Industry Week in Review – August 17, 2018
Aerospace & Defense Update
Lockheed Martin was awarded a $2.9 billion contract to produce three next-generation geosynchronous nuclear missile-warning satellites. This follows Northrop Grumman win of a contract for two polar-orbiting satellites. Together, the two sole-sourced contracts mark the first major development for the construction of the Air Force’s Next-Generation Overhead Persistent Infrared (“OPIR”) constellation, which is set to supplant the existing Space-based Infrared Satellite System (“SBIRS”) beginning in 2023. The OPIR constellation system boasts improved missile warning capabilities that more adequately suited to combat the world’s evolving threats. The Air Force is now targeting a 2029 completion date, four years ahead of the original timeline.
The global space industry has continued its rapid growth, expanding to $384 billion in 2017, and nearly doubling in value over the last decade. The industry is expected to reach $1 trillion in value by 2030. The private sector is driving much of this growth, with companies such as Blue Origin and SpaceX investing millions of dollars to gain market share in the growing and largely untapped space industry. The growth and high expectations have rendered an uptick in commercial spacecraft launches from U.S based spaceports over the past few years. In the U.S.’s most active states (California, Florida, and Texas), launches have increased from 4 in 2012 to 21 in 2017 and are on target for 25 launches in 2018. Existing spaceports are undergoing massive expansion to accommodate this increasing launch cadence, with plans for new launch site locations on the horizon.
Government Technology Solutions
On Thursday, CACI closed its $84 million acquisition of CSRA’s Systems Engineering and Acquisition Support Services Business Unit (“SEABU”) from General Dynamics (“GD”), who was forced to divest the contracts due to a conflict of interest with its US Navy (“USN”) ship operations. The business that CACI acquired provides complementary engineering services for the USN to its legacy USN work. The acquisition comes in the aftermath of a bidding war between GD and CACI for CSRA earlier this year, which GD ultimately won. CACI expects the acquisition to add $150 million in revenue to its 2019 fiscal year, increasing estimated annual revenue to approximately $4.8 billion. Additionally, CACI intends to grow its engineering work and expand its solutions and services offerings with the USN through SEABU. Notably, the deal will position CACI to capture part of the USN’s accelerated shipbuilding timeline, a result of the growing importance of reconnaissance, maritime border security, and nuclear deterrents amidst Chinese and Russian developments in undersea technology and fleet capacity.
With legacy customer relationship management (“CRM”) systems becoming outdated and cumbersome, federal agencies increased attention to improving back office functions and overhauling the overall customer experience. Similarly, higher GFY18 appropriations, coupled with pressure to respond more quickly to proposals, have incentivized agencies to allocate funding towards modernizing their CRM systems. A 2018 Deltek study on the state of the Government IT market indicates that 26% of surveyed contractors are investing in their CRM capabilities, in order to be able to deliver solutions to federal agencies in need. This emphasis on modernizing CRM tools in the hopes to be more agile in the bidding process should pave the way for agencies to both deliver a better customer experience and allocate more time and resources to their mission performance.
Triumph Group, Inc. (down 9.1%) – Share prices were down this week due to first quarter fiscal year 2019 earnings coming in at 34 cents per share, missing the Zacks Consensus Estimate of 36 cents by 5.6%.
ICF (up 6.2%) – Share prices were up this week due to an announcement that ICF’s CRM division was awarded multiple new and incremental retainer funding during the first half of 2018 to provide loyalty marketing and CRM services.
Boeing has agreed to acquired Millennium Space Systems, Inc., provides agile, flight-proven small-satellite solutions. Terms of the deal were not announced.
CACI International, Inc. has acquired the Systems Engineering & Acquisition Services Business Unit (“SE&A BU”) of CSRA LLC, a provider of comprehensive engineering services to the U.S. Navy. The deal is worth an estimated $84 million.
Lentech, Inc. acquired Edge Space Systems, Inc., provides aerospace thermal engineering solutions for space and launch systems, high altitude balloon missions, and terrestrial instruments. Terms of the deal were not announced.
Zen Technologies Ltd. has agreed to acquired Unistring Tech Solutions Pvt. Ltd., develops electronic warfare (EW) solutions, advanced communication systems for defense, telemetry systems and simulators for radar and EW system evaluation. Terms of the deal were not announced.