Q4 2020 ManTech International Corp Earnings Call
Good day, ladies and gentlemen, and welcome to the Mantech fourth quarter fiscal year 2020 earnings Conference call.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time.
If anyone should require assistance during the conference. Please press Star then zero on your Touchtone telephone as a reminder, this conference is being recorded I would now like to turn the conference over to Steepen father.
President corporate development and Investor Relations.
Welcome everyone. Thanks for participating on Mantech fourth quarter call. Joining me today is Kevin Phillips, our chairman CEO and President Judy was Uranus, our CFO and Matt <unk>. Our CFO. During this call we will make statements that do not address historical facts and thus are forward looking statements made pursuant to the safe Harbor provisions of the <unk>.
Private Securities Litigation Reform Act of 1995. These forward looking statements are subject to factors that could cause actual results to differ materially from anticipated results for a full discussion of these factors and other risks and uncertainties. Please refer to the section entitled risk factors in our latest form 10-K, and our other SEC filings.
We undertake no obligation to update any of the forward looking statements made on this call.
On today's call, we will discuss some non-GAAP financial measures, which we believe provide useful information for investors. These non-GAAP measures should not be evaluated in isolation or as a substitute for GAAP performance measures you can find a reconciliation of the non-GAAP measures discussed on this call in our fourth quarter earnings release with that.
Let me hand, the call over to Kevin.
Thanks Steven.
Good afternoon, everyone and thanks for joining the call.
Before I walk you through our 2020 results I want to spend a few minutes updating you on the operating environment.
2020 brought towards unconventional personal and professional challenges for us all.
Despite those lingering challenges our people remained resilient and committed to delivering excellence for our customers and their critical missions.
I want to thank both our employees and customers for showing great strength, a willingness to adapt quickly and for their continued perseverance throughout this ongoing pandemic.
I also want to thank our employees for their continued generosity.
Only do they enable critical outcomes for our customers, but they are beacons within their communities.
Since the start of the pandemic our employees have raised over $2 million to support those most impacted by the pandemic.
One year into the crisis I am satisfied with how we have managed the business, while keeping a steadfast focus on our employee safety and our customers' critical missions.
Our 2020 financial performance exceeded our expectations across all measures and we closed out the year on solid footing.
We delivered our fifth consecutive year of healthy organic growth increased profitability and margins generated.
Robust cash flow and successfully retained at new and existing business to fuel the continued growth of our record backlog.
In the fourth quarter, we executed on our commitment to deploy capital for long term growth and did so through two small strategic acquisitions that add to our full spectrum cyber solutions within the intelligence community and department of Defense.
I am pleased to welcome the talented employees from closed Minerva engineering, and tapestry technologies into the Mantech family.
I look forward to the team leveraging the enhanced customer capability position.
We have ample financial capacity to continue creating value through M&A, and we'll prioritize acquisitions that add to our differentiated capabilities.
Net to a few thoughts on the market environment I am pleased that the FY 'twenty, one NDAA and appropriations are enacted in December.
This offers our customers clear visibility into funding levels for their mission critical requirements.
Consistent with expectations set forth under the last two year budget deal.
FY 'twenty one appropriations provides for 696 billion from the department of Defense.
Additionally, embedded in the legislation passed in late December.
With an extension of Cares Act section 36 10 coverage through March.
Okay.
Our last call a number of important events that transpired, including the electric.
Announcement of multiple viable COVID-19 vaccines, and a catastrophic cyber attack.
Over the course of our 50 plus year history.
We have executed consistently for our customers irrespective of the political composition of Congress from the White house as well as across different national security priorities and threats.
With New administration is experienced and understands the complexity of the global threat environment and recognizes the need for rapid technology insertion to combat those challenges.
The threat environment remains elevated and multi vector with a growing and continued trend that these threat vectors are not solely kinetics.
Of course this was most recently evidenced by the solar onetime.
As the administration evaluates and responds to the aftermath of this hack a few points are clear.
Cyber is a priority and we expect that our national cyber posture as well as our response will be a big focus area.
