Q4 2023 Science Applications International Corp Earnings Call
Speaker 1: crises history. I want to thank all of our finance and business unit leaders who contributed to this and to our treasury team who led the effort.
On business development, we had $1 3 billion of net bookings in the fourth quarter, which contributed to a trailing 12 month book to bill of approximately onex.
Included in this was a $350 million extension on our department of State Vanguard program, which provides us visibility on that contract through our FY 'twenty, four and partially into our FY 'twenty five.
While our book to Bill of approximately one dot O is generally in line with our average over the prior year, our trailing three year book to Bill is over one <unk> and we continue to be confident around our ability to generate stronger rates of organic growth for two reasons, one our win rates on new business.
Pursuits as strong highlighted by the two new wins, which <unk> mentioned and to our Recompete win rates are returning to normalized levels in recent quarters.
As we annualize recompete loss headwinds in the quarters ahead, partially in our fiscal second quarter and fully in our fiscal third quarter.
Although we have key re competes to focus on in FY 'twenty four and beyond we are heartened by the ability of our organization to bounce back from these temporary setbacks importantly, the vanguard extension and the supply chain divestiture, certainly improve the near term risk profile of the company.
Prior to discussing our updated FY 'twenty for guidance I want to quickly summarize the financial impact from our two recent portfolio actions the divestitures of <unk>.
Our logistics and supply chain management business and the deconsolidation of our forfeiture support associates joint venture.
Our supply chain business consists of a portfolio of contracts, which contributed roughly $645 million to revenue in FY 'twenty, three approximately $35 million to $40 million of adjusted EBITDA and $30 million of free cash flow.
The second item relates to the deconsolidation of our joint venture forfeiture support associates, which SAIC acquired as part of the agility transaction.
Effective February four 2023, we amended the operating agreement such that SAIC no longer controls to joint venture and accordingly, we've begun accounting for the arrangement as an equity method investment.
The deconsolidation will reduce our FY 'twenty four revenue by approximately $150 million, our adjusted EBITDA by.
By roughly $3 million and our free cash flow by approximately $6 million.
For clarity the combined impact from these two transactions on our FY 'twenty for financials will be a $615 million reduction in revenue and $35 million reduction in adjusted EBITDA, resulting in a roughly 30 basis point benefit to year over year margins for <unk>.
FY 'twenty five we expect an additional 10 basis points of margin from our logistics and supply chain management divestiture.
Our updated FY 'twenty four guidance assumes approximately one quarter of financial contribution from that business for the year, we will provide updated guidance if needed based on the actual closing date of the transaction.
I would now like to discuss our updated and improved outlook for fiscal year 2024. After adjusting for the two items just mentioned and the impact of section 174 on cash taxes.
Given the number of changes compared to our prior guidance, we have provided additional detail and disclosures in our slide presentation to assist with modeling and to clarify the underlying strong performance from the go forward SAIC.
Our FY 'twenty for revenue guidance for a range of 7.05 billion to $7. Two zero billion reflects organic growth of roughly 3% at the midpoint.
After adjusting for the fewer working days in FY 'twenty for our supply chain sale and the deconsolidation of FSA.
On a reported basis, we expect roughly flat revenue in our fiscal first quarter with improving growth rates into F. <unk> and F. Three Q as we annualized contract transitions and benefit from new programs ramping up.
Our fiscal fourth quarter will be impacted by an estimated $150 million headwind from fewer working days, which will result in flat or modest growth on a GAAP basis with strong growth rates when adjusting for the working days.
Our FY 'twenty for margin guidance of nine 2% to nine 4% compares to our FY2023 margin of eight 8% and includes 20 basis points from margin improvement initiatives and an estimated 30 basis points benefit from our portfolio actions as <unk> mentioned we.
To see a multiyear opportunity to drive organic margin improvement.
Our FY 'twenty for EPS guidance for a range of $6 80 to $7 compares to our FY2023 EPS of $7 55.
