Q3 2020 Earnings Call

Perfect of $75 million by the end of this fiscal year well in advance of our initial plan.

Employee fringe benefit harmonization and the successful conversion of our financial system as well as several other back office systems have been completed.

Facility consolidation is the last significant cost synergy milestone to be achieved I.

I would like to emphasize that our integration efforts and cost synergy achievement are being completed ahead of schedule and our combined workforce is focused on a single mission, serving our customers under the FDIC banner.

Actually I see is leveraging our increased capacity capabilities and customer access which has resulted in greater pipeline development stronger recompete beds and new contract wins.

During the quarter FDIC was awarded a task order for $85 million from the US Navy naval surface warfare Center.

That is a great example of revenue synergy as a result of the combined company.

Through the acquisition of agility FDIC obtained the Deo DS IOC Mac IDQ vehicle that provided contract access to new customers. This vehicle combined with legacy FDIC technical capabilities allowed us to jointly compete for and when this task order.

This is just one proof point of our successful expansion of growth opportunities as we go to market together, leveraging each company's capabilities and customer access as one team.

With program operations in the business development organizations fully integrated Sai sees enhanced pipeline reflects our expanded addressable market and contract opportunities, enabling the acceleration of profitable revenue growth.

Our value of submitted proposals increased to $16 billion up $2.7 billion from the second quarter.

While our contract proposal activity increased we also continued to invest an innovative and differentiated capabilities to drive growth.

We have recently garnered accolades from Washington Technologies industry Innovation Awards for one of our solutions as they icees Internet of battlefield things. This innovative state of the art solution integrates a variety of commercial technologies, including sensors mobile broadband and networking cloud and high performance computing and power managed.

Yeah.

And Expeditionary Command center can now fit into a vehicle, giving our military forces and anywhere platform arming them with real time information and informing situational awareness targeting and other battlefield actions.

With investments in differentiating technologies, and an expanding business pipeline I continue to have confidence and accelerated revenue growth next fiscal year and beyond.

As a people centric business, winning the war for talent is vital and has our attention at all levels.

A top priority will always be to attract and retain the best talent by fostering a purpose driven inclusive and flexible working environment, while encouraging our employees to make a difference outside the workplace through citizenship and community programs.

Our employee benefit programs reflect our emphasis on flexibility, we are investing and programs that provide options and how our employees manage their work schedules and leave time.

We are proud that FDIC was recently named as a top five company in 2020 for flexible jobs based on the study of over 52000 companies.

This recognition reinforces our commitment to provide remote and flexible work options to improve the well being of our employees and their families while providing world class talent in support of our customers.

We also know that today's employees want to work for an organization that reaches outside their walls to give back and positively impact their communities.

Throughout the month of September FDIC raised over $200000 in employee and corporate contributions in support of feeding Americas hunger action month, providing over 2 million meals to America's hungry.

Let's see I see desires to have a tangible and positive impact on targeted communities populations and the environment to that end, we have a focus of four areas to achieve this goal military veterans stem education community wellbeing and environment and sustainability.

Our employees are dedicated to our nation and our communities as FDIC was recently named by the Washington Business Journal as one of the largest corporate philanthropists as measured by volunteer hours.

See I see is culture of exceptional service, both in and outside the office make it a rewarding place professionally and personally.

Now turning to the market environment, our customers continue to operate and make their investment decisions. Despite a continuing resolution.

Wallace Crs not ideal government fiscal year 19 budgets were strong and operating at those levels allows most customers to continue executing their important missions.

As I conclude I would like to follow up on the strategy review that I highlighted in our September call.

The successful integration of the agility acquisition and market dynamics uniquely positions as say I see for opportunities that leverage our scale expansive portfolio and strong customer relationships to accelerate profitable revenue growth.

We will prioritize the most compelling opportunities by focusing on a few market driven areas that include space systems and mission engineering that takes advantage of Sci sees leadership in this market and the continued focus and ensuring our nation's dominance in resilience and space.

Mission engineering and integration across DSD system modernization communities to ensure our nation has the most advanced solutions to stay ahead of our adversaries.

And modernizing and managing our nation's critical IP and enterprise infrastructure to gain efficiencies improved cyber security enable increased analytics and improve the citizen experience.

Going forward. These areas will be the catalyst for growth that FDIC. This is not to say that we will forsake other areas of contract opportunity, but these areas will drive increased focus and investment in order to drive profitable revenue growth over the long term.

While M&A always seems to draw increased attention and speculation FDIC will continue to take a disciplined approach this area to fill gaps in our portfolio accelerate penetration of an underserved customer or gain differentiated capabilities, we do not have today.

