SAIC - Earnings call transcript Q2 2019 | Science Applications International Corporation

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Operator

Good day, and welcome to the SAIC to acquire Engility Conference Call. This conference is being recorded. At this time, I’d like to turn the conference over to Shane Canestra. Please go ahead, sir.

Shane Canestra

Good morning, and thank you for joining us on a rather short notice to discuss an important announcement that SAIC released earlier this morning. Engility acquire joint Engility. and SAIC’s release SAIC to intention morning, issued press a announcing This found This be with be utilized release in investors.saic.com. press and conjunction today’s presentation call slides to at can to Please them utilize this obtain take during a the slide intend significantly as presentation call. to we moment

and filing We as announcement regarding have you that X-K Form ask filed well. refer a this I to that

encourage our also fiscal the results a those release to I for year second have separate discuss distributed we release announcing Additionally, call. that of the quarter XXXX. also as you review press we during results

You themselves have one to this time the for limit and we question if call, reenter then so allotted approximately one question participants ask that queue hour permits.

intended COO, Tony SAIC’s Mathis. the acquisition CFO, Charlie Joining by Nazzic and me Moraco; to CEO, Keene; today discuss

call, risks, this Factors of on and SEC quarterly and annual XX-Q. for on on Form SAIC fully Lynn forward-looking Chief and that of We’re unknown cause to of more that could Chairman also from Executive we refer differ on Risk you actual made Please statements to Slide X. subject results filings and discussion a XX-K Form Engility including joined both uncertainties known described statements may the are today’s Engility. these Officer by Board, I of that to note materially the President as make risks Dugle, of reports and section reports call on

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

pleasure it SAIC’s X presentation slides, to Tony to of Moraco. turn is Page you introduce As CEO, the my

Anthony Moraco

announced customers employees Nazzic that morning, has call we company. in and Lynn and of for market. shareholders, I’m Engility excited value-creating taken federal SAIC with move discuss this joining strategic and to This thank Dugle. government morning, Charlie, intention in to a our to opportunity host services Good the us the acquire for you each along

press to Engility valued detailed services is unite acquire to $X.X the all transaction is closing billion two months be billion accelerate in companies’ will powerful As strategies release, last employees, and revenues both requirements. customary in regulatory Engility intends subject and leading equity-based government approximately pro providers. long-term and the force and forma SAIC $X.X approximately of This in With the and to SAIC XX marketplace. combination XX,XXX a

tenets. in large of of important equally a strategic is three is there array benefits rooted While transaction, this it

highly creates government government will First, two leading second-largest cultures. well-known and complementary two this transaction providers a and respected services The technical services combine pure-play companies of with capabilities, combination customers these provider.

both accelerates acquisition national areas another improved execution [indiscernible] of companies’ portfolio in combination customer a a development comprehensive This compelling diversified SAIC’s the of strategic market step scale interest. long-term subsegment of competitiveness. and of and business and services strategies, broader strategy, innovative this solutions Second, with creating long-term is XXXX, range Ingenuity

enterprise provide combined market to of complementary access and it SAIC’s highly strong this to stronger is a not combined intelligence to, position growth As interest. company’s became both suite space offerings mission-focused services. customers and but technical include, important limited to IT with is customers full Engility’s for will clear as companies together each within approach be partnership, that in other’s companies The accelerated

expand provide improved Expanding differentiated combination market opportunities net solutions. annual we profile, shareholder these look pro identified expect complementary hard flexibility months’ With and and pro shareholder profile strong forma months’ portfolio, margin forma competitiveness. future customer net additional synergies enables to employee competitiveness we profitability financial comprehensive types of perturbations strategies of The of annual with after a shareholder also leverage and X% of billion market balance improve and in at for share cost driven potential of Dugle. to discussed SAIC few transaction range a growth EBITDA including earnings underlying the greater cost lower for in advantage creation. and revenue federal a and creation, flow rate market synergies expected strategy, minutes. Charlie XX to flow, diverse an taken pro and but cash full and generation, strategy. competitive take To greater transaction longer-term reasonable of realization services SAIC compelling flexibility, on sheet complementary broaden X, revenues. cost value to The portfolio customers. company’s in to businesses and This and adjusted transaction protection to will and from All with our for presence just transaction customer rationales Lynn, focus strategy, the the have a improved by enabled is cash free cost and this $XX both million increased growth, like organizations, the create environment, value expected create on is dividend. cash shareholders. indirect flow Lynn rationale, last due transaction synergies. the quarterly for significant provides improved will The synergies by our Engility’s the services, individual run profitability not near-term a through the of for I access this that Through increase because more enhance long-term turn please. strategic revenue innovative a the profile, our annual solutions transaction cultures to expected joining customers integrator Third, for the increased growth continued of We’ve $X.X on Engility’s of continue thanks a market opportunity against contract will opportunity objectives revenue synergies technology Ingenuity to business balance Engility of will and combined alignment to in cost create a of only and value today. deliver profitability With leading improved provides projected two to The provides SAIC’s customers. for opportunities to improved powerful a two profiles to us creation. cost This downside shareholder from provide will upside greater profitability viewpoint, forma growth, projected this a I’d structure. synergies call accelerate in margin government to and existing further by profile and value opportunity each to creates accelerated natural synergies, Enhanced and are of Engility and and compelling expand – discuss opportunities. opportunities career profile. net last this contribute and Slide performance capture XX reach, XXXX diversified payment over long-term value funding businesses with combination