As illustrated on slide 12, the midpoint of our guidance reflects roughly 60 of operational improvement offset by the divestiture of our supply chain business and below the line items, including a higher tax rate assumption and increased interest expense.
Note that the dilution associated with our supply chain divestiture is expected to be minimal overtime as we actively deploy the proceeds from the sale.
Our FY 'twenty for free cash flow guidance of $460 to $480 million compares to our prior guidance of $560 million and includes a $100 million impact associated with the net effect of higher section 174, and other cash tax payments and our supply chain divestiture.
This is offset by an approximately $10 million benefit to free cash flow from expected operational improvements.
Note that we provided an updated multi year free cash flow walk on slide 13 to reflect the effects of our supply chain sale and section 174 week.
We continue to see strong opportunities to increase free cash flow in the coming years, despite the expected impact from higher cash taxes.
Based on our updated intention to repurchase approximately $350 million to $400 million of shares in FY 'twenty four with a continued bias towards repurchases in FY 'twenty five in FY 'twenty six we have good visibility to strong free cash flow per share for our shareholders.
This outlook is supported by our recently announced $1 billion share repurchase program.
Even with this plan for increased repurchases, we will maintain sufficient capacity for capability focused M&A over the next few years importantly, our capital structure and debt maturity profile is in good shape with no meaningful maturities until October 2025.
We intend to provide a detailed multiyear financial outlook at our Investor Day next Tuesday to include revenue earnings free cash flow and capital deployment I very much look forward to seeing all of you there.
With that I will turn the call back to an ASIC.
As probably you mentioned and as you've seen we will be hosting our Investor day next week on April 11th.
While I wont preview any of the specific financial targets will provide that and I do want to quickly highlight three things that we're looking to accomplish during our time with you.
First to provide you with an improved understanding of who we are our key leaders in the markets and capabilities, we're investing in <unk>.
Second to provide multiyear financial targets and articulate a compelling investment case for SAIC shareholders.
And third to discuss our commitment to being an asset light technology integrator with a shareholder focused capital deployment strategy.
We're very excited about seeing all of you next week and thank you in advance for joining US we will now take your questions.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
And your first question comes from the line of Jason Gursky from Citi. Your line is open.
Hey, good morning, everybody.
Yes.
Just one question for you and probably one.
For you I'm just curious on the outlook.
For bookings for the year kind of what's in the pipeline and what you expect from a book to Bill this year and maybe some color on the cadence of that kind of weather. We're front end loaded back end loaded and kind of your expectations around.
The <unk>.
The behavior of the customer.
As we head into what is likely another.
And then probably for you it looks like.
On the margin guidance that you are kind of flat to up 20 basis points.
Pro forma basis I was wondering if you could just describe to US what you think will allow you to get to the top end of your range. Thanks for thanks for the time.
Great. Thanks, Jason So let me tackle your first one in a couple of ways. So.
Obviously all of US are closely watching what's happening in Washington, the budget impacts and certainly we expect ACR this year and could be even a bit longer than we've seen in the past that we continue to navigate that the good news is we have experienced in a lot of history in navigating a CR and we've worked very closely with our customer.
There is to do exactly that so on contract growth will be a key component of our sales strategy. This year as it has been the last couple of years and we continue to see great success in being able to drive on contract growth with our customers, it's probably even more important this year as we help our customers ensure that they can deliver on their mission objectives.
In the event that there isn't a long aided CR. So working very closely on that particular part of our bookings.
Bookings strategy and our sales strategy.
As it relates to bookings in general we don't tend to give guidance in that arena, but we would continue to expect strong bookings a good mix of recompete as well as new business and has probably mentioned in his prepared remarks, we have seen our recompete win rates get back to our more normalized very strong position and we continue to.
See the opportunity to drive that.
