Q4 2020 PAE Inc Earnings Call

Ladies and gentlemen, please standby your P E fourth quarter of 2020 earnings conference call will begin momentarily. Thank for you.

Your patience and please standby.

[music].

Good morning, ladies and gentlemen, and welcome to Pee Aes for quarter 2020 earnings Conference call. My name is Josh and I will be your conference. Operator today. This call is being recorded I would like to turn the presentation.

Over now to your host for today's call Mark Denman, Vice President of Investor Relations for P. E E.

Please go ahead, Mr isn't there.

Good morning, and thank you for participating in <unk> fourth quarter 2020 earnings announcements.

We hope you've had an opportunity to read the press release, we issued earlier. This morning. We have also provided presentation slides on the Investor Relations section of our website.

And he made at the day to discuss our business and financial results for John Heller.

He is president and Chief Executive Officer, and Charlie Piper, Our Chief Financial Officer.

Following our prepared remarks, we will close with the question and answer session.

Management may make forward looking statements during the call regarding future events anticipated future trends for the anticipated future performance of the company.

We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.

Actual results may differ materially from those projected in the forward looking statements due to a variety of factors.

These factors are described in our SEC filings.

Please refer to our earnings press release for <unk> complete forward looking statement disclosure.

We do not undertake any obligation to update forward looking statements.

Management will also discuss non-GAAP financial measures during this call and we remind you that these non-GAAP financial measures are not a substitute for their comparable GAAP measures.

Reconciliations of these non-GAAP financial measures to the comparable GAAP measures are contained in the press release and Investor presentation issued earlier today.

And now I will turn the call over to John Heller.

Thank you all for joining us this morning for our fourth quarter earnings Conference call.

Like to start by thanking pie's workforce, including our newest employees, who joined us through our recent acquisitions of central net.

We all know where the challenging year. This is Dan.

But amidst this backdrop, we've been successful on turning the myriad of the challenges we face and the opportunity.

We observed on the front lines of COVID-19 relief efforts, while maintaining daily operations and successfully executing several strategic initiatives, including our debt refinancing and two acquisitions.

Our teams consistently rose for the challenge and delivered exemplary results.

For your dedication and steadfast resolve to deliver.

For the agenda for today's call I'll start with an overview of the key fundamentals of the business and the highlights of the fourth quarter.

And then I will conclude my remarks with the discussion on federal procurement trends.

The competitive position.

Our perspective on the federal government's top priorities and their impact on PAA.

I am excited to start with the momentum and trajectory of our business.

This is a watershed moment for P. A coming off a strong year and in the position of strength, we'll take the next step in our evolution of transitioning our portfolio into higher value market areas and expanding margins.

Looking back on 2020, we did everything we set out to do we increased margin 60 basis points, we refinanced our debt and completed two strategic and accretive acquisitions, all the while navigating the pandemic.

We have built a strong foundation and I'm extremely excited about our prospects for 2021 of BR.

Moving to additional accomplishments first we continue to execute against our strategy of growing our competitive IV IQ portfolio, both organically and through acquisitions.

We've added <unk> contracts to our portfolio with the ceiling value of more than $60 billion in.

In the fourth quarter and throughout the year, we have consistently won positions on attractive <unk> vehicles.

Our free to Air Force G tax to the recent GSS to point of award and access to RFS III and Si E. Three through the acquisitions of central the medicine to name a few.

We believe these contract vehicles offer tremendous growth potential with an efficient procurement process.

When we win seats on multiple award <unk> contracts, we did not take any portion of the awarded the backlog. However, these vehicles have provided us a viable path to drive meaningful backlog expansion.

We've also been successful in our execution of the expanding profit margins. When we provided guidance of March of 2020, we set out to expand our adjusted EBITDA margin by 20 basis points over 2019 results.

