ManTech International Corporation
Q2 2021 Earnings Call Transcript

Published: 3 Aug 2021

[Operator:]

Ladies and gentlemen, good afternoon and welcome to the ManTech Second Quarter Fiscal Year 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, the conference call is being recorded. I would now like to turn the conference over to Stephen Vather, Vice President, Corporate Development and Investor Relations.

[Stephen Vather:]

Welcome, everyone. Thanks for participating on ManTech's second quarter call. Joining me today is Kevin Phillips, our Chairman, CEO and President; Judy Bjornaas, our CFO; and Matt Tait our COO. During this call, we will make statements that do not address historical facts and thus are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to factors that could cause actual results to differ materially from the anticipated results. For a full discussion of these factors and other risks and uncertainties, please refer to the section entitled Risk Factors in our latest Form 10-K and our other SEC filings. We undertake no obligation to update any of the forward-looking statements made on this call. On today's call, we will discuss some non-GAAP financial measures, which we believe provide useful information for investors. These non-GAAP measures should not be evaluated in isolation or as a substitute for GAAP performance measures. You can find a reconciliation of the non-GAAP measures discussed on this call in our second quarter earnings release. With that, let me hand the call over to Kevin.

[Kevin Phillips:]

Thanks, Stephen, and good afternoon, everyone. I'd like to start the call today by thanking the entire ManTech team for their unwavering dedication to our customers and their critical missions. The steadfast focus enabled another quarter of strong results including record profitability. We also saw strong Q2 bookings, which were driven by successful outcomes on the recompete front, as well as new awards and contract extensions and expansions. We exited the quarter with nearly $10 billion in proposals outstanding, another company record. This includes both a significant level of new business opportunities, but also a higher than average level of recompetes. This activity demonstrates the healthy demand we are seeing from customers for our differentiated services and solutions across the business. The market environment remained uneven throughout most of the quarter. However, we are seeing signs of incremental improvement, as customers are increasingly returning to normalized operations. Collectively, these trends reflect the impact from pandemic related disruptions, which have created a choppy and somewhat slower pace of awards in year-to-date 2021. Exiting the quarter and through the balance of the year, we see and expect a robust level of proposal submissions and the current velocity suggests that we may exceed last year's volume. The volume of adjudications, combined with our ability to continue to take market share, will be the key driver for our anticipated bookings and acceleration of revenue growth in the second half of 2021 and into next year. Overall, we are seeing strong market demand across the majority of our business and we expect that to continue throughout the second half of this year. Turning to the defense budget environment. Congress appears to be making good progress on the FY 2022 appropriations. However, given the fulsome legislative agenda, we expect to begin the year under a continuing resolution. Since our Q1 call, we have received administrations detailed budget, which continues to demonstrate clear alignment between national priorities and ManTech's areas of focus. This is a reflection of the actions we have taken to continuously position our business for success. For example, cyber remains a top priority and the budget calls for over $20 billion unclassified spending across defense and federal civilian customers, which represents nearly 9% growth year-over-year. Cyber demand remains evident across a broad range of capabilities. We see a strong focus on zero-trust architectures and cyber operations, both areas where we have differentiated solutions and capabilities. The budget also calls for over $97 billion of unclassified IT modernization, representing 4% growth year-over-year. The continued IT modernization push across the federal government also aligns with ManTech's investments and capabilities in analytics, automation, data at the edge and other key technologies, enabling both mission and enterprise operations. Finally, intelligence community spending remained steady at nearly $86 billion and we still have ample market opportunity in this area. Lastly, I want to note that the drawdown of US military presence in Afghanistan remains on track. All ManTech personnel supporting DoD programs in that country, have already shifted into other regions. ManTech has proudly supported the Department of Defense for multiple decades at the tactical edge. We look forward to continued support for our customers in their global missions and are monitoring how their needs are evolving and the implications that it has for our programs and employees. Now, Judy will walk through details on our Q2 financial performance and outlook. Judy?

