Science Applications International (SAIC) 5 Jun 232024 Q1 Earnings call transcript

Company Profile

Participants

Joe DeNardi	VP of IR and Strategic Ventures
Nazzic Keene	CEO
Prabu Natarajan	CFO
Tobey Sommer	Truist Securities
Matt Akers	Wells Fargo
Bert Subin	Stifel
Cai von Rumohr	Cowen
Sheila Kahyaoglu	Jefferies
Jason Gursky	Citi

Call transcript

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Operator

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the SAIC's First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions]

I would now like to turn the conference over to Joseph DeNardi, Vice President of Investor Relations and Strategic Ventures. ahead. go Please

Joe DeNardi

joining thank Chief year and DeNardi, joining first our are Officer. Ventures, SAIC's President business Financial discuss Good financial Chief Officer, and earnings you and call. fiscal results and Strategic and XXXX Investor Keene, Joe today My quarter to of our our morning Nazzic Relations for me Executive name Vice Natarajan, is Prabu

XXXX. in that utilized with Earlier information the for prepared be results XX-Q morning, Today utilized supplemental copy to along with we documents, will ended quarter in to fiscal a and earnings later outlook our May year our also slides X, and be investors.saic.com, our of remarks. should today, evaluating will issued Form be first XXXX filed management’s call. our can found be this of we results find today’s in conjunction which provided where presentation discuss call release, financial These at addition today’s on to you

note you and statements these subject I on factors to made filings call. discussion and SEC quarterly of unknown XX-K form refer this materially of our we a XX-Q. statements form risks, and for today’s cause known to call that risk risks the report are from Please make including that our results on section annual to reports may on actual differ could uncertainties forward-looking that on

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

with the our in GAAP. not measures provide accordance and information useful measures for non-GAAP considered metrics, for, we to supplemental a slides most addition, which both in will addition and other comparable GAAP In to, The and measures be substitute release presentation measures. financial reconciliations discuss should financial financial include investors we non-GAAP press believe and

It is CEO, Nazzic now to introduce our Keene. my pleasure

Nazzic Keene

Joe joining Thank morning to you, those good and our call.

for and EPS for fiscal the revenue today, reported Earlier first results our guidance for increased strong quarter year 'XX. we and

year, to on a Our to provided our start performance we Investor you we deliver to remain XX. track at thefinancial on and targets Day represents on April strong the

more Before continue want discussing shortly. colleagues our slight results our highlighting Though, their I this tradition get SAIC I’ll of be twist quarter, contribution will to in for there detail, success. my at which to a to

our families an our of personnel and you meaningful Appreciation military is many is how service members time which foundational SAIC’s and Month As are ERG. their largest are XX%of is know, Military our especially to Veterans Employee culture veterans SAIC Resource given Group May and SAIC’s for and employees and military Over Military values.

and for country our Forces on During important we V-E the Spouse X, several on XX. on May recognize May, days of our May and, month employees: May Memorial XX, Day Military Armed Day course, on XX, Day Day Appreciation of May

In Homes its its Heroes. May for SAIC addition, XXth through XX, home Building partnership on gifted with

homes provide and and For for in process. deserving to Heroes raised the to XX have years, SAIC $XXX,XXX Homes partnered over over Building veterans

the fund donate and twist and recognize important for leadership can where to you their support to remarks Bramble, outstanding program. on Here’s want slides presentation in Robinson veterans. these Wall, where included cause and our our we’ve this I Mike help prepared homes earnings comes David this in: for links future Stefanie

results Now, of onto and financial our a outlook. review

provided our the in a long-term meet our April. in goals first us financial As the step is to and targets positions I solid first well the year for towards mentioned, performance quarter achieving we

our I the second revenue growth improve expect billion growth rates further of represented performance remain we’ve pro-forma both X.X%. quarters. to $X and encouraged Our delivered in by revenue and third of

as fiscal by at performance 'XX of quarter. least operating improvement EBITDA reflected initiatives. basis XX through shaping We in to track X.X% points strong deliver margin in year our our adjusted remain delivered organic our margin a on the We of and portfolio combination

