possibly some of that facility plans, we had based around those wins, we see another award being awarded closely to that we may make a different facility.
Buying decision that allows us to buy one facility. So we can hows multiple programs in it I'd also tell you that as the mix of expertise and technology programs change the level of investment and things like test facilities and labs and those types will also drive additional capex as well I'll, let Tom I'll talk a little bit.
More about the financial side of it yes, so in terms of.
Where we spend the capital allocated couldn't number one is facilities kind of John mentioned, our intersect continue to internal Ikea unity infrastructure to support.
Our 20000 employees and then probably the third element is you did cut in laboratory testing equipment to support some of the I R&D efforts on.
Somewhat analogous to working capital growing companies need more working capital to sustaining that growth in at company shrink. They can free up working capital in a very similar to capital spending you as companies growth will need more you to get a capex to support that growth.
In the extremely unlikely scenario that we'd never grew anymore into beyond it beyond this year, we would need very little in capital spending so it's somewhat of a leading indicator of.
In our business and I will also underscore that's on.
The expense associated with the capital spending which is going to do in a full post into depreciation et cetera are reliable expenses in with the recaptured in our current rate structure. So our unit thats part of our CAD to bid process ought to have you see I owned facilities were employees will do work on behalf of the government.
Okay. Thank you and then just for the fall off.
Now while margin down a bit here year over year, you're talking about flat net income and not in second quarter. He is getting a sense for the cadence biggest at 10.3% margin for the year versus 9.3% on this quarter. We know is sort of backend loaded, but just give us seems gives a sense of the moving pieces. There. Thank you.
Had a negative to kind of margin performance and I did mentioned a large contract transitioning from can a time and material at very attractive rates to cost plus that transition headed dovetailed. The first and second quarter. So that was a little bit negative.
Headwind associated with that.
Throughout the year unit in particular that during the fourth quarter, you'll see some healthy kind of margins to support that 10.3% guidance that we provide.
Yeah, I might also add John that.
If I if I look at our first quarter.
I believe it sets us up very well for having a fine fine year, we provide year yearly guidance.
And I would tell you that our progress. Thus far is is in line with that guidance, it's sort of playing out as we Ics ex expected and we've got two other items here. When we look at these in a year over year a quarter quarter measures. One is that the mix of our business continues to change as we get more into the mission Tech.
Business and as I mentioned, those those ramp up times are very different than our traditional ex expertise programs.
So overall I'm very pleased with where we're at and where we're looking forward to a strong second half which is very much in line with the guidance that we provided.
Our next question today will come from Matt Sharpe of Morgan Stanley . Please.
Please go ahead.
Good morning, gentlemen.
Good morning matched wanted to just wanted to touch on LG us in mass did on performance here for a moment obviously given.
At times choppy nature of deliveries there are revs in the profitability can jump around some wide and I think we saw that.
Last quarter. So maybe if you can provide some color on how those acquisitions that track through one Q and whether or not there are on plan today would be helpful.
Yes, Matt Thanks, I mean, as Tom mentioned during his prepared remarks.
Financially bolt are performing just as expected you did mentioned there is going to be choppiness in some of their.
Product deliveries, but you know fest, thus far going as planned I'd also.
Share a little little bit of color on just how that integrations going no since since March.
And verbal and financial support to procure software defined solution. So the reason why we bought those two companies and integrated them with what we're doing in the segment and in the communications area was to make sure that we had products slightly ahead of need so the the CLO.
Operations going very very well.
In the limited limped limited time remarks was not that far.
Our back and I mean overall overall when we look at the significant margin expansion I think with about a 100 bips that we're expecting from both companies we are nicely on track.
Got it thanks, and then I also wanted to touch on a.
To look at our you our UK foot footprints and.
Take very attractive margins their customer relationships.
Both expertise and technology capabilities, and how do we expand that.
And as you mentioned over the last year or so as recently as yesterday.
We did have moved we did purple says cure and now Ddrthree all mission expertise companies that provide technical and domain knowledge.
You know to us the worlds are very dangerous place us continues to work with the sidecar partners out there many of whom get support from across our company. Both in the in the enterprise technology area and especially in the mission mission Tech area. So in the future it's safe to say that will use our UK.
Business as a a beachhead of sorts from where we can deliver in support mission technology those countries.
That that are buying and are looking to buy our products as well as established our self.
The fact that we have a large.
A material.
Well established 30, plus year business, there with great customer relationships knows how to do business in the UK really sets, especially mastodon up very very well to be delivering there so again and their E. W products directly into that marketplace.
Our next question.
From that acres of Barclays. Please go ahead.
Good morning, everybody.
Morning.
I wanted to ask them.
The deal that you just announced could you talk a little bit about the process.
