ManTech International Corp (MANT) 2011 Q1 法說會逐字稿

Good day, everyone. My name is Ruthie and I will be your conference facilitator today. Today's call is being recorded. At this time, I would like to welcome everyone to the ManTech's first-quarter 2011 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions).

Thank you. Mr. Davis, you may begin your conference.

Thank you, Ruthie, and welcome, everyone. On today's call, we have George Pedersen, Chairman and CEO, and Kevin Phillips, Executive Vice President and CFO. We also have members of our senior team available for the question-and-answer session.

During this call, we will make statements that do not address historical facts, and are thus forward-looking statements made pursuant to the Safe Harbor provisions of the 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 risk 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.

Now I'd like to turn the call over to George.

Thank you, Stuart. Good afternoon and thank you for participating in today's call. We began fiscal year 2011 with 19% topline growth for the first quarter. Profitability was also very strong, with operating income up 24%.

With a government fiscal year 2011 appropriation bill complete, we see a healthy outlook for the markets we serve. We are on track to achieve our financial goals for the year, so we are reaffirming our $3 billion revenue guidance, and increasing our net income and earnings per share guidance to reflect strong performance and gain from the sale of our equity stake in NetWitness, a network security product that we developed and then sold in 2006.

Turning to the industry outlook, we finally have an approved 2011 appropriation bill for the Department of Defense that covers expenditures through September 30, 2011, and a continuing resolution that authorizes funding for the remaining government agencies. The Department of Defense and VA Affairs are the only agencies who discretionary appropriation bills are up compared to last year.

The base defense appropriation bill is now $513 billion, which is up about $5 billion from fiscal year 2010 level of $508 billion. Additionally, the DoD has $158 billion of authorization in overseas contingency operations, and $17 billion for military construction for a total of $687 billion in 2011.

Nearly 90% of ManTech's revenues come from this DoD and its related agency bill, which include the intelligence community. It is clear that the defense and national security mission remains to be a priority for the nation. With only five months to obligate 2011 funds, our customers are now rushing to put work under contract. We are working directly with our customers who identify their most important priorities, and we have contractual vehicles with the available ceiling to address these priorities.

Now that the debate has turned to the 2012 budget, President Obama's original 2012 budget request call for a base DOT appropriation of $538 billion, which would reflect a 5% increase, and oversea contingency operation funding of $118 billion.

The President has since proposed cutting $400 billion from defense, spread over the next 12 years. This would essentially keep the base DOT budget flat. It is too early to tell the potential impacts of this plan, but we do not see any scenario in which there is a near-term impact on our business. In fact, Secretary Gates has already indicated that meeting the President's goal would involve major strategic changes involving force structure and weapon systems, and could not begin until 2013.

We have no doubt that the priority areas that ManTech supports such as Cyber C4ISR, will continue to be well-funded. Through this year's process, our customers have learned that they need to take advantage of short windows of opportunity to obtain funds for their missions. The companies that will thrive in this environment will be those who are agile, have sufficient contractual vehicles to reach their key customers, and have a reputation for program execution at a competitive price. This is precisely how I would describe ManTech today.

We have more than 1,000 active contracts so our customers can gain access to us for their assignments quite easily.

Strategy and mergers and acquisitions. Turning to the merger and acquisition question, in mid-February, we acquired TranTech, which gave us a prime position on the $12 billion DISA ENCORE II contract. We expect to leverage ENCORE as well as TranTech's capabilities in network engineering and operations and information insurance, and we expect to drive rapid growth throughout DISA and the Cyber Command, protecting and securing [the] network and information.

Looking forward, acquisitions will continue to be an important part of our growth strategy. We will enhance our national security core as well as look to extending our current discriminators, such as cyber security into adjacent markets. Future acquisitions will diversify our business away from the OCO exposure. We will remain disciplined and insist that acquisitions be accretive immediately. We are optimistic that through the course of this year, we will be able to complete additional acquisitions that position our business in areas of long-term strategic importance. We have the financial capability to do so.

We will reach $3 billion revenue mark this year, and we are charting our course to reach $5 billion over the next several years through robust organic growth and the acquisitions we just described.

Now Kevin will provide details on our financial performance and our forward-looking view.