[Judith Bjornaas:]

Thanks, Kevin. We continued our steady execution in the quarter with a focus on generating sustainable long-term value for our shareholders. Quarterly revenue grew to $649 million, up 3% compared to Q2 of 2020. Direct labor moderated some in the quarter with the return to normalized PTO usage and the impact of the additional federal holiday. For Q2, prime contracts comprised 93% of revenue and the breakout of contract pricing structure was approximately 69% cost-plus, 18% fixed price and 13% time and material. Q2 EBITDA was $67 million, up 19% from Q2 of 2020. This resulted in an EBITDA margin of 10.4%, up a 150 basis points year-over-year, as margins continue to benefit from stronger labor mix and continued lower indirect cost spending. Net income for the quarter was $37 million and diluted EPS was $0.89, up 22% and 20% from Q2 2020, respectively. Adjusted net income was $40 million and adjusted diluted EPS was $0.99, up 19% and 18% from last year. Our effective tax rate was 24.2% in the quarter, in line with expectations. Turning now to the balance sheet and cash flow statements. Cash flow from operations of $75 million in the quarter, represented two times net income. Days sales outstanding were 64 days, an increase of one day compared to Q2 of 2020. At quarter-end, the balance sheet showed $65 million in cash and $30 million of debt. Additionally, we distributed $15 million in dividends in Q2, maintaining steady return of cash to shareholders. The Board has authorized us to continue our current cash dividend of $0.38 per share to be paid in September. We also recently amended and extended our $500 million revolving credit facility and added $600 million in capacity through a delayed-draw term loan. ManTech is taking advantage of favorable debt capital markets and positioning the Company with significant flexibility for capital deployment going forward. As consistently stated, our capital deployment remains focused on M&A, and we are continuing to actively review opportunities in a very busy market. We remain focused on transactions that bolster our capabilities, expand our customer portfolio and that best position the Company to generate long-term value. Moving on to guidance. We are reiterating our previously communicated revenue guidance and increasing our guidance for adjusted net income and adjusted diluted EPS. We will continue to evaluate our expected go-forward results, which we believe are most impacted by several factors. These include, the rate at which we are able to successfully win new business and retain recompetes, as well as the timing of each, the pace of hiring and ramping new and recent contract awards, and the level and timing of material procurements, as well as the cadence of the normalization of the supply chain. Our revenue guidance remains $2.65 billion to $2.75 billion, representing 5% to 9% growth year-over-year. At the midpoint of guidance, a little over 90% of the revenue is expected to come from existing backlog. We are increasing the outlook for adjusted net income to be in the range of $146.5 million to $151.1 million, with adjusted diluted EPS of $3.57 to $3.68. We are also increasing our expected EBITDA margin for the year to be 9.3% to 9.4%, which represents a 20 basis point to 30 basis point improvement over 2020. Year-to-date margins have been running higher than the full-year guide, so we anticipate greater volume of lower fee bearing ODCs, higher and more normalized indirect spending from the acceleration of expenses related to business development and M&A efforts, as well as increased travel and PTO utilization in the second half of 2021. The adjusted net income and adjusted diluted EPS ranges assume an effective tax rate of approximately 24%, and a fully diluted share count of approximately 41 million shares. Finally, cash flow from operations is still expected to be at least $200 million with capital expenditures expected to be around 2.5% of revenue for the year. Now I’ll turn it over to Matt to cover the business development and operational highlights for the quarter.

[Matt Tait:]

Thank you Judy. We achieved bookings of $813 million, resulting in a book-to-bill of approximately 1.3 times in Q2. Some specific highlights from the quarter include winning a $100 million contract to continue providing the Navy with range sustainability services for training and test ranges to meet military readiness and environmental requirements. We also won an $86 million contract to continue providing cloud engineering, DevSecOps and enterprise IT for the US CIS global enterprise. Finally, we secured a new $85 million contract to provide the State Department with enterprise IT, training, technology deployment, and communications services that support global Consular Affairs operations. These contract awards continue to demonstrate the differentiation and strength of ManTech's capabilities in mission and enterprise IT and systems engineering. Additionally, 55% of contract awards in the quarter came from classified customers. As a result of these bookings, our total backlog was $10.2 billion at quarter-end, representing 10% year-over-year growth with funded backlog at $1.4 billion. We are pleased with the progress we have made during the quarter. We look forward to continuing to drive strong results in the back half of 2021 as we help our customers leverage best of breed commercial technologies in support of their missions. Our success and ability to deliver for customers remain squarely driven by talented employees. We have increased our commitment to attracting, developing and retaining talent in what has become an even more competitive labor market. We have been hard at work, ensuring we have best-in-class, highly skilled and highly clear talent in order to deliver our leading solutions. We remain focused on our objective to be the Employer of Choice in our industry, which is why we are evolving and improving how our team operates, advocating for flexibility to maximize employee success, satisfaction and productivity in a new normal. Over the past few years, we have made significant investments bolstering our capabilities and positioning the business in alignment with national priorities including cyber, enterprise IT, digital and platform modernization, analytics and other key areas all of, which as Kevin mentioned are showing steady demand. Overall, I am confident that ManTech's service offerings across its various businesses have positioned us to continue to win. Our focus on driving continued innovation and differentiation is positioning ManTech to maximize pipeline conversion into revenue growth. We expect to harvest the benefit of those investments in the quarters to come. With that, let me hand the call back over to Kevin for closing remarks.

