SAIC - Earnings call transcript Q1 2025 | Science Applications International Corporation

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Operator

Thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to the SAIC First Quarter Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] thank you. I will now like to turn the conference over to Joe DeNardi, Senior Vice President of Investor Relations and Treasurer. your begin may you conference. Joe,

Joseph DeNardi

Investor ended thank May will which Good Townes-Whitley, fiscal with that Chief discuss slides Quarter DeNardi, management's discuss conjunction investors.saic.com, our today's we in joining our And remarks. year our of First we Today, business our also morning, presentation and are first Executive for for Year can morning, Senior will me be supplemental XXXX Toni to find of at release, President prepared XXXX. of Joe quarter Chief and Natrajan, X, call issued Fiscal is Earnings SAIC's results name Officer; Financial the Treasurer. Prabu found results where you Officer. earnings and Call. this you today utilized and Relations copy to financial Earlier financial Vice XXXX joining our be a My and

and materially our this uncertainties section XX-K. later documents, we our in cause that be today's and to forward-looking unknown to XX-Q subject evaluating our including Please Risk utilized a provided risks, made the Form Form filings These to on today's be call. statements annual addition make are known on differ Factors discussion of results could that risks for results from outlook note I actual SEC refer information that along report to on statements today, call. in on with you should may our and of these call filed to

cause views events our change. as to In of addition, today, may our the subsequent statements views represent and

specifically any the statements forward-looking obligation future, the to update but some at to so. elect point may do in disclaim we We

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

CEO, Toni is It now my to Townes-Whitley. our introduce pleasure

Toni Townes-Whitley

Joe, solid greater quarter, in detail. start with a an to discussed will pro then recompete in and on a We our results outlook ramp of Thank our our financial and good on and due results everyone new provide basis from organic discuss headwind points offset roughly and to results you, then programs, the reported morning Prabu growth priorities. existing financial our quick strategic of up XX quarter forma X-point first update review call. the by on I'll losses. previously

EBITDA resulted EBITDA First $XXX million reflects in the margin investment quarter adjusted an which business. in the of of adjusted of impact X%, increased

of program improve to of second We good as ahead to expect of margins. half see performance $XX timing plan flow million the of in was Transaction-adjusted capital continue certain we the on momentum the working cash free milestones year efforts.

I'll April update now I outlined for growth want to joining Day, on at Investor multiyear strategic SAIC's you our strategy. where we many thank our us provide of priorities. an again

progressively increase into key X imperatives, to enduring Warfighting, customer vectors: growth All and bid will X Mission and Undersea by our These Citizen technology Advisory. the demand. SAIC's grow our Dominance. imperatives we missions Enterprise across drivers Solutions, integrating Mission of to in profitable and IT, imperatives: serving our national the discussed shift expertise then, we and represent emerging more Future company across Civilian Next-Generation long-term order As growth Border Integrated customers to profitably value deliver the Domain in of X to and portfolio and customers' work Experience, positions Space,

optimizing of Operational AI, Solution across that And Systems the enterprise operating six. Secure The which portfolio Integration our investment national Delivery. six implementation – the building Digital is five, with customers, imperatives we On-dEmand a Analytics, Multi-Cloud, in on market, the and progress schedule. continues four, differentiators: model, enhance in of to to our Four X System execution. finally, growth prioritize deliver And business and Engineering, organization program we value development to competitive vectors positioning five Secure will differentiators Data best-in-class

While our take encouraging are indicators, to for business BD it XX fully submit thresholds strategy XX is including sales volume. progress cycle and that months bid results, will such with selection, we our our more bid to seeing likely impact year-to-date

drive leverages innovation and assesses vectors selection and imperatives, which Bid deal our size. degree mix to to differentiation with aligns factory the pipeline growth optimal our capabilities national of

have $XXX recent strong programs on million Our with TCV rate in a years. quite win been under

that mix proper focused prospects. pursuits this are One Treasury larger of upside in like deals to providing Department growth zone and DCSA a ensuring We our program, on of our TCV our IT pipeline T-Cloud measurable with reflects

utilization present, our with heavily pursuits higher TCV on At less deals. our towards of the skews differentiators more enterprise across pipeline midsized-to-smaller impact

strategy correlation the involvement program. utilization and ensure pricing Bid and that thresholds over profitability will discuss the volume we're increase see a IF over to into the submitted pipeline ability IF in to reallocate and properly we metrics our bringing reflect Given Prabu customer we time. win rate, investments convert as our and value between capability internal proposals on seen schedules inevitably time. our and improvement have measures will share procurement effectively shift Submit recent quarters.

