General Dynamics CEO: Census Bureau Support Win Part of IS&T Segment’s ‘Diving Board’ for Growth

general dynamics logoGeneral Dynamics (NYSE: GD) CEO Phebe Novakovic singled out to investors Wednesday the company’s potential five-year contract to support a Census Bureau contact center as part of what she referred to as a “diving board” for growth in the information systems and technology segment.

That contract worth up to $430 million announced in September calls on General Dynamics to help build, test and operate a contact center in support of the 2020 Census and the company performed similar services for the 2010 Census.

Backlog for the IS&T segment totaled $9.2 billion in the third quarter with $7.1 billion funded, while group revenue increased 5.4 percent year-over-year to $2.34 billion at 30.27 percent of total company sales for this year’s July-September period.

Novakovic also credited the IS&T segment’s cash generation contributions to General Dynamics and overall performance with a portfolio of shorter-term programs in remarks to investors during the company’s third quarter earnings call.

She said IS&T’s third quarter book-to-bill was 0.8-to-1 at a “solid for a short cycle business… eight of the last 11 quarters had a 1-to-1 or greater ratio.”

“That’s quite exceptional in a short-term, highly-transactional business.”

Novakovic has backed the IS&T segment’s book-to-bill and cash contributions in this and prior calls with investors this year as other large GovCon contractors have looked at their government services businesses for either a potential sale or spinoff in order to focus on higher-margin work in product manufacturing.

Lockheed Martin (NYSE: LMT) wrapped up in August the transaction to separate and merge its former IT business into Leidos Holdings (NYSE: LDOS) and L-3 Communications (NYSE: LLL) offloaded its services segment to CACI International (NYSE: CACI) in February for $550 million.

And according to a Reuters report from Oct. 4, Harris Corp. (NYSE: HRS) has started a process to divest IT services business following the radio maker’s agreement to a pair of mutual board appointments with Barry Rosenstein’s activist hedge fund Jana Partners.

General Dynamics’ IS&T segment has footprints in both services and product manufacturing as the group comprises an IT services unit and a mission systems business that builds technology platforms for communications, cybersecurity, imagery sensors and command-and-control.

Novakovic said the mission systems business’ pipeline includes opportunities in nuclear weapon technology support, space payloads, cybersecurity, avionics and intelligence, surveillance and reconnaissance.

Shares in General Dynamics were down 55 cents to $152.04 as of 2 p.m. Eastern Wednesday, while Executive Mosaic’s GovCon Index that includes General Dynamics was up nearly three-fourths of a percent then.

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