From Leidos, we have Chris Cage, CFO. Leidos has been on a little bit of a, I would guess, a recovery or a rebound. I mean, there were certainly some events in 2023 that, you know, brought into question sort of where the company was going. But now you've been on a tear and earnings have exceeded even sort of the most bullish expectations. So maybe to set the stage, Chris, if you could just sort of give us an overview of Leidos, maybe what's happened over the last year, year and a half, and where the company is going?
Sure. Well, Bert, first of all, thanks for having us out. You guys do a great job, great conference. Happy to be here, and you're, and you're right. Over the last year, we've seen excellent performance from the company, but, you know, there's a few different things going on. We've always had the building blocks for exceptional performance, and I think one of the main things that happened obviously is the CEO transition. Tom Bell came on board in May of last year and really helped the organization, you know, fo- Obviously, is the CEO transition. Tom Bell came on board in May of last year and
Really helped the organization, you know, focus, get back to some discipline on the execution side, and really optimize the pieces of the portfolio that we had already in place. Get back to some discipline on the execution side and really optimize the pieces of the portfolio that we had already in place. And, you know, Leidos is headed towards a $16 billion government technology and services company, you know, addressing some of the most critical missions for our customers, and that's, you know, U.S. and internationally.
One of the things that we've done over the last five months is the reorganization. So, put the piece parts together a little bit differently to unlock the next gear in performance. We had acquired some capabilities in the 2020 and 2021 time horizon in the next gear in performance. It was an opportunity to really reconfigure how those pieces fit together in the portfolio. We had also won some significant programs in our digital modernization space, do a lot of government IT support work and transformation work for our customers. Putting that together in a more critical way.
So, you know, organizationally unlocking the next gear, we've always had the talent, the people kinda double down on our innovation agenda. And, you're right, you look at the last year, 8% top line growth, 20%–25% EPS growth. You know, more than 100% free cash flow conversion. So really, the organization has been hitting on all cylinders.
I guess as we think about that, that growth trajectory, you know, I think there's certainly been a good portion of that has come from the health business. Can you just talk about maybe what changed in the health business? But as we go back to 2022, and the PACT Act was passed, and there was sort of this idea that that would drive some growth. And I think what we've seen has been certainly better than what we expected. I mean, there's obviously been other components to that growth story. Maybe how would you segment sort of what's driven that uptake in VBA?
Right. Well, our health business, which is now part of our Health & Civil segment, that you can see reported externally, has been a standout performer and, you know, excellent leadership at the top, first and foremost, a great strategy. We were well penetrated within our VA customer, so that's one of their our primary customers, but we obviously do a lot of work for the DHA, for Health and Human Services, et cetera. But within the VA space, we had a disability examination business, so that had been performing well, and it's a business that rewards investment in optimizing throughput, optimizing customer satisfaction and quality, and those are characteristics that Leidos, you know, always prioritized.
PACT Act created an, you know, additional demand signal, right? So the volume of veterans that were eligible for disability benefits increased substantially, and we see that continuing into certainly through 2025. The number of veterans that were eligible for disability benefits increased substantially, and we see that continuing into, certainly, through 2025. It also created more complexity with each veteran that was being seen, multiple conditions needed to be evaluated s o, the dynamic was changing. Volume was elevated. You were leveraging your fixed cost base more effectively. Investments applying case was changing. Volume was elevated.
Investment supplying capabilities that Leidos brings to bear in areas like IA and robotic process automation, things like that, could be leveraged to increase the number of veterans that were being seen, most importantly, but then yield, you know, excellent results because the way we're contracted to provide those services is on a fixed unit rate basis. So that business is, you know, an area that we're looking to... How do we expand that platform of our managed health services beyond just the VA? We do some of that today, and we think we can expand more significantly into platforms of our Managed Health Services beyond just the VA, you know, some areas of a commercial market, insurance providers, et cetera.
