ManTech International Corp (MANT) 2013 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the ManTech International Corporation third-quarter fiscal year 2013 conference call.

(Operator Instructions)

As a reminder, today's conference is being recorded.

I would now like to [turn the] conference call to Mr. Stuart Davis. You may begin.

Thank you, Kevin, and welcome, everyone.

On today's call we have George Pedersen, Chairman and CEO; Kevin Phillips, Executive Vice President and CFO; and Bill Varner and Dan Keefe, our two Group Presidents. In addition, Lou Addeo, Executive Vice President for Corporate Development and Strategic Acquisitions, will join us for the Q&A session.

During this call we will make statements that do not address historical facts and thus are forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to factors that could cause actual results to differ materially from anticipated results. For a full discussion of these factors and other risks and uncertainties, please refer to the section entitled risk factors in our latest Form 10-K and our other SEC filings. We undertake no obligation to update any of the forward-looking statements made on this call.

Now I would like to turn the call over to George.

Good afternoon and thank you for participating in today's call.

The third quarter of 2013 was highlighted by improved bookings, especially in our growing cyber and intelligence business, and also outstanding cash collection. Cash flow from operations was $77 million for the quarter, $166 million year to date. As a result, we ended the quarter with $259 million in cash, a record for us. This cash balance is a tremendous asset in today's uncertain market.

After a 16-day shutdown, the Government is now operating under a continuing resolution which will keep spending at last year's level until a January 15, 2014, before the next round of sequestration cuts kick in. As a part of the agreement to end the shutdown, a special committee is looking for ways to avoid the scheduled cuts of defense budget.

Whatever the outcome, I am encouraged that all parties seem to realize that the shutdown was pointless and that all of the uncertainty has been detrimental to the economy. I'm hopeful that the Congress can set a level of long-term spending that provides the certainty that our customers need to begin issuing new procurements again. I'm confident that once they do, ManTech will return to a growth posture through organic means and to employing our strong balance sheet for acquisitions.

Now Kevin will provide you with details of our financial performance and outlook. Kevin.

Thank you, George.

Revenues for the third quarter were $567 million, compared to $645 million in the third quarter of last year. This difference is mostly explained by the MRAP S3 contracts. The MRAP family of vehicle support work contributed $105 million in the quarter, down $45 million year over year and $36 million from the second quarter.

S3 revenues were $135 million in the quarter, unchanged from last quarter, and down $21 million year over year. All told, OCO revenues were $147 million for the quarter, which is down $42 million year over year and $39 million from the second quarter. In contrast, our primary strategic thrusts of cyber, intelligence and healthcare grew compared to last year and last quarter.

As a percentage of revenues, direct labor including applicable fringe and overhead increased compared to the third quarter of last year. Prime contractor work remained steady at 91% of revenue for the quarter. There were only minor shifts among the contract type compared to the second quarter, the cost plus contracts at 74%, time and material contracts at 10% and fixed price contracts at 16%.

Operating profit was $32 million in the quarter. This translates into an operating margin of 5.6%, which was a bit below our expectations as a result of three primary factors. First, investments in our commercial cyber business reduced operating profit by $2.1 million which was about $700,000 more than the second quarter.

Second, award fee determinations totaling $1 million originally scheduled in the third quarter were pushed out in the fourth quarter and possibly the first quarter of next year. Third, G&A as a percentage of revenue is down 50 basis points from the year ago, but up 20 basis points from last quarter. Though G&A is down $1.6 million in absolute terms compared to the second quarter, we are still taking out indirect structure to match declines in revenue base for the OCO drawdown.

We had two offsetting factors below operating income that generated inline net income of $17.7 million and diluted earnings per share of $0.48. We incurred $750,000 in bid and proposal expense from a populated joint venture with (inaudible). These expenses reflect our share of the extensive BMP efforts this year as we began to pursue large base operations contracts on the EAGLE Basic Ordering Agreement with the Army. Also the effective tax rate was 35.2% which is down 180 basis points from the third quarter of 2012. Rising stock market pushed returns higher on certain retirement plans, which created tax credits and we also benefited from a one-time return to provision adjustment for 2012 [expense -- technical difficulties]. These -- each of these items offset at $0.02 impacts.

