Stephen Vather - ManTech International Corp. George J. Pedersen - ManTech International Corp. Kevin M. Phillips - ManTech International Corp. Judith L. Bjornaas - ManTech International Corp. Daniel J. Keefe - ManTech International Corp. L. William Varner - ManTech International Corp..

Brian David Kinstlinger - Maxim Group LLC Brian Ruttenbur - Drexel Hamilton LLC Kwan Hong Kim - SunTrust Robinson Humphrey, Inc. Gautam Khanna - Cowen and Company, LLC Amit Singh - Jefferies LLC Rick M. Eskelsen - Wells Fargo Securities LLC.

Good day, ladies and gentlemen, and welcome to the ManTech's Fourth Quarter Fiscal Year 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.

I would now like to turn the conference over to your host, Stephen Vather, Executive Director, Corporate Development. Please go ahead..

Thank you, Andrew, and welcome, everyone. On today's call, we have George Pedersen, Chairman and CEO; Kevin Phillips, President and COO; Judy Bjornaas, Executive Vice President and CFO; and Dan Keefe and Bill Varner, our two Group Presidents.

During this call, we will make statements that do not address historical facts and thus are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements are subject to factors that could cause actual results to differ materially from the anticipated results. For a full discussion of these factors and other risks factors and uncertainties, please refer to the section entitled Risk Factors in our latest Form 10-K and our other SEC filings.

We undertake no obligation to update any of the forward-looking statements made on this call. Now, I'd like to turn things over to George..

Good afternoon and thank you for participating in today's call. I want to begin by saying that I am pleased with our strong performance in 2016, which is a result of the hard work, steadfast dedication of our talented employees. In 2016, ManTech delivered solid revenue growth, strong bookings and improved profit metrics.

Let me offer a few brief comments on the market environment. The government is operating under a continuing resolution at least through the end of April. It is possible that the continuing resolution may extend through the rest of FY 2017. However, our hope is that Congress enacts its FY 2017 budget.

Our understanding is the President is expected to request a supplemental for FY 2017 in March and will address near-term readiness challenges within the Department of Defense. The President's FY 2018 budget process has begun and is expected to be submitted to Congress in the May timeframe.

We believe that the long-term budget outlook will reflect an increasing demand for our technologies and solutions. ManTech has been at the heart of our customers' mission for nearly 50 years. Our capabilities and our market position are well-aligned to the broad national security priorities laid out by the new administration.

Now, Kevin will provide you with a view of our operations.

Kevin?.

Thank you, George. I am pleased to see growth in all of our key metrics for the full year and continued strong performance in winning new business. In 2016, we delivered year-over-year improvement in revenue, operating and net income (2:59), and earnings per share.

Over the past few years, we have focused on enhancing our technical capabilities and integrating those capabilities into tailored solutions that will meet the requirements of our customers' critical long-term programs. As part of this positioning, we have invested in offerings for cyber, IT, cloud and big data.

We recently received our ISO 27001 certification for information security, which, along with our ISO 20000 certification for IT and services management processes, bolsters our market position in cyber defense and information security.

Furthermore, we made two make acquisitions in 2016, Oceans Edge Cyber, which enhances our positioning within the cyber network operations market and expands our presence within the service elements of U.S.

cyber command; and more recently Edaptive Systems, which enhances our positioning within the health IT market, expanding our presence at the Department of Health and Human Services, and more specifically, centers for Medicaid and Medicare services. We have a well-balanced and strongly positioned company entering 2017.

We have an even mix of work in both the intelligence and defense communities that combined represent about 85% of our business. We also have an increasing footprint in the federal civilian sector that is focused on federal health IT and DHS.

Within DHS, our largest customers are the customers in border patrol and the Office of Cybersecurity and Communications. We will continue to make internal investments in support of these cyber and information technology areas. Now to some of the key operating statistics for the quarter and year.

In Q4, we received $460 million in contract awards, representing a book-to-bill of 1.2 times, capping a very strong year of contract awards. For the year, contract awards totaled $2.3 billion and book-to-bill ratio of 1.4 times. New business comprised of over 40% of the awards for the year.

