Mantech International Corp (MANT) Q4 2020 Earnings Call Transcript

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Mantech International Corp (MANT)
Q4 2020 Earnings Call
Feb 17, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the ManTech Fourth Quarter Fiscal Year 2020 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Stephen Vather, Vice President, Corporate Development and Investor Relations.

Stephen Vather -- Vice President, M&A and Investor Relations

Welcome everyone. Thanks for participating on ManTech's fourth quarter call. Joining me today is Kevin Phillips, our Chairman, CEO and President; Judy Bjornaas, our CFO; and Matt Tait, our COO.

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 anticipated results. For a full discussion of these factors and other risks 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.

On today's call we will discuss some non-GAAP financial measures, which we believe provide useful information for investors. These non-GAAP measures should not be evaluated in isolation or as a substitute for GAAP performance measures. You can find a reconciliation of the non-GAAP measures discussed on this call in our fourth quarter earnings release.

With that, let me hand the call over to Kevin.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Thanks, Stephen. Good afternoon everyone and thanks for joining the call. Before I walk you through our 2020 results, I want to spend a few minutes updating you on the operating environment. 2020 brought forth unconventional personal and professional challenges for us all. Despite this lingering challenges, our people remained resilient and committed to delivering excellence for our customers and their critical missions. I want to thank both our employees and customers for showing great strength and willingness to adapt quickly and for their continued perseverance throughout this ongoing pandemic. I also want to thank our employees for their continued generosity, not only do they enable critical outcomes for our customers, but they are beacons within their communities. Since the start of the pandemic, our employees have raised over $2 million to support those most impacted by the pandemic. One year into the crisis, I am satisfied with how we have managed the business while keeping a steadfast focus on our employee safety and our customers' critical missions.

Our 2020 financial performance exceeded our expectations across all measures and we closed out the year on solid footing. We delivered our fifth consecutive year of healthy organic growth, increased profitability and margins, generated robust cash flow and successfully retained new and existing business to fuel the continued growth of our record backlog. In the fourth quarter, we executed on our commitment to deploy capital for long-term growth and did so through two small strategic acquisitions that add to our full spectrum cyber solutions within the intelligence community and Department of Defense.

I'm pleased to welcome the talented employees from both Minerva Engineering and Tapestry Technologies into the ManTech family. I look forward to the team leveraging the enhanced customer capability position. We have ample financial capacity to continue creating value through M&A and will prioritize acquisitions that add to our differentiated capabilities.

Now to a few thoughts on the market environment. I am pleased at the FY '21 NDAA and appropriations were enacted in December. This offers our customers clear visibility in the funding levels for their mission critical requirements. Consistent with expectations set forth under the last two year budget deal, the FY '21 appropriations provides for $696 billion for the Department of Defense. Additionally, embedded in the legislation passed in late December was an extension of Cares Act section 3610 coverage through March.

Since our last call, a number of important events have transpired including the election, announcement of multiple viable COVID vaccines and a catastrophic cyber attack. Over the course of our 50 plus year history, we have executed consistently for our customers irrespective of the political composition of Congress and the White House as well as across different national security priorities and threats. The new administration is experienced and understands the complexity of the global threat environment and recognizes the need for rapid technology insertion to compact the challenges. The threat environment remains elevated and multi-vectored with a growing and continued trend that these threat vectors are not solely kinetic. Of course this was most recently evidenced by the SolarWinds hack. As the administration evaluates in response to the aftermath of this hack, a few points are clear. Cyber is a priority and we expect that our national cyber posture as well as our response will be a big focus area.

ManTech has a multi-decade track record for advancing customer missions in this domain and continues to be integrally involved in the cyber mission across a number of customers today. In addition to cyber, the administration is focused on digital expansion and modernization across all aspects of the federal government as well as the domains of warfare which is providing longevity to the customer demand levels experienced over the last few years.

Overall, I believe that ManTech is well positioned to continue to support our customers' mission sets with our differentiated solutions that span not only Cyber & IT modernization, but also other priority areas including the analytics, automation and intelligent systems engineering.

