Q1 2021 Science Applications International Corp Earnings Call
[music].
Good afternoon, and welcome to S.A. I see Q1 fiscal year 2021 earnings call. At this time I would like to turn the conference over to Shane can extra S.A. I see Vice President of Investor Relations. Please go ahead Sir.
Good afternoon, and thanks for joining I see I see each first quarter fiscal year 2021 earnings call. My name is shaking Astra Vice President of Investor Relations is joining me today to discuss our business and financial results are not the key FDIC, Chief Executive Officer, and Charlie Mathis, Our Chief Financial Officer.
Sure.
Today, we will discuss our results for the quarter ended may 1st 2020.
This afternoon, we issued our earnings release, which can be found that investors I see I see dotcom. We also find supplemental financial presentation slide three advice in conjunction with today's call well. How these documents. In addition to our form 10-Q, two we follow soon can be utilized in evaluating our results and outlook along with the information.
Provided on todays call.
Please note that we may make forward looking statements on today's call that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from statements made on this call I refer you to our SEC filings for a discussion of these risk, including the risk factor section of our annual report on form 10-K and corner.
Reports on form 10-Q. In addition, the statements represent our views as of today and subsequent events may cause our views to change you may elect to update the forward looking statements at some point in the future, but we specifically disclaim any obligation to do so.
In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information and supplemental financial presentation slides include reconciliations to the most comparable GAAP measures. It is now my pleasure Nazak team.
Thank you Shane and good afternoon, guys, Steve first quarter results and outlook I want to first take a moment to extend my hope that each of you is your loved ones are healthy and managing through the disruptions in these unprecedented times. Each event has been affected in some ways and it is my sincere wish that you and your families.
Well.
I intend to cover several items that I know are of interest to you, including the impact of Copel 19 on the business an update on our completed acquisition of Unisys Federal and a significant contract win in our Amcomp portfolio.
Before discussing these items, let me touch briefly on our first quarter results included about seven weeks of you. This is federal performance. Additionally, as our quarter ended on May 1st the quarter contained roughly the same seven weeks of coated 19 impact on larger timeframe and those with the March quarter end.
Based on the quarter and our outlook for the.
Actually I see has started fiscal year.
Note highlighted by revenue growth consistent profitability and healthy free cash flow.
This unprecedented business environment.
These results are attributable to the dedication of our approximately 26000 employees and I want to thank our entire team for their results. During this challenging time I'm. So proud of the men and women of FDIC.
Despite the modest impact of cobot 19 to first quarter revenues.
I see achieved.
Organic revenue growth of 3% as compared to the prior year quarter.
Adjusting for the cope with 19 impact organic and.
Free cash flow.
You see in our market and the best thing I see as well as continued confidence.
We leveraged plan.
As for the impact of Copas 19.
FDIC has been operating as an market.
We are fortunate the demand for our services is essentially unchanged.
Im extremely proud that we could provide these vital services to our customers and support our country in a time of global crisis.
See I see has experienced only a modest financial impact I would however, I'd like to talk about our focused response to this crisis in three areas employees customers and shareholders.
First and foremost we immediately prioritized our employees safety in welding.
In mid March we responded decisively and advised our employees where possible to.
There's also adjusted quickly and have been very accommodating and supportive allowing for remote work although.
Turning to work schedules or modified.
Set of our employees are currently working remotely while others work at Worksite following CDC and local guidelines.
We are working very hard to support our employees when they needed. Most we are advancing leave to employees, who need more time to care for themselves and family members. Many FDIC employees are donating their accrued leave to fellow employees and we are committed to providing all direct charge employees with paychex at least through August onest.
In addition, FDIC is setting up a charitable foundation to further support employees their families and our communities that are struggling due to cope with 19 related financial or health setbacks.
We've also increased our recruiting pace throughout this period as we continue to attract skilled talented people who are looking for the opportunity to work and thrive finished staple business environment.
You've often heard me talk about our deep commitment to our employees and FDIC his focus and priority in winning the war for talent.
These priorities have never been more truven today and continues to inform the decisions we make even more so in these trying times.
Second we are focused on ongoing high quality customer performance to ensure continued mission execution through this pandemic.
The level of customer demand for our core services is essentially unchanged.
Although we are seeing an increased interest in solutions that will help modernize the government and support the remote workforce at the future.
Agencies that are already looking ahead to.
We are here to support their digital transformation.
I'm extremely proud of the work our teams have done to help us government respond to the needs of our nation in our fellow Americans.
Virtually overnight.
As government employees typically pivoted to work from home FDIC provided virtual infrastructure engineering and help desk services to return agency employees to productivity.