The mix of business we won during 2016 skewed towards cyber, IT solutions, intelligence and systems engineering support. Total backlog at the end of the quarter stood at $4.9 billion, up 6% from our backlog at the end of Q3 and up 19% from last year. Funded backlog remains at approximately $1 billion.

We've seen an increase in the length of contract awards, which results in greater long-term revenue visibility. Proposal activity remains high. We submitted over $7 billion in proposals in 2016 and expect a similar volume in 2017. Our qualified pipeline (5:37) is $18 billion and we have about $4 billion waiting adjudication.

For 2017, we are seeing increasing proposal opportunities within the intelligence community, select federal civilian and health customers and within the DoD. Given the uptick in priority around defense, intelligence and homeland security sectors, I would not be surprised that the set of opportunities grows even more over the course of 2017.

We see increasing demands for cyberspace operations, cyber defense, enterprise IT and systems integration and engineering solutions. Our strength in worldwide sustainment, O&M and logistics support also offers our customers a full complement of capabilities needed to respond to today's national security demands.

I'm excited about ManTech's differentiated capabilities and their market positioning and remain eager to continue to drive long-term value to our customers, our investors and our employees. As part of producing long-term value, we will continue to prioritize capital deployment for organic investments in select acquisitions to enhance our growth.

Now Judy will provide you with some additional detail and specifics with respect to our financial performance and outlook.

Judy?.

Revenues for the year were $1.6 billion, up 3% from fiscal year 2015. The growth is a result of several new contract wins announced in late 2015 and throughout 2016 and the acquisition of Oceans Edge Cyber. Edaptive Systems could not contribute meaningfully to the quarter or year.

For the fourth quarter, revenues were $394 million, down 2% compared to fourth quarter of 2015. The year-over-year decline was driven by lower ODCs in material purchases this quarter compared to last year and the loss of some smaller re-compete contracts in 2016.

For the quarter, the percentage of work as a prime contractor and the contract mix were essentially unchanged. We performed 87% of our work as a prime and our contract mix was 67% cost-plus, 13% time and material, and 20% fixed price. Operating income for the quarter was $21.3 million for an operating margin of 5.4%.

For the year, operating income was $91 million, up 7% from 2015. Operating margin also improved to 5.7%, compared to 5.5% for the full year of 2015. Net income was $13.7 million for the quarter and $56.4 million for the full year, up 10% from 2015. Diluted earnings per share was $0.35 for the quarter and $1.47 for the year, up 8% from $1.36 in 2015.

The effective tax rate was 34.9% in Q4 and 37.5% for the full year, which was lower than expected due to some one-time tax adjustments and lower state tax expense. The lower tax rate added $0.02 of EPS in the quarter and the year. Now onto the balance sheet and cash flow statement.

During the quarter, we collected $13 million in cash flow from operations and $96 million for the year, which is 1.7 times net income. DSOs were 73 days in the quarter, a five-day increase from the fourth quarter of 2015.

The increase is due to the timing of the Edaptive acquisition and year-end funding modification delays at the start of the government fiscal year. Free cash flow for the year was $85 million, given capital expenditures of approximately $10 million. During the year, we invested $61 million in the acquisition of Oceans Edge Cyber and Edaptive Systems.

Additionally, we distributed $32 million in dividends, maintaining a steady return of cash to shareholders. At year-end, we had $65 million in cash and no debt. The board has authorized us to continue our current dividend level with $0.21 per share to be paid in March. This equates to an annualized dividend of $0.84. Now to the forward outlook.

Before any acquisitions, we are calling for 2017 revenues of $1.625 billion to $1.7 billion, net income of $55.5 million to $59 million and diluted earnings per share of $1.42 to $1.51. At the midpoint of the range, approximately 80% of guidance is expected to come from current backlog, with re-competes lighter than usual.

We have cleared through a number of the Army re-competes and have greater clarity in 2017 in that area. From that result of these re-competes is a 2% headwind to the overall business in 2017, which is included in our guidance. We have a clear path to growth with our recent awards.