Thank you, George. The first quarter was a great start of the year. We were able to navigate and push out of awards and stress from the continuing resolution as a result of our positioning on priority programs. Almost all of our key measures were on plan, and we are on track to achieve or exceed all of our financial targets.

Quarterly, revenue of $701 million represented 19% [in] total growth above last year's first quarter revenue of $588 million, with nearly 10% coming organically, even though some customers were elected to begin new work, given budget uncertainties. As was the case in the fourth quarter, organic growth came despite reduced material purchases supporting route clearance and MRAP contracts. Excluding the MRAP programs, organic growth was 16% for the quarter. This growth reflects our ability to capture share in the priority missions and customer markets that we support.

Direct labor grew 22% compared to the first quarter of 2010. [So it] grew more rapidly than revenue. Direct labor brings higher profits, and it also builds more organic capability in past performance qualifications. So we have placed a major focus on growing direct labor. We are growing direct labor even as we are increasing our work as a Prime, which tends to contain more subcontractors and material purchases, so this is a major accomplishment for us.

Breaking down the components of growth, the S3 contract remained a real driver with about $237 million in the quarter, up about $87 million from last year. T4ISR support is a critical area of need with strong funding and we expect to sustain this kind of growth. We will continue to benefit from the $750 million [in] S3 awards from the third quarter of last year, and there is a large and growing pipeline of new opportunities that we expect to be awarded within the next two quarters.

The MRAP and route clearance support contracts contributed $119 million in the quarter, which was down $19 million from the first quarter of 2010. This drop-off was exclusively in material purchases that come at no margin. Direct labor and profit continue to grow on these contracts. We expect the MRAP and our clearance support contracts to generate at least $500 million for the fiscal year.

The government has spent about $17 billion on over 13,000 critical systems that we support under this contract. Simply put, the country will not walk away from its investment, and the missions and needs that they were designed to support will not change. Furthermore, I expect that ManTech will continue to support this effort at significant levels for years to come.

We are enhancing our reputation and capabilities of Prime contracting. For the quarter, 82% of our revenue came as a Prime, which was up from 73% last year and 59% two years ago. With the change in our business mix and the results of the recent acquisitions, as well as some recent contract changes, we saw movement away from time and material contracts towards cost-plus. For the quarter, 60% of revenue came from [T&M] contracts; 26% came from cost-plus contracts; and 14% came from fixed-price contracts.

Operating profit was $55.9 million in the quarter, up 24%. Operating margin was strong at 8%, which is slightly above our forecast for the year based on vigorous cost controls. G&A for the quarter ran at 6.5% of revenue compared to 7.3% for last year's first quarter. Even with our three recent acquisitions, amortization-related depreciation was essentially flat, as the STI depreciation began to ramp down after year one.

We see our competitive cost structure as a key differentiator in today's market, and we are committed to continually improving the efficiency of our indirect infrastructure to the benefit of our customers and our shareholders.

Net interest expense for the quarter increased by $3 million compared to the first quarter of last year as a result of the $200 million of senior notes issued last April. Since issuing the notes, we have used $155 million to complete three accretive acquisitions, and going forward, their returns will offset the incremental interest expense from the debt offering.

Our effective tax rate was 38.7%, which was up slightly above expectations, and up almost a full percentage point compared to last year's first quarter. So our net income for the quarter was $31.9 million, up 16%, which translated into diluted earnings per share of $0.87, up 14%.

Now on to the balance sheet and cash flow statement. Operating cash flow for the quarter was $11 million and days sales outstanding was at 80 days. Our first quarter is historically the most challenging from a cash flow and cash collections perspective for a number of reasons.

This year, cash collections were hampered by the continuing resolution and some one-time contract startups and transitions. With the appropriation bill in place and the startup issues behind us, we still expect to generate about $170 million in operating cash flow and be at our 70 to 80 DSO goal for the year. In fact, so far this quarter, we have collected more than $265 million, or about 44% of what we collected for the entire first quarter, which brings us close to the 70-day run rate.

We have a proven history of generating cash and deploying it successfully on strategic, accretive acquisitions. We have tremendous financial flexibility to continue that growth pattern, with $73 million in cash on hand at the end of March and no borrowings on our $350 million revolving credit facility.