Mantech has a multi decade track record of advancing customer missions in this domain and continues to be integrally involved in the cyber mission across a number of customers today.
In addition to cyber.
Administration that is focused on digital expansion and modernization across all aspects of the federal government as well as the domains of worker.
Which is providing longevity to the customer demand levels experienced over the last few years.
Overall, I believe that Mantech is well positioned to continue to support our customers' mission sets.
With our differentiated solutions that span not only COVID-19 modernization.
But also other priority areas, including analytics automation and intelligence systems engineering.
Let me offer some brief thoughts on the business development growth.
We exited the year with an annual one five times book to Bill.
Despite the disruptions from the pandemic, we submitted proposal volumes consistent with 2019.
And expect this level to remain relatively constant going into 2021.
That said, we remained focus on expanding our market positioning and differentiation in a competitive market.
I am pleased with what we accomplished in 2020 and look forward to maintaining this operational execution and strategic focus.
Yes, Judy will walk through the details of our 2020 financial performance in 2021 outlook Securities.
Thanks, Kevin we continue to execute well and build upon our track record of generating strong financial results with a focus on long term value creation.
Revenue for the year with $2 5 billion up 13% year over year with 11% organically.
Growth was primarily driven by new contract wins growth on existing programs and our strategic acquisitions.
For the fourth quarter revenue was $639 million up 6% over 2019.
For both the quarter and full year direct labor was a critical driver of our growth.
Our contract mix largely remained unchanged year over year from 2020 Prime contracts comprised 91% of revenue and the breakout of our contracts pricing structures was approximately 68% cost plus.
19% fixed price and 12% time and materials.
EBITDA for the quarter was $59 million on EBITDA margin of nine 3%.
Q4, EBITDA benefited from a onetime facility amortization adjustment.
Excluding the impact of this onetime item EBITDA margins for the quarter would have been consistent with the balance of 2020.
For the year EBITDA was $228 million up 18%.
EBITDA margin for the year was nine 1% up 40 basis points from 2019 exceeding our expectations and more than accomplishing our targeted incremental margin improvement.
Strong direct labor utilization and lower PTO usage as well as indirect cost management continue to provide tailwind to margins.
Net income was $32 million and diluted EPS was <unk> 79 cents for Q4.
Full year net income was $121 million and diluted EPS was $2 97.
As a reminder, our Q4 2019 and full year 2019, net income and diluted EPS benefited from a pickup related to the reassessment of multi year R&D tax credits.
Adjusted net income and adjusted diluted EPS, which excludes the R&D tax credit impact as well as the impact of the amortization of acquired intangibles articulate more representative operational growth.
Net income was $36 million and adjusted diluted EPS was <unk> 89.
Both up 10%.
For the year adjusted net income was $137 million and adjusted diluted EPS was $3 36.
Up 17% and 15% respectively.
Now to the balance sheet and cash flow statements for the year, we collected $247 million on cash flow from operations a robust two one times net income.
DSO was 56 days at year end and three day improvement from last year.
As Kevin mentioned, we executed on two smaller acquisitions in the fourth quarter.
Additionally, we distributed $52 million on dividends for the year, maintaining a steady return of cash to shareholders at.
At year end, we had $41 million on cash and $15 million of debt.
Given the strength of our balance sheet and expected cash flow on board has authorized us to raise our quarterly dividend by six to.
With 38 cents per share a 19% increase from current levels.
This dividend will be paid in March and equates to an annualized dividend of $1 52, or a yield of approximately one 7%.
Now on to our 2021 guidance, we expect revenue to be between $2 65 billion and $2 75 billion.
Midpoint of the revenue range implies 7% growth.
Proximately, 80% of guidance is expected to come from current backlog with the balance from Recompete and new business.
We're seeing greater variability and the timing of awards, particularly for new business and compare to the last few years, we face on an increased level of Recompete in 2021.
Turning to margins our guidance assumes on EBITDA margin of nine one to nine 2% for the year, which offers the potential for incremental margin improvement of up to 10 basis points.