include and in net One do IT to begun us bookings DCSA however, was $XXX our ramp we process. from TCloud which million which in protest the contract the on program contribution any re-awarded up; to which the Our include not have bookings quarter remains from the

the solid up our Looking quarter, year-over-year. value our first strong remain X% qualified XX% total overall with year-over-year submitted GTAs, of while specifically. increase ahead, billion, and within was proposals growth submitted our the was pipeline approximately proposals of of our At pipeline our end and $XX an backlog of

portion Importantly, higher with our the aligning our XX% areas the of with pipeline continues of towards our award of our contract pipeline to margin GTAs. skew qualified portfolio approximately favorably

Before acquisition. Prabu, and retention turning we I want highlight trends encouraging late the to in over some to of seen have both talent call

well we number some and turnover our employee While initiatives there industry attribute SAIC ahead the hires against contributing we’ve factors we Obviously, performing industry-wide in for of of labor an are on believe this well-being benchmark this is improvement of metrics, a plan previously. are some of year-to-date to the discussed we headcount. new to and tracking including

and it for I also It believe will a our as stakeholders. that be of the diversity, all to leadership in best-serves priority the company inclusion top we shown a is fostering a culture has based continue believe SAIC equity, upon factor.

turn our will greater I the now to results Prabu detail. over improved and in call discuss outlook to

Prabu Natarajan

and everyone. you, good Thank morning Nazzic

from fiscal year X.X% of quarter quarter previously year strong later in up sales the results in the along planned roughly reported chain revenue when materials or over billion, with for pro-forma We of $X.XX first X% certain performance. with improved the supply fiscal timing Revenue excluding year benefited sales.

are year. by of macro facing industry, strong to encouraged risks the potential some the we Given the the start

the of in quarter performance was $X.XX solid The lower diluted execution per and of company’s earnings improvement first margin a benefiting quarter tax initiatives. benefited ongoing from adjusted stronger the share EBITDA margin also and effective X.X% the impact strong, Adjusted from of operating rate.

the ahead as at end million, plan fiscal flow cash fiscal demonstrated the First XXXX. collections into was momentum XXXX continued free quarter of has year year we on cash of our $XX

presentation, FY our by quarterly first $XXX cash cycles free the be 'XX a earnings in we As of one quarter million timing our headwind. payroll in in representing flow cycle with will roughly impacted payroll additional highlight

second to We quarter, a again headwind tailwind in reverse expect in third reverse this a our be to quarter. then in and our our fourth quarter,

business billion, updated range at million our discuss a fiscal prior now now the roughly net $XX $XX to We our by increase is represents midpoint improvements now growth. million XQ a expect guidance, primarily in driven two from I'll of supply $XX outlook $X.XXX roughly year in XXXX. for of elsewhere. X% and from chain approximately increase million $X.XXX This billion our factors: revenues outperformance year-over-year from which

through adjusting five of cadence see to days terms year. XQ continue the mid-single In the quarterly our the this low year, fiscal digit growth for rate year of of to quarter expected we fewer remaining after in growth every working

We in have our with provided additional detail assist slides to modeling.

our path maintaining X.X% margin EBITDA mentioned, strong are I to by X.X% of as I a our to year encouraged adjusted improvement. though, further to start see multi-year am margin and the We continue to

the diluted result $X expectation of adjusted our a forward. increasing to and improved expense as $X.XX going are performance operating for the to – lower interest guidance EPS We

$XX and million in shares million deployed related of flow picked we million $XX cash to expect free repurchases. guidance our our million our have cashflow Note maintaining share the in supply the to expect other up roughly transaction We to in pay and are pace $XXX to of about free quarter. $XXX repurchase that of $XXX cash to to continue guidance roughly We second cash QX costs million taxes, here our sale. excludes and chain million $XXX fees,