Now on to the balance sheet and cash flow statement. DSOs ticked up slightly at 78 days. Our operating cash flow for the quarter remained strong at $77 million, or more than four times net income. The government services business in general and ManTech in particular consistently generate strong cash flows. Year to date we have generated $166 million in operating cash flow, or 2.8 times net income. With capital expenditures of $4 million, free cash flow with $73 million. Capital expenditures were a bit higher than normal for the quarter as we build out a new office in Denver to capitalize on the market there.

On the financing side, we paid $8 million in dividends, and the Board has authorized a $0.21 per share dividend to be paid in December, which will make a total of $0.84 over the course of the year. All told, we grew our cash and equivalence balance by $65 million in the quarter to end at $259 million, which is a record quarter ending balance for us. Our strong and steady cash flows enable us to support organic growth, diversifying acquisitions and our ongoing dividend program. We view our strong balance sheet as an essential asset in this period of uncertain funding.

On to business development. Bookings for the third quarter were $647 million, or a book-to-bill ratio of 1.1 times, with more than half of the awards for new or expanded work. New business awards were especially strong in cyber and intelligence with a book-to-bill ratio of 2.3 times, again mostly for new or expanded work. With a book-to-bill above 1 time, backlog was up slightly from last quarter ending at $5.4 billion and funded backlog was $1.2 billion.

At the end of the quarter, we had a total qualified pipeline of $25 billion, of which $3 billion is submitted and awaiting adjudication. Since the last quarter we have won prime positions on several large and definite delivery and definite quantity contract, including a key cyber program with the Department of Homeland Security and another of the Pillars contracts with the Navy Space and Warfare Center.

Turning to the forward outlook. The MRAP drawdown has proceeded according to the customer's plan. While we are adjusting the guidance that we gave on the last call based on three unanticipated factors. The first factor is the Government shutdown. At peak levels we had more than 1200 employees unable to charge their contracts in the fourth quarter as a result of the shutdown. Many intelligence customers who had previously been immune to furloughs or shutdowns were closed the entire 16-day period, temporarily ceasing their sensitive missions.

The second factor is the continued slow down in awards and startups on awards due to the shutdown. There were some rush to obligate year end funds and procurements but not at the same volume as in previous years. Awards have been slow so far in the fourth quarter as the shutdown has exacerbated delays in RFPs and contract awards. The third factor is the overturn of a previously awarded contract on S3. The $180 million award supporting OCO requirements that we discussed on the last call was reawarded to the incumbent after their successful protest.

Our fourth quarter also reflects the impacts of the currently planned OCO drawdown on our CLSS program. As a result, we now expect to achieve revenue of $2.35 billion, net income of $75.5 million and diluted earnings per share of $2.03. There's still too much uncertainty to give 2014 guidance. That said, fourth quarter of 2013 should provide a reasonable baseline heading into the first quarter of next year.

We anticipate incremental declines in our OCO business in 2014, but we see significant opportunities in many of our business segments. We await greater clarity from the next round of budget talks and movement on awards by our customers. Now our Presidents will speak to the performance and outlook for our two operating groups.

Dan.

Good afternoon.

Within the Technical Service group, our focus is on managing the OCO drawdown and positioning for growth in other sectors. On the OCO front, by the end of November we will have just under 900 people on the CLSS program and we expect further reductions throughout 2014, but the customer is still refining 2014 requirements. Our S3 customer has been primarily extending work, so new awards have been slow but we expect a large number of adjudications in 2014. We are continually working our indirect structure in response to the OCO drawdown.

On the growth side, earlier this month we won a prime position on the final Pillars award out of Navy SPAWAR covering transport and computing infrastructure. This is our second major Pillars award, and we look forward to growing our presence in SPAWAR, especially in key areas such as mobile and cloud computing, networks and data centers. This continues to increase our Navy portfolio as the nation's military strategy turns its focus to the Pacific. In addition, our strategic direction is focused on increasing our presence in DHS, Fed civ and health, especially around IT.

Bill.

Thanks, Dan.

As Kevin indicated, our cyber and intelligence business continues to grow and we continue to win new business, which augers well for future expansion. In fact, our September bookings were the strongest one-month total since we won the AMBIANCE program two years ago. Unfortunately, I cannot disclose much about our recent wins, but we will be expanding our cyber and systems integration work for the intelligence community.

