Lou Von Thaer on His 2016 DynCorp Outlook & The Int’l GovCon Market Picture

LouVonThaerLou Von Thaer began a new phase of his nearly three-decade GovCon career in Summer 2015 when McLean, Virginia-based DynCorp International appointed him to the chief executive post.

He joined DynCorp from a two-year stint at Leidos as national security sector president, which was preceded by a decade at General Dynamics as head of the advanced information systems unit.

ExecutiveBiz recently caught up with Von Thaer to discuss three priorities he has set for DynCorp from a long-term perspective, his outlook for the company’s international market prospects and his initial observations over the first six months as chief executive.

ExecutiveBiz: What led you to join DynCorp and what have been your immediate priorities since you started?

Lou Von Thaer: I saw this as an opportunity to lead a long-standing company with a great brand that does very important missions in the customer spaces that I’ve been around my whole career.

When my discussions with the company started to get serious, I went out and spent a fair amount of time talking to a number of retired general officer friends about their impressions of DynCorp. Each spoke passionately about some point in their career where DynCorp basically saved them — either during a deployment or a conflict.

Whether it was going to a hard place or dealing with a challenging environment where soldiers were going to be put in harm’s way, DI was able to be there with them and for them. That’s the kind of legacy I wanted to be associated with.

When I walked through the doors, I told the team that the first thing I wanted to do was learn the particular market space and make sure I had a good understanding of what we do. I have been building that knowledge with the help of the team and talking to our customers.

In the near term, I have focused on stabilizing the core business. The rapid drawdown of American forces in Iraq and Afghanistan resulted in a fifty percent reduction in revenue — that’s a lot of shrinkage, especially when coupled with sequestration.

The last two focus-areas include evolving the business development team to be able to execute both the global strategy of the company and our core strategy, while simultaneously improving EBITDA generation. My predecessor Jim Geisler laid a solid foundation for progress in this regard. We are continuing those efforts to make sure we stay cash-flow positive and strong and growing from the EBITDA standpoint.

ExecutiveBiz: Where do you want to focus DynCorp long-term?

Lou Von Thaer: The first obvious focus area that I am just picking up is to continue to expand our global positions. Today, more than half of our employees are deployed outside the continental U.S. In many cases, allied foreign governments are familiar with our employees, and the quality of our work in support of existing U.S. government contracts.

Increasingly, we are receiving invitations to work directly for those governments in cases that are either foreign military sales, or direct commercial sales for those services we have historically provided under contract with the U.S.

We want to continue to expand those opportunities. Our successes this year include a Saudi Arabia National Guard aviation contract and the Taji contract that supports the Iraqi army, just to name a few. The downside of pursuing these commercial opportunities is that the timing is sometimes difficult to predict.

The second priority is to continue to win in our core markets by making sure we do the work required to succeed in those spaces we know so well. Once we have nailed those two, the third one is to look at some adjacencies that can take advantage of our core competencies.

Our core capabilities include the ability to operate in austere environments. The skill sets and the background capabilities that go with that might be beneficial for intelligence contracts, IT support or supply chain activities that are required to get equipment into those areas.

We are laying all of this out right now so that our leadership team can plot a longer-term strategy in this regard.

ExecutiveBiz: Which other market areas are you looking to grow DynCorp’s footprint?

Lou Von Thaer: The nearest term priority, and the area we are investing the most resources, is to push these DynGlobal strategies. Today, our attention is Middle East-focused because there is obviously a great need and the customers have the resources to fund programs.

We are also looking to expand to other locations like Australia, Eastern Europe and potentially Africa and Asia. While most of our people are overseas, they are overseas on U.S. contracts. Today, the direct international business to those customers is less than five percent of our sales. We would like to see that double in the years to come.

ExecutiveBiz: How do you envision DynCorp’s evolution with austere budgets?

Lou Von Thaer: We believe there continues to be plenty of opportunity in our core markets and hopefully, given some of the macro budget moves in Congress, we are reaching a point of stability. We also hope to focus more on direct contracts with some of these countries I mentioned previously, to have more predictable results going forward.

Looking at the budget environment, while there is still tight spending by the U.S. government, we are pleased with the Bipartisan Budget Agreement. With a two-year budget, our customers will be able to do some things we haven’t seen in the last couple of years. We are hopeful that will make the acquisition cycle work more efficiently.

In summary, we believe the market is flattening to slight growth, which is a much better place compared to where it has been in the last several years.

ExecutiveBiz: How do you see international markets fitting into DynCorp’s portfolio?

Lou Von Thaer: It is a natural step for us. I’ve been with other companies that did good work internationally, but the way DynCorp operates, it is truly set up for international work. It is almost more natural for us in some ways than doing work domestically. Half of our people and a little more than half of our sales are currently overseas and it comes down to the relationships we have in those regions and our existing systems.

We have a hiring engine, which is really effective in hiring large volumes of people and deploying them in very short time frames. We have management processes that let us manage from afar with our resources and tools that let us keep connected to those program managers and management assets.

I’d like to see commercial international contracts grow over the next several years to be about ten percent of our business and potentially much more as we look into the future.

ExecutiveBiz: What have been your other main observations at DynCorp so far?

Lou Von Thaer: One of the special things about this company that is different from any I’ve been at before is – while many companies put the customer’s mission first, DynCorp goes beyond that and has made a strategic decision to literally be side-by-side with our customers, often in dangerous and austere environments. As I travel around and talk to customers, the level of affinity that our people feel for the customer’s mission on the ground is truly extraordinary.

I see this as I go around and talk with our teams and work with the customers. That is part of the secret sauce of what makes this organization special. What those generals I interviewed told me is true – DynCorp is a great company and the missions we execute are truly important. Getting a chance to meet the folks that actually do the work in the organization is inspiring for me and it has been an amazing experience so far.

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