Turning to business development, bookings for the first quarter were [$793 million] for a book to bill ratio of 1.1. The main driver was the $489 million bridge contract for our MRAP and route clearance support. In addition, we received a $78 million classified contract which included $30 million in expanded tasking, and significant extensions on our support for NASA and DHS.

We also received a Department of Justice Information Technology Support Services, or ITSS-4 prime contract. This multiple work contract gives ManTech another vehicle to provide critical information technology and cyber services to the federal law enforcement community. We're encouraged that the customer is open to new approaches, given the number of previous incumbents who did not receive an award. Based on these awards, backlog at the end of the quarter stood at $4.7 billion, which was up 2%, and funded backlog was $1.6 billion, up 13% since the first quarter of last year.

Looking ahead, our total qualified pipeline at the end of the quarter was $27 billion, which was up nearly $2 billion from the end of last year, and the dollar volume of bids outstanding remains steady at $2.6 billion. Moreover, we expect about half of our total pipeline to be awarded during the fiscal year 2011.

Included in the 2011 pipeline is the recompete of our MRAP and route clearance support work. The draft RFP is out and it underscores the importance of this critical program. This will be a five-year award and it calls for consistent levels of labor and OTCs to meet mission requirements. As I said earlier, this program will be significant for the foreseeable future, and we will be proud to continue our support.

Based on the lingering effects of the continuing resolution when customers were holding back RFPs, book to bill may be a bit below our objectives for the second quarter. However, now that they have full budget in place, our government customers are turning to the task of obligating all of the remaining funds within the next 60 to 90 days. Our proposal center is now filled to capacity, and we expect a flood of awards in the third and fourth quarters.

When we look at this potential award flow, it is the direct result of ManTech being much better able to step up and compete effectively on large, complex efforts as a prime contractor than we were just a short time ago. We now have the past performance, infrastructure, contract vehicles, and the mindset we need to compete as a prime in all areas of our business. In certain cases, we will step up and compete against our current prime in order to drive revenue and earnings, be closer to our customers, and better manage budget risks as a prime.

This enhanced competitiveness comes at the same time that we see some customers bundling efforts and some moving work that had been done on a sole source basis by large primes into multiple work contracts, and we will be ready.

On the people front, the first quarter was essentially neutral, as we and our customers work through the continuing resolution process, which kept overall headcount steady. We now have about 1,800 people in theater and most in Afghanistan. As part of the US drawdown in Iraq, we will likely have to move most or all of our 600 people in Iraq over the next year; but, as has been the case over the last nine months, the up tempo in Afghanistan is such that the total in-theater headcount will continue to grow.

During the quarter, we were pleased to bring on Dan Keefe, who will lead strategic initiatives for Lou Addeo and manage relationships between our Technical Services Group and its current customers, potential customers, and strategic partners, and help expand our positioning with the Army beyond logistics and C4ISR to include IT and other areas. Dan brings an outstanding background, retiring as a Brigadier General in the U.S. Army and then serving in key executive positions within our industry.

Within our overall cost envelope, we will invest to hire the critical talent necessary to help us achieve our $5 billion revenue goal, and expand our positioning as a mid-tier government services provider critical to our customers' missions and needs.

Turning now to the forward outlook, we are reaffirming our fiscal year 2011 guidance of revenue of at least $3 billion, and increasing our net income and diluted earnings per share guidance to at least $138 million and at least $3.73 per share, respectively. This is supported by our market position, on-plant performance in the first quarter, and a one-time gain from the NetWitness sale that George alluded to earlier. In April, EMC purchased NetWitness, and based on our equity stake in the company, in the second quarter, we will record a gain of $3.7 million.

ManTech has a history of developing innovative, high-end solutions for our customers, and translating that into a viable security product for government and commercial applications. ManTech has developed and deployed many proven security technologies now being used by the government that may be candidates for future commercial incubation. We will continue to look for opportunities to leverage potential products, while maintaining our focus on cyber services and solutions, and other sophisticated technologies.