However, we expect that strong direct labor utilization driven in part by below average PTO usage will normalize and be a headwind in 2021.
Some of the other factors that could influence our performance within our revenue and margin guidance include.
Sectary path of the recovery from the pandemic.
Level timing and ramp of contract awards.
The level of material procurements, and the duration and level of reliance of the cares Act 36 10 coverage.
Our resulting 2021 guidance for adjusted net income between $142 5 million and $147 4 million and four in adjusted diluted EPS between $3.48 on $3 60.
After your assumptions for your models built into our guidance as an effective tax rate of 24% and our fully diluted share count of 41 million shares.
Cash flow from operations should be at least $200 million per the year on.
All of the year over year decline is attributable to working capital.
We expect capital expenditures of approximately two five percentage of revenue for the year, which is down from 2020.
Now over to Matt to cover the business development and operational highlights from the quarter.
Thanks Judy.
Let me expand on what Kevin highlighted earlier in the fourth quarter, we won $605 million of contract awards, resulting in a 0.9 book to bill, which aligned with our expectations.
Overall, we had a successful year on the business development front.
In 2020, we secured $3 7 billion in contract awards, leading to a one five book to Bill.
New business comprised approximately 45% of awards for the year.
Our success was evident across our customer base and our key capabilities and intelligent systems engineering full spectrum cyber mission in enterprise it.
Analytics and programs in support of intelligence operations.
Nearly 40% of our bookings were awarded on a sole source basis in the year.
As a result of our strong 2020 bookings, we exited the year with total backlog of over $10 billion.
<unk>, 12% and funded backlog stood at $1 2 billion.
Entering 2021, our total qualified pipeline remains over $30 billion with approximately 6 billion of proposals awaiting adjudication.
Our expectation is that there will be steady proposal submissions throughout the year for a relatively even mix of recompete and new work.
We are seeing demand across customers and capabilities.
2021, we'll continue on our multi year journey to further develop capability differentiation across our business with a focus on our solutions and cyber analytics automation.
Computing and systems engineering.
Our capabilities and talent are fundamentally intertwined and as such attracting developing and retaining talent remain a key priority for us.
We have a strong track record of investing in our talent and most recently announced that we will be offering tuition free access to an advanced analytics degree offered by the University of Maryland Global campus.
This is one of many initiatives focused on our people and our enduring drive to be the employer of choice in the industry.
Our ability to clearly articulate and demonstrate mantech value proposition to our existing and prospective talent and a virtual operating environment is critical.
With that let me hand, the call back over to Kevin for closing remarks.
Thanks, Matt in closing, let me reiterate that we are pleased with our 2020 performance.
We're executing well on building on this foundation to deliver long term value to our customers employees and shareholders.
Our strategy and business focus remains sound as we enter 2021 and look to the national priorities of the New administration.
We remain agile with a demonstrated ability to proactively position and quickly pivot to navigate through complex operating challenges.
Evidenced by our handling of the business over the last year.
Core to our agility and operating philosophy is empowering and enabling our talented employees to do what is in the best interest of our customers and the nation.
With that we're ready to take your questions.
Thank you to ask a question you will need to press star one on your Touchtone telephone.
So on your question press the pound key again Thats star one on your Touchtone telephone to ask a question. Please standby, while we compile the Q&A roster.
Our first question comes from the line of goes from Ghana of Cowen Your.
Your line is open.
Yes. Thank you good afternoon.
Okay.
First just a specific question to the guidance from 2021 any can you frame the add backs is their amortization what have you.
How how large that is and if there's a big change year to year with respect to that.
With respect to amortization.
Yeah, and the Delta between GAAP and adjusted EPS.
It's primarily just the intangible amortization.
Okay, and does that rise year to year.
It looks like I'm, just trying to frame like below the line tax rate's, a little bit higher.
Share counts down minimally or whatever up minimally.
So I think it's a 300000 share change or something.
Anything else, we should be thinking about below the line or non operational.
Yes.
Yeah.