While recognize provide free of performance. cash these and flow payments the from from our with XQ flow these cash business's a investors understanding guidance bulk we we clearer flow the are underlying operations, XQ expect of costs to our to in excluding cash

record to in In the our addition, result will adjusted which a of XQ as transaction we from gain a exclude we results. expect

to Nazzic first growth, day. margins our adjusted X.X%, we deliver result the targets cash the provided free than financial we next flow which EBITDA per will in asset-light an to true As solid greater ROIC us results mentioned, well business multi-year quarter upon line in at driving top in position outlook SAIC our This $XX fiscal accomplish investor We while and of result approximately few improvement year in intend years. over the XXXX. will model leading this to believe industry share remaining by

best we growth disciplined that sustained recognize and believe key also our capital While in shareholders. of while we priority, long-term interest is profitable driving increasing so is that the stewards of a margins being doing

As a leadership and shareholder long-term company, value. on focused maximizing we as a remain team

I’ll With turn that, Nazzic. to call back over the now

Nazzic Keene

Prabu. you, Thank

confident we SAIC’s our Identifying our X. our SAIC say further is team Toni, as next and The XXth, more and we will I been As priorities supportive orderly smooth best SAIC my for the effective to a serve and candidate Townes-Whitley and their on as appointed we be decision. couldn’t May CEO I has very Toni key place of Board October the have be I to to and an role Board, process transition her welcome employees, under that can incredibly retiring ensure transition CEO, announced putting confidence this successful in with are are and month both. Toni leadership team strategy customers, eight have to announced allows plan that and the The achieved we shareholders. accelerate to for for a excited our the I leadership. from

you all let’s still in I then. one until As with leave September, more call goodbyes have our

now I’ll Q&A. that, the call operator to to turn With begin the over

Operator

line first come with [Operator JPMorgan. Instructions] the will of from question Seifman Our Seth

Apologies.

Truist from Our Securities. first line come with Tobey will question ahead. of Sommer go Please the

Tobey Sommer

And you're you the talk on intel space terms talk Thanks. that if much could something for you talk Hi. develop about Good earnings about arena, in in the the them to us I very military, of the question. and exposures, that if opportunities the morning. periodically all you about was these Thank agency? civil we wondering And seeing calls. could

Nazzic Keene

off certainly add is and This can Prabu Nazzic. some start Tobey, then color. Yes. I'll

way of Intel key been civilian space to really the leverage I with think consistent DoD describing areas of the and we including opportunity this see the the obviously, broad we've domain, some across GTA. market,

modernization example, IT capital-light to nation domain, a modernization able delivery and being being SID systems in integration and further space in as space looks the IT expand strategy, very able our the manner an to and as to across strengthen the in drive domain. So do

sales strategy. work our key well opportunity a our accelerate. the space the continued say a We of in the performance that's of as it domain, certainly, -- GTA. And in and part see I we do So have it's the of allows our further competencies the and of to course, space business and as to us part past would and core areas relates then, key to SETA key some

want you to anything add? Prabu,

Prabu Natarajan

space. And pretty core And as the you about Nazzic. pointed amount a X/X picture, of Really the space fair for GTA portfolio areas military intel mission has out, great, exposure. as There's space portfolio. that's side big is Nazzic across space, Tobey. civil the That's and the engineering Thank the as a the well business. SETA of space our inside of of sort of portfolio combination well balanced question,

there's -- area. And space so in the that's predominantly Intel

So the space development side space things or the flagged side. see We've by SETA some you'll that good of taking impacted the side. on we of over on couple our not years to so exposure are business, the the OCI typically last on

a neat out, building happening Nazzic are out development update a all we'll that development a to teams of side I able is hopefully more pointed things the the portfolio would future calls. be So biased success in there couple as on towards you say, are some And the that that side. had little

Tobey Sommer

Thank you.

Thank as improve to achieving biggest For that ROIC. to plans about you a the talk like do talking you follow-up to growth change ROIC see returns, you or percentage being or What industry? absolute goal? of sort risks in are And question, industry-leading to your I'd about you.

