ManTech International Corporation
Q3 2016 Earnings Call Transcript

Published: 3 Nov 2016

[Operator:]

Good day, ladies and gentlemen, and welcome to the ManTech Third Quarter Fiscal Year 2016 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. And as a reminder, this conference call is being recorded. I'll now turn the conference over to your host, Stephen Vather, Executive Director, Corporate Development. Please, go ahead.

[Stephen Vather:]

Thank you, Karen, and welcome, everyone. On today's call, we have George Pedersen, Chairman and CEO; Kevin Phillips, whose promotion to President and COO was announced today; Judy Bjornaas, whose promotion to Executive Vice President and CFO was also announced earlier today; and Dan Keefe and Bill Varner, our two Group Presidents. 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 risk 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. Now, I'd like to turn things over to George.

[George J. Pedersen:]

Good afternoon and thank you for participating in today's call. I want to begin by focusing my remarks on the management changes described in the press release issued earlier today. Kevin Phillips has been promoted to President and Chief Operating Officer of the Corporation and Judy Bjornaas has been promoted to Executive Vice President and Chief Financial Officer. In each case, these promotions will formally become effective on November 7 after we have filed our Form 10-Q. Under Kevin's leadership, Bill Varner and Dan Keefe will continue to lead their respective business groups. Kevin and Judith's promotions are smooth natural transition for the company. Kevin served as Executive Vice President and Chief Financial Officer for 10-plus years and has been expanding his overall leadership responsibilities over the last two years. In similar manner, Judy has served as Deputy Chief Financial Officer since joining ManTech in 2010. Both are highly qualified for their respective new roles and I look forward to working with the entire ManTech team to continue the growth of our company. I will continue as Chairman and CEO, focus on the strategic direction of the company, evaluating acquisition targets and Congressional relations. I am bullish on the merger acquisition market in 2017 and believe that once the election cycle is complete and several strong companies will become actionable. We have $71 million in cash, no debt and a $500 million line of credit. We are in a strong position to make acquisitions to grow the company. We plan to be active buyers in 2017. Let me briefly comment on the current political situation. As expected, the government is now operating under a continuing resolution, which fully funds our programs through December 9. We believe that it's likely that we will see another continuing resolution to start calendar 2017. Our hope is that we will get greater visibility into the government's budget and spending priorities, following the upcoming election. Regardless of the outcome of the election, the level of overall threats to our nation remain elevated and thus demand for our services should be strong. Now, Kevin will provide you with a view of our operations. Kevin?

[Kevin M. Phillips:]

Thank you, George. I'm excited about the opportunity that you and the board have given me. ManTech is well-positioned to differentiate itself to our customers and grow within our current market. I have strong relationships with Bill Varner and Dan Keefe. Although they will now report to me, both will continue to lead their respective groups as they have done so effectively over the last few years. Judy has been playing a critical role over the finance and accounting area for many years, so I look forward to her taking on greater responsibilities. The transition and changes in reporting relationships should be smooth. For 48 years ManTech has been a mission first, customer-focused company, and I will carry this philosophy and approach forward. We will continue to invest in targeted markets and capability areas that our leadership team has already identified. These investment areas include best-in-class capabilities in cyberspace operations and cyber defense, and increased footprint into enterprise IT and mission IT. These are areas that require Agile software development, cloud environments, mobile and use of big data analytics. We will expand these capabilities into existing customers in the Department of Defense and increase our footprint in federal civilian and federal health customers as well as the intelligence community. In addition to these cyber and IT areas, we have strong capabilities in multi-discipline intelligence, total lifecycle systems engineering, test and evaluation, logistics, field operations and sustainment operations. We are capable of supporting these needs around the world and on numerous customer platforms, whether they are on land, sea, air, space or cyberspace. We have exceptional capabilities in cyber defense, cyber range services, supporting classified programs and insider threat protection that collectively provide exceptional protection to critical information in networks. My focus and mission is clear. We will help our customers meet their most challenging demands. We will also provide an environment that will attract and retain talented employees and we will increase shareholder value as we continue to grow the business. Moving on now to our quarterly financial performance and outlook, I am pleased to see continued year-over-year growth in all of our key metrics, and strong performance in winning new business. In the quarter, we delivered strong organic revenue growth and year-over-year improvements on operating and net income. We received $886 million in contract awards this quarter, which represent a 2.1 times book-to-bill. Our solutions are in demand by key customers and we are taking share in existing and new markets. Approximately 44% of our bookings were for new business. Total backlog at the end of the quarter stood at $4.6 billion and funded backlog was $1 billion. Proposal activity remains high. We expect to submit over $8 billion in bids by the end of 2016. Our total qualified pipeline is $18 billion and we have about $3.5 billion in proposals awaiting adjudication. Our capabilities and past performance allow us to effectively compete for larger contracts against large competitors. Over the next 12 months, we anticipate continued heavy proposal and award activity. Overall, we are pleased with the improved market visibility and the resulting growth potential. While I am very optimistic on our outlook, protest activity remains elevated and small business set-aside trends remain in some customer areas. Collectively, these may temper or delay growth. I want to echo what George mentioned earlier, we will continue to prioritize capital deployment for selective acquisitions and are actively identifying companies that are well-positioned for growth. I'm excited about our market positions, record proposal activity, and the long-term value of the capabilities that Dan, Bill, and the rest of the company's strong leadership team are creating. Now, Judy will provide you with some additional detail on specifics with respect to our financial performance and outlook. Judy?