[Kevin Phillips:]

Thanks Matt. In closing, our results this quarter reflect the efforts by our team to drive strong program execution, innovation and attract and develop best-in-class talent. At the same time, we remained focused on leveraging our strong balance sheet to deliver long-term shareholder value, while supporting our customers and their critical missions. We are now ready to take your questions.

[Operator:]

Our first question is from Matt Akers of Wells Fargo. Please go ahead.

[Matt Akers:]

Yeah. Hey guys. Good afternoon. Thanks for the question. I wanted to just ask on the margins. And if there is anything else behind sort of the uptick in margins, I know what you see there you are still off from kind of the normal pace a little bit. Was that all that it was, or was there anything sort of one-time that you would point to in that?

[Judith Bjornaas:]

There were no real large one-time items, it continues to be the lower OEC volume. And the reduced indirect spend is still not caught up back to kind of the pre-COVID levels.

[Matt Akers:]

Got it. Okay. And I guess, like thinking about how that will trend here going over the next couple of quarters, is it fair to assume Q3 is kind of more back to normal than Q4 is kind of fully back or just kind of like the way to think about the pacing of the rest of the year?

[Judith Bjornaas:]

Yeah, yeah, we're clearly projecting lower margins in the second half of the year, some of that is a return to normal spend and some of it is just because of our high percentage of cost plus. We're actually trying to uptick some of our R&D spending and other investments like that, that won't be necessarily recurring in nature, but are within our current indirect freight budgets for the year.

[Matt Akers:]

Okay got it. Thanks that's helpful. If I could do one more, I guess, that can you touch on kind of the intelligence business in general? And I think some of your peers it sounds like maybe have seen a little bit of a slowdown there recently is that something that you guys are seeing as well?

[Matt Tait:]

So I think at least for us, and maybe some of those questions all speak to I'll say tied to some of the disruptions overall. But I'd say portions of our portfolio overall, we're seeing a little bit of delays in the Intel side of the business, versus say the others in terms of defense and federal civilian, just kind of I'll give you the overarching commentary there.

[Matt Akers:]

Got it, okay. That's helpful. Thank you.

[Operator:]

Thank you. Our next question comes from Matt Sharpe of Morgan Stanley. Please go ahead.

[Matt Sharpe:]

Kevin, Judy, Matt good afternoon and thanks for taking my question.

[Matt Tait:]

Good afternoon.

[Matt Sharpe:]

Judy, I just wanted to touch on the organic growth rate cadence here for a moment. I believe Q1 was about 1%. It looks like this quarter more or less was along those lines and you reiterated the guidance range which, correct me if I'm wrong had 5% embedded in it at the midpoint.

[Judith Bjornaas:]

Yeah.

[Matt Sharpe:]

So looking at the Q3, Q4, its inflection in Q3 or is this more of Q4 weighted? And sort of what's driving the back-end weighting profile is this ODC surge, or what can you tell me about it to get me comfortable with that that inflection in the coming quarters?

[Judith Bjornaas:]

Yeah. It's a combination of things. I would say, the biggest is related to some of those ODC catch-ups kind of ramping Q3, and then, even more so in Q4 as well as just the volume of proposals outstanding, where we're hopeful that the government will stay on pace. And we'll see a good Q3 of adjudications that will potentially drive some growth in Q4 going into Q2, sorry into 2022.

