SAIC - Earnings call transcript Q1 2019 | Science Applications International Corporation

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Operator

Good day. And welcome to the SAIC Fiscal Year 2019 Q1 Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Shane Canestra, SAIC’s Director of Investor Relations. Please go ahead, sir.

Shane Canestra

afternoon. Good Shane of is Relations. SAIC’s Canestra, name Investor Director My quarter joining XXXX And for first fiscal thank you our year earnings call.

with Joining information and issued financial of to our that I report on Chief discuss call materially unknown Please our differ Chief today’s from the XX-Q. Financial our be find be in Tony Mathis, to which annual section be team. can other our found call. evaluating conjunction Officer; our statements to and supplemental cause provided you risks, utilized Keene, of SAIC’s known subject that our on could members these presentation and discussion release, Operating Risk Nazzic Executive where we to me Moraco, made Officer; also This at utilized our these on earnings you’ll Chief be filings of results call. Charlie Factors to today’s including make financial slides actual management Officer; in results Form on refer a note forward-looking that statements are of for results and today are uncertainties addition reports our should business and to documents, our today’s Form to afternoon, with on we Both call. investors.saic.com filed in risks quarterly this XX-K and may SEC soon, XX-Q along outlook Form

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

release our discuss GAAP and my useful the supplemental pleasure introduce which comparable non-GAAP CEO, to most to Moraco. and will believe press financial measures. and investors, other we now It provide metrics, both slides presentation reconciliations Tony measures our addition, include In information for we financial is

Tony Moraco

long Ingenuity SAIC the begins with the strategy term afternoon. continued good and Shane, our fiscal momentum XXXX in from XXXX. resulting of marketplace, you, Thank year execution

revenue delivered consecutive increased year chain orders quarter our book-to-bill platform billion in of last effective the quarter primarily management and opportunities, with quarter as per the of quarter to for fiscal working in backlog. compared returns due differentiated Protection NASA of to X.X% continue of share first attributable revenue prior as third to capital fourth addition due fiscal X.X quarter also a mid capture chain contracts slightly for portfolio. generation Team enable integration business delivered the the below of Environmental the growth Year-over-year in collections margins Operating business. cash of solutions new of investing year to strong were materials our strong the performance quarter increased quarter. revenue year. to SAIC was flow awarded on to the and and and quarter, In expectations in in Agency, in the and in growth, SAIC first investments growth to X% of $XX invest while favorable EBITDA with internal in pursuit and first earnings and the compared cash future. of quarter ended and the supply our growth X% with first supply to new significant ‘XX volume was

expedient increased customers year appropriations is government’s before our in to fiscal avenue opportunities. capture fourth consistent continue of our proposal omnibus the with and our Our our XXXX. environment the by middle proposals the their the on obligate of the most first quarter, submitted passing quarter, to be to Congress business end of amounts $XX ability of award market budget decisions value is end billion With the submitted and for we encouraged

of of color Let September. passed the end anticipate environment. decisions, continue through in increased you our March, late pace Since budgets’ the pace to expect year me award we of were an with on federal provide additional contract fiscal market and view that

may growth fiscal increased this this provide late in largely benefit activity award should year, fiscal year. some While revenue next contract

operations, for While fiscal to decisions than that honoring budgets higher demand at year award and and remain government budget XXXX years. expect in contract increased an quicker forward their enable we for with looking tempo previous a and activity their will continuing that our we government’s optimistic resolution, modernize customers fiscal could baseline XXXX to is imperatives. year to at the mission place brisk move capabilities relatively contract are agreement With a begin as amount customers

can discussions government desire markets to and in from directly leverage order play leadership Our and to of by while existing to capabilities. mission generation on to technologies user. encouraged their the accelerating costs diverse desire development end solutions effectively integrator implement SAIC I the technology this that adopt with capability as next reduce innovative delivery am a has strengths risks, centered the

higher We with continue modernize range additional evident an opportunities enterprise growth, solutions. and upside. well-positioned an government expectations area is to for providers, federal demand readiness. growth, improve for mission with market service a especially associated systems environment and there the systems With to modernization of SAIC organic growth improving military for realize are Training wide revenue both offers to differentiated solutions see to IT with system

addition, market we seeing In increased consolidation. M&A are and activity

As we’ve broader to a being customer assessing capabilities will to company. the past, new strategic the disciplined primary M&A filters of take stated in the with when fit continue approach and access we any

are position opportunistic growth as long-term can being to in active we over said, to the now COO, and a very We call calls strong complement XXXX, organic M&A Nazzic Keene. for our through in strategy. continue our execute turn acquisitions. our financial we that value confident to That acquisitions in Ingenuity we strategy, creating I’ll which be are strategic evaluating be