So I see will always approach M&A as one of the many tools in our tool box that we used to deliver shareholder value creation.

As part of our strategy refresh our goal is the disproportionately invest in technologies talent and infrastructure that will enable long term growth in these strategic areas, while preserving predictable growth from our core markets.

We also know our market is dynamic and our customers need a partner that can be agile. So we will continue to measure our strategy against milestones and adjust as needed.

I'd like to as Charlie to share our business development and financial results before we take your questions.

Thank you nothing.

See I see has delivered results that reflect consistency in the business, while gaining momentum and contract awards and business development activities that will drive future revenue growth and create value for our shareholders.

First let me cover business development results net bookings for the third quarter were approximately $2.2 billion translating to a quarterly book to Bill of 1.4.

As a testament to our diversified portfolio net bookings were strong across all of our business segments as well as being very balanced between winning new work on new awards growing existing contract value through own contract growth and retaining or recompetes.

On a pro forma basis CRC is trailing 12 month book to Bill is 1.1.

Included in this quarter's booking rototill of $582 million in contracts to support space and intelligence community customers.

These contract serve customers in the intelligence community and classified space domain that rely on FDIC for highly specialized expertise and technology integration engineering, it modernization and mission operations.

Notable in these awards was the previously announced National Geospatial Intelligence Agency Award for the innovative Geo end application program.

Other notable awards in the quarter included to US army awarded over $41 million to modernize its infrastructure by migrating enterprise applications to end cloud environment.

Approximately 24% of the total year to date gross contract awards of $6 billion has been for new business and as Nonstick mentioned, we have $16 billion of Submittals awaiting award with 75% being for new business opportunities.

I would also like to point out that over $2 billion, a new business contract value has been awarded to FDIC through our third quarter has been protested by competitors.

The favorable resolution of these new business awards before fiscal year end, which is expected based on normal timing for protests resolution would significantly increase our contract award bookings.

And book to Bill for the fourth quarter.

We're also awaiting decision on our largest recompete. This year the department of Justice asset forfeiture contract, which was slowed by a pre award protests.

At the end of third quarter Sassy's total contract backlog stood at approximately $14.5 billion with funded backlog up 11% from the second quarter.

Let me now turn to financial results for the quarter.

Third quarter performance on revenue margins and adjusted earnings per share were in line with the first two quarters of the year consistent with our previous communication.

Our third quarter revenues of approximately $1.6 billion reflects total revenue growth of 38%, which were due to revenues associated with the agility acquisition organic revenue contracted 1.5% year over year, although after adjusting for about $30 million, a revenue dis synergies in the quarter or.

Organic revenues grew approximately 1% compared to the prior year quarter.

As a reminder, we have previously communicated and approximately $120 million of revenue dis synergies for the full fiscal year equally impacting revenue throughout the year due to elimination of prime sub relationships lower volume on cost plus contracts due to cost synergy achievement and other factors.

This approximately 2% headwind to growth will not exist in our next fiscal year.

Third quarter, adjusted EBITDA margins were 8.3% as a percentage of revenues consistent with the previous two quarters of the year, reflecting continuing strong program performance and the favorable effect of accelerating our net cost synergies.

Year to date adjusted EBITDA margins have increased 90 basis points over last year due to the blending of the agility portfolio strong program performance and the net cost synergies achieved.

Third quarter, adjusted EBITDA was $135 million, a 37 million dollar increase from the prior year adjusted EBITDA excludes $9 million of net integration related cost in the quarter.

Net income for the third quarter was $55 million and diluted earnings per share was 94 cents, excluding the $9 million of net integration costs as well as amortization of intangibles are adjusted diluted earnings per share was $1.39 for the third quarter.

The effective tax rate for the quarter was approximately 24% consistent with our previously communicated and reaffirm today expected full year rate of 20% to 24%.

Our expected cash tax rate is also unchanged at 13% to 15% benefited by the tax assets acquired from agility.

Third quarter free cash flow was $116 million, an increase from the second quarter and attributed mostly to a lower partial payroll cycle and reduced capital expenditures.

On a year to date basis free cash flow has increased $237 million over the first three quarters of last year.

We have achieved approximately 88% or a full year target to date.

Days sales outstanding at the end of the quarter were 62 days.

We finished the quarter with cash on hand of $162 million since the acquisition of agility, our net debt to adjusted EBITDA leverage has decreased from 3.7 to 3.4 and we remain on track to be below three times by the end of our next fiscal year, reflecting our.

Leveraging commitments at the time in the acquisition.

During the third quarter, we deployed $24 million and capital consisting of $21 million in dividends and $3 million a mandatory debt repayment.

We did not repurchase any shares in the third quarter directly or in the open market as the direct repurchase in the second quarter was an acceleration of activities plan later in the year.

