NCI revenue guidance signals tough path to growth in 2017

NCI Inc. issued revenue guidance Wednesday that suggests this year may not be one of noticeable growth for the government technology services contractor.

The company reported a 3.2-percent decline to $322.4 million in sales last year and its top-line forecast for this year shows a range of $311 million to $335 million with the midpoint at $323 million.

Wall Street analysts expected NCI’s 2017 revenue guidance at a midpoint of $329.5 million. Last year’s revenue also fell slightly below the Street’s forecast of $323.2 million. As NCI struggles to find revenue growth, it also is dealing with the aftermath of its controller's alleged embezzlement of $19.6 million.

NCI’s organic growth challenges have led recently-appointed CEO Paul Dillahay to prioritize the company’s pipeline with a new focus on fewer and larger opportunities, he told investors in the company’s fourth quarter earnings call Wednesday.

Dillahay joined NCI in joined NCI in October and is a 15-year industry veteran who previously served as an executive vice president at CACI International and is also a former CEO of ASRC Federal.

He told analysts the company plans to pursue 70 contracts worth $1.7 billion combined this year versus the 90 bids at $1 billion total last year.

“We are actively pursuing proposals where we can integrate our agile software development in (operations and maintenance) with our network modernization capabilities and we are concentrating on expanding our agile capabilities into other DHS components,” Dillahay added.

NCI reported no debt on its balance sheet as of last year’s end with $13.4 million in free cash flow. Additionally, the company has access to a $50 million revolving credit facility. Those metrics led one analyst to ask NCI about plans for an acquisition.

“We will continue to look at M&A (and) hopefully with the right opportunity and the right rigor and process, make an acquisition at the appropriate time,” Dillahay said.

Part of NCI’s organic growth and pipeline focus includes the appointment of three-decade industry veteran Bridget Medeiros in December to senior vice president of business development. Her career includes more BD leadership roles at CACI International, ASRC Federal and Lockheed Martin.

Medeiros said in the call she focused on efforts to build NCI’s “capture and technology expertise” to pursue larger contracts in her first couple of months at the company. She joined NCI in December.

President Donald Trump’s proposal to increase defense spending 3 percent in fiscal year 2018 bodes for “improving budgets for our addressable markets,” Dillahay said.

NCI’s defense and intelligence portfolio grew 3 percent year-over-year to 63 percent for 2016. Civilian work represented 37 percent of revenue last year.

Dillahay said the Trump administration’s focus on expanded force structures and technology modernization “plays directly into our core capabilities in contract vehicles.”

NCI’s two major contracts with the Army – PEO Soldier and Cyber Network Operations and Security Support – represented 27.7 percent of combined revenue last year. The PEO Soldier vehicle for engineering and logistics services accounted for 16.2 percent with CNOSS at 11.5 percent.