CSRA Buy Helps General Dynamics Post Strong Q2 Results

The integration of newly-acquired CSRA into General Dynamics' own IT business is running ahead of schedule and already producing ’pretty darn impressive’ results, CEO and chairman Phoebe Novakovic said during an earnings call on Wednesday.

’The combined GDIT under the new GDIT has had a 75-percent win rate this year,’ she told investors. ’That is pretty darn impressive for a highly competitive business. So I think that speaks to the power of the combination of these two businesses.’

In April, Fall Church, Va.-based General Dynamics beat a last-minute challenge from CACI to win its bid to buy CSRA for $9.7 billion, creating a massive solution provider business heavily leveraged in government contract work.

Novakovic said the strength of the new GDIT -- following the acquisition – lies in having both the GDIT and CSRA teams working together to develop cost-effective solutions for customers and leveraging their experience across multiple agencies. She said both companies are excellent at transitioning old IT solutions to secure cloud-based solutions that are easier to operate and maintain.

’The beauty of putting these two businesses together is we can take the best-in-class out of GDIT in the best-in-class out of legacy CSRA and really marry those capabilities for some pretty impressive performance in the marketplace,’ she told investors. ’They are bringing the best-in-class technical capabilities in each business and the customer intimacy in each business. So we're very pleased with our employee retention. We've had super contract generation. There have been frankly no surprises or disappointments in any of the contract activity since the acquisition.’

Combined IT revenue – both CSRA and General Dynamics -- had reported revenue of $2.44 billion in the second quarter. CSRA contributed $1.29 billion.

General Dynamics' IT business sales were up $96 million or 9.1-percent against the year-ago quarter.

Among the notable IT deals last quarter was a $615 million contract with medicare and medicaid for contact center services, as well as $375 million from the New York State Department of Health to provide engineering and technical improvements to the health exchange.

General Dynamics posted $9.18 billion in revenue for the quarter ending July 1. That’s up $1.51 billion or 19.7 percent from the same quarter a year ago. The company posted a higher net income of $786 million versus $749 in the second quarter of 2017.

That translated to earnings per share of $2.62 up from $2.50 in the year ago quarter. Analysts had expected the company to report earnings of $2.49 per share, according to a survey by Zacks Investment Research.

General Dynamics' stock was up more than 3 percent to $203.45 in after-hours trading on Wednesday.