And through our mobile ops rapid deployment kit, we are deploying IP and communications infrastructure for use by temporary hospitals and medical test facility, allowing them to become operational within 24 hours.
To assist our healthcare heroes in their life saving work, our data science and analytic services helped produce high quality predictive models for demand and supply of healthcare materials.
Third we have ensured the stability of the business and protected shareholder interests.
I'm proud that our strategy to align our company to missions critical to our nation's priorities have allowed us to continue operating our country in this time of crisis.
While we successfully navigate a myriad of operational challenge, we have managed to stable business first.
Shareholders.
We continue manage our cost profile reallocate resources, where it necessary great and continue our focus on business development and growth for the long term future of our company.
While navigating through the pandemic it should not be loss that during the first quarter FDIC successfully completed the acquisition of Unisys federal.
While less complicated to the integration of agility. The successful integration of uses federal is an absolute priority for me in the enterprise.
We are leveraging our previous integration experiencing success into this integration and we're off to a great start and are on track.
One of the first items that we accomplished was to home the intellectual property and technology driven offerings in our solutions and technology group and begin to leverage these assets in our business development efforts.
Key leaders are working in their new roles and are looking to capitalize on the new customer access they now have.
And say I see through the use us federal portfolio was recently awarded a $630 million new business patient development, It's a statement or two pads to support the us Air Force whether agency.
Yes.
Point of the value that Unisys Federal Act.
Charlie will soon share our business development results, but I'm thrilled that after we closed the first.
Quarter, we were awarded the first half Army aviation in missile command or.
The task order valued at $2.9 billion over a five year period of performance reached a cares about $300 million of and.
Contract revenue and provides 100 $250 million range.
This is the largest contract awarded the FDIC some separation in 2013 and I couldn't be more proud of the six.
Building off the deep relationship we have with our Amcomp customer our proposed systems Engineering solutions was recognized as the best opportunity for Amcomp to drive future digital transformation.
Yes.
The risks the Amcom recompete portfolio.
Successful award of several remaining task orders.
I'd like.
The development and financial results as.
Thank you Nick FDIC start.
Strong results, particularly in organic revenue growth free cash flow.
Actively navigating a variety of issues associated with Akovaz 19 print.
Three strategic and financially accretive units.
This is federal acquisition.
As Nonstick mentioned in her remarks weeks are little over half of the quarter of both cobot 19, and Unisys federal impact.
Filament results net bookings for the first quarter were approximately a $1.6 billion translating to a quarterly book to Bill.
Bill a 0.9.
While our first quarter book to Bill ratio is simply.
It does not fully represent the success of contract awards in the quarter. In addition to kind of approximately $4.6 billion hours of single award contracts, our largest quarterly amount never.
These contract awards do not immediately contribute to backlog for bookings.
Bookings for the next several years.
Of these single word IDH skews.
For for New business Awards this.
Included the new business wins on us.
Air Force EPS.
And defense Logistics agency efforts.
Since contract valued at $368 million to provide support services across the FDA workforce of more than 50000 people.
The single award idea Q also.
Recompetes over department of Justice asset forfeiture contract worth up to 1.3 billion hours and our FAA controller.
Training contract valued at six.
New business awards, and maintaining large recompetes.
The momentum continued in the second quarter.
Subsequent to the ended the quarter and his Nonstick mentioned.
FDIC was awarded the first in a series Amcomp portfolio Recompetes is $2.9 billion task order has been a notable and significant recompete for FDIC important work we're amcomp.
Customer through Unisys Federal were also awarded another new business cost $30 million.
Not only were contracts awards robust as well.
I see value of submitted proposals at the end of the first quarter was good.
$10.6 billion.
This improvement from a combination of strong quarter of internal submittals.
And the addition of Unisys federal ALS pending proposals.
At the end of the first quarter FDIC total contract backlog stood at approximately which included the addition of approximately $1.5 billion.
For some units is federal.
Let me now turn to the financial results for the quarter, our first quarter.
Revenues of approximately $1.8 billion reflect total revenue growth of 9%, which was a balanced mix of acquisitive and organic revenue growth, 3% year over year.
Growth in New business Awards first quarter revenues were negatively.
Impacted by approximately $33 million from coated 19th.
Largely due to canceled or delayed activities in our defense and intelligence business, a slowdown enters operational tempo and our mill.
Terry forces as well as in our excluding decoded 19 hit.
By 5%.
First quarter, adjusted EBITDA was $137 million and adjusted EBIT.
The margins were 7.8% as a percentage of revenues.
Cove at night.