Nazzic Keene

healthy billion, for of the the which of re-competes successful operating to translates book-to-bill continuing quarter. for business new these am $X resolution and Tony. activity by encouraged of led approximately awards, With majority Thank Contract to award you, of results, despite the X.X quarter under first in a quarter. I mix first a a bookings the

trailing Over SAIC ratio low beyond. fiscal for which month, internal and indicator of a growth X.X, year book-to-bill single-digits leading 'XX strong XX in has a revenue produced the is

included providing First protect engineering and re-compete US the award category the to from $XX AMCOM IT $XXX from $XX Human quarter win support. Also, for Resources systems the was services. million and customer of the bookings in Army protect support architecture million to continue Navy's or support our US million to SPAWAR contract the award contract command continue

expand GSA OASIS IDIQ Under new SAIC awarded program US As the I vehicle, and contract awards. mentioned, first the $XXX quarter to million several or technical Order bookings also services. engineering, included management support provide business Army Task

to awarded customers, first IT to contract us assist the of infrastructure. customer Web the modernizing a quarter, Task sites, awarded Web from Order the from largest Technologies and million services modifications was Virginia Commonwealth the VITA, in $XX contributions our Order new to to integrator of SAIC infrastructure delivery the balance first across manage transition the with services a be creation, multisource their suppliers awarded provider Agency, IT SAIC to notable responsibilities the end Subsequent was are fall most of delivery. cloud-based concludes services. a quarter of to the portfolio. other SAIC contract awards related Web IT our VITA's will other to Task multisource bookings to their to and next-generation Last for comprised of the include the model. or Virginia applications One and same Information management NASA, from moved previous transition as under new approach That services maintenance provide the

second billion of SAIC's expect award contract We the third first quarter, At fiscal bookings total backlog proposals billion, estimated to this of $XX revenue approximately funded of stood end at quarter the of unchanged year from $X quarter contribute backlog in fourth $XX billion. and quarters. last approximately the awaiting fiscal fourth and the submitted the 'XX award with SAIC's year. value The is

programs awaiting of the demand are submitted reviewed, for proposals seeing enterprise increased we award pipeline and modernization. other being into IT Looking customer

business strong quarter, AMCOM competitor. Order. I the a were sheet, our excess awarded our Order in am Task we $XXX for and Order margins. re-compete a protested to the that report this brief pleased subsequently look were revenue remarks of higher Task excited communicated you of on Last I Task to at by let give on this we about balance growth Concluding XX development my was am potential the that we As I opportunities status for million, been re-compete. update re-awarded leverage me but resolved has it protest

contribute to quarter award our this to expect bookings. second We

ACV programs. our Before the AAV two quarter, turning Charlie business, notable the of and Corps the discuss financial to over me on comment let Marine in to platform integration it efforts details

of On are will the production LRIP the or the AAV and tactical program, rate upgraded soon delivering we these begin low contract, vehicles. executing initial phase

testing vehicles enable integration additional Carolina, near as for creation. our completed, and select announcement in by and the of decision we this a opportunities, are the On that down expecting value XX believe the our we Marine we’ll platform demonstrated a in the strong evaluation we South ACV new program, platform. future pipeline prototype Center long-term has Platform Charleston, today, of the With Corps are of investments recent making Innovation been

to on committed Charlie, you business Department's readiness our this the and focus results? to of are growing it modernization. with line align new We Defense financial for over and

Charlie Mathis

good and afternoon. Nazzic Thank you,

orders quarter the Revenue last first of year. $X.X within services X.X% first approximately compared decreases the by fiscal as were was of revenues offset certain growth driven portfolio. NASA billion well EPA increases OMES growth end-user of other supply the partially internal These and Our as and reflect quarter to by the as chain completion across revenue portfolio. programs, increased of our net contracts

equating percentage to was as quarter revenues. a First million, EBITDA $XX X.X% of

quarter increased the $XX our The was platform improving the chain investments share resulted first quarter. to $XX million and first $XX and recent was quarter. primarily million year, income Operating operating margin in business. While of in expected quarters for the business, was and earnings be quarter consistent quarter first EBITDA income affected tax with timing first the rate $X in integration in in X.X% previously of at effective per our the time. last prior our profitability recognized orders throughout than by rate the lower margin year was of Net we XX% diluted current the vest for an supply of full lower year stock is accordance quarter tax awards was tax awards. the of in Similar of quarter significantly affected and with the year for of accounting to year, our equity that XX%, by based treatment on equity million XX%. fiscal the quarter communicated rate price these predominantly We first the benefit that the first quarter than to approximately