In addition, we were a successful bidder for the $6 billion continuous monitoring as a service, or CMaaS, multiple award ID/IQ program to provide continuous monitoring and diagnostics capabilities to bolster civilian agency's cyber defenses. Through this program, the Department of Homeland Security will implement a common set of technical tools that can help federal agencies detect network anomalies in realtime. There is a lot of activity within the cyber and intelligence market. Our group's largest customer, the National Security Agency, will undergo a significant leadership change as General Alexander and his deputy will both leave in the next few months.

Congress will continue to debate the ability of NSA to collect bulk meta data on phone calls and e-mails of American citizens. Also, the Senate is working on their version of a Cyber Information Sharing Bill that will largely mirror the House's version that passed last spring. We will continue to monitor these activities, but I expect that the cyber and intelligence markets will continue to be strong and that ManTech will be a leader in these markets.

George.

In closing, I want to acknowledge the contributions of our long-time Board of Directors members, Admiral Dave Jeremiah who passed away earlier this month. Admiral Jeremiah served on ManTech's Advisory Board from 1994 to 2004 and then on our Board of Directors. He brought broad and deep leadership experience to our Board having served as Vice Chairman of the Joint Chiefs of Staff and at the highest level of private industry on numerous other boards. Dave was a world-class person who served both ManTech and our nation admirably.

At ManTech we are fortunate to have such high caliber Board members and we use him as one example. All the others have the same level of quality and knowledge to guide us as we grow. This will continue. They will all continue to challenge and guide us going forward and their counsel is invaluable and we welcome it.

With that, we are ready for your questions.

(Operator Instructions)

Tobey Sommer, SunTrust.

Hi this is Frank in for Toby. Quick question in your prepared remarks and your press release you talk about the liquidity there, the $500 million revolving credit facility and the other cash flow that you've been generating. Can you talk a little about your priorities regarding the use of that cash going forward?

We continue to focus on organic growth, acquisitive growth and our current dividend program. We will continue to focus on M&A as one of our priority use of the cash.

Okay. And then you also --

We have been somewhat reluctant over the past number of months to pursue on as aggressive acquisition program until we saw the outcome of the Congress' meetings and determination. We are now -- we now believe that the Congress will get its house in order, and we are not as reluctant at this point in time to pursue aggressive acquisitions and some of them quite large.

Okay. Great, that's helpful color. And then you highlight the awards in cyber and intelligence, can you give us a break down of the existing versus new work there?

Yes, yes, we can. This is Bill. Some of the awards were recompetitions. Some of them were new work. It's -- I'm not sure I have right off the top of my head the ratio, the exact ratio of new to recompetitions. And in one program we had a very nice ceiling extension. But it was a very, very nice September for us in terms of the cyber and intelligence community awards.

This is Kevin, a little over 50% of the awards were for new business both across the Company and within the cyber and intel business.

The largest single piece of that was in the intel awards was a large extension to existing work, but that increased the scope, and we count that as new work.

Okay, great. And then regarding the shutdown, if you could give us any size or kind of areas affected. What were the type of functions? Was it people working at customer sites, was it people on specific projects? Any color you can give us more than the 1200 employees that you gave on the call.

This is Kevin, I'll quantify it and then Bill and Dan can speak to customers. Roughly $15 million top line impact based on the time frame in excess of $2 million bottom line, probably closer to $2.5 million, just based on the type of work and uncertainty about level recovery in some cases. In addition to that, in the third quarter, we did have some impact from furloughs. And I don't want to discount that as well, because it's been started in the smaller level in Q3, but it had full impact in Q4 as the Government had to go through the decision-making process of sending people home. Dan, both of you guys want to speak to --

Yes, in TSG's area, anything that was really mission essential like none of our overseas work or direct support to forces was impacted. We saw a significant impact in our test and evaluation community.

And this is Bill, in MCIS we noted that it was almost exclusively the people who work in customer sites who were affected by the furloughs. It was only in rare cases was it people who work in ManTech spaces.

All right. Great, thank you very much.

Bill Loomis, Stifel Nicolaus.

How much was the cyber and intelligence work in the quarter?

It's consistent with a run rate we've provided before, running at about $750 million annually.

Okay. And then since the -- it's becoming a bigger percent of revenue and increasingly so, why not break that out? I mean that's obviously a key part of the story, and we'll be able to track it over time. Because you're giving the book-to-bill for that type of work. I think -- certainly I think it would be helpful to have the revenues, so both a comment and a question in there. And one other question on the DHS, continuous monitoring contract. Have you seen task orders on that and it could be -- how do you expect the level of activity to flow from that over the next year?