[Kevin Phillips:]

It's Kevin. Let me expand a little bit on that. If you look at the $10 billion of proposals outstanding at the end of last year that number was $6 billion for the Company. And for the first half of this year there's two trends that we've seen. One is an increasing demand as well as -- resulting submissions of proposals by the customers meaning, that they asked for us to provide and compete on bids is not going down it's gone up. At the same time, the amount of adjudications in raw dollars over the first six months of this year has not stayed at the levels that did for the last two years. So that's -- that adjudication part is reflective of some delays, that we think is from COVID the choppiness. But you put those two together, there is just a lot of proposals out there, that we think are nearing the end of their adjudication cycle. And we'll expect to see outcomes from those -- booked from here and taken across the industry as a result of that pickup.

[Matt Sharpe:]

Got it. That's very helpful. And then, just on the cash balance and M&A, it looks like, if you did nothing else other than services the dividend as well as the remainder of the revolver outstanding you'd end the year with more or less a $150 million in cash on the books. And I think with the revision to your credit facility you've got another 1.1 or so in terms of dry powder. So how are you guys thinking about M&A flow here in the coming quarters and in particular, any commentary around deal size?

[Kevin Phillips:]

Yes, I'll start and then Judy can add. Generally, we've seen an uptick in assets that are available in the market this year at all sizes. It just feels very busy in 2021. And so we are active, but also the debt availability is there and it's a very good time and very good terms to be able to be in position to have that capacity should we find the right fit. And we still stay disciplined the multiples was fairly elevated but it's a good time in the market to have that capacity available which is why we work that and did a great job on that.

[Judy Bjornaas:]

Yes. As Kevin said, it was time to kind of do the amend and extend M&A market crazy lots of things so we just felt like it was a good time to have extra capacity should we find the right larger opportunities that makes sense we'll be ready to go.

[Matt Sharpe:]

Got it. And then just one more if I may. Kevin I think you had mentioned that some of your forward deployed staff that were previously in Afghanistan might have been redeployed within the region. Can you just maybe tell us if you're seeing any opportunities associated with sort of an over horizon capability or what you've been able to redeploy those bodies to?

[Matt Tait:]

So, Matt, this is Matt. I'll feel that maybe initially here and from a DoD perspective, our presence within Afghanistan now is complete. And I can't really give you the specifics about where our folks have been a redeployed, but they have been in support of the national security missions that we do support overseas.

[Kevin Phillips:]

And now I'll add to that at a very high level. We are a mission and tactical edge company and some of the investments we're making around R&D and technology relate to our ability to support deployed forces deployed systems and that's an area that's got a heavy amount of focus within the DoD with large based on the change, I'll call it, a generational change in the strategy from priority counterterrorism to priority countering near-peer threats. And how that plays out in terms of funding and activity will play out over time, but there is a very real and compelling need and we can sense that in the customers. So, we'll see how it plays out in terms of our support, but we've supported these locations for decades, we're proud to do that and we'll continue to do that.

[Matt Sharpe:]

Got it. Thanks so much. I'll get back in the queue.

[Operator:]

Thank you. Our next question comes from Gautam Khanna of Cowen. Your line is open.

[Gautam Khanna:]

Yes, thank you. I was wondering if -- I know it's early, but would you mind giving us some color on what you think the medium term or longer term organic growth rate may trend to be for ManTech? I know we're coming off of a big year and we got the pass through dynamic, but I'm just curious like based on what's in your pipeline, what you see the national security needs as being? And just putting it all together, is it a low to mid-single-digit organic business medium term or how do you think about it?

[Judy Bjornaas:]

Well, I think, in general, the pipeline shows that we've got lots of opportunities out there that we're pursuing. As you said, it's early to start talking about longer term. Our goal is always to grow a little bit faster than the budget. And so we're feeling good about it, but it's -- there is $10 billion proposals out there and it just is going to depend on how many fall our way.

[Gautam Khanna:]

Judy could you refresh us on sort of the recompete rate next -- or maybe over the next 18 months as we think about the $10 billion.

[Judy Bjornaas:]

Yes, there's not a lot of impact remaining in 2021 from recompetes. We've got about 90% plus in backlog with the balance kind of evenly split between recompete and new. Next year I think in general is a relatively average 20% to 25% recompete, but it's a little more front-end loaded in the year than we've seen in the last few years.

[Gautam Khanna:]

Okay. Thank you.

[Operator:]

Thank you. Our next question is from Robert Spingarn of Credit Suisse. Your line is open.

