SRA International Inc. Q3 2009 Earnings Call Transcript

End Time: 17:36

SRA International Inc. (SRX)

Q1 2009 Earnings Call

May 7, 2009 5:00 pm ET

Executives

Dave Keffer - VP, IR

Ernst Volgenau - Founder and Chairman

Stan Sloane - President and CEO

Tim Atkin - COO

Melissa Burgum - CFO

Analysts

Gautam Khanna - Cowen

Bill Loomis - Stifel Nicolaus

Erik Olbeter - Pacific Crest

Tim Quillin - Stephens Incorporated

Mike Smith - BB&T Capital Markets

Ed Caso - Wachovia

Brian Kinstlinger - Sidoti & Company

Tobey Sommer - SunTrust Robinson Humphrey

Steve Fordham - UBS

Michael Lewis - BB&T Capital Markets

Presentation

Operator

Welcome everyone to the SRA International third quarter fiscal year 2009 Earnings Call. (Operator Instructions).

I would like to turn the call over to Mr. Dave Keffer, Vice President of Investor Relations. Thank you sir, you may begin.

Dave Keffer

Thanks, Anna and welcome, everyone. On the call today are Ernst Volgenau, our Founder and Chairman, Stan Sloane, our President and CEO, Tim Atkin, our COO, and Melissa Burgum, our Corporate Controller and Acting CFO.

During this conference call we will make forward-looking statements to assist you in understanding the company and our expectations about its future financial and operating performance. These statements are subject to a number of risks that could cause actual event to differ materially, and I refer you to our SEC filings for a discussion of these risks.

In addition, the statements made during this earnings call represent our views as of today. We anticipate that subsequent events and developments will cause our views to change. We may elect to update the forward-looking statements at some point in the future, but we specifically disclaim any obligation to do so.

During this call, we will also refer to non-GAAP financial measures. A reconciliation of any non-GAAP financial measures to the most directly comparable GAAP measures is available in the IR section of our website at www.sra.com. Stan?

Stan Sloane

Thanks, Dave. Revenue for the third quarter was $377 million, our operating margin was 6.4% and diluted earnings per share were $0.25. We generated $22 million of operating cash flow during the quarter. We also received $805 million of contracts awards in Q3 for a book to bill ratio of 2.1. Total contract backlog was up 8% year-over-year. Our voluntary attrition for the quarter was 10.8%, its slowest quarterly level in four years.

Turning to the industry environment, fiscal year 2009 budgets were passed for all remaining agencies in the federal government during the March quarter. Economic stimulus package was passed as well, which is expected to provide additional funding to areas such as cyber security, health, IT, energy and environmental solution. While few business opportunities have begun to emerge from the stimulus, it has not yet had a significant effect on our revenue outlook.

The Obama Administration is also begun to establish its government spending priorities in contract to perspectives. Increased transparency and accountability are common themes in new legislation and budget development. The administration is called for fewer self sourced and cost reimbursable contracts, preferring more competitive bids in fixed-price contracts. We don’t expect these measures to significantly impact our business.

In the Defense Department, Secretary Gates is outlined a plan to reprioritize defense spending and the President reflected those initiatives in his fiscal year 2010 budget proposal today. We don’t yet have the details underlying the budget proposal and Congress still has an opportunity to make changes, before appropriations bills are passed.

So, it’s too early to speculate on potential impacts to the business. While we are mindful, the current contractors are spending in areas such as acquisition support maybe pressured in the coming years, our business space in those areas is limited.

Across the government several areas in which we do business are expected to experience solid growth in the coming years. Cyber security, Health IT, ERP, environmental services, C4ISR and homeland security are all areas of emphasis under the new administration. Given our strong capabilities in these areas and our diversified customer portfolio across the government, this budget trend should continue to provide us with ample opportunities for growth.

Next I would like to update you on the status of our global clinical development and Era businesses. In our GCD unit, we continue to reduce costs to right size the business. The demand environment in the clinical research market remains slow and we expect to remain that way for several months.