Yes, Bill, this is Bill. We have just seen indications of the very first task order being released, and as always, we will evaluate each and every task order. Our hope was that would be that we would bid every single one, but in reality that might not happen. The Government has not really given us -- well, they haven't given us a schedule for the release of future task orders, but they have indicated that they are expecting a full menu of task orders to be released under the program. So we're just -- we're ready. We're eager to see the task orders, and as I said, the first one we think is on the verge of being released.

Okay. And that's -- is the individual agencies, are they doing their own RFPs through that or is the DHS doing it for them?

The answer to that is both, individual agencies are permitted and encouraged to use the vehicle. We also expect a lot of work from DHS itself.

Okay. Thank you.

George Price, BB&T Capital Markets.

First thing I wanted to ask, going back to the balance sheet, you know, you made the comment that you look at the strong balance sheet as a competitive asset in the uncertain times. And clearly you have by far the lowest leverage I think of the larger public government services companies, but you still have very well regarded and still fairly successful competitors who have much higher leverage and have used that not only for M&A but also share repurchases and dividends. And I suspect there are a number of investors looking at this issue with ManTech, yet the liquidity has not been used that way. And I'm wondering do you think George, do you see that changing and how quickly would you see that changing?

I do see it changing because we have confidence once again that the Congress will address the appropriations issues in a meaningful way. For the past 1.5 years, we have been reluctant. We had a number of transactions that we were ready to negotiate, indeed we were negotiating, but we were reluctant to go forward until we saw that the appropriation process was in place and that the programs that we were expecting to use on our acquisitions would be funded. We are now comfortable again in that market, and we're back in. And I think you know that in addition to the $250 million in cash, we have a $500 million line of credit with Bank of America. So we are well positioned to grow, and I think we've got that comfort back again.

I guess to follow up on that specifically, your comments suggest that that liquidity is predominantly going to be used for M&A. Is that fair or do you anticipate other capital deployment beyond the current dividend that you have?

The dividend has not been addressed at this point in time. Kevin, what are the other issues we would look at?

So will we will continue to primarily use it for M&A. We'll consider and continue evaluate dividend options but those are the primary uses. The M&A is the primary use.

Okay. Would further uses, George, the sequester remaining in place despite the fact that obviously there's a lot of people that don't like it, if we continue to have more CRs take us through GFY 2014, if there's more issue around the debt ceiling. What of those things would change your mind and perhaps make you maybe go back to being a little bit more reluctant to use the cash?

Part of my comfort factor is in recent conversations over the past month with members of Congress, particularly members of the appropriation committee, I come away with a feeling they had resolved those issues. They're not going to let it happen again. I'm not telling you, there won't be the normal political squabbles, but we're back to what the world was like two years ago.

Okay. And if I could switch over to cyber and intel, what do you see -- I guess, what do you see that business growing on a year over year basis next quarter in the first quarter, which I believe is when the AMBIANCE contract ran anniversaries and -- but correct me if I'm wrong. And I'm -- I'd also like to ask what you see as maybe a more normalized growth rate for that business and market going forward perhaps in 2014?

We -- well, first of all, to address part of your question, we are right now at the second year AMBIANCE anniversary. So we've -- I think we've made great progress ramping the program to where we needed it and wanted it to be. And of course it's a seven-year award, so we're in good shape to continue out the rest of the year. The Government is -- has moved a lot of integration and what I would call sustainment work from other contractors into AMBIANCE. So that's been very good for us, and that work will continue. That's not part of any temporary ramp. When we won the program, the idea is that we would performed all sustainment work for that customer, and it's moving rapidly in that direction. So I do believe that the cyber and intelligence future looks excellent for us.

And it's Kevin, I'll add that we will see growth in that area in Q4 over Q3, based on our visibility. The Q1 comp for next year I know is difficult. I think we'll have to wait and see how the Government wants to align its material and ODC purchases to the mission versus the services. We are seeing an increase in a lot of requirements to matter of the timing against that one specific quarter search.

We will, George, have double-digit growth in cyber and intel for FY 2013. We're not providing guidance, but FY 2014 looks like growth as well on that business because we've had very strong bookings throughout the year in cyber and intelligence. But we're not -- it's too soon to put a number on that growth range.