And then on the new business side as we continue to focus on our GTA areas of opportunity and building our pipeline in that arena and booking business in those areas. We continue to see good traction. There. So we don't we don't tend to provide guidance, but I'm comfortable going into the year with a portfolio a pipeline that will support the growth targets that we have out.
Mind.
Okay.
Thanks.
Thanks, Jason for the question.
Maybe before the margin question book to Bill the bookings do not reflect <unk>, which was recently rewarded to us.
Nor does it obviously includes <unk> cloud, which is still kind of early days as the protest process.
As we pointed over the course of FY2023 our new business win rate was trending very nicely actually higher than our historical averages for new business and the trend has continued to start FY 'twenty four.
Yes.
Exactly pointed out we don't offer guidance on book to Bill, but look for that number to be above one <unk>.
Comfortably in that sort of how we are targeting kind of long term trajectory for book to bill to ensure that we are consistently growing the business so kind of big picture.
On the margin rate guidance, I think youre exactly right I think.
Sort of on a truly a pro forma basis.
We are expecting the business to grind up about 20 basis points kind of year over year.
I think I'm very proud of kind of what we delivered last year and obviously the portfolio actions plus the other things that we've got in the Hopper here allow us to get comfortable on a 50 basis point increase to margin rate from 88 to 93 at the midpoint.
There are a couple of things that we very actively looked at.
<unk> focus on efficiency related improvements.
We have actively talked about our real estate footprint as a potential tailwind here as we continue to cycle out of facilities that are minimally used inside the organization. We are very actively looking at labor curves across the portfolio. So I'd say the short way of answering the question would be that we've got a few things that that we are continuing to grind.
Through insights organization that gives us comfort that we will obviously continue to move margin up on a multiyear basis and the realities at Q1.
We want to make sure we start the year appropriately placed on the risks and opportunity side and hopefully we continue to execute and improve margins as we Brian through the rest of the year.
Okay, great. Thanks.
Your next question comes from the line of Matt Akers from Wells Fargo. Your line is open.
Hey, good morning, guys. Thanks for the question.
I wanted to ask kind of on the portfolio.
After this.
Divestiture of the logistics business.
The pieces that maybe don't fit.
Or I guess on the flip side are there may be other other assets that you might need to sort of an actress GTA kind of mix strategy that you've talked about and maybe you could M&A be part of the cash flow story going forward.
Yes, Matt this is not that high.
Couple of things.
Is there other aspects of the portfolio that we're looking at from a divestiture. The short answer is no.
We continue to run and operate a very agile strategy process inside of SAIC. So we're always looking at how our current portfolio supports our long term objectives, and we continue to do that on a regular basis, but as we sit here today, we don't see anything that that bubbles up as it relates to that divestiture I wanted to hide.
A couple of things.
Very proud of what that portfolio has contributed to SAIC over the many years since it was acquired.
Into the SAIC portfolio, but as we sat here today and as we've been communicating with you as we focus on the GTA part of our strategy. It became not core to our long term strategy and so we look for the right time at the right price that all the rights for an opportunity to divest that and very very pleased.
With how the team has executed against that objective and very proud and pleased with where it's going to end up inside of ASR Federal where I know they will have a great ability to drive their business drive growth and be a great part of their long term strategy. So as we sit here today, we don't see anything else that falls into that category on the.
Flip side of your question do we see opportunities to acquire we're very well positioned at SAIC. We believe we've got the scale and the capacity to deliver and execute on the strategy that we've been communicating and the strategy and which will provide some some longer term financial guidance next week.
But there could be opportunities for us to do some technology technology based tuck ins as we did with the <unk> acquisition and so we continue to look at the opportunity space to accelerate our GTA strategy today, So that's where I would see potential acquisition again, we're very choosy very particular and very disciplined.
But as I look forward. If there is an opportunity similar to what we did with <unk> or an accelerant accelerate that part of our strategy. We would certainly take a hard look at that type of acquisition.
Okay, great. Thanks, and I guess, if I could do one more just if you could.