Through a concerted effort to drive our pipeline towards higher margin bid opportunities improved operational program performance and through successfully navigating the impacts of the pandemic, we delivered a 60 basis point improvement over the prior year.

Furthermore, on the strategic initiatives front, we did exactly what we committed to do we refinanced our debt after prudently evaluating the return of the credit markets and executed the strategic acquisitions of Central technologies embedded solutions. The integration efforts for both acquisitions are on track.

And we expect to be essentially completely integrated by the fourth quarter of 2021.

The customer facing integration is largely complete and we have expanded our NSS business segments bid pipeline to include opportunities related to both acquisitions.

Most importantly, our business development teams are hard at work identifying and developing capture strategies to drive revenue synergies, which is the core objective of these acquisitions.

The combination with Centura and Metis enables a key component of our strategy of positioning <unk> as the leader intelligence services and National Security solutions.

In combination with central Metis, we now have widened our capabilities customer access and contract vehicles across the intelligence of National security communities and significantly increased our addressable market by about $45 billion.

Having scaled up this side of our business. We're now positioned to complete compete effectively for the largest and most attractive opportunities in the intelligence analysis communications and training solutions market areas.

Next I'd like to take a moment to discuss the business in the context of core capability focus areas.

In addition to reporting our results on the basis of our global mission services and National Security solutions operating segments.

And our earnings presentation, we breakdown our financial profile across our core offerings to provide an expanded view of how we go to market and the strategic focus across these offerings.

Looking at the business across five core capabilities infrastructure and engineering Mitch.

The mission readiness business solutions test and training solutions and intelligence and technology services.

The infrastructure on engineering is focused on government facilities operations management and engineering services.

<unk> readiness provides global logistics support as well as aircraft and vehicle maintenance support.

We typically see long enduring cost plus contracts across these two business areas.

And cost plays a larger role on bid decisions.

These two core capability areas represent the pieces of the portfolio that we want to protect.

The modest growth and extend into adjacent market areas. For example, integrated health services and Smart basin as.

As well as additional geographic regions, notably the Asia Pacific region.

The business solutions area, which primarily targets third ship and Dod customers is focused on a variety of outsource business process solutions, including biometric processing data analytics and professional services contracts are typically five years in duration.

And primarily fixed price and time and material.

Immigration financial management, and various citizen services, our key focused areas in terms of expanding our footprint.

The test and training solutions capability area is primarily department of defense and National security related with several fed ship customers also mixed in.

The offerings include training solutions and testing range operations.

One of several strategic focus areas is further expansion to modeling and simulation based training and test environments.

Lastly, the intelligence and technology services area of comprises classified operations analytics communications and emerging technology programs targeting the Intel community and other national security customers.

Growth in the East latter three business areas will be driven by using technology to deliver the best solution for our customers and less driven by price of <unk>.

Great example, being metis counter threat finance programs, helping national security customers track analyze and assess at the serial money flows and the associated risk profile.

These three capability areas represent about 50% of our revenue this year.

And have the potential to grow to at least 60% of our business over the next three years and an even greater percentage if the accelerated with M&A.

They also represent the portions of the business, where we'll pursue the white space on opportunities enabled by the central and <unk> acquisitions.

Moreover, we expect these latter three areas will play a prominent role on our strategy of expanding margins towards the 8% long range goal.

Moving on to fourth quarter results I am pleased to report, we generated revenue and adjusted EBITDA at the high end of our revised guidance.

From an awards perspective, the fourth quarter has been on historically slower quarter for PAA, while we maintained a solid one two times book to Bill on a trailing 12 month basis.

Contract award win rates were strong.

The Recompete and new business win rates were 93% and 35% respectively.

Of the which were higher than our historical averages.

However, these outcomes were on lower than expected award volume of several award decisions were pushed to the right.

<unk> do the protest and will likely be adjudicated in 2021.

Moving to our awards activity for the quarter. We had several notable awards that provide the foundation for strong future growth and profitability.