We do work similar vein with the Reserve health readiness program, leveraging a platform to make sure they get examinations for states of readiness. So there's a lot of opportunities to continue to take that business forward as we execute our strategy here over the next year.
I mean, when I spoke with Tom, soon after he joined, he said he was asking all the business heads to sort of prepare a plan, sort of what they thought would be, like, the most bullish outcome, and wanted to think about, like, the best ways to maybe allocate capital. If we fast-forward today, you guys have gone through that resegmenting exercise and sort of have the leaders in place for the businesses that sort of as the business is gonna go. If we fast-forward today, you guys have gone through that resegmenting exercise and sort of have the leaders in place for the businesses that sort of as the business is going to go forward. What has that exercise yielded?
You know, where does health, like Health & Civil, you know, fall into going forward? What has that exercise yielded? In terms of a category for where you think the company is going, is that gonna be the growth arm for the company, not just in 2024, but maybe through the 2020s or is that more of a temporary thing?
Well, I mean, I'd certainly say health is an important part of the longer-term view. So big picture, you're right. You know, Tom's come on board, and, you know, we're in a year of deep strategic thinking, as he would characterize it, and we're middle of the movie, working through a robust set of strategy dialogues with all of our units, and really evaluating which of those have the best potential to accelerate growth and profitability from where they are today. Really getting deep into areas of our capability and into the customer demand space.
You know, more work to be done there to finalize that, and our plan is to have a robust dialogue with investors early part of next year, at an Investor Day to kind of reveal some of that strategic thinking. But I think the important part is that, yes, we wanted to be more intentional with resource allocation into the parts of the business that showed the most promise. Easier said than done, right? We've got $16 billion. We got a lot of contracts. We get a lot of work that we're executing on today, but, you know, redistributing some of those resources for maximum benefit. We're doing some of that right now.
We've actually, with our good performance, have been able to increase the investment in innovation this year. But as we transition into 2025, you'll even see more of that. Back to your health question, absolutely, they'll be an important part of that strategic horizon. You know, again, like I mentioned, there's areas of the managed health services space that are suboptimized, that within our customers, whether it's DHA, whether it's VA, whether it's e ven in the commercial arena, where we can apply some of the capabilities we've developed more broadly, because the healthcare trends in this nation will continue to drive increased spending, demand. So, more to come on the specifics around how we execute that, but we do believe that's a business that has a lot of legs, and we like the way, again, it's set up and structured, where it rewards investments in optimization and innovation.
Maybe just another, like, I guess, high-level question. If we go back in the history books on, on Leidos, you had the split with SAIC in 2013
And then innovation.
You know, sort of the acquisition merger of the Lockheed Services business. You bought QTC, which got you into the fact that or the VA exam world. And I think the business was starting to become known for winning these major enterprise IT programs. You had maybe NGEN AEGIS and, you know, the DHMSM Defense Health Program.
Mm-hmm.
And then sort of went down a path of maybe acquiring more into the product side, bought Dynetics, bought the SD&A business from L3Harris . Now maybe I wouldn't say backtracking on that, but putting maybe a little more emphasis back on services and not necessarily just enterprise IT, large programs, still big focus, or are those fewer of those to go after? And so thinking about sort of how you can grow in the medium-sized programs.
Mm-hmm.
Like, just from a strategic standpoint, thinking over the next past decade to maybe the next decade.
Right. Well, there definitely was an opportunity, and the business has gone through a lot of transformation over the last decade, you know, starting with the mega enterprise IT jobs, right? So, that's not something that we were moving away from, but there aren't as many of those to go after. I do think that Leidos has proven capability, the scale, the size, the past performance to be a credible bidder for some of those as they get consolidated into mega jobs across key clients. So as those come up, you would expect us to continue to be a strong competitor for some of those opportunities.
