How these 3 companies are looking ahead to 2021
- By Ross Wilkers
- Feb 11, 2021
One publicly-traded blue chip defense company and two others with significant footprints in the federal market reported their financial results for 2020 and spoke to investors this week.
All in the name of putting a period to the paragraph on last year and looking ahead to whatever 2021 presents.
Here are snapshots of what these contractors said to investors in conference calls Thursday and Wednesday.
Huntington Ingalls Industries
The shipbuilding giant’s CEO began the call Thursday by summing 2020 up as a year that “will be remembered as one of the most challenging business environments that we've ever had to navigate.”
“Throughout the COVID-19 pandemic, we have made decisions that are focused on the safety and well-being of our employees and I could not be more proud of the way our team responded to the challenges,” Mike Petters added in his opening remarks.
For all of 2020, Huntington Ingalls reported revenue growth of around 5 percent to $9.4 billion and a 27-percent increase in net income to $696 million. HII Technical Solutions -- the government services segment -- saw sales climb 2 percent to $1.3 billion. The company sees services revenue as holding around $1 billion this year.
Unmanned opportunities remain in the center of HII’s services strategy “whether that's a technology capture or portfolio expansion,” Petters said, adding “we’re just keeping our eyes open” on how to do that organically or through acquisitions like last year’s deal for Hydroid.
One certainty HII sees for that particular business is its unique fabric and characteristics versus the shipbuilding segments.
“We’re keeping the unmanned business separate from shipbuilding… unmanned customers are very different than the shipbuilding customers,” Petters said. “So we want to have customer facing organizations that respond appropriately and so that's been very successful for every business inside of TS, including unmanned.”
HII is also watching the cyber and IT arena for potential deals, though Petters cautioned “that’s a pretty dynamic space right now and valuations are kind of challenging.”
For just shy of three years, ECS has operated as the government technology services segment of ASGN and used that backing to push for $1 billion in annual revenue by 2021.
Goal set and goal met one year early right on the nose, as ECS on Wednesday reported $1 billion in sales for 2020 -- up 25.8 percent from the prior year. ECS represented one-fourth of ASGN’s overall revenue in 2020.
ASGN made three acquisitions last year and one in 2019 of other businesses to roll into ECS. But CEO Ted Hanson told investors Wednesday ECS recorded “higher organic growth than growth through M&A.”
That shows up in ECS’ $2.65 billion backlog as of last year’s end, or roughly 2.6 times revenue. ECS also sits on a 1.0 book-to-bill ratio for the last 12 months to measure backlog growth versus drawdowns to book revenue.
ASGN Chief Financial Officer Ed Pierce said is “ECS expected to be up double-digits year-over-year.”
The Biden administration’s initial focus on IT modernization and cybersecurity is giving ECS optimism for this and future years, including the Defense Department’s in-the-works Cybersecurity Maturity Model Certification standard for industry.
“We are excited about what’s going to be going on with the federal government and CMMC,” ECS President George Wilson told analysts. “We do see it as a growth area for us.”
Federal has increased in importance for Cerner ever since the health IT company partnered with Leidos to clinch the Defense Department’s Genesis electronic health record contract in 2015.
Cerner was chosen for the Veterans Affairs Department’s similar EHR effort three years later and the roles are reversed, where Leidos is the subcontractor.
On Wednesday, Cerner pegged its federal revenue at around $1 billion for last year. That accounts for roughly 18 percent of the company’s total revenue for 2020. That number appears poised to increase even further as more DOD, VA and Coast Guard sites enter the go-live for the Cerner EHR.
Cerner’s lead executive for federal who recently took on an additional senior role at the company indicated to analysts they are also thinking beyond just the EHR efforts that mean both the same record and new joint information exchange.
“I see potential with the work that we're doing and strategic growth to go do work with them on the network side,” said Travis Dalton, president of Cerner’s government services business and also now chief client and services officer.
“Federal continues to be an opportunity for us and I think we'll become more and more efficient in that business as time goes by particularly in how we deliver service, how we behave as a prime contractor, and also prior to use of third-party resources.”
The immediate future means more deployments at additional sites. Dalton also highlighted Cerner’s mass vaccination solution being included at the DOD and Coast Guard live sites to fight COVID-19.
Ross Wilkers is a senior staff writer for Washington Technology. He can be reached at email@example.com. Follow him on Twitter: @rosswilkers. Also connect with him on LinkedIn.