Additionally, we repaid $100 million that was placed on our revolving credit facility in the second quarter to facilitate the execution of the truck share repurchase from one of our private equity shareholders.

I should note that our board of directors will meet in mid December and we'll consider capital deployment opportunities going forward, including our next quarterly dividend that is typically payable to shareholders in January .

Now turning to our forward outlook, our expectations for the second half a year or unchanged from our previous communication. We continue to expect second half revenues to be consistent with our first half revenues of approximately $3.2 billion.

As a reminder, our fourth quarter typically is a lower revenue volume quarter due to holidays and associated employee vacation time.

We continue to expect full year adjusted EBITDA margins to increase about 80 basis points from the prior year Standalone FDIC adjusted EBITDA margin of 7.5%, which is at the middle to upper end of our previously communicated range of 8.1% to 8.4%.

Additionally, we expect to meet or exceed $425 million of free cash flow. This year with the fourth quarter being impacted by an additional payroll cycle as compared to the third quarter.

And finally as I mentioned earlier in my remarks, we expect bookings to be stronger in the fourth quarter due to the factors I discussed, which will favorably impact our fiscal year 21 growth projections.

Operator, we're now ready to take questions.

Thank you that he would like to ask a question. Please signaled by pressing star one on your telephone keypad, if you're using a speakerphone. Please make sure. Your mute function is turned off too and I just take not to reach our equipment.

Again press Star one ask a question I'll pause for just a moment should not have an opportunity to signal for questions.

Well go first to Jon Raviv with Citi.

Thanks, Good afternoon, everyone.

So you just mentioned the stronger bookings in Four Q2 good for roughly 21 growth. We just think about some of the moving pieces into fourth quarter by 21.

And reiterated $3.2 billion this year implies.

In a low single digits organic growth in Fourq, you can you sort of speak to that and then I think now that you also mentioned new increased confidence the acceleration of 21, if you lose 200 basis points of the synergies now that would suggest potentially 4% to 5% 21, there how should we frame the acceleration of growth here. After afterwards, but I feel couple of quarters here. Thank you.

Okay, Hey, Jonathan Thanks for the question and let.

Let me give a little color just around the forward guidance, because I think thats the essence of the question that you're.

Asking about going forward or that's what we're anticipating the questions will be but we're right now going through the annual planning cycle.

And we were we will communicate our expectations for fiscal 21 in the March timeframe as we historically have done so but as I said in his remarks, the year to date bookings and the expected contract awards in Q4 give us great confidence in revenue growth going into.

Next year NBR and we also expect to achieve 85% of the net cost synergies by the end of year and realize the benefits over the course of the year.

And I would add that we're focused on organic revenue growth and want to make sure. We have the right balance of investments, especially in the basis should the strategic growth areas that now say convention.

And that's what we're going through into planning cycle right now I hope that address your question.

Yeah sure and then I'm on the on the margin was synergies you.

You talked about accelerated synergies. This what does some of the flow between those synergies being accelerated versus the investments here is something of a anything of a change from when you first set the 9% targeted at 9% target still very much achievable and perhaps even doable sooner.

If the as you mentioned the the benefits of accelerated thank you.

[noise], yes so.

First of all going back to where we are.

Today, we're up 90 basis points over last year, a blending of the agility portfolio and the.

Cost synergies, we've achieved so far far by the ended the year were anticipating 85%.

That will reflect margin increase next year and.

But as I said, we're going through the planning cycle, now and we'll be able to communicate more detail.

About the Nextshares full year outlook ended March timeframe.

Okay. Thank you I'll hop back into queue [noise].

And well go next to Matt acres with Barclays.

Yes, hi, Thanks for the question I wanted to ask about this sort of customer demand you saw in the quarter last quarter, you talked about little bit about delays that a couple of customers around the CR that something you're still seeing or that loosened up a little bit.

Yeah. This is not Nick thanks for the question, Yes. So certainly we are operating under NCR and Dan.

Hello specific cases, when a customer cannot expanded the work.

Based on the CR situation.

But it's very minor we don't see a significant impact to the portfolio and we'll continue to navigate it.

We have navigated Crs many times in the past have that having a good ability to do that and we don't see that a significant risks.

They are already there are a couple of clients, where it does provide a little bit of a headwind. It will just continue to work through that as we go forward.

Okay got it and I guess, you talked about the asset forfeiture contract are there any other big sort of.

Recompete contracts coming up which you keep an eye on that that could be a risk.

Yeah, the yen in a seasonal highlighted certainly the asset forfeiture as you noted added to that has gotten pushed out we'll continue to work through that with an award hopefully the next couple of months and but we are we continue to work and work under bridge contractor Americas physician there.