[Judith L. Bjornaas:]

Thank you, Kevin. I am honored to be given this opportunity and look forward to undertaking my expanded duties and responsibilities. Over the past six years, I've gotten to know the company and the role quite well by serving as Deputy CFO. Revenues for the third quarter were $415 million, up $22 million or 5.7% compared to the third quarter of 2015 and up $14 million or 3.5% compared to the prior quarter. We experienced strong organic growth this quarter of 4.7%. Our support for overseas contingency operations was consistent with the prior quarter and expectations. For the quarter, prime contracts represented 88% of our revenues. Contract mix was essentially unchanged, with 67% of revenues on cost-plus contracts, 13% on time and materials contracts, and 20% on fixed-price contracts. Operating income for the quarter of $23.5 million was up 11% from the third quarter of 2015. Operating margin of 5.7% increased approximately 30 basis points year-over-year. Net income was $15 million and diluted earnings per share were $0.38 for the quarter, which were up 13% and 9%, respectively, compared to the third quarter of 2015. Now on to the balance sheet and cash flow statement. During the quarter, we collected $32 million in cash flow from operations or 2.2 times net income. DSOs were 63 days for the quarter, an improvement of six days compared to the third quarter of 2015, and an improvement of four days sequentially. Our balance sheet at quarter-end shows $71 million in cash and no debt. We will continue to strengthen the balance sheet, while we move ahead on our focused acquisition strategy. The board has authorized us to maintain our current dividend level of $0.21 per share to be paid on December 23, 2016. Moving on to guidance, we are narrowing the range of our previously communicated 2016 guidance. Before any future acquisitions, we are calling for revenues of $1.59 billion to $1.61 billion, net income of $55.5 million to $56.2 million and diluted earnings per share of $1.45 to $1.47. The implied operating margin for the year is 5.7%. Net income is expected to be up 9% to 10% and earnings per share is expected to be up 6% to 8% from last year, benefiting from revenue growth and margin expansion. Cash flow from operations should be between 1.7 and 2 times net income. Built into our guidance are an effective tax rate of 38.3% and a fully diluted share count of 38.5 million shares. We are in the process of building our plan for 2017. We have cleared through some large bids, but we are still awaiting the outcome of several others that will factor into our outlook for next year. We have responded to a few solicitations from the Army that consolidates some of our existing work with work held by competitors. The outcome of these procurements will factor into our outlook entering 2017. When we provide our 2017 outlook in February, we expect this uncertainty to be resolved. Now, Dan will speak to our defense and federal civilian business.

[Daniel J. Keefe:]

Good afternoon. ManTech Mission Solutions and Services had another strong quarter, as reflected in the corporation's results. We're also pleased with the continued strong program execution across the board that has resulted in award fees in line with expectations. In October, we delivered to NASA and Northrop Grumman the final fight materials supporting the James Webb Space Telescope. This completes our portion of production as a major subcontractor on this Cat 1 [Category 1] NASA program. Additionally, some of the re-competes that we have described in previous calls were awarded successfully to ManTech in the third quarter. Those awards include $208 million award with the Marine Corps ISR Enterprise, and the $32 million award with the Defense Health Agency. Bill?