In summary, we still expect to meet our targets based on current business and do even better as we layer in accretive acquisitions throughout the year. We now have nearly 90% of our revenue and guidance for 2011 either in backlog or recognized in the first quarter, and we expect robust award activity for the remainder of the year. As we execute on plan, we are also building our presence in growing markets that will endure, regardless of current budget battles or operational tempo in Iraq and Afghanistan.

With that, I'll turn the call back to George.

Thank you, Kevin. In summary, I'm delighted with our ability to continue to grow our Company. Over 43 years, ManTech has seen many different cycles in our industry, and we've seen and gained a lot of experience. Through it all, we have grown our revenue and profit every year and we continue to continue that record. There's bipartisan support for national security, especially in areas in which we focus. I'm extremely proud of the contributions made by our more than 10,000 people every day. They make our success possible.

With that, we're ready to take your questions. And thank you again for joining us.

(Operator Instructions). George Price, BB&T Capital Markets.

Just a couple of questions. First, on the quarter, gross margin, if I'm looking at it right, was down -- I don't know, about 60 bps year-over-year. It seemed in the context of the strong direct labor growth. Can you maybe give some color as to why that was the case?

Sure. Two primary components. First, the acquisition of MCTSC did two things. Number one, is it increased our cost-plus percentage because most of their contracts are cost-plus. But secondly, their costs profile, based on the amount of facilities and other activities supporting direct charge programs, are aligned more cost into the above-the-line expenses and below-the-line. And that drove roughly half of that change.

And the other half was based on first-quarter expenses tend to be a little bit higher as well as margin compression in some of the contracts that we had discussed last year.

Okay. And the second question, just your comment about the new acquisitions and looking to broaden the mix away from OCO, talking about obviously doing additional acquisitions this year -- does that comment, I guess, kind of signal any increased concern about your exposure to the OCO-related work?

No, I don't think so. It's just that we are sensitive to that issue and we keep looking for a broad base of acquisitions. And again, our policy has been we will not buy sales. We need new technology, new people, new customers, and it has to be accretive. And that's our principal approach. Kevin, any comment on that?

No, sir. I think George is right. It's just an overall profile picture. We're very well-positioned and happy with the in-theater work we support, as well.

Okay. And just to be clear, there's -- you don't have any unannounced acquisitions incorporated into the guidance, correct?

That's correct.

Okay. I guess, last question, just -- it's a little early, but can you maybe talk a little bit about incremental traction on the ENCORE II contract from the TranTech acquisition?

This is Lou Addeo. I think the ENCORE acquisition is going along well. We have a fairly robust pipeline, a pipeline that existed when we acquired TranTech. In the next few quarters, we will be looking at adding about 50-plus opportunities to increase the value to between $600 million and $800 million of available and addressable opportunity. We have six -- at least six opportunities in the pipeline right now that we look to close in the near-term.

Okay. Great. Thanks very much.

Brian Kinstlinger, Sidoti & Company.

The first question I had, I think that Kevin may have mentioned that bookings you expected to increase in the third and the fourth quarter. Are we talking about the government fiscal quarter or your fourth quarter?

Our third and fourth quarter. If you recall, last year, third quarter was very heavy and we expect that most on the timing of some procurements as well as the government's push for obligating funds. But there's also a significant amount of activity in our fourth quarter that we expect to occur as well.

I guess I'm just surprised by that, because once the fiscal year is done, I mean, it seems we're going to go through another budget battle, and it seems like the fourth quarter would be when bookings would be seasonally weak again. So I guess I'm trying to reconcile that with what you guys are saying.

The government has an intended procurement cycle based on the current term of contracts and we have to follow that. If there are delays, then it would delay those awards. But at current, the government is still working actively to -- and we're working to respond to requirements that are likely to be adjudicated in the fourth quarter.

Okay. Can you guys also talk about -- you guys mentioned a lot of the recompetes that went through this quarter. Can you talk about the new and expansion work versus recompetes as a total of the bookings?

Yes. For this quarter, about 20% of the work won was for new business.

And on the recompetes side, can you just talk about -- A, pricing, and we've already seen a little bit of the shift away from T&M and towards cost-plus for you. Are you seeing more recompetes move towards cost-plus and away from T&M?