The timing of ramping of some awards may be impacted by clearance process delays and, in some cases, a highly competitive demand for skilled labor. First quarter revenues are projected to be up slightly from fourth quarter 2016, with a similar number of billable work days and then we'll build through the year.

The implied operating margin guidance for the year is 5.6% to 5.7%, reflecting continued investments in key growth markets. A number of our contract awards in 2016 were bid when price was a major award criteria and, as such, it will take time to see the impacts of a return to best value contracting on our operating margins.

The ranges for net income and earnings per share compared to 2016 are impacted by a return to a more normalized tax rate and a projected increase in share count. Built into our guidance are an effective tax rate of 38.5% and a fully diluted share count of 39.2 million shares. Cash flow from operations should be between 1.6 and 2 times net income.

Overall, we are pleased with the improved market visibility and prioritization of needs within our customer requirements. Now, Dan will speak to our defense and federal civilian business..

Good afternoon. ManTech Mission Solutions and Services 2016 financial metrics were the best in the four years I have led the business. Strong top and bottom line, excellent cash management and continued strong bookings describe our 2016 performance.

Investments to improve our business development talent and processes will continue to be a priority in 2017. Additionally, one of my strategic focus areas will be to continue our expansion of the business into emerging IT capabilities including cloud, Agile and DevOps, where we are seeing strong demand from customers.

As Judy mentioned, we have cleared through the 2016 headwinds we faced in our Army business with multiple re-competes. Key to our success is the late fourth quarter award of $152 million award supporting Army's CECOM Software Engineering Center, in which GAO denied a protest by our competitors.

We continue to expand our sales approach across the Navy war-fighting centers in SPAWAR, NAVAIR and NAVSEA. In 2016, the award of new work supporting SPAWAR at the United States Naval Observatory exemplifies that approach. Also of note, we won $87 million re-compete providing combat weapons system support to NAVSEA.

In December, as Kevin mentioned, we closed the acquisition of Edaptive Systems and I'm pleased to welcome them to the group. The company fit precisely with our strategy to expand our presence within the federal health IT market.

Edaptive provides talented employees, exceptional capabilities, past performance and deep customer relationships at HHS and CMS. The integration is off to a great start and we're excited by the enhanced positioning and are already pursuing new work together.

With the strong execution, recent awards, investments made and momentum built in 2016, I look forward to continue the success in 2017.

Bill?.

Thanks, Dan. The Mission, Cyber and Intelligence Solutions Group had a great year and quarter. We had many wins in 2016, both new work and re-competitions. We continue to staff our current work as well as the new wins with highly qualified people. Within MCIS, full-spectrum cyber support is a core foundational capability.

Over the course of the last quarter, we continued to expand (14:27) and cyber operations. We continue to experience substantial and growing demand, and we are consistently able to win both new work and re-competitions based on our exceptional technical staff, innovative tools and frameworks and proven performance.

From a defensive cyber perspective, we continue to expand our presence within the FBI, now serving as the largest cyber security provider on the enterprise, information, assurance and cyber security support, or the EIACSS Blanket Purchase Agreement, where we are providing cyber engineering, information assurance, threat monitoring and detection, incident response and security operations center support.

We continued to leverage our acquisition of Knowledge Consulting Group or KCG and Oceans Edge Cyber and have successfully realized the synergies we expected as part of our acquisition plans, winning re-competitions within the federal government, military services and commercial customers.

With wins in mid-2016 and the subsequent staffing this quarter, the combined ManTech team now has the largest presence on the Continuous Diagnostic and Mitigation, or the CDM program, at the Department of Homeland Security.

We provide continuous monitoring as a managed cloud-based service across 44 agencies and we're also implementing privilege access management for 65 government agencies.

Building on our cyber capabilities, we also won a significant contract valued at $323 million within the intelligence community, which couples defensive cyber with enterprise management, which we noted in last quarter's earnings call.

This provides a new vehicle for ManTech's ITSM or IT services management model to expand in support of a large, geographically dispersed organization, the National Geospatial-Intelligence Agency. I'm pleased to report that we are well on our way to being fully staffed on that program.