$X value submitted a quarter. billion We of over proposals first the in total with

in represents roughly quarter 'XX in year the billion 'XX. Similarly, billion and Our in first XX% a with Force billion in of U.S. & business $XXX awards the Space a first the delivered $XX NASA. of recompete our the of the $XX business. bookings new of the was business. progress award strong value performance win new to for our compared Of we're in fiscal value book-to-bill and submissions billion the $X.X representing X.X, $XXX expected seeing X/X of with with bookings million business we fiscal new Space for gives contributor with Intelligence in Group quarter, net reaching million roughly year, targeted to year $XX us submit confidence significant

multiyear organizational pipeline convert $XX the 'XX, to bid resources increased behind identified see volume and quality standardization bid, to into in fiscal year and throughput. pipeline to we processes to goal this: greater to drive BD X talent and accountability drive by increase adopting and efficiency upgrades drivers enterprise-wide primary billion to Relative investment Greater

intend to In and we bid higher we as we the Importantly, selection thresholds. pipeline in overall expect improvement while volume shot our words, drive other volume. submissions margin also increase quality improving an of and

in to Prabu the their our call thank in strategy. to I outlook SAIC partnership contributions financial and turning quarter and want the Before over detail, for their our and results the implementing for team to discuss

and we revenue in recent lift heavy Clearly, margin we have by many their headwinds encouraged customers endured in and have quarter and dedication proud and appreciate year. to overcome of I seeing. we our our this functions business I shareholders. groups of of the that indicators the performance delivered and the the some are am quarters recognize to progress

expected driver Prabu, have must We near-term an plan. for ownership with a to that plan long-term and this our We balance challenge, be value long-term intense of will and our we what this focus creation commitment taken of of you. I understand shareholders. on them. our groups recognize over to significant believe is business execution employees, a

Prabu Natarajan

$X.XX a points forma and XX business was approximately growth remainder disclosed year. as first We by previously largely new reported everyone on pro on-contract call. for discuss an and of will representing results Thank update joining you, I morning increased provide revenue organic to of outlook revenue our of good the the billion, the growth our financial detail in transitions. offset quarter basis Tony, and greater program

a timing margin investment to with of In Adjusted approximately rate program X% quarter, year-over-year benefited to milestones largely internal $XX prior roughly from and diluted $XXX weighted Adjusted of sales addition, half year-over-year EBITDA being worth headwind. from which, in decline weighted to of million in the reoccur, share the as year X.X% XX.X% roughly due a count. tax that was benefited a planned, creating million our material discrete increased it average is second quarter revenue year. one performance $X.XX of roughly the adjusted the a did EBITDA a in decline, customer X% revenue the resulting not EPS in noting first

million, flow of FY year-over-year 'XX our quarter. headwind $XX and sale to adjusted in business in ahead cash higher roughly chain free the included supply $XX and due plan million cash a the of Transaction was bonuses

our see release for X XX-Q, you'll quarter, be as providing intelligence earnings in this will profitability and and Lastly, and & civilian. we segments: beginning metrics revenue Defense

presentation have our release slides to both segments We earnings your and assist with modeling. results historical provided for in

capital to we While I'd adjusted diluted margin, for around guidance quarterly per flow, and FY free financial expectations 'XX revenue, provide and adjusted our plans. some additional color cash earnings EBITDA deployment like share are reiterating

to a revenue new assumes first quarter similar with in as second X% recompete quarter to revenue roughly offset expect growth. a from losses, and flat now roughly on-contract headwind we higher be by which year-over-year, X% strong from continued saw the dynamic business We

Second growth 'XX increase the expected quarter ease. with our is half FY stronger in in revenue range recompete mid-single-digit as to headwinds fourth

our guidance year, X% approximately and which FY from growth for expected X% quarter to recompete expect X% in 'XX. our X% a the an normalized full to fourth to into more of we For includes losses, headwind ease

materials our this first revenue quarter normalization in revenue government to the revenue in expectations softened attribute outlay quarter Overall, to recent plan, somewhat. part line though certain with trends. We of was in generally second have for and a timing

year this recompete face to year-over-year more guidance. headwinds comparisons X% on and overcome we difficult growth our push the understands team to X% to Our deliver

have have with growth but active remaining is engaged that that ceiling we focused year which spending It challenge drive to cycle. are of initiatives a many, in are not ahead accomplishing. value of risk, we with on programs place without is of we a and We potentially on proactively one specific end customers revenue on-contract