Just to clarify one thing, Kevin, I think you said growth in cyber and intel in the fourth quarter versus the third quarter, what about year over year? And I guess what I'm getting to is I'm trying to think about it less so as the ramp up in AMBIANCE came with -- I know some of that was material and other ODCs, but obviously you had very strong growth earlier in the year and that's trailed off and I'm trying to get to a more normalized level. Do you see it growing year over year in the fourth quarter?

Yes.

Okay. Can you -- do you have any -- even a range or a qualitative level that you think is reasonable to think about?

It will be in the range of a few percent of 10% growth. So it'll be roughly 10%, maybe a little bit less than that.

Okay. All right, great. Thank you very much for the time.

Robert Spingarn, Credit Suisse.

Wanted to ask -- Kevin I want to go back to your comments on your guidance and clarify a couple of things. First the S3 award reversal, does that -- are you saying that your orders of $647 would have been higher than that, or you're talking about this from a revenue perspective?

We had revenue that we expected based on that award that impacts our numbers between $20 million and $25 million, and we had -- because we had won it and it would have increased bookings as well had we been successful on the protest.

Okay. So there's a negative $180 million in that number.

We didn't recognize it in Q3 because of the protest.

Okay. I'm trying to figure out what the implied bookings might have been had you had that there. It would have been closer to some of the peer numbers is where I'm headed.

It would have been the $647 million plus $180 million if that had sustained.

Right so that would have been almost [1.5] which would have made -- more consistent with some of the other numbers we've seen. Okay. And then the other thing I wanted to talk about was on the -- you mentioned G&A had risen as a percentage of sales slightly on a sequential basis. Of course it's down a little bit on an absolute basis. How should we think about that in Q4?

It will be roughly the same dollars declining a little bit and a greater level of decline going into next year.

Okay. All right, that's very helpful. And the other thing I wanted to ask you about, you talked about the booking climate since the end of the quarter. It sounds like it's still soft. Could you give us a little more color on that, what you're really seeing in realtime right now?

I'll speak generally and then let folks add in. So we've got a large number of proposals outstanding based on furloughs in the third quarter and the shutdown, there really have not been a lot of people available to adjudicate awards. And there's also been a slowdown as a result of the Government furloughs of people submitting RFPs to folks like ourselves to respond to. So we're dealing with both of that right now and I think how quickly the Government gets back up to starting to work through its backlog on the proposal requirements is how we'll gauge how quickly it will get back to normal.

And one of the things I'm noticing is when we look at the award data from DoD, and I understand it's not a perfect comparison, but I think awards were plus or minus 1%, September quarter versus September quarter. Obviously a very different story here. Is there -- other than the $180 million we've already talked about, is there anything else we should be considering?

I think that there's less obviously less OCO requirement and that's going to temper the compare for that piece of our business, but there's nothing else I think.

Okay. All right. Well, thank you very much.

And as we talked about, a lot of the S3 awards that typically get done in the third quarter were extended and so that certainly tempers with the bookings numbers.

Okay. Thank you.

Gautam Khanna, Cowen and Company.

Kevin, maybe you said this, but what are your expectations now for the CLSS route clearance type work this year and do you have a guess on where it shakes out next year?

Well, it's obviously continuing to decline as we go into the fourth quarter. I think we mentioned $104 million for this quarter, and it's going to decline to between $50 million and $60 million in the fourth quarter, and that's in the total guidance (inaudible). So I expect it'll exit this year at that level. The ODC is obviously declined in 2014. I'll let Dan speak to that, but right now it's -- the fourth quarter level is what we expect until they make other decisions that Dan can speak to.

Yes, and the answers depends in part on how the US ends up with the Status of Force Agreement and long-term presence in Afghanistan. And even if we pulled out completely, there will be MRAPs in the active iron brigades that will be maintained on our CLSS contract and there's certainly potential support work that would follow foreign military sales of MRAPs and pre positioning MRAPs at various sites. Also logistics and maintenance support of sensor equipment under the S3 contract will continue at some level.

Yes and maybe you could speak to that a little more. In the past you've mentioned the labor tends to be a little more enduring and as we look at the sequential decline Q2 to Q3 and then as we look to Q4, how is the labor changing relative to that overall top line decline?

The -- I would say the labor has definitely gone down less. Where we've seen the reduction in the top line is on procurement side of ODCs.

Yes, but Q2 to Q3 both declined based on the MRAP support. The other components being (inaudible) clearance do have more enduring requirements which is why there's -- we'll have to evaluate customer requirements for 2014 to know how that works through that year.