[Robert Spingarn:]

Hi. Thank you. Kevin, you talked about ManTech's zero-trust capabilities and this is obviously a big focus for this administration. Can you describe what ManTech brings to the table? And do you have any partnerships from the leading vendors there may be a CrowdStrike or Cloudflare? I think that both of them have talked about ramping their federal business meaningfully.

[Kevin Phillips:]

Yes. Great question and thanks. I'll talk about both. We're supporting the federal government in operating in a contested cyber environment, right. That's got the full breadth of cyber operations to cyber defense. We've done that for a long time in terms of both sides of that and policies have and will continue to change in focus on that. The cyber defense piece is moving toward -- zero-trust architecture is moving to the cloud there is a lot behind that through the executive order that came out. We have within the cyber R&D and investments that we've made focused on zero-trust as a core component and within the business as a business we've also -- we're also I'd say almost complete with the implementation of the zero-trust architecture within our own environment not planning execution and we're almost done with that. So you put those two together we think that those combined offer at least a path for customers to know it can be done, how it can be done and also we have strong capabilities that Matt can expand upon around how we would do that and with the clients and customers as well as partners that we have.

[Matt Tait:]

Yes, and I would say that just to add on to Kevin's commentary that we actually have -- we don't typically talk about the specifics of the partnerships that we have, but we have a wide breadth of partnerships across the zero-trust landscape. And we're involved in I'll just say multiple areas of discussions with customers around zero-trust. And this aligns it's a great question because it really aligns great with our -- the technical focus areas we have within our 2023 strategy and where we're investing. To Kevin's point, it aligns with I'll say innovations that people are looking for, but also I'll say reasonable innovation where everyone gets sold the next best thing on zero-trust. So it's us helping them as the independent technology-agnostic partner to help sort that out to get to real solutions.

[Robert Spingarn:]

Do you see a particular timeframe when this really ramps?

[Matt Tait:]

Gosh, I've never been good at for prognosticating the pace of the federal government, but the one thing Robert that I would say is that the government is in earnest in these conversations where in the past it was more -- it was I would say not as urgent a dialog. So I think that there is a pace to which they want to act upon and it's just and so I think the urgency there and then we'll see in terms of it but in terms of this isn't a the case of whether they want to do it or not it's just a case of them getting through their own acquisition processes to make it happen.

[Kevin Phillips:]

It is Kevin. I think if you read the executive order the government has been very clear on what they suggest agencies prioritize. And that guidance as it relates to the response to the executive order how it's going to flow is very important, but it will also guide these different agencies as to how they're going to do it once funding is afforded in available and you can see an attempt to establish more funding to make that available and make the changes necessary.

[Robert Spingarn:]

Okay. Well, thank you for that. Just a quick one for Judy. Really on the EBITDA margin I want to just look at a little bit to the right and see if you think the expansion can continue next year, or does it -- does the renormalization of some of the costs like PTO and travel kind of limit that opportunity relative to this year?

[Judith Bjornaas:]

Yes. I think, we outperformed last year. We're on track to outperform this year clearly it's something that we're focused on trying to continue to do we've said in the past 10 basis points -- 15 basis points a year. Hard to say today given the 2021 outperform that we'll be able to do that in 2022, but it's clearly a focus.

[Robert Spingarn:]

Okay. Well, thank you for that. Appreciate the color.

[Operator:]

Thank you. Our next question comes from Brian Kinstlinger of Alliance Global Partners. Please go ahead.

[Brian Kinstlinger:]

Great. Thanks for taking my question. You mentioned, you've got 90% of the midpoint of revenue guidance coming from backlog for the remainder of the year I think. How does that compare to the past at this point in the year and how was potential hiring difficulties ramp delays and I guess award delays factored into that?

[Judith Bjornaas:]

Yeah. Hi Brian it's I think the -- yeah just to clarify the 90% is for the full-year not the second half of the year. So obviously the first half of the year now is all backlog. So if you're looking at just the second half of the year it's a little bit higher percentage coming from new and recompete. And as far as how it compares to prior years it might be a little bit better off, but usually by this point in time you kind of have one what you're going to win that's going to have any kind of major impact on the revenue in the year.

[Brian Kinstlinger:]

Right. That was why I asked that. Okay. And the only other follow-up a small number of questions. I missed if you said what new business was of that 800 in change of awards?