How you you reach the deals and it looks like devaluation has pretty reasonable where there any other.
Yes.
Thanks, Pat I'll I'll.
As part of our competitive market based strategy, we look at a kid, where we have strengthened in where we have white space in.
Either eight technology, your customer or eight geographic or rather cutting kind of you state and into the operations organization business development team you keep a running list of where that white space exists in what type of acquisition targets would fill in those particular.
Spaces offer two of the domestic acquisition are they were sole source code. We knew the company we've had conversations with one company for over two years.
In dialogue about potential opportunities for us to acquire them I'll do other one was more recent but it was as you six to 12 month process have though is how to discussions and we are.
Convince them I think rightly so that we would be a very good home for their companies you'd argue do you do from a cultural fit our treating their employees appropriately a very consistent you called sure couldn't mission values associated with though is if we were able to negotiated price.
Which would be our from their perspective and fair from our perspective.
The.
<unk> deep three acquisition was a a processing unit competitive process back to kind of bucket in the UK.
And you can we did the appropriate due diligence trying to understand the capabilities of it and team to through this process. We revisit some of their yes. We were off you know you happy with the financial.
Acquisition.
Good growth in marketing characteristics, and we purchased I'm not a of will be considered an attractive price on.
I got that probably enough set for that.
Yes.
Great. Thanks, and then maybe I missed it but what what are you see for interest expense and your guidance now.
Okay.
We did not to into kind of change it, but the acquisitions $100 million with incremental off our use of capital.
At 3.5% on an annualized basis will deliver produce three and a half million dollars of additional interest expense for full year. This is a part year or sell without a couple of million dollars of our unit interest expense into that being said often these had rates you appear to continue to come down.
So.
That should offset.
The lower rate should offset some of that incremental debt.
I was wondering can we maybe following up on John's question with the regarding the profitability branch is there anyway. I know you gave a ton that color on you know the past new businesses, maybe 20 Bips have an impact in Q1, how do we think about a recompete and then you're over here can we just is there anyway, you could bridged the moving.
He says the headwinds in maybe the benefits from a change in you know focused and more meshed in technology and how that benefits net.
Yeah. So interstitial I'll start my remarks, with we provide full year guidance on and we run our business on a kind of 12 month basis Saab odd you'd although good portions of our business are relatively steady and there's not a lot of change from period to period there are aspects of it.
New business that needs to be one this year, new business, which reported last year, which was being executed in 2020 as well as falloff in the business be cost of natural program kind of lifecycle in that provided that kind of revenue bridge you are generally thats unchanged, but.
We're adding LG and mass adoption in we spoke about the marketing characteristics in revenue characteristics of those acquisitions and core C.C. I. You know is obviously the bigger pieces of business are you there should be experiencing in product gross margins you consistent with the goals. We previously articulated that tend to.
30 basis points, and so thats the full year within every quarter, we're going to see those are unit fluctuations.
So I did mentioned one.
A good piece of work long established relationships, the customer decided to structure that affect cost plus it so that had some headwinds a little bit in the.
To appropriate offsets in terms of organic growth and improvement in other aspects of our current business.
Thank you for the color and just as a follow up maybe on.
The contracts that you expect to when I think you said, 94%, which seems that relative high.
How do you think about you know the 2% that's not only from New awards have makes the pipeline kind of.
Yes, yes Sheila.
I think we're at 94.
Currently.
4%, Recompete and 2% wins so.
Yes, im coming off of first quarter that was.
A very very strong.
You know, where we're we're confident on closing both to four 4% and the to present a gap.
That has its own challenges as a very little of that work is new new so those are all to April a ways.
So I would say that the mix is is what we would like to see coming out of the first quarter.
Should we have well I guess I'll just leave it that we'll have we'll see how awards go in the second quarter and also look at what that ramp up.
Pattern is to determine what our guidance looks like going forward.
Our next question will come from Cai von Rumohr of Cowen. Please go ahead.
Looking at because of the stretch child's are we looking at particularly strong fourth quarter or.
Not so strong give us some color on that if you could please.
Yes sure Chi.
We we attribute our strong.
Book to Bill numbers around making sure that we're staying close to our customers that we make sure we actually I understand where they're going to go about five to 10 years back we gotten involved the electromagnetic spectrum, where we believe the government is going to spend their funds and lo and behold, we find our cells with very well.
I, we Oh, we consistently look for you ended the year flushes, we did not see that we've been hearing about multiple protests and how those of change frankly, only one very immaterial and you less than $30 million, our $4 billion was actually protested so I mean.
We're at 220, or so billion dollar addressable market. So we would attribute our awards successes around being very judicious and very focused on what we're out there bidding rather than trends are the federal government, having a well versed contract forced or have any funding in place. We just frankly I've not seen.