Remind us on Recompete.
And you mentioned Vanguard got extended anything else that we should watch for Florida.
Well certainly the Vanguard is one that's top of mind, it's everybody in the industry knows about it and it's a significant part of our portfolio. So very pleased with our team's focus as we continue to deliver to our critical.
<unk>.
The department of state, there and very proud of their keeping the eye on the ball even through the procurement process that is taking place so but as we look forward. There's always some elements of re compete in our portfolio and we keep a close eye on those and we just we've become over the course of the last couple of years much more disciplined much more focused on it.
Showing that we're delivering the right solution to the customer at the right price to protect those re competes that are so critical to our success.
Due to competitive reasons, we prefer not to touch or talk about too many of those in a public forum.
Yeah understood. Thank you.
Thank you.
Your next question comes from the line of Robert Connors from Stifel. Your line is open.
He probably will novel this is Rob on for birth are you guys able to hear me.
Yes, good morning, everyone.
Okay.
Great.
I was just wondering with regards to the margin expansion and.
Think before you guys had cited some.
Metrics around GTA versus core and.
Just trying to get a sense.
So.
Part of the margin expansion story going into 'twenty for how much is driven by GTA versus core.
Versus sort of on contract growth.
Sure Hey, Rob <unk> here I'll take that one.
So we've flagged over the last few quarters that we expect <unk> margins to be about 200 basis points higher than our core margins.
That was obviously before the divestiture of the supply chain business.
As well as the deconsolidation of the FSA joint venture.
Continue to see GTA margins trending achieved 2% higher than the core margins, which are now actually higher than where they used to be core margins are sitting right about the high eights now and therefore, we are continuing to see that opportunity on a multiyear basis.
We tend to think about what's inside of the pipeline.
And whether the pipeline is bias to higher levels of GTA and the answer is thats an important metric we track inside the company.
Pipeline is trending towards an biasing towards higher levels of GTA on a multiyear basis and then we want to make sure that we are differentiated in the things that we're going after so we are really truly focused on the quality of the things that we're chasing to ensure that we're not spraying the investment dollars across the portfolio. So.
Tuned into the depths of the pipeline, but also the quality of the things that we're going after so we continue to see I would say encouraged by the potential for margin expansion as we inflect the business towards higher levels of GTA over the next several years hopefully that was responsive.
Yes that was great. Thanks for that and then sort of as a follow up recently you guys have announced some hires.
Around the Navy and Army business units, just sort of wondering what your guys thinking is around that.
Well some of the holes are capabilities that were brought to the table by assuming the reason the recent business unit tires.
Yes, Nasik here, yes, thanks for thanks for noticing that.
One of the critical elements in our type of business. Our services business is the caliber and the talent and what the people bring to the table and so very proud of over the course of the last few years, we've been looking across the organization to do a few things where where it makes sense to bring in some new talent.
Aligned to our priorities aligned to the growth priorities the margin priorities and most importantly, our customer priorities and in many cases look for the opportunity to develop the talent that we have and efforts like rotations to get additional skills in the company and so as you've commented in those two portfolios, we have been able to accomplish.
Anything exactly on those fronts. So we've got some great talent that has been able to do some rotations and built out their skill sets and become even more valuable leaders for SAIC and we've had the opportunity to also bring in some talent from the outside that strengthen our team and make us a better company and also deliver stronger solutions too.
Our customers and so we take advantage of those opportunities when we can to ensure that we have the absolute best talent the best leadership in the industry.
Okay, great. Thanks for taking my questions.
Yes.
Sure. Thanks, Sarah.
And your next question comes from the line of Seth Sigman from Jpmorgan. Your line is open.
Hi, Good morning, this is rocco on for Seth.
Okay.
Good morning, guys.
The prior question, what sort of changes are driving the increased recompete win rate as well as the one weight on win rate on new businesses.