Let me offer some brief thoughts on the business development front. We exited the year with an annual 1.5 times book-to-bill. Despite the disruptions from the pandemic, we submitted proposal volumes consistent with 2019 and expect this level to remain relatively constant going into 2021. That said, we remain focused on expanding our market position and differentiation in a competitive market. I am pleased with what we accomplished in 2020 and look forward to maintaining this operational execution and strategic focus.

Now Judy will walk through the details of our 2020 financial performance and 2021 outlook. Judy?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Thanks, Kevin. We continue to execute well and build upon our track record of generating strong financial result with the focus on long-term value creation. Revenue for the year was $2.5 billion, up 13% year-over-year with 11% organically. The growth was primarily driven by new contract wins, growth on existing programs and our strategic acquisitions. For the fourth quarter revenue was $639 million, up 6% over 2019. For both the quarter and full year, direct labor was a critical driver of our growth. Our contract mix largely remained unchanged year-over-year. In 2020 time contracts comprised 91% of revenue and the breakout of our contract pricing structures was approximately 68% cost-plus, 19% fixed price and 12% time and materials.

EBITDA for the quarter was $59 million for an EBITDA margin of 9.3%. Q4 EBITDA benefited from a one-time facility amortization adjustment. Excluding the impact of this one-time item, EBITDA margins for the quarter would have been consistent with the balance of 2020. For the year, EBITDA was $228 million, up 18%. EBITDA margin for the year was 9.1%, up 40 basis points from 2019, exceeding our expectations and more than accomplishing our targeted incremental margin improvement. Strong direct labor utilization and lower PTO usage as well as indirect cost management, continue to provide tailwinds to margins. Net income was $32 million and diluted EPS was $0.79 for Q4. For the full year, net income was $121 million and diluted EPS was $2.97. As a reminder, our Q4 2019 and full year 2019 net income and diluted EPS benefited from a pick-up related to the reassessment of multi-year R&D tax credits.

Adjusted net income and adjusted diluted EPS, which excludes the R&D tax credit impact as well as the impact of the amortization of acquired intangibles articulates more representative operational growth. Adjusted net income was $36 million and adjusted diluted EPS was $0.89, both up 10%. For the year, adjusted net income was $137 million and adjusted diluted EPS was $3.36, up 17% and 15% respectively.

Now to the balance sheet and cash flow statements. For the year we collected $247 million in cash flow from operations. A robust 2.1 times net income. DSO was 56 days at year-end, a 3-day improvement from last year. As Kevin mentioned, we executed on two smaller acquisitions in the fourth quarter. Additionally, we distributed $52 million in dividends for the year, maintaining a steady return of cash to shareholders. At year-end, we had $41 million in cash and $15 million of debt. Given the strength of our balance sheet and expected cash flow, the Board has authorized us to raise our quarterly dividend by $0.06 to $0.38 per share, a 19% increase from current levels. This dividend will be paid in March and equates to an annualized dividend of $1.52 or a yield of approximately 1.7%.

Now on to our 2021 guidance. We expect revenue to be between $2.65 billion and $2.75 billion. The midpoint of the revenue range implies 7% growth and approximately 80% of guidance is expected to come from current backlog, with the balance from recompetes and new business. We are seeing greater variability and the timing of awards, particularly for new business and compared to the last few years, we faced an increased level of recompetes in 2021. Turning to margins. Our guidance assumes an EBITDA margin of 9.1% to 9.2% for the year, which offers the potential for incremental margin improvement of up to 10 basis points. However, we expect that strong direct labor utilization driven in part by below average PTO usage will normalize and be a headwind in 2021.

Some of the other factors that could influence our performance within our revenue and margin guidance include the trajectory path of the recovery from the pandemic, the level timing and ramp of contract awards, the level of material procurements and the duration and level of reliance of the Cares Act 3610 coverage. Our resulting 2021 guidance for adjusted net income is between $142.5 million and $147.4 million and for an adjusted diluted EPS between $3.48 and $3.60.

A few assumptions for your models, built into our guidance is an effective tax rate of 24% and a fully diluted share count of 41 million shares. Cash flow from operation should be at least $200 million for the year. All of the year-over-year decline is attributable to working capital. We expect capital expenditures of approximately 2.5% of revenue for the year, which is down from 2020.

