Perspecta puts strategic focus on digital transformation

Digital transformation might be an appropriate catch-all phrase to describe the range of technology areas federal agencies want to advance such as cloud computing, cybersecurity, big data or even other general terms like enterprise IT.

Regardless of what one calls it in the end, those technologies are top of mind for Perspecta, executives said during the company’s second quarter earnings call Wednesday.

CEO Mac Curtis said that digital transformation is the "number one part of our strategic initiative.” 

Curtis is the latest chief executive of a publicly-traded government IT company to be asked about where he sees opportunities in cloud services now that the Defense Department has awarded the JEDI infrastructure contract to Microsoft.

He did give his views on the implications of JEDI and the overall DOD cloud market. You will have to click over to this updated story to see not just Curtis’ comments on the topic but those of his fellow CEOs as well.

But as Curtis hinted at on Wednesday, JEDI is merely one facet of DOD’s push for a more modernized, digital architecture as “everybody is looking at enterprise IT as a service.”

Both the Army and Air Force have awarded various pieces of their own so-called “EITaaS” contracts with plans for more. The Navy’s next version of its Next Generation Enterprise Network services and integration contract that Perspecta is fighting to keep will have elements of IT-as-a-service as well.

In addition, the Defense Information Systems Agency is taking the charge on that front by taking over a bulk of IT services for the non-military branch agencies in DOD’s so-called Fourth Estate.

“There's a lot going on in DOD. I think this Fourth Estate (move) is going to be really interesting,” Curtis said. “There's a lot of movement, large contracts and small contracts.”

Many civilian agencies are also driving digital transformation for themselves. Perspecta is one of 12 prime contractors on the General Services Administration’s COMET contract vehicle awarded in October for broad IT modernization services.

One thread Perspecta has increasingly touted since it opened for business in June 2018 is the ability to string together a series of large wins to build a book of business beyond just the $3 billion NGEN services contract slated for award between January and March of next year.

The Navy awarded the nine-year, $1.4 billion hardware track in October to HP Inc.’s federal subsidiary. Perspecta is working with HPI Federal on the transition and expects revenue from that part of NGEN to start winding down in Perspecta's 2020 fourth quarter ending in June.

NGEN is not the only large contract Perspecta is awaiting word on. The company is bidding to take away a $6.5 billion DISA global information grid contract from incumbent Leidos, and is likely going to get a second shot at the $7.6 billion Defense Enterprise Office Solutions contract to roll out email and other collaboration tools across DOD.

Perspecta protested the initial award of the DEOS contract to General Dynamics IT but the General Services Administration rescinded that and will ask for new proposals from both companies.

“This particular protest we felt was warranted given the feedback that we received" Curtis said. “It wasn't frivolous. I think corrective action is on its way, and I think it's substantial, so we'll see what happens.”

Chantilly, Virginia-based Perspecta slightly lifted its full-year revenue guidance to $4.425 billion-$4.5 billion from the prior $4.4 billion-$4.5 billion range. The company still expects a 17-to-18 percent adjusted profit margin.

The company reported a book-to-bill ratio of 1.4x on a trailing 12-month-basis to measure how fast the company has added contracts to its backlog versus drawdowns to realize revenue.

That quarter ended Sept. 30 saw $2.3 billion in awards for a book-to-bill ratio of 2.0x, including its win of an $824 million National Geospatial-Intelligence Agency systems engineering contract.

Perspecta also is reporting momentum in its civilian and health care business that is going through a reboot to get growth going again. Outside of COMET, Perspecta secured a $147 million Homeland Security Department contract for cybersecurity services in a win that Curtis credited in part to the acquisition of Knight Point Systems.

The company is also awaiting the outcome of a protest involving a $150 million Housing and Urban Development end-user IT services contract as well.

“Up to this point, our civilian and health business has underperformed, primarily as a result of underinvestment by legacy companies. But the recent wins and strong qualified pipeline suggests that we will grow sequentially beginning in (quarter) four,” Curtis said.