Q4 2024 Science Applications International Corp Earnings Call

After the Speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star one on your telephone keypad.

I will now turn the conference over to Joseph de Nardi.

IC Senior Vice President Investor Relations Treasurer. Please go ahead.

Good morning, and thank you for joining Saic's fourth quarter fiscal year 2024 earnings call. My name is Joe de Nardi Senior Vice President of Investor Relations and Treasurer, and joining me today to discuss our business and financial results are Tony Townes, Whitley, Our Chief Executive Officer, and <unk> <unk>.

Our Chief Financial Officer.

Today, we will discuss our results for the fourth quarter of fiscal year 2024 that ended February <unk> 2024.

Earlier. This morning, we issued our earnings release, which can be found at investors Dot SAIC Dot Com, where you will also find supplemental financial presentation slides to be utilized in conjunction with today's call.

A copy of management's prepared remarks. These documents in addition to our Form 10-K to be filed later today should be utilized in evaluating our results and outlook along with information provided on today's 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 IRA.

I refer you to our SEC filings for a discussion of these risks, including the risk factors section of our annual report on Form 10-K.

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

We 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 for investors and both our press release and supplemental financial presentation slides.

Reconciliations to the most comparable GAAP measures.

The non-GAAP measures should be considered in addition to and not a substitute for financial measures in accordance with GAAP.

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

Thank you Joe and good morning to everyone on our call. My prepared remarks. This morning will focus on a review of our fourth quarter and full year results and an update on the implementation of our corporate strategy, probably will then discuss our results and outlook in more detail before we take your questions.

I'm proud of the financial performance, we delivered in the quarter as our focus on providing value to customers and a favorable funding environment contributed to our strong revenue growth.

For the full year, we increased pro forma revenue by over 7%, which highlights the potential of this business to deliver market level rates of profitable growth.

While our margin rate and earnings per share were impacted primarily by higher incentive compensation accruals in the quarter. Excluding this we were able to increase EBITDA margins by 50 basis points over last year and free cash flow per share grew by 11%, indicating that our underlying execution remains very strong.

We continue to manage the business in fiscal year, 'twenty five to maximize EBITDA and free cash flow, while accelerating key investments and portfolio Differentiators market proven business development talent and upscaling initiatives to drive growth and long term shareholder value.

Relative to the framework, we provided last year at our 2023 Investor Day, we now expect fiscal year 'twenty five adjusted EBITDA and free cash flow to be higher despite a roughly 20 basis point incremental investment to drive profitable growth.

We expect this investment to generate returns in fiscal year, 'twenty six with more meaningful impact in fiscal year 2007 and beyond <unk>.

Importantly, we will align incentives appropriately to drive these outcomes, which I will discuss in more detail shortly.

Now I will provide an update on the execution of our corporate strategy since we last spoke.

As I discussed on our third quarter earnings call. The leadership team's focus is on four strategic pivots related to our solutions portfolio, our go to market, our culture and our brand.

The ultimate goal of these four pivotal is to create a more differentiated more efficient and more valuable SAIC in the future by becoming the Premier mission systems integrator for the government market with a specific focus on five national imperatives.

<unk> undersea dominant order of the future.

Citizen experience all domain war fighting and next generation space.

All four pivots will contribute to our success in these areas and we have made strong progress against each in recent months.

On brand, we recently hired a new Chief Communications Officer, and Saic's first Chief marketing officer with a focus on ensuring that saic's capabilities are known across our markets and our solutions are effectively package our success with our customers.

On our portfolio pivot.

We've completed the reorganization of our innovation factory under our new Chief Innovation Officer.

With a focus on scaling and systematically deploying our technical Differentiators and secure multi cloud digital engineering operational AI secure data analytics and system of systems integration.

To support this we will be increasing our investment in the innovation factory in fiscal year 'twenty five while implementing new performance metrics to ensure we generate our targeted return on invested capital.

This is important because we've recognized a correlation between higher wind probability and year over year growth in accounts that leverage our innovation factory solutions.

Our new enterprise operating model outlines required contract delivery processes bid rubrics and performance metrics at the account and business group levels to drive greater accountability and adherence to our strategy.

Our expectation is that this investment will deliver increased value to our customer programs and our pipeline opportunities, resulting in sustained organic growth, increasing EBITDA and free cash flow in the coming years.

On go to market our focus to this point has been both organizational and operational.

Organizationally, we centralized our business development and capture functions and reported them into our senior Vice President who directly reports to the executive leadership team.

In addition, we are increasing investment in fiscal year, 'twenty, five and our business development teams to upgrade talent where appropriate.

Operationally, we've implemented a new enterprise model to leverage our innovation factory investments and further standardize our business development and delivery functions across the company.

In practice, we expect the result of these efforts to be earlier and more consistent engagement with our customers a longer procurement lifecycle allocating business development dollars disproportionately to our high growth markets and driving accountability to ensure that pipeline to identified is pipeline quad.

Wifi and bid.

On culture I spent much of my time over the last several months meeting with senior government customers and our employees.

Strength of Saic's commitment to our customer is evident across the enterprise and provides a valuable base off which we can build.

Consistent with the investments, we're making in our innovation factory and business development functions, our pivot around culture will align with positioning SAIC to deliver profitable differentiated growth over the long term.

We will focus on adapting our one enterprise mindset to encourage the sharing of best practices and talent and cross functional coordination to bring the best of SAIC to our customers.

We will aspire to accelerate our growth taking ownership of outcomes driving accountability for results and providing differentiated rewards for outsized achievement.

Relative to our incentive design, we recently recommended to our board of directors that we increase the relative share of psus to <unk> and our equity compensation to encourage our senior leaders to drive our portfolio towards more sustainable and profitable growth vectors. We've additionally, broaden the use of total.

The return as a metric to ensure we are in centene results that meet or exceed the performance of our peer group.

As I started with the driving force behind these pivots is to position SAIC to maximize profitable organic growth in the future.

We have continued to see a lower than targeted recompete win rate in recent years impacting our book to Bill.

We've been able to offset this with good new business capture and capitalizing on our large backlog with continued on contract growth. It is important that we improve our retention of existing work.

While our efforts to standardize best practices across the enterprise, we will improve our overall business development and capture functions. We are specifically focused on improving two outcomes first retaining our current business by improving our recompete win rate and second increasing our yearly bid rate with more.

Strategic bid selection to drive higher book to Bill over one data.

For our current programs, we are implementing new process, and rigor and driving innovation and value progression to additional as a service offerings. We are expanding the scope of our customer satisfaction process to gain broader and more objective feedback throughout program delivery.

Our improved enterprise processes will allow us to monitor inform and influence our bid selection to ensure our portfolio remains on strategy and in our growth vectors.

Given the longer procurement cycle inherent in our business, we expect to realize the full impact of our efforts to impact business development results over the next 12 to 18 months.

While <unk> will discuss our updated guidance in greater detail our expectation for fiscal year 'twenty five pro forma revenue growth is approximately two 5%.

Now this is notably off of a higher base than previously contemplated and it assumes a still healthy but more normalized funding environment.

We expect to deliver EBITDA of approximately $690 million with free cash flow per share of approximately $10, which excludes any potential benefit from changes to section 174 legislation.

We're off to a strong start and I am encouraged by the enthusiasm and cohesion IC across my New leadership team, we have momentum building off three peak performance quarters. The best financial results SAIC has delivered over the last decade I look forward to seeing many of you in New York on April 11th for our 2010.

Given the longer procurement cycle inherent in our business, we expect to realize the full impact of our efforts to impact business development results over the next 12 to 18 months.

For Investor Day, we plan to provide updated multi year financial targets greater detail into our growth strategy, including a showcase of technical differentiators from our innovation factory.

While <unk> will discuss our updated guidance in greater detail our expectation for fiscal year 'twenty five pro forma revenue growth is approximately two 5%.

Now this is notably off of a higher base than previously contemplated and it assumes a still healthy but more normalized funding environment.

I'll now turn the call over to <unk> to discuss our financial results and improved outlook.

Thank you Tony and good morning to everyone on the call My remarks will focus on our financial results in the quarter and updated guidance. We've reported strong fiscal fourth quarter results with revenue of $1 74 billion, an increase of nearly 8% on a pro forma basis revenue growth in the quarter was <unk>.

We expect to deliver EBITDA of approximately $690 million with free cash flow per share of approximately $10, which excludes any potential benefit from changes to section 174 legislation.

We're off to a strong start and I am encouraged by the enthusiasm and cohesion.

Driven by ramp up on new and existing programs the timing of certain materials revenue and favorable labor and funding trends, which helped offset expected headwinds from program transitions adjusted EBITA margin in the quarter was seven 3% and was impacted by higher incentive compensation accrual.

Across my New leadership team, we have momentum building off three peak performance quarters. The best financial results SAIC has delivered over the last decade.

Look forward to seeing many of you in New York on April 11th for our 2020 for Investor Day.

We plan to provide updated multi year financial targets greater detail into our growth strategy, including a showcase of technical differentiators from our innovation factory.

Given our strong financial performance for the year higher incentive compensation accruals impacted margins by approximately 30 basis points with a nine 3% margin adjusting for this in line with our guidance and reflecting continued strong program performance.

Speaker Change: I'll now turn the call over to <unk> to discuss our financial results and improved outlook.

Speaker Change: Thank you Tony and good morning to everyone on the call My remarks will focus on our financial results in the quarter and updated guidance. We've reported strong fiscal fourth quarter results with revenue of $1 74 billion, an increase of nearly 8% on a pro forma basis.

Adjusted diluted earnings per share of $1 43 was in line with expectations.

Full year adjusted diluted earnings per share of $7 88.