Now over to Matt to cover the business development and operational highlights in the quarter.

Matt Tait -- Chief Operating Officer

Thanks. Judy. Let me expand on what Kevin highlighted earlier. In the fourth quarter we won $605 million of contract awards, resulting in a 0.9 times book-to-bill which aligned with our expectations. Overall, we had a successful year on the business development front. In 2020, we secured $3.7 billion in contract awards, leading to a 1.5 times book-to-bill. New business comprised approximately 45% of awards for the year. Our success was evident across our customer base and our key capabilities in intelligent systems engineering, full spectrum cyber, mission and enterprise IT, analytics and programs in support of intelligence operations. Nearly 40% of our bookings were awarded on a sole source basis in the year. As a result of our strong 2020 bookings, we exited the year with total backlog of over $10 billion, up 12% and funded backlog stood at $1.2 billion.

Entering 2021, our total qualified pipeline remains over $30 billion with approximately $6 billion of proposals awaiting adjudication. Our expectation is that there will be steady proposal submissions throughout the year for a relatively even mix of recompete and new work. We are seeing demand across customers and capabilities. 2021 will continue our multi-year journey to further develop capability differentiation across our business with a focus on our solutions in cyber, analytics, automation, edge computing and systems engineering.

Our capabilities and talent are fundamentally intertwined and as such attracting, developing and retaining talent remain a key priority for us. We have a strong track record of investing in our talent and most recently announced that we will be offering tuition free access to an Advanced Analytics Degree offered by the University of Maryland Global Campus. This is one of many initiatives focused on our people and our enduring drive to be the employer of choice in the industry. Our ability to clearly articulate and demonstrate ManTech's value proposition to our existing and prospective talent in a virtual operating environment is critical.

With that, let me hand the call back over to Kevin for closing remarks.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Thanks, Matt. In closing, let me reiterate that we are pleased with our 2020 performance. We're executing well and building on this foundation to deliver long-term value to our customers, employees and shareholders. Our strategy and business focus remains sound as we enter 2021 and look to the national priorities of the new administration. We remain agile with a demonstrated ability to proactively position and quickly pivot to navigate through complex operating challenges as evidenced by our handling of the business over the last year. Core to our agility and operating philosophy is empowering and enabling our talented employees to do what is in the best interest of our customers and the nation.

With that, we're ready to take your questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of Gautam Khanna of Cowen. Your line is open.

Gautam Khanna -- Cowen and Company -- Analyst

Yes, thank you. Good afternoon. First just a specific question to the guidance in 2021. Any -- can you frame the add backs? Is there amortization, what have you, like how large that is and if there is a big change year-to-year with respect to that?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

With respect to amortization?

Gautam Khanna -- Cowen and Company -- Analyst

Yes. And the delta between GAAP and adjusted EPS.

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

It's primarily just intangible amortization.

Gautam Khanna -- Cowen and Company -- Analyst

Okay. And does that rise year-to-year? It looks like, I'm just trying to frame like below the line tax rates are a little bit higher, share counts down minimally or whatever up minimally. I think it's a 300,000 share change or so like, anything else we should be thinking about below the line or non-operationally?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes, the amortization is dropping a little bit year-to-year.

Gautam Khanna -- Cowen and Company -- Analyst

Okay. The other thing I just want to make sure I understand the -- like Booz Allen made a comment on their call about awards in the intelligence and cyber space, being a little soft. Are you seeing any incremental slowdown or is this just kind of par for the course given the COVID environment we're in and I just wondered if you've seen anything change since last quarter with respect to pace of procurement activity?

Matt Tait -- Chief Operating Officer

Sure. Hey, Gautam. This is Matt. We have not seen a change from our perspective. I think we've been telling you on the last few calls that there's -- that we'd expect the choppiness especially in defense and intel. I mean and so it's no surprise for us. And -- but we were very happy with 0.9 times book-to-bill in Q4 that's actually was what we were expecting, because that's kind of seasonally soft for us, with a 1.5 times for the year.