Turning to Era, we won a number of key civilian air traffic control contracts during Q3. Given the orders delay on the military and security side, we have implemented restructuring plan that assumes no further military sales and we are sizing Era's business to be profitable at that current revenue level. We are also pursuing several opportunities to leverage Era's technologies and domain expertise in the US market, the first example of which was the FAA low cost ground system contract win that we announced in April.

This program, potentially worth over $20 million will implement leading-edge ground surveillance systems for a number of airports around the country. Also Jack Nager recently joined SRA’s Vice President of Aviation Programs, an industry and FAA veteran with an excellent understanding of the business. Jack will lead our efforts for further penetration into the US air traffic control and aviation systems market.

Turning now to our new business results from Q3, our contract wins totaled $805 million, of which more than 55% was new work for SRA. Our total backlog was $4.2 billion, as of March 31st, an increase of 8% from the same quarter last year. Funded backlog was $808 million, up 3% year-over-year.

Our largest award in the March quarter was a five-year $216 million IT services contract for the US European Command and US Africa Command. Startup process for that job has been progressing smoothly and we expect it to ramp up completely by mid summer.

Our next largest win in the quarter was our GAO recompete worth up to $117 million over five years. We won other key recompetes in Q3 for the US Coast Guard, US Transportation Command, Environmental Protection Agency and Office of Personal Management.

Two of the task order awards we received in Q3 were protested and therefore excluded from our award in backlog totals. The first contract was to manage a security operation center for the Transportation Security Administration.

GAO has since dismissed the protest on the grounds that the customer revaluating the bids; we are now awaiting a new decision. The second protest was the $21 million Centre for Disease Control win that we announced in February, which is following a similar path to the TSA protest. We were also awarded prime positions on several multiple award IDIQ vehicles in Q3.

In January, the US Army awarded SRA a prime position on its $17 billion Simulation and Training Omnibus Contract know as STOC II. In March, we were named the winner of the GSA Alliant contract for government wide procurement of the integrated IT solution, which has the $50 billion sealing value over 10 years.

We generated well over $1 billion of business under Millennia, one of Alliant's predecessor contracts, but consistent with our past practice, we have not included any value for this or any other multiple award IDIQ vehicle wins, in our award totals or backlog. Tim?

Tim Atkin

Thanks, Stan. Hello everybody. I want to update you all on a few areas. First on program execution and customer service, which are critical as we strive to retain our existing base of business and when new work based on the quality of our job performance, we continue to enhance our technical review processes, particularly for a more complex development contracts.

Stan and I are also joining the sector of leadership teams, in an effort to meet more frequently with customers and nurture strong relationships with them.

Second in the area of organic growth acceleration, we are focused and making sure, we are dedicating the right resources in the most effective manner to our marketing and sale efforts. We are anticipating busy June and September quarters for bid and proposal activity.

Our total pipeline stands at $35 billion of which $1.2 billion is pending adjudication. Several significance task orders and IDIQ contracts will be up for bid this summer. One particular important opportunity for SRA will be our FDIC recompete, which we expect to be awarded in the late summer or early fall.

Another of my primary focused areas had been employ development. We are doing a good job, but efficiently and effectively increasing the scale of our training program and we are focused on leadership development. Our cultural and values have always emphasize taking care of our people and our efforts has reflected in our retention statistics remain very strong.

As Stan mentioned in the March quarter, our voluntary attrition rate was 10.8%, its lowest levels since the second quarter of fiscal year 2005. Our overall headcount decline by 55 during the quarter, for an ending total of 6,896, the billable headcount increased however, is directly for utilization and the core business grew by 90 basis points.

Another area of focus remains SG&A cost control, in this quarter we made prudent reductions to our non-billable staff and reduced certain back off its expenses. We followed a very discipline process for intra-quarter cost management and did a good job of managing SG&A across the entire company. The positive effect that our costs control initiatives should be increasingly apparent going forward.

With regard to acquisition, due diligence and integration, we continually open to smaller targeted M&A opportunities, and we have applied lessons learnt to our approach cross the M&A lifecycle to improve our efforts including continuity and seamlessness from due diligence into integration. We will continue to evaluate the best uses of our cash over the next three quarters.