Generally, there is -- continues to be a trend towards cost-plus, but it depends on the actual procurement and the procurement agency. If you look at the increase that we had this quarter in cost-plus, about half of that was related to the MCTSC acquisition; the other half based on movement towards cost-plus environments in customers.

Okay. And the last question I have is on proposals. As you look to the remaining of 2011 and also into 2012, do you expect to be proposing more work? About the same as you proposed in the last year or two? Or less work?

Much more. There's a lot of activity expected in the second half of this year and going into next year, which speaks to the demands for the technical work we do; the typing of procurement; the timing of procurements; as well as our ability to go after larger opportunities based on our scale and maturation today.

Great. Thanks.

Tobey Sommer, SunTrust.

This is Frank in for Tobey. I wanted to talk a little bit about SG&A. Nice job this quarter. Can you talk about maybe the breakdown? How much of that was due to MTCSC? And how much of that was due to SG&A initiatives and where did that come from?

So for MCTSC, I think I mentioned that higher proportion of their indirect profile is above the gross profit line, based on the facility supporting programs and things like that; so much less related to that acquisition. We at ManTech, as I mentioned last quarter, are very focused on making sure we have an efficient organization; being streamlined. And that is the primary driver for the lower G&A rate.

Okay, great. And can you remind us of the percentage of revenue related to cyber-based work? And what you see out there in terms of cyber opportunities and growth?

So cyber is continuing to be about 7% of our revenue. We obviously had a strong growth in the revenues, but it continues to be about the same percentage in terms of opportunities. I'll let Bill Varner speak to that.

Yes, this is Bill. In terms of the revenues that Kevin mentioned, it was about $200 million last year. And we continue to see a strong backlog and pipeline. We're also seeing cyber capabilities being bundled across broader opportunities -- whether they are for battlefield systems, integrated security, or just IT jobs. So we're still seeing the strong prospects for cyber that we saw all along.

Okay. And maybe one quick numbers question -- you may have mentioned it, but the tax rate and share count used in guidance?

Tax rate, 38.5%; share count, 37.

All right, great. Thank you very much.

Joseph Vafi, Jefferies & Company.

Good quarter. Maybe we can just get a little more color here on driving the DL higher even though you're doing more prime work. Is it a function of the fact that the contracts you're winning are relatively -- you have the skill sets to do all of the requirements? Or is there any other things going on, maybe reduced requirements for small businesses or things like that?

This is Lou. I'll take on some of the question regarding direct labor. We've seen direct labor increases in my organization at least above 10% in certain areas. Where we had heavier procurement in the MRAP work in the past, now we're having -- we had had, over the past two quarters, increasing DL, at least [to] 10%. Same token, we have other increases in DL on contracts that we won over the past quarter. So DL has been rising.

Joe, this is Bill. To follow on what Lou said, I think you're absolutely right with one of your earlier comments, that we're seeing more and more of our ability to do more of the work ourselves. We've been undertaking a growth pattern in the Company, and a lot of that means to make sure that we have a lot more of our own skills and capabilities. And I think we're at the point where we're seeing that now.

And I'll close out. Partnerships are still very vital to any teaming and growth of a business, so that's not lessened. And there has not been a lessening in the small-business profile of our customers.

Okay. That's helpful. And then, I know, Kevin, you said that part of the good operating margin here was a function of cost control. Is there -- was that cost control put in place because perhaps the budget impasse could have drug on and maybe you were trying to protect your margin here a little bit? Or was this kind of normal course of business, cost control in the quarter?

If you look broadly -- and I'll go back a few years -- ManTech has tried to mature its systems so that there's more repeatable processes and systems scale. And we're very focused to take advantage of that and continue to focus on that of how we can streamline and automate things. And what you're seeing is a more systemic and long-term view of that. And we hope that will continue to play out.

Okay. And then I know you threw out some DL numbers here and there. I don't know if I caught the number overall for overall DL organic growth. Did you throw that out, Kevin?

DL growth was 22% above last year's first quarter.

All organic? Or --?

I didn't split it.

Okay.

But it's over half organic.

Okay. And then did you throw out the DL growth in route clearance and MRAP?

I did not.

Okay. But I guess you did say that you do expect in-theater headcount will continue to grow, even if we see some drawdown in Iraq as maybe there's more up-tempo in Afghanistan. Maybe provide a little more color on that and why you feel confident that that will continue.