I do think there is a sweet spot in, you know, a level down on size, too, that perhaps we weren't as focused on, and those can be areas that, you know, as we built out this digital modernization organization, and today they're looking at, you know, bringing those contracts together has allowed us to evaluate how do we deliver cloud migration, desktop support services, you know, cyber, et cetera, across multiple customer sets into an optimal delivery, a repeatable offering.
And that will help us get even more efficient in that delivery mechanism, and that can be applied to contracts that are potentially smaller in scale as well, to make us a viable, strong competitor in that domain. And I think the other area that we haven't unlocked full value is really getting into some of those mega client environments and expanding right beyond the base set of activities we were contracting for. So as customers need more cyber protection, more software development, app development, etcetera, there's opportunities to expand that.
So digital modernization, I think, has a lot of room to grow, and I think both in mega and mid-size programs. You mentioned some of the non-services parts of the portfolio, a lot of room to grow, and I think both in mega and mid-size programs. We're still excited about the prospects there as we think about the application of, you know, even in the hardware arena. It comes down to software, it comes down to cyber, it comes down to trusted mission, artificial intelligence application. Those are things that Leidos brings that can be differentiators for us. And so those parts of the portfolio aren't yet where they can be from a growth and margin perspective.
But we still think there is a lot of exciting, demand and growth prospects in that part of the portfolio too.
Maybe if we bring this, I know this is sort of started like high, high level theoretical more, more than anything, but if we bring this into the context of 2024, yeah, you've given pretty I would say, segment by segment sort of guidance on a revenue and a margin basis. And if we drill down into the national security and digital business, which is decent which is historically the core of the business-
Mm-hmm.
You're looking for, you know, call it a 3%-ish growth year. The market or your peers are certainly growing a little faster than that. On the margin basis, sort of high 9%, low 10% range. You know, maybe help us understand like, how to calibrate that, why, why there's not opportunity maybe for more growth in this market.
Yeah, and I think there certainly can be no doubt. Like, you know, every year is situation dependent, you know, whether you had some contracts ending or rolling off or maybe a recompete that didn't go our way in the case of one intel job. But, there are definitely some growth tailwinds in that particular sector. Programs like Defense Enclave Services, but t here are definitely some growth tailwinds in that particular sector. Programs like Defense Enclave Services has been slower to get to where we are today than we expected, but still see a significant ramp up as we migrate other parts of the DoD.
Has been slower to get to where we are today than we expected, but still see a significant ramp up as we migrate other parts of the DoD Fourth Estate agency onto the DoDIN network and sustain and modernize that for them over time, as an example of a growth catalyst. So yeah, there is absolutely parts of the DoD Intel services market where we see a robust set of opportunities in the pipeline. Actually, that's one of the more exciting parts of the portfolio as it relates to bidding activity and what we can see in the intermediate horizon.
Doesn't mean we'll win everything we're going after, we know that, but there's a lot of activity which sets us up for growth momentum in 2025 and beyond. From a margin perspective, this gets back to what I was saying earlier, Bert, on the repeatable operates. I think in digital specifically, there's most of the contracts that we perform on, you know, a fixed unit rate, it's outcome-based, right? So as you optimize your delivery, you can capture more margin opportunity.
And so there's a lot of those programs that are still relatively in the NGEN, you know, year three, DES year two, Aegis, you know, year two-plus, right on, you know, sometimes eight to 10-year early innings a nd you find opportunities as you get into the middle innings to drive even super superior performance. We're very focused on that. So I, I'm bullish on the opportunities in that particular segment to drive margins higher over time and hopefully couple that with a good win rate against the robust opportunity set, and we can set ourselves up for more growth as we pivot into 2025 and beyond.
So you, you mentioned DES, Defense Enclave Services, that was the marquee win, the $11.5 billion contract that it won back in 2022. You also won CHS-6 which was the, you know, phenomenal takeaway win last year, and, and that's transitioned now. But DES, you know, sort of anyone's guess where it could go. I know you sort of previously, Roger, used to set expectations a little lower for it. Wasn't running. I think it was running around half of that.
Mm-hmm.