Lynn Dugle

the market deal primarily Thank the the very and the leadership you, Board thank you I or a we Engility was team have of heard times brought market has Tony, Engility conditions journey the best understood you our was to to that pursuits say I that of forward. and in we that the to solutions. near-term this that for join two a M&A as on that scale-for-scale But pursue would me many and to an scale but cost-savings a differentiated excitement that the giving I and call said adding positive synergies advantage Many distinct interested the and outcome. simultaneously notable had not me us sake, companies and decade giving we’ve was of share revenue opportunity in combination be together attack experiencing the that chance Engility by proposition. not share me intrigued companies in invest were to could ability more clearly important in the large a multiple seen be and moving I interested capacity

parties. the we and caught as to the improved we various from execution team market resulted So strong of the and successful in repositioning hard attention performance, market industry’s interest work, continued expressions the multiple Engility received and of improve

goals, our share companies SAIC, transaction our but just aspect perhaps to invest alternatives, ability priorities. to our workforces represents for country. portfolio forward skilled is company to and even our we’re very and way base a delivering shareholders, of to of two cultures, unique companies enhanced the timely offerings is creates the to each a objectively and accelerate of highly SAIC’s IT joint that and logistics while it sustained Engility very space important and SAIC – the a option unmatched a companies mission level, The to this achievement bring we strategic evaluated advantage the collective take making business and coming a complementary combination higher of an of that evaluate looking similar our As our The for became very two with positive our our that, customers. two commitment very customers But employees. share difference and and strategic for at represented most values our superior strategies, two a budget talent, our an stronger intel serving proud bring not together increase uniting obvious customers broader combination of growth. profitable to environment

and our to transition. closing we to deal commitments year, focused delivering all team SAIC the strong, very Engility to our Tony, complete back and early smooth you. the Nazzic, the stakeholders team the next the and working a with look Charlie rest Tony, on forward successfully completing on is of to As year of successful

Anthony Moraco

pro value each $X.X shareholders shareholders at billion, will X Lynn. with a issue for XX% SAIC transaction will net this million forma Please own attributes SAIC to of of share Engility tax shareholders SAIC’s be In million. SAIC of acquiring Engility. X.XXX current of and consideration net closing. value With materials. you, Slide Engility approximately own turn at Engility’s approximately transaction, including $XXX On SAIC of closing, will shares XX% the Thank of a present $XXX basis, a presentation will debt of

the is implied billion. Excluding approximately value $X.XX transaction these tax attributes,

on financial be immediately amortization the excluding accretive Engility provide EPS, acquisition While to details Charlie will of further nonrecurring we expect the costs. and aspects, to cash acquisition

With Engility’s through obtained X.X provides initial incremental future existing borrowings we’re SAIC’s financing notes existing flexibility. commitment of and is to million generate ratio EBITDA The of utilization current a to million, expected annually be EBITDA estimated synergies margin A our enterprise of significant of from profile. net $XXX pro the credit flow full has an forma existing rating cash realization closing EBITDA, and over net With synergies. this $XX times on leverage debt increase full to also X%, after profile forma adjusted credit agreements. cost facility are to sheet maintain expected our committed at credit outstanding been free pro margins of to refinance balance forma expected pro

current of from policy Directors will governance Our SAIC’s selected the SAIC’s be Board regards expand Executive This corporate of will post-closing. Board The current Officer my in members to Board role combined its Engility’s has Chief Directors additional expected Sandy Directors. capacity. SAIC and to bring the unanimously be dividend of members. Sanderson, With current be existing both by management, Chairman the is transaction executive company’s Board Board This by unchanged of of and to as in current continue and to that Engility’s to two will XX been Board, will approved I continue Directors.