Teen negatively impacted adjusted EBITDA margins by 8 million does this was primarily due to uncertain profit recovery Interstate labor cost.
We are grateful for the recognition of the care SEC gave in keeping our work.
Adjusted EBITDA excludes.
Foods $28 million of net acquisition and integration related costs in the quarter.
Net.
And income for the first quarter was $36 million and diluted earnings.
Excluding the $28 million of net acquisition and integration cost as well as amortization of intangibles are adjusted diluted earnings per share was in first quarter.
The $8 million uncoated 19 impact profitability equated to about 11 cents per share.
The effective tax rate for the quarter was approximately 18%.
Modestly below our 23% to 25%.
First quarter free cash.
Reflecting a quarter of strong collections and great start to Cisco.
Full year 2021, the free cash flow generation in this part the resiliency of the government services market and reinforces our confidence in our rapid delevering profile.
During the quarter and included in our free cash flow.
Our onetime acquisition and entertain million dollars in fine.
Free cash flow does not include the 200 million dollar impact from the accounts receivable purchase agreement that we initiated as part of the financing for the Unisys Federal acquisition.
A full reconciliation can be found in our press release and supplemental financial presentation slides.
No foreman days sales outstanding at the end.
To sell receivables were 60.
He days, we finished the quarter with the $6 million.
During first quarter, we dipped consisting of $23 million dividends in 16.
Billion dollars, a mandatory debt repaid voluntary debt repayments in the first quarter on an abundance of caution for potential coated 19.
The impacts however.
Ample liquidity and continued confidence in the full year, we recently made $125 million voluntary debt.
Did note that as announced in our press release today.
They are board of directors has approved a 37 cents a share payable.
On July 30, Onest to shareholders.
Now turning to our forward outlook.
Good work for how we viewed the fiscal 2001 prior to the emergence of decoded 19 pandemic, but did not provide formal guidance given the deep.
There is still uncertainty related to the course and effects of the pandemic, particularly around the timing of returning to secured facilities EFI a training and the operational tempo the department of defense, but given the strength and stability of SC I see in a market we wanted to provide.
That ends for fiscal year 2021.
Based on what we know today.
First fiscal year, 2021 and including.
We believe revenues will be between $7.1 billion and $7.3 billion, implying organic revenue growth between 1% and 4%.
This revenue range assumes a full year impact of approximately $150 million cobot 19.
Primarily associated with the same factors that affected the first quarter.
This estimated cobot 19 revenue impact equates about two points of organic revenue growth.
South Dakota, 19 impact we would be back at the organic revenue growth range of 3% to 6% framework that we provided in March.
With regards to profitability adjusted diluted earnings per share are expected to be between $5, an 80 cents and $6 of 10 cents.
This includes a negative billion dollars from coated 19.
Primarily due to the uncertain profit recovery.
And our defense and intelligence community business on ready state labor.
Impact we saw in the first quarter.
Turning to free cash flow, despite the revenue and profit impact.
Thanks from Cobot 19 weeks were greater than $500 million, an increase of 50 million to this includes the favorable.
Timing impact of 70 million.
We will tax payments afforded.
The impact of $20 million, some cobot 19 related reduced profitability.
And of course this excludes the 200 million dollar impact from sale of accounts receivable one.
Our free cash flow. This fiscal year is negatively impacted by approximately $40 million of expected tax adjusted Unisys federal transaction related outflows.
We are committed to the rapid Delevering plan that we had initially communication and Unisys Federal acquisition.
With our increased cash flow outlook for the year, we will be able to pay down debt somewhat faster than previously planned.
We are confident in meeting our targeted net leverage ratio of 3.0 times by the end of fiscal year 2022.
In conclusion, it with financial resilience as evidenced by revenue growth consistent profitability strong cash generation and exciting contract awards during one of the worst crisis. Our country's has faced we are tremendously fortunate and proud to continue to support our country was critical missions and.
Solutions during these challenging times.
And I'll get back to you for concluding remarks.
We have always been recognized as a market leader in our industry.
Now we can proudly say industry a few weeks ago FDIC was named to the prestigious Fortune 500 list for the first Tom.
With an initial making a 466, we had been recognized for trends.
Two years ago to the much larger and powerful business for US we are today.
And as we add the unisys federal portfolio and accelerate organic revenue growth.
I am confident that we will increase our position on the list next year.
With profitable revenue growth as an FDIC strategic priority, we have made incredible higher to further drive that momentum over the long term.
We are pleased to welcome DD health and started to the company as executive Vice President and Chief strategic growth Officer.
This new position was created to drive the company's organic growth and market leadership by aligning capabilities.