I'll speak to it and then Lou can add. When you look at the overall requirement broadly, the maturation of what we were doing in Iraq will also mature in Afghanistan. We have more C4ISR requirements. We still have systems that are being fielded that require logistic support, and a number of other missions that we do that require our presence. And that's why we have some comfort that, broadly, our labor will continue to grow as well as our revenues for in-theater work.

Do you want to add anything?

Yes, I would just add that we have seen DL growth in Afghanistan. The Iraqi drawdown, which is largely contained with people over to Afghanistan, and the S3 contract vehicle and the C4ISR work is growing consistently across both Iraq and Afghanistan. That's what we've seen in the past two quarters.

All right. Thanks very much, guys.

Edward Caso, Wells Fargo.

With the lower G&A ratio this quarter, is this -- is that sort of the level of gross margin and G&A ratio that we should expect for the rest of the year? And is it -- if I heard right earlier, did you say that operating margin target for this year remains 7.9%?

Yes. So if we look at operating margin, it remains 7.9%; G&A might be slightly higher than this quarter's run but it's going to be in the [6.6 -- 6.7%] range. And the gross profit will -- gross margin will be somewhere in the 14.6% range.

And do you have an attrition number, employee attrition?

Attrition for the quarter was -- I think it was 15%.

Is that voluntary or total?

Voluntary.

And there was some commentary about your new hire focusing you more on IT work versus C4I work. So, I guess, overall the whole Company, how much of it is IT-focused at this point and how much is operation support?

(multiple speakers) Generally, if you look at -- we mentioned that we have about 30% to 35% of our work supporting things that may be in theater like logistics and ISR work. The balance of that is the rest of our business -- IT, cyber systems, engineering being the balance. And when you look at that, it's fairly evenly weighted for the types of work that they have.

Yes, this is Lou. IT is consistent across our business, as Kevin said. We do IT around the world. We do IT with the State Department. The new ENCORE vehicle will have an IT component in it. But like Bill Varner said, IT and the ENCORE contract could look like information assurance; could look like network security. And that ENCORE contract vehicle allows us to position IT across all groups.

Kevin, I think you paid $22 million or $24 million for TranTech. What was the revenue contribution -- which I believe you put in guidance last quarter, but I'm just curious what the contribution is?

Contribution for the year is expected to be somewhere between $15 million, $16 million prior to us taking advantage of the contract vehicle and expanding that.

And that's not an annualized number but the actual -- how much you're going to capture -- I guess 11 months worth or --?

Yes.

Thank you very much.

Bill Loomis, Stifel Nicolaus.

Good quarter. Kevin, just on the $2 million, is that all the NetWitness gain after tax?

Yes.

Okay. And then on the -- so you were talking about gross margin and D&A mix -- last year, we saw gross margin show a pickup at the G&A from first to second quarter and in the second half. Is that pattern going to repeat this year or is it going to be more steady?

I expect it to be more -- well, I'd say it's going to be slightly improved but we're are going to have a higher B&P volume, but it's nothing to be that much higher. It's not going to be as widely swinging as it was last year.

Okay. And then on the MRAP-related business, the $119 million, can you tell us what the operating margin was on that business?

It was consistent with the first three quarters of last year, somewhere around 5%.

Okay. And then with the higher direct labor on the MRAP business, is that going up over the next year on your [$500 million]?

It has -- it increased last year compared to the year before, and I think it will stay somewhere in that range. It could increase a little bit. It's all dependent on the volume of materials, as we said in the past, which is very specific to mission requirements.

Okay. And then on awards, it sounded like you expect some pickup in the June quarter but not much. You're looking for the bulk of it to come in the September quarter. Is that what you're saying? In terms of when you took talked about book and bill being a little bit lighter in June, you're still not seeing a pickup yet and you don't expect to until late in June, maybe?

Yes. I mean, there could be a lot hanging between the June/July timeframe, but clearly, the third quarter is going to have a heavy crest based on obligation of funds, which could slip back into the second quarter as well as the timing of some competitions.