We timing similar primarily in the year driven timing the half profile and repurchased We lower investments. of shares in $XX quarter. expect the margins of half a performance milestones the with of margins follow with of the first million by in the program second to improvement

repurchased long while capability-focused intend $XXX can range in million maintaining capacity of deployment that over million we Faith consistently plan this As the will that end strategy profitably recall roughly from to M&A. our by to term. the target for now we year. driven of Day, shares confidence you capital higher Investor this grow is business and $XXX our our assumed We sufficient

time over market, our the As portfolio to shifting value and align Toni pipeline discussed, focused which of areas with differentiation. we're on

pipeline, In while best to execution notching mitigate implementation of year. drive long-term this over focus our we for to time. growth revenue on more up the closely the closing, We are profitable put improvement in more to stringent within we our seeing backlog profile expect mix this thresholds and implied have in place pipeline bid shift our as favorable strategy on margin a faced our strategy intensity our and and align remains SAIC reflecting the the continue challenge

will drive We are strategy more the predictable in growth consistent, in confident that market our term. and SAIC's strengthen long competitiveness the

the in program. results our and intend our reflect we execution, our our share may remain the discipline not deployment the capital repurchase While near-term in our strategy via impact always and strategy capacity investment increase full of have to to and company rigorous the

I'll for now to turn the call operator Q&A. over the

Operator

the [Operator TD Instructions] comes question first Rumohr of from von with Cowen. line Your Cai

Cai Von Rumohr

of several guys. impressive Could and you some terms into half and still the over is kind recompete the Vanguard the bookings, know then us the split timing the Yes. give maybe recompete because looking we're I at update of second pieces. Vanguard in

Prabu Natarajan

Sure. Prabu here.

the that. we're say would in On right now. take process I'll part first Vanguard, of I So

we of be but outside really well award have as largest programs, SXi this expectations of an QX our QX probably say That's now from chance probably that impact worth There's this changed. to Our Army any out. And right year. it's year potential next the We've not one that on revenue that's of seen year. may Vanguard. may timing RFP the as recompete one at impacts for single or the year get on calling for minimal point, the hard this a an of

X largest are So calling worth those ones probably the out. .

Toni Townes-Whitley

I'm if Cai, sorry, ahead. you recompete, go the look So at

Cai Von Rumohr

on decision you could sense timing some I of and just say, SXI? give you the when might expect going of Vanguard to a was us

Prabu Natarajan

-- say, biased the probably starting year, half the of would end probably this year. I assume the to Safe of second the towards fiscal

probably that's best right now, our estimate Cai. So

Toni Townes-Whitley

foR Cai. fiscal really clear And We that I have won't of to as end a would be true the well. mean for both, year, correct? sense SXI

Cai Von Rumohr

increment of the then that. you Prabhu, stronger we think XX your give time you ]? color mentioned you're the first talking XX, talking talking kind XX-XX? are margin the of I the [ Can you in us -- backlog is last it. give the Got booking. kind bps, have Are than any on that's margin that Can And we one, quantification mentioned or any you

Prabu Natarajan

the little that, and Cai. the some, bids the is on time catch, we by from margin we're information as Good are mention providing margin some the the of script, seeing also the Yes. rates We out in going said in it stringent we're qualitative put pipeline. backlog on it implied and impacts way inflecting positive more bids a we winning are first but We've did bid the higher. where currently, thresholds that are door, and

not types for shot say, generally all our in higher through going is your as us. would and new the an hopefully, seeing that well well are the for willing seeing is T&M say cost work. that of our probably this this than start seeing we our as our margin cost-plus customers price well numbers say. all that [ and differentiation programs bid be selection multiyear have, fixed of and are higher inflect pipeline journey of I specific the pay our trend. And a we the selection to in reality we plus our are to And higher a ] we as as backlog, are uptick It's as improved to as you is for indicated coming programs, the on are we question but can not And levels contract is across strategic we

Operator

Your comes with Gursky next of the Jason question from line Citi.