So this has been an area. We've we've shared some of this over the course of the last many quarters.
There's probably nothing that that motivate the team more than losing.
We had some losses.
Several quarters ago, you guys saw them, we felt them and certainly we try to take advantage of situations, where we can do better. So I would say that a couple of losses really kind of accelerated some things that we were already doing and of course, we'd love to win this is a team that loves to win so.
Across the board, we have been doing some goods soul searching on what we did well and what we didn't do so well have corrected those areas. We've talked about briefly on my last question the topic of talent and we've been able to bring in some great new talent to strengthen our sales and business development teams and we have been laser focused on on contract growth.
Helping our customers deliver on their missions.
Those are certainly some highlights but I will tell you. This is something that gets my attention on daily basis, probably was attention and the entire ELT really looking at one of those must wins inside the company and sharing that we're dedicating the resources.
To those areas of the opportunity or.
The pipeline that we have to win.
That's probably mentioned on the last question that he addressed is also being pretty focused and disciplined on what we pursue because.
There is so much opportunity there is so many rfps are so many opportunities for us to make a difference but to those to the extent that we can focus on our key accounts and the GTA areas in our core areas of focus.
Been a little bit more differentiated and how we focus our attention and our money. So I would say there's many aspects that are going into that it is it's certainly not a one and done we intend to strengthen our ability from this area to continue to drive great success at our Recompete win rates as well as our new business recognizing that we're not going to win everything we're not going to win every.
Recompete, but to those that are must win for us, we we aspire and we put our money where our mouth is and our talent where our mouth is to ensure that we have the best solution for the customer probably let anything you want to add to that that was fantastic.
Okay.
Touching on the <unk> portion how is the hiring environment changed over the last few months.
A couple of comments there so I would say on that turnover is obviously a part of that dynamic.
We are seeing turnover return to in a much more closely aligned to the pre pandemic levels and so very very pleased to see what was probably heightened issue for us as well as other companies over the course of the last couple of years.
Get back to what a more normalized environment. It is an area. We continue to focus on we want to be best in class when it comes to turnover as well as hiring on the hiring side certainly we.
There are some headwinds and <unk>.
In some areas, but I would say over the last few months. It has gotten what again, what I would consider more normalized and so there's pockets of the business. If you think about looking for special security clearances.
Tend to take us a little bit longer as it does everybody in the industry, but in general the hiring teams are hiring what we need to especially as we're looking to start up some of these new programs that are top of mind for us and we've put again tremendous focus on that as well as trying to mitigate the turnover risk where it makes sense. There is pockets of the business that are more critical than others. So.
Appreciate the question. It is it is a dynamic we're all watching especially the services business, but very pleased with how we sit today.
Great. Thank you.
Thank you.
Your next question comes from the line of Cai von <unk> from Cowen Your line is open.
Thank you very much so.
<unk>.
Thanks Vanguard.
Hello, Hello Nasdaq.
Vanguard, Brian you've got you've gotten the extension, but where are we in the.
The Recompete my understanding was that it was going to be split into five different sections and you could only bid on two and then secondly.
My understanding is this.
Has been an above average margin program should the profitability should generally be sustained if you win it and kind of when did those decisions come up that we should be looking for.
Hi, <unk>.
Comments, obviously this is a very very active procurement and it's going through its cycle.
As far as timing I.
I don't know that I can predict when its all going to happen others.
With such a big program going through a very different procurement cycle, then that obviously they had many years ago I think there's a lot of moving pieces. It is true it will be broken up into multiple pieces. Obviously SAIC will we will look to play a critical and important role in those aspects of the procurement, where we believe we can bring differentiation.
<unk> solutions.
And but.
Probably not going to comment on exactly which ones that we're going to pursue or not pursue for all the reasons that I know you appreciate as it relates to profitability I think that Thats something TBD.
It's not uncommon for re competes to put some profitability headwinds.