The other one on that.

I think is is worthy of mentioning is the and Tom portfolio of work that we do for the army and it is not a single task order or single contracted bundle around several but over the course in the next 12 to 18 months that portfolio will go through a recompete cycle and so we.

We'll continue to navigate that the.

The positive news from our standpoint is that as they continue to refine their acquisition strategy the opportunity actually exists or FDIC to expand its its footprint and its work with this particular customer, but recognizing that we have to do a recompete on our work as well so that that's the most significant one going.

In the next year, and but again it has probably pretty limited.

Impact next year's financial because it'll go through the cycle.

And and we expect most of that work to be repeated over the next 12 to 18 months.

Okay got it and I guess, maybe last one just now with the right level of Capex to think about going forward, it's actually obviously young come down a little bit this year.

Yes.

Charlie So we're still looking at $8 million to $10 million that capex per quarter.

But you know that this quarter. It was there was minimal capex some of that had to do at the timing of our systems conversion and I would also say that are in our there you see I always takes a different approach as far as what goes to the cloud there will be more of that goes to the cloud and.

So there were could be will.

Lower capex going forward dramatically, lower but but I would say in that a eight to 10 million dollar range per quarter kind of a normal.

Capex.

Got it thank you.

Mhm.

Well go next to Seth Seifman with JP Morgan.

Hi, Thanks, very much and good afternoon.

I wanted to task.

Follow up little bit on on John's question and.

We think a little bit about some of this investment that you're talking about it what specifically might it be is going to show up as kind of internal R&D expense.

Or it might might it be.

<unk> future Capex. So you know how does is going to show up and the financials count going forward, what what specifically is it.

Well it.

As I mentioned, we're going through the annual planning cycle right now, but just want to be clear with one thing that the total cost synergies that we had talked about the 75 million. We're on track to achieve that and or any anything that we would look at as far as making.

And investments in certain areas, where we think there is potential for strong stronger revenue growth strategic areas. Some of those that nothing talked about will go through that process and evaluated going into next year, and we'll look to make the right decision for our shareholders.

We have Oh, we have the right balance.

As far as margins go and revenue growth and this is not there. The other thing I will add is certainly we talked about investing to drive growth in many cases, it's really focusing our dollars in a very focused and strategic way. So so in some cases, just making sure that we're focused on the right acquisitions the right.

Business development efforts are the right solution development and said as Charlie reference, we'll certainly look at the opportunity will always way. What we think is the right investment profile for us the company.

But also in addition to that analysis. We also want to ensure that we're investing the dollar that we spent today in the absolute right areas consistent with our strategy to drive profitable growth.

Alright, okay. Thanks, Thats helpful. I guess, there's kind of like you know what can they get a sense of visit is it you know that you might need to have facility at some point is it that you might have to invest in.

Developing a certain type of software application or technology at what what type of investments talking about.

Yes, so again as Charlie mentioned, we have not buttoned up every every aspect of that investment debt profile as we go into next year, but for the most part.

As I talk about investments, it's really investing in the talent and investing in the people in the and then I'll use the word infrastructure, but not in the central facility to be able to capture pursuing capture business. It is consistent with our strategy. So I would think about it in buckets as money like BNP and pre DMP and investments to.

To drive growth for the most party and were services business. So we would not right you know.

I would never say never but our strategy doesn't call for investment in facility will for infrastructure along those lines.

That helps create great yeah, absolutely now that that's what I thought thanks, and then just to put kind of a fine point on it by fiscal 2002, we're still looking for a 9% adjusted EBITDA margin.

[laughter] within a week and nothing has changed to a different from what we've communicated previously as far as a three year outlook, we've got great confidence in the value proposition that we set forth back in may the agility.

Acquisition, So nothing has changed from that.

And and certainly the 500 million or free cash flow that we stated there.

Wouldnt be intact to any type of investments, we would look for return to come back to enhance this value proposition.

That we laid out earlier.

Great. Thank you very much.

[noise] [noise] well go next to Edward Caso with Wells Fargo.

Hi, good evening.

Just so I'm really clear on up over the three years. So I think you're roughly 425 million for 80, and then roughly 500 million in free cash flow outlook can you is that right one and then.

Is there.

Help us again on what the expectation is for shareholder return and.

Differentiate that between M&A. So I mean, if said if you do M&A does that take away from repurchase.

Yes so.

Let me just to get back and say that you know.

And in general averaged over time, you're correct with the endpoint as far as the free cash flow goes.

And.

You know I Wouldnt say that it's for 80 next year, we'll give you a better indication of what our free cash flow outlook is in the March quarter.

