ManTech International Corp (MANT) 2003 Q3 法說會逐字稿

Good evening and welcome ladies and gentlemen to ManTech International Corporation’s, Third Quarter 2003 Earnings Conference Call. At this time I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open up the conference for questions and answers after the presentation. I will now turn the conference over to ManTech’s Executive Director of Investor Relations, ((Maureen Crystal)), please go ahead Maureen.

Hello. Welcome to ManTech International’s 2003 Third Quarter Earnings Conference Call. My name is Maureen Crystal and I am the Executive Director of Investor Relations. Leading today's call for ManTech are George J. Pedersen, Chairman of the Board, CEO and President, and Ronald R. Spoehel, our Executive Vice President and CFO. Before we begin our discussion, it's important that we provide you with the required statements relating to our disclosures and commentary regarding ManTech and our results and operations. Statements made in ManTech’s written and verbal disclosures and commentary, which do not address historical facts could be interpreted to be forward-looking statements.

These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are subject to factors that could cause actual results to differ materially from those statements. For example, we note the risks and uncertainties of retaining existing contracts and winning new ones and the contract performance and legal and regulatory compliance. For a discussion of these and other risks and uncertainties, please refer to the section titled risk factors in ManTech's Annual Report on Form 10-K, filed with the Securities and Exchange Commission on March 31, 2003, and from time to time in ManTech's other filings other the Securities and Exchange Commission, including among others, its reports on Form 8-K and Form 10-Q.

The company’s statements are made as of October 29, 2003, and ManTech assumes no obligation to update any such forward-looking information. Also the entire contents of today's call, which is being recorded and Webcasted is a copyright of ManTech International Corporation and may not be reproduced in any form without prior written consent. Now I'd like to turn the call over to George Pedersen for introductory remarks.

Good afternoon, everyone. Thank you for joining us today. I am pleased again to report a record quarter for ManTech International with strong top line growth, expanding margins and increasing profitability. Our year-over-year revenues increased 39% to $181.6 million, our operating margin expanded to 8.9%, and our earnings per share rose 21% to 29 cents, all record achievements for the company. Our financial performance is a direct reflection of the progress we have made in meeting our strategic goals and objectives.

First we are focused sharply on the national security marketplace and aggressively pursued IT and technical services business in this expanding sector. Second, by relentlessly emphasizing operational discipline, we set a standard of excellence to drive our internal growth and expand our profit margins. Third, we maintain a disciplined acquisition strategy coupled with an adaptable integration of products to capitalize on opportunities that will strengthen our market position and enhance our performance. Most importantly, we are keenly focused on maintaining our strong relationships with both our customers and employees. They're our most important assets.

While we continue to expand and leverage these relationships, we are energetically pursuing new customers and seeking to attract and recruit additional high quality employees. I'll come back to the significance of these topics later in the call, but at this point, I would now like to turn the call over to our Executive Vice President and Chief Financial Officer, Ron Spoehel to provide more detail and for comment to you on our record quarter. Ron.

Thank you, George. Good afternoon, everyone. Our record results show that ManTech continues to deliver on the performance expected from our now integrated platform of companies supporting national security, defense, and civilian government IT solutions. Our revenues for the quarter rose over 39% to $181.6 million as compared to the same period last year. This was an organic growth rate of over 12% above pro-forma revenues of $161.5 million that our current operations achieved during the comparable period in 2002. We have seen and continue to see strong demand across our core growth markets supporting national security programs for the Intelligence community and the Department of Defense.

Our operating income for the quarter increased 48%, to $16.2 million, as compared to the same period last year. The operating income margin was 8.9% in the third quarter, up from 8.4% in the same period in 2002, and up sequentially from 8.6% in the second quarter of this year. This margin improvement was driven by improvements in contract margins, as well as continuing improvements in operating efficiencies. EBITDA increased over 50%, to $18.1 million, similar to the growth of operating income, and the EBITDA margin increased by eight tenths of a percent to 10%. Similarly, for the third quarter further margin expansion was reflected in net income, as it increased 47% to $9.2 million from $6.3 million in the comparable period in 2002.