approximately XX% from be we XX%, Looking full year, communicated expectations. estimate XXXX down previously year the slightly tax to to fiscal fiscal to our rate our

and fourth of by and operating payments $XX sales receivable cash quarter respectively. XX-days. were favorably were cash the First free Cash the quarter, quarter delayed flow Days in impacted was the the recovery flow the collections million quarter $XX of continued management. and at end focus on outstanding in million

in normal our We the DSOs range. within expect XXs to operating remain our low

first cash $XXX cash balance quarter ended million. target $XXX with operating with balance average our consistent The million,

our of Net $X During the consisting million EBITDA XXX,XXX $XX reflecting capital and the $X was our in less cash is first quarter, to strong representing leverage approximately shares, about ratio repurchases, repayments. balance net planned first and quarter term we of debt million three deployed month trailing at million loan than XX sheet. of of times, share debt debt the end billion $XX dividends of million $XX

on, call Before we status the fourth you of and filings. that weakness our would quarter provide I like disclosed in to moving material

be to previously in fiscal We have the second implemented actions, to with we ensure alignment have our of will a weakness quarter expectations, remediated this effectiveness. second quarter testing intend completed material the An remediation and in year. communicated

forward our for to turning year fiscal XXXX. outlook Now

consistent are outlook margin and and With improvement, be for and of our regards targets, revenue basis target annually. growth basis previously in our long-term with XX the remain line to EBITDA On margin, single-digit expect revenue year to to in improvement XX committed specifically targets. low long-term measured year, they overtime, and expect to points fiscal by We our are with profitability we communicated as our internal confident average 'XX we points long-term and financial unchanged. growth

and a this a last fiscal reminder, an believe X% points EBITDA margins Despite increase we mix this basis contract of than achieving XX EBITDA confident fiscal and we several lower quarter’s a of with target to can In communicated the the including fourth the quarter ended to favorable expected XX 'XX points we basis reform year. discipline. similar annual than year we million, our in cost levers, margins that the first As margin, more half. remain margin I through call, margin expect increase $XXX adjusted in first be to pattern from fiscal December. to half continued increased attributable new in On in last tax free year, flow fiscal second our higher $XXX million passed cash I

We to infrastructure. year, an expenditures, we capital $XX IT million as expect increase million an $XX in this incremental to invest

expect cash continue of fiscal $XXX free flow We approximately in XXXX. million to year

Our capital the share our a to strategy M&A. distributing remains deployment consistent through to repurchase strategic continue cash and intent with dividends, combination shareholders of excess

now our be dividend to $X.XX I has am payable Directors Finally, announce share, XXth. we questions. shareholders that July are to take next quarterly approved to on our pleased Board will and of ready of per Operator,

Operator

will with question take Please ahead. Company. first And and go Thank our von you we Cowen Cai Instructions]. Rumohr from [Operator

Lucy Guo

Thanks Hi, a to protest still your understand piece it of of but question. EXPRESS, a parts ramp resolved my $XXX million just for on re-compete. in Task down three the wanted Is I taking there more this the on than it’s of Lucy won out seems one Cai. contact? Order piece moving for XX, Raytheon AMCOM favor on revenue the

Tony Moraco

within -- it’s is there there’s Task so continuity the that think, of I re-compete entirety Order Order. Lucy, Task for XX, the

we Orders two last portion has of that that to work. have majority into successful a of Task of three one on able three won retain and set pieces, of the broken those the So up year we were yet

into factored protest quarter. the last the aligned after does have But we're just and finally resolve that with re-compete, current re-award pleased activities profile. this re-compete been recent it year's not that’s are risks, last this get So quarter year’s to

Lucy Guo

are re-compete You to QX, tires the be been or in that postponed? anticipating has

Nazzic Keene

Hi is being Nazzic. out a bit. is Lucy, pushed That this

award, the work tires as the expect decision closer the will process this to existing year. in that get we of getting us program year. the an we So, of to throughout to this disclose on carry are the we extension And end the award calendar

Lucy Guo

finally accelerating. pointed to? referring bid if in pace pipeline? specific in And modernization, give you’re tone enterprise maybe you color just of the any have a in IT you on terms Are And large just you then bit do there the of can then agencies more out little opportunities here awards mind specifically