I can say that a you know we always look to manage the cash flow effectively to achievement of the 425 million to free cash flow is a tremendous accomplishment of our commitment that we made a year ago.

And you know we're still focused on on this going forward, but I don't want to commit to any numbers right now things do change after a year and we'll give you a better sense in the March timeframe.

[laughter] and help us understand the returns.

Yes, and so.

As far as the capital deployment.

You know returning.

Cash to our shareholders as always our priority absent a M&A opportunities. So that's been the consistent theme for the last.

Five six years and that's consistent going forward, so that has not changed.

[noise], Okay, and then made the other question.

There's a significant amount of of items in protest.

Can you remind us the big pieces, I guess, including the one I assume the one that no tripped up your guidance last quarter.

Is it isn't that isn't that a number.

Yes, so and so we do have a couple billion dollars of.

Mortgage in protest the significant ones are the SIFI or cloud one contract, we expect that just going through the normal protest cycle to clear that cycle as we get towards the end of this calendar year. So thats a significant one area. Yes is one that was has been in various stages protests since.

Early very early this calendar year, so that that's another significant one.

And then we've seen a couple of that one of them. Once it was pretty award protest is the one we just talked about earlier.

With the DJ and that has come out of the create work protesting going through a cycle as a as we discussed earlier.

So so none of the ones that are in protest of happen favourably yet.

Sure just a nice hopeful that they'll follow your way this quarter.

That's exactly right.

Thank you, thanks, and or timing of that data that we would expect.

Great. Thank you.

Welcome.

And we'll go next to she that Kid yogurt with Jefferies.

Hi, good afternoon, everyone and thank you and I think you talk about our Charlie you might have said it you talked about the pipeline being 16 billion up 25% quarter over quarter can you talk about maybe your win rate.

And the current corridor and went through that big increase to scattered across big programs are smaller ones and then at Apollo right now.

Okay. So I'm trying to tackle your question. So yes, we continue to see great pipeline activity.

You know that we see it across the board.

Yes, as we did reference and we continue to see a lot of the pipeline being a populated with new business opportunities a new.

The ability to drive growth for new business and so this was the S and refresh your memory at relatively low recompete for us that we've had the opportunity to invest in pipeline and submit that will drive growth in the out years.

As far as a win rates I know, we don't tend to talk specifically about those what I can tell you is we feel we don't feel very confident about our recompete win rates and a and believes that we are certainly industry, leading in that regard and then when it comes to new business. We have a very competitive win rate on our new business and then certainly.

One of the aspects of growth is on contract growth, So where we look for the opportunity working with a customer working with the contract vehicle to to be able to expand our footprint and expand our presence and be able to deliver greater solutions to existing customers. We continue to see good momentum and on contract growth as well.

Okay, and then I'm, just a cleared up a little bit do you mind reminding us in terms that.

The current fresco here what impact the CR had what impact habitats pad and then there was a slight shift what payroll I'm not sure if that impacted revenues at all and then how do we expect that catch transmission into that's got 21, and the organic growth that looked like what how much of revenues got pushed out.

So Oh, Hi, Sheila this is Charlie let me just to.

As far as one of the CR goes or my comments last quarter to crude or proved to be true on those very very few customers.

And they continue to be cautious or you know, we're operating NCR until December Twentyth, we don't see any further impact this year due to the CR. If this CR moves out.

Longer it's it's a much longer process. Then then it's possible we could see an impact to revenue and but it's too early to tail.

As far as the protests I think we covered most of those are and we do look for those to be resolved in the quarter. That's why.

We expect our book to bill to be greater than any other book to bill and the quarter.

And we are gaining momentum as far as that goes you know from a <unk> 0.9 to 1.21 0.47, we expect fourth quarter book to Bill, it's even stronger that.

So I think that that translates into what we think the is high level of confidence of revenue growth going into next year.

Okay.

Thank you thanks.

Oh, Yes, I'm sorry, there was a question on payroll and that.

That has no impact on the on the revenue.

Or the cash flow for the year, it's merely sinking up the FDIC and the agility pay roll cycles.

So that we're all on the the same payroll now so the overall quarter to quarter cash flow impact is a bit pronounced or that the differences are because it was somewhat blended between FDIC and agility and now we're all seemed up so that's that's why we have somewhat more of an impact in Q4.

Than the previous quarters.

Okay. Thank you very much [noise].

And we'll go next to Cai von Rumohr with Cowen and company.

Yes, thank you very much and a nice job.

So.

Obviously, you've got a lot of bookings coming in from the protest, but sometimes protests take longer to clear then one expense if none of those protests clears those so that's the the 2 billion.

What kind of a book to Bill can can you still do one point, though.