Was ahead of prior guidance when adjusting for the aforementioned incentive compensation accrual, which reduced EPS by 34.

Speaker Change: Revenue growth in the quarter was driven by ramp up on new and existing programs the timing of certain materials revenue and favorable labor and funding trends, which helped offset expected headwinds from program transitions.

Due to our stronger performance in the fourth quarter and a lower tax rate.

Free cash flow adjusted for transaction fees and other costs related to the sale of our supply chain business was $119 million in the quarter and $486 million for the year as we continue to see good momentum and maintaining our industry leading rate of cash conversion as.

Speaker Change: Adjusted EBITDA margin in the quarter was seven 3% and was impacted by higher incentive compensation accrual given our strong financial performance for the year higher incentive compensation accruals impacted margins by approximately 30 basis points with a nine 3% margin adjusting.

As Tony indicated we delivered an 11% increase in free cash flow per share in FY 'twenty for representing our third straight year of double digit pro forma cash flow improvement.

Speaker Change: For this in line with our guidance and reflecting continued strong program performance.

Speaker Change: Adjusted diluted earnings per share of $1 43 was in line with expectations.

Net bookings of $1 4 billion resulted in a book to bill of approximately <unk> eight in the quarter and roughly <unk> nine on a trailing 12 month basis.

Full year adjusted diluted earnings per share of $7 88.

Speaker Change: Was ahead of prior guidance when adjusting for the aforementioned incentive compensation accrual, which reduced EPS by 34.

Subsequent to the closer to the quarter, we were awarded several new bookings, including a $444 million contract with the U S. Space Force, we remain encouraged by a healthy and growing pipeline of opportunities in the coming years and expect proposal submission volume to increase by at least 25% in FY 'twenty five.

Speaker Change: Due to our stronger performance in the fourth quarter and a lower tax rate.

Speaker Change: Free cash flow adjusted for transaction fees and other costs related to the sale of our supply chain business was $119 million in the quarter and $486 million for the year as we continue to see good momentum in maintaining our industry leading rate of cash conversion.

Consistent with the strategic focus to improve our overall process, including the quality and volume of our submissions.

Our pipeline has a healthy mix of larger needle moving opportunities and strategic pursuits in areas, such as a BMS <unk> and data analytics and operational AI, which will leverage our enterprise solutions.

Speaker Change: As Tony indicated we delivered an 11% increase in free cash flow per share in FY 'twenty for representing our third straight year of double digit pro forma cash flow improvement.

Tony mentioned, our long term focus is on building a more differentiated pipeline and capture a greater share of markets, which valued differentiated and more profitable outcome based work.

Speaker Change: Net bookings of $1 4 billion resulted in a book to bill of approximately <unk> eight in the quarter and roughly <unk> nine on a trailing 12 month basis.

I'll now discuss our updated guidance for fiscal years 2025, and 2026, we are increasing our fiscal year 'twenty five revenue guidance to a range of 735 billion to seven 5 billion, which represents pro forma organic growth of approximately two 5% at the midpoint.

Speaker Change: Subsequent to the closer to the quarter, we were awarded several new bookings, including a $444 million contract with the U S space Force.

Speaker Change: We remain encouraged by a healthy and growing pipeline of opportunities in the coming years and expect proposal submission volume to increase by at least 25% in FY 'twenty five consistent with the strategic focus to improve our overall process, including the quality and volume of our submissions.

This outlook assumes a more typical outlay environment than we saw in FY 'twenty four and incorporates our expectation for an approximately 4% to 5% headwind from contract transitions spread ratably over the course of the year.

Speaker Change: Our pipeline has a healthy mix of larger needle moving opportunities and strategic pursuits in areas, such us abms, <unk> and data analytics and operational AI, which will leverage our enterprise solutions as Tony mentioned, our long term focus is on building a more differentiated pipeline and capture.

Consistent with our comments on the last earnings call, we expect roughly flat to low single digit organic growth in the first half with higher growth rates in the second half of FY 'twenty five as we ramp on the strength of our new business wins and see more funding clarity for our customers.

Speaker Change: A greater share of markets, which valued differentiator and more profitable outcome based work.

We expect FY 'twenty five adjusted EBITDA of approximately $690 million at the midpoint of our guidance is increased revenue and underlying margin improvement are partially offset by an approximately 20 basis points investment predominantly in our innovation factory and business development function as Tony discussed.

Speaker Change: I'll now discuss our updated guidance for fiscal years 2025, and 2026, we are increasing our fiscal year 'twenty five revenue guidance to a range of 735 billion to seven 5 billion, which represents pro forma organic growth of approximately two 5% at the midpoint.

FY 'twenty five adjusted earnings per share is expected in a range of $8 to $8 20, and assumes an effective tax rate of approximately 23% and further benefits from our share repurchase program.

Speaker Change: This outlook assumes a more typical outlay environment than we saw in FY 'twenty four and incorporates our expectation for an approximately 4% to 5% headwind from contract transitions spread ratably over the course of the year.

I would note that every 1% of our tax rate impacts earnings per share by approximately <unk> 10.

Speaker Change: Consistent with our comments on the last earnings call, we expect roughly flat to low single digit organic growth in the first half with higher growth rates in the second half of FY 'twenty five as we ramp on the strength of our new business wins and see more funding clarity for our customers.

We are increasing guidance for fiscal year, 'twenty five free cash flow by $10 million to a range of $490 million to $510 million with increased earnings and working capital efficiency, helping to offset higher cash taxes and cash outflows related to FY 'twenty for incentive compensation.

Speaker Change: We expect FY 'twenty five adjusted EBITDA of approximately $690 million at the midpoint of our guidance is increased revenue and underlying margin improvement are partially offset by an approximately 20 basis points investments predominantly in our innovation factory and business development function as Tony discussed.

<unk>.

We expect to deliver approximately $10 and free cash flow per share in FY 'twenty five and approximately 11 in free cash flow per share in FY 'twenty six.

Our outlook for free cash flow does not assume any favorable change related to section 174 legislation.

Speaker Change: FY 'twenty five adjusted earnings per share is expected in a range of $8 to $8 20, and assumes an effective tax rate of approximately 23% and further benefits from our share repurchase program.

Should this occur we would expect a recovery of approximately $125 million from FY2023 in FY 'twenty for payments already made and our fiscal years 25 to 27 free cash flow should improve by approximately $45 million $20 million and $5 million respectively.

Speaker Change: I would note that every 1% of our tax rate impacts earnings per share by approximately <unk> 10.

Speaker Change: We are increasing guidance for fiscal year, 'twenty five free cash flow by $10 million to a range of $490 million to $510 million with increased earnings and working capital efficiency, helping to offset higher cash taxes and cash outflows related to FY 'twenty for incentive compensation.

Actively.

Please note that if a section 174 change is enacted our FY 'twenty five effective tax rate could be higher than our guidance of approximately 23%.

In fiscal year 2024, we deployed $357 million to repurchase three 3 million shares reducing our weighted average share count by a bit over 4% year over year.

Speaker Change: We expect to deliver approximately $10 and free cash flow per share in FY 'twenty five and approximately 11 in free cash flow per share in FY 'twenty six.

Over the past three years, we've repurchased over 8 million shares representing about 15% of our total outstanding shares at prices, representing a substantial discount to our intrinsic value.

Speaker Change: Our outlook for free cash flow does not assume any favorable change related to section 174 legislation.

Speaker Change: Should this occur we would expect a recovery of approximately $125 million from FY2023 in FY 'twenty for payments already made and our fiscal years 25 to 27 free cash flow should improve by approximately $45 million $20 million and $5 million.

We accomplished this while reaching our target net debt over EBITDA leverage of approximately three <unk>.

As reflected on slide 11, our solid cash generation gives us options for additional value creation.

For fiscal years 2025, and 26 at this time, we expect to allocate approximately $600 million to $650 million in total through our repurchase program, while reducing leverage to roughly $2 five X and remain opportunistic given ongoing budgetary or market dislocations.

Speaker Change: <unk>.

Speaker Change: Please note that if a section 174 change is enacted our FY 'twenty five effective tax rate could be higher than our guidance of approximately 23%.

Speaker Change: In fiscal year 2024, we deployed $357 million to repurchase three 3 million shares reducing our weighted average share count by a bit over 4% year over year.

In an uncertain election year.

Our perspective on the M&A market is largely unchanged as we prioritize capability focused acquisitions that can differentiate our portfolio and accelerate the execution of our long term strategic roadmap.

Speaker Change: Over the past three years, we've repurchased over 8 million shares representing about 15% of our total outstanding shares at prices, representing a substantial discount to our intrinsic value.

We believe our bias towards organic initiatives with a discerning eye towards M&A is the correct posture for our long term shareholders Lastly, I want to thank our treasury team for their outstanding work and managing the seven year extension of our term loan B, which strengthens our maturity profile and provides us with an.

Speaker Change: We accomplished this while reaching our target net debt over EBITDA leverage of approximately three <unk>.

Speaker Change: As reflected on slide 11, our solid cash generation gives us options for additional value creation.

Speaker Change: For fiscal years 2025, and 26 at this time, we expect to allocate approximately $600 million to $650 million in total through our repurchase program, while reducing leverage to roughly two five X and remain opportunistic given ongoing budgetary or market dislocations.

<unk> rate compared to our prior term loan b. The transaction represented the tightest seven year loan pricing on a non investment grade rated facility in over two years more importantly, it has generated additional flexibility with respect to our near term debt maturities and this positioned us to take.

Speaker Change: In an uncertain election here.

<unk> of potentially lower interest rates in the future.