Nazzic Keene

conversations, that on following budgets are Yes, again. increased this to going so flowing I and where bit, communicated. certainly visibility what’s have is based touch and are the Nazzic can a We been the budget on

or Now the place. process the of pushing those taking dollars into still command the into agencies is

of -- the at form awards. year, there. RFPs few increased certainly that priorities, toward But get come next pace we But towards that in although general we a haven’t modernization, of seen government acceleration of over increased awards. so the mentioned as of haven’t as understanding And expect our the of of nature, an we infrastructure, fiscal juncture, course of seen IT end months, peer they things we see Tony have this the increased yet some the gets as particular the to do readiness, or around

Lucy Guo

many more So X% closer actually a would follow-up much somewhat require basis $XX increase contributing? the EBITDA mentioned? address how sturdy to a more How net, mix, I just to of second hockey-stick of that that get was then points that million and in it margins, you one favorable half, year-over-year margin the at to from revenue is believe midpoint. restructuring on coming maybe is also savings it

Charlie Mathis

This is Charlie.

just the margin. on get Let me EBITDA back

the the of there’re drivers margins margins. EBITDA to main X.X%, So two

points we remained lower last XX that then XX can points points. said communicated XX I by the program. impacted $XX year quarter, were integration that the volume, points savings lowered despite quarter. by higher restructuring had impact orders, the in our $X in for investments basis XX basis the EBITDA included confident, the supply First, script on mentioned XX to to of of million the And year-over-year quarter. margin overall on chain about increase that XX we that the as basis margins approximately This million. achieve we margins about we basis last there, this that platform And And

Operator

Our next Citi. Jon go will question ahead. from Raviv with Please come

Jon Raviv

driving can you there. increased a consolidation, M&A in your the demand that’s your enterprise going you upcoming mean your of bit But lot more you IT what’s you you And in to industry. chances order outlined like at related improve of filters for. in that need pace order of on your has a little question, something competitors opine you’re the an do say modernization termed is M&A compete Tony, to perspective then in on the been I you accelerating, that saw tight. because also what more some the scale feel need you

Tony Moraco

I around M&A improving the think further conditions optimism there’s I think increased pace growth. with market

positioning collectively see to ahead in cycle. XX of some we can access M&A cases think, that around I and XX contract facilitate month sales this

customer see we So bit come in always and access demand. still organic is a cyber consolidation niche technical through some play, needed there's a this that. the and then of cloud mission The that, be areas components. to into more growth. in one a positioning the There’s In on again, as particular some driver for marketplace for also areas higher catalyst capabilities, expansion a way M&A of us and

of contracts, portfolio, a So some context as is service type the leveraging modernization. broad the can I a the that be scale modernization you’re optimism well of as and IT base services whether appetite think pace enterprise positioning to bigger managed There IT across combination products through sometimes enterprise is merit a our complement. in as a have

there's so capacity others, entrants, a seeing AWS, and are We large Microsoft component.

more we probably so that economy move and modernization application scale and analytics, applications level, chain value there sense migrations the at a and so So scale modernization. for up Probably that I scale less the data on as within you the [indiscernible] less maybe is gives think on play. cloud, infrastructure

to of broad balance stay we’re to side mission development, try and this on enterprise analytics scale a probably that and into play with out the more emphasis more I latter mission So relevant. is where commoditized, looking more the application the and bit IT, capabilities think

Jon Raviv

Where then re-compete I put a down know that up And the line. coming Vanguard you in Vanguard. like, there's potential there would something spectrum?

Tony Moraco

redesign, across Vanguard customers a from. where the the that services operations The to scale then move large end or modernization end efficiencies allows there’s of Well, and interfaces and program. where us delivering can these development give -- understanding you does some architecture applicable. suppliers the benefit from to general application And recapitalization, you still see is benefit

So offer which end-to-end services, programs those very attractive. are are

the at end-to-end think such to a over out the account so bases time. volume period AMCOM that broad not is but as and the on but combination sheer NASA I multiple, of services demand the are attractive, state allow customer multiyear so And a the those department contract base, seeking our only much navigate the and of not us

Jon Raviv

that then I way a your how more there And and order outside of up seems mean, address mean things, ones, terms you buying. you also be how -- of approach are partner government much to where course addressing to decisions. I in in make/buy bring more the with people sorts technology, do in effectively of there's these can

do how approach So that? you

Tony Moraco

I probably a overall, biased think, partner we're on play.