Let me turn it to Melissa.

Melissa Burgum

Thanks, Tim. Third quarter results were largely in line with our expectations entering the quarter. Revenue was $377 million flat overall and up 1% organically from a year ago.

The net hires we added in Q2, let to higher labor services revenue in Q3, offset by slightly lower re-billable volume. Our operating margin of 6.4% with up 110 basis points sequentially, due to the improvement in our business mix and a decrease in SG&A.

Net interest expense was $450,000 in Q3, below the Q2 level, because of the lower interest rate and lower average debt balance. The effective tax rate in Q3 was 39.6% about on track with our usual level.

Earnings per share were $0.25, down $0.05 year-over-year, but up $0.06 sequentially. Era and GCD were both diluted earnings per share in Q3, in part because of the severance cost incurred in right sizing their work forces. Era's bottom line performance in the quarter was better than anticipated due to a foreign currency gain. GCD's results were in line with our expectation.

Going forward, we anticipate Q4 improvements at both revenue and earnings from Era, given a stream of recent contract awards. GCD's progress is likely to be slower because of the challenging market condition in the CRO business.

Turning to the balance sheet, we finished the third quarter with about $102 million of cash and $159 million of debt for a net debt position of $57 million. Our accounts receivable balance was $348 million. We had approximately $1.1 billion of total assets and shareholders equity of $719 million.

Now to the statement of cash flow, Q3 operating cash flows were $22 million and we used $25 million to pay down our debt balance. Day sales outstanding were 80 in the March quarter, down 2 days from the December quarter. Capital expenditures were about $2 million in Q3.

Next I would to update you on a few other key metrics starting with the contract business mix. As a percentage of Q3 revenue, time-and-materials business was 44%, cost-plus 35% and fixed price 21%. By customer, national security contracts accounted for 49% of our Q3 revenue, federal government's 36% and health 15%.

Within this breakdown US government customers accounted for 93% of our revenue, commercial customers 5% and international governments the remaining 2%. We were the prime contractor for 85% of our revenue in the quarter.

Turning to forward guidance, we are reaffirming our previous revenue and earnings ranges for the full fiscal year 2009. Revenue guidance for the year is $1.51 billion to $1.54 billion. Earnings per share guidance is $0.94 to a $1.

As is our custom, we intend to provide guidance for fiscal year 2010, on our next earnings call in autumn. Tim?

Tim Atkin

Thanks Melissa. I would like to take a moment to comment on few words that the company recently received. The alliance for workplace excellent, non-profitable organization that help DC area companies become great places to work, named SRA a winner of three awards this year.

Its workplace excellent seal of approval, EcoLeadership Award and Health & Wellness Trailblazer Award are all indications of the emphasis we place on taking care of our people and being good corporate citizens.

Also the EPA named SRA, a winner of its annual web award for a work on the ENERGY STAR program. We are proud to be a valued partner of EPA and look forward to continuing our support of its important mission.

In conclusion, I am pleased with the progress we have made in several areas this quarter. Our win rate was solid. The contracts backlog grew nicely as a result. We controlled SG&A spending, delivered sequential margin expansion. Employee retention was another notable area of improvement.

We remain cautious with regard to the business environment as a whole. Contract protest continue to challenge our growth rate, they show no signs of slowing in the near-term. Potential changes in defense spending were also caused for some concern and the global economic situation continues to affect our GCD business.

We are now ready to take your questions. I am sure that we can to as many people as possible. Please restrict yourself to one question. Now Anna will explain how you can ask your question. Ana?

Question-and-Answer Session

Operator

Thank you. Our first question comes from Gautam Khanna with Cowen.

Gautam Khanna - Cowen

Hey couple, if I may ask one in the follow-up. On Era you mentioned there was an FX gain and there was some severance cost, what was the net impact of the FX gain and what was the severance? Was it a plus in the EPS this quarter?

Melissa Burgum

It was a plus of about $1 million.

Gautam Khanna - Cowen

A $1 million after tax?

Melissa Burgum

Pre-tax.