DD will lead FDIC corporate strategy and growth initiatives reporting directly to me.
Our solutions and technology group and our strategic development team will be key parts of Dts organization to strengthen the company's ability to bring innovative differentiated solutions to our customers and deliver digital transformation to the federal government.
As indicated through our results in commentary today, there is a great deal of momentum in our business.
I've, often said that Weve and FDIC are driven by mission, United by purpose and inspired by opportunity.
This crisis that we're all living with although incredibly tragic creates the opportunity for our purpose driven company to align and come together and support each other in partnership with our customers and as service to our nation.
I've never been more proud to be a leader of such an incredible team of men and women that lift as everyday with selflessness passion commitment and true purpose. Thank you to all my FDIC colleagues operator, we're now ready to take questions.
As a reminder to ask a question you'll need to press star one on your telephone once again that a star one on your telephone to ask a question.
And you have a question from the line of Sheila Kahyaoglu with Jefferies.
Hi, sorry, this is I've seen Greg on for CLL.
Good evening, Isaac hoping you could provide an update on Amcom you had some color in your opening commentary.
When the net clarities are how much upside to the total scope of the contract than just timing on some other awards within that contract.
Yes, this is not deck.
So as we reported were very thrilled that we won the park.
Certainly secures a significant portion of it.
Our revenue and de risks the year for us.
That news with you.
The Amcomp Recompete portfolio has multiple contracts that will go up for bid between now and the course of probably the next 12 to 18 months and.
And so we'll continue to examine and look at.
Those where we believe were the best suited to win and and them and in a great position to be very very competitive at this stage. This this win secures most of the revenue or a significant part of the revenue for the year and the rest of them. Then we'll start to fall into place from award cycle as we get later in this year.
Going into next.
Thanks, and then just one follow up.
Unit that.
You had this has when in the quarter I mean, how incremental was that the kind of the growth expectations you laid out when you acquired in the business and how do we kind of think about the ramp on that wins.
Yes, so that was actually and the plan we.
There was a number of new proposals in there.
We knew that going in we had a very good chance of winning knows when we did the due diligence and it came to fruition. So that's part of the expectation Unisys federal providing double digit revenue growth for the next couple of years. So yes that was factored in.
Your next question comes from the line of Cai von Rumohr.
Amar with Cowen and company.
Thank you very much so.
You explained the cash flow.
I guess your die and has been for 500 million next year.
Another 35 million headwind from deferred payroll tax is 500 million still kind of you still thinking about that.
Yes. Thanks.
First of all we're very happy to give.
Cash flow in the end that very difficult.
Times.
And like you said because of the people to defer payments.
And accelerate.
The free cash flow. This year, that's why we increased from the two 500 million, that's really a timing issue because.
You know previously to $550 million, we talked about with users don't roll.
We would have to pay that back so it's really timing related but between the two years, we were projecting a billion dollars of free cash flow and we're still projecting.
Billion dollars or free cash flow between the two years.
That's that's terrific and can you give us some color on the expected margin profile.
Over the year I guess.
And back to co with your margins flat year over year, how much of that was was unisys and how should we expect profile margins.
Yes.
Yes, thanks, Thanks Kai Esa.
My question, there and let me just out of Q.
Just just to be clear the margin outlook provided in our guidance. Excluding kobin is inline with the pre copas outlook provided in March.
Nothing has changed.
Previously, except thanks, Toby we can have we're expecting have a 25 million dollar profit impact most of that impact.
Hi, just related to non recoverable of the feet on the ready state workforce. So our margin are and additionally, I would say, there's our second half margins.
Historically been higher than our first half.
Sure quarters will contain full quarter of Unisys federal margin contribution this quarter you already had half.
And there are some.
Joe the synergies impact centered stronger in the second half two that we're still realizing.
So.
We have good line of sight to to the margins and again nothing has changed from our three copel outlook, except the fact, we have this 20 that help.
That's terrific one last one could you give us some color you mentioned the AMCOL, although recompetes or your bookings prospects for the year.
Hi, Yes, hi, this is not there so great question, obviously retiring the the significant recompetes that Charlie mentioned.
In his opening comments was put us in a very strong position going into the year in sort of like we're very pleased to be able to retire the risk of recompete as it related to FX say of 1.3 billion of the am Comet 2.9 in the Epay 650, so retiring those going into the year certainly de risks the year.
Those were the three most significant recompetes that had any type of material revenue impact to us for this year and so we have the normal cycle of Recompetes as you can imagine.
Nothing of that size or scale that would have that kind of impacts that we feel very good about going into and retiring that risk at this stage of the year.