integration that vendors the not plays into some strategy. but case our buy partnering I guess characterize actually acquisition, I in much that So so with sense, technology in right

is supplier strictly the The differentiated marketplace intent to And we on side differentiate. basis scenario, as the we a to on time market. basis. back primary make capabilities a I strategic integrator. acquisition to an and the that's a on then solution that sell buy We So bundle can bundled think set

cross intelligence around boundaries. community, We’re and example one you organically as grow tough seeing to the elements agency try

volume So some cases, on that area be some facilitate acquisitions where continues creating own. in portfolio, that to a its an so some capacity can, in and portfolio stand

trying side to the get market the think faster. is when limited I you’re So bright

as acquisition contract mission creating developed we've that relying have supplier the solidify capabilities strategic cycle and bundling it's to mature. advantage base -- Otherwise, that missed wise. yes where on you’re vehicle, integration deliver and been might partnerships, You we've so strictly well, are solutions,

transfer As play, mechanism lower development risk, customer cycles. tech to our a long speak as lower avoid faster and delivery cost a

on is in this that to think and position we the what to signals and line demand market do. perfect a and be transfer So in that continue type customer much integration we’ll us is of for very

Operator

our next Please ahead. Joe Stifel. take go from question we’ll with And DeNardi

Joe DeNardi

Two wrong. questions Correct think. for Charlie, me if I I am

single-digit years. some bit we low than little think of I the the over you some at be considering? a I with that? offsets be budget, do seems expecting rate How next that which growing faster mentioned reconcile should type or to a that that you’re growth Are there risks few

Charlie Mathis

low developments the And I to what budget we coming. think Nazzic again is continue that is single-digit target. revenue we will stated that and and out, growth update long-term we watch pointed the see that the financial we when the

Tony Moraco

we’ll think try I midyear the looking some the to as we're through think launch uplift low and some still year's of we to have look, above that outperform Nazzic now growth X.X% we’re level awards upside year. book-to-bill, said, that at last we’re so maybe almost contract and in can We we this at single-digit. growth, and see as get

QX able that's single time ’XX premature to our we update single and and still that there’s and to be profile finish digit. in QX, as out QX But for to point. address mid think a government to particular, low just I that tell as fiscal

Joe DeNardi

basis on Is expectations for points a XX even And of reasonable platform margin to of then, just business Charlie, ramp-up? starts the XX the still as to goal that side your expansion.

Charlie Mathis

the X%, And movement Yes, this And our with year, points lower XX the that's that's feel the that's currently and despite to comfortable expectation. pretty we in I quarter. basis XX fiscal over actual we’ve mean, of by higher cost that's programs lot that pointed that programs, type of to Nazzic the margin mix, out, about and and the this contract so discipline really driven seen. talked continued

with the pretty messaged consistent we've half first prior that will be half the at you the higher the If than ramp-up second year. look as margins

get it’s similar back somewhat how year. project occurred, this look you and and we see what and that if So

Operator

from will question next Our Conrad with ahead. Jefferies. come Please Greg go

Greg Conrad

consolidation Just wanted to we today question. to market, in the -- mean, you you mean, on the that competition? I any the markets changes maybe new or in just when have I market compete. And come follow-up of competitors the terms look at seen the

Tony Moraco

in is component the where see It put couple AWS IT Microsoft. a wouldn’t but with of I it the we’ve types think not entrants play the last Commercial with opportunity, and firms in attractive. and change was biggest surely may quite modernization I years cloud those seen or an budgets, migration growing the Probably -- of but side, non-traditional, be the the there demand. commercial truly is on is poor infrastructure

to in some so system knowledge and engineering it’s So entrants. IT of broader that seeing application less side. to IT on as side the so can bring bring that quite play. partner mission of base It’s with then more tend so infrastructure capability the that the we we’re less bear level. mission We the them with they on Again,

consistent companies, we think landscape similar or movement even small mid the among to We there’s mission though consolidation some the resource pretty I side. feel of still and the competitive tier. on system relative see the

Greg Conrad

And is that something costs down as come in headwind QX. then throughout mentioned that the platform and improve, drives year, also margins that’s integration just or you go Does that improvement? from the we clarification, why

Charlie Mathis

fixed with back we if chain the and that to less increased margins in the year. the cost the mix priced So and mix, again of that we out an what’s QX for recurring that contract driven and The driving discipline the the by supply margins really our orders you and the contract last have portfolio are was that we continued QX similar more separate discrete half That’s have year. don’t mix, investment even volume really again. see in

Operator

Edward Next will from Please go Fargo. come question Caso Wells with ahead.

