Science Applications International Corporation

Please stand by. Good day and welcome to the SAIC Fiscal Year 2020 Q3 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Shane Canestra, SAIC's Vice President of Investor Relations. Please go ahead, sir.

Good afternoon and thank you for joining SAIC's third quarter Fiscal Year 2020 Earnings Call. My name is Shane Canestra, Vice President of Investor Relations. And joining me today to discuss our business and financial results are Naza Keen, SAIC's Chief Executive Officer, and Charlie Mathis, our Chief Financial Officer. This afternoon, we issued our earnings release, which can be found at investors.saic.com, where you'll also find supplemental financial presentation slides to be utilized in conjunction with today's call. Both of these documents, in addition to our Form 10-Q to be filed soon, 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. 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, and quarterly reports on Form 10-Q. 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 in both our press release and supplemental financial presentation slides, include reconciliations, to the most comparable GAAP measures. It is now my pleasure to introduce our CEO, Naza Keen.

Thank you, Shane, and good afternoon. SAIC's third quarter results reflect strong program performance and customer confidence in our ability to deliver solutions that advance their most critical mission priorities. We are pleased to report solid results while we look towards a future with a refreshed strategy that takes advantage of our expanded portfolio, positioning us for sustained profitable growth. In our September call, I communicated three areas of my immediate focus, and they are unchanged. The successful integration of agility, accelerating profitable revenue growth, and winning the war for talent. All three are integral parts of our refreshed strategy, and we made progress on these imperatives during the quarter. As we near the one-year anniversary of the agility acquisition, I am very pleased with the progress and success of our integration efforts and the exciting opportunities that our stronger business presents. We accelerated and achieved all of the year one net cost synergies of $38 million earlier this year, and we are well on our way to achieve the year two target. We expect to achieve 85% of the full net cost synergy target of $75 million by the end of this fiscal year, well in advance of our initial plan. Employee fringe benefit harmonization and the successful conversion of our financial system as well as several other back office systems have been completed. Facility consolidation is the last significant cost synergy milestone to be achieved. I would like to emphasize that our integration efforts and cost synergy achievement are being completed ahead of schedule and our combined workforce is focused on a single mission, serving our customers under the SAIC banner. SAIC is leveraging our increased capacity, capabilities, and customer access, which has resulted in greater pipeline development, stronger recompete bids, and new contract wins. During the quarter, SAIC was awarded a task order for $85 million from the U.S. Navy's Naval Surface Warfare Center. That is a great example of a revenue synergy as a result of the combined company. Through the acquisition of Agility, SAIC obtained the DoD's IAC-MAC IDIQ vehicle that provided contract access to new customers. This vehicle, combined with legacy SAIC technical capabilities, allowed us to jointly compete for and win this task order. This is just one proof point of our successful expansion of growth opportunities as we go to market together, leveraging each company's capabilities and customer access as one team. With program operations and the business development organizations fully integrated, SAIC's enhanced pipeline reflects our expanded addressable market and contract opportunities, enabling the acceleration of profitable revenue growth. Our value of submitted proposals increased to $16 billion, up $2.7 billion from the second quarter. While our contract proposal activity increased, we also continued to invest in innovative and differentiating capabilities to drive growth. We have recently garnered accolades from Washington Technologies Industry Innovation Awards for one of our solutions, SAIC's Internet of Battlefield Things. This innovative, state-of-the-art solution integrates a variety of commercial technologies, including sensors, mobile broadband and networking, cloud and high-performance computing, and power management. An Expeditionary Command Center can now fit into a vehicle, giving our military forces an anywhere platform. Arming them with real-time information and informing situational awareness, targeting, and other battlefield actions. With investments in differentiating technologies and an expanding business pipeline, I continue to have confidence in accelerated revenue growth next fiscal year and beyond. As a people-centric business, winning the war for talent is vital and has our attention at all levels. A top priority will always be to attract and retain the best talent by fostering a purpose-driven, inclusive, and flexible working environment while encouraging our employees to make a difference outside the workplace through citizenship and community programs. Our employee benefit programs reflect our emphasis on flexibility. We are investing in programs that provide options in how our employees manage their work schedules and leave time. We are proud that SAIC was recently named as a top five company in 2020 for flexible jobs based on a study of over 52,000 companies. This recognition reinforces our commitment to provide remote and flexible work options to improve the well-being of our employees and their families while providing world-class talent in support of our customers. We also know that today's employees want to work for an organization that reaches outside their walls to give back and positively impact their communities. Throughout the month of September, SAIC raised over $200,000 in employee and corporate contributions in support of Feeding America's Hunger Action Month, providing over two million meals to America's hungry. SAIC desires to have a tangible and positive impact on targeted communities, populations, and the environment. To that end, we have a focus in four areas to achieve this goal, military and veterans, STEM education, community well-being, and environment and sustainability. Our employees are dedicated to our nation and our communities, as SAIC was recently named by the Washington Business Journal as one of the largest corporate philanthropists as measured by volunteer hours. SAIC's culture of exceptional service, both in and outside the office, make it a rewarding place professionally and personally. Now turning to the market environment, our customers continue to operate and make their investment decisions despite a continuing resolution. While a CR is not ideal, government fiscal year 19 budgets were strong, and operating at those levels allows most customers to continue executing their important missions. As I conclude, I would like to follow up on the strategy review that I highlighted in our September call. The successful integration of the agility acquisition and market dynamics uniquely positions SAIC for opportunities that leverage our scale, expansive portfolio, and strong customer relationships to accelerate profitable revenue growth. We will prioritize the most compelling opportunities by focusing on a few market-driven areas that include space systems and mission engineering that takes advantage of SAIC's leadership in this market and the continued focus in ensuring our nation's dominance, and resilience in space. Mission engineering and integration across DOD systems modernization communities to ensure our nation has the most advanced solutions to stay ahead of our adversaries. And modernizing and managing our nation's critical IT and enterprise infrastructure to gain efficiencies, improve cybersecurity, enable increased analytics, and improve the citizen experience. Going forward, these areas will be the catalyst for growth at SAIC. This is not to say that we will forsake other areas of contract opportunity, but these areas will draw increased focus and investment in order to drive profitable revenue growth over the long term. While M&A always seems to draw increased attention and speculation, SAIC will continue to take a disciplined approach in this area to fill gaps in our portfolio, accelerate penetration of an underserved customer, or gain differentiated capabilities we do not have today. SAIC will always approach M&A as one of the many tools in our toolbox that we use to deliver shareholder value creation. As part of our strategy refresh, our goal is to disproportionately invest in technologies, talent, and infrastructure that will enable long-term growth in these strategic areas while preserving predictable growth from our core markets. We also know our market is dynamic and our customers need a partner that can be agile, so we will continue to measure our strategy against milestones, and adjust as needed. I'd like to ask Charlie to share our business development and financial results before we take your questions.