Yes, Hi, don't don't overlook the $4.6 billion, a single award I'd accused in the quarter I mean that was the largest ever that the company's experience and in there's a lot of new business wins SSG 80, 950 billion units is federal the attach with $630 million.
Hey, everyone I FC 358 million. So it was a very robust.
Quarter of contract awards so.
I know those don't show up in a book to Bill, but that is a very suvs.
Actual number and I can continue to say that as we said before the momentum of Submittals and proposals were extremely busy and the momentum there continues on the BD efforts.
Thanks.
Your next question comes from the line of John Ramsay with Citigroup.
Hey, Thanks, everyone and good afternoon, Idera Bruins well.
Just a quick follow up Charlie on the free cash flow comment.
So you're still seeing $1 billion across the two years I understand the timing nature of the tax.
The tax the tax.
Holiday so to speak.
Just a little more specifics. So we saw 550 522 is 515 now going to be.
For 80 sort of losing the 70 million or with the 550 going to be enough way 22, and what does that $20 million lost a little bit play into that still seeing billion dollars across two years or essentially making up the 20 million elsewhere or it's kind of rounding error yet so.
Good question, Jonathan Let me, let me just do a little walk here to help you through this so our previous guidance was the 450 you got to add the 70 million from the cares act on that for deferred payroll tax right and then you subtract 20 million from the profit impact of Coke Thats how.
We get to the 500 million this year.
So next year.
Next year at White 22.
450 baseline and we also had the anti cash impact that we won't have and 22.
You get a revised base of around 490 million.
Free cash flow.
We don't anticipate having cobot headwinds next year, that's 20 million, we're having this year and next year also increased profit of 20 to 30 million gets you to around 540 million of which we have to pay 35 million back.
For payroll tax okay. So that's how you get 500 this year 500 next year and hopefully.
Will you.
We need to take this offline and go up to this again, but that's that's the kind of the walk and roll up.
Hello.
Yes, it does that sort of making it was really making sure that we're still at Thats 550 ish level.
For the Ipsit approaching 550 enough whats way to that that one space. So that helps a lot on thank you and then in terms of a lot of the new wins that you have other you've come across here and how do you think about the margin profile of those wins.
You talked you're still targeting 8% to 9% X cobot for this year.
Where do things go thereafter appreciate that Youre Unisys is accretive, but I don't know some of those things coming in better starting at new we're going to be dilutive.
Yes.
I am very.
Very.
And profile and.
Yes.
Our solutions oriented.
You look at some of our disclosures as.
As far as the.
Our on direct labor content.
So we have some very favorable trends happening at a macro level that gives us confidence and that.
Increased margin profile Theres always there's always pressures with the number of Recompetes that we had that.
We we have to deal with for sure but.
We've made we've made good progress and just because.
Going after more firm fixed price contracts.
Should help with the margins in the future.
Thank you.
Your next question comes from the line of Gavin Parsons with Goldman Sachs.
Hey, Thanks, good evening.
Hi, Kevin.
I wanted to ask on organic revenue growth rose, 3% in the quarter and your full year guide is one before but I think youd previously spoken about.
Growth accelerating throughout the year on Azure your Newark ramps up obviously, you know the cobot headwind looks like it might be more impactful going forward than it was this quarter, but on the upside you lock in Amcom and pads and you've got the 4.6 billion of single or any reason organic should decelerate from look.
Isn't that what might actually get you to the low end to that range like was there any pull forward in the quarter. Thanks.
No when you look out too.
Q2, we've got.
Probably more cove it related than we had in Q1, because that really started halfway through the quarter.
And.
A lot of it is is driven by operational Tim.
Hi chain business.
Well the stop movement order that was audit training exercise cancel.
Correct on that on the revenue.
Topline there so.
Most of this impacted big began is going to be in the first half of the year, we do see modest improvements in the second half of the year related to the posted impact.
How we're planning for this but but again as we said when we gave the guidance.
We don't actually no theres still uncertainty related to the pandemic, but this is the best that we know at this time.
Yes, so there's nothing abnormal in the 5% underlying exco good growth rate this quarter.
Yep.
Okay, Great and then.
Longer term, obviously, a lot of moving pieces you spoke about the told that uncertainty but.
You guys had a prior target of fiscal 20 to 22 organic growth of 3% was that something that you could still cheap.
So.
So Rick repeat that again, you're saying for our longer term view of 3%, yes, yes is that something could still achieve over fiscal 20 to 22.
Yes, we still feel confident in our in our growth profile. That's obviously a key priority of hours as we've shared with you and as.