Gautam Khanna - Cowen

Pre-tax, okay. Secondly, the DSOs now are around 80 days, is that sort of the right run rate going forward, if I would call Era has some unique cost to completion type of sales recognition, is that right?

Stan Sloane

They do, but my answer to you is no1. That’s not the run rate we were going forward. We're working hard to get that down lower and we think we're going to start seeing some progress in that direction, but that’s too higher number for us.

Melissa Burgum

Right. We dropped two days quarter-over-quarter, as I mentioned and hope that will drop another two or three days over the next quarter.

Gautam Khanna - Cowen

Operator

Our next question comes from Bill Loomis with Stifel Nicolaus.

Bill Loomis - Stifel Nicolaus

Much improved results today. Just looking at the again Era and global health again, just to make sure I understood your comments more. So, including that $1 million benefit on exchange rates pre-tax from Era, did you say that Era was still, when you say dilutive do you mean it lost money in the quarter in the third quarter?

Melissa Burgum

Yes.

Bill Loomis - Stifel Nicolaus

Including that exchange rate gain?

Melissa Burgum

Yes.

Bill Loomis - Stifel Nicolaus

Then Global Health also lost money in the quarter?

Melissa Burgum

Yes.

Bill Loomis - Stifel Nicolaus

Looking to the fourth quarter, how do you see it sounds like global health going to continue to lose money and Era will be profitable is that correct?

Stan Sloane

That would be our current expectation.

Bill Loomis - Stifel Nicolaus

When does Era get back to, would be consider more normal profitability, do you see that happening late this calendar year or is that something that’s going to happen next year?

Stan Sloane

We’re working hard have it happen, as soon as we can make it happen.

Operator

Our next question comes from Erik Olbeter with Pacific Crest.

Erik Olbeter - Pacific Crest

Question on the bookings number, I mean $800 million really good in the quarter, but we didn’t see much follow through in that to the total and funded backlog, which still seem to be lagging even such a big number, Can you talk about what’s going on in there? The contracts long lived, are there a lot of options; a lot of recompetes?

Stan Sloane

Well, see the ratio of funded is about what it’s been running if I do the math right. I think it typically runs about 15% to 18% of the total backlogs. So, I'm not sure there is a lot of change there. So, I don’t think there is much different Erik.

Erik Olbeter - Pacific Crest

Okay, great and gross margin seems, we’ve had some big improvements year-over-year, up 70 basis points year-over-year now. What you succeed on moving forward on the gross margin line?

Stan Sloane

Well, we are working margins, no in gross, but net obviously are things we working in hard to get up. We think we’re headed for improvement. We’re going to keep driving it, but as Tim, mentioned earlier focusing on SG&A control and some of the other operational aspects to business, I think it’s starting to pay off.

Operator

Our next question comes from Tim Quillin with Stephens Incorporated.

Tim Quillin - Stephens Incorporated

Especially nice news on the turnover figures that you gave. Can you just talk about the status of the FDIC recompeted, the RFP actually out yet and how are you going to ensure that you retain that business or are there any other key recompetes you have over the next 12 to 18 months.

Stan Sloane

FDIC we have the draft and as you would expect, we are busily working on that. We would anticipate the final RFP I want to say few weeks to month, would anticipate relatively quick turnaround on that such good award on that job should be made towards either the end of the calendar year, early next calendar year.

Tim Quillin - Stephens Incorporated

Late summer or early fall.

Stan Sloane

Other recompletes, that’s obviously the biggest one. That one I think is running about 7% of revenue at the moment. So, that really is the big one. We do have recompete on one of our DA jobs coming up that’s probably in the summer early fall time frame call fits.

CR2 is another one that comes up, that’s probably the bid is in on that one, but we are not bidding as prime. So, those are the highlights on the recompete.

Operator

Our next question comes from Michael Lewis with BB&T Capital Markets.

Mike Smith - BB&T Capital Markets

Actually it's Mike Smith in for Mike Lewis. In terms of the protested awards you guys are saying, you mentioned that TSA and the CDC win. I understand you guys still have PMSS-2, the DEA EMS and (inaudible) contract that there kind of being held up.