Amortization is dropping a little bit year to year.
Okay.
On the other thing I just want to make sure.
I understand.
The.
Like Booz Allen made a comment on their call about.
Awards in the intelligence and cyber space being a little soft are you seeing any incremental slowdown or is this just kind of par for the course, given the COVID-19 environment. We're in.
I was just wondering if you've seen anything changed since last quarter.
With respect to pace of procurement activity.
Sure Hey, Gautam this is not.
We have not seen a change from our perspective I think we've been telling you on the last few calls that we've.
The choppiness.
Especially in defense and Intel.
So it's.
So there's no surprise for us.
But we were very happy with it.
<unk> nine book to Bill in Q4.
Actually with what we were expecting because that's kind of seasonally soft for us.
Let's say one five per year.
Okay. So no change and then lastly.
Can you characterize the M&A pipeline.
And what you might expect do you think we'll see more properties.
Come to market in 2021 than we saw in 2020 on.
How those might stack up to.
So the deals you've done recently are there any bigger opportunities that are.
Potentially more juicy from Mantech perspective.
Yes, we do expect 2021 to be very active on the M&A front.
2020 actually.
We ended up much more active than we were expecting a few you know mid year last year.
You know, we're going to continue to focus on making deals that fit.
Within our strategic plan and are going to give us debt.
The capability or customer stocks that we want to leverage on expand on.
Yeah.
M&A has been on our DNA and we continue to look at properties on <unk>.
I'd be very surprised if we werent able to find something that makes sense for our per share.
But as you're well aware it is a very competitive market and valuations are high.
Thanks, guys best of luck.
Okay. Thanks.
Thanks, Adam.
Thank you. Our next question comes from the line of Tobey Sommer of choice Securities. Your line is open.
Thank you.
I was wondering if you could give us some more color on your Recompete calendar this year.
Maybe discuss.
The timing and details of any particularly chunky pieces of business that we should keep an eye on.
Yeah, we don't really have any large re competes on.
We don't even have any programs that are greater than five per cent of our revenue.
Did see.
On a number of recompete kind of slip out of 2020 into 2021 so.
We are seeing a little bit of a bunch up in kind of the second half of the year from Recompete, but nothing crazy.
Overall.
About 80% of our midpoint of our guidance is coming from existing backlog on the balance kind of split between new and Recompete.
Is there an opportunity.
There has been sort of over the last couple of years to go to your clients for for which you have re competes coming up this year and sort of see.
See if you can get an extension, where you're performing well so that it <unk> the need for a recompete competition or could you give us your perspective on that.
Tobey this is Matt.
That is definitely one of the levers that we use as a part of our go to market strategies that we.
While we can't comment on specifics on OCA.
Contract by contract basis that is definitely those conversations are definitely ongoing.
How has the success rate than in recent years.
Any reason to think that this year would be different.
Look I think if you look at I think 40.
40% of our bookings were awarded on a full force basis last year.
That's a pretty healthy number.
No I can't.
How are we going to be that high next year I don't know, but again, we are very.
It is definitely part of our go to market focus.
Tobey is Kevin what I think you'll see across the space. As you know there were some delays last year because of Covid. There's only so much capacity within the acquisition work portion of the government. So.
So they do have to make choices about what they spend their time on from a major recompete or competition standpoint.
And therefore, it causes delays in across the customer as well so it very much depends on the internal capacity that they have.
And what they can accomplish.
Alright. Thanks.
What is it.
Sort of internal billable head count growth now and could you talk about your your target for what kind of growth you may be able to achieve.
Towards year end or maybe for 'twenty. One if you want to speak about it from that perspective on a year over year basis and discuss the.
The hiring and talent environment.
So tobey.
I mean, we typically don't give head count statistics, but this past year we were on.
Our Dl drove our growth growth for the year right as evidenced by the results. So we're very happy with the hiring that we have been doing until we have a.
Miller plan going into 'twenty one.
In terms of head count.
Ill try to drive the kind of growth that we're looking for.