Speaker Change: Our perspective on the M&A market is largely unchanged as we prioritize capability focused acquisitions that can differentiate our portfolio and accelerate the execution of our long term strategic roadmap.

I am proud of the financial performance, we delivered in FY 'twenty, four and I'm confident that we can sustain our ability to deliver value for shareholders over the long term.

Speaker Change: We believe our bias towards organic initiatives with a discerning eye towards M&A is the correct posture for our long term shareholders Lastly, I want to thank our treasury team for their outstanding work and managing the seven year extension of our term loan B, which strengthens our maturity profile and provides us with an <unk>.

I will now turn the call over to the operator to begin Q&A.

Thank you if you have a question. Please press star one on your telephone keypad. If you have queued up and want to withdraw your question simply press Star one again.

Your first question comes from the line of Seth Sigman with J P. Morgan Your line is open.

Speaker Change: Crude rate compared to our prior term loan b the.

Speaker Change: <unk> represented the tightest seven year loan pricing on a non investment grade rated facility in over two years more importantly, it has generated additional flexibility with respect to our near term debt maturities.

Hey, thanks, very much and good morning.

Thanks Seth.

I guess a.

A couple questions maybe.

The investments.

Speaker Change: Positioned us to take advantage of potentially lower interest rates in the future.

You are making I guess you guys have talked a lot over time about having kind of a.

Speaker Change: I am proud of the financial performance, we delivered in FY 'twenty, four and I'm confident that we can sustain our ability to deliver value for shareholders over the long term.

Our capital light business model I know this is this a capex or sorry, this R&D or other investments that you're making it's not it's not capex, but.

Speaker Change: Now turn the call over to the operator to begin Q&A.

Can you talk about kind of the investments that you're making and how we think about that as being being different are. These these are investments in people that you are making at hiring people or in developing new technologies and how do we think about what these these investments are.

Speaker Change: Thank you if you have a question. Please press star one on your telephone keypad. If you have queued up and want to withdraw your question simply press Star one again.

Hey, good morning, Seth It's Tony let me start off with that and probably we will add some color. So we have three flavors of investment that we're making in the business first around our innovation factory, we mentioned that we've got some differentiators across our enterprise, particularly around AI, our secure data or digital.

Your first question comes from the line of Seth Sigman with J P. Morgan Your line is open.

Seth Michael Seifman: Hey, thanks, very much and good morning.

Seth Michael Seifman: Thanks, Ed.

Seth Michael Seifman: I guess.

Seth Michael Seifman: A couple questions maybe.

Engineering the investments, we're making are primarily in people, but also tools and some capabilities that we are looking to expand to ensure that those differentiators when systematically deployed across all our programs can can be integrated into our customer environment. So we've been able to identify.

Seth Michael Seifman: <unk>.

Seth Michael Seifman: The investments.

Seth Michael Seifman: That you are making I guess you guys have talked a lot over time about having kind of.

Seth Michael Seifman: Our capital light business model I know this is this a capex I'm, sorry, that's R&D or other investments that you're making it's not it's not capex.

Seth Michael Seifman: But can you talk about kind of the investments that youre, making and how we think about that as being being different are. These these are investments in people that you are making in hiring people or in developing new technologies and how do we think about what is these investments are.

We're making roughly.

$15 million and investments in this space around the differentiator is that we're going to add more color to on Investor day to give some demos on how those are actually deployed in the customer environment second areas in our business development. Obviously, we have been focused heavily on not only our ability to bid.

Seth Michael Seifman: Hey, good morning, Seth It's Tony let me start off with that and probably will add some color. So we have three flavors of investment that we're making in the business first around our innovation factory, we mentioned that we've got some differentiators across our enterprise, particularly around AI our secure data.

Higher volume bidding, but also high quality strategic bid capability for our pipeline as well as our recompete our ability to retain the current business that we have and we have challenges in both of those areas. So we are investing in upgrading of talent in key areas and we're making a significant significant investment in business development, what we call cap.

Seth Michael Seifman: Our digital engineering the investments, we're making are primarily in people, but also tools and some capabilities that we are looking to expand to ensure that those differentiators when systematically deployed across all our programs can can be integrated into our customer environment. So we've been able to identify.

Sure and solution architects, which is all around ensuring that we create more value for our customers in existing programs and that we can bid in a systematic standardized way with higher talent and greater talent in certain areas and then the third investment is around Upskilling and thats, our ability to deliver our capabilities at our customer sites.

Seth Michael Seifman: These were making roughly.

Seth Michael Seifman: $15 million and investments in this space around the differentiator is that we're going to add more color to on Investor day to give some demos on how those are actually deployed in the customer environment second areas in our business development. Obviously, we have been focused heavily on not only our ability to bid.

With individuals that have to evolve with the talent and the expectation that our customers have in terms of the solutions that we're implementing those are the three fundamental investments that we're making in the business and we expect over the next 12 to 18 months that those investments will shore up our bid capability our win rates are recompete rates.

Seth Michael Seifman: Higher volume bidding, but also high quality strategic bid capability for our pipeline as well as our recompete our ability to retain the current business that we have and we have challenges in both of those areas. So we are investing in upgrading the talent in key areas and we're making a significant significant investment in business development, what we call caps.

And overall our customer satisfaction.

Anything else you'd like to add thank you Tony Good morning, Seth I. Appreciate the question I'm going to zoom out a little bit and it really big picture success, we're investing about 20 basis points of margin. That's the $15 million that Tony referred to we have a chart in our earnings package that shows that operationally, we're poised to deliver mid <unk> margins.

Seth Michael Seifman: <unk> and solution architect team, which is all around ensuring that we create more value for our customers in existing programs and that we can bid in a systematic standardized way with higher talent and greater talent in certain areas and then the third investment is around Upskilling and that's our ability to deliver our capabilities at our customer sites.

Nine 5% consistent with the guidance that we've previously provided and the $15 million of Tony refers to effectively brings the midpoint of the new guide down to about $9 three which is what we're communicating this morning.

With individuals that have to evolve with the talent and the expectation that our customers have in terms of the solutions that we're implementing so those are the three fundamental investments that we're making in the business and we expect over the next 12 to 18 months that those investments will shore up our bid capability our win rates are recompete rates.

You picked up on something else that I think is really important to emphasize this operating expense primarily.

We are not expecting our capital light model to change fundamentally as a result of these investments we are committed to remaining capital light and I think just as important as making the investment is to ensure that we're generating an adequate return on the investment and therefore, we are laser focused on delivering good ROIC on the <unk>.

Seth Michael Seifman: And overall our customer satisfaction.

Speaker Change: Anything else you'd like to add thank you Tony Good morning, Seth I. Appreciate the question I'm going to zoom out a little bit and it really big picture Seth we're investing about 20 basis points of margin. That's the $15 million of Tony referred to we have a chart in our earnings package that shows that operationally, we're poised to deliver mid <unk> margins.

<unk>, we are making right now and as Tony said were.

18 to 24 months out and we but we are dialed into.

Ensuring that we're delivering an appropriate return for the investments, we're making hopefully that was responsive.

Speaker Change: <unk>, 5% consistent with the guidance that we previously provided and the $15 million of Tony refers to effectively brings the midpoint of the new guide down to about $9 three which is what we're communicating this morning.

Yes.

Absolutely absolutely and then.

And as a follow up.

Maybe.

If you could talk a little bit I mean, I assume the answer is yes, but if you could maybe tell us a little bit about why I assume increasing.

Speaker Change: I think you picked up on something else that I think is really important to emphasize this is operating expense, primarily we are not expecting our capital light model to change fundamentally as a result of these investments we are committed to remaining capital light and I think just as important as making the investment is to ensure that we're gen.

Right I assume you feel like you can both increase the bit rate, but also the things that you want to be focused on in terms of priority areas and value added solutions as it means I think you ought to be somewhat discriminating about what you bid on and so the idea of being being discriminating in bidding and high higher VAT.

Speaker Change: <unk>, an adequate return on the investment and therefore, we are laser focused on delivering good ROIC on the investments we are making right now and as Tony said were.

Areas.

With also increasing that bid right, how you kind of square square that circle.

You want to start there, yes, I'll take that one first Seth look I think we're taking a longer term view of the pipeline to ensure that the pipeline reflects the priority areas. We've got out there.

Speaker Change: 18 to 24 months out and we are dialed into.

Speaker Change: Ensuring that we're delivering an appropriate return for the investments, we're making hopefully that was responsive.

As you probably observed we're holding our topline multiyear guide at that 2% to 4% range recognizing that we are not chasing calories, but we're chasing vitamins our incentive comp is focused on delivering more EBITDA from the business as well as generating cash out of the EBITDA we're delivering.

Speaker Change: Yes.

Speaker Change: Absolutely absolutely and then.

Speaker Change: Yes.

Speaker Change: And as a follow up.

Speaker Change: Okay.

Speaker Change: If you could talk a little bit I mean, I assume the answer is yes, but if you could maybe tell us a little bit about why I assume increasing.

Speaker Change: Right I assume you feel like you can both increase the bit rate, but also the things that you want to be focused on in terms of priority areas and value added solutions as a mainstay.

Therefore, I think think of this as the right kind of top line for the business that will differentiate this portfolio and one of the benefits of having a more differentiated portfolio downstream is that you actually improve your incumbency win rates because it has less gladiatorial in that part of the market.

Speaker Change: I think you ought to be somewhat discriminating about what you bid on and so the idea of being being discriminating in bidding and higher higher value areas.

Speaker Change: With also increasing the big rate, how you kind of square square that circle.

And candidly that's why I think we're trying to get the equation calibrated between.

Speaker Change: Let me start I'll take that one first Seth look I think we're taking a longer term view of the pipeline to ensure that the pipeline reflects the priority areas. We've got out there.