Our tax rate for the quarter remained at 40.7%. With our fully diluted share count for the quarter of $32.3 million, our earnings per share on a fully diluted basis were 29 cents, an increase of 21% over the comparable quarter in 2002. The net debt balance at the quarter was $5.5 million, which is comprised of $25.3 million of total debt, offset by $19.8 million of cash and equivalents available. This slight decrease in the cash balance level at the end of the quarter was in large measure due to the impacts of obtaining new business and the continued success of several of our operations, which have longer than average cash conversion cycle times, but which have very attractive operating margins which more than offset any costs of carrying the working capital.

This, combined with the processing delays of some of the receivables resulted in our DSOs increasing to 86 days, or nine days over the second quarter of this year. This reserve -- this resulted in third quarter cash outflow from continuing operations of about 400,000. For the fourth quarter, we are targeting an improvement in the DSO level and the associated cash flow from operations, but the final results will again be dependent on our contract mix.

As mentioned previously, we have maintained our focus on personnel retention efforts and the third quarter voluntary turnover rate remains at approximately 15%. We have also further focused our recruiting efforts as we continue to see strong potential for growth, especially in our classified programs. The strong activity in our core growth areas is reflected in our recent contract awards and contract expansions with an estimated value in excess of 260 million. Including our previously announced wins of JCON and the Marine Corps System Support BPAs.

Our proposal activity remained quite active in the third quarter. At the end of the quarter, we had over 1.3 billion in proposals under evaluation with a total pipeline of qualified opportunities, which remained in excess of 4.5 billion. Our total backlog at the end of the third quarter was 1.5 billion, with funded backlog growing to 410 million. Our percent of revenue from GSA contract vehicles continues to increase as well and is now at 44% of our revenues. Reflecting our strategic focus, revenue from DoD and Intelligence community contracts expanded to 93% of the total in the third quarter, with all our federal government contracts accounting for about 99% of revenues.

We continue to serve as prime contractor on over 90% of our work, as we continued to seek the greatest degree of direct control over program management as a means to enhance our growth potential. Our cost-plus contracts accounted for about 34% of our revenue in the third quarter, continuing the downward trend as the company increases its opportunity for margin expansion under time and material and fixed price contracts.

With the strong performance of the company in the first nine months of this year, we are reaffirming our guidance for 2003. For the full year, 2003, we continue to project revenues of 695, to 705 million, and based on 32.2 million fully diluted shares, we would expect fully diluted EPS for the year to be $1.07 to $1.09 per share. Consistent with this guidance for the fourth quarter, our guidance is for revenue in the range of 188 to 198 million and with 32.4 million shares EPS between 29 and 31 cents. Looking forward to 2004 guidance all current indications suggest top line growth to be in the range of 13% to 15% with consistent or slightly better growth in earnings for the next year. At this point, let me turn it back over to you, George.

Thank you, Ron. Our solid performance this quarter again reinforces that our strategy is working. As we have highlighted before, ManTech has adopted a market positioning strategy that consists of offering advanced technology solutions to support high priority national security programs for the Defense, Intelligence and Homeland security markets. Given current global military deployment, the need for timely intelligence and our nation's focus on homeland security, we believe these customers will continue to require more and more contracts to support the IT and key technical services in the coming quarters. We foresee that these markets are not only poised for growth but are well protected given the Defense department's technology base, transformational initiatives. The government's outsourcing trends and unfortunately, our continuing war on our terrorism.

Industry funding is also on track. Since our last call in July, Congress has passed the '04 appropriation bills for the Department of Defense and Department of Homeland Security. As expected, the President and Congress approved spending for '04 of 368 billion, when you add in the construction and other segments, it adds up to almost 400 billion. The focus is on leading edge technology and support for the global war on terrorism. Important to note is that the base appropriate bill does not include current and future supplemental spending bills, which have become a regular process, as you know well and one is under consideration as we speak. The lack of a defense authorization bill is somewhat problematic. But this is a policy matter That Senator Warner is working on , as you know well. With the spending bill approved, 2004 looks promising for ManTech and the industry. At this time the fate of the DoD authorization bill remains uncertain. But I understand that all parties involved want to reach an agreement on the contentious issues.

