1. SecurityStockWatch.com: Dr. Volgenau, as founder of SRA and
chief executive officer and director since the company’s inception in
1978, would you kindly give our audience an overview of your background.
I grew up on a small farm in western New York, attended the Naval
Academy, and then served 20 years in the Air Force, where I worked on the
development of space boosters and satellites, gained a PhD in engineering
at UCLA, and was director of data automation for the Air Force Logistics
Command. After two years as director of inspection and enforcement for
the U.S. Nuclear Regulatory Commission, I founded SRA in the basement of
my home. SRA is now approaching $750 million in revenue and has about
3,500 employees.
2. SecurityStockWatch.com: SRA’s largest market is national
security. We understand that SRA currently serves over 300 government
clients on over 700 active engagements. Please give us an overview of the
solutions which SRA provides to the Department of Defense, the National
Guard, the intelligence agencies, and other federal organizations with
homeland security missions.
We provide a wide range of services for national security customers,
including: strategic consulting; systems design, development, and
integration; and business process outsourcing. We also have specialties:
information assurance, network management, text and data mining for
counterterrorism analysis, and command, control, communications, and
intelligence.
3. SecurityStockWatch.com: From fiscal 2000 to fiscal 2004, SRA
increased revenue at a compound annual growth rate of approximately
18.5%. Revenue for the fiscal year ended June 30, 2004 was $615.8
million, a 36.7% increase over the prior fiscal year. Do you expect this
rate of growth to continue? Will the outcome of the Presidential
Elections impact your business in any particular way?
It is hard for any company to sustain the kind of growth that we saw
in fiscal year 2004 - 25% organic and 37% overall. SRA has generally
grown in the 15-20% range, and we expect to be able to maintain that over
the long term. However, the Federal IT Services market is very good right
now and we are winning significant new contracts with substantial
build-out opportunity, so growth prospects are favorable. For example, in
the last twelve months, we won two jobs over $300 million, and both are
with new clients.
As for the election, SRA maintains a balanced portfolio; 62% of our
revenue is from national security clients and 38% from other federal
civil agencies. We will be able to grow our business under either
administration.
4. SecurityStockWatch.com: SRA has strategic business partner
relationships with a number of significant industry players. Please give
us an overview of the relationships with Microsoft (MSFT), Oracle (ORCL),
Research In Motion (RIMM), and Siebel (SEBL).
As a systems integrator, we must have deep knowledge of the hardware
and software products to create the solutions that our clients need. We
have had longstanding relationships with Microsoft and Oracle, who are
dominant players within the government market. We are a services provider
for RIM in the federal market and manage a very large wireless network at
the National Institutes of Health (NIH). We have recently partnered with
Siebel and are implementing customer relationship management solutions
for a number of clients.
5. SecurityStockWatch.com: What is SRA’s Guidance for the year?
At our conference call on August 2, 2004, we provided revenue guidance
of $720-$750 million and EPS guidance of $1.65-$1.75 for the year that
ends June 30, 2005. If we meet the top end of our guidance, fiscal year
2005 will see revenue growth of 22% and earnings per share growth of 23%.
6. SecurityStockWatch.com: What is SRA’s backlog at this time and
how does the company define "backlog"?
As of June 30, 2004, our backlog was $2.1 billion. We define backlog
as “signed business orders.” We do not use expected values, run
rates, or ceiling values for contracts; we only include signed contracts
and priced options. We will probably realize significantly more than the
full value of our backlog because our clients often ask us to do
additional work.
7. SecurityStockWatch.com: Thank you very much for your time, Dr.
Volgenau, are there any other subjects you would like to talk about?
At SRA, we are trying to create one of the world’s best companies.
We think that we can realize this vision by steadfastly maintaining our
ethic of Honesty and Service, which has created a culture that attracts
and retains excellent people and helps us to deliver real value to our
clients. This ethic is the basis for the success that we have enjoyed.