Jason Gursky

the could strategy to wanted is been prepared you referring kind us remarks M&A talk right this M&A I just have and Maybe in capabilities. through I of what point to what sure you Probably, at and about the you heard there? might make just

Prabu Natarajan

a in certainly our of well. Jason, and I'll question, posture. not thanks lot here But for M&A in chime the let Toni big change as really, picture,

tuck-ins I there, preference don't couple now. and seller reasonable out think years right be of for a seeing pipeline It we've all tends still things and for signaled but very technology-based capability-based kind of we're a of kind exciting believe our it's market. of tuck-ins to that I oriented now,

looking being And at. we're just we're so very what about disciplined

of strategy think pipeline is really in it, the scale-based refresh the ] strategy, given starting acutely [ And our M&A. we've sensible tuck-ins how that's now thinking pivoting terms I pivoting strategy more we're going the our us. reality to Toni? not to become the and is reflect is simply got about where

Toni Townes-Whitley

in, of current not head are recently in guess the the we strategy Corp obviously, of I consultancy that of about tightening of differentiation just that our capability, capability also differentiation, our hardening which Jason, highlight, would are would believe the growth the And I fact our in processes, reviewing terms we've only against hired be market, advisory a She's Think part our is Development. strategy and identified as enterprise the business, of looking but also where we assessing that includes hardening in targets there into civilian we've terms where our there. technology tuck-in

on but Prabhu relevant has the process. forward. gotten our our to aperture and diligent many we process bit. And expanded our very with in hasn't opportunities been indicated, flushed looking market tight that date, We've we've So are a as

Jason Gursky

a Okay. over then there to Great. for you're if little the growth curious few in side the like And continent company seems seeing spending. in that question. a just opportunities you any be Europe. your on see the additive have about going a That's rates I here it's potentially bit that follow-up years. cycle And a opportunity of might, Talk over just expected what if prolonged to kind up next could here

Prabu Natarajan

of Jason, that. part the I'll take first

looking domestically think customer that up-tempo where in think they real specific ] the create that see market, interesting are them will is follow theater. likely we priorities differentiated that the So the will aligned of strategy to much as internationally, I particular what to there at there. differentiation be are in more that set opportunities are say say, capabilities are remain. means pipeline follow those just And world, we we very in [ about say, say closely that very there I'd big more tuck-in specifically, to picture, we part the and I'd if our to opportunity as

by So point this our sticking I'd to there. knitting of large, of opportunities say, kind and terms at in

Toni Townes-Whitley

primary conversations, consider refresh that's a made, And having enabled, so is will We're opportunities our and location of look that right? if right? of that initially come in yes, we're strategy. conversations that X customer-driven; think to I the statement strategy to strategy internally capabilities having a the to at look, all geographic -- multiyear those our statement ability they're with secondary And thesis. the probably trump having our we're part

up heads we're taking business, to are and where point looking, determining if good place Prabu's capabilities a disciplined to where and just more do out. customers obviously to geography we're it our around and a us is need So our But versus much for be.

Operator

comes Wells with question next from Our Matt Akers the line Fargo. of

Matthew Akers

thanks for which potential? think do Defense on the towards the you'll kind or the as I and think of going more X right segment if of segments data segments kind providing I most time. then had mix think Intel right segment kind of a the kind of upside of the I you between couple of between the margin X/X you that, just of the you and guess, around of other? think mix Is of guess, And the has you mix? the those the XX% forward? move one how long-term about business questions side, X that this target, Or

Prabu Natarajan

that point we one. long this of to part it's the in term, over out I would And point reported grow data terms there, segments have Data we expect that where T&M fair both relative say for and we take and the price of Matt, first. therefore, I'll the segments predominant X probably think to business to the mix not improve the would defense to fixed we by and of work, And is . intel us market. large, mix two, continue that market. have the civilian to the surprising quantitative expect

programs, is the targeting we the we civilian I where is in share. few only expect the I business group that improve margins potential grow here that we recognize improve I going the But our our to and as relative a that third is, teams margins market have portfolio, in a business say the is, given and margins the that think times civilian, a as across And in to cost-plus mix are candidly, we to to includes sit and over, Toni where Toni? here [ our there we're side. which think as ] not say improving have is long-term data Intel about think wish Defense point to ensure are that would would to on optimal mix. pound and business specific the that the pivots we payment referenced strategy mix could the I continue margins reality well

Toni Townes-Whitley

that a of still have significant to we think and side. will spaces to chain. growth I profile our still bid how advisory an going be these of currently well. Intel to frankly, areas. like opportunity measure up the think areas in accretive growth we start we And will positioned, as move and -- the growth look how the where about quite one into that's we more have capability even I our forward our growth as value to are creation where relative in we expand question way. as bid what on as we we we determine X a story, earlier civilian that have you'll And talk Defense value how there those launching Civilian, is part look strategic

to to all first grow, think statement, business them So we we all Prabu's plan grow. have of X and expect I groups

bit focus think be we we a on larger I major over of the the next that Civilian, takeaway. putting will making sure addressable of market years. get X a that's quite part