Is there a total dollar amount in protested awards that you guys are looking right now that could potentially flow it in the next several months or the next few months?

Stan Sloane

I'd have to add them up. So, everybody is looking at the paper, as I'm talking, so you can add those numbers up. We'll give it to you. Otherwise we'll follow up. Let me talk about DEA EMS. That job has been awarded and not to us. So, that won’t behind us. The others are all still pending and like I said, we can add up the numbers. My guess is it's about 150-ish if you lump them together.

Tim Atkin

In terms of the single award contracts, that's right.

Mike Smith - BB&T Capital Markets

Okay and a quick follow-up. I believe you are saying you've taken out the military expectations for Era in your forecast?

Stan Sloane

I want to be sure. I'm very clear on that. We anticipate getting those orders at some point. We just can't operate the business having a lot of costs associated with readiness to serve without having the orders. So, we got to get the business size right, which we've done and we still anticipate getting those orders, but we want the business to operate profitably if they get delayed more. That's the action that we've taken last quarter.

Mike Smith - BB&T Capital Markets

That was about 30% of Era business, if I recall correctly. So, that's been taken out of your forecast?

Stan Sloane

It's only 30%, but when we do our guidance obviously, we'll make some judgment calls as to what we include in the guidance for next year.

Operator

Our next question comes from Ed Caso with Wachovia.

Ed Caso - Wachovia

I noticed there was a big drop off in deferred revenue. Anything that I should look into that, read into that?

Melissa Burgum

That was a related to our global clinical business and it was basically a correction of something that we've done, when we brought the business and when we integrated them, I sorry, effective July 1. It was just some cleanup that we were doing.

Stan Sloane

Accounting.

Melissa Burgum

Yes, revenue that we should have recognized actually.

Ed Caso - Wachovia

My other question is, of in the fourth quarter has a lot of true ups and adjustment accrual adjustments and so forth. Is there a bias up or down this year, your view at this point?

Melissa Burgum

No.

Stan Sloane

Not that we're aware of now.

Operator

Our next question comes from Brian Kinstlinger with Sidoti Company.

Brian Kinstlinger - Sidoti & Company

Are you able to quantify the loss (inaudible) so we can see it sequentially, what we could expect for an improvement and then second, what your customers on the military side saying, given you've elected now to start to restructure that business.

Stan Sloane

Brian, can you restate the first part of the question. I missed it.

Brian Kinstlinger - Sidoti & Company

I was wondering if you could quantify the loss you had on that business in the third quarter, since you expected to turn around and become breakeven in the fourth quarter?

Stan Sloane

You're talking Era?

Brian Kinstlinger - Sidoti & Company

Era, yeah I'm sorry.

Stan Sloane

That was about a $1 million.

Brian Kinstlinger - Sidoti & Company

What are the military customers saying that you have elected now to restructure that business?

Stan Sloane

They are not saying anything different. We're just taking action because we want to be as risk versus as we can.

Brian Kinstlinger - Sidoti & Company

So, no cancellations, just on the back burner sort of?

Stan Sloane

That’s correct.

Operator

Our next question comes from Tobey Sommer with SunTrust Robinson Humphrey.

Tobey Sommer - SunTrust Robinson Humphrey

I wonder if you could speak to cash and your uses of cash, it looks like you employed most of in terms of debt repayment in the quarter. What are your plans going forward?

Stan Sloane

We always strive to maximize or optimize our utilization of cash. We in the past have bought shares back and made acquisition. We will continue to look at the best way to employ it going forward. You're correct. We did reduce the debt last quarter around $25 million and we will try and figure out what the best thing to do with that for next quarter and next year.

Operator

Our next question comes from Jason Kupferberg with UBS.

Steve Fordham - UBS

Hey guys, this is Steve Fordham sitting in for Jason. In the past you guys had discussed a 10% plus organic revenue growth target. Is that a raise of still seems visible over a multiyear period looking forward based on your current business mix?

Stan Sloane

Well obviously we’re not going to kind of speculate about guidance for next year. My view is, we want the organic growth to be as high as we can, as we’ve said in this quarter, our focus is shifting to organic growth and we have to look at the budgets President’s budget now, to me it looks encouraging, but we will have to see what gets through Congress in terms of real appropriations and where that money goes.

