Science Applications International Corporation

Good afternoon and welcome to SAIC's first quarter 2021 earnings call. 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 second quarter fiscal year 2021 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. Today, we will discuss our results for the quarter ended July 31, 2020. 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 the 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, and 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, Nizit Keen.

Thank you, Shane, and good afternoon. Before discussing SAIC's performance and forward outlook, it is my sincere hope that each of you and your loved ones are healthy and managing through the continued challenges related to the pandemic. To those SAIC employees who have been directly or indirectly impacted by COVID-19, we continue to support you and provide assistance where we can for you and your families. Charlie and I have a lot of details to cover today, but I am pleased to report that SAIC continues to operate from a position of strength despite a challenging macroeconomic environment. We've been operating in this environment now for six months, and I'm proud to say our employees and our organization have adapted very well. While we have experienced isolated pockets of COVID-19 related impact, customer demand for our offerings remains strong, as evidenced by our positive business development and financial achievements. Let me briefly discuss our second quarter results. SAIC continues to demonstrate a resilient and stable portfolio as evidenced by our strong revenue base, improved profitability, excellent cash flow generation, and the highest bookings and book-to-bill ratio in our seven-year history. Internal revenue growth for the second quarter, excluding the impact of COVID-19, was in line with our expectations at 3%, demonstrating the underlying strength of the business. SAIC exited the second quarter with the highest backlog in our company history, a proof point of our go-to-market strategy and acceleration of our business momentum. These are notable achievements considering the many COVID-related issues we are all navigating. In June, I communicated our focused response to the pandemic in three areas, employees, customers, and shareholders. Our efforts continue in these key areas, but as it relates to our shareholders specifically, while we navigate the pandemic-related headwinds, our attention is on managing the business to meet our commitments and create shareholder value. We are focused on managing profitability, generating substantial cash, meeting our delevering commitment, and continuing our business development and growth activities to ensure the long-term success of our company. SAIC is grateful to operate in a market that has been minimally impacted by the pandemic. We continue to play a vital role in our customers' missions across our broad customer set, but in particular those responsible for ensuring our nation's health and security. As the expiration of many parts of the CARES Act approaches, particularly Section 3610 that provides for the maintenance of ready state labor, we are hopeful and confident that the provision will be extended, allowing us to continue our vital support to our national security customers. Looking a bit into the future, government fiscal year 2021 is almost assured to start under a continuing resolution, which will likely remain in place until after the November elections. SAIC is accustomed to operating in a CR environment, and we know how to navigate potential disruptions. I'd like to take a minute to discuss talent acquisition and retention during the pandemic. By making talent a priority and a key element of our strategy, we have maintained our ability to recruit and retain best-in-class technical talent, while also benefiting from an all-time low in voluntary turnover. We have over 500 direct open positions available, and we believe that SAIC provides a very attractive career opportunity in a stable market, providing customers with technological solutions of national importance. Speaking of valuable talent, let me provide a quick update on our acquisition of Unisys Federal. Unisys Federal contributed for the entire second quarter and has operated very well during the pandemic, similar to the rest of SAIC. As I have mentioned before, the integration of Unisys Federal is much less complicated than the integration of Agility, and I am proud to say that the work of the integration team has exceeded our expectations. We are infusing their commercial-style delivery model and go-to-market approach in key markets and with receptive government customers. While we remain focused on our strategic priorities, we also periodically review the portfolio for non-strategic areas to de-emphasize or divest. During the second quarter, SAIC sold a few State Department and Department of Justice International law enforcement support contracts. These contracts were obtained through our acquisition of agility and were not viewed as strategically important to our strategy or our future. They were also dilutive to our margin profile and not financially material to the company. As it relates to our strategy execution, we are seeing the positive impact of past year's technology investments and acquisitions in our ability to cross-sell capabilities to new and existing customers. Most notable and exciting is the increased interest by intelligence community and defense customers in our IT modernization capabilities, especially in advanced analytics, software and app modernization, and cloud migration. Our digital transformation capabilities, strengthened by the Unisys federal acquisition, are also creating growth opportunities through increased customer and market access. This is an example of a realization of our strategy that continues to guide our investments and priorities and will provision SAIC for sustained profitable growth. Before turning the call over to Charlie, I want to take a moment to discuss his recently announced retirement. Charlie has decided to retire, but has graciously agreed to stay until the end of our fiscal year, allowing for a smooth transition to a new CFO and a continued successful year as we navigate the pandemic challenges. I am very appreciative of Charlie's financial leadership over the past four years, and in particular, supporting me through my transition as CEO. His extensive experience in financial acumen has helped SAIC grow from a $4.5 billion business to the over $7 billion company we are today. Although we will miss Charlie's passion and commitment to SAIC, we congratulate him for reaching this milestone, and I ask you to join me in wishing him well and celebrating his recent decision to retire.