Okay. And then on the pricing, you talked about your efficiencies in cost-cutting and other factors. But can you give us a sense kind of what kind of magnitude are we seeing on pricing pressure? Is it significantly worse than what you saw last year on the recompetes, a year from now -- you know, a year ago? And is it getting significantly worse? Or is it moderately so? Any way to characterize that for us?

I think it depends on the customer set, the opportunity set, and the demand for the skills, just as normal with procurements. Certain areas, it's more competitive; in others, like cyber, I think that it's more who can provide the right services to meet the mission requirements. So again, it depends on the area that we support.

Okay. And what's the final status on the global property contract?

We continue to support that while it's under adjudication with the government.

So it's under renewed adjudication?

Yes, sir.

And when do you expect a resolution there?

Probably the third quarter.

Okay. Thank you.

Michael Lewis, Lazard Capital Markets.

Kevin, what is your internal plan on bookings for fiscal year '11?

We generally don't communicate what our internal plans. What we would do is we have an objective across the Company to have a 1.2 to 1.3 book to bill. And it could slightly exceed that, depending on the timing of recompetes. But broadly, ManTech wants to have a 1.2 to 1.3 times goal so that we continue to have double-digit organic growth.

Got you. Okay. And just to shift gears here for a second, on Vanguard, I think you have a sub-roll there. What are your expectations nearer-term on this contract? I was wondering if you anticipate being a major sub on that, on any new work coming out of that vehicle?

A lot of the work in the growth profile in that is subject to the realignment of tasking under prime's award, based on the fact that they took the current incumbent and rolled them onto the team. So that action certainly disrupted the potential upside of all the other participating subcontractors, and we're evaluating that.

Okay. And then just one final question -- if we back out the February 7 countermine order, did bookings in the quarter meet your plan or did it fall a little bit short?

Bookings in the quarter were slightly below what we wanted, but for the quarter specifically, we were expecting some slowness in the CR and we're not surprised by the outcome.

So can you quantify the extent or the amount of that shortfall?

No. I mean, we look at the proposals that we have outstanding at $2.6 billion and we look at the timing of adjudication. It's hard to say that but for, we would have this. It's better for us to look holistically at the entire opportunity set for the year.

Okay. That's fair. And just so I'm clear, you expect a little bit of weakness in the second quarter on bookings, but acceleration through third and fourth quarter -- that's correct?

That's correct.

Thank you, sir. Have a good day.

Mark Jordan, Noble Financial.

A question I have in terms of liquidity that you would, like, need to maintain when you're thinking about your M&A program. Specifically, you've got cash at $73 million. If you look at your DSOs and had it at 70 days versus 80 days, you would have freed up about $77 million in cash. And you have your bank lines, obviously.

My question, Kevin, when you're looking at deploying cash, what kind of buffer do you feel you need in terms of DSO movement? Or do you feel that this was really an anomaly here in the first quarter?

Generally, we have targeted about a $75 million cushion. Obviously, we'll have to expand that a little bit because of anomalies you have to plan for. But one of the primary drivers of this change was the bundling of what was three contracts into one for that route clearance work, and the fact that we have a much larger set of data that we have to provide under a new contract to get through the review process. And we're working with the customers on that. I think you see that as a one-time thing, given the size and scale of that program.

Okay. The MRAP or mine clearance programs that you mentioned were up for recompete. What is the timing do you expect of that decision? I think you mentioned it was a five-year contract. And what's the value for that? And is it broken down between direct labor and material?

Yes, this is Lou. I can give you the schedule. Right now the draft is out. The RFP will come out around June 7, according to the schedule. We expect an award in November. And we would expect that this could be a -- it is published as such, a multi-year contract, up to five years.

Okay. And again, is the material pass-through and the labor separated? Or is one? And is there a gross amount that's estimated for the ceiling?

The customer doesn't have a gross amount, and they do have information for material and labor components, but we can't give you the details.

Okay. Final question, just with the transition from Gates to Panetta at DoD, do you see any change in terms of how the DoD is going to be run or any comments as to what that change of leadership might be?

We're hoping the names that have been put forth are indeed the candidates. If it is Mr. Panetta and the others that have been mentioned today and the last couple of days, it would be outstanding, because they're very knowledgeable. They wouldn't require any time to come up to speed. And we see it as very positive and hope that it's correct.