Those issues.
And last one given your Super bookings has the backlog.
The length of the backlog the average duration changed at all.
Yes, hi, thanks, absolutely. So you know as as we've been focused on.
Programs, let's say and many of those are larger and they're also longer term because many of them our technology programs versus program. So we would classify as expertise one so as we've won some of these 800 900 million dollar jobs. Those are not 110 million dollar three year programs those are multiyear programs.
Where we're delivering a solution to our end item customer and that's what we've been focused on its taken us a while to sort of.
I'll take the next step in Cpis.
Long term history, but we find ourselves well position at winning those so if you look at our back backlog, yes, it's going to be a longer term one.
Our next question will come from Tobey Sommer Suntrust. Please go ahead.
Thank you. Thanks could you talk about the ongoing opportunity for you to push into kind of higher margin recurring services and I ask in the context of the the announcement you had recently with Blackberry, which I found quite interesting. Thank you.
So with some strategic hires understanding what other parts of the fiber government needed what are those was superior community communications.
For those data day everyday voice and text community communications going on across the federal government a lot of that we believe for quite a long time in our government customers or are coming to that which is how do we do a better job of not only securing the emails that are so.
On around the federal government for how we had we secure text and voice and looked at that's probably about two years back again ahead of ahead of need.
And found a great partner in black and Blackberry or John China, and his team there had been outstanding partners, we've actually come up with a ill and with the win win solutions for not only both of us but to our front of government customer. What's unique has begun offered as a service either in a in a.
Customers infrastructure or cloud or within hours.
And it's starts to get us into those those perpetual revenue streams right, where we're on delivering.
A software solution that sits on a already issue government, a smart smartphone and allows us to drive drive revenue and earnings growth on a monthly basis, we've got a couple pilots going on now.
We like that type of model and Ah I respect you would see us doing doing more of that in the future.
And our next question today will come from Seth see Smith of JP Morgan. Please go ahead.
Thanks, very much and good morning cloud to cloud to turn the call.
Thanks Seth.
John I Wonder if I can maybe ask as ties question.
Second question, a little bit different way back when the backlog total backlog was around 11 billion that seem to support a business with almost four and a half billion dollars to styles.
How should we think about the sales level that business with you know $20 billion in backlog can can support.
Yeah I guess.
First as you should you should see us to continue to grow.
The easy answer.
You know were we watch.
The backlog number we look at the funded backlog number. We're also keeping an absolute eagles eye on making sure that we continue to be does that this disciplined in what we in will be chase as Tom mentioned earlier.
What that says about revenue growth and therefore earnings growth overtime as we should consistently want to see that going up into the to the right.
We have been.
Talking about growing this business not only topline because there's a lot of organic growth chatter out there.
That's just not for US we actually believe the we build a better shareholder value when we're being very discriminating on what we're out there chasing in the things that were out there chasing and shaping need to not only provide top line growth, but also provide additional capabilities and grow our addressable market at the end of they grow better show us better.
Better margins, what's exciting about if you are using your numbers. If you compare where we were maybe two years ago to where we are now our backlog is greater we are larger company. We are consuming backlog at a much more rapid rapid pace.
And you all I can tell you is that we are extremely focused on bottom line as much as we are top.
As well as well as cash cash flow because that additional cash flow funds additional acquisitions that not only feels gaps by every time, we fill the gap out there. It drove a grows our addressable market and allows us to a a differentiated even even more.
Great, Thanks, and maybe as a follow up how.
To be to be very very transparent, we just rolled this framework I'll have we're still making sure that.
The definitions that we have to these areas because the one thing I admit we strive to do with what we think is a very simple wait time, our businesses make certain that the receivers of our our updated mess messaging believed that it's a simple now or heavy having said all of that at Investor day.
We did provide the current mix of business and we also provide information if I remember on bid submitted.
And ER to be submitted I believe we did that are in each of the four areas of what we've done since then and if you've noticed as in our press releases. We've continued to show that level of information. So every award that we have out there. We put dollar value. We also talk about whether that's a mission or enterprise expertise and whether it's me.
You know I, what I'll tell you is a Tom and I and the IR team work continued to assess providing more information.
So the book to Bill Little over two times trailing 12 month. So given what you said about the pipeline and expectations for bid activity. If you win what you think you'll win what does that imply.
For kind of a book to Bill for.
Fytwenty I get this is your opportunity to say that book to Bill should moderate if that's the case if that's not the case that that's good to just interested in your thoughts. Thanks, [laughter] may end up [laughter] kick off.
[laughter] quite interesting question.
Yes, [laughter] so until we do have a good amount of couldn't bids outstanding could a bit to be submitted last year cutting into 2019 and $10.3 billion of award our capture rate the percentage of revenue that we won with 70%. So just to have.