Prabu Natarajan

Yes.

one. take So that I'll

of be the we really picture, over order business well are And capacity that. think over believe believe to that to business I we pretty and we build last to this done to profitably. recognize we've the demonstrating got in couple big to I And long organically to to years. we're grow here term, the do, But -- able we've there's ROIC So more quarter-over-quarter. continue consistently for the we going grow that do

for portfolio. addition inside we In improvement that, path is that to multiyear a this there recognize margin

well Day So portfolio Investor multiyear the are committed margin, side to adjusted targets ensuring we and do we that firmly provided to our have on this at operating margin continues on EBITDA.

been we buyback is biased our share here. towards value And finally, program, clearly have which adding

share As single-digit retired I over would net in total count, the just think basis, our issuances, about last short on I say, two of we've area count over the of years. high buybacks in share total the XX% equity of a couple years the

the and combination of the relative So over we're years set. going capital to to next the going allow years. improving leading business, in couple growing next of shareholders we actually believe peer us margins that of we earnings presentation interest to have the chart the deploying ROIC And to is a the couple generator over long-term our the favorably of be progress of to the make a demonstrates

long the of So to you. me, it Thank to this ROIC to them. that growing how when and business make for talk And the creating how term. that's economic our think mash is is shareholders, important value sure our of real sort we sort communicate we to to we they over profitably about this metric are us

Operator

line Please with of ahead. Akers from Our Matt go the next will Fargo. question Wells come

Matt Akers

Thanks your comment debt thoughts long-term Hi. how if your the assumptions Good very of and long-term morning. could much. with ceiling on I that fits wonder Yes. in on deal guidance? sort the just you

Nazzic Keene

Yes. Thanks, Matt.

So and as everybody able I a and passed ahead passed to schedule. bill it probably really, think get they in our we're in industry, of get certainly really the were that pleased with bipartisan nation

So were of this supposed doing to happen -- very, our on day hear to when expire. was we we very the it happy discussions be that. This to having call -- around

pleased us. we're that behind So that's

kind particular change defense, continue a near-term high or addressable and this things is any a The -- we very as a we're hearing large that expect don't market, that across about. very At and of we're we intel. bill of well our position level, see diversified to result to materially nondefense

next well statement. whatever positions and believe the might into certainly And the so bring we as months as that modernization as us go well positioned in few well we both

that bipartisan So passed, pleased got very a way. very pleased in to passed get

as we see across think to does it or short-term showed industry. the monitor any with it everybody I but trends, some hiccups challenges just it, continue don't we'll encouraging and else

to provide going as Prabu let I'm little a well. color

Prabu Natarajan

latest for single-digit now gridlock you this Matt, long-term defense in range. for messaging been budgets that guidance deal fairly assumed. in multi-year this of probably thank to that what Sure. three of sort to say of we provided of think that memorializes prognosis on a reflect budget sort We've think I the budget we've I in And relative this direct basis, the terms and low with growing the question. we potentially the expect particular would quarters it's view, impact deal I line

X% X% We watch potentially in is budget. which deal have the market X% to versus going have the by could some specific revenue the reflects of What place. capture, line we inside for the means to reality it been long-term midpoint have and sort communicating reinforced at bills element share include to that, that of The that modest of we're guide what potentially systems. supplemental items legacy modernization is

to both away into of rather are To extent you said, actually systems our see think inside back in from well. exposure the I as we FedCiv, legacy dollars of terms particular, legacy well as balanced modernization. portfolio placed front Nazzic well flowing our and is on systems I in that As modernization think as

say have So no long-term revenue or But again, just six provided. more to months. learn think, We'll change a we'll out. impacts going real And this lot. discover I'd think over on how we're plays see I we next the to the big things, even guide I

Matt Akers

can steady expect pretty That's like book the you've to pipeline to in do talk about I for mean It at been And helpful should one healthy. for level. think? see the year. come Xx Obviously, I bill in how kind is then Great. you book-to-bill above we year, do the Okay. pretty you sounds color. guess, of you coming

Prabu Natarajan

Yes.

the be midpoint X.X. guide So on a book-to-bill we to actually expect on last multiyear on this Look, a to to that question the we guide I obviously, all call. now business. And are think us I comfortably job think, doing coincidentally and say be can basis, registrants. one how comfortably a right quarterly came nice earnings objective, time help is recognize don't over the and going to to is delivering up over backlog at we're I would you across how therefore, to over lumpy different long-term that different continue X% would practices grow I basis, X% inherent it think and book-to-bill And just revenue a of this

Matt Akers

you. Thank Great. Okay.