Operator

comes with question from Your of Sheila next Kahyaoglu Jefferies. the line

Sheila Kahyaoglu

of discussion. just profitability to and segments? the do defense kind which, shorter guess, it the X attributed focusing If we the proposition margins, my little divergence? of we part they divestiture. just could expect Maybe defense the maybe it, value on I wider contracted the earlier, profile touched a But of and question, longer a on segment term we should first the with intelligence how continuing Toni, here think but term was on about You year-over-year, bit

Prabu Natarajan

the that to focused. down of margins Sheila, came take Prabu Intel in is crack one. Part I'll relative more Defense picture, are here. of of first EACs, last this and half year. at which QX the timing second Big

I think our call as across making our the Day. explained as we've the additional Investor through earnings as year-end we're well business investments

So QX of Defense margins Intel in to, what's year. and driving relative that's last partly I'd down say,

And in margins mix I go just margins well we do up mentioned think and of have a we as big is there. think that we rates picture, expect a business, as prepared fair work business. as our we are in that I but pipeline cost-plus have our remarks, work pick up the Defense I our as higher mentioned, Intel to margin our we EBIT amount and in in seeing of work, cost-plus EBITDA

the spread, EBIT work. roughly, I'd as does reality terms said, fixed margins business And EBITDA and their and price double I In the digits. say, T&M is of the relative low are margins have, civilian

our to expand that we'll we expectations in business continue presence that particular up continue margins in grind our Our civilian market. in as to

near I margins mix is that the Civilian it's probably to term. term. to the in a improve easier So over do would there segments, expect segments in bit And long given the both reality little the reportable just

Toni Townes-Whitley

add as programs inserting thing return only our current would the as thesis both more a that, Sheila, think I differentiation, well investment to our cycles. terms be in I was would bid to the relative of

is mix accretive drive more profile, as going know, So differentiated expectation plus advisory its introducing you of capability, accretive the move has as as terms to different as well which more revenue we that, a space, in that the what's nature. contract is into

bottom are over really going it's that the on drive aspects top next years. those the X So to and growth few and

Sheila Kahyaoglu

growth probably digits organic then really growth, just ramp the on talked the cadence of talking first remarks, more quarter about the ]? comments advisory in quarterly Can just of and drivers [ are of mid-single QX you weighted. basically and No, that biggest programs you your outside recompete of definitely what rather prepared Sure. to seems about nice ]. losses? And [ ramping that flat the timing Maybe in talk the about the capability

Prabu Natarajan

organic do in that, flattish Relative Sheila. We'll kind mid-single-digit of to year. growth, think half first signaling up I Sure. we're of ramping the second growth to the half,

think I expected shift. in script, change expectations, pull as obviously, working in I we the things But will much the part some the occur in second QX. cycle to as to of shift of that left underline the is mentioned into the half. word here may the we may as can material sales will into the as that we we QX

talk And the continues to year ] million win, early program. Air second some In DTAM is between continuing the team HX, out year, And $XXX year is on to to there's revenue from we the Force weeks on the in year. good progress we half more growth of are then biased which and is ramp also business relatively task out recent likely which the on some expected our program, ] likely terms [ GMS, will over momentum see to and there. the up. over we year our to days the fill there, a of we year-end the to new to last the but of about And over generate the HX to T-Cloud be say, to of we're We're last likely relative through. front. that growth over call T-Cloud still program, next several that on is building drivers some T-Cloud growth I'd likely that as see coming orders growth going X% we the more win, won that at of called we [ think this ramp course are QX

reality are And Sheila, about year. incremental contract expecting our also X% then to had be to X% we the is X% separate estimate last The losses to growth that, from of about for we've year. is recompete

new ultimately together put as more on-contract the be what X% comfort back-end gives as and to us initial this to in between losses well we'll little that's a the although increased growth you So if our all loaded that of X%, through estimates. wins, them recompete that year albeit relative business that

Operator

line Your of next the question comes Seth with JPMorgan. Seifman from

Seth Seifman

you more normalizing alarm you for bit wanted think a expecting as script some talk the reason you it, that. you quarter. the for government environment yes, second little about Yes. in driving made about changing, in some the doesn't I to a about I that second if could how be environment the probably comments a can might slowness of I address outlays more And ask, you're that what's why little a the bit half, if wonder