But DES, you know, sort of anyone's guess where it could go. I know you sort of previously, Roger, used to set expectations a little lower for where it was going to go. But there's a lot of opportunity there. What's the best way to think about that? Because I think people would have anticipated CHS-6 to ramp more this year, feel like the expectation's been maybe that's a little slower.
Mm-hmm.
Then DES has taken a little longer. Is there still an opportunity for the CHS-6 to ramp more this year? And then DES has taken a little longer. Is there still an opportunity for those to get the, to a substantially higher level than we're there today?
Well, yes, in both cases, you know, take them each in turn. I talked a little bit about Defense Enclave Services to get to a substantially higher level than we're there today. So, you know, it's a unique animal. This was a new start program, right? But the scope of work was being conducted in a variety of services. So, yeah, it's a unique animal. This was a new start program, right? The scope of work was being conducted in a variety of defense agencies that bought their IT and network support and cyber protection individually.
Bringing them along a journey to migrate to a new, modernized, secure network is a, you know, it's a long process. DISA, as the contracting agency, is excited about that, as are we. There's been great dialogue around planning for the next wave of migrations, and ultimately, yes, we'll pull more of these agencies onto the network. You'll have a robust set of users, and that'll drive the volume substantially higher. So we would have liked to have been further along. Once these agencies onto the network, you'll have a robust set of users, and that'll drive the volume substantially higher.
I think we were prepared to be further along, but, you know, working through this customer dynamic, you know, we're not in control of that all the time, and the budgetary aspects associated with that. But there is still a robust business case around that, and, you know, you can look forward to multiple years in front of us of additional growth there. CHS-6, similar, it was never going to be the volume, like you said, of Army buying several years in front of us of additional growth there. We won't recognize even that level into revenue necessarily, given some of the way the contract is handled. But activity was maybe half the ceiling.
But what we've seen is more users want to use that vehicle, so it's an attractive vehicle for the customer. There are some long lead procurements already being put on order under that contract, so it sets up the future to see a higher demand signal. And ultimately, it should be a nice profit driver for us because even some of the things that don't translate into revenue, we make a nice, you know, fee and management fee associated with the procurement activities. So, early innings, a little slower ramp up, but a long opportunity ahead of us to grow and scale that contract up. And really, they broadened it to a full C5ISR procurement vehicle and so I think there's a robust demand s ignal that will come out of that.
That was an example, I think, where Tom talked about, you know, there's an opportunity for cyber or for AI, and how does that fit into a contract like that where there's a degree of sort of acquiring, you know, technology and ruggedized equipment? Like, how does that play into it?
Well, yeah, I mean, there's the logistics aspect. I mean, planning and, you know, pre-positioning and the, the ruggedization. But, you know, I think the-- It's opening the aperture of what they can buy. They're not going to buy services under it, but they can buy, you know, improved products, right? Configured products, ruggedized products. And so as they branch out beyond the traditional buying command, I think, you know, the jury is still out on what types of things could be put onto the, the catalog of offerings per se. That continues to be built out, and so, you know, we're only, what, six or so months into kinda having maybe nine months into having that in place. But ultimately, I expect that will continue to grow.
Maybe just to wrap up conversation on this segment, I guess, should we think about the margin opportunity being the maturity of some of the larger, sort of the larger, longer dated contracts, and so that, you know, provides you a little bit of a, you know, modest glide path to higher margins over time and from a 10% level?
I'd say that's fair. I mean, again, this isn't one that I'd point to, you know, substantial margin expansion, but clearly we're challenging the teams to look for areas to drive, you know, 10s of basis points improvement, half a point improvement, maturing of long-dated contracts, y ou know, again, as we get certain customers to pivot, a lot of the intel and DoD agencies still like to buy under a cost plus award fee or fixed fee arrangement, but, you know, maximizing your award and incentive fee. N egotiating a little bit more on the fee side and some of those. So modest uptick is where the team is focused, and then we'll hopefully be able to put together a robust plan to execute that.