Edward Caso

president a your agencies talk exposure little that like? about the bit to does not federal you Can

Tony Moraco

be to can those presuppose… that ones which don’t are, specific Well, want on I

Edward Caso

anything Well, doesn’t to with right? I do defense, think national that have

Tony Moraco

to portfolio. with administration, the it to we government that changes -- we’re FY a reaction on of If as we still be this point. we see that more dramatic slower rhetoric, on a is demand we’ll track But there’s any the a is skepticism we that yet as can side FY’XX. major maybe in hold is But having fed bit, say or haven’t I going and still the seen it, -- shifts actions will get at in don’t slight come based flip also conservative, there. maybe little little tendency into to

think they’d have there short they explanation some be a month, they’ve do holding I go part that’s of rationalize are the the the budgets that the of we time still And period through. believe about money, may a I back. but of given process

and player, side and know again modernizations those little some and on very say early to our beyond still in think you services. got the going real who’s we’ve end-to-end missions agencies to it’s So limited be I is have a exposure that but we a diverse portfolio the solutions

Nazzic Keene

I thing agree is that to I would said. with only The totally add Tony what

We looks what trying cautious to a your and little more maybe to some and point a of more around like. are really get -- certainty seeing that those more little

that of or that manifests seen some we in So decisions any at funding itself juncture. certainly on awards it there’s haven't this

Edward Caso

that number quarter, The the the upside release. you absolute change dollars? supply chain put this the is that in press Is or the year-over-year

Charlie Mathis

That's change. a year-over-year

Edward Caso

basis does of throughout if thought you're year, thinking or then to XX you the get Was you you to more… what points. going hit that you're -- would get pull a could that XX still And forward

Charlie Mathis

would contract half planned business I of again, the and say this supply in supply we and again that chain And see where the anticipated chain had we that's is changing as margins sight less the quarter. how increasing. was of that and the the that back the have we line again in backend be So that's is to why, the mix

Tony Moraco

be to on XX. in to that that like the XX sit long us position this I'd we think or add trying year's XX comment XX back gets on to to marketplace, we And term where last today, from performance

acknowledge. catching year, last we're up little bit from So we a

appropriate the solution of to organically actually I we're So cycle. some put investments that's really bids off -- putting we place, want also advantage build back But a the take of differentiated this the that money make in that can target. making sure that into and so

it's cycle think I to last a for also where approach we're invest So appropriately margins balanced year. going next able year, making yet being up this into from

Edward Caso

was the get you -- it in we update of or the I you these new data ACV opportunity What much in How this? was you're should the Is the Charleston one it maybe plus captured? relate to this, is AAV looking a for? billion be I next are award? have opportunity. point of building on Where is anticipation program. that milestone hoping think award space facility to $X

Nazzic Keene

This let capture me try a Nazzic, couple those. is to of

AAV, a production so the or vehicles with of rate as So the the to few our those quarter are phase, as we we or phase, next first look on in delivery and out of QX. LRIP limited we in close

then from And so XX production that years. so of just into about go a in LRIP that's two we're months four phase rate production of of or XX And early the sense a -- we'll production, so, stage you standpoint. are for where we to go the phase months and will give

investments of the of that stages are So in and production made early support we're still space. to that we've the some

production LRIP. facility, with mentioned, as and associated the you the So materials and infrastructure labor

to as As you supporting the integration as it as that support our just Army to not the also well certainly, to support AAV Marine building but the platform other across, relates facility, broader is to opportunities and look as well. Corps pipeline the our and portfolio Navy -- new

Edward Caso

about memory When the XXX the have potential vehicles might My make you next a on rate for but contract for is have full more? that now, a they decision XX you production?