turn found in the takes by of $X.X which in SAIC be an Slide set. Please creates these largest XX and months’ operating of The and as both on combination an shareholders, merger position Closing a Slide in leadership services the quarter in of filing, XXXX. XX, Details agreement. agreement today’s of approval stronger marketplace. shareholders pro is SAIC’s to fourth to SAIC two forma approximately customary place a voting a companies approvals, two closing increased the by revenues provider Atlantic the year and With KKR. X. expected a subject of number with government great fiscal last peer federal please. billion, regulatory Engility’s Engility’s contains part with X-K our As General two can is proposed transaction,

and of mentioned, market margin our importance driven of and services remarks customer flow through I Engility with value customer SAIC contract this competitive in and size consistent perform and cash strategic regarding is differentiated notable solutions. transaction greater filter improved the of diverse and more for access. filters one greater customer increased country. customers As SAIC tenets shareholder our primary evaluation of Individually, access met by and our portfolio our very been Engility’s has new and M&A profile, to

to to existing provides with As each their base. new sell into customers access several to demonstrated customers, while leverage other’s there some customer companies for on each their this offerings are opportunity common this or capabilities page, transaction both into

past These customers, different is with to combination expanding data content by In we contract the security national approximately provides very train Engility. intel significantly us do Slide remains outstanding Engility’s consistent, larger-scale operate critical space space SAIC Through geographic those federal forma win transaction, in a share solutions. civilian SAIC’s different performance new companies marketplace with in in and from our cost-plus leading mission or this workforce a while performance market content diversified to have these to business capabilities a the systems, the position our and understand we XX. business concentrations. the portfolio. solutions XX%, often balanced adding reputations to provide expanding for provide certain and of relatively profile portfolio, Although more creates protecting simulation, and growing is increasing The cyber customers. customer-mix mix cost-plus program balanced analytics cleared contracts. capacity turn our current our higher-margin pro and complementary of in that Both Please Combining two customer that and perspective. businesses heavy DoD more capabilities

Charles Mathis

pro Please you, to overview an Thank XX, the Slide provides which turn morning, good financial and everyone. profile. of Tony, forma

months’ the pro forma When On is profile transformational XXX revenues and provides X.X%. improvement leader, rate the points margin EBITDA basis, $XX flow basis are of rate margin forma run million, pro cash combines XX a from transaction billion $X.X non-recurring industry trailing margins improvement forma and two synergies approximately combined excluding market costs free factoring billion this margin synergies Pro generation. company, in of adjusted for the profile. are full government forma adjusted X%, our the our the a EBITDA when $X.X current in in impact creates of the leaders included run service pro

XX forma is and including free combined This the months transaction excluding addition, is transaction synergies. accretive, – million generation accretion, low cash flow of XX cash XX% XX of excess cash free rate expected generation cash a run trailing expect In has be enterprise last months with expected flow $XXX profile realization our immediately projected acquisition full in pro the an net This we EPS standalone costs to double-digit after cost cash generation. synergies. full from increase the EPS

XX. Now turning to Slide

companies the tremendous offer cover me Let opportunity cost for synergies. significant The synergies. two a

facilities detailed a We analysis cost have removal potential costs, enabled streamlining by the savings, redundant of conducted of go-to-market optimization. initiatives and

X.X% net annual projecting $XXX million gross of million, for of synergies contract approximately We’re or combined factoring XX%. cost-plus revenues combined of companies’ and mix cost savings the of $XX approximately after

of time believe the we We result expect by the are savings of fully a as that realize end revenue favorable to year. Also, possible over second this synergies transaction.

and capitalization to Slide on Turning capital XX. deployment

credit under we in in on mentioned As our through which existing borrowings all-stock debt existing incremental plan Tony is all his remarks, facility. transaction repaying of Engility’s this an

net leverage ratio of With in leverage run with net of with to We closing, expect credit of billion, and have our the to full pro debt total we expect rate current line forma refinance ratings. cost synergies. $X.X expected have pro to a pro committed debt to forma leverage assuming today. At X.X, be value financing opportunities. current of shareholders free debt higher our annual The maintain creation. will in payment our and equating to future strong to profile, about needs place projected SAIC’s quarterly which ratio net at capital closing, expected reasonable in forma and in flexibility strong leverage to cash to we for balanced operating continued mandatory a sheet deployment a strategy, dividend, of reasonable flow return shareholder have With of repayment includes we continue balance leverage expect return absence and deployment excess capital a continue capital

times. X.X operating average an the time a balance ratio and on maintain and leverage optimal to to $XXX expect average of over million capital X.X We cash and in target range,