So maybe moving back into, to the Health & Civil side, that was a segment that did, you know, 19% margin in the first quarter. So maybe moving back into the Health & Civil side, that was a segment that did, you know, 19% margin in the first quarter. You know, I think operating income grew something like over $100 million year-over-year.
Yeah.
You mentioned that that's going under a recompete just as a function of hitting its ceiling value early. How should we think about that recompete process? Is it more procedural in nature and so probably things stay more or less the same, or is there... You'd think the VA is focused on taking back economics?
Well, listen, we approach every recompete as if we got to win it for the first time, and so the teams are, even though there's no RFP on the street, the team is already, you know, knee-deep in how do we plan for a, you know, a very competitive procurement cycle. But that being said, what you focus on is the, you know, the VA needs to serve the veterans, and, you know, we're a proven commodity. You know, we tend to score, you know, very high as a provider on one of the key metrics that they're focused on. And so, you know, exceptional service.
And so, you know, keeping that performance up is the best way to re-win a recompete, right? And continuing to invest to help the VA be effective and efficient a nd continuing to invest to help the VA be effective and efficient, putting things like, you know, a lot of capital into mobile clinics so we can go reach the rural veterans. So Leidos has, I think, prioritized that veteran service over anything else, and that ultimately has been rewarding for us as well. So, re-compete, I wouldn't. I would never call it procedural, but, but yes, you'd like to believe that, you know, things have been working well. The providers they've got in place today are doing a good job. So I would never call it procedural, but, but yes, you'd like to believe that, you know, things have been working well.
The providers they've got in place today are doing a good job, stepping up to the increased volume. We're a key part of that ecosystem, and our job is to make sure we preserve that.
This is the type of contract because you don't get assigned, like, a share in the contract. It's just there's a ceiling, and you can go up. You can help process claims, is that right? So there's not an element where under a re-compete gets resegmented in terms of how many claims you can have under the domestic side.
Yeah, you don't get a committed share. I mean, you know, in theory, if everybody's optimized their performance, they'll split it equally. But it really is a day-to-day, week-to-week, month-to-month thing. I mean, who is driving throughput? Who's providing exceptional service? Who's optimized their performance? Who's ready to take on more of the demand? Because there is more demand than throughput capacity today, right? So our job is to stay a step ahead of that and to be able to continue to capture more of that activity on an ongoing basis.
So, maybe besides the VA business, you know, can you give us just sort of an idea of how the rest of Health & Civil is performing? I know DHMSM was expected to step down a little bit.
Mm-hmm.
It was probably your biggest headwind this year. You know, where is that program going, and what else in the portfolio are you maybe excited about?
Sure. So, well, DHMSM, just to touch on that, we're very proud of the performance there on the deployment. I mean, this has been a, you know, year nine of a 10-year vehicle, right? So there is a horizon in 2025 and what's next. But, you know, to be able to deliver the capability on schedule, under budget, deployed, you know, to all the key locations, workability. We're proud of that performance. We've had a great partnership and a great execution team there. And the customer is interested, now that they've got the capability deployed, how do they continue to modernize and optimize the experience for the medical providers in the Defense Health Agency? And so we're working with them on things like digital first and other expansion opportunities. Our job is to win the follow-on, right?
But beyond that, there's some significant opportunities to expand. You know, VA has got a VA supply chain, which is a mega job as it relates to their digital ecosystem to manage how they do the logistics, if you will, across all the VA centers. There's opportunities within CMS and within HHS, and we've had some success on the digital and data analytics side and cloud side.
And so there's no shortage of pipeline opportunity that's competitive, no doubt, but in the health arena and the customer set, those economics have been good and attractive. And we see areas that we can expand. On the civil side, we've had a longstanding FAA software business, right? Where we've built and operate a lot of the key FAA systems. International expansions around those capabilities is actually an exciting area for us as it relates to, you know, we announced earlier this year, you know, setting up a hub in Singapore as it relates to innovation, you know, looking at some of the global markets where we can extend that capability.