Note about 80% of fourth quarter single awards were for new business and we had several significant <unk> contract awards.

One of our big strategic accomplishments of 2020 was winning a seat on the global support strategy to point out for GSS IQ contract vehicles.

This is a 10 year $3 $3 billion department of state contract, providing integrated business process solutions to assist with the worldwide processing of non immigrant an immigrant visa applications.

One of the three Awardees will compete for task orders by leveraging the company's strengths and biometric collection solutions secure data processing and integrated technology services.

We expect to see the task Order award activity in the second half of 2021.

And anticipate this contract being a strong contributor to revenue and adjusted EBITDA beginning in 2022.

As we have discussed since becoming a public company last year, we are making great progress bidding and winning attractive complex programs across our entire business.

To this end our Dms segment was awarded the electronic warfare operations training and infrastructure maintenance for Evo, Tim a single award <unk> contract with the ceiling value of about $100 million.

To provide on site program management services for electronic warfare training missions throughout Europe and Africa.

This win is another example of our concerted focus to move the business up.

The services value chain.

Additionally.

Our NSS segment was awarded the seat on the U S Department of Justice Mega five automated litigation support services the IV IQ.

Under this contract we support department of Justice attorneys throughout the course of litigation with a wide range of professional services.

Under the predecessor contract, we generated an annual revenue run rate of over $50 million.

Which we expect to expand on Mega five.

Next I'll provide a brief update on the one through 3 billion CVP Award.

As we previously discussed we were awarded the 10 year, one $3 billion contract with the U S customs and border protection in May 2020.

The award was subsequently protested and CVP Reevaluated The award decision and.

On January CVP awarded the contract to a competitor.

We have filed a protest with the government accountability office and will provide an update next quarter.

Next I'll provide a summary of the bid pipeline.

At the end of the quarter, we had about $7 billion in awards under evaluation of which about $3 billion as new business and approximately $4 billion of Recompete Awards.

We also have an incremental 1 billion of the proposal writing process. The majority of which is new business.

In Gms, we are awaiting about $6 billion in awards, which includes the protest at $1 3 billion CVP contract.

Approximately $4 billion of Recompete awards, and about $2 billion or new business opportunities.

In our NSS segment.

We're waiting more than $1 billion on awards, the majority of which are new business opportunities.

Note that the task orders, we will bid under the GSS contracts are not included in the bids under evaluation.

And the proposal writing process.

Moreover, our qualified pipeline has grown to about 39 billion driven by the center and <unk> acquisitions and organic growth initiatives.

Before I pass things on the Charlie.

Take a moment to provide my perspectives on the macro environment procurement trends competitive position and the federal government's priorities.

Despite the impacts created by the pandemic and the change in administration, we have not seen any material impact of the daily functioning of the government the.

The federal government continues to rely on contractors to perform mission essential services and agencies continue to award contracts on a best value basis, incorporating both solutions and price into the award decisions and for.

From a competition standpoint, it has remained consistent and rational.

PAA is uniquely positioned given our strong customer diversification.

And our 2021 revenue guidance.

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<unk> amongst army Navy and the Air Force represents only 30% of revenue.

<unk> is now 20% of revenue.

The federal civilian represents the remaining 50% of revenue with the state department, representing 19% of revenue.

Next I'll address our customer sets and competitive position.

The U S government and our Allied nations continue to face heightened geopolitical risks, China, Russia, Iran, and nation state activity and.

In the last months, we have seen continued turmoil and conflict in Syria. The recent kidnappings in Africa, and the reevaluation of the U S military force structure around the globe.

All of which demonstrates the interconnection between a national defense strategy and foreign policy initiatives supported by the state Department that the by the administration is fostering.

With our rich 65, plus year history, and are just heartburn or department of state and Department of Defense services legacy, we are very well positioned with many of the by the Ministry of <unk> priorities.

We are encouraged by the new administrations immediate focus on foreign policy.

