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With a revamped corporate name and technology services business, HII is talking about its own software and data shipbuilding this year as much as it is at work.
HII, formerly Hunt Ingalls Industries, had one significant success story to talk about on that front during its second quarter earnings call with investors on Thursday: a potential five-year, $826 million technology integration task order that supports the entire Department of Defense.
The task order, under the full name of Decisive Mission Actions and Technology Services, is directly related to HII’s $1.65 billion acquisition of Alio Science and Technology in the third quarter of last year, HII CEO Chris Kastner told analysts.
Alian became part of HI’s Mission Technologies division, formerly known as Technical Solutions.
“It’s a very good indicator that things are starting to take off and really validate our Alion acquisition strategy,” Kattner said. We’re seeing some things unravel, we’ll have to see how that translates to revenue.
HII placed the DMTS order on a statewide OASIS professional services contract vehicle. The task order includes analysis including technology, development, integration, collaboration, ongoing support, threat analysis, and those of a specialized nature.
DOD service units, component research laboratories, Fourth Estate management and support agencies, intelligence agencies, and combatant commands can receive support from the command.
Federal Procurement Information System records show the Mission Technologies business competed against another bidder for an order covering one initial year and up to four individual option years.
But predicting when HI’s next big win will be is a tough proposition. Kastner said that while this kind of collaborative win is positive, continued delays in agency awards are “putting pressure on the timing of this year’s earnings.”
But the company isn’t standing still for those opportunities to further expand its mission technologies segment.
The business has $8 billion in bids awaiting the agency’s decision, and another $26 billion is in the qualification and proposal stage. About $27 billion is in the exploratory phase, or where the company decides to continue the business.
All of this adds up to an estimated $61 billion pipeline for HII, “which we’ve had since we raised (Aleon) last year,” Chief Financial Officer Tom Stiehle told analysts.
Even with that favorable long-term outlook, HII is revising its Mission Technology revenue forecast to $2.4 billion to $2.6 billion this year. HII’s advance sales guidance was at the high end of $2.6 billion.
“This revision is a result of slower reward activity in the contracting environment than we initially expected and was driven by continued determination to start the year,” Stiehle said.
In the second quarter, Mission Technologies’ revenue was $600 million, an increase of $363 million in the prior period, due to the Allion acquisition. The company expects the segment to hit 8% to 8.5% EBITDA margin (earnings before interest, taxes, depreciation and amortization) this year.
In addition to the award delays, HII is also leading the way in the same tight hiring environment that other defense and government tech stocks have spoken to investors on earnings calls over the past two weeks.
HII is seeing that problem on both sides of the business: mission technologies and shipbuilding.
“Right now we have more seats than we have heads,” she said. “The labor market is tight, to find people with such a background and tickets, so there are unfilled seats and that will make some difference in the sales results of the year.”
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