Is there any rule of thumb that we should think of externally in terms of looking at D. L.
Breaking apart.
The two major components, which would be volume and price.
So I wouldn't over index on that Toby just because we are moving to more of a solution space.
Organization and so it's not exactly a one for one there.
Okay.
Hum.
Is the hiring and talent marketplace.
A constraint on growth maybe you could just discuss that.
The demand environment in the contracting activity win rates versus hiring and kind of give us those puts and takes.
Sure sure let me just make sure I answer.
So on the.
On the on the you kind of talked about a couple of things there. So I think from an industry perspective.
Yes, we would love to have more cleared people on the overall population.
To go work, you've heard us talk about that and Thats something that Kevin has been leading is an active part right in terms of driving a reform around getting folks cleared. So we can bring more talent and to the overall federal market space.
So that's kind of a writ large commentary, but specifically for us.
Look we've been very successful hiring the talent.
Rotating the business towards the technical five technical focus areas that I mentioned on the last call. Our recruiting team has done a phenomenal job of that.
The Covid environment now, it's a competitive environment.
But we're still able to hire the folks that we're looking for but to go to go do the mission set work that we want to do.
Kevin I'll add something just it's important making sure our industry not just for Mantech.
Those individuals in those programs.
On the highest level of clearance.
We'll have the largest delay in getting new talent and also new awards because people physically you have to be on site to do the work and unless they cleared through all the different COVID-19 hoops.
So its debt really higher echelon type of work, both the procurement and the talent influx.
You will likely see the biggest delays.
Okay. Thanks, that's helpful last.
Last thing from me.
I heard you say cash flow impacted by working capital. This year I may have missed it could you explain.
To explain that a little bit further please. Thank you yeah. We gave we guided to at least $200 million in cash flow from operations for 2021, which is down slightly from what we eat.
Generated in 2020 and that basically just driven by you know what might happen with dsos and other capex or capital requirements working capital requirements in the quarter and the year.
Could you elaborate as to what those factors are that make you.
Want to accommodate for what May happen is it.
<unk> related.
Are you bidding for some things with different payment terms new customers what are those factors.
We saw you know.
Three day improvement in DSO in 'twenty 'twenty on it.
That ticks back up you know that alone almost gets US you know with ever do that with the coupled with the growth gets us to that level.
Nothing unusual we did see that.
It seemed like the government was pushing cash out if that was related to you know.
Incentives trying to make sure that theres money on the economy on giving small businesses paid given the COVID-19 environment.
Hard to say so we're just.
Being a little cautious on.
If they were trying to what we've seen historically is more normal payment cycles.
Thank you that sounds prudent thank you.
Thank you. Our next question comes from the line of Matt Sharpe of Morgan Stanley. Your line is open.
Kevin Judy Matt Good evening and nice quarter.
Thank you.
Judy just a real quick on the revenue guidance it looks like it's up 7% at the midpoint, what does that imply for organic growth and then what was the book to bill or the bookings cadence Nieto looked like to push you guys to the high end of the net of other range.
This here.
Hum.
Combination.
So to answer your first question the organic was about 5% or so at the midpoint.
And I think you know the factors kind of getting out from the midpoint up on.
Or are you.
You know the timing of the awards and when they happen. So we could have a really strong book to bill, but if it all comes on in fourth quarter versus the second quarter EBITDA, that's going to that's going to change that top line number.
And how much of its recompete versus nail without that impact that so I think you know just.
But the factors that I mentioned on the call on.
On the prepared remarks about timing of awards recompete material procurements as well as.
Covid and the cares Act extensions.
Are the factors that get us throughout that range.
Got it Okay, and then just on margins.
Much of the 40 bps of expansion in 2020 was.
Either COVID-19 or mix related EG sort of lower material pass throughs.
How much was sort of underlying performance is there any sort of pressures where I'm going here with a question is there any pressure on 2021, you're sort of flat to up 10 bps.
Yeah. So I mentioned on the yeah. We had this one time adjustment in Q4, which added probably over the course of the year about it at 10 basis point uptick in EBITDA margin.