And then, you know, there's other software development that's a secret sauce for us in the large mission software development space. Civilian customers are continuing to look for some of those key capabilities, and there's a lot of exciting things in the pipeline there. So, you know, Health & Civil has excellent growth prospects. I mean, the VA will continue to be a dominant piece of the story in the near and the intermediate term, which is great, but really leveraging that capability beyond that.
Maybe, moving on to the commercial and international side of things, this is the business that, I mean, I guess houses SES, which is the, the airport security business. You know, what have you seen in terms of the last several quarters in terms of improvement? I guess if I went back a couple of years, I would have thought this business was gonna grow a ton just based on air travel demand.
Mm-hmm.
Resuming and the needs for security. But it's been, yeah, a couple of years, I would have thought this business was gonna grow a ton just based on air travel demand, resuming and the needs for security. But it's been, you know, maybe a little lumpier than I would have expected, and you pared back in some of your products there.
Right.
So what are you seeing broadly? Has that improved?
Sure. Well, I mean, commercial, international, first of all, putting some pieces together that were strictly our commercial and international businesses, I think was I think was a great move by Tom. It allowed the team to, first of all, take some of those distractions away from other parts of the business and then really think about how do we want to prosecute work internationally, whether it's our legacy U.K. and Australia-based businesses or SES, which has got a global footprint. You know, so SES specifically, yes, a lot of work is still going on to optimize the inner workings of how we manufacture the equipment, how we do the service, combining our ports and borders and aviation business.
I think the team has made nice gains there, but they're manufacturing the equipment, how we do the service, combining our ports and borders and aviation business. I think the team has made nice gains there, but there's still work ahead of us. And then it's investing in, you know, the innovation for the next series of products. You're right that air traffic travel has certainly bounced back. We've all experienced that, but, you know, sometimes it doesn't immediately translate into new procurement opportunities, whether that's with TSA or global customers.
Only bounce back, we've all experienced that, but, you know, sometimes it doesn't immediately translate into new procurement opportunities, whether that's with TSA or global customers. There are some that we're competing for, and, but there's really, you know, optimizing how we deliver the service. It provides a more near-term path toward consistent profitability. And so we're, you know, certainly focused on driving that. And some of that was, you know, supply chain challenges, consistent profitability and part shortages, et cetera, et cetera. A lot of those things have improved, and we'll see continued improvement as we get through this year.
But beyond SES and Commercial International, we're very excited about our energy utility business. It's been an excellent performing business for us. You know, the utility markets, there's a ton of demand for critical infrastructure. The engineering services work we do for those utilities is expanding. That demand signal is very high. Ultimately, you know, tying in cyber protection into grid resiliency, we think there's a long-term play there because that's a capability Leidos stands out in, and, you know, some utilities have prioritized that more than others. But, you know, so seeing that particular subsector of the market as a growth catalyst over the next several years is something we're excited about too.
I guess the only thing that's been a little confusing here is that the margin profile-
Mm-hmm.
'Cause, I would have expected this would have been at least in the low double-digit range, it's been, correct me if I'm wrong, like mid eights.
Mm-hmm.
Is there, is it a profile?
Mm-hmm.
Is this the biggest margin opportunity this year?
Well, it's one of the biggest, right? Where, you know, if we have time, we might talk about different systems.
Yep.
Um, yes. So it's not where it should be, and there's a couple, you know, areas we talked about SES and driving that, a products and services component, and we think there's room to run there over the next, you know, few years. Energy is doing well. I'm very proud of the team's performance there. But even in the U.K. and Australia, there's opportunity to mature parts of those parts of the business portfolio as they grow and scale up a little bit more. There's margin potential to unlock. So the team has got a bogey. You know, I mean, Tom has been very clear around, you know, what the expectations for margin improvement are there, and they're building their plan to execute that. And so I am bullish that we'll see this as a part of the portfolio that's a margin tailwind over time.