You do Recompete and it's certainly in the early days of execution, but again, we will look to areas, where we can differentiate we can set ourselves apart we can bring solutions to bear that best support the customer and best support our objectives as well so.
So that's probably all I'm going to say on Vanguard at this point, but there again I just want to reiterate and appreciate the team that's <unk>.
Delivering to this very critical mission, because it's easy to get.
Kind of get sidelined sometimes with all of the Recompete.
Process, that's happening, but our team is laser focused on delivering and very very proud of them.
Terrific and the last one.
Impressive takeaway wins in T cloud and <unk>, so as we look at kind of what you're bidding.
You have other significant takeaway bids and the outage because.
Until these two wins, we hadn't really seen this kind of aggressive takeaway effort on your part.
Okay.
So on those two we appreciate you I appreciate the comments very proud of how we sit today, but as probably mentioned theyre both still in their post award process, but very pleased with our ability to get this far and very very optimistic that we will clear the postal work process and have much more to share with you after that I will say that both of these are.
<unk> and our GTA areas of focus so continues to.
Really focus on that part of our strategy and complement and provide some proof points of that part of our strategy.
And I think it's.
All I will say is I believe the team has brought forward a very competitive and compelling solution for our customers.
As it relates to other things that our pipeline.
Certainly do see opportunities to continue to create position in the market in these areas that we choose to differentiate and we look forward to sharing more of those types of wins with you in the quarters to come.
Thank you and if I can add to that.
Now as I said, we've got a few other things in the pipeline on an annual basis for every one of the next three to four years that have the potential to deliver the more important thing that we tend to focus on is.
SAIC, how can we articulate the proposition that we bring to our customer on a takeaway opportunity. We all know takeaways are hard in this business because incumbent Recompete win rates are pretty high. So therefore, the Y SAIC question is a really critical part of the questions do you have for the team inside our gate review process and.
Making sure that we are tying the investment dollars to effectively and compelling the answering the question on a repeated basis looking at draft Rfps whats changed from the last time terms and conditions are these the things that we wanted to be bidding at.
What is the potential for a particular opportunity to be a game changer in terms of use of that customer that class of technology or a way to build out other parts of the pipeline. So those are all really important ingredients that we look to the teams to answer for us and again at the end of the day. This is good old fashion habits in hygiene.
Getting the getting the things positioned where the technologies that we're bringing truly get differentiated from our competitors, but not just that they also get scored as a differentiator to be business just good old fashion solid business development resulted in two big wins and hopefully a few more in the future.
Terrific. Thank you.
Okay.
Our next question comes from the line of Greg Konrad from Jefferies. Your line is open.
Good morning.
Hi, Good morning, maybe Greg.
Maybe just to start I mean, you called out record collection in January and just thinking about the.
The cash flow bridge working capital and earnings are the contributor over the next several years can you maybe just give some color around the opportunity to see in working capital whether its metrics or just how to think about that going forward.
Yes, I appreciate the question, Greg and let me try and take a stab at it.
We've got a chart in the earnings presentation that offers a multiyear view of cash flow and I think most importantly.
At about a three turn leverage for FY 'twenty four we're sitting at let's call. It around nine Bucks a free cash flow per share.
Our previous estimate was about 10 and.
And the difference is effectively $1 74, and the sale of our supply chain business and the deconsolidation of FSA and so that's sort of the multi year view.
We're a very strong believer that there is potential for working capital improvement. If you just looked at the Q4 cash to this business generated we reported free cash flow of $150 million round numbers that included $70 million on section 174.
Plus we had a payroll deferrals give back in Q4, when you add those two elements to the free cash flow, we generated in Q4 that trends to free cash flow in Q4 of about $275 million round numbers, so very strong cash flow generation in Q4 and as we.
About working capital on a multiyear basis look.
We're not going to take the foot off the gas pedal, we see opportunity to continue to improve DSO, we continue to see opportunities to improve GPO.