Gautam Khanna -- Cowen and Company -- Analyst

Okay, so no change. And then lastly, can you characterize the M&A pipeline and what you might expect? Do you think we'll see more properties come to market in 2021 than we saw in 2020 and how those might stack up to the deals you've done recently? Are there any bigger opportunities that are potentially more juicy for ManTech's perspective?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes, we do expect 2021 to be very active on the M&A front. 2020, actually ended up much more active than we were expecting a few -- mid-year, last year. So we're going to continue to focus on making deals that fit within our strategic plan and are going to give us the capability or customer sets that we want to leverage and expand on. M&A has been in our DNA and we continue to look at high properties and I'd be very surprised if we weren't able to find something that made sense for us this year. But as you're well aware it is a very competitive market and valuations are high.

Gautam Khanna -- Cowen and Company -- Analyst

Thanks guys. Best of luck.

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Thanks.

Matt Tait -- Chief Operating Officer

Thanks Gautam.

Operator

Thank you. Our next question comes from the line of Tobey Sommer of Truist Securities. Your line is open.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. I was wondering if you could give us some more color on your recompete calendar this year and maybe discuss the timing in detail of any particularly chunky pieces of business that we should keep an eye on?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

We don't really have any large recompetes. We don't even have any programs that are greater than say 5% of our revenue. We did see a number of recompete kind of slip out of 2020 into 2021, so we are seeing a little bit of a bunch up in kind of the second half of the year from recompetes but nothing crazy. So overall, about 80% of our midpoint of our guidance is coming from existing backlog and the balance kind of split between new and recompetes.

Tobey Sommer -- Truist Securities -- Analyst

Is there an opportunity like there has been sort of over the last couple of years to go to your clients for which you have recompetes coming this year and sort of see if you can get an extension where you're performing well, so that it obfuscates the need for a recompete competition? Or could you give us your perspective on that?

Matt Tait -- Chief Operating Officer

Yes, Tobey, this is Matt. That is definitely one of the levers that we use as a part of our go-to-market strategy. So we -- while we can't comment on specifics on a contract-by-contract basis, that is definitely -- those conversations are definitely ongoing.

Tobey Sommer -- Truist Securities -- Analyst

How is the success rate than in recent years. And any reason to think that this year would be different?

Matt Tait -- Chief Operating Officer

Look, I think, if you look at I think 40% of our bookings were awarded on a sole source basis last year. That's a pretty healthy number. I can't -- are we going to be that high next year? I don't know, but again we are very -- there is definitely part of our go-to-market focus.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Tobey it's Kevin, what I think you'll see across the spaces, there were some delays last year because of COVID yet, there's only so much capacity within the acquisition workforce in the government. So they do have to make choices about what we spend their time on from a major recompete or competition standpoint and that's what causes delays across the customer as well. So it very much depends on the internal capacity that they have and what they can accomplish.

Tobey Sommer -- Truist Securities -- Analyst

All right. Thanks. What is sort of internal billable headcount growth now and could you talk about your target for what kind of growth you may be able to achieve toward year-end or maybe for '21, if you want to speak about it from that perspective on a year-over-year basis and discuss the hiring and talent environment?

Matt Tait -- Chief Operating Officer

So Tobey, this is Matt. We typically don't give headcount statistics, but this past year we were -- our DL drove our growth for the year as evidenced by the results. So we're very happy with the hiring that we have been doing and so we have a similar plan going into '21 in terms of headcount and DL to drive the kind of growth that we're looking for.

Tobey Sommer -- Truist Securities -- Analyst

Is there any rule of thumb that we should think of externally in terms of looking at DL and breaking apart the two major components, which would be volume and price?

Matt Tait -- Chief Operating Officer

Yes, so I wouldn't over index on that Tobey, just because we are moving to more of a solutions based organization. And so it's not exactly a one-for-one there.

Tobey Sommer -- Truist Securities -- Analyst

Okay. Is the hiring and talent marketplace a constraint on growth. Maybe you could just discuss that? The demand environment and the contracting activity win rates versus hiring and kind of give us those puts and takes?