[L. William Varner:]

Thanks, Dan. The Mission, Cyber & Intelligence Solutions Group also had a great quarter. We received a $322 million award from a new customer, the National Geospatial-Intelligence Agency, or the NGA, to provide enterprise management and cyber security support. In addition, we had several contract awards both new and re-competitions, as well as contract add-ons and extensions in the quarter from classified customers. I am pleased to announce that we brought in a new executive into the company this quarter, Damian DiPippa. Damian came to us from Engility TASC and prior to that Coleman Research. Damian's technical and leadership experience with many of MCIS's programs and customers will be a great asset in helping us expand our business across advanced technology and emerging service markets. We remain focused on winning new work and have submitted many proposals in Q3 and earlier this year with expected adjudications in 2017. Finally, attracting and retaining the strong talent needed to support our customers' missions remains a key priority for us. I would like to turn the call back over to George for closing remarks.

[George J. Pedersen:]

In summary, ManTech is positioned for growth based upon strong execution over the past three quarters and our recent contract awards. We're committed to leveraging our strong balance sheet to accelerate our growth. I'm looking forward to a more strategic role and procurement in the team to grow the business and continue the 48-year history of supporting the customers' most critical missions. With that, we're ready to take your questions.

[Operator:]

Thank you. Our first question comes from the line of Brian Kinstlinger from the Maxim Group.

[Brian David Kinstlinger:]

Great. Good evening. Congratulations to both of you.

[Judith L. Bjornaas:]

Thank you.

[Brian David Kinstlinger:]

I wanted to start with the Army consolidation comment, if that's okay. I'm curious what's the annual contract value that you currently generate under those contracts that are being consolidated with others?

[Kevin M. Phillips:]

Well, generally, there is a lot of – not, there are few contracts among many that we're bidding that consolidate some of our work with other competitors. And the range of those outcomes can have a great positive impact or some downward pressure as well. It totally depends. And we're waiting to see how they play out. Some of them have been awarded to us, some not to us and still some outstanding. So I think that the range of outcomes is still early to say. I would say, for internal planning, we're viewing the general Army needs to be net down, but not such that it would be more than, in my view, a mid single-digit impact. But we'll wait and see how these play out.

[Brian David Kinstlinger:]

Okay. And then I wanted to ask about the operating margin. If I look at some of the peers, they're slightly higher. So I'm curious, your opportunity long-term to close the gap with some of the public peers, is that with volume, is that contract type? I'm just curious over time how you see that playing out.

[Judith L. Bjornaas:]

I think that we're definitely suffering from contract type. We've got about 70% of our revenue from cost type contracts. So every time we make actions to reduce our indirect spending, $0.70 of every $1 goes back to the government. So it's hard to leverage growth like in the past when it was heavy T&M and fixed price. So I think if the mix starts to shift and as we grow, we'll see at some point some improved margin, but we're not expecting anything tremendous for the balance of this year or into next year.

[Daniel J. Keefe:]

Hey, Brian.

[Brian David Kinstlinger:]

Thanks.

[Daniel J. Keefe:]

This is Dan. I'd just add one of the reasons that you see us really moving into the health market is there's a lot – number of more firm fixed-priced contracts in there and also in the enterprise IT space, so certainly something that we're focused on.

[Brian David Kinstlinger:]

Great. Last one I've got and I'll get back in the queue is, I may have missed it, did you say $8 billion in awards being – in proposals being prepared and over what timeframe? And then, did you say $3.5 billion awaiting awards? And then maybe you can – how much is new versus re-competes? Thanks.

[Kevin M. Phillips:]

So, yes, for the full year 2016, if you recall, the budget approvals over the last couple of years have provided our customers certainty around the budget, and they have much more clarity about what they consider important. So, for 2016, ManTech will have submitted over $8 billion in submittals for work. And I think that's a very strong representation of the efforts that the entire team and Bill and Dan have done to position ourselves in the market and take on some of these larger programs. We've got $1.8 billion of contract awards here to date. We've got $3.5 billion of proposals outstanding. And generally, if you look at the proposals that we've been going after, between 35% and 45% of that work has been new business. So, I think it speaks well for the positioning we have.

[Brian David Kinstlinger:]

Great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Amit Singh from Jefferies.

[Amit Singh:]

Hi, guys. So your full year guidance for top line, if you could talk about what is the organic revenue growth at the midpoint of that guidance? And at this point, what could get you to the upper end or the lower end? What are the puts and takes for that range?