Inventory management supplier terms and conditions, our terms and conditions with our customer all of those present I believe solid opportunities for us to improve cash on a multiyear basis, obviously with a growing business free cash flow.
Working capital impacts are a little more of a pressure on our growing business than when you were roughly flat, but there are enough things in the hopper here that we will continue to allow us to offset the growth needs of.
The business and actually generate some improvement in working capital on a year over year basis. So we're pretty committed to kind of the plans, we put out there and youll see this team will really hard and finally, just as importantly.
Flow from ops is an important incentive comp metric for this team and therefore, you will continue to see us Brian through operating cash. So we can deliver better cash than most in our business and most importantly, as <unk> mentioned you will also see us make good choices with capital deployment element to this so we continue to be a differentiator.
Story in that space I believe.
And then just to follow up you gave a lot of helpful commentary around GTA bidding strategy and just some of the opportunities out there with the caveat that there is.
Market volatility near term just given what's going on in DC.
Any way to quantify maybe how the pipeline overall has moved just given some of these opportunities and bidding strategy and how youre kind of thinking about that when you talked about book to Bill before.
Yes, I appreciate the question look I think.
<unk> can I spend a fair amount of time looking at the quality of the pipeline, but also the depth of the pipeline in order to consistently grow this business, let's call. It 3% at the midpoint what is the quality that we want to see inside of the pipeline and are we targeting the kinds of work that would be relevant to our future three to five years from now to me that's an important vendor.
From that we draw inside the company to make sure that we are committed to growing this business.
Consistently profitably over time and so to me that's the way we think about it.
Internal dashboards that we.
We take a hard look at we share those obviously as part of our governance with our board and the reality is we're fixated almost on improving the quality of what we bid quality of the pipeline and making sure that this business. Our business today is chasing the kind of work that we want to be.
And in three or five year stock to me, that's a very important new longer term perspective of this and we're happy to do that because to us that's what brings balance between growth rates margin expansion and cash generation and we're truly trying to thread the needle there between those three metrics.
Thank you.
Sure.
Your next question comes from the line of Tobey Sommer from Truest Securities. Your line is open.
Thanks, So kind of building on some recent questions.
You reflect back in recent years.
Changes in incentive comp.
Have those changes.
Produce the desired result.
And going forward in the new fiscal year and beyond.
<unk>.
An opportunity to refine those and if so how to get sort of different outputs.
Sure.
Yes, Tobey not occur so.
I'd say the short answer is yes. So if we think about the changes we've made which is really to balance the incentive comp structure on the three components of the business that probably would just highlighted obviously revenue growth margin expansion and cash.
We believe that all three of those are necessary for us to achieve our long term strategy and to drive shareholder value creation, and when we drive shareholder value creation, we drive value for our employees, our senior leaders as well so.
So we believe it's the right mix is the right balance.
We don't want to drive revenue at the expense of profit and cash and we certainly don't want to drive profit at the expense of the other two so so I think it is very balanced our team understands it and it also helps drive decision, making inside the company and I will highlight that as you've heard from our this year's guidance and you'll hear next.
Weak, we look to drive improvement in all three of those dimensions.
The next several years and so having that backdrops reminds all of us of what's important to the company, what's what's going to ultimately drive shareholder value and I'm very pleased with.
It's kind of a simple model if you think about it just the balance but it does drive the right behavior of the right incentives and we're seeing that we're seeing that in the results that we're talking about today and we're seeing it as we as you'll see next week when we share our future guidance, probably a I know you did a lot of work to help us get to this point. So anything you want to add Tobey the only other thing I would add too.
<unk> commentary would be the underlying theme for every one of the changes we've made over the last two years.
Accountability and more skin in the team skin in the game for the leadership team.
So to me that's the permeating theme and you are truly seeing the team step up to the challenge and embrace having more risk into the insight inside the incentive comp system and continuing to drive better performance, we have made it.