Matt Tait -- Chief Operating Officer

Sure, sure. Let me just make sure I answer. So on the -- you kind of talked about a couple of things there right? So I think from an industry perspective, yes, we would love to have more clear people in the overall population set to go to work. You've heard us talk about that and that's something that Kevin has been leading as an active part right in terms of driving a reform around getting folks cleared. So we can bring more talent into the overall federal market space. So that's kind of the writ large commentary. But specifically for us, look, we've been very successful hiring the talent as we are rotating the business toward the technical -- five technical focus areas that I mentioned on the last call. Our recruiting team has done a phenomenal job of that within the COVID environment. Now it's a competitive environment, but we're still able to hire the folks that we're looking for to go do the mission set work that we want to do. Kevin do you want to add something?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Tobey, I'll add something just it's important for industry, not just for ManTech but those individuals in those programs that are the highest level clearance, we'll have the largest delay in getting new talent in and also new awards because of the people physically have to be on-site to do the work and unless they clear through all the different COVID hoops. So with that really higher echelon type of work, both the procurements and the talent influx that you will likely see the biggest delays.

Tobey Sommer -- Truist Securities -- Analyst

Okay, thanks, that's helpful. Last thing from me. I heard you say cash flow impacted by working capital this year. I may have missed it. Could you explain that a little bit further, please? Thank you.

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes. We guided at least $200 million in cash flow from operations for 2021 which is down slightly from what we generated in 2020 and that basically is just driven by what might happen with DSOs and other capex or capital requirement -- working capital requirements in the quarter -- in the year.

Tobey Sommer -- Truist Securities -- Analyst

Could you elaborate as to what those factors are that make you want to accommodate for what may happen? Is it COVID related? Are you bidding for some things with different payment terms, new customers, what are those factors?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

I think we've -- we saw a three-day improvement in DSO in 2020. If that ticks back up, that alone almost gets us with a reduced -- that coupled with the growth gets us kind of to that level. So nothing unusual. We did see that it seems like the government was pushing cash out as that was related to incentives trying to make sure that there's money in the economy and getting small business paid given the COVID environment. Hard to say. So we're just being a little cautious if they were trying to what we've seen historically is more normal payment cycles.

Tobey Sommer -- Truist Securities -- Analyst

Thank you. That sounds prudent. Thank you.

Operator

Thank you. Our next question comes from the line of Matt Sharpe of Morgan Stanley. Your line is open.

Matt Sharpe -- Morgan Stanley -- Analyst

Kevin, Judy, Matt, good evening and nice quarter.

Matt Tait -- Chief Operating Officer

Thank you.

Matt Sharpe -- Morgan Stanley -- Analyst

Judy, just real quick on the revenue guidance. It looks like it's up 7% at the midpoint. What is that implying for organic growth? And then what was the book-to-bill or the bookings cadence need to look like to push you guys to the high end of the range this year?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

It's a combination. So to answer your first question the organic is about 5% or so at the midpoint. And I think the factors kind of getting us from the midpoint up are the timing of the awards and when they happen. So we could have a really strong book-to-bill, but if at all comes in, in the fourth quarter versus second quarter that's going to change that top line number and how much of it's recompete versus new would also impact that. So I think, just the factors that I mentioned on the -- in the prepared remarks about timing of awards, recompetes, material procurements as well as COVID and the Cares Act extensions have -- are the factors that get us throughout that range.

Matt Sharpe -- Morgan Stanley -- Analyst

Got it, OK. And then just on margins. How much of the 40 bps of expansion in 2020 was with either COVID or mix related EG sort of lower material pass-throughs and how much was sort of underlying performance? Is there any sort of pressure is where I'm going here with the question, is there any pressure on 2021 you're sort of flat to up 10 bps?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes, so I mentioned we have this one-time adjustment in Q4 which added probably over the course of the year about a 10 basis point uptick in EBITDA margin. I think it really is the indirect spend, more normalizing which is we had a really strong performance, a little bit of headwind or tailwind that we talked about from labor utilization and indirect spend slightly under so looking to do a 10 basis point improvement, I think is something we're focused on. But given those headwinds with returning to more normalized indirect spend and labor utilization, we still think we can get there.