Charlie and myself, we're seeing good momentum in the pipeline development.
We continue to see the opportunity to drive growth in the business.
Obviously, we are dealing with a headwind that is a bit on predictable, although we have good.
Visibility into at least the actions that are being taken right now with the customers, so still feel comfortable and confident with that projection.
Yeah.
Your next question comes from the line of Joseph Denardi with Stifel.
Thanks, Good evening.
Not that can you just talk a little bit about business. It sounds like it's primarily.
Please folks not being able to get where they need to be but is there anything on the award that's kind of factored into.
In terms of the areas of the business that are being impacts that are you having conversations with customers first.
In terms of like a timeline to get back to normal.
Or is that.
Still to come just trying to understand what when you think the business gets back to where you thought it would it so.
Thanks to the impact that we see is in areas that are so as an example, the intelligence community and all of US in this market the service.
And that is.
Okay.
Many of the individuals that serve that community work in skin and and so ensuring that we can protect the health and well.
Well being of our employees collectively customer might be able to respect to social distancing.
Creates an opportunity or challenge we worked in a method that allows us to protect that so think about shift work.
Think about spreading out a bit and so that's been one area of impact Fortunately the customers and in those about.
Serving these customers.
Fourth the mission other there.
Well being of our employees and so thats an exam.
And then as Charlie mentioned, there's just some tempo type thing. So one example is in the.
Before air traffic controllers, theres not a lot of.
Activity right now as it relate to.
The commercial flying and so.
So thats an area, where we've seen a slowdown that's another very good impact. So we've certainly seen those types of impacts.
For the most part though the work that we do is continues and it just continues.
But we do work hand in glove of the customer were on customer site run our site.
Because thats, where the work has to get done.
Employees and provides.
And the work environment that that allow but in some cases and many many cases were about 75% of our workforce.
Let's now is working remotely working from home and so the work that we can do we can effectively be able to support our customers on the work side those are some of the impacts.
As it relates to the timing of.
Stations with several customers.
And and we're all navigating this any sit here today so.
So in some cases were looking at the up the option to do work.
In in a combination of tend to be able to spread out a bit more so.
Coming to the table with some creative ideas customers.
In some case.
That allows the customer to to do the work in a different fashion as well and so.
In which I can certainly pretty.
Dick that we'll get back to normal I can in the industry side as well as the customer side looking at the op.
Opportunity too.
10, you to do the work that we do today as well as to be able to close the gap does but.
I think it will continue to be days and weeks.
Except possibly month in some cases.
Okay.
Thats very helpful.
And then I'm wondering just just on the agility side can you just talked about the revenue.
No as their.
Realized that.
And at this point as you guys look at it and you couldn't have one.
Independently or is that opportunities still in front of.
Yes, so couple of comments one.
Yes, we we fully integrated upon.
<unk>.
Oh, Yes, we're now in year two of that that's from what was in Jersey city or could have been.
And what was Sai C., we look at it collectively an example, I can.
Ample if one were coming together.
Obviously, we were able to secure that win and.
And and deliver at this juncture the other thing I'll tell you as we look at it probably broader.
Broader conversation so space as an example, where the two of US together are so much stronger in serving the space missions and neck.
Part of our pipeline and part of ours.
Strategy and so exactly what you're looking for but I can.
He is the result of acquisition are in the portfolio development.
Hit critical areas like the until.
That that we are seeing growth.
For the Edward Caso with Wells Fargo.
Hi, good evening thanks.
Just looking for some clarification here on the cobot 19 impact in the guidance.
That goes through September so.
Now that.
The arrangement.
Well go to Dan and by that point all the hub.
Adjusted work plans will collapse in the guide.
They are there.
That is basically the assumption. However, we do believe some of this will be Kerry.
Of which should.
Potentially take care Zack.
Could be extended or not but our our assumption.
In the first half of the year or till the time that the cures Act in.
And but we still have we believe is still have some co that impact till the end of the year.
Not covered.
And I guess the question.
Historically.
Thanks.
Generally it's been reluctant to do things do things off client sites.
Now that we of course, what up into the.
Business back to business as usual clients are started saying, but a lessons learned.
[laughter] any.
In that.
Thats too so.
That's a great question.
I've actually had that specific conversations with several customers over the course of the last 12 weeks.
Sure so.
There is an appreciation and look at different ways to deliver work.
I have contemplated being able to due to the types of work that they do.
In a remote fashion and.
Hand in glove with them, helping create some of the technology based solution.
And we can in fact be asked successful in a different delivery model than what they are accustomed to has.
If there is a silver lining maybe that's one of them of this such challenging way in which we're working so I do believe that that as we go forward, it's an opportunity for us to look at different.