Now and our if quarter results. second you I’ll would Slide turn XX cover strong to

that press mentioned, second our we be announcing quarter on website. a Shane found issued our separate release results As release can and

billion revenues year. growth X.X%, internal of $X.X reflect quarter fiscal approximately to of of second as Our compared last quarter the second

and services revenue quarter within Xth the as net quarter. completion chain is growth the contracts portfolio. same programs, offset attributable basis by OMES of Revenue that to year-to-date decreases certain Our NASA was end-user well increases drove other revenue by the our supply across driven and straight second portfolio. of orders as on growth the were increased X% EPA These a and the factors partially

the program XX decision cost Net Marine Corps and Corps revenues, request, million evaluates second for program $X.XX diluted vehicles effective the a $XX the we on the quarter. received quarter per the for a XX% second the expected Second above direction our expect AAV equating partial to stop days we plans Vehicles. Amphibious was XX%, within rate expect to continue rate are we still as Marine our quarter evaluated to be end Subsequent its work quarter. by was our and limited the earnings previously rate full-year being for effective to third to share million, and program, will we a for performance deliver the quarter was communicated XX%, driven The EBITDA of X.X% quarter, on of order tax controls. tax $XX future this of approximately program Assault the although range. during full-year strong At for income slightly percentage of a the strategic while on the number as was

higher year to and usage to flow to cash in payroll close sales operating the improvement and this integration use business. and we free working was respectively. by million, million and days. expect $XX zero flow Day outstanding last quarter $XX capital payments. at our were be flow flow a due of cash also was of was income tax additional the cash end over platform Second quarter impacted an This quarter XX Cash to

We XXs year the expect in our range. our DSOs to low normal operating the to fiscal within the second-half return of

of second capital, not the consisting repurchases of We quarter, we and Engility. repayment. million acquiring million repurchase During paused as during loan term debt program the any deployed quarter, share make cash our of contemplation $XX we did of $XX in in second million dividends $X

and evidence during compliance this quarter. previously Before moving commitment. in business that concluded of action remediation on, on to is of cleared billion, $X.X our I’m regards to with our the committed our X.X and the swift full SAIC controls weaknesses pleased to for report award issue have to bookings activity this second we led material quarter. translates is disclosed actions a of second book-to-bill Contract to approximately quarter which the

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

our outlook. our be to free with EBITDA to improvement with we turn regards as to our measured long-term in With outlook margin expect communicated for line year flow let growth previously cash communicated by Now revenue XXXX margin quarter. and me full-year specifically and generation consistent outlook and and year, previously fiscal the last targets

significantly over it shareholders. back to to is companies our long, combination announcement Engility country. acquire Please turn The SAIC proud financial its to accelerates Tony. strategy, profile enduring long-term mission history to two another increases of long-term these our the Slide I to our XX great impacts serve as of value and Our turn meaningfully in today in our milestone

Anthony Moraco

continue fourth company operate as Charlie. an are in today. to Depicted move company SAIC’s the can transaction as Each they individual closing jointly you milestones as a Thanks, will towards do we that few quarter. anticipate

on transition We appropriate will activities coordinating planning. integration as and be

as regulatory conducting approach we in see We by be filings these progress of votes transaction. company will by Investor anticipate You activities. followed and SEC SAIC Engility make shareholder an to and from Day the each we various closing as

will XX. turn As accordingly. available, the Please schedule Slide of we these events to becomes notify you

points would to regards our to I our in reemphasize three As I announcement conclude like today. remarks, prepared

providers First, combines cultures. government this and highly capabilities, with service complementary leading transaction customers two

strategic in increased and critically this to of space. through long-term interest, growth. we driven market more and sustained The important of compelling and sight profile, creating areas subsegment from areas accelerates intelligence as scale clear the market combination by this of customer Second, flow for of And time business enhance expect improving access profitable both ripe national value companies’ strategies, shareholder such improved last, growth and combination with greater how cost and achieve margin solutions. differentiated an is to environment line synergies competitive and cash

our about security. for solving on two companies challenges our nation’s to critical Again, market your us employees. I compelling passionately we companies short most you We’re a and questions. very compelling joining and our and one are shareholders, our relatively becoming a thank contributing will our very to Nazzic, dedicated what both customers’ now excited to for Charlie customers opportunity is notice discuss our take believe Lynn, and force,

Operator

from Partners. [Operator you. Research Thank first from Vertical question our take Sinha We’ll Instructions] Krishna