Prabu Natarajan

fiscal see year here. do outlay. Seth, of Yes. our in began to I some here, I'll that, in as add we we sort Seth. And if began Toni, miss a O&M please softening thing,

data think came I the the out all saw that of you DoD.

saw change Now The weakness it or began the data. maybe for we last we that X X again. then months, to saw and outlay O&M time

we that sit April the a like actually what is quarter that the if saw outlay second year. I And data is would and fiscal a in the in of saw into really I last what or to back reversion part radar So year. think to trend signaling see think we the X-month is the start we a heading blip softness the to we're caution

many the and industry And to consensus year the as incredibly something And caused fiscal more reminder, as handsomely. numbers normalized, just continue impacts in some revenue we've been remained likely signaling through that returns well for we very last us are of a strong couple course as beat outlays on of environment the months to the now is that outlay to see profile. to when a

is, we the do therefore, a it pick up alarm we budget place do doesn't to and So again. for reason expect GFY have outlays 'XX, O&M me in

lag but about this Sometime right is last being through saw away, a lag. revenue reality pick we a didn't to outlays X- but little are we the X-month see year, the cautious a bit we because always come we of up, saw time

cautious our we'd calibrated I like we're So And investors to the stay seeing about we're just it. I've said, think around market. with what as being in

we because the So cautious to alarmed we're But temporary trend. script, signaling don't it in a and all certainly that's may not our are profile, long-term think impacts revenue we Seth. simply we're it's have given some that

Seth Seifman

Okay.

Okay. then that just point. Great. follow up to And on maybe

spending You potentially also cycle. mentioned end-of-year active an

exit And extent so by of award fiscal the of you activity some which part fair looking resolution like the sounds and year potential all the to of we And a despite outlays, in unevenness . last it this as has for tempered your wondering that at are the the election. continuing maybe amount I'm through maybe year.

Toni Townes-Whitley

me let that of into question. part Seth, the jump particular just

in continuing be government pretty our research We where as advance have of at year, trepidation signal signal fiscal of various to agencies worked having of we year, the either a be year set, -- spending going customer of in close and relations active that with you what do to happens, down on we and our will fiscal sectors clear resolution. concerns, see do what cycle, sort the clear an fiscal end fact, obviously to not next we've get see for be know, done team the every across may are government the the and/or

business in one the end plan across of sort a fairly make got year of our sweeping we've every in part groups. of that So sure a robust to fiscal are and we of the place playbook

fact, targeted down program we specific it In level. to

to partially of probably about some HX, talks us we regard. offset see when QX for lift HX the that's one that component in So are looking an

Operator

question Stifel. comes from of Bert the with Your next Subin line

Bert Subin

we're there. should builds drive improvement question a just maybe supplemental taken the the following that place environment, to past first and quarter. having now cautious in sounds somewhat with but Seth position the spending It in like appropriations on you're from up incremental spending

does be and larger how that mentioned some X% happen, help order to about still X% Assuming to to what's setup of maybe do 'XX going wins new go padding awards. more just awaiting you're for on-contract more pushing FY some where you to those above task a be level you growth, broader provide the uncertain and likely

Toni Townes-Whitley

had our fundamentally, got a contracts, even differentiation. One a programs of each AOC, a be groups. T&M, of you on-contract we've looking specific off Look, gives, will, fixed-price, around and programs that That question. it here even good others. plus, we working them, to number actually cost a you, are we're playbook for and template types different Falconer grow of thank DCSA But we've we around that mentioned, Prabu contracts, introduce those whether ramp have Bert, we across how at one year you growth IT, as if of we that business how over mentioned

in our measure to about programs. starting programs And our larger have current right deliver our we of now, X/X our from know factory. programs the We're we differentiation differentiation that

the programs quarter to beyond are many majority our delivering the to of possible. as we as drive that We looking systematically that are

our do on-contract to starting measure And occur where, So that differentiation how forms introduce part you we're enterprise other if will, tech growth. differentiation our of we on of contracts. and as existing

are of customers our growing of in programs even terms where their for then And missions. understanding focus terms various mentioned in putting their their Prabu

So you have understand we'll We've goal rest the as to we on instituted need. we to heard that start with tight just we annualized growth as driving that Prabhu say as for now that of fiscal that possible, be working. impact year we're a the soon all have the starting move left, this contract the pretty playbook has of on-contract right

Prabu Natarajan

the of out year only in not second we the on X% half thing the lot of would add would be relying Bert, the to have that X% that we there. to guide And wins new to response make are a I business