[Matt Tait:]

So this is Matt. The recompetes add-ons and contract extensions with the majority of the bookings for the quarter.

[Brian Kinstlinger:]

Got it. Okay thank you.

[Operator:]

Thank you. Our next question comes from Tobey Sommer of Truist Securities. Your line is open.

[Jasper Bibb:]

Hey good evening everyone. This is Jasper Bibb on for Tobey. One of your competitors said last week that the majority of their employees will adopt some form of hybrid work over time. I was just curious what do you think their service delivery could look like long-term and what that would mean for your recruiting margins etc.?

[Matt Tait:]

Sure. So this is Matt. I'll just start off. So we've been doing obviously the war on talent has not ended. So, we're very sensitive to that. We have our mobility program which has hit record numbers this year in terms of where enablement of our folks and I could spend 20 minutes talking to you about all the career enablement things we're doing. But the key for us is that, I mentioned in my comments just around flexibility with the -- we have a wide variety of customers that some want I'll say a 100% remote and others that want a 100% on-site. And so we're working through that as well as for our -- each of our employees in terms of what experience and career enablement they want to have. And I think the phrase that we really use to sum that up was we really want our folks to be the best version of themselves. And so we're going to be working with them to make sure that they can do that within the context of the pandemic and the things as our customers are I'll say changing their requirements or updating their requirements for remote work.

[Jasper Bibb:]

Thanks. And then I just want to get your thoughts on what wage inflation might mean for the business based on your contract mix? How might that impact margins? And is that potentially a tailwind for the cost plus portfolio if your customers are willing to pay out for the best IT or cyber talent?

[Judith Bjornaas:]

Yeah I mean that's definitely an area where having the high percentage of cost plus work is to our benefit. So, they are willing to pay those higher costs. But that said it's still very competitive market both on a bidding standpoint as well as a hiring standpoint.

[Jasper Bibb:]

Okay last question for me. I just wanted -- well there seems to be a pretty dynamic environment responding to Delta. Now have you seen any customers putting capacity when that's back in place have skipped workers is there kind of any expectation that that might happen in the coming months?

[Kevin Phillips:]

Yeah we are not seeing that. I think the general guidance is we want you to show up the -- we want to make sure you're vaccinated. We want to strongly encourage as best we can your vaccinated and if you're not we're asking that you take a lot of precautions and we're going to help you take those precautions. And in terms of not only doing math but testing. So we'll see how it all plays out but the guidance generally is a fair amount of the citizens have at least one shot but we still have a surge going on and let's work through this and try not to shut down things if we can have all of it.

[Jasper Bibb:]

Got it. Thanks for taking the questions.

[Operator:]

Thank you. Our next question comes from Mariana Perez Mora of Bank of America. Your line is open.

[Mariana Perez Mora:]

Good afternoon everyone. Hello. So my question is on cyber security. We see a lot of commentary around how cyber security is important for -- to national security we have seen cyber security funding included in most of the deals that we have seen recently. But then how should we think about the timing from those -- ideas for funding to become, like budget to become, contract and plus probably become something that is reflected in your organic growth?

[Kevin Phillips:]

Yeah, it's a great question and thanks. Look there's a lot of -- like any major change, it starts with policy level changes as well as incremental funding and reprioritization of funding and basically in that order. And you can tell that there's a lot of policy level discussion with the new National Cyber Director and all the activities that's going on that will inform where the funding goes. That said, there is already an increase in unclassified budget for cyber, so you can see there's beginning for prioritization, same thing for IT infrastructure renewal and we think that that will be consistent, but it's hard to say where it will line up against other priorities. But directionally, I think that the ship is moving in one direction it's a matter of when and how those priorities lay out over time.

[Mariana Perez Mora:]

But when you do your internal planning, do you see this as a short-term boost or more like it could be years for these to actually become top line growth?

[Kevin Phillips:]

I think certain program is going to be a short-term boost, but the bulk of it is going to be longer-term mission requirements and changes that have to be funded and procured. So it's a mixture of both, but more and more of this will be more persistent in terms of the obligations and allocations toward it.

[Mariana Perez Mora:]

Interesting. And then have you seen given these trends like new entrants into the business, how hard it is to get like -- to compare?