Krishna Sinha

you. thank Hi,

And here you bookings company maybe share will terms XX why So a we space, expect comment in of the as more deal market maybe this integration? typically, when year, your you see the a integration that. a your over a upwards months next large-scale on for Can do just doing of XX as to you suffers than now? little this book-to-bill the you’re or in combined what bit

Anthony Moraco

XX as believe XX cycles fairly submit be Both presence. sustained awaiting a I that to large companies that will start. our market months. for award, near-term, profiles now book-to-bill very the both profile run driver carry is I’ll still our obviously strong a sales have given

year’s both from next predicated strong. will profiles I of submits on be this So which are firms, book-to-bills believe and existing revenue largely both very

as business through looked our compatibility diligence due there of of one. opportunity we pipelines, a to is advance the partnering at lot for continuing As the

very demands critical now about that against discussed together profiles be begin current able market and today. as think today, I’ve submitting and the we’re in is the execution, submit Lynn we timing to the confident are As we’re that to it, there

this environment. will the what more at or tail favorable positioned be we’re end towards of likely – So market mid

a being be now in on the to XXXX. we different opportunities think our into government profile about end bidding together the maximize to stronger want XXXX opportunities as of FY slightly going we So

Krishna Sinha

your a programs, had surprise. to a past? like bit being of AAV Mobile still maybe that to go ability stopped the been hardware being a deal integrator little recent then hardware And the committed does hardware to How as – in this Protected augment you your outlining? Firepower And have on after here you the is you programs are been

Nazzic Keene

this Hi, Nazzic. is

So, yes.

part the that fully of is we an and So for stop to we Marine to is it with the remains focus that in working Corps and profitable believe understand sustained work an business very there. will something intact. partial transaction It is important us. on AAV to come invest years will we’re long-term months strategy strategy, the the that. and area the to on relates that our either closely in long-term continue the But or as growth drive This it

Krishna Sinha

Thank you.

Operator

Moving our from Sheila on, we’ll next Jefferies. take Kahyaoglu question from

Sheila Kahyaoglu

years [indiscernible] could comment the everyone, the integration, you deal past we us close can morning, integration through maybe five steps. maybe three XXXX about Tony, how If you year believe, deal. first and February after closure? in in congratulations on on first I the walk the think post the months Good do

Anthony Moraco

similar. strategies the we we’ll the looked place have already that in structures But is you integrate our that high-level more a of are we of profile at the ability expect look very details as businesses, cover organizational two I’ll Investor Day more that facilitated we with on to by strong combined kind Sure. and as would alignment give clarity.

around business and Our business civilian units still much and federal security. lines agencies defense sector, are the national organized intelligence and very of

let’s alignment strong a very of not complication. there, see disruption we – So say, lot or, in

and simplify alignment it. It in expect strong. we the I’ve very So should integration, discussed as the Lynn going is

actually it will on in a one to expect facilitate our ability the time some other as marketplace. line in operating transactions the than business We that have perhaps shorter

at to shift in comfortable to on entity, very within capacity pipeline of where what at look alignment lot look We’ll first increased at we’ll better positioned have as resourcing given I’m have deals the investment a our now would we’re fact we’ll XX we place. profiles, days, that our one maybe look that that to together. that resources So

look profiles. at investment those So we’ll

the again we that by organizations, we I of did and favorable blended. is probably we of takes between complementary synergies in in some execution. between We found way think is have we providing of mission-type will a through very expected IT providing and the of that lot alignment more not but cases, part where direct or existing due be customers, the diligence puts our may and fact businesses. the the type and the a just be pipeline contract reconciled work on than facilitated And bidding that Engility services, bidding more

very profile maintain opportunities domain. So blended. the both exist like because I IT about a project IT talked the of market mission full complementary to And more that I’ve again those would modernization balance, across think they’ve a become on the are and want some and those very side that in for to should we’ve well security service hard technical customers lot areas of as in that for in that regain national We are past. this some the new enterprises the as past environment to X that XX accelerate we and critical superiority years. believe the that technology on of the their look as mission systems budget serve, that lost under to now kind customers

Sheila Kahyaoglu

you. possible. And more one thank just Okay, follow-up, maybe if

space about the loss transaction. You of early activity the mentioned in

open forward, the their in with Engility You terms it going profile your does of provides what mentioned scope up of workforce. the change XX% kind the addition that bid does higher of market? of or How clearances

Anthony Moraco

significant been have for always It a the beginning from continued it you grow access if and organically bid a has to impact that, people, you contract clearances to unless to you on is for get M&A. we’ve market target can’t very don’t that those in message and have the as In the profile the place, very into a vehicle. SAIC’s intelligence other agencies. is aspect, One community us contract tough