I extent on to what help likely we as we us deliver to focus can And to growth. remains upsize the it's underlying X%, performance. contract X% bolster the think acutely our

also billion $XX in have We backlog.

large contracts there through are team programs. many so volume And have additional the delivering of large amounts we many, laser-focused ceiling on is these with and ample sealing

Bert Subin

year. think as -- first sort then that ] the NASA you recompete X Got the maintain showed I area, start a partner now such headwinds things, potentially least Or pursuits this be to it. a of in the you you other side And other confident quite how then up, and the of noted losses under about when AEGIS protest sort guess NASA the EAST. parts. my those of points get a EAST? chance One, that follow-up, and at go-forward lot with of the seems assumed Maybe where NASA which recompete some there is of recompete NASA question in do changed that strategy still work is is of those is headwinds? [ X we your you with OMS sort two, way?

Prabu Natarajan

We a into question. the that roughly of in win million that QX I $XXX this recompete, SMAEC Bert, year, our NASA bookings. we appreciate did booked program went

counts. think I certainly it So

the On program. NCAPS on -- the

lot But we is unlikely X% mission our I team bit now, area SMAEC turn expectation out about portfolio. right next is particular in one being part the laser-focused is disruptions spent X% terms we've we relative that time are And NCAPS year. the we've the that the fix suitability, evaluation in ability think we're of mission guide in to are of a to way NCAPS' submissions on the hopefully and of revenue, year's this little a of fully a fiscal major very thinking to got that itself the evaluating from see suitability impact to there. are we where revenue our the represents careful and but our reflected -- on to

Toni Townes-Whitley

the well our line there as within mission differentiation actually as customer I'm factory set. right Prabu in with resonates the terms that suitability in within of well NASA

think reviews frankly, were solutions as, poor and those side. number terms I contributors well as proposed understand of loss in to challenge, of if the on our we've dives ground. both meet will, deep loss the where positioning -- recompete the did the to our positioning, quite execution done with of Both we NASA a our So not on you

We are delivery driven on current mention call on differentiators improving substantive the the contract. over in programmatic both the recent quite areas, frankly, to as million, $XXX here, also, but into win being our recompete with Prabhu mentioned, enough the

an is opportunity. still NASA So

evaluating opportunities X and there next where play, still we're bid for major to we purposes over think I X we've got a quarters. the couple of

Operator

the question David Your of with line next Barclays. Straus from comes

David Strauss

to dynamic. half back wanted versus this growth to Just half second first go

half tough. of comp growth. fourth to year through in just second come really mean I digit QX all the Is the quarter? mid-single in going about your it talking really is still You're

the comping the in QX? relatively workdays easy. basically -- minimal hockey setup, on the I growth is in [indiscernible] You're think Is QX, that kind a stick of

Prabu Natarajan

Yes.

I up something. David, think So picking you're on

signaling roughly HX We flattish mid-single-digit growth. and are

I the being this we're right. of get into partly why hard think heading print. do second particular the half cautious year, you're in The exactly which comps

I the going getting traction we think is regime fiscal on-contract have here growth place rest the year. revenue some time Obviously, the in are teams that pull to right the to take in. gain now over to pushed of

the hockey stick moving procurement side -- be is So that the be the beyond operational or to hopefully, now, certainly a so that looks my left expectation would start in reality have we cadence But plan always forecast of of revenue starting left. game and what the would -- control that right of the that that's my this, QX less in we in revenue becomes the we QX. pull improves That's to QX for what volume like it hope execution our don't

careful we're hard But think we QX And we're this HX do. to be going the that's be HX. all to a calibrating the want in way in don't versus so to being that know because we go just get I very very,

David Strauss

of flow -- had the cash flow, in When does like that cadence receivable you rest out? the what kind it. Okay. QX then And the look reverses the on benefit this Got of on cash year? is

Prabu Natarajan

Yes.

a So David. question, fair

I free $XX think -- delivered of $XX we of QX itself, flow. million cash in terms million,

higher of it chain were incentive last we of business, year. supply be accrual as as normalized we'd top comp you well where If the sale for the the right on

of $XX cash $XX million free roughly flow. So million to

QX for to weighted incredibly is be say, our half. where year. this free the were no different cash tends flow, last flow all Our QX collections year the versus get year is I'd on our strong than I the full HX This on HX from, through second rhythm of dynamic of typical in year cash typical that actually way free comfortable

trend cadence So I itself, would the not rhythm HX to I'd us. to likely flow cash be say more the that of and change. to help focused, HX, itself, expect But HX that's to terms in continue tends

Our impacted flow is periods. pay also our by cash

other typically period so additional pay there's And quarter. one every

And year. again, the no cash so our surprise flow as impacts that well. But timing real actually expected for

that these bonuses onetime timing right Hopefully, on in our It's we're just I QX was cash items, of track of including terms think responsive. collections. the here. at of some

Operator

question comes Sommer from Your of line next Truist with the Tobey Securities.