Diplomacy and immigration initiatives.

These are areas well aligned with <unk> core strengths as evidenced by our global reach.

Ms Enduring embassy work.

Humanitarian and development programs and our recent award on the State Department's Global support strategy <unk> supporting the processing of these applications.

As the state Department and other federal agencies are called upon to drive the more visible and leading role in global issues CAE is well positioned to benefit from this renewed focus.

With that I'll hand, the call over to Charlie for an overview of our fourth quarter and full year 2020 financial results and 2021 financial guidance.

Thanks, John.

Good morning, and thanks to everyone for joining us on the call.

I'll start by providing an overview of our fourth quarter and full year 2020 results.

Followed by a discussion of 2021 guidance.

Looking at the Big picture.

There are three important takeaways for.

First our strategy of expanding the business towards high margin contracts is working as the.

Evidenced by our 60 basis point improvement of margins in 2020.

Second our agility and diverse set of capabilities paid off.

Quickly responding to the COVID-19, pandemic, winning contracts to provide COVID-19 relief in testing.

Not only did those COVID-19 relief opportunities yield strong revenue and margins, but the creative past performance to pursue health services work going forward.

And third we put ourselves in a position of strength for the future with the acquisitions and integrations of central on Mendes. The further expand our capabilities customer presence and contract vehicles.

Moving.

To the results I'll start first with revenue.

<unk> delivered a record quarter of revenue $749 million for PAA on a standalone basis and $788 million included in the contributions from sensor and Mems.

The.

Ganic year over year revenue growth of seven 4% was driven by increases in contract volume.

Non labor revenue and new business opportunities despite the impacts of the pandemic.

This increase was partially offset by $62 million negative impact.

From COVID-19 of which nearly 70% was non labor related.

Full year revenue, excluding the acquisitions of approximately $2 7 billion.

Was at the high end of expectations driven by the strong fourth quarter.

Fourth quarter adjusted EBITDA margins.

We're five 5% on a standalone basis, and five 6%, including the contributions from central and medicine.

Reflecting a higher mix of non labor revenue in the quarter.

This performance was at the high end of expectations.

We experienced strong program performance, especially on our NSS segment, which was a key factor in driving the fourth quarter results for the full year, we delivered $178 million of adjusted EBITDA, excluding the contribution contributions from the acquisitions.

This too was at the high end of expectations and with margins of six 6% represents a 60 basis point improvement over 2019, and a 40 basis point improvement over our original 2020 guidance.

Cash provided by operating activities was about $9 million for the quarter. This was slower than expected for driven entirely by the timing of certain collections.

We experienced about $15 million of accounts receivable that we anticipated collecting in December.

But were delayed into early January.

Consequently, our free cash flow for the year was $97 million, which was $13 million below expectations.

The reduction of free cash flow was solely a timing issue.

We have anticipated the $15 million shift and our 2021 cash flow guidance.

Full year cash flow was impacted by two nonrecurring items first we benefited from $37 million of cares act the for payroll taxes, which will be paid back ratably in 2021 and 2022.

Second we incurred $27 million in M&A.

And the integration expenses in 2020, and currently expect the only incur approximately $7 million of integration expense in 2021.

Moving next to our segment results Gms fourth quarter revenue grew 11% over the period through the increases in contract value.

COVID-19 leaf relief opportunities in non labor revenue <unk>.

This growth was partially offset by a nearly $56 million negative impact from COVID-19 of which more than 70% was non labor related.

Gms fourth quarter adjusted operating income was $28 million for the quarter at a margin of four 8%.

Margins declined relative to last year due to the higher selling general and administrative expenses and a higher mix of non labor revenue.

For the full year Gms revenue of $2 1 billion.

It was comparable to the prior year, despite a 140 $147 million negative impact from COVID-19.

Gms was successful in offsetting the majority of the Covid 1919 impact with increases in contract volume new business revenue and Covid relief revenue opportunities.