So is challenging. that Catch XX

the the the intelligence bid very and that has is agencies critical perspective. is NRO, we to community cadre at from you both saw expertise and an at contracts at has key in access opportunity to in agencies the the already the and larger actually this levels for subject various continues customer multiple intelligence us. increase able presence our as other in here of They have transaction SAIC in strong very this places. verification to could well traditionally very broad different one workforce look reluctant to at transaction clearance that but be with the we in improvement the M&A personnel deliver that resources. capabilities have these matter unless We you acknowledge those improved So have a the of large and fact is a they’re our the various And limited. target have assets contractor. been near-term, We hand, presence three-letter positions dramatically to in shift one cleared cleared And actually their actually new and move on can workforce and cleared

and access able workforce So facilitated of larger of new look the part a intelligence with to levels we forward expansion in to gain of broad this clearances agencies result to bid be accesses cleared as by that. multiple and increase, and at it’s large programs

Sheila Kahyaoglu

Thank you.

Operator

from question next take Caso from Moving on, Wells we’ll Fargo. Edward our

Edward Caso

OCI issues how Can morning. the much to go moved be have, And please? you will that revenue Good over on? have you

Anthony Moraco

that of our business core lot compatible business when done the see side acquired very intel business think We’ve with about Engility we intel limited a very Yes. OCI really is The with work conflicts. Scitor. you the on and

community. navigate filter So was always the boundaries intelligence a us, we’re for been given that we’ve That crossing to key had challenging environment. not in

ability So that, to limited certain intel after had in part, go portfolios. our

we those move recognize And there. at potential that we that a cases scope of customer customers. to easy it that attrition for with compatibility maybe just is very working high or be will two one there other contracts outward where opportunities or through that have limited a contracts. to level, navigate overlap or A you things smaller significantly very reconcile OCI other. the of certain one see And a be immaterial doing either we fairly So in couple recognize than the that the will to to very

Edward Caso

the what late. a minutes be is call the management on Did hopped going top structure mention just to I sorry, post-deal? few you I’m

Anthony Moraco

Sanderson Lynn’s Just working CEO, the continue Nazzic be the to and mentioned that Chair with will Sandy I’ll team. and be

We’re working blend will organizations integration perspective. from of capabilities’ the our on how structures part through two

focus our execution, the contract continuity. is always, mission As on

the senior the And so to in that’s appropriately is part really to expected structures and the talent need across effectively technical unchanged. spend just organization. efficiently, to level, be practices best both operate their the to sometime available sure reconciling enterprises corporate the synergies alignment talent, capture make we for take with can the then management the best We program and and customers management

Edward Caso

if to answered apologize this forma I before the wrap bid the rate? – ability was do close already. cap have with But you Again, pro a rate

Anthony Moraco

that’s case. No, I don’t believe the

rate We independent we’ll under we blended rate close the we rate current basis. and not regulators ability provide bid then we the structures. to indirect We will but a have advance close, be after able and on blended run structure. bids will We’ll our won’t information close, the enter Once opportunity. or bid a submit have that to of have in will to bids

Edward Caso

Great. Thank you.

Anthony Moraco

Ed. Thanks,

Operator

Moving Jon from on, we’ll Raviv from next our Citi. talk question

Jonathan Raviv

Year that those to for? Can looking the are of on before, just [indiscernible]. could Thanks. do maybe of things are in just governments some give or general? you types and those now bid Happy work New good the can What big not of big things you you things, an that Hey morning, example that

Anthony Moraco

to specific I’m bids, not about Jon, on going which exactly. bids talk

color And as have as well talked more intel on sector, within We’ll existing defer as I think in go subsegments and opportunities there’s the that the portfolios Investor probably civilian. we federal that to the space portfolios, just defense key probably it’s and you we forward about. not market we’ve Day. I’ll the give

can market see we take to and how consolidate that in fact and both in advantage between capabilities of channels the looking firms. We’re transfer directions

So it’s a going we’re to resources. to premature where say shift those little as

I at under that of the be target think better be subsegments certain of the prepared we’ll opportunities scale. market will

out it talk we correlation domain there to contracts specific able today. think I will be about the will and opportunities to given going not are we’re public fairly the but to the of that, draw a be clear what

Jonathan Raviv

Thanks. and queue. one I’ll back stick to hop the in

Operator

Hamilton. on, take Brian Ruttenbur Drexel Moving from next our from we’ll question

Brian Ruttenbur

very thank Yes, you much.