Different bases around the U.S. being able to bring in talent from from across the country and in some cases be able to to reduce the cost or improved profitability as it relates to different talent mix. So I got the great question, it's something that we.
We are talking about and I do believe could have sustained.
I have a sustained.
Rhythm going forward.
Okay.
Your next question comes from the line up.
Hi, Thanks, and good evening.
I Wonder if you could comment a little bit about your thoughts on kind of longer term demand environment post coated.
Are there certain areas of the budget are you thinking in target that maybe sort of higher priorities.
Thank you sort of.
Good offer.
Had to think about positioning that portfolio at the best.
Go forward.
Great question.
So we're very fortunate to have a diversified portfolio across the customers, we serve as well as what we do and and I think that that that continues to serve us well and we'll continue to serve as well in the months in years to calm as I think about.
The potential of where where we could.
As as we lean forward certainly there has been an appreciation.
That the digital transformation the IP monetization.
Leverage of cloud Tech.
And all of that that enables.
Organizations to work in a different environment has certainly become more more important collectively across the federal landscape. So I think that that's an area of opportunity, we're very very well positioned to continue to serve customers in that regard and and bring solutions to bear that allow.
While them to meet some of those objective so that would be one example.
You could see increased.
Increased interest increased funding to to be able to solve some of the challenges that exist in some more traditional IP.
Back office, and so that would certainly be an example.
Cyber.
Cyber fees and being able to manage the cyber security infrastructure in a in a distributed model certainly as an area, that's getting a lot of attention and focus as well.
Got it thanks, and then I guess, if you could update us on I guess on working capital that you had talked in the past though.
Maybe trying to improve dsos.
How much room as sort of still left so from that.
Yes.
Good question, Matt. So we're very pleased with the Dsos of.
60 days, so that we had.
In the quarter and that was also reflective in the fact that people working from home collecting and billing and going through that cycle. So.
Actually very pleased with that so we're looking to maintain that kind of level of dsos.
For the remainder of the year and entities does create jobs just adjusting to this environment. So.
Yes, I would say that are up that's our target looking forward.
Got it okay. Thanks.
Thank you.
Your next question comes from the line of Tobey Sommer with some tough.
Thank you.
I wanted ask question about the.
It will word I'd accused 50%, that's new business, what sort of the art can the cadence of that new business ramping in coming quarters.
What do you will be think at this stage.
Well I think.
So some of the single word I'd accuse have started.
FSC 80 for example Air Force CDIY, yes.
And those are those are ramping up now a little bit slower than we had initially hoped for particularly with the supply chain as GE 80, just because the operational tempo.
I would say that.
We're on track as before.
Separately.
Related.
On these ramps and I know theres a lot of focus on our team to transition quickly to get these ramped up and.
No just very pleased that we're in this position that we are to how having one these analysis transitioning and and booking revenue so.
Good question.
Okay.
And then my follow up is.
Based on your cash flow outlook.
When.
We will your leverage be at a level that you could reassess your capital deployment priorities.
And then specifically.
Could you kind of speak to the Companys exposure in the public health arena, and whether that would be an area of focus.
I'll take the first one on this one.
So we did make to 125 million voluntary get payment last week.
Based on our outlook, we believe we can make another 200 million of voluntary debt payments. If we so choose to and we'll evaluate that as we go through the year. So that would be a total of 325 million of voluntary debt combined with the 75 million of mandatory.
So it's about 75 million more of debt repayments than we initially planned.
And that would take our leverage down too.
Quite a bit of an improvement.
Given the fact that when we close Unisys federal where for 4.4 times and this would be you know.
Really cutting a lot of that often that.
3637 type arranged by then.
Year, and then and then we feel very confident and getting that three to the Threeo times net debt to EBITDA going into fiscal 2000, too. So I would say that we're focused on continuing to repay debt. This year and we'll reevaluate next year as far as capital deployment any changes there.
Yeah. This is not X. I'll touch briefly on the at the public sector health market certainly.
It's getting a lot of attention as we sit here today.
Over the course of the last couple of years as I've talked about the priorities, if if and when we would look external that was one of the areas that I gave it as an example, we do not have a significant portfolio serving that part of our market and it has been and continues to be something of interest now. The good news is that we do have solutions that we can take.
To that market today, and so if you think about public sector health and their need to modernize their systems there need to go through digital transformation. Those solutions that we have can serve that market and do serve that market and we'll continue to do so but as it relates to the deep domain expertise.
That would be something as we look forward in the months in years to calm ads, that's an opportunity to not just organically, but potentially inorganically look to be able to compliment that.