Unknown Analyst

Wilson Jack is on Tobey. This for

Can see of on sort and any cadence sort you key of to continuing trend. sort in Sort sort in of contracts? to of seasonality speak the given changes ramp line of of 'XX, time 'XX historical expect the some you the

Prabu Natarajan

if the let let expecting we know, to our losses me Jeff, more headwinds for was year growth not clarify. we said, into delivered and of and to about Last in FY we going take us We're assumption let say, do So have a try me the end at the year to, FY about down responsive, similar year. the rhythm as cycle 'XX and normal X% Kind picture, -- of 'XX. first I'd from recompete big about half are it's we're the us. happy recompete last specifically, the loss we at QX that's year, X.X% X%

X% that business that So I would to which to is and at if guidance say recompetes year, to would rhythm, are into grow to X% our be continues expected to next if trend X% this QX back current expect we X%.

there. conversion we a heading depends revenue outlays it have also again, on, pipeline out year. robust But But frankly, next into of into

volume billion We in the last As $XX remarks, year we submitted about prepared of $X QX. in we combined. of in mentioned all submitted billion

on So is we pace that inflecting of about X/X I business. to say billion. to And are least would vast that, at new getting of $XX majority the to certainly

for that is is expectation while we're expecting are year, the for some organic wins into not ramp and of as we thesis rate growth to part business 'XX we here this provide something think head I our new on business to continue new So support 'XX. and relying

Unknown Analyst

you're differentiator? the sort quick submitting then it quantify of using in follow-up. a And a bids of . you're AI what maybe percentage as possible helpful. That's to Is as

Prabu Natarajan

that bids That's we're as are AI our certainly in door, are -- it don't AI oriented door operational that we that I question. as reviewing proposals a going for that out development inside oriented are we pipeline, likely are we're coming the a of are and to about here. the differentiator the handful tools organization comes good up. a business the the the into using know using talk There something more is bids when

Toni Townes-Whitley

we revenue It's actually of it Yes, Yes. say sort solution form classified capability in differentiating we we fairly that we have fact, our we both driving on, majority if do insert leveraging And that data in how you which is into got AI bids. our set, that capability about a bids factor [ terms that we're kinds are some again finding in ] bids. think That -- of our all say that measuring Koverse and usually for we bids of about an of pleased it to our just that largest the use is see then environments. top I our just capabilities. largest is and air data AI our is talk what those balanced in operational bid unique to those. capability are, is secure lightweight those AI. It's systematically It we we be platform certain of are would ability operational combined platform. And what to bids, that to of is make on our are in that is environments considerations. gapped for to our with that, in the sure to are

revenue And account. aspects, measuring and both so we're

Operator

comes today question Rumohr von final with Cowen. Our TD Cai from

Cai Von Rumohr

answered, partially in benefit MARPA quarter. This million had but the $XX you has been

XX that from to looks out, XX. went I DSOs the it So back if like

are reverse going So the to Do to decline. we cash going you for be expect you Or is our a -- have hill MARPA we flow of XX high be way X to to that the part out? target? to that relatively get year, the

Prabu Natarajan

the question. appreciate I cai,

operating and borrowings flow excludes MARPA cash cash guidance flow definition, free our for from Our facility. our by

operating that, and cash metrics. actually it our we're normalizing we're including in So for not

average look is in think of terms a very on we I basis. DSO quarterly it's measure collections hard to tend of to daily at sort volume. the DSO question, our What

or And look remained X our daily in very strong months, very, X and if QX. over at it's the it I course collections, strong very, average very last remained of the trend the at

cash collections DSO concerns adjusted bit. The went our free our cash that flow operating in rhythm the little on metric. we or no MARPA yes, full up So are around with and reality a not is . comfortable but pretty is year,

Operator

you Ladies and conference today's gentlemen, conclude does that does that call. with your for disconnect. session. now conclude Thank question-and-answer participation, And our and that, you may

Science Applications International (SAIC) 3 Jun 242025 Q1 Earnings call transcript