of So questions. a couple

transaction? GA this of lockup. for lockup. Are the they’re new a out of all, know plans I lockup their into KKR, with First going a they and

Anthony Moraco

they no other X% or forward. there stock after No, lockups Proactively, ownership as are the close. going KKR company each positions restrictions about GA for or of own pro far as forma

without we’re So navigate an that agreement. to able area I think in the that’s any lockup conditions

Brian Ruttenbur

about And best talk the if you that a were bit two Engility then you – But you process? little that? little competition more. Okay. is follow-up but about You bid there bid? guys talk the I Can mentioned or can the a could for bid was the ask actually another high asset, question,

Anthony Moraco

bid. No, I that we the can were best say

Brian Ruttenbur

Okay, fair easy long-term targets. enough. last then That And question, would be answer. your

with from those Do where same down single-digit integration year down going of pro point to growth of margin you two road. of own your you a the growth years XX then basis the and kind internal to You also forma to about expansion. XX two single-digit the to margin with talk characteristics road talk growth about the expansion get anticipate And you’re Engility in basis? Engility, have – kind to

Anthony Moraco

we’ve looked projections, those long-term the as in fact, say I would and intact. Well, future that objectives are, at goals

as seen, down. few or points market move, up we’ve dynamics the a move you As

to marketplace, last it’s you can favorable got we’re – where sector, revenue that dynamics required correlation. macro we the that get the and economics, low We’ve look a optimistically, in Yet been in good continue that performance say, out. think substantial a can a XX that from of working the and we’ve with two sustained think in different. There requisite I at our overachieve in function expansion where together. again, long-term that, something modest XX our spin. think single-digit basis on to to of The year improvement basis XX expect to that slightly But step beyond. and margins points. expect has slightly do ability the services margin we’re points profile will our government before of – Again, creates we margin do targets But baseline a our be move opportunities single-digit from I be even lot government to outperform we’ve year’s a growth messaged play to market we growth broad is marketplace. such trying been margin This to we each on to portfolio median. I market exceptions, growth side, by yet still from, low XX move year

Brian Ruttenbur

Thank Okay. you.

Operator

on, take is line from Moving from Rumohr Cai, question Cowen. your open. next Von Cai we’ll our

You may muted. have yourself

Cai Von Rumohr

Yes.

do things? to proposal these to million hit $XXX you to others. how Charles are you achieve than And terms much Cai, in - expect net likely of you reinvest sooner million? cost What this do expect to bid and is synergies there? Hey, you and said, of Charlie. it A the Mathis] When other think You’ve you will get $XX the

Let me take that.

So run million. we’re full the the to we going anticipate years, achieve within rate cost two $XX synergies,

So by annual fiscal opportunities. see considerable identify these you work year full impact. XXXX, to the done We’ve will

we As we first discussed, of execute year. the end the by we at feel least can confident on half

identifying XX% in anticipate be year also these first year. they costs cash that I’ve would million, XX% as So one-time two. that’s synergies. EPS estimated these of our at we $XX end achieve year Again, to discussed. We’ve the in factored and included one, in cost target wouldn’t half in by the It’s

Cai Von Rumohr

no, – unrelated. so – just And Okay. then two helpful. that’s very And

you if accretion it’s looks two these what at, very, face companies? of And integrating What usually do barring at extended. have modestly other because DSOs revenue are First, accretive it as synergies? I are very the look in looking you the integrations, like we key challenges numbers, sort

Charles Mathis

the cash day from will accretive one from EPS be one. Well, year –

rate you if low expect the be double-digit EPS to the one. cost We cash accretion synergies full factor year run in in in

Cai Von Rumohr

of organizations? both expect can hold Are key Okay. And you the you challenges? the the DSOs for

Charles Mathis

the quartile, DSOs. say, I would have companies both The in top

little think better if Engility’s that’s move for forward. a do there closer We cash look to are and and opportunities there the than additional can that’s is be Ours DSOs to would what our generation going Engility’s. bit what we intent we’d

Cai Von Rumohr

Terrific. Thanks much. so

Operator

question from we’ll on, take from Moving Citi. another Raviv Jon

Jonathan Raviv

some Can by you Thank the protection – taking company you for meant for what you follow-up. mentioned from Thanks your context on something give in prepared Tony, the that market some us about comment? remarks, downside the providing you. perturbations. larger

Anthony Moraco

we think I government. budget the continue to to with, really it’s tied live with cycle the two-year that