Uncomfortable to be comfortable if thats the way to characterize it. So I think that was likely not to change over the next couple of years, you will continue to drive.
And internally a little more of a view that performance matters and we have to operate the business as owners of the business and what is the mindset that it takes to actually drive performance and Youll continue to see us pull the thread on it we're not going to comment specifically on the changes that are upcoming we don't want to get ahead of our board here, but but certainly you.
You'll see that as an animating theme and the changes we're making.
Thank you and as a follow up could you discuss the <unk>.
<unk> domain.
What youre seeing in opportunities maybe rank order.
Civil military and Intel as.
Attractive markets.
Yes, so space continues to be an important part of our portfolio.
As we sit here today, we're certainly saying.
Increased focus in the military aspect of space with I think with kind of the global unrest that exists. So we continue to see opportunities there, but really not at the expense of civil civil or Intel in many cases they are.
They're interwoven and the learnings and the solutions that we deliver in one aspect can be replicated in the other so so we look at it from a balanced perspective, working obviously closely with our customers on where the budget is going to go but very fortunate to have a position in all three of those domains and again, we do leverage the talent, we leveraged the solutions, where we can.
Can to drive differentiation.
As the ecosystem in the Rfps.
World stage demands it.
And your next question comes from the line of Louie Dipalma from William Blair. Your line is open.
Yeah.
NASDAQ probable and Joe Good morning, and happy Cherry Blossom season to all on the D. C area. Good morning.
Okay.
Hi, Larry.
Hi, good morning.
For NASDAQ SAIC has multiple branded solutions you have the ascend cloud solution and the 10 gene solution that is part of your <unk> data platform.
You just mentioned that.
<unk> has been an accelerant have these branded solutions gain traction.
In the market and should we expect more partnerships like what you did with data <unk> for Tien tsin.
Yes, so I'm thrilled that you've noticed and you recognize the brands.
Makes me happy, but the short answer is yes.
Really we have we've been very pleased with how we've been able to integrate those solutions.
And awesome, new beds and as we as we get a little more public on a couple of recent ones, maybe you'll hear a little bit more about that but.
But also being able to bring our solutions to existing customers in many cases looking for the opportunity to strengthen the position that we have and evolve the position that we have so very pleased with that they are differentiators for us in the market. So if you think about cloud.
We talk about the GTA area of cloud migration cloud management and.
Integral part of that and then turn churn obviously is a key part of our strategy as well. So we do have this as part of our strategy whether it's.
In most cases is partnering with best in class commercial technologies that exist and being able to bring the SAIC wrapper to bear being able to deploy it to domains in customers that we know and that combination is very powerful as you know we don't build a lot of our own solutions, but we can and we do.
But we really rely on the integration of best in class technology, and Thats, what youre seeing here. So thanks for recognizing and and that means a little bit of our work is going well, but we'll make sure that we highlight when we can some of these key new wins and the linkage to these types of solutions.
Thanks, Matt.
Vic and I have a follow up on the takeaways questions from Cai and Jay.
J P Morgan along with the $900 million one <unk>.
Program and the $1 $3 billion T cloud SAIC also.
<unk> had been part of the Verizon team that won the two for $1 billion.
Hey spend contra.
Contract is this <unk> contract in the same category of Ms.
<unk> reality as the former two contracts.
Yes.
Great we are.
Very proud to be part of the Verizon team that one.
And as I know you can appreciate it's going through the normal process. So I'm not going to say a great deal about it until we kind of get.
The all clear that goes through the process, but I will say that we're proud of what the team brought to bear.
We're able to bring some differentiation and strengthen the overall team.
We are sub so.
In general several tends to be.
Probably less on topline that a prime role, but we will play a critical role in the integral role in the delivery to the FAA.
Great. Thanks, everyone next week thanks, Sir.
Thanks, so much.
And there are no further questions. This concludes today's conference call. Thank you for your participation you may now disconnect.
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Okay.
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Okay.