Thank you.
Uh huh.
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And your next question comes from the line of Louie Dipalma with William Blair.
Now as a child lynching good afternoon.
And do it.
No Magic you referenced your end Jilly based assets Im last week's space actually completed an exciting mission as part of Nasa's commercial crew program, you're obviously, one of the largest providers for NASA and the space for US what are your thoughts about the future budget plans for the space for us.
NASA and the Moon mission do you think that there's bi partisan support there.
I certainly can't can't begin to predict what could happen with with whether it's a new administration or even the existing administration down the road I can tell you that we're very fortunate to be to serve that customer and to serve these critical missions and our team takes great pride in it we bring a tremendous amount of upgrade engineering.
And and related IP work to support the mission. So at this juncture, they're getting good support at this juncture, they're getting yet.
Being award afforded the budget to help serve their missions and we're very very happy part of that.
Thanks, Andrew Charles.
Charles can you quantify the and the amount of integration and restructuring costs for the Unisys acquisition that remain for the rest of the year.
Well, it's pretty small.
Can't.
Let's see.
Less than 10 million.
In July.
Yes.
Yes, Unisys federal right Unisys, yes, yes.
Let me get back to you on that one because I am not exactly.
Sure I want to give you a.
Wrong number here, we have some acquisition integration related to steal too and Joe the a very small part of that and then we have unisys federal.
Which.
A large part of that was taken acquisition integration in the first quarter. So.
We would like to follow up with you and get back to you more specifically on that so.
But the way this is saying I think in total for the year between the two efforts at six still remains $60 million for the full year and we'll get this breakout.
Great. Thanks, Thanks, Jane Thanks, Thanks, everybody.
Thank you.
You have another question from the line of Jon Raviv with Citigroup.
Hi, John Thanks, so much for today, thanks for taking the follow up here I'm, just I get that that's the one earlier nozick now there.
I need any sort of perspective on creating that role for didi and bring your on him. It's a pretty notable higher so one of the long career at a competitor evolved in a group driving a lot of change in that other company.
What are your plans fresh I know you've previously talked about.
You know some tibbets that you guys looking to make deals what do you. What are you looking for out of this right at this particular change.
Oh, great question, so as that as we.
As we looked at.
The priorities the company the strategy the company I've I've really reinforce the you know one of my top three priorities is to pivot us to profitable organic growth.
Then in working with the leadership team, we decided that having somebody who you know we all wakeup everyday focused on it but who really look across the enterprise across the customer groups across the solutions. The technology group to really help us strengthen our position and strengthen our resolve and focused on growth.
We'll be a terrific position and a and money well spent 10 so.
So as I think about it it really is to continue to strengthen the leadership team and bring on somebody light duty and we're thrilled that that she joined us to really help us strengthen arc strengthen our commitments strengthen our resolve bring us some best practices as we continue our journey on driving growth.
You have another question on financing on the hope.
Sorry, a you have another question from the line of Cai von Rumohr with Cowen and company.
Thanks, So much. So you have 33 million of DNA in the first quarter flat year over year, even though you had seven weeks of.
This is how comment wasn't higher and where should we model DNA for the full year.
Yes so.
Let me too if you just some.
General guidance on.
On this so depreciation amortization for the full years about 175 million.
Hundred 35 million is amortization of intangibles $35 million depreciation.
Yes.
Okay, and how confident wasn't higher in the first quarter given that you had.
Yes as for half of the.
Half of the two quarter.
Yeah I'm.
I'm not I'm not sure.
Why that is I'd have to get back to you on that Chi.
Let me give you a couple of other just kind of guidance assumptions here why are we have the the tax rate, we're assuming for the full years, 23% to 25%.
We're also assuming interest expense of 31 $32 million per quarter.
And we're assuming in that guidance.
Share count on average of.
58.7 million.
Year end diluted shares.
And I will get back to you as far as the depreciation amortization on Q1.
Your final question comes from the line of Gavin Parsons with Goldman Sachs.
Hi, guys. Thanks for the follow up.
Do you expect am common tends to be protested and is there any risk to your guidance at scope. If those go into an extended protest cycle like you experienced last year. Thanks.
Good news is now and I'm happy to report there, they're both out of their protests cycle.
And there are currently no other questions I would now like to turn the call back to Shane with <unk> with any closing remarks.
Thank you very much for your participation in FDIC fees first quarter fiscal year 2021 earnings call. This concludes the call me. Thank you for your continued interest in FDIC.
Ladies and gentlemen, this concludes todays conference call. Thank you for participating you may now disconnect.
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