Operator

with Your line next ahead. Stifel. question Please the of will come Bert Subin from go

Bert Subin

morning. Good Hi.

Nazzic Keene

morning. Good

Prabu Natarajan

morning, Bert. Good

Bert Subin

what it more view up then of couple it's that expect next like headwinds following some Prabu. those pressure question, of experienced Tobey's budgets are previously your pretty Just of the will what thinking. you a in Fed up going contract following and looks you to that FEDSIM ones to Nazzic with side Prabu, broadly, Where and when Maybe Nazzic are be Hi, year? sounds is are were line expecting in to it because space? the most on pressure look towards Civil we like do show you that the

Prabu Natarajan

first, second Sure. take Maybe I'll part the Bert.

So on you and there's To away legacy programs on extent the said, see budget see balance some good we any starting dollars do be as beneficiary impacts to you modernization, could systems we from systems FEDSIM And potentially. the of actually fair between side, modernization that that I impacts have modernization. move of will will. the amount on legacy a accounts, are if ramp again,

the to presumes not all to will. reality happen, does standard deal, actually get the this if well right than That's see caveat in by all we that all enough that will of oddly would more And likely this place January. money bills is now. you the in asked Now is of is early FEDSIM if appropriation sort that they know

about plays think methodical out I next six how careful why months. this to over that's a and it's important think the I little be So

to do the priority systems, funding well. in therefore, modernization that and we we next see the But months. And we we over exposed becomes the through navigate eight some systems to legacy any maintaining reality can shifts the six are legacy potential see is, as impact if manage we and potential our well way or think

Nazzic Keene

Yes.

add Defense, I the the is, the think short-term could head, government on federal the of and one Civil absolutely thing the for hit of that, is to whether to kind nail some pressures, it's critical. there you but necessity I certainly requirement I its think Intel, be Prabu all across would modernize

might still believe scenario if the although is modernization for some we deal that your It's to pressures plays So government see systems short-term current cyber out, federal to those headwinds, with things. we and all key. required in stay

but I think either put we're portfolio. -- positioned navigate We either way. can across Prabu support it can the way, We and well. So well

certainly, the in protest going particular, process. in NASA, On the contract to is

not other an too much the on see we We to through I'm competition We a to apart areas But do we opportunities for that continued differentiation discuss from in areas, from space. IT we obviously, those just in GTA through in pivot which some that. us, ourselves So ability detail. do to can set need continued solutions in the see, focusing the of modernization, the going civil and can where bring it's innovation. see

priced labor see course, combined. when we tend sure and labor And when of only more it's it's to and

of it's space of the areas the we're some pipeline drive those really civil in areas and pivoting seeing domain, the maybe opportunity to where that the can we bring differentiation other And leverage side. competency so in

Bert Subin

Okay.

first hiring Really Nazzic, like follow-up. well. quarter going performance. a And sounds the as there strong you on and just commentary it some that's Maybe positive front had Great. Okay.

context then bridge revenue that's pretty a modest and pretty gap into us you maybe the So growth? pretty imagine I just strong increase thinking Because putting quarter? on-contract about sort a of first a just that after of the can tailwind solid help

Prabu Natarajan

one. that take I'll Bert, So

So that flatten signaled has to on that the seeing we're I I out. QX think that, And we call continued. think to earnings are report we start attrition pleased trend

years. over than the attrition trending where has last So it couple of certainly been is better

the to as generation labor IT if been will, good starting side. Our upward think on And we hiring ramp, pretty potentially you continued has is DCSA especially with well. there One bias,

of is our business that broader it more margin X.X% good is because part why certainly and little Now the that to therefore, all having chain have affordable you is coming base know us And us. delivered a our makes margin will. of come side historically labor the which if we've for a which cost, actually business, from flip spite certainly through side, which against communicated good that fixed rate starting margin a a a on of to portion reason beat we the that is supply we in labor of lower we generation spread

spite full So the well, I trending about think we for there's strong on quarters to it got three keep But And to said is me, share the having well to here, that work. of all mix of our and year in late quarter, that, we've the growth we'll posted. a on-contract the think fact when you go and bodes good first basis. labor year