We will also build on our experience elsewhere in the intelligence community as we support the customer in their efforts to migrate to high-side (16:46) services. From a defensive cyber perspective, we leverage our qualifications in cyber engineering, endpoint security, network security and security operations center support.

In summary, we are optimistic about the market environment and strongly believe that our positioning is well aligned to our customers' strategic priorities. We look forward to leveraging our strong balance sheet to accelerate our growth through acquisitions. With that, we're ready to take your questions..

Our first question for the day will be coming from the line of Brian Kinstlinger from Maxim Group. Your line is open..

Great. Thanks. Good evening. My first question is, I'm curious about the Army outcome. It sounds like it was a 2% headwind.

Did your update us, were you consolidated out or did you just lose some share and maybe is that ramp already reflected in 4Q or will we see that sometime in 2017?.

I'll speak briefly to it and then if Dan wants to add to that. So there were broadly three competitions within the Army that we had worked on that had scale to them. We won one, another one we won as a partner and then another one we lost and we're not successful on the protest.

Combined, those were the 2% headwind and that actually started to affect a little bit in Q4 and will level off as we execute Q1 in terms of the overall impact on the business. But it's still an overall 2% headwind year-over-year..

Great. Thanks. And then the – quick one on the bookings and backlog. It seems like revenue and bookings are $70 million apart, yet backlog went up by about $300 million sequentially.

Can you go over the dynamics or explain what I'm missing there in terms of the increase in the backlog?.

Yeah. Obviously, Edaptive added some to the backlog, but we did not include in bookings. And then, our CLSS contract has been performing higher than we expected. If you recall there were a couple of years ago we had to reduce the backlog on that contract significantly, and it is now outperforming those expectations.

So we actually put some back into backlog that we had removed in the past..

Oh, that's great. And then, the last question I have is ManTech clearly has significantly more cost-plus than your peers. Do you see this when you look at your backlog and proposals submitted changing in the next year or two years or three years, I'm just trying to gauge your potential to narrow the gap of your margins versus your peers..

So, broadly, you follow the customers' procurement patterns as to the type of contract that they lead. So we're not going to shift our customer mix in order to respond to their contract performance type. That said, in the pipeline, we do see a slightly higher mix of work that is either T&M or fixed price.

We see a higher set of solutions because the government is looking for more opportunity for responsive answers to how we can improve things. And over time, I think that that will or may shape towards a less cost-plus mix. That said, it's very much dependent on how the customers procure..

Great. Okay. Thanks so much..

Thank you. Our next question comes from the line of Brian Ruttenbur from Drexel Hamilton. Your line is open..

Yes. Thank you very much. Couple of housekeeping things and some real questions.

Tax rate, can you repeat that tax rate for 2017 again?.

We're expecting 38.5%..

Okay. And then, can we talk about the – the revenue was essentially in line but EPS was below consensus.

Is that because higher G&A, lower gross margin on a year-over-year basis, operating margin shrink? can You help me decipher what's going on, on a year-over-year basis, revenue is growing but earnings are not?.

Yeah. In fourth quarter, obviously, fringe is higher. It was higher this year than last year with some healthcare costs, and then people taking vacation and things like that. So, primarily, it's the indirect cost driver for that going up..

Okay.

So you expect gross margins to essentially be flat on a year-over-year basis, but the difference between 2016 and 2017 earnings is a higher SG&A, is that correct?.

Well, some of it will – fringe impacts both cost of sales and, to a lesser extent, the G&A line..

Okay. So the cost of sales gross margins are going to be weaker on a year-over-year basis 2017 versus 2016, is that – I'm trying to get where is it going to come out of.

Is it a weaker operating gross margin, which it sounds like it's on the growth side, is that correct?.

No. The gross margin should be flat year-over-year. So it will be, you're right, the SG&A side..

Okay. So, it's not an SG&A impact as much as gross margins being flat, tax rates being essentially flat to slightly up. And then just trying to understand what's built into your assumptions on the revenue. You say 80% of your revenue is already in backlog.

What happens with the CR as well as the Trump effect? What have you factored in on that, both positive and negative?.