Gms delivered $129 million on full year, adjusted operating income and a margin of six 2%.

Representing a 20 basis point improvement over 2019.

The improvement in dollars and margins despite lower revenue year over year was driven by strong program performance.

And a lower mix of non labor revenue for the year.

Turning to the NSS segment, we generated $194 million of sales for $155 million, excluding the acquisitions for the quarter.

This represented a modest reduction compared to last year is primarily attributable to a $7 million COVID-19 negative impact.

Fourth quarter, adjusted operating income and margins improved to $13 million and eight 4% respectively per.

The acquisition.

And about $16 million, an eight 1%, including the acquisitions.

NSS delivered a 600 basis point improvement over the prior period.

Driven by higher revenue volume and improved program performance.

For the full year NSS delivered $634 million in revenue.

For $595 million before the acquisitions.

Pre acquisitions revenue was negatively impacted by $4 million due to COVID-19.

As we have previously discussed NSS lost three small business set aside contracts in the fourth quarter of 2019 and made the decision to not bid on the fourth contract in 2020 due to its low margins, excluding the four contracts NSS grew 13% organically year over year.

Approximately 50% of the growth was in the intelligence of technology services capability area and the remaining 50% was predominantly in the test and training areas.

With these losses behind US we are poised to show strong growth in 2021 and beyond.

NSS delivered $52 million of adjusted operating income at an eight 1% margin of $49 million at an eight 2% margin. Excluding the acquisitions. This represents an approximate 200 basis point improvement over the prior year driven by strong program performance.

Moving next to the integration efforts on central of Medicine, as John mentioned in his remarks, the integration for both acquisitions are on track.

Customer facing activities will be fully integrated by the end of the current quarter and we expect to be largely integrated by the fourth quarter of 2021.

We expect to drive $4 million on cost synergies in 2021, and expect to generate approximately $7 million of full run rate cost synergies by 2022.

Now turning to 2021 financial guidance.

We expect revenue in the range of 3.05% to $3. One 5 billion was the midpoint of $3 1 billion.

We expect adjusted EBITDA in the range of $205 million to $215 million representing a.

A 20 basis point improvement at the midpoint over 2020.

For 2021.

Guiding to cash flow from operations instead of free cash flow.

A change to better align with our peer group and a simpler process that will be that will tie to the statement of cash flows.

We expect at least the $120 million in cash flow from operations, which incorporates the $15 million of collected receivables that were originally anticipated in December of 2020.

Two part of the cash flow guidance back to free cash flow, we expect approximately $5 million in capex.

Guidance is based on the assumption that we will experience impacts of COVID-19 through the first half of 2021.

We are assuming the COVID-19 the.

COVID-19 impact on the first half of 2021 will be comparable to the second half of 2020 Covid impact.

The revenue growth implies low single digit growth in Gms and low double growth low double digit growth of NSS.

We anticipate revenue to be backend loaded driven by new business opportunities.

And reduce the impact from COVID-19 at a second half increase in non labor revenue.

We expect revenue to increase sequentially with first quarter revenue to be below the fourth quarter 2020 level. This is aligned with historical trends as we typically experience a higher weighting in second half revenue due to increases in non labor revenue in contract volume driven by end of year government.

<unk> and the availability of contract funding, but the start of a new fiscal year for the government.

At the midpoint of revenue guidance of approximately 85%.

Of our guidance is in backlog approximately seven percentage from Recompete.

Tracks and about 8% is from new business Awards.

With regard to adjusted EBIT the guidance, we expect a sequential increase in dollars consistent with revenue growth throughout the year.

Other key assumptions for 2021 guidance are available in our earnings presentation on the investors section of our website.

With that operator, let's open the call for questions.

Thank you as the reminder to ask a question or the need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.

Our first question comes from Chris Moore with CJS Securities. You May proceed with your question.