Improving growth rates, which I think is a must but also making sure that we're delivering good value for the topline Tony No I think thats exactly on point, where <unk> and acknowledging that we spent some time, putting a strategy together to identify specific growth vectors. So when we talk about big rate, we want to make sure that we talk about strategic bid selection.

Speaker Change: As you probably observed we're holding our topline multiyear guide at that 2% to 4% range recognizing that we are not chasing calories, but we're chasing vitamins our incentive comp is focused on delivering more EBITDA from the business as well as generating cash out of the EBITDA we're delivering.

Because thats also as probably was talked about correlated with our ability to win a recompete is also about bidding the right work. The first time work that is in fact differentiating that we bring value.

Therefore, I think think of this as the right kind of top line for the business that will differentiate this portfolio and one of the benefits of having a more differentiated portfolio downstream is that you actually improve your incumbency win rates because it has less gladiatorial in that part of the market.

From the first day of a contract that has led and so we are looking at and we quite frankly historically our bid rates are bid volume has dropped over the last couple of years, we want to return back to a higher bid volume and not do that at the expense of a win rate. So we're doing both at the same time and that will be why the investments we're making now we believe will pay off over the next two.

And candidly that's why I think we're trying to get the equation calibrated between.

12 to 18 months.

Great. Thank you very much great. Thank you. Thank you Sir.

Speaker Change: Improving growth rates, which I think is a must but also making sure that we're delivering good value for the topline Tony No I think thats exactly on point, where <unk> and acknowledging that we spent some time, putting a strategy together to identify specific growth vectors. So when we talk about big rate, we want to make sure that we talk about strategic bid selection.

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

Hey, good morning, everybody. Thanks for taking the question.

Morning, Jason Tony I was wondering if you could just.

<unk> was well chime in if he has got some thoughts as well.

Tony: Because thats also as probably was talked about correlated with our ability to win a recompete is also about bidding the right work. The first time work that is in fact differentiating that we bring value.

Just the postmortems that you've done on.

The recompete losses in <unk>.

Has driven those losses have you seen that kind of a common theme just trying to understand that this is a pricing issue do we have performance issues to give just generally speaking from a broad brushed broke perspective.

Tony: From the first day of a contract that is left and so we are looking at and we quite frankly historically our bid rate our bid volume has dropped over the last couple of years, we want to return back to a higher bid volume and not do that at the expense of a win rate. So we're doing both at the same time and that will be why the investments we're making now we believe will pay off over the next.

What's the lesson learned here.

Yes look there are probably about three areas that we have we have learned going across the various losses, specifically and where it's tied to our investments we want to make sure that we differentiate on our technical proposals when we submit in our solutions and the differentiated.

Tony: 12 to 18 months.

Speaker Change: Great. Thank you very much great. Thank you. Thank you Sir.

Speaker Change: Your next question comes from the line of Jason Gursky with Citi. Your line is open.

<unk> offerings that we have and so we know that we have gotten feedback at times that are technical volumes. Our proposals have not been evaluated as positively and so one area that we have got to make sure is that our solution differentiation is not only clear, but also well presented in the proposals in this.

Jason Gursky: Hey, good morning, everybody. Thanks for taking the question.

Jason Gursky: Jason Tony I was wondering if you could just.

Jason Gursky: In Peru, as well chime in if you've got some thoughts as well.

Jason Gursky: Just the postmortems that you've done on.

Jason Gursky: The Recompete losses, what has driven those losses have you seen that kind of a common theme just trying to understand that this is a pricing issue do we have performance issues because of just generally speaking from a broad brush broke perspective.

Systematically part of all things that we bid across our factory.

The second area in terms of is making sure that our processes are standard across and that means that how we run bid and capture has to be a systematic standardized in the DNA no compromise approach at the enterprise level, which is why I centralized and put under one.

Jason Gursky: What's the lesson learned here.

Jason Gursky: Yes look there are probably about three areas that we have we have learned going across the various losses, specifically and where and it's tied to our investments we want to make sure that we differentiate.

One humane quite frankly.

With direct reporting entity executive team, how we run those with the appropriate forward metrics not only backward looking for the appropriate forward looking performance metrics to really look at the health of our pipeline and understand look I think the last pieces as we've heard we've expanded our our understanding of our feedback throughout.

On our technical proposals when we submit in our solutions and the differentiated offerings that we have and so we we know that we have gotten feedback at times.

Jason Gursky: Our technical volumes, our proposals have not been evaluated as positively and so one area that we have got to make sure is that our solution differentiation is not only clear, but also well presented in the proposals and are systematically part of all things that we bid across our factory the.

A program when we are delivering a program you think of a recompete that you win the Recompete day, one delivering a contract.

And we've got to make sure are listening mechanisms are in place across multiple customer sets that we that we deliver to this generally not one set of customers and so we're expanding that to make sure that we're getting the feedback throughout and that we are training our teams on the ground to add value in every aspect of the.

Jason Gursky: The second area in terms of is making sure that our processes are standard across and that means that how we run bidding capture has to be a systematic standardized in the DNA no compromise approach at the enterprise level, which is why I centralized and put under one.

Track delivery value into as a service offerings value into integrated solutions, increasing capabilities that we're adding all throughout the contract that is how you ensure that you are not only the provider for the current business, but you are the provider for the future business. So we've learned in those three areas and Thats, where we are.

Jason Gursky: One humane quite frankly.

Jason Gursky: With direct reporting into the executive team, how we run those with the appropriate forward metrics not only backward looking but the appropriate forward looking performance metrics to really look at the health of our pipeline and understand look I think the last pieces as we've heard we've expanded our our understanding of our feedback through.

And are placing some bets and having some mitigation PREPA or any other thoughts there that was great Tony.

<unk> the only thing I would add if you looked at our new business win rates there.

Jason Gursky: A program when we are delivering a program you think of a recompete that you win the Recompete day, one delivering a contract.

We are higher than we would expect them to be and the thing that animates that higher win rate is how much more differentiated we are when we are bidding new work.

Jason Gursky: And we've got to make sure are listening mechanisms are in place across multiple customer sets that we that we deliver to this generally not one set of customers and so we're expanding that to make sure that we're getting the feedback throughout and that we are training our teams on the ground to add value in every aspect of the con.

Some of that is natural in an organization with a ton of excitement around new business captures I think it's the how do we replicate that performance across the Recompete spectrum I think that is sort of where we have to have less of an opt in culture around best practices, we are making.

Jason Gursky: Track delivery value into as a service offerings value into integrated solutions, increasing capabilities that we're adding all throughout the contract that is how you ensure that you are not only the provider for the current business, but you are the provider for the future business. So we've learned in those three areas and Thats, where we are.

A number of changes to bid thresholds expectations for profit expectations for differentiation, while we are executing and while we are delivering programs and we do sincerely believe that all of those things will result in higher recompete win rates over time, but recognize that we are doing some really good.

Speaker Change: Placing some bets and having some mitigation is PREPA or any other thoughts there that was great Tony Jason here. The only thing I would add if you looked at our new business win rates.

Things on the new business front, it's a question of replicating that across the entire portfolio of programs we have.

Jason: They are higher than we would expect them to be and the thing that animates that higher win rate is how much more differentiated we are when we are bidding new work.

Okay, Great and then just as a follow on I just want to make sure.

I understand that you've got more focus here on.

Jason: Some of that is natural and an organization with a ton of excitement around new business capture I think it's the.

Re competes and having a better win rate on that youre, increasing the pipeline by 25%.

Jason: How do we replicate that performance across the Recompete spectrum I think that is sort of where we have to have less of an opt in culture around best practices.

And yet we're still looking at 2% to 4% growth coming out the back end of things it seems to me.

Hey, This is maybe just a general comment you can you can comment on that.

Jason: We are making a number of changes to bid thresholds expectations for profit expectations for differentiation, while we are executing and while we are delivering programs and we do sincerely believe that all of those things will result in higher recompete win rates over time, but recognize that we are doing.

The risk would be that that 2% to 4% moves higher over time, given the kind of youre successful in these first two things. So first I just want to confirm that.

And then secondly, if you if you are successful with this pipeline youre growing at 25%.

And your win rates end up being as good or better than they have been historically.

Jason: Some really good things on the new business front, it's a question of replicating that across the entire portfolio of programs we have.

Do you have the people in place the ability to scale can you grow faster, we'll you'll be able to actually fulfill all of that demand should it come in at.

Speaker Change: Okay, Great and then just as a follow on I just want to make sure.

Speaker Change: I understand that you've got more focus here on.

And maybe that's an indication that you are kind of you've got some underutilized people around today and we ought to see some really nice opex leverage that comes with it. So just kind of generally you win all of this then what happens how do you how do you execute on it what happens to margins when you do thanks.

Speaker Change: On re competes and having a better win rate on that youre, increasing the pipeline by 25%.

Speaker Change: And yet we're still looking at 2% to 4% growth coming out the back end of things it seems to me.

Speaker Change: Is this maybe just a general comment you can you can comment on that.

Yes, great questions, Jason I'll take the first part and deferred or Tony on the second one on the first part look I think.

Speaker Change: The risk would be that that 2% to 4% moves higher over time, given the color of your successful in these first two things. So first I just want to confirm that.

The expectation is that the investments we are making will translate to better returns in the out years and obviously as you probably notice we provided FY 'twenty five in FY 'twenty six guide we've held back on providing FY 'twenty seven Thats, obviously, a topic of discussion at our Investor day in April, but I think it.

And then secondly, if you if you are successful with this pipeline youre growing at 25%.

Speaker Change: And your win rates end up being as good or better than they have been historically.