[Judith L. Bjornaas:]

So, the midpoint of the guidance has a total growth of about 3% and organic of 1% for the full year. And then to get – as we kind of narrow the range to get to the upper end is really going to be dependent on hiring and any ODC surges that we might see.

[Amit Singh:]

Okay, great. And then you talked about the contracts that are coming up for re-compete. Could you give us an idea as in this year what percent of revenues were up for re-compete? And early next year or the full next year, I guess, what percent of revenues are going to come up for re-compete so that we can get an idea of the risks that you talked about?

[Judith L. Bjornaas:]

So, for the balance of the year, very little revenue is at risk due to re-competes. And I would say the first half of next year is pretty light as well, a normal trend. We have seen over the course of the last year or two delays in awards, so that we end up working under bridges and extensions and delays to re-compete. So, again, kind of the second half of next year starts to spike up a little bit above the normal 20% trend.

[Kevin M. Phillips:]

Yeah, it's Kevin. I'll add that generally the re-compete level for 2017 within the intelligence community side will be a little less than average, and within the DoD side, it'll be a little bit greater than average. If you recall, the government had shortened their time period for certain contract awards on the DoD side. And that's kind of putting them in a constant re-compete. And I think that'll level off over time.

[Amit Singh:]

All right. Great. Thank you very much.

[Operator:]

Thank you. And our next question comes from the line of Bill Loomis from Stifel.

[William Loomis:]

Thank you. Good quarter. Congratulations, Kevin and Judy.

[Judith L. Bjornaas:]

Thank you, Bill.

[William Loomis:]

I imagine there's not going to be too much role changes. When I first saw the press release, I kind of thought for half a second, weren't they're already that, but congratulations. But on the re-competes – first of all, on the Army consolidation, I guess I didn't understand the answer on that. If you could just clarify a little more on how much revenue, is it mid single-digits of revenues is affected in total by the consolidation?

[Kevin M. Phillips:]

No. There's a wide range of potential outcomes, which is why we keep emphasizing that these are out there. I mean they can be net positive and they can drive downward. But I think that the range of outcomes could be – rough order, plus 5%, 6%, 7%, minus 10%. So for internal planning purposes, we don't know what that pushes into next year until the contract awards are adjudicated. But generally, the overall requirements are going to be a little bit lower. And if you would think about low to mid single-digit planning right now, not knowing the outcome. This is just an internal planning number, but it's a wide range of outcomes, but I am trying to frame it as less than 10% down, about 5% up and we'll have to see how it plays out.

[William Loomis:]

And are these just task orders under IDIQs or are you talking about IDIQ and the task orders will get re-competed?

[Judith L. Bjornaas:]

Task orders under existing IDIQ.

[William Loomis:]

Okay. So the IDIQ vehicle themselves aren't being consolidated or is it...

[Judith L. Bjornaas:]

No.

[William Loomis:]

... task orders within an IDIQ? Okay.

[Kevin M. Phillips:]

Correct.

[Judith L. Bjornaas:]

Correct.

[William Loomis:]

And then, you mentioned small business and protest. I mean everybody's mentioning that, but why do you think it's going to get worse, because I assume you factored that into your guidance, but everybody at some point in the year seem to have slipped their guidance because of the impact of these two issues. Do you think it could get worse? And what are you seeing in terms of quiet behavior on the different types on the small business issue?

[Daniel J. Keefe:]

Yes, this is Dan. It does vary by client. I would say within the last six months, it seems to have kind of leveled off. So I wouldn't say it's gone away, it certainly is the administrations guidance to the agencies and the services, so kind of levels off. What was the second part of the question?

[William Loomis:]

Have you seen it different in different areas what the customer – when you talk to customers, if you think it's going to get worse or what have you?

[Daniel J. Keefe:]

It's pretty balanced. The administration's guidance is across the services A&P, (22

[Kevin M. Phillips:]

So broadly, it's created for the last few years a headwind for our part of the industry, but I think that over time if it hasn't already leveled, it will level. So the question is, is this the new normal in terms of what we see today?

[William Loomis:]

Okay, great. Thank you.

[Operator:]

Thank you. And our next question comes from the line of Edward Caso from Wells Fargo.