Hi, this is not they so you're absolutely right. We know we have.

Lets protest go through it pretty standard cycle, but you're absolutely right summer elongated. We certainly are thing that Ah, yes. It's a great example of that so so what we're trying to do it gives you some insight based on our best guess of what May happen, but have but certainly we can't say, we can't be 100% certain as the customer.

Makes the ultimate decision. So so with that being said we have a very strong pipeline as we referenced we have very high submit ethylene referenced and so to the extent that down those decisions stay on track and stay in the quarter I do believe that add that we should demonstrate a strong bookings quarter, but at the you're absolutely right.

Our when it comes to bookings the customer mix those decision and so we'll continue to navigate watch that.

But in addition to know the protest we also have other in a pretty significant pipeline opportunities that could close in the quarter.

Got it and then you know you referenced 75 million Runrate, 85% by year end, that's a 16 million run rate you did 10 million of synergies in the third.

Should we look for like 14, 15, something like that I mean, that's sort of would seem to be the trend line to get us to the 16.

Yeah.

Yeah.

Oh, sorry carry I'm trying to follow you here on the the numbers. So I think I should say you mentioned the you know 75 million is you're kind of synergy target.

And that you expected to be at 85% of your target by yearend, 85% to 64 million and if we add if we do quarterly run rate of that is 16 million and yet you did 10 million of synergies in the third quarter. So the question is.

You know does that mean, we should gas you do something like 14 million of synergies in the fourth quarter to get you to that run right.

[noise] [noise] [laughter], let's see.

If that is the calculation that you're coming up with Cai I would say there I would agree with you the where you know we will get to the 85% of the 75 million by the end of the year.

I don't quite track Q2 getting to that.

That exact number there.

But assuming that you're correct. There then that would be the case and we're on track to do that their remaining part the remaining 15%.

They have the net cost synergies wouldn't be achieved over the fiscal year 21, and then that full benefit would be realized in the next year. So there is particularly relating to the facilities as nothing talked about so there is some of that that carries over.

Into next year until you get the full benefit of that.

Got it and last one so you mentioned amcom as an opportunity if I recall correctly, you've got like 650 million Enam com business. So I assume you got a lot to kind of defend against so can you give us a little color in terms of how is this going to beach.

Popped up how much business is available and so that we get get some understanding as to how this is an opportunity for you.

Yes, Hi, this is not that so you're right you've got the you know we do about 600 million ish and you're right now under various task orders, a with Amcomp and the customer is still working through their acquisition strategy, but what we know to be true is there going to be acquiring through multiple act.

Missions.

Much greater than that run rate.

Because they're gonna put together some other other scopes of work and acquire in a bit different different manner and so the way that we're looking at it is first and foremost we're going to protect the work that we have today, but we also have the opportunity to expand our footprint because of their acquisition strategy over the course of the next 12 to 18 months.

[noise], Canada that answered I mean, that's something sorry, no no that's definitely very helpful. So so basically there's more available.

What are some of the bigger chunks because.

Yeah, Okay, that's exactly right.

Okay, great. Thank you very much [noise].

Well go next to Joseph Denardi with Stifel.

Yeah, Yeah, gauging, Charlie sorry, sorry to beat its a good to ask but if the protests to resolve favorably. The i. I think forfeiture contract comes through how much of that in total would you guys are reflected in bookings and backlog to give it now youre a treatment of that thank you.

See I believe the asset forfeiture is a single award I'd Q.

And so I'm just to refresh your memory, we don't we don't take that as a full booking as it's just the way that we do it and so we would only book as it relates to a calculation to the book to Bill ratio at whatever task order what happened to come with it and it depends on how much they want to put other task order, but it's about.

Under $100 million, a year hundred a $140 million year, but the customer could could acquire it in a couple of different ways based on whatever task order structure, they want to set up.

That help <unk> and then on in terms of whats in protest what would the whole 2 billion coming.

Yeah.

[noise], yes so.

Let me, let me clarify that as well Joe so.

Because there is a difference when the contract awards in a single award idea accused to contract awards is the cloud one day cloud computing environment. That's a 728 million that's a contract award the.

Oh, Yes is a single word I'd add Q.

As I say is not acts as a single word I'd like Q.

Of which we get some of the task orders and there was one other one which was a supply chain ideal way Fs Ci 80, It was 950 million close to $1 billion over seven years.

A competitor protested this and Custer themselves is handling the protests resolution we expect a resolution next few weeks, but that one is also a single word IDH Q.

Task order of that would get.

Booked as well.

Does that help kind of clarify some of that.

Yes.

Yeah, a little bit.