Do you have the people in place the ability to scale can you grow fast where you'll be able to actually fulfill all of that demand should it come in in.

It seems to make sense to assume that we would expect a higher level of <unk>.

EBITDA growth and cash growth from the investments. We're making then then there is currently the 25% comment that you referred to that was really a improvement in the submission number as opposed to improvement in the pipeline number our pipeline.

Speaker Change: And maybe that's an indication that youre kind of you've got some underutilized people around today and we ought to see some really nice opex leverage that comes with it. So just kind of generally you win all of this then what happens how do you how do you execute on it what happens to margins when you do thanks.

Is as you think about kind of a TCE here of the pipeline we are in that circa 80% to $100 billion.

But we are explicitly talking about submission rates improving by at least 25% in FY 'twenty five relative to FY 'twenty four and so to me I just want to make sure. We're clear on exactly what we're improving but I think it's a fair comment that you should expect our EBITDA and cash performance to improve relative to what <unk>.

Speaker Change: Yeah, great questions, Jason I'll take the first part and defer to Tony on the second one on the first part look I think.

Tony Jason: The expectation is that the investments we are making will translate to better returns in the out years and obviously as you probably noticed we provided FY 'twenty five in FY 'twenty six guide we held back on providing FY 'twenty seven that's obviously a topic of discussion at our Investor day in April, but I think.

<unk> got out there in the long term.

Jason Let me take the second part of that question in terms of the human capital supply meeting the demand increased demand as a function of of <unk>.

Tony Jason: It seems to make sense to assume that we would expect a higher level of EBITDA growth and cash growth from the investments. We're making then then there is currently the 25% comment that you referred to that was really a improvement in the submission number as opposed to improvement in the pipeline number our pipeline.

Prosecuting all of this new this new pipeline in a positive way for SAIC. So really there's sort of two responses. There first in terms of talent acquisition SAIC relative to the market.

Isn't a leadership position on talent acquisition days to fill in our ability to fill open requisitions. In fact, it was underpinning some of our upwards performance in Q4 was a positive labor market and our ability to execute very well on talent acquisition and quite frankly, the lowest attrition we've had in the company over the last couple of years so in that regard.

Tony Jason: Is as you think about kind of a TCE here off the pipeline, we're in that circa 80% to 100 billion.

Tony Jason: But we are explicitly talking about submission rates improving by at least 25% in FY 'twenty five relative to FY 'twenty four and so to me I just want to make sure. We're clear on exactly what we're improving but I think it's fair comment that you should expect our EBITDA and cash performance to improve relative to what we've got.

Our ability to go get talent from the market and retain top talent I think has been proven and we obviously have to sustain that secondarily you heard my investment relative to Upskilling and that is the conversation that we have got two in each one of our business groups is engaging and upscaling initiatives even across our various functions in the corporate and the company.

Tony Jason: Out there in the long term.

Speaker Change: Yes, Jason let me take the second part of that question in terms of the human capital supply meeting the demand increased demand as a function of.

To ensure that we can't just acquire all of the talent, we need we have to incubate that talent and so we are upscaling in critical areas. Those upskilling areas generally aligned with where our differentiation is in our portfolio. So upscaling into cloud area Upscaling and data analytics upscaling and AI those are all the support the actual enterprise.

Speaker Change: Prosecuting all of this new this new pipeline in a positive way for SAIC. So really they are sort of two responses. There first in terms of talent acquisition SAIC relative to the market.

Speaker Change: It is in a leadership position on talent acquisition days to fill in our ability to fill open requisitions. In fact, it was underpinning some of our upwards performance in Q4 was a positive labor market and our ability to execute very well on talent acquisition and quite frankly, the lowest attrition we've had in the company over the last couple of years so in that regard.

Differentiation that we are investing in and expect a significant returning from our portfolio hopefully that answers your question on human capital.

Great I appreciate it thanks everybody.

Mhm sure.

Your next question comes from the line of Greg Konrad with Jefferies. Your line is open.

Speaker Change: Our ability to go get talent from the market.

Speaker Change: Kaine top talent I think has been proven and we obviously have to sustain that secondarily you heard my investment relative to Upskilling and that is the conversation that we have got two in each one of our business groups is engaging and upscaling initiatives even across our various functions in the corporate and the company to ensure that we can't just acquire all.

Good morning, Thanks for the question.

Good morning, Greg, Greg, maybe just to kind of.

Follow up on the last question, but you mentioned, a 12 to 18 month cycle, but also that.

Increase of at least 25% and submitted bids in fiscal year 'twenty five.

Speaker Change: Of the talent, we need we have to incubate that talent and so we are upscaling in critical areas. Those upscaling areas generally aligned with where our differentiation is in our portfolio. So upscaling into cloud area Upscaling and data analytics upscaling and AI. Those are all the support the actual enterprise differentiation that we are investing in them.

Thinking about the strategy that you laid out I mean, how much of that is maybe market growth versus early returns on going after green space and expanding the aperture of what you bid on and then with that how do you kind of think about that number trending forward as you execute on this strategy.

Speaker Change: Expect a significant returning from our portfolio hopefully that answers your question on human capital.

<unk>.

Yeah, Hey, Greg ill take the first part of it here.

Speaker Change: Great I appreciate it thanks everybody.

In terms of just the aperture we see these as less about green space development.

Speaker Change: Mhm.

Speaker Change: Your next your next question comes from the line of Greg Konrad with Jefferies. Your line is open.

I think this is core to the pipeline we built over the last few years I think they are maturing to a place where I think we're actually in a play.

Gregory Arnold Konrad: Good morning, Thanks for the question.

Gregory Arnold Konrad: Okay, great, maybe just to kind of.

Gregory Arnold Konrad: Follow up on the last question, but you mentioned a 12 to 18 month cycle, but also that increase of at least 25% and submitted bids in fiscal year 'twenty five just thinking about the strategy that you laid out I mean, how much of that is maybe market growth versus early returns on.

Two more readily bid these things with the right solutions inside of the factories. So I would say less in the way of new Adjacencies more in the way of where kind of the core capability investments are being made inside the company and we've already been able to confirm we have a significant addressable market. So before we need to look.

Gregory Arnold Konrad: Going after green space and expanding the aperture of what you bid on and then with that how do you kind of think about that that number trending forward as you execute on this strategy.

Two any sort of adjacency, we've got the ability to bid and we're going to lay out sort of those growth vectors in our investor day to show, what's driving the strategic bid thesis, but thats. The way we are looking to drive this additional bid volume is not only.

Speaker Change: Yeah, Hey, Greg ill take the first part of it here so.

<unk> probably will speak to this is this is about vitamins and not calories. So it's not just bidding for bid say hybrid high strategic bid and quite frankly processes that can monitor that we are bidding on strategy and a routine manner.

Speaker Change: So in terms of just the aperture.

Gregory Arnold Konrad: We see these as less about green space development.

Gregory Arnold Konrad: I think this is core to the pipeline we built over the last few years I think they are maturing to a place where I think we're actually in a place to more readily bid. These things with the right solutions inside of the factories. So I would say less in the way of new Adjacencies more in the way of work.

And then maybe just one quick follow up thinking about those differentiators I appreciate that.

When you think about those vectors how much of this is based on.

Or how aligned is where you think you can compete better versus maybe where the market has the most most growth I mean are those two areas aligned when I think about things like AI or is it more about where you think can compete or is that about where you think the markets may be gone.

Gregory Arnold Konrad: Sure.

Gregory Arnold Konrad: Our core capability investments are being made inside the company and we've already been able to confirm we have a significant addressable market. So before we need to look to any sort of adjacency. We've got the ability to bid and we're going to lay out sort of those growth factors in our investor day to show, what's driving the strategic bid pieces, but that's the way we are looking to drive this.

The most.

Hey, Greg that's a phenomenal question I appreciate it because it allows me to speak to how the strategy is built and how growth factors are identified or a combination of where we have footprint and capability. What we are both Lee in terms of contracts that we may currently have but also solution capability thats meeting the need for.

Gregory Arnold Konrad: Additional bid volume is not only <unk>.

Gregory Arnold Konrad: We will speak to this is this is about vitamins and not calories. So it's not just bidding for bid say hybrid high strategic bid and quite frankly processes that can monitor that we are bidding on strategy and a routine manner.

And the express demand of that customer set as well as where there are parts of the market that are growing the underpinning and so they come together and it is a multifactor equation for us to identify growth factor should we think about secure multi cloud one of our key differentiators. The fact that we have cloud one of the one of the largest.

Gregory Arnold Konrad: And then maybe just one quick follow up thinking about those differentiators appreciate that.

Gregory Arnold Konrad: When you think about those vectors how much of this is based on.

Gregory Arnold Konrad: Or how aligned is where you think you can compete better versus maybe where the market has the most most growth I mean are those two areas aligned when I think about things like AI or is it more about where you think can compete or is that about where you think the market's maybe.

Cloud contracts and the department of defense for the largest cap cloud contracts in the civilian market at Treasury.

The fact that we are there and we have cloud capability and we have a unique offering in cloud in the brokerage and security of our cloud that is not only an area of differentiation for US. It's also one of the fastest growing markets across both defense and civilian and in the federal government and so it is it is both that are part of the.

Gregory Arnold Konrad: And the most.

Speaker Change: Hey, Greg that's a phenomenal question I appreciate it because it allows me to speak to how the strategy is built and how growth factors are identified or a combination of where we have footprint and capability. What we are both Lee in terms of contracts that we may currently have but also solution capability that's meeting the need for.

<unk> of how we identify growth vector and that's why we get pretty excited and engaged about our opportunity to take share in those areas.