Well, generally, over the last few years, our customers have already gotten used to a CR, I would say that's a norm, and the procurement activities they are fairly confident on in terms of being able to execute upon award. So we're really not seeing a slowdown on whether requirements to submit a response to proposals, adjudication timeline.

There are some delays in some agencies just as a transition of a senior leadership, but broadly we're not – in the customers sets we're seeing, we're not seeing or hearing of any concern as a result of the CR.

And the expectation is that with the new administration, they're going through the process of talking about a supplemental and deciding which component of the overall budget that they will potentially approve. And if actually budgets get approved on the DoD side or a supplemental comes in, I think for the industry that could provide some upside.

But, frankly, it's not built into procurement retirements that have been laid out today. Having said that, I'll ask Dan if he's seen or has any different view on that on the DoD side.

Dan?.

No. I agree with what you just stated out saying (24:10) difference on the DoD side..

Okay..

Okay. And then a couple of other minor ones. Re-competes, you mentioned that there's going to be less re-compete that you're going to have this year.

Can you give us a percentage of what it's going to be in 2017 versus what it was in 2016?.

Well, built into our guidance, the midpoint is about 10% coming from re-compete wins, which is last year we were looking at about 15% in our initial guidance..

Okay. That's helpful. And then last question.

Progression of EPS, similar to 2016, should I be looking for anything different? On a quarter-to-quarter basis, are there going to be any blips in there?.

No. It should be relatively consistent with last year..

Okay. Thank you very much..

Thank you. Our next question comes from the line of Tobey Sommer from SunTrust Robinson Humphrey. Your line is open..

Hi. This is Kwan Kim on for Tobey. Thank you for taking my questions. First off, regarding small business set-asides, has the issue abated recently or is the magnitude of impact still the same? And are you expecting any changes to rule under the new administration? Thank you..

On the second, we really can't respond to that. It's a policy decision that we'll have to wait and see, just like any administration, what becomes their priority and how it gets built into their future acquisition plans. So we're not banking on any change on that. It could be upside if it does happen.

The overall headwinds from 2016 to 2017 still exist, and that's part of a factor that we've come into our guidance because for the last few years that overall policy direction has been consistent and has created a headwind and we've built that into our overall view of the 2017 guidance range..

Thank you. And what are some of the trends you're seeing on the protest side? Are you seeing the same level of protest this year compared to the level last year? Any comments there? Thank you..

Protest levels are consistently high and it just adds time to go through the process. That said, I would say that within the business, both components of the business, we're going after larger procurements. We're going after more new business within our overall pipeline. We had $7 billion of pipeline last year that we submitted.

We expect $7 billion this year. A high proportion of those are all for new efforts and we're increasingly successful on those. So, directionally, even if there's a 100-day period of delay from protest, we're fairly bullish on our outlook moving into 2018 just based on our market position..

Got it. And lastly, are there more candidates now for acquisitions under the new administration.

And how would you rank the assets and capabilities you would like to add to your portfolio in the near future?.

All right. So the capabilities are fairly consistent, I think, and Dan and Bill can add if they want any flavor, because they've definitely matured the areas that we want to focus on over the last few years. But the businesses are fairly known and it's a matter of the timing of when they want to come out. I would say that it's somewhat consistent.

It's been a little bit disruptive going into and exiting an administration change. That's not unusual. But we are seeing some decent businesses that we have interest in out of the market and we're looking at.

Bill, do you want to talk anything about the areas that you're focused on?.

Sure. I can say that I agree with what Kevin said. We're seeing some good businesses. We all believe we'll see more this year, which is good.

But we focus – at least in my part of the business, we're focusing on businesses that have capabilities that would be additive and in addition to what we do to the intelligence community and in the cyber business..

Dan, do you want to add flavor to your area?.

Yeah. I think along the same lines that Bill kind of highlighted there. Certainly, I see companies that – they're looking for success, potentially an upturn market, and they may wait a little bit. A couple of companies are kind of in a wait-and-see mode if the market turns with the new administration.

Otherwise pretty steady what we've seen the last year or so..

Great. Thank you very much..

Thank you. Our next question comes from the line of Gautam Khanna from Cowen & Company. Your line is open..