Charlie you also mentioned some of the effect of its if the CR or continues for any longer I think it could have an impact on revenue the revenue outlook, where are you referring to this year or a more pad next year, maybe just clarify which I. Thank you next door, yet or that would be next year, we don't see any impact this year.

Sure it and it's really if its longer I mean much longer.

That's a full year CR something like that May impact the revenue, but you know terror too early to tell.

Right now, how that's going to a workout.

Okay, and then the magic just kind of higher level. When you look at your organic growth even adjusting for some of the dissynergies compared to maybe what where the market is we're seeing or your peers are you just maybe provide your perspective on the bridge between where you are and where they are is it kind of end market differences is that when rates.

And maybe what when you think you can you can get to a level like that I mean, it sounds like the the strategic review that you guys. You guys have ongoing as a part of that but maybe just your perspective on that thank you.

No absolutely and you're absolutely right the into strategic review is not part of it is absolutely our our intent to step that take a look at the opportunities that are the industry to to ensure that we are.

Very very well aligned to the areas that we can drive growth for the enterprise and so.

So certainly I'm not going to seek to our competitor.

And their strategy, but but at this point I feel very good about the choices, we are making the investments in people and talent and ER and pipeline development and customer access that we're making and and if it is for that absolute purpose that you just mentioned and that is to drive profitable revenue growth.

As we look forward in the in the months in years to come and so that is that that's our intent that's absolutely one of the top three priorities that I mentioned earlier and the strategy refresh in the implementation of that strategy and focus on the areas that I mentioned will drive to growth in the out years.

Thank you.

Yeah.

Well go next to that Tobey Sommer with Suntrust.

Thanks. This is a jasper bip on for Tobey I wanted to ask if your fried any additional color on the airports cc take away that was protested in late September and could you size up award relative to previous quite contracts.

Yeah, that's as one of the touched on earlier. So it is still under protest and we look for it if it goes it's normal cycle to come out of protests as we get towards the end of this calendar year and and that's really all I can say about the opportunity.

Okay, no, whereas size just wondering to strike the size of there was roughly 700 million.

Our contract about do you have a anyway to think about timeline as it did seem like a pretty strong one for the company.

It's a strong light for the company Trung when it title yeah.

Yeah, we feel Mary and we feel very confident.

Okay, great. So I was wondering kind of how your [noise].

Just wondering how you're thinking about additional.

All right.

So now you go ahead please.

Yeah, It's just kind of wondering how you're thinking about additional M&A activity. At this point you know a do you see the company waiting until unjustly is fully integrated before you're throwing your hop back in the right.

Well. This point is as Charlie mentioned that I referenced as well we feel very good about the success of ingenuity acquisition today and for you know for almost all the major milestones that we put in place.

About a year ago, when things were going into the acquisition and we have you know either met or exceeded our expectations along the integration path. So we have good confidence it usually a acquisition integration has gone well the cost synergies, we touched on and and so with that being said, we recognize there's still some work to do I mean.

Just on the real estate consolidation that will take place and provide the initial cost synergies next year and and then on the revenue synergy side. We are seeing good momentum as we touched on with regard to the pipeline development with regard to some of the key wins and we'll continue to certainly put priority navigate that now with that being said yeah. We.

We do you know why keep the options open we are very selective in our approach to M&A, we always have been and we do not look to be a serial high volume acquire I'm doing many transactions, but but if there was a transaction that brought capabilities or market access or customer access.

That would support our strategy and support our priority of organic profitable revenue growth. We certainly would look at that and that's I think that that's the best way to frame that is that we believe we're in good position, we've got a good balance sheet and and want to make sure that we capitalize on the market opportunity to head of Oh, that's certainly continuing to.

Work the Angelotti acquisition is top of mind.

Okay. That's helpful. Just last question for me I believe the other press released last week, but no. It's almost 600 million space and intelligence contract wins could you kind of highlight how the capabilities acquired in the agility deal have been leveraging your recent bid and proposal activity.

Yes, so so certainly in that portfolio on wins, you know the theme where around space and and the acquisition of NGL and a strengthened the FDIC portfolio, serving our space customers and and so we've got a great position in the space missions across both the severe.

Early in the Intel community in the de Odeon, So that combination of what agility brought to the table when I say I see had a already in place as really strengthen our position in space and so I would say that was certainly one thing and then the broader Intel community or the acquisition of agility and gave us great access to broad.

Our customers and intelligence community and we continue to see excellent pipeline development and and submit and now beginning to see the wins that come with that in that particular area as well and I think those are the really the two themes of that bundled announcement.

Alright, thanks for the color.

Welcome.

Well go next to Gavin Parsons with Goldman Sachs.

Hey, Thanks, good afternoon, everyone.

Good afternoon.