[Matt Tait:]

We don't see a lot of new entrants in this. The areas that we're -- that you're talking about our -- I mean there is -- it's a high bar of entry to be able to do this -- the type of work that we do.

[Mariana Perez Mora:]

Perfect. And last one not related to this more like next opportunities. Would you mind giving us some color on what is the new work that you mentioned in the qualified pipeline of opportunities? What is that related, where does it come from or timing that we should look at?

[Kevin Phillips:]

Yeah. Appreciate the questions. So we have been positioning as we mentioned with our investments to be able to kind of predict where the market is and go after some of these procurements of all sizes, but more larger procurements as well as prime contractor. And we have been able to put together teams and compete and put in strong bids. I think that we're on the playing field competing for some of these larger deals across our different components of our business intel defense and federal civilian. And so I can't point to any one specific area. But if you think about cyber, think about enterprise IT, analytics and automation as well as remote computing and data at the edge support and systems engineering all those are areas that we are expanding into and competing more routinely.

[Mariana Perez Mora:]

Great. Thank you very much.

[Kevin Phillips:]

Thanks.

[Operator:]

Our next question comes from Louie DiPalma of William Blair. Please go ahead.

[Louie DiPalma:]

Kevin, Judy and Stephen good afternoon.

[Judith Bjornaas:]

Sure.

[Kevin Phillips:]

How are you doing?

[Louie DiPalma:]

Great. Your bookings were…

[Matt Tait:]

This is Matt.

[Louie DiPalma:]

Matt. Your booking were -- and Matt.

[Matt Tait:]

Clearly my feelings aren't hurt at all.

[Kevin Phillips:]

You got to a…

[Matt Tait:]

Not hurt at all.

[Louie DiPalma:]

Okay. For you Matt, particularly your bookings were particularly strong from classified customers, I believe you and Kevin may have said that 55% of bookings came from classified. Would you say that the intelligence community demand for your services and general award activity is back to 2019 levels or almost back to 2019 levels after all of the disruption associated with the pandemic and administration transition?

[Matt Tait:]

So, I would say there is still some delays in the intel sector and not necessarily from the administration changes, but more from the pandemic. But there is funding there, but it's just a matter of like Kevin talked about earlier the pace of what -- you have coming back in mass and getting things through. So it's a bit of a throughput issue that they're working through.

[Louie DiPalma:]

Sounds good. And also related to classified spending, the intelligence community seems to be accelerating investments in its cloud computing architecture with the Amazon C2S, the successor C2E that was awarded last year and the recently awarded wild and stormy. From a high level perspective, are migrations to the cloud a significant growth area for ManTech in terms of classified and non-classified customers? And if Amazon, Microsoft or others win a large federal contract as a prime, are you often involved as a sub-contractor for like these large cloud implementations?

[Matt Tait:]

Yes. So writ large, while we didn't mention cloud specifically within the five technical focus areas, it's like electricity for us, which is -- it's a part of all the things that you do. It's kind of hard not to do the types of work and the innovations that we want without being cloud enabled. And so we do work with all of the CSPs and do support a lot of the activities there. I know we've had recent press releases on certain relationships. And so I think this new unclass and class that part of our go-to-market is not going to be changed -- is not changing in a good way, meaning that we are investing in that. We do see opportunities across the patch. But we don't want to lead with cloud, we want to lead with solutions right. That customers really want us to solve their problems and so this is an -- these are enabling technologies that we are investing in to make sure that we can be technology agnostic given the right answer.

[Louie DiPalma:]

Okay. Thanks.

[Kevin Phillips:]

Yes. And this is Kevin. I'll just follow on that briefly. There's tactical cloud support, there's mission and I think service rate level cloud and there's enterprise level, and all of those are focus areas for our customers and are going to be areas that we'll seek concentrated movement over time in terms of just creating that foundational element up and down the overall decision making stack if you want to call it.

[Louie DiPalma:]

Thanks, Kevin.

[Operator:]

Thank you. At this time, I'd like to turn the call back over to Stephen Vather for closing remarks. Sir?

[Stephen Vather:]

Thank you all for your participation on today's call and for your interest in ManTech. As usual, members of our senior team will be available for any follow-up questions. Have a good evening and please stay safe.

[Operator:]

Ladies and gentlemen, this does conclude today's conference. Thank you for your participation and have a wonderful evening. You may now all disconnect.