I think it really is the indirect spend.
More normalizing which is.
We had a really strong performance a little bit of headwind or tailwind that we talked about from labor utilization and indirect spend slightly under so you know looking to do.
A 10 basis point improvement I think is is yeah.
We're focused on but given those headwinds with returning to more normalized indirect spend and labor utilization.
Yeah, we still think we can get there.
Got it and then just one last one if I may.
On the employee base some of your peers have pointed out a PTO dynamic where we're a resurgence in time off is potentially pressuring top line and our margins is.
Mantech experienced any of that or expect to see any of that dynamic play out through 2021.
Yeah, we definitely saw.
In Q2, and Q3, a reduction on P. T O usage, we saw it a little more normalization in Q4 around the holidays.
I think we're seeing people figuring it out.
But it definitely had a little bit of a impact on revenue and margin in 2020 that again will the more of that normalizes it'll have some impact on revenue on margin, but we feel like.
Within our guidance range weighted fully accounted for that.
Got it thanks.
Yeah.
Thank you. Our next question comes from the line of Mariana Perez Mora of Bank of America. Your question. Please.
Good afternoon, everyone.
So that's one five per cent plenty plenty of awards were from new businesses could you describe what our moms. That's my nephew of Banca channel strength that position the company to continue taking market share.
So yeah.
Kevin I'll speak briefly in terms of how we're getting new business with 45% and what we're doing around that.
We've been fairly consistent over the last few years about investing in certain technology areas.
And we continue to do that I think Matt mentioned, a number of them and then bringing those to the mission and solutions that our customers' needs. So we're literally trying to.
I get too far ahead of our customers, but invest into solutions can bring to them because it will be a new environment in the future that people need to operate in.
Especially in the D O D in our view.
And we're trying to provide that for the customers have a path and as it relates to the new business in 2020.
So we are definitely kind of focused on three main areas right. So one is around business development. The second one is around our solutions, Kevin kind of intimated on that but we really are doing that for the new solutions as well our new work and then the talent right, we really want to sharpen our competitive edge in terms of the type of talent, we're bringing in but also the <unk>.
Additional training and certifications that we're giving them and so we feel like when we combine all that together.
But we're going to continue to have the win rates that we've been enjoying over the last several years.
Okay. Thank you on Panamax, one he's really took the topic with Catholics going down to 210 per cent of sales each year.
Cash flow.
The main capex requirement in the near to mid term.
Yes.
The main Capex has come on from a couple of our managed services contracts. So we came in a little bit lower this year than we were expecting at the start of the year because COVID-19 did delay some tech refresh on on one of those contracts that we expect that kind of normalize in 'twenty and 'twenty one.
And then we are doing some facility expansions related to secure skiff space for you know to help support our customers. So those are kind of the primary drivers of Capex.
And I do think we've kind of like stabilized around that two and a half percentage of revenue.
And barring any significant changes I could see.
Revenue growth continues to drift down slightly.
Thanks, and my last one is related to EBITDA you saw on expansion and plenty plenty on the CNS expansion in 'twenty one.
Should we think.
The long term looks like or what is embedded in our backlog today in terms on the EBITDA margin.
Yeah, We you know we've.
We've kind of said, we're targeting you know that 10% to 15 basis points per year. It. It really is going to depend on as we see that shift towards more solution bids that Matt talked about and if we see a shift in contract mix away from the debt almost 70 per.
<unk> costs, possibly have now those are the kinds of things that would allow us to deliver a more meaningful margin expansion.
So at this point in time, when you just kind of focus one year out on what we think we can deliver.
Yes.
Great. Thank you.
Thanks.
Thank you. Our next question comes from Robert Spingarn of Credit Suisse. Your line is open hi.
Everybody I don't know if this is for you.
This is for Kevin Matt Judy.
But in terms of the new administration are we seeing any.
Priority shift yet from them I know they talk a lot about cyber and so on but is any of that come through yet or is it too soon.
It's too soon I think.
