ManTech, CACI report some shifts in business dynamic

ManTech International and CACI International describe to Wall Street how they have adjusted functionally to working with agencies during the pandemic and the impacts they have seen and expect to see.

The novel coronavirus’ arrival in the U.S. has caused shifts and disruptions to how government services companies work with their agency customers and in some cases put things largely on pause.

In their most recent earnings calls Wednesday and Thursday, ManTech International and CACI International described some of those changes to investors and how they are working through the situation, plus financial implications that substantially all companies like them will likely have to consider.

Signed in late March, the economic stimulus law known as the CARES Act signed March 27 includes language on how agencies can modify contract terms to reimburse companies for paid leave if their employees cannot get to a federal facility or telework because of the pandemic and related shelter-in-place orders.

ManTech CEO Kevin Phillips said Wednesday that “less than 20 percent of” that company’s 9,126 employees are not able to work full-time due to those restrictions, while the rest are teleworking. Many in the former category are able to do some work, certainly of an unclassified nature even though at least some of that work is often done inside a secure facility.

“We have… a group of people who are either working full time within that 20 percent or 30 hours a week or 20 hours a week or 10 hours a week, and those are the new baselines from which they're going to start gradually ramping back up,” Phillips told analysts during ManTech’s first quarter call. “But generally, less than 20% of our workforce is in some mission-ready state for some part of their time.”

Herndon, Virginia-based ManTech lowered its full-year guidance ranges to $2.35 billion-to-$2.45 billion in revenue and $120.3 million-to-$125.2 million in adjusted income to account for getting the ready state workforce back on a full-time basis and any potential disruptions in procurements or ongoing programs. That still puts ManTech on a path of 6-to-10 percent sales growth.

But ManTech’s backlog sits at $9.3 billion, up 11 percent year-over-year, with $1.4 billion of it funded and slightly more than 90 percent of the sales guidance’s midpoint already in that backlog.

In addition, ManTech did not sound greatly concerned about its potential of sending a large amount of requests for equitable adjustments to contracts in the event on-site work is not possible.

“On the services side, the vast majority of it is going to be business as usual for any amount of time after the 27th of March where our people were moved into a mission-ready state,” Phillips said. “There's a couple-of-week period before that where a little bit -- maybe one and a half months, depending on the customer set in the region, where people may have started moving into a different mission-ready state on an interim basis. For that portion of it, there may be some REA requirements.

“But the vast majority of it, we will be able to bill on a regular cycle the cost for the period that they're in a mission-ready state.”

CACI did not give a specific number on how much of its roughly 20,000-strong workforce is in that kind of ready state. But during CACI’s fiscal third quarter call, CEO John Mengucci said nearly 70 percent of employees are working remotely with the rest largely in a secured company or government facility.

Nearly 10 percent of CACI’s billable hours will be considered recoverable costs under the Coronavirus Aid, Relief, and Economic Security Act in the event of any disruptions to the work.

“Just like when the government closes down or we have weather delays, that time’s difficult to make up because the time has already gone by,” Mengucci said, adding the company is “looking at for probably 15-to-20 percent of programs, we’ll have the ability to submit REAs and then get incremental costs.”

The company found a workaround for one program, in which Mengucci said it converted 30,000 square feet of office space into a temporary facility that can handle classified work for one national security program.

Arlington, Virginia-based CACI did see an impact on business during its third quarter and sees that continuing for the current fourth quarter. Revenue took a $10 million hit, while net income was negatively impacted by $4.5 million and operating income by $6 million.

Chief Financial Officer Tom Mutryn said the fourth quarter could see a revenue impact of around $65 million and net income of close to $15 million, while some product sales will likely be delayed until CACI’s next fiscal year. One-third of that net income hit is “timing related and is expected to be recovered in future periods” Mutryn said.

Any minuses previously mentioned did not translate into a lowering of expectations. CACI is holding to its $5.6 billion-to-$5.8 billion revenue outlook for the full fiscal year ending June 30 on net income of $305 million-to-$325 million.

CACI holds a $19.9 billion backlog and trailing 12-month book-to-bill ratio of 2.1 times, a key indicator that growth is on the horizon. The company sees its path as on organic growth of 7-to-8 percent.

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