Science Applications International Corporation

Welcome to SAIC's fourth quarter and full fiscal year 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. My name is Shane Canestra, SAIC's Vice President of Investor Relations, and thank you for joining our fourth quarter and full fiscal year 2021 earnings call. Joining me today to discuss our business and financial results are Naza Keen, SAIC's Chief Executive Officer, and Prabhu Natarajan, 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 K 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 defer materially from statements made on this call. I refer you to our SEC filings for our 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, where possible, to the most comparable GAAP measures. It is now my pleasure to introduce our CEO, Nazik Keen.

Good afternoon and thank you for joining us to discuss SAIC's fourth quarter full fiscal year 2021 results and our outlook for fiscal year 2022. Our momentum increased throughout the year and SAIC continues to be very well positioned for long-term shareholder value creation. On March 15th of last year, SAIC quickly adapted to a significantly different operating environment as a result of the pandemic. Although not without challenges, SAIC operated effectively throughout the fiscal year and continues to do so today. Our focus has always been the safety and welfare of our employees, continued high-level performance for our customers, and successfully managing the business for our shareholders. I want to thank the employees of SAIC for their dedication and flexibility both personally and professionally through an incredibly challenging time. The end of each fiscal year allows us to look back, reflect on our achievements, as well as our journey over time. As we think about what SAIC is today, I'm even more encouraged about our future. Over the past few years, we have grown our annual revenue from around $4.5 billion to more than $7 billion, concurrently expanding our adjusted EBITDA margins from the low 6% range to close to 9% today, an almost 300 basis point improvement. Over the same period, we have more than doubled our free cash flow. We are now in the Fortune 500 and one of the top providers in the government services market, and we have even more to accomplish as we continue to push forward through focused strategy execution. Our journey continues, and with a long-term eye on the business, I am confident in continued progress. I would like to highlight a few areas of strong performance in fiscal year 2021. Compared to fiscal year 20, revenues grew by 11%, adjusted EBITDA margins improved by 50 basis points, adjusted diluted earnings per share grew by 11%, and we generated a record high free cash flow of $524 million. Organic revenues grew by 1% in fiscal year 21. While we can't ignore the effects of COVID, revenues grew organically by 4%, excluding the approximately $250 million of foregone revenue related to the pandemic. SAIC delivered strong profitability and cash generation that met the expectations we set at the beginning of the year. Last March, we laid out a pre-COVID framework. As these were the early days of the pandemic, the effect on our business and the nation was uncertain. Our expectations at that time for fiscal 21 was 3% to 6% organic revenue growth, adjusted EBITDA margins in the high 8% to 9% range, and free cash flow of at least $450 million. While adjusting for the impacts of the business from the pandemic, we largely met those expectations. While we continue to experience impacts from the pandemic into this fiscal year, we remain focused on business execution. We also had a very successful business development year with a book to bill of 1.7 times revenue through a healthy mix of re-compete and new business awards. One of the most important business development priorities for the company was to secure our position in the AMCOM portfolio in a very competitive market. I'm incredibly proud to report that SAIC has been awarded all four of the AMCOM re-compete task orders. We received two of the awards during fiscal and two early in this quarter. Each of the four task orders contains elements of new business, and while the transition of the new work will happen over time into fiscal year 23, we are very pleased to continue supporting these important missions. Turning to the market environment, our customers continue to execute their missions and priorities with confidence. Though there has been a change in both administration and control of the Senate, we have not seen notable changes in customer behavior. the President will deliver his government fiscal year 22 budget request in the next few weeks. This will show intent, the administration's priorities, and desired direction. While we do not expect significant changes that would negatively impact our business, we do anticipate overall customer budgets to remain flat for the most part into next fiscal year and potentially beyond. However, within those budgets, there will be faster streams of priorities and investments. So while the budget environment might present a headwind to overall industry growth, direct alignment of our strategy to high priority and potential growth areas could be a tailwind that will enable us to outperform the market environment. Growth will be enabled by the execution of our long-term strategy, elements of which you will hear throughout our remarks today. As we navigated a challenging year, we remained focused on our commitment to de-lever following our successful acquisition and integration of Unisys Federal, and we made tremendous progress. During the year, we paid down $400 million of debt, exiting the year at a net leverage ratio of 3.7 times, down from approximately 4.5 times at the time of the acquisition. While we continue to meet our commitment of achieving a net leverage of around three times by the end of fiscal 22, I'm also pleased to report that we started repurchasing shares midway through the fourth quarter, deploying $19 million to repurchase approximately 200,000 shares. Joining us today for his first earnings call as SAIC's Chief Financial Officer is Prabhu Natarajan. We are very excited to have Prabhu as part of the executive management team, bringing with him a track record of success as a finance executive in the aerospace, defense, and technology markets. I'd like to ask Prabhu to share our results for the fourth quarter in our fiscal year 2022 outlook.