At a high level the guidance of what they are from focusing on in terms of.
Newer technologies, whether it's nationally are applied within the government because they need to protect those technologies and deploy them for futures of conflict as well as where those conflicts might be and this is this is outside of the U S borders I think the one area that we will see.
More focus that we'll be tracking is clearing COVID-19, that's clearly a priority.
Getting through whatever climate.
Approaches and strategies need to effect to our customer sets.
But beyond that you know I think that debt.
There's less true.
Pain from the technology areas that we're focused on from.
<unk> administration administration because of the external threats.
Those changes were being responsive to.
Okay. So there's a consistency and it's not like you need to go out and do particular, M&A or anything to real line with with the future mandates so to speak.
No. We still think it's more of a talent issue against the opportunity set than it is where the market standard.
Okay, and then on related to that.
Theres been some talk out there we've seen a lot of Silicon valley interest and the beltway and government customer.
From a technology perspective are you seeing any disintermediation from that crowd trying to get into your markets.
And are they having any success with that.
I think if you look at debt.
The overall answer you'll get it mixed.
Alright.
Definitely have silicon valley folks trying to come in and a lot of that through like <unk>.
But they also don't know how to do contracted within the federal market space. So a lot of times they'll come to try and join our partnership to go make it happen. So I think.
Well, there's definitely innovation that is being asked for by the federal market or by the federal government overall, which we think is a great thing and aligns with our strategy.
I think the Silicon Valley.
Folks that are trying to get into that.
Into this environment, where we're seeing is taken we see them as is.
Ways to actually help us from a solution perspective versus anything Thats a competitive.
Okay, Okay, and Judy just quickly I don't know if this was covered already but cadence for the year, how we should think about sort of the quarterly cadence as we move through the year here and I think you've already talked about the organic growth in 'twenty, one being closer to 5% what was it in the quarter when you had the acquisitions.
In the quarter it was 5%.
Okay, and then just on that cadence.
Yeah as you know, we really don't give out.
Our quarterly guidance, but it is yeah, we think that you know a moderate step ups throughout the year from from Q4 on 2020.
Okay, so sort of the normal trajectory.
Yeah.
Okay. Thank you very much.
I call. It boring good I guess, what I'm even more.
Okay Alright.
Well yeah.
Thank you once again to ask a question. Please press star one on your Touchtone telephone again Thats Star one on your touched on telephone to ask a question. Our next question comes from the line of Louis Dipalma of William Blair. Your line is open.
Okay.
Kevin Matt Julianne Steven good afternoon.
Okay.
Given how mantech has high exposure to government cyber security has the solar wind cyber breach materially impacted any of your contracts and longer term can you access or assess any of the specific impacts.
That it may have on demand for cyber security services and in cleanup and remediation of what took place.
Sure.
So from a solar winds perspective.
Can't talk about specific customers in terms of what they've been impacted right. I mean, I think any of the customers that we serve they are making their own public declarations are so I don't want to comment specifically on that.
But I do think or at least what we're seeing is.
Because of the you know.
More and more conversations in dollars that are trying to figure out how to.
Stop this from happening again, so from a demand perspective, we think that this is going to continue to keep the focus on fiber or drive additional demand and do that in places that we are already in so.
So from an overall cyber demand we expect this to.
To increase and elevate it.
This is Kevin I'll add that from a national policy level I do think we're gonna see more maturity around that both from a national defense side, I mean protecting all of.
The nation and also how the government react to these events.
Differently or more aggressively one or the other so I do think that from a policy level, we will see a shift and we'll all have to stay tuned as to what that does for our sector and for broad broader national strategy.
Yeah.
Thanks, and switching gears on.
A little bit late in 2019, Mantech announced that it won.
$132 million task order to provide software and systems engineering for the Army's distributed common ground system program and related to that I was just wondering could you provide a quick overview of mantech involvement with the army and air.
Force network and ISR modernization efforts like we've seen like other similar types of army contracts like capabilities that 'twenty three prototypes and recently there was a report about this project Titan for network.