I XXXX/XXXX think government really the accelerate those our technology there’s would expectations in for well fit part driven that think and strategy got that large favorable current capabilities. by modernization, developments our innovation, drive budget, FY a we’ve It’s through. the into

sustained. levels current most range that expect be XXXX/XXXX You not the think to about that budget are going

occur. a environment more that’s the right budget to to environment more is but And all austere way to so sequestration, back back now likely flatter

X.X we be and a that’s so near-term together stronger turn and advantage behind of still XXXX/FY by another but dramatically, lower place. deal still a in in slightly is we FY in better marketplace the And can in a believe exists profiles Again, navigate the not take that out one positioned subsequent Budget slightly budget then out, flatter that budget to than environment, year current and upside sequestration we’ll are the that need deal. XXXX Act Control

at provides set it’s diversification individual the portfolio that So and defense down that this to that from in agency’s downside pointing up priorities to our or of shift from broad capabilities, if – fact with domestic. really protection movement the it just

Jon, able the that impact context, really to financial that that higher speak enterprise. navigate and long-term being to of, in confidence as so less performance stronger And it’s of overall with business we with

Jonathan Raviv

Understood quick on then that one. a just And follow-up.

been – less your there? weaker, – any seeing you certain in are the the side that some now? set customers are comment Anything intrinsic on difference a Just has any little some There civil there. concern is customer bit

Anthony Moraco

consistent. pretty been It’s No.

The the lot compatibility we have and in pipelines IT. compatibility get again think mission on an of a basis. with context I of Engility overall

We’ve of customers our in to current those So found contracts, for we the I broadening mechanisms as insights at provide contracts services. – together creates customers to called be more and get scope think, current we’re large opportunity. customer to our doing convenient IDIQ kind past, would services what that

give us So increased market IDIQs, the tangible we more the scope capabilities near-term. with of broad access combined in the think

helps the both that in well particular So side But security one I continues level the an again, really national change level mitigate interest, so Again, macro fed as budget think, from federal supportive to be potential the at agency-by-agency. an it’s I’m any civilian. side. and the far civ But customer. it’s as agency diversification pleased

Jonathan Raviv

you. Thank

Operator

Stifel. question Moving next on, Joe from we’ll take DeNardi our from

Jonathan Ladewig

Ladewig Joe Jon Hey, DeNardi. guys. for This is

really focused something sense you made of Was to get in make on what’s into is drive six out deal? question larger? go getting in months a pushing there that What’s there this this past, more and the First say, market? the changed

Anthony Moraco

– story but larger, first, positioning, environment on market improved. think the not the same got again, Well, I get we consolidations, just slightly market – you’ve it’s to the real a that’s

to to We’ve about being to opposed with near-term establish lot positions. small talked deals as of trying long-term move to mid-to-larger a capabilities. market biased the tuck-in always ability We’re forward and

take full advantage of fits of cost So those within perspective. maturity business be an The well that we our one tends can companies synergies, integration from that operations. to

found those lot in it even our core this we from of fit there we in a a confident beyond good a – collectively the looked detail, that then So distance. first a two explored coming more together. as we’re we we’re There’s acquisition to more a position high-volume positioned were in part more strategy, more be don’t one marketplace. at years, many overall, and deals strategic buyer, companies we I that major I see we’ve it and were not saw just but driver, And think although as actually challenges of long-term up in opportunities any there’s over filters. our the that in and going

try contracts Lynn profile. with to line, large together that ability her segments the to part provide in flexibility leverage the the margin our business the on future. whole by are we position up to together bring necessary a partner line very very to cash with for the flexibility generation, very solutions successful in look in serve the pleased larger in this time that market the our is mission increased and financial on allow then and So and the the really as getting with the solutions allow in side along vehicles strong customers invest our new in access and a new customers case, capacity this and maintain with punch driven support and a under we be contract team leaders our part continue continue portfolio to full ourselves manageable diversification invest to as ability in our acquisition market growth elect talent through in access a that to to the and to broad IT profile, very and position. and as balanced and We complements and technical us That organic

Operator

it Then our conclude speakers for like at this the over time, will any turn to that back to I’d section. remarks. additional question-and-answer or closing

Shane Canestra

previously morning. progress very much your we not look that participation through would our conduct and of you second be as for to quarter today’s had this call. your transaction. dialogue that continue our forward the We call interest morning’s release second and release appreciate announced We Thank a this necessary. with will Obviously, call This quarter results, announcement and we Wednesday results conference this evening. concludes

Operator

Again, today’s We your thank disconnect. The you participation. now that do will phones for may conclude lines conference.

Science Applications International (SAIC) 11 Sep 182019 Q2 Earnings call transcript