[Tyler J. Scott:]

Good evening. This is actually Tyler Scott on for Ed. Kevin and Judy, congratulations to you both. My first question is just on award activity in the intelligence community. Have you seen any fallout from the whole NSA contractor being arrested? Maybe if you can comment on any sort of slowdown or impact you saw with the Snowden arrest a couple of years ago, any thoughts there? Thank you.

[L. William Varner:]

Sure, this is Bill. Of course, we can't comment on anything going on internally in any of our customer areas. We actually have not seen any slowdown in awards or any delays that we would attribute to either of those events. Of course, you could say that the recent event, it would be too soon to see anything resulting from that at this point.

[Tyler J. Scott:]

Okay, great. And then just on the book-to-bill, the bookings in the quarter, obviously, it was a really strong number. What kind of visibility does this give you? I mean the 2.2 times book-to-bill, do you have visibility into the first half of next year, or further or over the next couple of quarters?

[Kevin M. Phillips:]

It's Kevin. The general proposal volume is high. It's expected to be high for the next 12 months in our view. And then the adjudication and award activity, I think, will still be robust. The timing between quarters is uncertain, but there's still a lot of volume that's being submitted. And there's still a lot of volume to come in terms of awards, and we'll have to see how successful we are. But I think we're in a good position to continue winning our fair share of the work.

[Tyler J. Scott:]

Has there been any change sort of in revenue conversion of the strong awards? It seems like the numbers have been really good this year, but the revenue guidance at the high end keeps coming down. So I don't know is there something going on there that you could talk about or anything else we should be reading into?

[Kevin M. Phillips:]

Yeah. Well, there are two factors that kind of dampened ramp-up time on staffing. One is, there's just a greater supply and demand gap in some of those skill sets and we are very aggressively looking to deal with that and have been. And the other is, frankly, that there are some delays in the clearance process that are normal and appropriate, but they are occurring as a result of the previous action in OPM to kind of address issues and also on the customer side to make sure that we have the appropriate issues to address what we may consider insider threat risks. So those are all important things to address. They're creating some delays in the clearance process that I think the entire industry is aware of and that's just slowing down some of the ramp-up time. But those are the only, I'd say, unique or different things than the normal.

[Tyler J. Scott:]

Okay. And just the final one, was there anything unique in this quarter? 5% organic growth is obviously very, very good. Was there something, an award fee or something like that or what are you sort of seeing that would make you think that that growth rate is going to step down moving forward?

[Judith L. Bjornaas:]

Some of the – you've asked a question about the size of the awards and some of the awards do have money set aside for ODC procurements. And in Q3, we did see a spike on some of those new awards in some of the ODCs.

[Tyler J. Scott:]

Great. Thank you very much.

[Operator:]

Thank you. And our next question comes from the line of Gautam Khanna from Cowen & Company.

[Lucy Guo:]

This is Lucy on for Gautam. He is traveling. Good evening, everyone. I wanted to follow-up on just kind of the conversation around the Army consolidation. I was wondering if there are any other swing factors or large drivers to your organic growth in 2017, perhaps in terms of programs and size.

[Kevin M. Phillips:]

No. I think it's all – frankly, we're bidding on larger bids. I think in Dan Keefe's area, we're more successful in taking on bigger bids, which is great, and Bill as well. And it all boils down to our ability to win those contracts and expand the business, but I think that we're in a really strong position. We've done a great job over the last few years to get there and we're very optimistic about the potential for the market and our positioning in the market.

[Judith L. Bjornaas:]

I think it all comes down to timing of the awards and then the protest and clearing through those so that we can start work.

[Lucy Guo:]

Got it. And secondly on the M&A pipeline, are there any large potential assets out there that you're looking at?

[Kevin M. Phillips:]

It's Kevin. As George mentioned, that once the election cycle is done, if you think about the overall budget footprint, we think it's going to be flat to up and we're in a good position. So we're going to be more aggressive on the acquisitions. And there are some good targets out there and we do think after January that there will be more active. So, yes, we're actively seeking and looking at candidates and we expect more in 2017 and George will be very focused on that.

[Lucy Guo:]

Great. Thanks, very much.

[Kevin M. Phillips:]

Okay.

[Operator:]

Thank you. And our next question is a follow-up from the line of Brian Kinstlinger from the Maxim Group.