Modernization can you provide a quick overview.
How mantech involved in programs such as like the D. C. G S a N and others.
Yes, so the short short hand term, who uses <unk> for that program.
And that's one of many examples that we have across the Army Air Force and Navy, where we're doing intelligent systems engineering work.
Well as you combine that with other the other technical focus on technology focus areas, we've talked about like analytics.
And cyber so yes. So that is one example, where we're trying to really bring digital to the mission.
With the army, we have several contracts on air.
Our force and Navy as well not that we talked in detail on specific contracts on the call here, but.
That is definitely.
Alignment with our strategy doing that type of work because we think it's good mission work that supports foundation.
Great. Thanks.
Yes.
Thank you. Our next question comes from the line of Joseph de Nardi of Stifel. Please go ahead.
Thanks, Good evening.
Good evening.
Kevin just in regard to Louis' question or.
Alright.
Matt you talked about.
I guess the potential for increase in demand in dollars coming from solar winds is it fair to say that that's not.
That hasnt, yet converted into awards or opportunities necessarily that that's still on the comm and hopefully in the near future is that how you all look about it look at it.
Yes, I'd say, that's fair, Joe we're definitely having multiple.
Multiple conversations.
Across multiple customer sets around these topics on right now.
Okay. Okay, and then maybe a question for Kevin can you quantify for us how much of the portfolio is actually aligned with are positioned to benefit from <unk>.
Cyber and if youre, not willing or able to quantify that which I'm. Suspecting is the case could you maybe talk about how you would go about conducting that exercise if you were on investor.
Well I'll speak more broadly from and if I could just looking at I T.
Analytics automation cyber in providing technology from mission support.
Business today is.
<unk> 85 per cent or more of our business when you combine that whereas maybe five years ago.
On this.
Okay, Okay, well alone 10 years ago, with 60% of our business, though.
It is a much higher concentration of our business.
How that gets affected from a growth standpoint.
It very much depends on the procurement process, our government has and what they decided to prioritize as we mentioned before but.
But we do think that we're in a very good spot from a capability standpoint against where the market needs are for the next few years.
Yeah.
Okay, and then Kevin Kevin You also mentioned that the talent.
Talent is the challenge, it's not the budget or a lack of opportunities can you just talk about kind of what that means practically is tomorrow you could find everyone. You wanted you could bill more that they're essentially unspent dollars out there because there is a shortage of talent is that is that right.
Yes, and yes so.
So we have internal degree programs and our price points for targeting Upskilling as well as certification processes that we pay for it because we wanted to get the internal resources we have.
And those veterans who come into the company.
<unk> towards what we think the growth of the future is both for them professionally and growth.
And to bring that talent and they're just there's not enough talent.
With clearance and technology capabilities supporting National Security period, you'll hear that consistently from the government and from revenue contract or you talk to.
Can you quantify what the shortages is it 3% or is it 30%.
In terms of Ah I would probably say I wouldn't hazard, a guess I agree with that.
There's a lot of openings, but I do think that yeah.
We have a lot of customers that.
Would love to be able to because it's also but this is also a budget driven right. So.
We're kind of opening up until Max theoretical world, but we probably would need to consider other factors.
Okay Fair enough and then just lastly, Matt when the when the budget comes out in a few months.
What do you look at first if anything with page flip to flip to first.
For us, we really want to make sure that the budget is aligning to the priorities that we've talked about today right day intelligence system engineering, cyber analytics automation and AI.
Yeah.
You know as well as Michigan and enterprise and data at the edge. So we look at those things.
Look to make sure that those things are prioritized within the budget.
We are obviously keeping tabs on those things to make sure that they are and so we feel that we continue to see good alignment to our overall strategy in terms of those capabilities.
Okay. Thank you.
Thanks, Jeff.
Yeah.
Operator peers that we have no further questions at this time as usual members of our senior team will be available for follow up questions. Thank you all for your participation on today's call on your interest in Mantech have a good evening.
Okay.
Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful evening you may all disconnect.
Okay.
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Okay.
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