So, I’d say that the environment is looking good to me at least in the near-term and I think that the kinds of things that we do IT and systems integration and software development and those kinds of things are good part of the marketplace to be operating until. I feel pretty good, but cannot give any numbers.

Steve Fordham - UBS

Okay. Is there anyway you can give us like maybe like a normalized operating margins as far as to expect?

Stan Sloane

Normalized operating margin, again I'm not going to put guidance out for next year. So, I think my answer it is, we’ll have to wait. We’re not changing guidance for ‘09 and in August we will give you, what we think for fiscal year ‘10.

Operator

Our next question comes from Tim Quillin with Stephens Incorporated.

Tim Quillin - Stephens Incorporated

Yes, thank you for taking my follow-up question. One of the questions embedded with my enquiry about FDIC was, how you’re approaching the recompete to ensure you win it and I'm just curious what kind of senior management contact you’re having with the customer there and I'm also curious, as what happened on DEA EMS, which I think was one that you won a couple of times and obviously let's put the other way?

Stan Sloane

Let's see, what we are doing at FDIC? Well, first of all, probably the most important thing on any recompete is current program execution and so we have a lot of energy going and to make sure that we have happy satisfied customers and doing everything we can to meet their expectations on the current contract.

Beyond that, we are working hard to keep in touch with all levels of management in FDIC. To make sure that we have a view of how they view our performance. That program will be hardly contested. We have no shortage of competitors, who like to take the work and we have to go and work with that mindset that it we really have to earn it and that’s what we are doing. Short of mean moving in with the customer, I don’t know if we could have much more customer contact. So, I think that’s working pretty well.

On DEA, I won't go in a lot of detail on the GAO decision. What happened with most of its public record if you want to go get it, I think you have access to it, but in essence there was a flaw with respect to an OCI issue and that ended up being a problem to overcome, the customer had a mission accomplished they just decided to go down different route than to continue the back and forth on the protest and rebid cycle. That’s an essence, where this happened.

Operator

(Operator Instructions). Our next question comes from Brian Kinstlinger with Sidoti & Company.

Brian Kinstlinger - Sidoti & Company

Yes, I had one follow-up, thank you. I was wondering if you guys have done a sort of strategic review about some of the ancillary businesses such as GCD and others and maybe talk about the plans of what you want to do going forward than with it all.

Stan Sloane

The answer is yes. As you can imagine, we have done a strategic view of not only those elements of the business, but the entire business. In fact we just completed that. What I’d say is, we’re always going to work to get our portfolio appropriate for where we think the business is going, and that’s true across the board, and as market conditions change, then obviously we have to revaluate things.

Brian Kinstlinger - Sidoti & Company

Does that mean, you can comment on, whether or you expect divest any of your businesses or not?

Stan Sloane

No, I can’t comment on that.

Operator

Our next comes from Michael Lewis with BB&T Capital Markets.

Michael Lewis - BB&T Capital Markets

Just a follow-up, are you guys still kind of going after, I guess strategy of forgoing some of the lower margin business and focusing on more higher-end type stuff and a quick follow-up is any update on the virus that was on the SRA system.

Stan Sloane

On the first question, our objective is to grow both top line and bottom line and as I said before, we are going to focus our energies there on organic growth, but the bottom line is also important to us. So, we are working hard to bring in revenues that generates increasing margins, and that’s the objective.

There are times, when you elect to take lower margin work, we’d like to try and do, where we do it because there is a strategic reason to do it, not that we do it, in and out itself and you are seeing that change, we said we are going to do that, about a year-and-half ago, and I think we’ve to demonstrate that we are going to do that. So, we’re continued down that path and work hard to get the bottom line up, as we grow the top line.

What was the second question again? I’m sorry.

Tim Atkin

Virus update?

Stan Sloane

A virus, nothing new there. My view of those kinds of things is, those are never ending things. You don't fix it one day, and it’s behind you, and then you can get off, do other things. You got to mount a continuing vigilance to deal with that, and that's what we are doing.

