Perspecta Inc. (NYSE:PRSP) Q4 2020 Earnings Conference Call - Final Transcript

May 21, 2020 • 05:00 pm ET

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Perspecta Inc. (NYSE:PRSP) Q4 2020 Earnings Conference Call - Final Transcript

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Q & A
Operator
Operator

We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Joseph DeNardi of Stifel. Please go ahead.

Analyst
Joseph DeNardi

Thanks. Good evening guys. John, I think two questions for you. Can you just provide a walk from FY '20 margins ex-NGEN to FY '21 margins ex-NGEN so that we can understand, kind of, why that new run rate is sustainable over the three-year target? And then is the pipeline consistent with that margin profile also?

Executive
John Kavanaugh

Yeah, sure Joe, I'll be very happy to. First off, very, very pleased with the continuing strong execution and performance in both of our reporting segments. Okay. So in terms of providing your bridge, as we've been talking about over the last year, we are obviously seeing lower asset intensity level. So we're having less depreciation as we go into FY '21, also associated with, again the NASA loss to EUH roll down. Okay? Secondly, again, we've had a little bit shift to higher cost-plus mix that's associated with some great new business wins that we had. We're starting to see those ramp up. And thirdly, again at this point, conservatively, we've taken a look at COVID-19 and we tried to put our arms around it, and it's about $20 million. So that's kind of bridging. So again, feel very good about the performance.

Now relative to the pipeline, when I look out over the horizon, very strong pipeline, again $13 billion in adjudication right now, a $70 billion pipeline over the next three years, north of 60% of that is fixed price. So we feel very good about, obviously, the guidance we put forward in FY '21, feel very, very good about the long term profile.

Analyst
Joseph DeNardi

That's great. And then John, can you just clarify what the disclosure around 8% of contracts up for re-compete over the next three years? What does that mean exactly? Like how much revenue are we talking about per year or over that three-year period?

Executive
Mac Curtis

Yeah. Joe, this is Mac. So what it means is when you look at the $70 billion, normally, if you have five-year run rate contracts, that means 20% of your business would normally be up at any given year. We've gone through a lot of large re-competes, we are seeing the period performance, a little longer on some of these contracts. So if you look out from '21 through '23, $70 billion you have about 8% is new business. So, that means 92% times $70 billion is really new opportunities for us. In some cases it's new starts, other cases it's take away from other people's business. So that's really the way we kind of think about it. One of the things that we've talked about, we mentioned in the remarks, is that we really focused on, and Sean Mullen and his team -- we've got Orlando Figueredo is coming back into the company to help drive the Intel business, so we're really investing and looking at that three-year run rate where