Matt Sharpe -- Morgan Stanley -- Analyst

Got it. And then just one last one if I may. On the employee base, some of your peers have pointed out a PTO dynamic where resurgence in time off is potentially pressuring top line and/or margins? Is -- has ManTech experienced any of that or expect to see any of that dynamic play out through 2021?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes, we definitely saw, I think, in Q2 and Q3 a reduction in PTO usage. We saw a little more normalization in Q4 around the holidays. So I think we're seeing people figuring it out, but it's definitely had a little bit of impact on revenue and margins in 2020 that again will -- the more of that normalizes, it will have some impact on revenue and margin, but we feel like within our guidance range we fully accounted for that.

Matt Sharpe -- Morgan Stanley -- Analyst

Got it, thanks.

Operator

Thank you. Our next question comes from the line of Mariana Perez Mora of Bank of America. Your question please.

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

Good afternoon, everyone.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Good afternoon.

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

So that 45% of 2020 awards were from new businesses. Could you please describe what are ManTech's relative advantages or strengths that position the company to continue taking market share?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

So, yes, this is Kevin, I'll speak briefly. In terms of how we're getting new business to 45% and what we're doing around that, we've been fairly consistent over the last few years about investing in certain technology areas and we continue to do that. I think Matt mentioned a number of them and then bringing those to the mission and solutions that our customers' needs. So we're literally trying to not get too far ahead of our customers but invest into solutions and bring to them, because it will be a new environment in the future that people need to operate that in especially in the DoD in our view. And we're trying to provide that so the customers have a path. And as it relates to the new business in 2020...

Matt Tait -- Chief Operating Officer

Yes so we are definitely, kind of focused on three main areas, right. So, one is around this business development. The second one is around our solutions. Kevin kind of intimated on that but we really are doing that for the new solutions as well or new work and then the talent right, we really want to sharpen our competitive edge in terms of the type of talent we're bringing in, but also the additional training and certifications that we're giving them. And so we feel like when we combine all that together that we're going to continue to have the win rates that we've been enjoying over the last several years.

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

Perfect, thank you. And then the next one is related to capex. Capex going down to 2.5% of sales this year, could you please discuss what are the main capex requirement in the near to mid term?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes. So we -- the main capex is coming from a couple of our managed services contracts. So we came in a little bit lower this year than we were expecting at the start of the year because COVDID did delay some tech refresh on one of those contracts that we expect to kind of normalize in 2021. And then we are doing some facility expansions related to secure gift [Phonetic] space for -- to help support our customers. So those are kind of the primary drivers of capex. And I do think we've kind of like stabilized around that 2.5% of revenue and barring any significant changes I could see as the revenue growth continues that, that could drift down slightly.

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

Thanks. And my last one is related to EBITDA. You saw an expansion in 2020 and expect to see another expansion in '21. What should we think the long-term looks like or what is embedded in your backlog today in terms of EBITDA margin?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes, we've kind of said, we're targeting the 10 basis points to 15 basis points per year. It really is going to depend on, as we see that shift toward more solution bids that Matt talked about. And if we see a shift in contract mix away from that, almost 70% cost-plus we have now. Those were the kind of things that would allow us to deliver a more meaningful margin expansion. So at this point in time we just kind of focus one year out on what we think we can deliver.

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

Great. Thank you.

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Thanks.

Operator

Thank you. Our next question comes from Robert Spingarn of Credit Suisse. Your line is open.

Robert Spingarn -- Credit Suisse -- Analyst

Hi, everybody. I don't know if this is for Kevin, Matt, Judy. But in terms of the new administration, are we seeing any priority shift yet from them. I know they talk a lot about cyber and so on. But does any of that come through yet or is it too soon?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

It's too soon. I think at a high level, the guidance of what they're focusing on in terms of newer technologies, whether it's nationally or applied within the government as they need to protect those technologies and deployment of futures of conflict as well as where those conflicts might be in this is outside of the US borders and I think the one area that we will see more focus that will be tracking is clearing COVID, that's clearly a priority, getting through whatever acclimate approaches and strategies need to effect through our customer sets. But beyond that, I think that there is less change from the technology areas that we're focused on from administration because of the external threats that those changes are being responsive to.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. So there is a consistency and it's not like you need to go out and do particular M&A or anything to realign with the future mandate, so to speak.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

No, we still think it's more of a talent issue against the opportunity set than it is or other market setting.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. And then related to that, there has been some talk out there. We've seen a lot of Silicon Valley interest in the beltway and in government customer from a technology perspective. Are you seeing any disintermediation from that crowd trying to get into your markets? And are they having any success with that?