Especially the by American provision the approval of the Department Of Homeland Security appropriations spending bill is also a positive indicator for our marketplace. With spending at approximately 30 billion, this young agency continues to be a priority for both the president and the Congress. In 2004, the department of homeland security bill, there are numerous IT and technology spending priorities that will require contractor support. We're actively pursuing business with the D.H.S. and we see this agency as a growth market and we will continue to target it in following quarters. Excuse me. Apart from -- aside from DoD and Department Of Homeland Security, the balance of the Federal Government remains under a continuing resolution which allows spending at the 2003 levels.

As we noted in the past, most of our funding comes via DoD, so we are not seeking, we are seeing any setback at present as a result of the continuing resolution. We are most sensitive to State Commerce Justice and the (inaudible) spending bill because of our work for the Department of State and the Department Of Justice. The current CR expires Friday. We expect an extension. Some of the subcommittee bills may make it through this week or next, but it is most likely there is going to be an omnibus bill that will recover any remaining appropriation requirements for 2004 in a one-piece legislation. We do not anticipate delays like last year. We expect passage before the holiday recess in December. However, as we approach 2004, presidential politics will become paramount and almost all policy and legislation will be reviewed in this context.

The continued improvement in our key metrics as highlighted earlier demonstrate that we have the right combination of technology service offerings and the right markets to grow and leverage our business base. Our recruiting and business development efforts support our growth and the integrated acquisitions are helping us win new business that would not have been possible for us a year ago. We have always used acquisitions as a means to grow our platform, as stated in our last call and in meetings recently with four acquisitions fully integrated and behind us we are once again looking at acquisitions to even more fully address our abilities to support the customer mission and their key priorities. Our strategy calls for sharp focus on classified DoD and Intelligence Community programs.

Acquisitions are often the best way to penetrate these new markets that capture the full value of our achievement and service. Several areas remain of great interest to us, the Air Force, especially Space operations, additional programs in the Intelligence Community and in the Department Of Homeland Security. We will not limit our search to just these areas, but these are priorities. We do not anticipate closing a transaction before the end of the calendar year, but we are now fully engaged in the merger and acquisition process as we head into 2004.

Our intermediate goal is to grow internally. Our immediate goal is to grow internally and through acquisitions with a desire to be $1 billion in revenue in 2004 in that range. Our strong balance sheet gives us significant flexibility in financing alternatives, and we'll take our time and we'll apply the disciplines as we did before and we'll make sure that the right fit for ManTech and to ensure that maintain the the strong platform we have already built. Regarding acquisition, expect more of the same of what you have seen from us. We will stay in our range we will pursue deals that meet our strict criteria. They have to bring new technology, new customers, new geographic locations new technical management skills. We cannot buy sales. They must also make economic sense and be accretive for our shareholders. So to wrap up our call today, ManTech had a record quarter in terms of our financial operational and strategic performance. We look to finish the year on a similar note and we believe we are well positioned to help our customers and meet the challenges they will face in 2004 and beyond. We thank you. We're now ready to open up the call to your questions.

Thank you, gentlemen. The question and answer session will begin at this time. [operator instructions]

The first question is from Joseph Vafi of Jefferies & Company. Please go ahead sir.

Hi, gentlemen. Good afternoon.

Hello, Joe.

Hello.

I was wondering if we could drill down just a little bit more on the DSO issue. Ron it, sounded like there was two things going on, one was some contract structure looks like maybe longer billing cycle and secondly, you said there might have been some more internal oriented collections activities that might have spiked DSO.

That's correct, Joe. On the internal activity, I would say it was both internal to here and internal to some of the government processing activity. That related to specifically the -- being -- I guess generalized. The contract names and the transition in some of our acquisition getting the right name on the bills, and I hate to go into the details, but it frankly overall is around making sure that contract names match up with contract vehicles and invoice names. That was difficult, and there was some transitions at the end of the quarter that caused some problems there.

On the broader issue of the contract mix, we have some very attractive contract activity under some contracts where the natural operational cycle of closing out the contracts is extended beyond which you see in the bulk of our business. So, as those contracts have expanded, and in particularly, some we have that have very attract attractive margins, the payment of these contracts is actually at the completion of specific milestones and activities under the contracts. So as those extend and some of those have turned their operational time frames that are in the 100-plus days, it naturally extends the time of our DSOs, particularly in the unbilled.