Speaker Change: And expressed demand of that customer set as well as where there are parts of the market that are growing the underpinning and so they come together and it is a multifactor equation for us to identify growth factor should we think about secure multi cloud one of our key differentiators. The fact that we have cloud one of the one of the largest.

I appreciate it thank you.

I appreciate it.

Thanks, Greg Thank you.

Your next question comes from the line of Bert <unk> with Stifel. Your line is open.

Hey, good morning, <unk>, Tony Thank you for the questions.

Good morning, good morning.

Speaker Change: Cloud contracts and the department of defense or the largest cap cloud contracts in the civilian market at Treasury.

Maybe just sort of focusing on the internal investment strategy. If we think about the lifecycle of winning new meaningful government contracts.

Speaker Change: The fact that we are there and we have cloud capability and we have a unique offering in cloud in the brokerage and security of our cloud that is not only an area of differentiation for US. It's also one of the fastest growing markets across both defense and civilian and in the federal government and so it is it is both that are part of the.

That can be a multi year process from the initial solicitation to a point, where it's actually contributing to revenue.

So as I think about ramping internal investment the payback period is probably a couple of years out with that in mind as we contemplate Purdue what seems to be a little bit of a lower buyback assumption.

Speaker Change: <unk> of how we identify a growth vector and that's why we get pretty excited and engaged about our opportunity to take share in those areas.

Lower projected leverage ratio is that a function of SAIC positioning to be more acquisitive to perhaps accelerate some of that internal growth return.

Speaker Change: I appreciate it thank you.

Yes, Great question, Bert look I think.

Speaker Change: <unk>.

Speaker Change: Thanks, Greg Thank you.

Speaker Change: Your next question comes from the line of Bert <unk> with Stifel. Your line is open.

In terms of the share repurchases, we are guiding to between $606 50 over the next couple of years.

Bert: Hey, good morning, <unk>, Tony Thank you for the questions.

And I think relative to kind of a multi year view that we provided maybe a year ago.

Bert: Good morning, good morning.

Bert: Maybe just sort of focusing on the internal investment strategy. If we think about the lifecycle of winning new meaningful government contracts.

Stock prices moved up considerably and therefore, the mapped ultimately just reflects that we are buying fewer shares than we had contemplated but not materially. So so to me I think that's the really big picture on share repurchases no real change to the strategy, but.

Bert: That can be a multiyear process from the initial solicitation to a point, where it's actually contributing to revenue.

Bert: So as I think about ramping internal investment the payback period is probably a couple of years out.

This is a really good problem to have but the fact that the stock prices reacted as well as it has.

Bert: With that in mind, as we contemplate Purdue what seems to be a little bit of a lower buyback assumption in <unk>.

I think just means we're buying fewer shares in terms of the dry powder I think we've always thought about this as whats the target leverage to run this business at and we've always signaled its about three X and we said there will be points in time, where we're just below end points at points of time, where we're just above <unk>.

Bert: Lower projected leverage ratio is that a function of SAIC positioning to be more acquisitive to perhaps accelerate some of that internal growth return.

Speaker Change: Yes, Great question, Bert look I think.

Speaker Change: In terms of the share repurchases, we are guiding to between $606 50 over the next couple of years.

And I think what we are right now assuming is that just given the potential for EBITDA improvement in the business and just the cash generation capacity of the business. There is a natural deleveraging mechanism happening inside of the portfolio and Thats why the charts reflect leverage coming down to let's call. It mid twos now.

Speaker Change: I think relative to kind of a multi year view that we provided maybe a year ago.

Speaker Change: Stock prices moved up considerably and therefore the map ultimately just reflects that we are buying fewer shares than we had contemplated but not materially. So to me I think that's the really big picture on share repurchases no real change to the strategy, but this.

That simply means that there is extra capacity for us to either use the proceeds to buy more shares if we see major dislocations in the valuation of our company.

Speaker Change: This is a really good problem to have but the fact that the stock prices reacted as well as it has.

Or continue to focus on where the tech enabled differentiators are in the M&A market to ensure that we are appropriately bringing capability one of the things that we're laser focused on inside of the innovation factories that make buy decision that we don't believe for a second that we have to make the investments to create innovation.

Speaker Change: I think just means we're buying fewer shares in terms of the dry powder I think we've always thought about this as whats the target leverage to run this business at and we've always signaled its about three X and we said there'll be points in time, where we're just below end points at points of time, where we're just above <unk>.

Inside the company if that effectively is available at a lower cost and a different color of money externally. So to me. The real focus is acutely staying calibrated on make buy decisions. So that we can decide where the best ROI is but I think fundamentally no real big change in the M&A strategy.

Speaker Change: And I think what we are right now assuming is that just given the potential for EBITDA improvement in the business and just the cash generation capacity of the business. There is a natural deleveraging mechanism happening inside of the portfolio and Thats why the charts reflect leverage coming down to let's call. It mid twos now.

Tony correct.

I think you nailed it there PREPA.

Speaker Change: That simply means that there is extra capacity for us to either use the proceeds to buy more shares if we see major dislocations in the valuation of our company or continue to focus on where the tech enabled differentiators are in the M&A market to ensure that we are.

Yes that was great. Thanks for the color there.

Just a follow up on that Tony last quarter.

I asked about the end caps contract and you gave some really good color there I think thats expected.

To be finalized here in coming months I'm, just curious as we think about your guide that now goes through FY 'twenty six.

Speaker Change: Appropriately, bringing capability one of the things that we're laser focused on inside of the innovation factory is the make buy decisions that we don't believe for a second that we have to make the investments to create the innovation inside the company if that effectively is available at a lower cost and a different color of money externally so to me.

How are you factoring in and caps and Vanguard and Theres, just sort of probability weighted at your percentage view of a wind and so if you do weight end caps and if a vanguard turning to evolve as a better outcome than you anticipate those just drive upside to the way Youre looking at your guidance.

Yes, hi, Bert ill take that one first and I'm sure I'll answer it so.

Speaker Change: The real focus is acutely staying calibrated on make buy decisions. So that we can decide where the best rois, but I think fundamentally no real big change in the M&A strategy correct I think you nailed it there PREPA.

So it really big picture and caps, we're waiting as folks know we did file a pre award protest on end caps and waiting for feedback on that.

Us clear.

Clearly our guide for this year at the midpoint of two 5% assumes.

PREPA: Yes that was great. Thanks for the color there.

Speaker Change: Just a follow up on that Tony last quarter.

Some disruption from end caps, but not a significant amount of disruption and caps is likely to be more of an FY 'twenty six disruptor than not.

Speaker Change: I asked about the end caps contract and you gave some really good color there I think thats expected.

Speaker Change: To be finalized here in coming months I'm, just curious as we think about your guide that now goes through FY 'twenty six.

And candidly the way we provided the 2% to 4% guide for FY 'twenty six right now stays calibrated on a potential negative outcome on end cap. So we think of that is by and large derisked as we head into FY 'twenty six but the other thing that I would point Bert is that we are just beginning ramp until cloud that program control.

How are you factoring in and caps and Vanguard and Theres, just sort of probability weighted at your percentage view of a win and so if you do weight end caps and if a vanguard turning to evolve as a better outcome than you anticipate those just drive upside to the way Youre looking at your guidance.

We did very little revenue last year and this is probably the first year of significant revenue uptick on T cloud picking up to about 1% of total growth rates inside the company.

Speaker Change: Yeah, Hey, Bert I'll take that one first and I'm sure I'll answer it so.

Speaker Change: It really big picture and caps, we're waiting as folks know we did file a pre award protest on end caps and waiting for feedback on that process.

Obviously G mass, which began in the Q3 timeframe of last year, we will continue to ramp through the first two maybe three quarters of this fiscal year. We've got some ramp left on Aoc as well as <unk> and.

Speaker Change: Clearly.

Speaker Change: Our guide for this year at the midpoint of two 5% assumes.

Speaker Change: Some disruption from end caps, but not a significant amount of disruption.

And of course, the most recent <unk> win that we announced a couple of days ago that will certainly start to ramp over the course of the year. So to me as I think about the tunes and furloughs here.

Speaker Change: <unk> is likely to be more of an FY 'twenty six disruptor.

Speaker Change: Not.

Speaker Change: And candidly the way we provided the 2% to 4% guide for FY 'twenty six right now.

We are comfortable that the two 5% that we're guiding to for this year reflects all of the headwinds in the tail winds and that the 2% to 4% appropriately reflects potential outcomes in a range of outcomes I might add on vanguard evolve.

Speaker Change: <unk> calibrated on a potential negative outcome on end cap. So we think of that is by and large derisked as we head into FY 'twenty six but the other thing that I would point Bert is that we are just beginning ramp <unk> cloud that program contributed very little to revenue last year and this is probably the first year of significant revenue.

And as well as potential negative outcomes on end cap, so that hopefully that adds a little more color here I think thats, great and Bert I think only thing I would add to that is is understanding that as we are ramping on new and we are acknowledging and de risking any challenges or headwinds relative to recompete losses. We also have.

Speaker Change: The uptake on T cloud picking up to about 1% of total growth rates inside the company.

Speaker Change: Obviously G mass, which began in the Q3 timeframe of last year, we will continue to ramp through the first two maybe three quarters of this fiscal year. We've got some ramp left on ALC as well as <unk>.

And the strategy that we are trying to implement here and we start talking about differentiating our portfolio the benefit up for new bids Youre absolutely right on the 24 month expectation absolutely correct in terms of the way the government procurement cycle works, but on existing work, we have the opportunity for on contract growth and assure up re competes and so when you think about.

Speaker Change: And of course, the most recent <unk> win that we announced a couple of days ago that will certainly start to ramp over the course of the year. So to me as I think about the tools and approach here.