Matt Tait -- Chief Operating Officer

I think if you look at that, probably the overall answer you will get is mixed, right? You definitely have Silicon Valley folks trying to come in and a lot of that through like DIUx, but they also don't know how to do contracting within the federal market space. So a lot of times they'll come to try and join our partnership to go make it happen. So I think, well, there is definitely innovation that has been asked for by the federal market or by the federal government overall, which we think is a great thing and aligns with our strategy. I mean, I think the Silicon Valley folks that are trying to get into this environment, what we're seeing is they can -- we see that as ways to actually help us from a solution perspective versus anything that's a competitive.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. Okay. And Judy, just quickly, I don't know if this was covered already, but cadence for the year, how we should think about sort of the quarterly cadence as we move through the year here? And I think you already talked about the organic growth in '21 being closer to 5%. What was it in the quarter when you had the acquisitions?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

In the quarter it was 5%.

Robert Spingarn -- Credit Suisse -- Analyst

Okay and then just on that cadence?

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes. As you know, we really don't give out quarterly guidance, but it is, we think a moderate step up throughout the year from Q4 of 2020.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. So sort of the normal trajectory.

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Yes.

Robert Spingarn -- Credit Suisse -- Analyst

Okay, thank you very much.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

I call it boring good, I guess and hoping some more of that.

Robert Spingarn -- Credit Suisse -- Analyst

Okay. Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Louie DiPalma of William Blair. Your line is open.

Louie DiPalma -- William Blair -- Analyst

Kevin, Matt, Judy and Stephen, good afternoon. Given how ManTech has high exposure to government cyber security, has the SolarWinds cyber breach materially impacted any of your contracts? And longer term can you access or assess any of the specific impacts that it may have on demand for cyber security services and cleanup in remediation of what took place?

Matt Tait -- Chief Operating Officer

Sure. So from a SolarWinds perspective, I can't talk about specific customers in terms of what they've been impacted, right? I mean, I think any of the customers that we serve, they're making their own public declarations there. So I don't want to comment specifically on that. But I do think, or at least what we are seeing is, because of this, more conversations in dollars that are trying to figure out how to stop this from happening again. So from a demand perspective, we think that this is going to continue to keep the focus on cyber and drive additional demand and do that in places that we are already in. So from an overall cyber demand we expect this to increase and elevate.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

This is Kevin. I will add that from a national policy level, I do think we're going to see more maturity around that both from a national defense side, I mean protecting all of the nation and also how the government reacts to these events differently or more aggressively, one of the other. So I do think that from a policy level we will see a shift and we'll obviously tune this to what that does for our sector and for broader national strategy.

Louie DiPalma -- William Blair -- Analyst

Thanks. And switching gears then a little bit, late in 2019 ManTech announced that it won $132 million task order to provide software and systems engineering for the Army's distributed Common Ground System program. And related to that, I was just wondering, could you provide a quick overview of ManTech's involvement with the Army and Air Force network and ISR modernization efforts. Like we've seen other similar types of Army contracts, like capability set, 23 prototypes than recently there is a report about this project tied in for network modernization. Can you provide like a quick overview of like how ManTech's involved in programs such as like the DCGSA and others?

Matt Tait -- Chief Operating Officer

Yes. So the shorthand term we use is D6 for that program and that's one of many examples that we have across the Army, Air Force and Navy where we're doing intelligent systems engineering work as well as you combine that with other technical focus -- technology focus areas we've talked about like analytics and cyber. So that is one example where we're trying to really bring digital to the mission where with the Army we have several contracts, Air Force and Navy as well, not that we talk in detail on specific contracts on the call here. But that is definitely in alignment with our strategy, doing that type of work, because we think it's good mission work that supports our nation.

Louie DiPalma -- William Blair -- Analyst

Great, thanks.

Operator

Thank you. Our next question comes from the line of Joseph DeNardi of Stifel. Please go ahead.