QX proud our on to that how got And of the but call good but and year. really see to to attempt first and execute. and hopefully the what plays and keep the we're As some to this provided X things we'll is go our margin you commitment we seeing hopefully, to year. a not I report do make done, quarter have this we've months, And on nine calibrated labor is update go over on we've what we said, we're out have growth, does internally

Nazzic Keene

add. Yes. A couple things of just I'll

to attract that to pivoted a labor talent hire, Obviously, strategy. on bit of and has few to fundamental growth COVID post So side retain little been these a and normal years. part our we've people COVID all side, adjusting what overarching and strategy the the our is. the us is But the to of new core last ability hiccup, gave

positive our we're Prabu very very so it as and stated, we the But And as as good momentum. closely, see pleased watch quarter. really last to

recognize peers, the So relative we very pleased industry that also with our industry. what to to But difficulty] relative we're [technical broader seeing

Cai von Rumohr

homes, what it's and a taken it When there. lost and protest when the then Thanks. update it, not would transition kind protest. it's is and in of maybe date back Vanguard, and you an ramp …if

Nazzic Keene

whatever let run I'll the color. Prabu few add do then Okay. I'll and through the

Prabu Natarajan

Sure. appreciate I question. Cai, the

rate So there ramp labor work rate our $XX stages continuing as to transition on and to DCSA away and million of to helping at them begun in One year. still we probably call generates to labor for in probably, run and that fiscal it the to on DCSA base, $XXX rate, it's $XXX IT, front expect has million the we as year, But get revenue and program in this run of with likely this let's And terms One IT we're and think certainly to full it, the of this year early ramp run I the to FY incumbent next from well. million that's come 'XX.

little this that. that X% environment. of it of towards time are based X.X% we of from half sometime who in just next a there than a and protest. out other in there call lines X.XX% may So And the resolution second less year. kind crazy let's steps of to about this year the will on believe there We course, remains June, some see knows be TCloud

here second get we'll when runs So of we the it -- watching think hopefully June. the June out clarity half some are sort of of end and is -- we the the before but clock

more lot the that's see beginning if So to unfortunately the we're position contract, holding not we in obviously, on And our of we now. whole than homes, say to that from a to TCloud in in QX. are say transition that impacts unable are to likely me, unfortunately, to

of provided that I for happen scenarios with without goes that possible it talked just three updated accounts Cai, and saying, that contracts course, revenue of we But may accommodates the one all any have guidance about. those

So year. with comfortable time suffice we're updated the transition the for say, that is this in it notionally QX to frame guidance, the but

Nazzic Keene

as And have expect We as cycle. procurement really we ago. customer contract, their it out, on have to is through reported nothing did, to an this material I extension months relates think the a year then Vanguard, the going we existing few happening

some it's but so predict it's year because And Cai. happen very to things a see to procurement, complicated hard Vanguard, next mid start on could

are to reiterate just big that and really I closely. these in them all scenarios that of very we we contracts. And revenue remain confident we consideration guidance Obviously, in guidance various the April want all provided. made. all provided the that We of took But Prabu watch that comment into these

Cai von Rumohr

Terrific. I pass I from question, will a my so side. huge had

Nazzic Keene

Thanks Okay. Cai.

Operator

line Next Sheila come with Jefferies. go the from of question will Please Kahyaoglu ahead.