Nazzic Keene

right. production. And it’s the we've to get that XX calendar, rate so you. year year that's I LRIP, decision to have -- so certainly I frame, this early a are got Yes, that. But next but late limited in confirm may the it's can I time back believe have

Operator

with Krishna Research Please We’ll our now Partners. next Vertical take ahead. from question Sinha go

Krishna Sinha

here. you for questions of Couple

think like in If modernization maybe I cyber XX% margins or down something from remarks government expecting look like time at pipe. that something it's higher type here work, of were is mid-XX type mentioned and guys that cloud margin that works the margins. you believing for percentile I contracts. have some the getting out handing are entities I commercial a what hard Nazzic

that guess you from competition that -- market? to And in direct I seeing terms what government margin saw government you what my willing department. their For for commercial are cloud what So entity pretty I terms entities big in of of of pretty have to type is Amazon standup commercial -- give seeing extent then in a are big work? is a question think example, within we the

direct seeing again And next type competition margins that that you’re guys? you the these So seeing are gen then technology from what are on work? of

Nazzic Keene

the haven't profitability but The also knowledge that is seen is government approach we see do we see a can the way with and it really on run we mission. to So like -- we where allows of we fixed model, us try modernization then the more in a as scenario IT outcomes base, price the commercial do totally programs we type have bring types and -- to to more less government what opportunities. But deliver specific agree profits customers the control to higher the can to support the currently going the commercial contracts the margin structure outcome mission, lever opportunity we -- the opportunities And I'll you. we that to to opportunity that. with we do couple I the where as engage the we staff I see see than mission with end opportunity in knowledge, is side, what call,

And Charlie different to really the to drive, well of the type mentioned, see, of with improved mission to overtime as the forward IT modernization, the as as margins. we combination so opportunities the the contract coupled a levers those with that opportunity are see

Krishna Sinha

And are commercial those? in you seeing competition

Nazzic Keene

We cases. are some in

bear. more the part, we’ve types where I partnering for, partnering -- a think, company most probably it's just direct. would bring But opportunities. is domain. So I certainly, and balance some more and seen like for more than calls the in the interest going -- But the a call are infrastructure SAIC particular particular mission good that still there some in can advantages that RFP there It's of to what

Tony Moraco

a it’d burden defense. that commercial clearance on civilian side. more point in without with Just might entry federal still access the probably happier the intelligence little gain see and be can access probably community S agencies a side folks on of an than or civilian intel we defense

and it’s robust commercial some the preclude to be market a probably that but that because extra access side guys basis. sustained still So in biased the on have civilian of there elements layer of security

Krishna Sinha

towards really work. or area inference very or more IT contract like isn’t is, compared mentioned legacy to cyber -- like types of price. mean, a driving cloud fixed my the not mature you there’re there these contract I some And

drive opposed legacy So is price the have terms a price like to as risky just fixed scope the contracts it doing? been fixed cloud a to guys of you type of in work bit installation

Nazzic Keene

I think it can vary. absolutely

your contract. the the extent with customer outcome more to outcome So define of more that base, towards can’t to certainly and price us lot has then have really little guide customer that we more environment good and the type to absolutely help you or environment risk working the that’s learning too. can a fixed some the if in with of folks influence a the exploration Certainly have collaborative flexibility point, us is

Tony Moraco

of priced to been a well. to our component the in repeatability drives processes faster. believe that quickly repeatability or it’s more, there’s that matured cloud to say, I’d migration has where probably outcome point Well, as the and that or advantaged the turning fixed get I of

release price mixed still think that challenge proposals the I are ability fixed customers result side. the on the on to acquisition

needs and then maturities on technology, what acquisition So it’s processes the get maturity to so done. people, of align of a to the the combination

you can we programs be agreement basis, at of or might So time the mix see level on basis. and fixed service do and the a traditional larger cost reimbursement modernization then price some sometimes a on materials done

mix and mature. customers technologies a the the as it’s So

Krishna Sinha

you know whether you’re some a then on about AMCOM know we for question just picture I any that. year. than have little are bit. recomplete about your And more that seen And Can talk I programs? extensions talked peers the your usual? greater major one seeing of contract bridge

Nazzic Keene

Yes, a is good so tires example.

as are one and the pushed I And in that the actually of of towards a out decisions this mentioned was sizeable us that to executing year. we get end award earlier us. is against re-compete bridge the so the for been calendar So has did next we year -- position that and grow

a good that’s example. So

of normal, the us certainly that seeing there’re that’s cases government bridges than a good for in course the not position. option. where certainly more And are exercises certain which and in income us that We some seeing business. am normal that’s but puts that we’re I but is, a

Operator

[Operator ahead. our Please next go Instructions] We’ll with take question Tobey SunTrust. Sommer from

Kwan Kim

on Hi, actually Thank this taking Kim for Kwan for questions. is you my Tobey.

with First NASA Thank in by for off you. or points? seeing in at on are NASA this new growth for how XX market target cloud? margin And addressable basis your at being goal into greater contracts NASA, to the outlook your lines on challenged service what competition? to market other SAIC taking And growth share in addition you EBITDA is fit XX