Okay.
During high level, you Frost sub odd you certainly higher than any number that we had before and job.
Is that repeatable I'm not sure.
So if repeat those very high overall bridging right Yeah, we'll we'll continue with this.
Joe I'd also add in there you know you'll never can we talk about awards and I'll say in the words the word lumpy right. You know every every every every time somebody goes through somebody streaks you know all it would take us for us to do 3.9 billion next quarter and Unfortunately Tonight will spend most of the quarter after what happened so.
No I, it's it's a mix.
The way I see it is that we had a great.
F. White COVID-19, we had the F. July 21st quarter than we expected plus or minus a you know a a couple points. The timing is going to play a factor is well not so much based on back a budget and you know these ended the year flushes that I continually here of it's really more.
About when our customers ready to really really so we're going to continue to watch the.
Mix and also I would I would tell you we will expect respectable bookings throughout this year.
Fair enough.
And then it does sound like you guys are giving some thought in terms of how to help the market understand.
How to think about kind of the bookings and the backlog as the duration changes a little bit too can you guys just disclose or help tell us kind of what the it'd be the weighted average duration of your bookings in the quarter was or kind of what the duration of your backlog is at this point it seems like that would be something that's kind of fairly.
Straightforward to calculate thank you.
Yes, yes, there Joe and John you previously answered the question that we believe the durations increasing because it is all into some of the large awards are.
578 years job, which is driving higher duration.
Yes, let us you just kind of could reflect on.
Are you providing that specific level lucky to fidelity.
Question and that May be helpful metric, so cutting duly noted.
Thank you.
And our next question today will come from Robert Spingarn of Credit Suisse. Please go ahead good morning.
Hi, guys.
So I wanted to go back to where we're Seth was and just to ask you about integrating these technology focused or more product focused acquisitions, how that differs from integration of an expertise type, but domain or an expertise acquisition and.
And just from a strategic perspective, how does it differ and then perhaps from a cost.
Or integration expense perspective.
Yeah, Rob. Thanks, So if we focus on the mission technology area.
Good and clearly that would describe a long before we had these terms what we would where we would put six three where we would put parts of bell three NSS, where we put a massive don.
LG Aspen to a smaller ones that we announced.
Today.
So to get to the integration I actually look at in a few different different ways. One is.
How do we all right on the same systems and I would tell you whether its expertise company.
Or a or a mission acquisition, we all benefit from being on the same system. So we haven't had some acquisitions, where the the acquired party comes in and you know there their financials on one system in their human capital informations on another and frankly, that's a distraction when we go forward together.
So first and foremost we look at systems.
Beyond that.
The next area is how do we bring new employees in a and there's really no difference between expertise and the type of technology in it.
Bringing technology companies in the third area is what type of company RV and ER and I have to tell you that as we do more mission technology companies, we'd like to bring those companies, we like to connect them.
But not a fully in integrate them what makes a mission technology company, great is the kind of creative culture, and how those people within that acquired asset a work together. So although we may have put them in the same umbrella.
We're really looking for those companies to coming to keep their unique innovative kind of kind of waste LG, yes, perfect. Examples so Kevin Kelly was the CEO of that company, Kevin Kevin came in the majority of LNG yesterday looks just like what al just looked like the differences is along the way Kevin Kelly.
Picked up another $1.2 billion of our.
Visits which are things that sort of look more like mission mission. Today. So you know where we're very very careful and frankly have done 79 acquisitions now if I'm right, we get to say that were very experienced at it.
The one thing we pride ourselves on is driving and increasing their value that they had the database came in and not eight used the word destroy because that's a to try to Tony and but not but not take away from on the on value that they bring so the integrations with us.
Three areas look exactly alike, but as we looked at larger perhaps technology companies.
We're going to make some very good decisions with the incoming management team, which is what we always do as to how best to position them inside of CHF.
Okay and then the only other thing I wanted to ask just with the Big Jed I Award that just happened is there any opportunity for CAC Ida play as a contractor or do you have any existing partnerships for.
For example, with Microsoft that might benefit you there.
Yes. Thanks, So yeah, we've had a longstanding relationship with the eight Ws, we have a and almost equally long relationship with the Microsoft folks, whether we're talking about Kws cloud, we're talking about Oh sure. Those are those are great.
Come on.
Out of the cloud based in foot.
Infrastructure slashed frameworks that both Deo, D. and the intelligence community and federal civilian agencies need out there.
We have more folks trained on the Ws clouds and most of one of my answers earlier I would just to put a sort of exclamation point on it we've been involved in the aided west cloud for quite a long time the intelligence communities cloud is called Cqs.