Sheila Kahyaoglu

Thank you, the time, kind for for being Prabu so guys question. and Cai and one Nazzic of

of QX basis points So but the that business of asked, talked in this XX year-over-year up wasn't a there. answering Prabu, question you kind profitability really chain margin guidance at in lower about the supply midpoint your despite

costs indirect to about talk this profitability margins about -- So how think chain kind get you then that a to supply lower of much point next that really should can quarter? you the we or the costs helped us helping in the better three and quarters

Prabu Natarajan

obviously, the of the points Sheila. chain adds appreciate supply basis, year basis I And about to the XX And question, Yes. sale at business QX. that full divestiture the closed of a end business that on margin.

of three quarters or you potentially tailwind, expansion got from potential margin we've that business. will, So if

somewhere basis. think That's year on of XX XX sort I presented Day back to a April. between points current So the how in basis Investor view we at

well impact to So to continue the what allow to areas think to to objectives in our to that perform cost we that manage and effectively. grow extent It to we us says business continue some investments gives base this some is continue profitably. for opportunities this me, differentiated our I us that

margin balance to variables, the the a business In in reinvest it's additional near go growth place of including implied lots other versus now of the in the term end words, in through QX, terms right that good down what's team to in of guidance road. being the has profitable to able that the the be of at beyond some to expansion drive

regretless -- most we I'm go series are this air going a, investments go us if which call to and regretless. allows of we position dust performance there things is to the companies say, through, are you be the decide that's continue organization, it this generate us sort will ones of in. profitable for there will, off, growth prioritize that to court good As which a for to on to a through trades when and And and

Obviously, with than add to So you but that. have. to pretty flexibility chain somewhere higher amount an if to X.X% it, supply the X.X%. performance element enviable the just us it's QX biases Obviously, of to comfortable

beyond in So to reinvestment there. for business continuing year think and to the this estimates us early drive that about be out may

Sheila Kahyaoglu

And a talked helpful. your AI guys example using you it little as and you one the this at DoD now, Analyst will how bit. how think such maybe know quantify about But a hot topic customer? exposure? And in you're I it's a just you internally about can take That's talk given Sure. it Day

Nazzic Keene

in across, certainly, ours. including getting Yes, a of lot days press industry, Sheila, think, these AI I every

driving think this an more from point, days couple And is be we've AI. points seem I the at government the coming and a customers I a the through -- of near market certainly, tipping an years. to is want interested out discussion several -- of for is advantage these that to we're area appears federal make. So This investing that in been a in using to looking be

position that. our do good we and to our feel about So market the in ability

so AI I embedded we is clearly think addition that that of way that to think about AI in many sake bring market. it's know AI's the also to in our important for solutions it's we to

solutions we very in have so AI to of programs many because AI our do AI what have it's quantify many our embedded and hard And embedded. of

that of about for measure investing this I'll you analytics. a thinking a the we've and difficult ago. we One very of AI evidence is market broadened Koverse while, data for did try example just me acquisition that be couple to this been exposure our Again, would that. both good years it So to and in that give market, to

several million with to And and space. both on -- the it we've already been space hundred we've defense across feedback contributed has the and received the winning solution, civilian of dollars customer really pleased the several wins

an asset tool AI investing been part [XX-Gen], as So very our that pleased is well. called with as Then portfolio. of which we've in

have you some factory got factory on then our meet a in chance and is AI, innovation and guys York. So of leaders we an New to innovation focused that

we again, And so of Secure JADCX. opportunities core Cloud, And see it's part to a our be and that whether Counter-UAS, strategy. continues

it out but those to of So and embedded types we just pull solutions. again, see AI, it's programs in hard

just highlighted, then both a and It's quarters last but called to out watch. was few a in that we because I analytics company were mention our I'll really and not things it the of And experience one AI. named least, that of JADCX just data ago,

important part an to part our we AI this to solutions, that our industry, So our in continue very is the as of and we'll our in we're mature more And of leveraging get is important our focused ability acquire. they invest our on. customers market way differentiate something recognize customers government for

Sheila Kahyaoglu

Great. Thank you.

Nazzic Keene

Thanks Sheila.

Prabu Natarajan

Thank you, Sheila.

Operator

question next Please line come of Gursky the ahead. Your will go Citi. from Jason with

Jason Gursky

good me Hi, stick wanted I you with hear question. everybody. the okay? AI to morning, generative Can

Prabu Natarajan

Jason. you, Yes, we can hear

Nazzic Keene

you. hear can We

Jason Gursky

can. You

Great. Okay.

Sorry about that.

