Engility moves on under new leadership

Engility Corp. has picked former Raytheon executive Lynn Dugle as its new CEO to lead the company as the board today moved to replace Tony Smeraglinolo, who has stepped down.

A company spokesman declined to comment on whether Smeraglinolo was asked to resign, but the company has struggled to find its footing in the market, and in January pushed its revenue and earnings guidance for 2016 downward, which sent its stock plunging.

It is trading at around $14.50 a share down from a 52-week high of $39.21.

Smeraglinolo was the chief architect for Engility, which got its start in 2012 as a spinoff of from L-3 Communications. Smeraglinolo was an L-3 executive and was tapped to pull the myriad business units together and create Engility.

He then led the company through two major acquisitions. First, there was the acquisition of Dynamics Research Corp. in 2014, and then the $1.3 billion acquisition of TASC in February 2015. This created a company with more than $2 billion in annual revenue.

At the same time, Smeraglinolo was focused on reducing costs and streamlining operations, which were the heart of his strategy to be the low-cost but high quality provider of solutions to the government.

There is no indication in today’s announcement that Engility will move away from that strategy. The focus now will be on paying down its debt and organic growth.

“The Board is confident that Lynn and John are ideally suited to lead Engility forward into its next chapter focused on achieving sustainable organic growth and debt repayment,” said Peter Marino and David Savner, co-chairs of Engility’s board.

The John they refer to is John Hynes, who was promoted to president from executive vice president. He joined the company when it acquired TASC, where he was CEO.

Dugle comes to Engility with 30 years of experience in the defense, intelligence and telecommunications market. She was president of Raytheon’s Intelligence, Information and Services or IIS, group. She held that position from 2009 to 2015, when she retired from the company.

She also knows Engility and TASC well, having served on the boards of both companies.

“I am excited by the opportunities that lie ahead for Engility, particularly in growth markets such as space and intelligence,” she said in a statement. “The combination of Engility’s cost-effective price structure and its offerings in these high-demand areas positions the company for continued success.”

It is worth noting that Smergalinolo held the position of both president and CEO, but the board has split those titles between Dugle (CEO) and Hynes (president).

Like many companies in the market, Engility faces multiple challenges. In addition to integrating TASC, which the company says is nearly complete, it also has the legacy of multiple companies that L-3 acquired over the years and then bundled into the Engility spinout.

Integrating all of those pieces was a major undertaking for Smergalinolo.

The company also cited when it reduced its forecast that several legacy contracts were ending, and it still was facing a reduction of its in-theater work for the military.

Smergalinolo said that the business was stabilizing and that investments in the company would pay off with organic growth in fiscal 2017 and beyond.

The responsibility now falls to Dugle and Hynes to take the scale and broad portfolio that Smergalinolo put into place and make it grow.