[Brian David Kinstlinger:]

Yeah, hi. Sorry if I missed this. But, first of all, did you mention or quantify the contract values that are in protest? And if there are some, are they in bookings yet or are they not yet in bookings?

[Kevin M. Phillips:]

First, we don't put any protests in bookings until the protests are cleared. And within that, there are a large number of bids that we've been going after, some successful, some not. I don't have a specific number to provide you, but I do think that there are some large bids that are going through the adjudication process that once they are cleared, either in our favor or not, will provide some good visibility on the level of growth that we can expect. So, it's pretty heavy in terms of the bid volume. It's pretty heavy in terms of the amount that's – above normal, I'd say, in terms of the protest volume and I think that's industry-wide. And we'll have to see how that play through.

[Brian David Kinstlinger:]

But is it accurate to say you have a couple hundred million dollars right now of wins in protest?

[Kevin M. Phillips:]

We have a sizable amount of wins and losses in protest and I would say that that number is light. I think industry-wide everybody's in the same boat. And about – over half, probably 60% of the bids that are in any protest position are actually for new awards. So, once they get cleared through if they're in our favor, that's potential upside.

[Brian David Kinstlinger:]

Okay. And then finally, again, you may have answered this as well, but if I look at 4Q revenue versus 3Q sequentially, is the lower revenue for less billable days you were pass-throughs, which I think is what you may have said, or is it because some programs are coming to their natural conclusion are lost?

[Judith L. Bjornaas:]

No, it's a combination of both of those. About half of it is from just fewer workdays and then people taking time off for holidays and then a slightly lower level of ODCs in the quarter.

[Brian David Kinstlinger:]

Great. Thanks so much.

[Kevin M. Phillips:]

Okay.

[Operator:]

Thank you. And our next question comes from the line Tobey Sommer from SunTrust.

[Tobey Sommer:]

Thanks. I wanted to ask a question about backlog. With the upcoming guidance about backlog and how that's supposed to be treated, are you comfortable that your methods and processes are aligned with that? Or do you envision any kind of changes you may have to make?

[Judith L. Bjornaas:]

I'll tell you that I don't think anybody's reporting is in line with the guidance. I think everyone's still trying to figure out how we're going to report the guidance. It is not clear – it is clearly not what we report as backlog and its, in fact, I don't even think what we report as funded backlog is in line with the guidance. So, I think industry-wide, we'll probably continue to report backlog like we have and then the GAAP reported backlog that's going to be required in the financial statement will be based on what they require. But it is not an industry norm definition that they've come out with the GAAP.

[Tobey Sommer:]

Okay. I wanted to ask a question about pricing and kind of the dynamics there. With LPTA maybe not being used as prevalently going forward, some contracts being viewed and awarded on a best value that used to be based only on price. Do you think that that provides the company any kind of margin tailwind as a portion of what had been formally bid and won on a LPTA basis can be re-competed on a best value?

[Kevin M. Phillips:]

It's Kevin. I'll answer that. First, different customers are still running through different methodologies. I mean some customers still tend to focus on price as a very important factor. Generally, though, the trending is moving away towards that to trying to find the right solutions and the right outcomes to support submission requirements, which is positive. And that will support over time the potential in our sector as well as ManTech for that upward movement, but I think we have to wait and see how those play out because there are still some that are focused on price, some that are focused on solutions and capabilities.

[Tobey Sommer:]

Okay. Thank you. That's helpful. And the last one I was going to ask, I didn't – if I missed this in the earlier part of the call, I apologize, but did you comment on M&A and what you're seeing in the market as opportunities versus a couple of quarters ago? Thanks.

[Kevin M. Phillips:]

Yeah, I did. We expect after the election cycle in 2017, there will be more assets out there. I'd say that there are some decent businesses out now and decent businesses we expect out next year, and we're actively engaged. But once we clear through the budget cycle, as I think we've noted, George has always been and will continue to be focused on acquisition strategy and the growth potential because that's our primary driver for capital deployment. And we expect to be aggressive next year. I think there are some good businesses. So this year it's kind of normal. Next year, we expect it to be a little bit above normal.

[Tobey Sommer:]

Thank you, Kevin, and congratulations.

[Kevin M. Phillips:]

Thanks.

[Stephen Vather:]

And it appears that we have no further questions at this time. As usual, members of our senior team will be available for follow-up questions. Thank you all for your participation on today's call and your interest in ManTech.

[Operator:]

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