Great. Okay.

we're see what threats lot a current sure quickly. talked any if understand is you opportunities. I kind and making the this So on about this just to balanced business book of represents. wanted there to I know and all are of very general moving the

So to I potential threats well from opportunities some as that the as suspect business.

it a I bit might could you us be? where kind threats perspective think the wondering if and tell So you out for of was your little balance us from

Nazzic Keene

it Absolutely. competencies of these an and well. you well -- threat with And into I and opportunity. federal huge a government market types considering some anything as institution that's It's our think as a captured of change the both is or pledges. There's huge

And way so of headcount reducing certain programs on sides. AI that much our threat side, headcount. measures on on on profit revenue of could Certainly, and we're that both see potential navigating industry have the the you and the is so a

And competencies to sense solutions we're we also in But and and drive sensitive our understand that. when what it preference our us the makes that so the We're the programs aware partnership certainly drive of our is customers. is and be performance -- in disruptor to with that. and to for

want government's it it's both But in the we to manage federal both. So relatively I make It on adoption. will early is absolutely you're right. We dimensions. sure days say

out think carved and to be And come, driver that and our and a in again, our make lot solutions. intend a we of difference where a can maturity where areas it there's we've so could leader believe where, those in I strategy we

Jason Gursky

Okay. up have great. set my delay. Great. you sensing the IT And excuse isn't I'm to that here

late, I might kind developing some year, be quite just this for next a perspective. seasonal of a answered you've in So this how but there I question getting you you currently to you bookings had everybody in on know seasonality picture was earlier that this few have the but a Prabu, seeing big mentioned year. want understand pipeline the bookings of you year questions from thought potential are from kind that perspective,

we related feel the softness update comments I in year to clean you you that earlier to for ready of that on year, some made that a debt CR. gets the But just that bookings. just We suggested had opportunity potential seasonality some an kind out. to want everybody see some of earlier in give I a if could think maybe you

Prabu Natarajan

needle-moving Got picture. appreciate course Jason. pipeline, on it. things. few We've larger book-to-bill big I basis. the things X over comfortably year. and which QX, to of of A to second couple in question we delivered a X.X, solid Really year there, a maybe We got over we the the be of this hear expect expect full the half

the prepared TCloud watch. certainly book Obviously, we in mentioned it's in book-to-bill Nazzic we her an remarks, area to numbers the actually reported. as or So is not continue

watching that as space well. we're obviously, So

if seeing higher think we feel But to about to are quarterly things put on be Again, So looks now. right we distribution finer how QX, good the is where QX what than I likely that's seasonality now. of point book-to-bill. and QX I sort probably pretty a of backlog like that had right

has I That's the the think means the And to some then the also up Street increase it. to the talked from certainly things good in Hopefully qualified as the year-over-year. about -- of the for X% book-to-bill the we've billion. time prepared $XX the broader is last about qualified pipeline question therefore, that's her that's total pipeline around a up that's value and healthy sign. submitted pipeline, depth gone an mentioned Nazzic proposals of to remarks,

out GTA from sign. mix is is also higher than that healthy ride to think deeper ago, bids it is of to the was pretty importantly, the points data number continue waiting most to is and XX-XX pipeline two year also those skewing right tell there that really hear of I a a are core qualified So we that now, perhaps us which a the than and

Logically, in if that sort in we especially may more that at of GTAs lower because assume differentiated, to than kind especially just a market a come trying are win is new lower break through. normal rate, takeaways of we it

order of taking up into in all our account to relative So factoring estimates. we're with sort come that of

likely and in and of some QX as be QX should probably But year year. last softness solid seasonality at of end kind QX saw the we QX will impact bookings

said the only is, thing you structured Jason, Yes, remind of would I an IDIQ. before, was as we've as TCloud

as resolved going favor, of book So our we'll in gets full value the when that we book we're not to if kind and go.

consider that's for one just the to So factor year.

Jason Gursky

Great. Thank Appreciate everybody. you, it.

Operator

you. Thank

all thank time. further questions you joining. We at We That will conclude today's have no for this meeting.

disconnect. may now You

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