Yes. Thanks. Good evening, guys..

Hi..

Hey..

I wanted to just – hey. Wanted to just touch on a couple of things. One, you mentioned sales in 2017 still reflect kind of some of the weaker pricing in the backlog. When does that start to move more favorably? And maybe if you could comment on the pipeline of opportunities you're bidding on.

Should we expect that the cost-plus mix starts to move to more T&M and fixed price in the coming years? Or are we going to have the same type of mix, but maybe just with better pricing?.

I think it'll be a combination of both. I think we are seeing a little bit more returns and best value in evaluation criteria. We heard a lot of talk on the DoD side about moving away from cost-plus, but we continue to see RFPs that way.

We are seeing though – I think one of the areas Kevin mentioned was in the managed services area, which is more of a fixed price service where we would expect to see margins start to improve..

Yeah. And a very high level, for the many years, government had reduced costs as a result of some debt constraints.

And now you can tell from the DoD and other folks that they have capabilities gaps, they have skill gaps, and that supply and demand mix and that availability to prioritize that over debt reduction helps with those decisions from a policy level as well, which helps our whole industry..

Got it.

So would you say, like, in recent quarters you've had much more best value-type awards in the bookings? Is that a fair statement compared to like a year ago or maybe even earlier in 2016?.

No. I would say that the proposals we've submitted in the last quarter or so have been starting to gear towards that way, but things that we've won in the last couple of quarters were bid 9-, 12-plus months ago..

Fair point. That makes sense.

Judy, by the way, what is the inorganic contribution in the 2017 sales guidance?.

At the low end – the inorganic, is that what you asked?.

Correct. The acquired sales. Yeah..

We roll them into our operations. So we can't really contribute or determine how much is going to come from the sales. Edaptive was really a capability play. So we're using them to be able to bid on a lot of our health IT areas. So it's not really going to be attributable to them, if that makes sense. They were both pretty small acquisitions....

Okay..

...and were more capability plays..

Got it.

So is it fair to assume under 1%, 2% of that range, $20 million, something like that?.

Yeah..

Okay. One thing I was wondering is, on paper it seems like you have great exposure to many of the favorite agencies and areas under Trump, under the new administration.

But just so I'm calibrated, do you guys have much exposure, maybe you could explain where you have it, to the unloved agencies under the Trump administration? I'm thinking of the EPA, Department of Education, I'm just spitballing here, but anything where you worry that maybe the work does not have as long a tail under the new administration?.

I would say, given our business mix, there's very little that we worry about as a result of that. There's certainly more upside than downside based on the prioritization that's happening, at least from a discussion of budget priorities. We have very little work.

That's why I mentioned that the highest profile we have in DHS is in CBP and the Cybersecurity Office within DHS..

Okay. That's helpful.

And Kevin, what were the CLSS sales in 2016 and in Q4? And then what do you anticipate they'll be in 2017 and beyond, if you have a view?.

It's been flat from 2015 to 2016, about $100 million to $110 million, and we expect that into 2017 as well..

And does the profitability of that stay relatively constant year to-year?.

Yeah..

Okay. One last one just on the M&A pipeline. You guys have a great balance sheet obviously and a little more budget certainty than you've had in the past.

How comfortable are you kind of stretching the balance sheet beyond the tuck-in acquisitions you've done the last several years for something bigger and A) in terms of your comfort level and B) in terms of the opportunity set, if you could comment on that? Thank you..

Sure. So the opportunity set I think we've talked a little bit about. I think that it's a normal operating set and there are some good businesses out there that we have constant dialogue with. And I think we're all gaining weight from a lot of lunches to make sure we stay current and close with some of the better companies out there.

From a debt level, yes, we are gaining more confidence. But you know how budgets work when they have to hit the discussion point, and I think that that's going to happen in March and early April and we'll see how that plays out.

We have more confidence in where the priorities are headed, recognizing that it's still a fluid negotiation environment through the decision makers and policy makers in Congress and the executive branch.

So we have a decent likelihood, if we find the right businesses which is the first priority, to be a little more aggressive and to accept a slightly larger amount of debt, but it's not going to be moving way out of what we call a normal debt capacity range within our business..