Hey, good morning, guys.

Maybe we'll start with the.

Charlie just left off the 20 basis point.

Margin expansion that you're looking for in fiscal 'twenty one is that.

Talk a little bit further is that driven by the mix program performance SG&A.

More color there.

Sure No problem. If you look at the drivers first of all of the.

Organic revenue growth that we're seeing in NSS that mixes.

It represents about 50% of that improvement in the balance of the other 50% is split between performance on existing contracts.

As well as well.

What I'll call expense management, obviously, we're not growing our SG&A and our expenses in line with the top line growth is also providing some margin expansion from that as well.

Got it Thats helpful.

So in terms of.

And Matt is it sounds like.

Most of the year is going to be focused on the integration of the two you talked a lot about the the white space growth opportunities. There is the assumption there that debt most of that white space opportunity is really kind of fiscal 'twenty, two and beyond the opportunity.

I think it's a real combination of theirs.

Good morning, Chris This is John I would say.

We do believe the idea of iqs that both of them bring to the table represent an opportunity in 'twenty one to see <unk>.

Expansion of the pipeline bidding work throughout the year and with IQ task quarters, you can have a much faster turnaround.

So I think there is of a depth.

Current.

Expectation that we can see some.

Cash quarter volume.

Hit in 'twenty one.

I think that when we call white space, there is white space, there as well because when you think of either of these companies bidding.

Bidding task orders that could come out on their contracts that are in the hundreds of millions of.

They might of been too.

The two large in scale or they may not have had the overall capability.

Past performance to bid on a number of those task orders, which now combining with medicine sentra, we have the ability to bid more so there's white space on the IDI cues, but then the other factor and Charlie mentioned this about how we've integrated the front end of the business to where.

We're really operating as one team, but obviously a team with much more.

Of past performance and and we've brought on some great people as a result of the acquisition that have experience with different customers and combining that capability allows us to identify single award opportunities. Most of those you would expect.

It would be more of a 'twenty two 'twenty three just given the timeline of the acquisition for that but we've already.

<unk> done really well at identifying additional pipeline Charlie mentioned the the the pipeline growth that we've had so we're excited about what that's already bringing to the table and the prospects for the future.

Got an ex extremely helpful. Last one for me are there any additional small business set asides on the horizon debt you might.

It may not be able of pit on you might have to walk away from.

Right now when you look at.

Small business set of size with the acquisitions, we just made there are any.

Headwinds like debt, which is what also interest us interest us in those acquisitions for Chris or there isn't anything like that.

But for the foreseeable future anyway.

Terrific I'll jump back in line thanks, guys.

Okay. Thank you of our next question comes from Matt Sharpe with Morgan Stanley You May proceed with your question.

John Charlie.

Hope everyone's doing well.

Do you.

Thank you. Thank you I just wanted to touch on revenue here for a moment sort of.

Unpack, what's what's buried within it.

It looks like it's about 14% at the midpoint of the guide.

What is that 14%.

Look like on a organic basis.

And just how much medicine sentra revenue is embedded in the three 5% to $3 one five range for the year.

So Matt if you look at the.

The guidance.

Our core business and Gms, we're expecting low single digit growth.

In the case of our NSS core pre acquisition, we're looking at.

The low double digit growth.

Consistent with what we just covered for 'twenty 2020.

And then similar to what we announced when we.

Completed the two acquisition transactions, we expect low double digit growth coming from the two acquisitions as well.

Got it.

And then just.

For.

The COVID-19 impact I think of 2020, it looks like it was about $125 million for the year is that a net number that accounts for any sort of COVID-19 response revenue and then maybe just a little bit of color on.

How you're thinking about it into 'twenty 'twenty, one I know you mentioned during your prepared remarks, Pat kind of its front end loaded, but interest any sort of cadence our overall expectations for that level.

Yes, when we look at overall Covid.

Headwinds.

