How Perspecta plans to fend off rivals and keep big NGEN contract

Perspecta is two months old as a public company and is preparing for the fight to keep the massive Navy NGEN IT contract away from its rivals.

Sometime later this year but possibly later, Perspecta will face the biggest test of its journey as a newly-minted company: defending its largest contract against a pair of rivals seeking a signature takeaway win to gain a major foothold in defense IT modernization.

But that test has yet to officially start in the race for the $3.4 billion Next Generation Enterprise Network-Recompete umbrella. A final solicitation was due “on or around July 31” but still has not been released. The winning team will provide broad IT services and hardware to the Navy and Marine Corps for their global Intranet network with 700,000 users.

Not that Perspecta is sweating the competition too much after its formation into a larger $4.2 billion-revenue contractor through the June merger of DXC Technology’s federal business into Vencore and KeyPoint Government Solutions.

During Perspecta’s inaugural and fiscal first quarter earnings call Tuesday, CEO Mac Curtis touted his bulked-up company’s chops in keeping the work it has held since 2000 through its predecessors DXC, Hewlett Packard Enterprise, HP and originally EDS. And his comments to investors show a glimpse of Perspecta’s thesis for both NGEN and the broader government IT landscape.

“The notion of being part of Perspecta where it’s a 14,000-person, $4 billion-plus public sector company with the ability to innovate with the patent portfolio, advanced networking and really focusing on doing what’s best for the government customer is good for us,” Curtis said.

The current NGEN contract is due to expire on Sept. 30. Curtis told analysts Perspecta and the Navy are negotiating a one-year extension through to September 2019 and expect that to be signed sometime in the next two to three weeks.

When Perspecta launched in June, Curtis and other executives touted the combination of DXC’s broad enterprise IT base with the intellectual property and high-end IT work of Vencore and KeyPoint as a vertical integration that sets the new company apart from the rest. And that should give Perspecta an edge in the effort to keep NGEN, according to Curtis.

“The timing of our spin-merge is ideal for the recompete because we can layer Perspecta’s rich IP and innovation portfolio, data analytics and cloud capability on top of our long history of performance. We can accelerate the Navy and Marine Corps’ IT modernization journey without missing a beat on operating the network,” Curtis said.

This new iteration of NGEN is being split into two parts: a services component and an end-user hardware track. Perspecta currently teams with AT&T for NGEN and they will partner again to pursue the services portion, which this time around is being awarded as a best-value contract versus the prior lowest price, technically acceptable approach.

Whoever wins the NGEN services track in particular will gain a major foothold in defense IT modernization just as military budgets are due to rise significantly again and agencies increasingly put more effort and focus on refreshing aging technology environments, but with affordability in mind.

Analysts largely view the competition as difficult to handicap given how all bidders have undergone major transactions in recent years but near-unanimously view the stakes as high given the broader spending and policy dynamics in government IT.

Teams led by Leidos and a bulked-up General Dynamics IT services business thanks to the April CSRA acquisition have lined up to try and wrestle the NGEN services portion in particular away from Perspecta however.

Leidos and GD tower over the rest of the government IT market at close to $10 billion in annual revenue each after large blockbuster deals they undertook in hopes of being better-positioned for programs with the size and scope of NGEN.

Leidos hopes it can go full steam ahead on pursuing the NGEN services piece with the integration of the Lockheed Martin IS&GS business fully in the rear view mirror two years post-close. And prior to GD’s acquisition, CSRA eyed NGEN as a natural extension of the company’s work on another program to maintain in-theater Navy networks outside the U.S.

NGEN is not the only large opportunity on Perspecta’s horizon as the company plans to throw its weight around for possible takeaway opportunities also. One that might fit that bill is a Leidos contract ironically: a $4.6 billion program awarded in 2011 to Lockheed IS&GS for international network and telecommunications services to Defense Department personnel. That contract expires next year.

“One of the things we like about Perspecta is there’s not a deal out there… that we can’t go after if we so decide,” Curtis told investors. “We’ve got the wherewithal, we’ve got the knowledge, we’ve got the innovation and we certainly have the resources to go after these big deals.

“That was part of the value proposition for Perspecta, so we’re excited about the opportunity to look at some of those larger deals.”

First quarter bookings of $1.3 billion for a 1.3 book-to-bill ratio -- primarily from civil and health recompetes -- indicate Perspecta is laying an initial growth foundation and mitigating some risk from a possible NGEN loss. Any book-to-bill number above 1 shows a company is growing the contracts backlog faster than drawing down from it to recognize revenue.

Pro forma sales for the quarter ended June 30 were $1.04 billion, up 2 percent over the prior year period.

Perspecta expects flat revenue for its current fiscal year, then grow between 3 and 5 percent for each year through FY 2022. The company also expects to maintain industry-high margins of 16-17 percent adjusted EBITDA -- the ratio of earnings before interest, taxes, depreciation and amortization expenses to sales.

Analysts closely watch adjusted EBITDA margins to measure the profitability of government IT and professional services companies. CSRA in particular was noted for having industry-high margins before its sale to General Dynamics.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.