Joseph DeNardi -- Stifel -- Analyst

Thanks. Good evening. Kevin, just in regard to Louie's question or sorry, maybe was Matt, you talked about seeing I guess the potential for increase in demand in dollars coming from SolarWinds. Is it fair to say that that's not, that hasn't yet converted into awards or opportunities necessarily that's still on the come and hopefully going to in the near future. Is that how you all look about it -- look at it?

Matt Tait -- Chief Operating Officer

Yes, I'd say that's fair, Joe. We're definitely having, I'll say multiple conversations across multiple customer sets around these topics right now.

Joseph DeNardi -- Stifel -- Analyst

Okay. Okay. And then maybe a question for Kevin. Can you quantify for us how much of the portfolio is actually aligned with their position to benefit from cyber and if you're not willing or able to quantify that which I'm suspecting is the case, could you maybe talk about how you would go about conducting that exercise if you are an investor?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Well, I'll speak more broadly, for ManTech if it's looking at IT, analytics, automation, cyber in providing technology for missions support that business today is 85% or more of our business when you combine that, whereas maybe five years ago OCO alone 10 years ago was 60% of our business, though it is a much higher concentration of our business, how that gets affected from a growth standpoint, very much depends on the procurement process our government has and what they decided to prioritize as we mentioned before. But we do think that we're in a very good spot from a capability standpoint against where the market needs are for the next few years.

Joseph DeNardi -- Stifel -- Analyst

Okay. And then Kevin, you also mentioned that the talent is the challenge, it's not the budget or a lack of opportunities. Can you just talk about kind of what that means practically? If tomorrow you could find everyone you wanted, if you could bill more that there are essentially unspent dollars out there because there is a shortage of talent. Is that right?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Yes and yes. So we have internal degree programs and price points for targeting upskilling as well as certification processes that we paid for because we want to get the internal resources we have. And those veterans who come into the company are scaled toward what we think the growth of the future is both for them professionally and for us, and bring that talent in. There are just is not enough talent with clearance and take technology capability supporting national security period. We'll hear that consistently from the government and from early contractor you talk to.

Joseph DeNardi -- Stifel -- Analyst

Can you quantify what the shortage is? Is it 3% or is it 30%?

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

In terms of -- I would probably say...

Matt Tait -- Chief Operating Officer

I wouldn't hazard a guess.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Yes, I agree that. So there's a lot of openings.

Matt Tait -- Chief Operating Officer

But I do think that, yes, we have a lot of customers that would love to be able to -- it's also -- but this is also budget driven, right. So we're kind of opening up until a max theoretical world that we probably would need to consider other factors.

Joseph DeNardi -- Stifel -- Analyst

Okay. That's fair enough. And then just lastly, Matt, when the budget comes out in a few months hopefully. What do you look at first if anything, what page do you flip to first?

Matt Tait -- Chief Operating Officer

Yes, for us, we really want to make sure that the budget is aligning to the priorities that we've talked about today, right. The intelligence system engineering, cyber, analytics automation and AI and as well as mission and enterprise IT and data at the edge. So we look at those things. We look to make sure that those things are prioritized within the budget. We are obviously keeping tabs on those things to make sure that they are and so we feel -- that we continue to see good alignment to our overall strategy in terms of those capability sets.

Joseph DeNardi -- Stifel -- Analyst

Okay, thank you.

Matt Tait -- Chief Operating Officer

Yes, thanks, Joe.

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Operator. It appears that we have no further questions at this time. As 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. Have a good evening.

Operator

[Operator Closing Remarks]

Duration: 42 minutes

Call participants:

Stephen Vather -- Vice President, M&A and Investor Relations

Kevin M. Phillips -- Chairman of the Board, Chief Executive Officer and President

Judith L. Bjornaas -- Executive Vice President & Chief Financial Officer

Matt Tait -- Chief Operating Officer

Gautam Khanna -- Cowen and Company -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

Matt Sharpe -- Morgan Stanley -- Analyst

Mariana Perez Mora -- Bank of America Merrill Lynch -- Analyst

Robert Spingarn -- Credit Suisse -- Analyst

Louie DiPalma -- William Blair -- Analyst

Joseph DeNardi -- Stifel -- Analyst

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