Okay. So, are those longer kind of milestone payment or contract terms as -- is that -- is it kind of -- are we talking a one-time catch up or are we looking at -

No, it could be -- Joe, it's not just one time that is something as that business continues to grow and is doing quite well it could well extend, we don't expect that DSOs would rise dramatically, but it's the nature of the business.

Okay. Fair enough. Maybe we could talk a little bit more about some of the pipeline that you're seeing, George. Looks like you have got a really big pipeline of qualified opportunities you're looking at. Has the nature of that pipeline changed at all over the last, say, one or two quarters, you know, given some of the various things going on, including the emergence of D.H.S. and maybe some more thought to, you know, where the DoD and the Intel world are really looking to spend? Are they more focused, and how do you see the pipeline moving forward?

The pipeline, obviously, is going more in the defense and the intelligence areas, particularly as we integrated the acquisitions. As you know well, we don't see any decline on the defense side. The $400 billion has been approved. The $87 billion bill, as you know, is being reviewed today. Our understanding is that hopefully before the end of the day or by tomorrow, the president will have 85 to 90 billion. The only issue remaining as I understand it is perhaps the --how much of that might be a loan. I'm hearing a number of $7 million that they might do. The short version we start out this year, the industry starts out with essentially $487 billion, and that's our focus. The fundamentals for what we do is very strong.

Okay. And then just one final question. It looks like the funded backlog sequentially moved up pretty nicely. Is there any specific color or items there moving that around this quarter versus last?

I think through a combination of awards that came in, but they are across the board as opposed to any single large contract.

Right.

I don't have that detail. So, it went up, that is (indiscernible) issue.

It did go up more than our --it's over 50% of our run rate of revenues which is a little higher than I would normally expect to see it, but given where some of the obligations came in on the contracts, it is a little higher at moment.

Yes we're obviously very happy with it and once again, the fundamentals are there.

All right. Awesome, thanks a lot, guys.

Thank you. Our next question is from Bill Loomis of Legg Mason. Please go ahead, sir.

Hi. Thank you. Just again on the DSOs I mean, it was a pretty big sequential increase of, I think 22 million. I'd just like to get a little color on it. I mean you mentioned program, was there one specific contract with the milestones that kind of dominated the issue in the quarter?

One -- not one specific contract, per se, but it is one company that does. We have one company, as you -- that in combination with the company that we had was one of our acquisitions, putting those together, they accounted probably for three quarters of that increase.

Okay.

I'd be glad to go into more detail, if you would like. Whatever would you like.

I mean that is a pretty key issue, just, you know, whenever you see a big move up on the receivables like that, sequentially, the more details that you have, the more helpful it is for the analysts. I mean, if you can go into anything -- anything that you are willing to say would be helpful.

Well I think the one organization that he's talking about the sales doubled.

Right and this primarily is -- it's not an issue. This is a reflection of the growth in that organization.

The growth in that organization and the sales in that area doubled, and that's the area where there is the small (indiscernible) completion type work and the delay is there.

So as you have the components that need to be completed along the way, for a fixed you know, essentially billing it for completion of particular tasks, as those extend beyond a particular quarter. So as we grow, we expect for the next quarter or two, that could still continue. It's not software development. It's very low risk. And there's no collection risk on this.

Not at all. And for me, it's a good news story sir

Okay, and so no, -- there's no contract issues. You're not in disagreement with them already.

No.

No, sir.

As a matter of fact, we're taking more than our fair share of business from the others in the industry at the moment, in that segment.

Okay. And just on the state department contract, you can update us on activity there. How that's been growing, where you see that over our next quarter or so, particularly under the C.R.?

The appropriation has not been approved, as you know. The last time I talked to Judd Greg. He was hoping to have a bill the middle of this month, but some of those things got -- I'm sorry the gentleman who is Chairman of the Senate Appropriations Committee, thought -- we see solid growth. They have added to that basic contract we had our worldwide deployments on the I.T. area. That's an area that's going to grow significantly as we go down the road. For the moment, I don't see a delay in that growth because of the appropriation bill, but obviously, if it turns out that they don't approve it, that would have an impact. I don't see that happening, sir.