The $187 million gross.

The <unk>.

<unk> share of that coming from Gms, just because of the nature of the business with higher non labor volume.

And then.

The headwinds were offset by.

The what I'll call Covid.

COVID-19 response revenue, which was predominantly in gms as well and if we were to net debt out we are roughly net around 80 to 85.

Of net negative impact once you net it out of about $100 million or so of Covid related revenue.

For the year.

Okay got it.

I just wanted to touch on awards and bookings here for a moment as well.

Did you guys I know you mentioned in the see any sort of impact from I guess, the overall government activity on the quarter, but was the <unk> seven ex book to Bill consistent with your expectation and then how are you thinking about book to bill trends into 2020.

One is there a target that you need to reach in order to sort of achieve the high end versus the low end of your revenue range of what you actually need to do in order to push towards the upper end.

Yes, I would say first of all I'll talk on.

Kind of the trends.

We definitely saw a lower volume from an expectation standpoint of actual awards in 2020.

So some of that is carried over into 2021.

Of.

The effects of Covid I think have had been a big part of that just the impact on the ability for acquisition teams to collaborate.

And get things accomplished a b the.

The fact that any contract that involve travel.

So individuals that had the travel across the U S or outside of the U S. In particular, the government slowed those acquisitions down because to do a contract transition that were acquired personnel to travel.

The kind of the transition a contract that was overseas or had significant travel in the United States that was severely.

Impacted by the inability of people to travel on the government recognize that and held back on certain awards that we saw that we expected in 2020, so as I would think that even in the first quarter first half of 2021.

Covid.

Still having an impact on the overall workplace and the ability to travel.

Residual there but were expecting that.

As the vaccine is.

Mostly distributed we're hearing about military bases opening back up government offices returning to normal.

I think we will probably get back to a regular pace of activity by the second half of the year.

From a book to Bill standpoint expectations for 2021, Charlie I don't know if you've got a factor there.

No no problem.

So Matt the the book to Bill.

For the total year basis should be around one five times.

It could be slightly higher than that but it would be in that range to support the guidance.

Items.

Got it alright, thanks, very much I'll get back on the queue.

Thank you. Our next question comes from Ashish <unk> with Deutsche Bank. You May proceed with your question.

Alright, Thanks for taking my question and congrats on solid results out of good guide.

Just going back to the big pipeline I understand the IDI cues are not included if I'm not mistaken, but I was just wondering if you could help us.

Just quantify how much docks Carter's do you have.

And the proposal phase or how do we think about the potential for task orders on.

On an annualized basis, this year and maybe any color going forward as well thanks.

Yes.

First of all just in terms of what we have in proposal today is around $1 1 billion.

Which is pretty consistent on a lot of that is task order oriented. So those are quick turnaround meaning.

The a lot of those bids go in shortly and.

Because of the expansion of the IDI cues, we probably anticipate a more steady volume.

Whereas in the past we would see.

Spikes in volume and then it would drop back off on your bidding 234 $500 million bids versus say a higher volume of smaller opportunities.

Also expect in the back half of the year. The GSS contract that we won in the fourth quarter of that task order volume will start to come out and Thats a pretty significant number.

But overall.

Our expectation from both businesses with a pretty healthy bid pipeline for the year.

That would.

<unk>, what we saw last year. So last year was in that 6% to 7 billion bid. So this year, we're expecting a higher volume just based on timing of what we see in our pipeline.

That's great. That's very helpful color and maybe just I was wondering if you could comment on some of the contracts that are coming up for renewal. This year in particular to do I'd add contracts for the oil.

And the list as well as the back of the cap.

Any color on when should we how should we think about the new photos contracts. Thanks.

So if you look at our Recompete.

All of them SaaS on Bliss.

Based on what we have what we hear from the customer we don't expect that to be awarded until 2022.

Net.

We're going to move to the right.

As far as.

Other contracts.