Nazzic Keene

this. capture to I’ll try some So of

in in mission side. we the are a of as as the substantial well NASA, IT So services, in provider both space

realized some And have the across and in onset so portfolio with last strong we the growth year. OMES of we’re certainly position there

the we opportunities drive sides, we to on and space, and So IT growth. to both for mission side support look the continue

consistent We’re with strategy consistent with our position. our and

Tony Moraco

shifts and broader really budget side control. Air in a I as basis, mission is a so ground exploration, Force, and capabilities on mission launch, think on NASA where And operations, NASA; command I it’s And of component mission space there’s that. the market; more broad the and the addressable in think market whether moves services an areas AMRO be we’ve got

like on side. our system provider So contracts. the as our we of see application we’ve growth talked those incumbent there’s on and a an on that earlier modernization critical mission as then migrations opportunities on side, And enterprise IT

So base, as account. as I us that modest leaving to and protect we allows already us characterize think bit it, I’d providing more we’re expand then talk services growth or some give as about that expand that

Operator

question with will next ahead. come Our Hamilton. Brian Drexel Please from go Ruttenbur

Brian Ruttenbur

to end to of and a about another it period everybody could both this, around through you year. CR come potentially there. a -- I I’ve bit little what potential talking way are in round happens I the happening you anticipating Can private this about what fiscal fiscal public, maybe going the next of And the But But cycle. of now been anticipate And that budget companies impact then election appears that know bookings. marks XXXX? cycle. fantastic for several talk to how going that government CRs far time, the am out question for be looking quarters you? two and there’s a

Tony Moraco

think got Unlike shift, see year, through probability that’s the duration has the how then plays and and at we’ve the I be outcome given higher may everyone be Well, of we a trend that’ll some single there’ll or do CR extended. varying and really election. a that CR a election that. how The expect optimistic We’ll how is last been. that off least there’s and CR of quarter

motivated government of budget optimistic near with and about to capturing With the ’XX recent government of at election. through off likely the is of fiscal year. levels everyone coming is So carry fiscal deal, a year this the end have short CR, higher ’XX the but to that everyone

get there ’XX, they level, if their seen so trend. committed be to they’ll CR, would less through at in then this navigate be a and funding that QX impact under So that year able money same we've

front So address mitigate to need you’re the up deal the We’ll that or challenge is and CR the the profiles. sequestration. to force will don’t to that two. again, booking the Then against see try that the you always is and the that we [BCA] a affecting first end on translate XXXX, and revenues watch year

I that's level back in lower want So seeing I don’t 'XX, least at is you’re and that’s reverting than And think think a the to to anticipate challenge. budget probably 'XX good biggest level. customers ’XX and government numbers sustainable

as and faster much So monetization they’re and and as us mission that existing well staff on get then that's serves capability capabilities. to possible. trying And again of deployment faster implementation key

compressed be planning going So to government it’ll out, it's are may still of flatten next. they of that front don’t believe be catastrophic, on to but just off want year in what get this down I people It fiscal potential and cycle.

Operator

with Please And follow-up take a go Citi. we’ll Raviv now ahead. Jon from

Jon Raviv

side specific Can investments you on or the new the more AAV Was stuff? the on a quarter? little side, platform it be ACB this

Tony Moraco

So in specific talk making were the late stages a for vehicles as we're preproduction delivering the time. that's don’t we start of really activities are platform integrations. about mentioned But for reasons. most moving preproduction we’re of competitive with at the -- we cycle platforms that, Nazzic before, the And engineering we’re where moving LRIP. into this investments And where this the into

Jon Raviv

And or function or getting get you you money the AAV, just volume until really contract? is making when not anticipate to -- to of going on it do

Tony Moraco

as in most industry, be phase it the early later LRIP. are again, and we profits familiar went Yes, of through going And the there. made will that think most the we stages. people the the full said EMD I and -- profitable with are be and that than into And get will stages the completing less I rate production we think

Operator

further conference any closing are remarks. or time. for telephone at Shane additional this back Canestra to there questions And no like turn the to over I'd

Shane Canestra

earnings in quarter call year continued XXXX This participation thank for we SAIC. first concludes the your fiscal SAIC’s interest and you call. very much you in Thank for your

Operator

this conclude participation. Again, you Thank today’s for does conference. your

You may now disconnect.

Science Applications International (SAIC) 13 Jun 182019 Q1 Earnings call transcript