And you define that as how – what is the normal range on a EBITDA basis?.

We have a 3 times leverage level that we are comfortable with, but very rarely do we hit that level. But we're very focused on having a business that's got to be executed on a one-plus-one-equals-three, and the synergies really work.

And the larger those businesses are, the harder that is to work because the procurements we're going after now are largely the procurements that everybody that is larger than us is going after as well because we're able to play at that level. So we have to have certainty around what the combination will bring..

Thanks a lot, guys. Good luck..

Thanks..

Thank you. Our next question comes from the line of Amit Singh from Jefferies. Your line is open..

Hi, guys. Just a quick clarification on what was discussed earlier. You were saying around sort of 1%, 2% inorganic in fiscal 2017. Just wanted to make sure if that makes sense.

And then, if you could also talk about what was the organic revenue growth in the fourth quarter and full-year fiscal 2016?.

In fourth quarter, it was a negative 4% and 2016 was 1%..

And just to clarify, in 2017, you are saying around 1%, 2% inorganic? Okay..

Yeah..

And just wanted to come back to the margin thing again. If you could – maybe I missed this earlier. I mean, the margins in 2016 were better than in 2015, and then if anything, over the last two years, maybe the pricing broadly, to speak, has been flattish.

So why would it go from now 5.7% in 2016, which was up 20 basis point, to now being down in 2017 again?.

There's a couple of reasons for that. First and foremost, we're going to continue to invest in the business. We talked through how the recent awards and re-compete wins have been in the market era where profit and budget pressure was very high.

And then we did lose or had some fixed-price contracts that ended and lost some smaller re-competes over the course of the year that were at higher margins. So those three things are kind of driving why we're being conservative in our 2017 expectations for 5.6% to 5.7%..

Okay. All right. And then you talked about in your guidance I think 80% of it is from the backlog that you currently have on file.

So is the rest of the guidance assuming that the CR continues for the full year?.

Well, I mean, some of it's just the timing of re-competes and the timing of new awards. So, if awards accelerate, that gets us towards the upper end of the range. If the CR causes delays, that gets us to the lower end of the range..

All right. Thank you very much..

Thank you. Our next question comes from the line of Ed Caso from Wells Fargo. Your line is open..

Hi. Good evening. It's Rick Eskelsen on for Ed. I wanted to ask a question again on the margin front. I know, in the past, you talked about sort of a 6.5% longer-term operating margin target.

Does that still hold and is it still doing, after this year, 20 to 30 basis points of margin expansion, something that you're targeting and think you can achieve?.

Yeah. I mean, long-term, our goal would be to try to improve margins 10 to 30 basis points over the next couple of years. But it's all going to be dependent on the timing of the mix shift and the awards under improved budgetary pressure environment..

And from a pricing standpoint, do you think 2017 is the bottom in terms of when you see the impact from the tougher pricing environment flow through your business, and then as you move into 2018 and beyond, you start to get some benefit from pricing swinging back towards best value?.

Yes..

The last one for me, just a question on the ability to find talent. I know, in the past, you talked about how some of your projects had been slow to ramp-up because of finding talent.

It sounds like things have gotten better there, but maybe if you could talk more broadly about the talent environment and how easy or not it is to find people?.

Yeah. This is Bill. We're seeing improvement in our ability to find people. We've made a lot of changes in our recruiting program, in our recruiting staff over the years, and we're having much more success with retention. So, obviously, the more people we retain, the fewer people we have to hire to staff up.

And so we think the environment is much better. We've seen a lot of improvement this year so far..

Thank you very much..

Thank you. It looks like we may have a follow-up from the line of Brian Kinstlinger from Maxim Group. Your line is open..

Sorry. I got hit (40:52). I don't have another question..

Okay..

Okay..

No other questioners in the queue at this time..

Okay, Andrew. Usual members of our senior team will be available for follow-up questions. Thank you all for your participation on today's call and your interest in ManTech..

Ladies and gentlemen, thank you again for your participation. You may now disconnect at this time. Everyone have a great day..