Thank you.

Thank you. Our next question is from Tom Meagher of BB&T Capital Markets.

Thank you. Let me just ask for one further clarification on the D.S.O. issue. George, you probably remember that Anteon had something similar happen to them I think about a year ago now.

Yes, sir. Exactly right.

In their case it related to review of some of their contracts and the way the invoices were mailed into DFAS Columbus. I want to make sure that I understand, this is not something similar to what they experienced? In other words, you’re not pulling your contracts out of the mix and auditing them for compliance and all that sort of a thing?

Absolutely not. This is not a DEFAS (ph) issue. That issue at the time as you know was a major problem for a number of people. We didn't happen to have the problem at the time and that is not the issue here. I think this is more that we made four acquisitions and some of the payment offices had us recorded under the names of the subsidiaries that we had acquired. Some of them had them in our names. It's a matter of getting those files converted to Magic International or the -- you know for instance, I.D.S. subsidiary of Magic International. There are no basic problems that I'm aware of sir.

Okay, then just a couple of other questions. First, We had the proposed reorganized reduction of the some of the G.S.A. GWACs. I am just wondering if you see impact on the company resulting from that.

I have not seen any impact that I know. Our G.S.A. sales increased to 44%.

Even going forward, the operating units are getting back to us, and given our mix of contracts, we actually see that as an opportunity under some of them.

Okay. And then finally, George, I know you track this kind of thing closely as well, it looks like we have a fair amount of C.I.O. turnover, both within O.M.B. and some of the deputies there as well as at the agency level. Do you see that having any negative impact on either yourselves or the sector going forward?

No, sir. I don't think so. There's been some change out, but I think some of the basic programs have been set. In concrete. They're going down the road. So, I don't see us -- you know, the government program -- the government program managers drive it, so you know that. And the CIO has to approve it and bless it. That's true. We don't see an impact because the program managers that we deal with and we know are on track.

Thanks very much. I appreciate it.

Thank you. Our next question is from Brett Manderfeld of Piper Jaffray. Please go ahead, sir.

Congratulations on the quarter, guys.

Thanks, Brett.

My question relates to the bid and proposal pipeline. Ron, maybe you can comment on where it was last year, and if I -- I don't recall where it was in the second quarter, and then related to that, I believe you're looking for at least initially in '04 internal growth that's somewhat -- a little bit better than what you did this quarter. You can comment on what's driving that? Thanks.

Okay. Two things. At the end of last quarter, we were consistent in where we had the total pipeline at 4.5 billion. Those contracts that bid and either had won or lost during last quarter. We have replaced those in the pipelines and we have more under evaluation than we did the last quarter. That was up to 1.3 billion to 700. We see good opportunities coming through here. As to where it was last year, I have to apologize. That information was before my time, and it's not something that I have gone back and compiled at this point, but I will now. Pardon me. The other part of your question, could you say that again?

Yes. Ron, just in terms of the initial guidance for internal growth next year, talking 13 to 15%, if I recall the last couple of quarters, it was 13%, and this quarter, I think you mentioned that it was slightly above 12%.

That's correct. Yes.

Is there something there that's, you know, kind of expanded the range to the higher end?

Please remember when we went out to do acquisition, we had a criteria that those candidates had to be growing at a faster rate than we did, and you are beginning to see the impact of some of those acquisitions. Not only the acquisitions, but the fact that the force multiplier coming together with us. That's what you are seeing in some of that growth increase.

Right.

Okay. Perfect. Thank you.

Thank you. Our next question is from Sandra Notardonato of Adams, Harkness & Hill.

A follow-up to the question on organic growth. What can we be expecting for the fourth quarter?

For the fourth quarter, where the growth will continue pretty much in line with where we are now. Margins we would expect to be in again about 8.7%, consistent with the full year for operating margins. And again, the growth, I think is going to be in the same range we are now. We have no reason right now to believe it's going to be significantly higher or lower.