We are fortunate in our business that we have some of the industry best information analyst, kind of folks, information insurance folks. So, we've got them engaged and we continue to battle this. But my view is, that’s a never ending battle. I think that's nothing unique to us. That's just a way it is given the current state of technology.

Operator

Our next question comes from Gautam Khanna with Cowen.

Gautam Khanna - Cowen and Company

Hi. Just to follow up on a couple things. Tim I think you mentioned, utilization was up 90 bps. Is that year-over-year or versus the second quarter?

Melissa Burgum

Second quarter.

Tim Atkin

That was quarter-to-quarter.

Gautam Khanna - Cowen and Company

Okay. The turnover with the lowest it's been in several years, I mean, was there anything that explains it beyond just good management, better training et cetera?

Stan Sloane

No. It was brilliant management. No, I have couple of comments. One is, I feel really good about the attrition. I think that trend, it would last few quarters, the trend is great. You can speculate that some of attrition is the result of general, economic conditions in the country and the world, but I think that the way I would prefer look at is as peer group, because whatever affects us in terms of general economic conditions also affects the peer group.

So that's the way we really measure it. Now, the gross number that the voluntary attrition number feels really good and we're going to continue on that, but what we're really trying to do is outperform our competitors?

Gautam Khanna - Cowen and Company

Okay. You touched on material pass-throughs as a decline in percentage of the mix. How big was materials and pass-through revenues.

Stan Sloane

For the quarter?

Gautam Khanna - Cowen and Company

Yeah.

Melissa Burgum

It was $3 million less than it was last quarter. I'm checking if I’ve got total of that.

Gautam Khanna - Cowen and Company

34 million roughly?

Melissa Burgum

9%.

Stan Sloane

We had it in the 9% revenue range, Gautam.

Gautam Khanna - Cowen and Company

Okay. Looking forward, your pipeline seems fairly large, or should we expect SG&A to pick up looking forward or are you going to be able to keep it down?

Stan Sloane

We’re going to work hard on SG&A control, Tim addressed this already 17-0.51 I think we’ve made significant progress last quarter and we don’t intend to lose that focus.

Where we elect to make conscious investments for example, new business or things, then we’re going to find cost to take out elsewhere to keep those cost under control.

Gautam Khanna - Cowen and Company

Should we think about as flat in absolute terms looking forward?

Stan Sloane

I would recommend you, think about it in terms of slight variations around the current numbers but there will be perturbations over time.

Gautam Khanna - Cowen and Company

Just to clarify on the FDIC recompete, if we had adjudicated summer or the fall, what’s the actual schedule right now for adjudication?

Stan Sloane

I think that’s their words, summer early fall. So we’re just reflecting what they’ve said officially.

Gautam Khanna - Cowen and Company

I thought for forward we will see talking about expanding it. Is it already after the expansion that would be a full year expansion?

Stan Sloane

A year about, lets see probably 3 or 4 revisions ago, you are correct. But that’s changed a multiple times over the last few months. What I just said to you is summer falls in the current schedule.

Gautam Khanna - Cowen and Company

Proprietary software sales in the quarter?

Melissa Burgum

It's about little less than $2 million.

Gautam Khanna - Cowen and Company

How does that compared with the year ago?

Melissa Burgum

I don’t have quarter-over-quarter a year ago, but this year year-to-date we are about on track with where we were last year at this time.

Stan Sloane

I think, my view as the quarter was a little light on the license sales, we expect that to pick backup. Summer was timing associated with state and local funding that kind of get tied up in stimulus and other delays. But the quarter was little light, but we do anticipate it coming back.

Gautam Khanna - Cowen and Company

I am sorry to monopolize, but last question on CFO search. Any update there?

Stan Sloane

We expect to have news regarding our search activities sometimes soon for you.

Operator

(Operator Instructions).

Dave Keffer

Looks like, we are all set Anna. So as always, anyone can feel free to contact me with follow-up questions. And in the meantime, it looks like that concludes today's call. Thank you.

Operator

Thank you. That concludes today's conference. You may disconnect your lines at this time.

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