Okay. Also, on your bid opportunity pipeline at $25 billion, I think it's been around that level for about a year. Can you talk about how the mix within that may have shifted? Is it more takeaway type opportunities now versus new program starts? And if so, can you help us size how much has shifted in that pipeline to take away opportunities versus just new business altogether?

I'll go one step beyond or ahead of that first. I think that the overall mix of opportunities still continue to be stronger in the cyber and intelligence community business. So if you look at within the $25 billion, we're seeing an increase overall or at least no decrease in the components of the cyber and intel space. And obviously there are more takeaways in those numbers than new business just because of the limits on new starts. Don't know if you guys want to add to that?

Kevin is absolutely right. One way to look at this is that even business that we consider new business, it's generally a takeaway from somebody. So depending on how you quantify that, there are a lot of takeaways in the pipeline these days. But I think the pipeline is very strong. We have a lot of significantly large opportunities that we're in capture mode on right now.

Okay. And maybe could you remind us what percentage of your sales are up for recompete next year? And do you think the traditional metric of 90% or better in terms of recompete win rates is realistic as you move forward, and if not, what do you think actually is more realistic? And I -- please feel free to segment it by end markets or however you see fit.

So the recompete mix for next year is fairly normal for the cyber and intelligence business, normal being in the 20% band. It's going to be higher than that within the other businesses because of the timing of these S3 competitions unless they get extended again, which tends to be a pattern. So that'll be closer to a 30% mark unless things get pushed out.

Okay. And in terms of what's realistic today in terms of recompete win rates? Do you think of 90% as still the norm for you guys or --?

I think in the market 90% is more challenging because the move towards contracting [offices] is making determinations and everybody is going to see that. But that is also providing more opportunity and potential return on the takeaway in new business for the same reason. So I would say it mixes out that our overall win rate on average is holding fairly steady, but it may change in the mix a little bit from recompete to new work. And we're doing a lot more new work activity as well.

All right. Thank you very much, guys.

Edward Caso, Wells Fargo.

I wanted to get some clarity on how much work you do for the intelligence agencies directly as opposed to intel work. One of your competitors mentioned that the intel agencies now are facing some of the funding crunch and reacting with more intense price pressure on a delayed basis relative to some other defense and civilian agency peers. So the question is what's your exposure and are you seeing that as well?

Well, Ed, this is Bill. First of all to address your second question, indeed the market in the intelligence community is more competitive than it has been. On the other hand we've been seeing that for a couple of years now, so it's not like anything has changed overnight. There has been the kind of competitive pressure we see today for the last couple of years. And the business that we refer to as intelligence, it really is business for the intelligence community for all the various agencies as well as the military intelligence agencies.

So I think Kevin earlier mentioned $750 million per cyber and intel, so it's some number less than that?

Yes. Yes, it is.

Great. Thank you.

George Price, BB&T Capital Markets.

I wanted to go back to MRAP a little bit and go back to your comments on MRAP. And I'm sure you're aware there's been press over the past several months about MRAPs, particularly the -- what sounds like a pretty extensive demilling effort going on in theater. Like two-thirds of the fleet ultimately is -- they're going to target or thereabouts targeting demilling if they don't sell them to anybody else but nobody wants to go in and actually get them, it's too hard.

So a couple of questions around that. Number one, is ManTech involved in any material way in the demilling effort? And two, related to that, as you look forward to next year because in some of your comments you mentioned the MRAP revenue level. Even just extending that on a slight decline as you go through 2014, that could end up being a headwind in the hundreds of millions. And I'm curious what your thoughts are in terms of how you're going to tackle that.

With respect to the demill, we're not involved in a material way. And yes they are being demilled, but remember the services requirements is still close to 10,000 of these vehicles that will remain in the fleet across all the services.

There has to be a headwind. I mean obviously it's a lower margin business, there's going to continue to be requirements on that for the types of work we still do today using the recently awarded, but protested, contract that we had. That's an example of takeaways in ISR arena that can help, and clearly we see a lot of opportunity in the other pieces of our business to grow organically.

Thank you.

And I'm not showing any further questions at this time.

Okay. Kevin given that there are no questions, I think we'll conclude the call and thank for your help on this call. As usual members of our Senior team will be available for follow-up questions. And thank you all for your participation on today's call and your interest in ManTech.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.