COMPANIES

CSRA sheds light on IT recompetes

(EDITOR'S NOTE: Subsequent to this story, CSRA said in a Securities and Exchange Commission filing the milCloud 2.0 contract has a $498 million ceiling price and "any other technical requirements, and any workloads to be migrated, will be addressed as needed and on a timeline directed by the customer." The story has been edited to reflect that value.)

CSRA is about to face one of the biggest tests in its two years of existence as it tries to retain key IT services work in its portfolio.

Speaking on CSRA’s first quarter earnings call with investors Wednesday, CEO Larry Prior said decisions on three separate contracts for the work up for recompete “continues to track for late August or early September” for the start of awards.

At $5 billion in total value, the so-called "Groundbreaker" program makes up for 7 percent of CSRA’s annual revenue and has been in its portfolio since 2001 going back to when it was part of the former Computer Sciences Corp. The contract was awarded in 2001 for services to update intelligence agencies' IT infrastructures.

CSRA has targeted sales growth of nearly 2 percent for its 2018 current fiscal year ending March 31.

Prior told analysts he “would expect this month” an award of the first piece called Regional Infrastructure Support I. Then the portion known as Greenway could see an award “either at the end of this month or early next month,” Prior said.

Greenway is the portion Prior told investors CSRA is “most interested in as a prime.” CSRA is pitted in a head-to-head showdown with General Dynamics for Greenway. CSRA and its partner Northrop Grumman lead the Eagle Alliance team in pursuit of Greenway.

Part number three -- called Regional Infrastructure Support II – is “likely delayed several months after (Greenway) is awarded,” Prior said. “It could be the end of the calendar year. It could slip a little bit beyond that,” Prior added.

That delay looks to be an aberration from what Prior anticipates to be an active two-month period this month and September in terms of awards across industry. Vacancies in executive branch leadership roles that require White House appointment should not disrupt what is typically a “defining month” regarding September for industry and government, Prior said.

“There is a lot of noise around the lack of political appointments, but I also see a lot of work by the career service and the career uniforms of our government,” Prior said. “So we are expecting that it will be not just a normal September but a robust September, and all the signals we see are showing that.

Groundbreaker in its current form is scheduled to expire on Sept. 30. Any delays in awards of the new iterations would likely require contract modifications to extend the work.

CSRA is in the running for other portions of Groundbreaker also. CSRA is on a team with DXC Technologies that is up against AT&T for one piece and in another group with CACI International and ManTech International for a second component.

On the financial results front, CSRA held to its revenue guidance of $5 billion-$5.2 billion with a $5.1 billion midpoint compared to the consensus analyst forecast of $5.11 billion.

A book-to-bill ratio of 1.3 in the first quarter represented CSRA’s 10th straight quarter of that figure above one, meaning the backlog is growing faster than revenue from existing work is being drawn down.

CSRA’s win of the Defense Department’s potential eight-year, $498 million MilCloud 2.0 contract was the quarter’s largest award and anchored that period’s bookings.

The company beat out for other bidders for that contract.

CSRA also reiterated its earnings guidance of $1.88-$2.00 per share with a $1.94 midpoint versus Wall Street’s $1.97 outlook.

First quarter revenue fell 1.6 percent year-over-year to $1.23 billion versus Wall Street’s expectation of $1.25 billion, while earnings of 48 cents per share exceeded the analyst consensus of 46 cents.

About the Author

Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at rwilkers@washingtontechnology.com. Follow him on Twitter: @rosswilkers. Also find and connect with him on LinkedIn.

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