My second question, you mentioned some increased costs associated with obtaining new business. Can you give a little bit of color on what kinds of contract, size of contracts that is associated with, or any other detail that you can provide around that?

Right. Sorry, if that was the interpretation, I apologize. We were looking to explain as we picked up some contracts and had the startup on those, that affected our D.S.O.s.

Only the D.S.O.

Yes.

Okay.

So, not in terms of the cost.

No costs associated with that.

As a matter of fact, generally, our contract margins continue to expand.

Are you anticipating that as you start bidding on larger contracts that could you see costs associated with procuring those contracts increase?

The answer is a general sense is, yes, on a dollars basis, however that is built into our guidance and what we expect.

Okay. Hurricane Isabelle, was there any impact on the quarter?

Yes, there was. It cut our revenues down a bit. What we did -- I don't know the exact amount. Let's say it's $1 million or something under $1 million, but what we did is to examine whether or not we had any claim under our insurance policies and we did not, and at the end of the day, according to the insurance policies, what we had was not material, so we couldn't put a claim in.

Okay, so about $1 million impact to revenue?

That may be a bit high, but it's in that ballpark.

It's in that ballpark.

Just a couple more here.

By the way, We didn't lose that. It's going to be -

Yes.

That will be pushed into Q4?

Some of it may -- some of it depends on the contract vehicle because as we are working at limited capacity of people and some of the things that we have under those contracts, it may actually move out a little bit farther, but we're not going to lose it under the contracts.

Just to talk about Q4 a little bit more in detail. You have provided somewhat of a wide range in terms of the revenue expectation. What exactly needs to happen for us to see you come in at the high end of that range? Talking revenue here?

The D.O.D. has to spend the money. The reason for the caution in that range is as you know in the beginning of the fiscal year, the comptroller sometimes holds back money, and what I didn't know was whether they would hold back money until the 87 billion was approved. I think once the 87 billion is approved, then all of the money will begin to flow. But my fear factor was that if they didn't get the 87 billion, they might, you know, slow some of the other funding. We also obviously need the state department appropriation, and the other thing is, the D.O.D. sees that it impacts on it. But the main issue, I want to see the $87 billion signed up so we don't get comptrolleritis.

Okay, Pass-through revenue this quarter versus the same quarter last year. Ron, do you have that number available?

Yes. Hang on a second.

Also while you're looking that up, the time and materials contract, and fixed price contract numbers.

He's looking it up.

I'm just looking it up here.

Okay, great.

Time and material contract in our classifications that we had, and we revised some of this recently, but it moved up slightly. It's probably just over 50% now. Fixed would be 15, and that was down for reference from about 18 unfixed and T&M up from 46, 47 before.

Okay.

The other was the ODC pass-throughs

This quarter and the same quarter last year.

Let's see here. Right. But what's the percentage on that. Pardon me for just a second.

Of course.

(inaudible) yes, this quarter is about O.D.C. as a percentage of revenue was about 31% -- this quarter is about 32, 33%. It is a 33%, and last year is about 31. We have been consistently in the low 30s. So the range continues there, but a little bit of a change.

Okay. Thank you, and nice quarter.

Thank you.

Thank you. Our next question is from Mark Jordan of A.G. Edwards. Please go ahead, sir.

Yes good afternoon, gentlemen. Could you talk a little about the acquisition plan. I thought, George, that you stated that you hoped by the end of '04 to be at a $1 billion run rate. Was that correct.

We are trying, that's our target. We'd like to have in '04, we're looking at 13% to 15% internal growth for '04. That would make in round numbers get us to 800 million, and we're looking for acquisitions that would generate sales operating sales at maybe 200 million for '04. Once again we have essentially no debt. We have a strong balance sheet. Our equity box is $270 million. So the idea is to be able to do the right acquisitions and gain another 200 million and be a $1 billion company in '04.

Okay. Your stated goal of revenue growth, 13% to 15%. You would pick up some benefit from the acquisitions that closed early this year. What would be the true organic rate of growth?

Mark, we were actually doing that at roughly our organic rate of growth. We may actually report slightly higher.

Okay. Looking at the operating margins as you say, you had a very strong quarter this quarter. Looking at 8.7.

Yes this quarter was 8.9.