Okay. Thank you very much.

Peter Arment, Gleacher and Company.

A lot of my questions have been answered but, Kevin, where is total headcount right now?

Total headcount at the end of the first quarter was at 10,300.

And what did you say -- you said 1,600 in Afghanistan, I think was correct? What was in Iraq?

It was 1,800 between Iraq and Afghanistan combined.

Okay. Maybe this is just more of a big picture question, but where did you peak out in Iraq? And what was the process you went through in terms of transitioning that workforce, either back, stateside, or into Afghanistan? Maybe just so I could have a better understanding of that, because this certainly is a large number that you're supporting in Afghanistan.

I don't know if we'd call it a peak, but I don't know. But we have close to 600 people in Iraq right now -- people who went from Iraq to Afghanistan. There's been no change relative to having to take them over into the stateside. However, if we do take them to stateside, we have programs within the US.

Okay, that you can transition to? And I guess just on the S3, Kevin, that was $237 million. You said that you thought would be sustainable throughout the year?

It will likely exceed that throughout the year.

(multiple speakers) Kevin said it's the kind of growth that we've been seeing on that program will continue.

Okay, the growth that you've been seeing.

Right.

Okay. Excellent. Nice quarter, thank you.

George Price, BB&T Capital Markets.

Just had a couple of follow-ups. Just on the acquisition front, can you give revenue contributions in the quarter for kinetic and MTCSC?

Rough order I think the acquisitions contributed $35 million in terms of revenue.

That's combined?

Combined.

Okay. And -- okay, great. Thank you.

Brian Kinstlinger, Sidoti & Company.

Just one follow-up. When taking a look at the total backlog, I think it went down $200 million despite a book to bill of better than 1, and you had an acquisition. Part of that brought on marginal backlog as well. So was there anything major that got pulled out of backlog in the March quarter?

Yes, when you look at the bundling of existing contracts to the TACOM Bridge, there was excess capacity on the prior contracts that were not going to be burnt, so it had to be reduced. And if we look at other programs, it may have a period through 2013 or 2014. Some of the view is that the competition of those is going to be moved up, and therefore, the out-year burn on those is less likely to occur. And that was the adjustment.

On the TACOM piece, does that in any way, shape, or form change how you feel about 2011 and 2012? Or is that also all in later years?

No. It's only -- it has nothing to do with the burn rate or requirements. It all had to do with having three contracts with additional capacity that aren't going to be used up.

Okay. Thank you.

Michael Lewis, Lazard Capital Markets.

Thanks for taking the follow-up. Kevin, when did -- what was the level of employees that peaked in Iraq and what year was that?

I don't recall the specific numbers in Iraq; we'd have to go back. What I'd say is that it was likely in 2008, but there's been a fairly consistent set of requirements for the last year. But we'll look at that.

Okay. But where I'm going with this is I'm wondering about utilization. Is the utilization on overseas staff higher than your core domestic-based staff?

The utilization tends to be higher, yes.

Okay. Is it materially higher? Or is it just a few points higher?

It depends on the location and the type of person. And some of the work the utilization will be a few points higher; in others, it won't be. (multiple speakers) Again that's demand-driven based on customer requirements.

Okay. Thank you so much.

Bill Loomis, Stifel Nicolaus.

Just a quick follow-up on the acquisition question. The $35 million, Kevin, did that just include MTCSC and Connectix?

The TranTech acquisition is fairly small for the quarter, so it would have included the TranTech component as well.

But you still had some partial contribution from STI, right?

Yes, I didn't include that.

Oh, okay.

Sorry.

Got it. Thank you.

Okay. I was thinking of the more recent ones.

And ladies and gentlemen, at this time, we have no further questions in our queue. Perhaps we'll offer one last opportunity. (Operator Instructions).

And we have no one signaling for questions. I'll turn the call back to our speakers for any closing remarks they may have.

Ruthie, thank you. I appreciate everyone's interest in the Company and participation on today's call. On behalf of the team, I want to thank you all for your interest in ManTech, and we hope to see you out on the road in May and beyond.

Gentlemen, this does conclude our conference. We appreciate your participation.