Speaker Change: We are comfortable that the two 5% that we're guiding to for this year reflects all of the headwinds on the tailwind and that the 2% to 4% appropriately reflects potential outcomes in a range of outcomes I might add on vanguard.

And the strategy and what underpins our growth expectation is the belief that on contract growth. We can we can improve upon with value creation with our customers and that our recompete. The our existing programs that will come up for Recompete that we can get back to our traditional 90% win rates by.

Speaker Change: <unk>.

Speaker Change: And as well as potential negative outcomes on end cap, so that hopefully that adds a little more color here, but I think thats, great and I think the only thing I would add to that is is understanding that as we are ramping on new and we are acknowledging and derisking.

Adding more value on the existing contract delivery, so new new business, absolutely 24 month term, but we have the opportunity we do have leverage with our current program.

Speaker Change: Any challenges or headwinds relative to Recompete losses. We also have in the strategy that we are trying to implement here and we start talking about differentiating our portfolio the benefit up for new bids you are absolutely right on the 24 month expectation absolutely correct in terms of the way the government procurement cycle works, but on existing work we have the opportunity.

Thank you.

Thanks.

Your next question.

Comes from the line of Cai von <unk> with TD Cowen Your line is open.

Yes, thanks, so much for taking my question.

So we're going to Europe could you give us where your bids awaiting decision or because they've gone down sequentially. The last two quarters and then maybe some color on kind of what's so.

Speaker Change: For on contract growth and assure up Recompete and so when you think about implementing the strategy and what underpins our growth expectation is the belief that on contract growth. We can we can improve upon with value creation with our customers and that our re competes that are existing programs that will come up for recompete.

Book to bill or sort of the bookings environment do you see the next couple of quarters and lastly, maybe an update on where we are with Encap and vanguard in terms of when you expect decisions to come down.

Speaker Change: That we can get back to our traditional 90% win rates by adding more value on the existing contract delivery. So new new business, absolutely 24 month turn but we have the opportunity we do have leverage with our current program.

Right Hey, Kai.

That's a multipart, let me make sure I get them, all and if I don't please remind me I know certainly go back.

Speaker Change: Okay.

On the on the submission rates I think as Tony mentioned, we are submitting less.

Speaker Change: Thank you.

Speaker Change: Thanks.

Speaker Change: Your next question.

And the last couple of years have been lower and I think the expectation is that submit rates will be higher over the course of FY 'twenty five and that should reflect in a higher level of bids waiting waiting final adjudication. If you will so we do expect that trend to flip this year really big picture on book to Bill.

Cai von Rumohr: Comes from the line of Cai von <unk> with TD Cowen Your line is open.

Cai von Rumohr: Yes, thanks, so much for taking my question.

Cai von Rumohr: So your could you give us where your bids awaiting decision or because they've gone down sequentially. The last two quarters and then maybe some color on kind of what's so.

As you've probably observed our book to Bill was under $1 <unk> last year trailing 12 month is under one <unk>, we would expect book to Bill for a business that's aspired to grow in that 2% to 4% range to be above one <unk>. So think of the objective for FY 'twenty five is sort of in that $1 <unk> and $1.

Cai von Rumohr: Book to bill or sort of the bookings environment you see in the next couple of quarters and lastly, maybe an update on where we are within cap and vanguard in terms of when you expect decisions to come down.

Speaker Change: Right, Hey, Kai that's a multipart, let me make sure I get them all and if I don't please remind me I know certainly go back on the on the submission rates I think.

One range so that to me is the expectation for.

Four book to Bill for FY 'twenty five and then finally on end caps were going to see how this process plays out over the course of the next several quarters, but I suspect it probably will not have a significant revenue impact in FY 'twenty five and evolve the customers in the middle of an active procurement cycle and.

Speaker Change: Tony mentioned, we are submitting less.

Speaker Change: In the last couple of years have been lower and I think the expectation is that submit rates will be higher over the course of FY 'twenty five and that should reflect in a higher level of bids waiting waiting final adjudication. If you will so we do expect that trend to flip this year really big picture on book to Bill.

Given how complicated that procurement processes, we would expect minimal disruption to our FY 'twenty five revenues and as I responded to the previous question I think we've calibrated our position relative to vanguard as an incumbent on the program.

Speaker Change: As you've probably observed our book to Bill was under $1 last year trailing 12 month is under one <unk>.

Speaker Change: Would expect book to Bill for a business, that's aspired to grow in that 2% to 4% range to be above one <unk>. So think of the objective for FY 'twenty five is sort of in that $1 <unk> and $1. One range. So that to me is the expectation for.

As you know.

Astutely as we can as we're providing guidance here.

Hopefully I captured three parter.

Actually there were one what was what were the bids awaiting decision at year end and then what are the milestones I guess I missed represented the question what are the milestones when should we expect I guess, it's a multi part.

Speaker Change: Four book to Bill for FY 'twenty five and then finally on end caps were going to see how this process plays out over the course of the next several quarters, but I suspect it probably will not have a significant revenue impact in FY 'twenty five and evolve the customers in the middle of an active procurement cycle and.

Decision, but when should we expect decisions to be forthcoming on vanguard. Thank you.

Yeah and on the first part Kai I mean, we typically don't call out individual programs that are awaiting adjudication.

Speaker Change: Given how complicated that procurement processes, we would expect minimal disruption to our FY 'twenty five revenues and as I responded to the previous question I think we've calibrated our position relative to vanguard as an incumbent on the program.

So just the total dollar total dollar.

Sure.

And if we can certainly try and find the number Cai, but it's probably right in line with where the historical numbers have been in terms of just waiting adjudication that at any point in time, we have a pretty healthy amount of.

Speaker Change: As you know.

Speaker Change: Astutely as we can as we're providing guidance here.

Awards that are pending adjudication. So we'll get you a more precise number if necessary.

Speaker Change: So hopefully I captured the three parter.

Speaker Change: Actually the one what was what were the bids awaiting decision at year end and then what are the milestones I guess I missed represented the question what are the milestones when should we expect I guess multi part.

And in terms of the timing question I would say, we would expect to hear on some of these in the Q1 Q2 Q3 timeframe Q4 is not where were expecting most of it obviously some of this will depend on.

Speaker Change: Decision, but when should we expect decisions to be forthcoming on vanguard. Thank you.

The government funding environment, but I would say biased to the Q2 Q3 timeframe for this year.

Speaker Change: And on the first part Kai I mean, we typically don't call out individual programs that are awaiting adjudication suffice it to say total dollar or so.

Thank you very much.

Sure.

Your next question comes from the line of Tobey Sommer with <unk> Securities. Your line is open.

Speaker Change: And if we can certainly try and find the number Cai, but it's probably right in line with where the historical numbers have been in terms of just waiting adjudication that at any point in time, we have a pretty healthy amount of.

Thank you.

What's the most important financial outcome.

You expect to derive from the.

The new organizational structure with.

More business units.

Speaker Change: Awards that are pending adjudication. So we'll get you a more precise number if necessary.

Tobey, let me take the first part of that and then and then Tony Please chime in so some really big picture Tobey I think part of what animated the re org was desire to eliminate a layer.

Speaker Change: And in terms of the timing question I would say, we would expect to hear on some of these in the Q1 Q2 Q3 timeframe Q4 is not where were expecting most of it obviously some of this will depend on.

To simplify the org structure, so that we could have direct perspective on what's going on inside of the business groups and so to me that was probably the most important reason.

Speaker Change: The government funding environment, but I would say bias to the Q2 Q3 timeframe for this year.

Part of what was animating that was to get closer to the customer closer to where the rubber hits. The road. If you will and that was really the reason we announced the reorganization in Q4.

Speaker Change: Thank you very much.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Tobey Sommer with <unk> Securities. Your line is open.

Last year in terms of the single most important financial metric.

Thank you.

Tobey O'Brien Sommer: What's the most important financial outcome that you expect to derive from the new organizational structure with.

Yes.

I would say look our incentive comp metrics are always reflecting what we want to deliver over long periods of time and that is EBITDA dollar growth free cash flow and total shareholder return so as I think about really important long term.

Tobey O'Brien Sommer: More business units.

Tobey O'Brien Sommer: Tobey, let me take the first part of that and then and then Tony Please chime in so some really big picture Tobey I think part of what animated the re org was desire to eliminate a layer.

What is the objective of driving additional organic growth. It is to drive higher EBITDA growth from the business and then converting cash out of that EBITDA and delivering GSR to me I think I have not given a single financial metric, but I think those are really what we're hoping to.

Tobey O'Brien Sommer: To simplify the org structure, so that we could have direct perspective on what's going on inside of the business groups and so to me that was probably the most important reason.

This is Tony let me just let me just give you an operational view for a moment so long term im completely consistent with what <unk> just shared.

Tony Jason: Part of what was animating that was to get closer to the customer closer to where the rubber hits. The road. If you will and that was really the reason we announced the reorganization in Q4.

<unk>.

One perspective, and there were two moves on the organization that are to be collective and theyre supposed to compound quite frankly to the right outcome. The centralizing of the BD function and the flattening of the organization. Both of those moves are towards ensuring that we derisk ourselves on organic growth by addressing our recompete rate.

Tony Jason: Last year in terms of the single most important financial metric.

Tony Jason: Yes.

I would say look our incentive comp metrics are always reflecting what we want to deliver over long periods of time and that is EBITDA dollar growth free cash flow and total shareholder return so as I think about really important long term.

We compete win rate that is not in our traditional 90% <unk>.

Becomes a drag on the business as we have spoken to before.

Tony Jason: What is the objective of driving additional organic growth. It is to drive higher EBITDA growth from the business and then converting cash out of that EBITDA and delivering GSR to me I think I have not given a single financial metric, but I think those are really what we're hoping to do it.