So I guess maybe then wrapping up the business conversation on defense systems, I mean, Dynetics, I feel like there was a lot of enthusiasm for that business several years ago, and, you know, there's been some interesting programs just haven't gotten off the ground quite yet. Margins, like you mentioned, maybe this is the one of the larger opportunities, sort of the mid-eight range. You talked about it improving this year and used to signal that, correct me if I'm wrong, that was maybe like a 12%+ margin business, not just defense systems, but Dynetics. You know, what, what's going on in defense systems? Is that, you know, if, if commercial and international isn't, is defense systems the biggest opportunity?
Well, it certainly, again, we're excited about the prospects there. You know, you mentioned Dynetics. That was an acquisition in 2020, and now we've surrounded it by some of our more hardware platform-oriented pieces of business in airborne and airborne autonomy and maritime and maritime autonomy. And so those things are integrated, and, you know, each one of those has some compelling growth threads for them.
I think the engineering discipline, program execution discipline, of bringing that together will help the organization find the next year. We're actually only five months into finally integrating Dynetics into all of our Leidos enterprise systems rates. There's a lot more sharing and collaboration and resource allocation that can happen more seamlessly now than they could last year. Kind of the big mix of programs, right? We've seen we're much, much closer to some transitioning from development stage into, you know low rate next phase of production, where lessons learned can be applied and, you know, you can really move up the value ladder.
So yes, there are several irons in that fire, that, you know, 2024 is a margin improvement year, not a huge growth inflection year. I expect 2025 to be better. But that's what the strategy work is for, to get conviction around where that part of the portfolio is going. But I think they've gotten better, but that's what the strategy work is for us to get conviction around where that part of the portfolio is going. But I think they've got multiple prospects for growth.
Is the big growth driver there gonna be IFPC and is that program... I mean, I think the expectation was sort of turn of the year, that might start to you see some production there. C ould that be a big tailwind in 2025 or is that more 2026?
I think that I would expect it to be a multiple-year tailwind. I don't think it's gonna ramp, you know, from zero to 60 in one year, but I think that's the one where we hear the most consistent, compelling demand from our customer around how do we get some of that capability fielded, defense of Guam and other areas. It's still in a critical testing phase, but that's not stopping, you know, discussion around the next phase of orders and ramp up, and we're ready for that to happen. So this one has a multiple year journey that we're still excited about. The Indirect Fire Protection Capability is the choice, you know, assuming it can deliver the capability that they're expecting. There's a robust demand signal over multiple years there.
Maybe just to wrap up, you know, we went back five quarters. You know, your book-to-bill on a trailing basis was below one. You're back above one. The environment should be fairly robust within terms of, you know, appropriations happening, supplemental.
Mm-hmm.
Spending packages. So you have a good setup as you think through the next several months. We've had some in the industry that have maybe, you know, there's been mixed setups in terms of business development and in the pipeline. Can you just tell us, you know, maybe what you're seeing and if those signals improved, you feel good about the pipeline, as you sit here in June 2024?
I do. I do feel good about the pipeline. The whole energy in our business development function, you know, bringing that under Gerry Fasano's leadership again, Gerry is relentless. He drives the organization. He make things happen. So the ton of energy, our proposal pits are jam-packed. You know, we've got two-thirds of the pipeline is new and takeaway work, so there's a lot of growth, expansion opportunities there. Yeah, I think it sets us up well. The activity level has been elevated, and I think it'll continue that way, you know, up through government fiscal year-end.
Obviously, we've got an election year, and then we'll see. But I like the setup going into the back half of the year and continue that way, you know, up through government fiscal year-end. Obviously, we've got an election year, and then we'll see. But I like the setup going into the back half of the year and positioning us for growth.
Great! Well, Chris, thanks so much for being with us.
Bert, appreciate it.