From an award standpoint in 2021, as we highlighted we have about 7%.

Of the volume that we have in 2021 guidance is related to Recompete.

It's the.

The resolution of CVP Johnson Space Center is a contract that we expect to be awarded in late 2021.

And then we have decisions on Pax River as.

As well as all tech or the.

Significant drivers and then we do have some of the Recompete activity on Vega, John highlighted that we want to see it on Mega five so those task orders will be re competed in 2021 as well as the new task orders will be coming up for us too.

Bid on which is the primary driver for some of the growth that we see coming out of 'twenty one on the make of contractor for us, but there was the major drivers.

And at or be happy too.

You mentioned Africa net I mean, we would just expect a normal task order season on Africa in 2021 as we've seen.

In the decades in the past so there is nothing.

Out of the ordinary expected there.

And when they awarded under the new contract.

Well I think it was two years ago. They were awarding of contracts in the period of performance that were more in the five year arrangement in the past. It was three so youre going to see is a slightly different profile on after cap.

Now, which is different than what you've seen in the past just because they have contracts with longer periods of performance.

That's really helpful color, thanks and.

Congrats on the good results. Thank you.

Thank you and as a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Josh Sullivan with the Benchmark Company. You May proceed with your question.

Hey, good morning.

Hey, Josh good morning.

Morning, Josh.

Just looking at the the strategic goal of the breakdown chart here.

Where do you think is the most significant change in that model over the last six months and then as we look forward maybe three years. How do you think this is going to change.

And youre talking about the strategic growth areas.

Yes, Im looking at intelligence infrastructure mission readiness for sure solutions.

Yes, yes.

What we're expecting just based on the investments we're making the pipeline that we're pursuing is right now if you look at the business solutions test and training solutions and intelligence and technology services, representing about 50% of revenue growing organically.

To closer to 60% over the next few years.

We really with the Medicine center acquisitions see momentum in the intelligence and technology services.

Sure.

The GSS award can really put some momentum behind the business solutions and training ETS C.

And other range work night and other contracts that were awarded.

We will provide continued momentum in the test and training solutions area. So we feel strongly that these three areas have really come together strategically well for us in terms of the capabilities.

And with the last two acquisitions should continue to drive.

Good growth at a higher rate than the infrastructure engineering of mission readiness, although we still have a great pipeline there as well our market positions are very strong in those areas.

And we continue to expect to win our fair share in those areas as well, we just expect a lower growth rate as compared to the other three.

Right.

And then I guess kind of Relatedly I mean, if we do see some funding shifts back to the state Department and I know you talked about the biometric and views of opportunities, but are there any other areas, where you think we could see upside or.

Maybe any holes on M&A, which you want to fill on that area.

Okay.

Well, we would expect debt contracts like App for cap will where the U S government identifies key.

Key regions of the World.

That will become a priority for engagement by the U S government, we gather and AC tap of our two other contracts.

The AC tap was awarded last year.

Debt Justice Department contract, but obviously, we will.

A link with the state department in terms of identifying.

Areas of the World, where the U S government wants to engage and that spending will follow.

So from a from an acquisition standpoint, we really do feel like we have a great put foothold.

Across the different capability areas in support of the state Department of obviously our relationships. There are strong. So we really don't see a need to leverage acquisition to expand however on USA I'd is an area that we have pushed into over the last couple of years.

Through the acquisition of Mcfadden.

Do see significant opportunities for growth that fits very well, it's not an area that we have done a significant amount of business in the past. So we think it represents great white space for growth.

But again, we don't think we need M&A to two.

To allow us to achieve our organic growth goals.

Great. Thank you for the time.

Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Mark the dental or for any further remarks.

Yeah.

Thanks, everyone for joining us this morning and for your continued interest in <unk>. If you have any questions. Please don't hesitate to give me a call. Thanks, a lot and have a great day.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

And then.

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Good day.

On the floor.

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