Excuse me, 8.9. but the fourth quarter, you are saying 8.7.

Yes.

What would be your thoughts or goals or objectives going out for '04 relative to operating margins, you know, again excluding the impact to potential acquisitions?

We would like to see those move up slightly, but don't have a specific target. We'd put forward at this time.

Okay. By slightly, you would be talking 10 or 20 basis points versus this year. Is that rough order of magnitude.

I think that's fair.

Okay, thank you.

As a reminder, should you have a question, please press "*" "1" at this time. Your next question is from Joseph Vafi of Jeffries & Company.

Just one quick follow-up on the re-compete Calendar if you're up for any major recompetes and how that looks in the next couple of quarters?

Joe, as you may recall, to date, we haven't really released specific information on recompetes or particular contracts. That is something we haven't done in the past.

How about more broadly, is it -- any color, if you can, Ron.

On -- I would say, well, start with the premise, if you look overall, there's no single contract that would be considered material to the company, when you look at the percentage of revenues. So, from that standpoint we have taken in to account, you know, we have a portfolio we're not assuming that we're going to win anything in our pipeline, but we're comfortable that we're ahead of the curve on what we need to achieve for next year.

That's helpful, thank you.

We have a follow-up question from Sandra Notardonato of Adams, Harkness & Hill, please go ahead Madam.

I apologize if you gave these numbers. The number of employees that you ended the quarter with?

About 5,000.

5,000. And the percentage of those that had security clearance?

I want to tell you 2 points -

About two-thirds.

Two-thirds.

I think it's 2800 that's top secret. Am I saying that right, David?

It's 2800 or maybe even more now at the top secret level and am I allowed to say the other piece of that?

It is 16, 1700 of those have a special compartmented clearances.

1600?

That may be a little low.

Okay, And do you have a sense of how many employees with security clearance you need to hire in 2004? I know you haven't really talked about what your plans are for '04 just yet, but just to get a sense of that, if you care to share?

I think it would be fair to say that we think we can leverage the talent that we have now into higher revenue levels. However, I think it would be fair to say the mix we have of cleared and uncleared moving forward, we need to grow the company something slightly less than the projected revenue growth consistent with that mix of talent that we have now.

Okay. So, do you expect to continue to have roughly two-thirds of your employee base with security clearance, is that how I should read that, Ron, or?

It may move up a little bit.

But not that much, and by the way, we continue recently. We have put a concerted effort on recruiting and we have been very successful in bringing people into the company. To date, that's not been a restriction other than the normal growth activity for the company.

Have you noticed on the margin, that it is costing you more to acquire employees with security clearance given the competition for folks with that -- for lack of a better word, characteristic?

As always, that market -- those folks who have those clearances and that technical capability know their worth, and I don't see a significant change. They have always known what they're worth and we pay the market price.

Okay, Last question, what kind of win rate should we be assuming on the number that you gave out for proposals under evaluation?

I don't know the answer to that.

That's something we haven't released.

I don't know the answer to that. I don't think of it that way. I don't think we have given that number out.

Okay. Thank you.

Thank you.

Thank you. If there are no further questions, I'll turn the conference back to Mr. Pederson.

Thank you. The question and answer session will begin -- let's see, if there are no further questions -- how do we do. Over the next couple of months, I guess we will have a number of conferences and we'll be out on the road meeting with the investors, and we look forward to discussions. In the meantime, if there are any questions, as always, we ask you to call, as some of you do on a regular basis. Before we sign off, as I usually do I want to take a moment to remember the efforts of our men and women in the armed forces, the intelligence agencies, and all of the government agencies that are in places around the world.

As you know, ManTech has a lot of people working side by side with our armed forces in Iraq, Afghanistan and those places. There are a lot of challenges ahead for us and for the country. We think we're on the right track. We try to support our government and try to support the military to the best of our ability. I think we and our industry have. That concludes our call. We thank you for your time, and please call us if you have any more questions. Thank you.

Ladies and gentlemen, if you wish to access the replay for this call, you may do so by dialing did 1-800-428-6051 or 973-709-2089 with an I.D. number of 307876. This concludes our conference for today. Thank you all for participating and have a nice day.