Maybe just following up on the kind of exactly that.

A year post a in Chile.

Some of your peers that have done the large scale M&A. So disruptor bookings up is obviously, but a lot of time talking about how you did pre integration for it to make sure I wouldn't happen.

Book to bills that a little softer this depending on the math at back these protests.

Actually been pretty strong this year. So I guess the question is has been generally acquisition disrupted bookings at all or those that are on track with where you thought it would be close and agility.

I know great question. So I think they the short answer it is not disrupted bookings at all that and we as you mentioned we did the early work to ensure that we had a very can he says go to market strategy on the data we closed that we had a very cohesive set of teams.

Focused on the customers in the pipeline development and and so we've seen the fruits of that over the course of the last couple of quarters I'm really come to me and so with the increase in submit the increase in our pipeline and and certainly a strong bookings quarter this quarter and the opportunity to have a strong one next quarter.

We believe that and we are thing the momentum that came from the integration and the acquisition of agility and we'll continue to do so.

Yes, so revenue synergies are still momentum going forward that you don't happen then captured in bookings quarter are in the pipeline spoke that's exactly right yeah.

Got it thanks, and then just.

What's the total percentage of revenues so for Recompete mixture.

It's in the normal kind of inorganic range 2020, 5%.

Okay. Thank you factored into the low year next year, we see it to be more standard.

[noise] [noise]. Thank you.

You're welcome well go next to Jon Raviv with Citi.

Hi, Thanks for follow up talk he was just clarify be expectations for fourth quarter again, I can you just level stuff and what the acquired fills it looks like for example, there. Thanks.

Fourth quarter luxury maybe.

At itself so.

Run rate for utilities contribution fiscal fourth quarter B.

In closing 400 million.

Okay, all right, you're breaking up there a little bit Jonathan I think you're at all just looking at revenue where.

The ability to contribution im going to be in fourth quarter or so the $1.6 billion as Phil do you know what else is that should be organic growth year over year correct.

[noise] you know, we don't breakout the any any longer they in Chile portfolio versus U.S.A. FDIC. So I couldn't really tell you I can just go back and give you an update on our guidance for the full year and.

And that the second half that's going to be similar to the first half. If you look at the first three quarters of the year. They were all right in that 1.6 billion dollar range as far as revenue goes.

And that translated into about a 1.5%.

Revenue contraction, if you take out the revenue dis synergies you get to about a 1% revenue growth.

And fourth quarter should be fairly similar to the first three quarters.

From a total sales number perspective or from an organic growth perspective.

[noise] someone like.

Oh, the total cells or get anything and just keep in mind that fourth quarter is.

Traditionally Lois revenue quarter due to as I stated in my remarks, due to holidays and vacation time, and it's part of this type of holidays.

Vacation time.

The growth in terms of dollars because what we could just because that's 1.6 through each of the four quarters [noise].

Yeah, I'd say in terms of dollars.

Okay.

No I think on Amcom perspective, I mean, I know Amcom went through a recompete crosses a few years ago can you compare that process to this process. It was was that more of a replacement recompete work now there's more to the open up the temperature and after some or just in terms of feel I feel like back then it was because they're more of a risk. We're now you're talking about a being perhaps an opportune.

[noise], yes, I mean, I'm going to try to answer your question, but ask me again, if I don't get into my breaking up just a bit but I, but yes. They compete three years out there okay.

Well that one day, you know what I'd call more normative recompete time repeating our work.

They they took a different acquisition strategy as far as how they did it from an acquisition cycle, but that but in general it was really competing our work and not all you know not a lot of additional type work in those in that particular cycle, what we're saying now to your point is the opportunity over the course of the next 12 to 18 month, so it's gonna be spread.

Over the next year year, and a half and what we understand to be the cases, they're going to you know do several acquisitions, where does provides the opportunity for us to expand our footprint depending on our bid strategy that I did I catch for your question, Yeah, and I appreciate that and then to spread last from me appreciate the follow up here just Tom.

On the low Capex do you guys put the result is below peers, how do you think about that from a strategic perspective.

[noise] well.

It wasn't anomaly the capex the minimal capex spending in the quarter.

So keep that in mind.

We do expect to return to more normal level, and Q4 and beyond but again as I mentioned strategically we're looking to do more into cloud from only I T. Capex side than we have done in the past and that should lower the capex spending.

In the future.

Okay. Thank you [noise].

[noise] and at this time I'll hand, the call back over to Shane can extra for any additional for closing remarks.

Thank you Vicki. Thank you very much for your participation, let's say I see third quarter fiscal year 2020 earnings call. This includes the call. Let me. Thank you for your continued interest in I say I see.

That does conclude today's conference we thank you for your participation.