And so the way to Derisk that was to address the recompete issue and two organizational ways. One can make sure that we have standardized process with a single point of accountability in the BD and capture function and second to flatten the organization. So that we were closer to the customer and driving so each one.

Tony Jason: This is Tony let me just tell me just give you an operational view for a moment, so long term and completely consistent with what <unk> just shared.

Of those business groups as a direct those leaders are directly reporting to me and a part of this is executive team to drive the value creation that has to happen during program delivery and ensure the systematic deployment of our differentiators across that portfolio and to bring that accountability to bright light and a flatter organization.

Tony Jason: One perspective, and there were two moves on the organization that are to be collective and theyre supposed to compound quite frankly to the right outcome. The centralizing of the BD function and the flattening of the organization. Both of those moves are towards ensuring that we derisk ourselves on organic growth by addressing a recompete.

<unk> with direct reporting responsibility.

The two ways to address a recompete issue, our standardized did capture capabilities and value creation on the ground and program delivery and those are the two that are reflected in the organizational changes that I've made.

Tony Jason: Right.

Tony Jason: Recompete win rate that is not at our traditional 90%.

Tony Jason: It becomes a drag on the business as we have spoken to before.

Tony Jason: So the way to Derisk that was to address the recompete issue into organizational ways. One can make sure that we have standardized process with a single point of accountability in the BD and capture function and second to flatten the organization. So that we were closer to the customer and driving so each one of them.

Thanks.

As you migrate the margins towards the end.

Industry average it seems to me that there was kind of attention where you're bidding on.

Work, that's higher value in order to drive the margin higher.

And also trying to inject more value into lower margin work to see if you can keep the same margin or even encourage that higher are you, having more success or less success on that higher value stuff sort of the newer work to the company, where we're trying to push the frontier out.

Tony Jason: Business groups as a direct those leaders are directly reporting to me and a part of this is executive team to drive the value creation that has to happen during program delivery and ensure the systematic deployment of our differentiators across that portfolio and to bring that accountability to bright light and a flatter organization.

More on that.

Lower margin work that you are trying to defend or sort of inject with more value and distinction.

Tony Jason: With direct reporting responsibility.

Tony Jason: Two ways to address a recompete issue are standardized did capture capabilities and value creation on the ground and program delivery and those are the two that are reflected in the organizational changes that I've made.

Drive the margin higher.

Great question, and maybe I'll take a first run at it out and then Tony.

So look I think I don't think we have the luxury of focusing just on margin improvement out of the new business.

Thanks.

Tony Jason: As you migrate the margins towards the.

And nor can we be sanguine about holding margins. When we go through repeated recompete cycles, I think it's a little bit of both I think part of what we've done on the new business front is focus on the differentiators that allow us to generate the accretive topline growth that is necessary to keep the bid.

Tony Jason: The industry average it seems to me that there was kind of attention where you're bidding on.

Tony Jason: Work, that's higher value in order to drive the margin higher and also trying to inject more value into lower margin work to see if you can keep the same margin or even encourage that higher.

Tony Jason: Are you, having more success or less success on that higher value stuff sort of the the.

Moving forward in areas that are relevant to the future of SAIC to me that's the way we're approaching it.

Tony Jason: The newer work to the company, where we're trying to push the frontier out.

Think as we think about the Recompete work I think the focus there is how do we bring innovation, while we're on a period of performance right now in a program how do we deliver.

Tony Jason: Or on the.

Tony Jason: Lower margin work that you are trying to defend or sort of inject with more value and distinction.

Tony Jason: Drive the margin higher.

<unk> as a service while we are on a cost plus program how do we.

Speaker Change: Great question, and maybe I'll take a first run at it out and then Tony.

Effectively deliver solutions within the confines of a fixed price program by actively getting out labor cost and replacing with solution costs. So theres, probably a couple of different ways, we're going at it. The other thing we are absolutely focused on doing is looking at our thresholds for Recompete win.

Tony Jason: So look I think I don't think we have the luxury of focusing just on margin improvement out of the new business.

Tony Jason: And nor can we be sanguine about holding margins. When we go through repeated recompete cycles, I think it's a little bit of both I think part of what we've done on the new business front is focus on the differentiators that allow us to generate the accretive topline growth that is necessary to keep the biz.

Rates to make sure that we are identifying the right things, we want a bit making sure that we are adding value over the course of the period of performance. So we're actually delivering higher operating margin rates in a recompete, but think of this as more solutions focused on what we have to deliver but it's.

Tony Jason: Moving forward in areas that are relevant to the future of SAIC. So to me that's the way we're approaching it.

Tony Jason: As we think about the Recompete work I think the focus there is how do we bring innovation, while we're on a period of performance right now in a program how do we deliver.

Hard to pick one or the other I think companies have to do both and I think we've got a different approach for both but we are focused on doing both and I look I fully agree on the Recompete side is probably spoke to very specific measures to ensure that margin is increasing on that the business that we retain.

Tony Jason: <unk> as a service while we are on a cost plus program how do we.

Tony Jason: Effectively deliver solutions within the confines of a fixed price program by actively getting out labor costs, and replacing with solution cost. So theres, probably a couple of different ways, we're going at it. The other thing we are absolutely focused on doing is looking at our thresholds for Recompete win.

If you will then tie in the investment we're making on <unk> scaling where labor is an element for a recompete that labor has to bring increased value over time. Another element of why we are making some investments on the upscaling side, but I would suggest to you that our win rates might indicate that our new business, given where we are it gets above industry standard that we.

Tony Jason: Rich to make sure that we are identifying the right things, we want a bit more.

Getting into the clip of being able to build differentiated portfolio and win with new business, we're going to spend a significant amount of time and the investments that we've made ensuring that in our existing program business that we're bringing more value on the ground in those existing contracts and bringing up the recompete side of that win.

Tony Jason: Sure that we are adding value over the course of the period of performance. So we're actually delivering higher operating margin rates in a recompete, but think of this as more solutions focused on what we have to deliver but it's hard to pick one or the other I think companies have to do both and I think we've got a different approach for both but we are.

<unk>.

Thank you.

Thank you.

Tony Jason: We're focused on doing.

Sure.

Speaker Change: Look I fully agree on the Recompete side is probably spoke to various specific measures to ensure that margin is increasing on that the business that we retain.

And your final question comes from the line of David Strauss with Barclays. Your line is open.

Hi, Good morning. This is Josh <unk> on for David Thanks for taking the question.

Speaker Change: If you will then tie in the investment we're making on re skilling, where labor is an element for a recompete that labor has to bring increased value overtime. Another element of why we're making some investments on the upscaling side, but I would suggest to you that our win rates might indicate that our new business, given where we are it's above industry standards that we.

So I think you mentioned it for sort of new vertical with during the prepared remarks.

<unk> border, which I don't think its really been emphasized before.

So just wanted to ask like how you plan to differentiate in those markets going forward. Thanks.

Speaker Change: Getting into the clip of being able to build differentiated portfolio and win with new business, we're going to spend a significant amount of time and the investments that we've made ensuring that in our existing program business that we're bringing more value on the ground in those existing contracts and bringing up the recompete side of that win.

Yes, let me speak to them, we call them National Imperatives, I believe there were five that were identified.

Don't think of them as an organizational construct they are not in fact, what they represent or the long term efforts of our customer our programmatic.

Engagement with our customers the imperatives for the country that the customers are working what we are trying to do in our strategy is to ensure that when we build differentiation across our portfolio and we do good bid selection in terms of how we want to grow our business that we're driving towards outcomes in each of those.

Speaker Change: <unk>.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: And your final question comes from the line of David Strauss with Barclays. Your line is open.

Speaker Change: Hi, Good morning. This is Josh <unk> on for David Thanks for taking the question.

So for example, undersea dominance is one that speaks to our our naval fleet and the undersea capabilities of the U S. We have contracts in that space. We are doing work in that space. We are differentiated we want to continue to differentiate in that space and grow that type of work going forward.

Josh: So I think you mentioned for sort of new vertical with during the prepared remarks.

<unk> border, which I don't think its really been emphasized before.

Josh: I just wanted to ask like how you plan to differentiate.

Speaker Change: Those markets going forward.

Speaker Change: Yes, let me speak to them, we call them National Imperatives, I believe there were five that were identified.

So they are more directional for mid and long range investments and how we engage and how we position with those customers that are driving towards those outcomes.

Speaker Change: Don't think of them as an organizational construct they are not in fact, what they represent or the long term efforts of our customer our programmatic.

Great. Thank you.

Great. Thank you, yes, sure it's Jeff.

Speaker Change: Engagement with our customers the imperatives for the country that the customers are working what we are trying to do in our strategy is to ensure that when we build differentiation across our portfolio and we do good bid selection in terms of how we want to grow our business that we're driving towards outcomes in each of.

This will conclude the question and answer session and today's conference call. We thank you for joining you may now disconnect your lines.

Yes.

Thank you.

Yeah.

Speaker Change: Those imperatives. So for example, undersea dominance is one that speaks to our our naval fleet and the undersea capabilities of the U S. We have contracts in that space. We are doing work in that space. We are differentiated we want to continue to differentiate in that space and grow that type of work.

Okay.

Speaker Change: Going forward. So there are more directional for mid and long range investments and how we engage and how we position with those customers that are driving towards those outcomes.

Speaker Change: Great. Thank you.

Speaker Change: Great. Thank you.

Speaker Change: This will conclude the question and answer session and today's conference call. We thank you for joining you may now disconnect your lines.

Speaker Change: Okay.

Speaker Change: Hum.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.