Engility (NYSE: EGL) has been on a contract winning spree.
The government services company has been awarded four contracts over the past month worth $106 million. In an interview with Benzinga, CEO Tony Smeraglinolo discussed what these contracts mean for Engility and what to expect for the company in the future.
Smeraglinolo began by commenting on the economic strength, so far, of 2014 -- by noting the stark contrast seen in 2013. The government shutdown last year paralysed several of the agencies Engility works with while adding uncertainty to budgets.
Regarding the industry as a whole, Smeraglinolo thinks the macro trend is changing. This is especially true since the start of the government’s fiscal 2014. “Our customer has more safety in their budgets," he said, "definitely from 2014 to 2015.”
One of the key reasons Engility has been capturing market share deals with price.
“This is going to be a $150 billion dollar market and it is going to be price sensitive,” Smeraglinolo said. “We created the company to be the price leader and you see the fruits of our labor there. You start to see some of that come to fruition in terms of deal flow and our fair share of jobs.”
Engility’s deal flow has been historically made up of Department of Defense and Fed Civ contracts. However, the company is in the process of restructuring the percentage of sales each of these make up.
Rather than 70 percent of deals coming from the Department of Defense, Smeraglinolo explained the company is targeting a mix closer to 50-50. This has a big impact on deal sourcing, and will cut down the dependency on a specific government agency.
“For us that [Fed Civ] is the growth area," he noted. "I am not saying that DoD is not going to be a good market for us, it is just that our dependance on that will diminish as we increase our presence in Fed Civ area.”
Smeraglinolo also briefly touched on the latest wave of conflict in the Middle East, which may provide opportunity for Engility. Most of the company’s contracts are for an extended period of time, but specific events of this nature do make up approximately 10 percent of sales. On this side of the business, the chief executive explained the firm’s flexibility is a key order winner.
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