Science Applications International Corporation

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the SAIC third quarter fiscal year 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again press star one. Thank you.

Good morning, and thank you for joining SEIC's third quarter fiscal year 2023 earnings call. My name is Joe DiNardi, Vice President of Investor Relations and Strategic Ventures. And joining me today to discuss our business and financial results are Nazik Keen, our Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today we will discuss our results for the third quarter of fiscal year 2023 that ended October 28, 2022. Earlier this morning, we issued our earnings release, which can be found at investors.SEIC.com, where you will also find supplemental financial presentation slides to be utilized in conjunction with today's call and a copy of management's prepared remarks. These documents, in addition to our Form 10-Q 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. I refer you to our SEC filings for discussion of these risks, including the risk factor 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. 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, Nazik Keen.

Thank you, Joe, and welcome to those joining us today. This morning we reported solid third quarter results, which reflect revenue ahead of plan and strong business development activity, both of which contributed to the improved outlook for fiscal year 2023 and further builds momentum as we enter fiscal year 2024. Before we review the quarter, however, I would like to continue a practice we began last quarter. I want to recognize a member of the SAIC team whose accomplishments reflect the values of our organization and contribute directly towards executing our strategy to drive long-term value for shareholders. In October, SAIC was recognized by Frost and Sullivan as a JADC2 company to watch and is one of only three companies named as being a provider of both services and products in support of the JADC2 effort and the only company in IT services. Katie Sheldon Hamler, our leader in industry analyst relations, continues to ensure that our unique offerings are well understood by the market. She played an important role in our recognition by Frost and Sullivan, a resource relied upon by many of our customers. The recognition highlights the unique role SAIC can play as a trusted integrator and builds upon other successes in recent years in executing on our JADC2 campaign, which is summarized on slide six of the presentation. Two recent accomplishments serve as solid platforms for further JADC2-related growth, the first being one of two IT solutions providers named to the five-member ABMS Digital Infrastructure Consortium, and the second, a key $100 million JADC2-related award won in September. With this momentum, we are very proud of our leadership position in the JADC2 mission area, as this is critical to our national security and an integral part of our growth and GTA strategy. Now on to review of our third quarter financial results. We reported revenues of $1.9 billion, approximately 1% growth as compared to the prior year. We were able to overcome pressures from contract losses with new business wins and a continued focus on driving on contract growth. Our revenue performance year to date contributes to our ability to increase guidance for this year as outlined on slide 12 of the earnings presentation. I'm pleased with our program execution year to date, which contributed to the solid margin performance in the quarter. We remain on track to meet our full year margin guidance of 8.9% and expect to see modest margin improvement in fiscal year 24 with further progress in fiscal year 25 and beyond. Our focus remains centered on driving long-term value for our shareholders, which we believe can be best accomplished by positioning the business to deliver sustained organic growth, improving margins, and deploying capital based on the highest ROIC. Given the importance we place on capital allocation as a strategic priority, I'd like to spend a few minutes reviewing our approach to capital deployment. Our first priority for cash flow is to invest internally to support future growth. Over the past 24 months, we have continued to refine our process to ensure that our internal investment dollars are allocated to markets and strategies that will produce the best long-term return for our shareholders. We see evidence of this priority in our pipeline, as represented on slide 11, which continues to expand with disproportionate growth in our GTA area of focus. With the excess free cash flow generated, we will then deploy capital in ways that maximize long-term ROIC amongst various options, including our share repurchase program, dividend, debt reduction, and M&A. Over the last few years, our capital deployment has skewed more towards M&A, with roughly two-thirds of capital going towards acquisitions, with the remainder returned through dividends and share repurchases. Based on the current market conditions and competitive landscape, we expect capital deployment to be focused more towards returning capital to shareholders, while opportunistically leveraging M&A to add capabilities, solutions, or technologies where and when we can accelerate our growth strategy. Our April 2021 acquisition of CoVerse is a good example of this, as the capabilities acquired have produced true differentiation in our solution and served as a key contributor in winning over $300 million in total contract value since we closed the transaction. Our current pipeline includes over $6.5 billion of contract value, where we expect CoVerse to serve as a key differentiator in our AI solution. As I said in our earnings release, aligning capital allocation with long-term shareholder value creation is our focus. Our results year-to-date and outlook for the next year reflect our commitment to this strategy. As I close out my remarks and reflecting upon the season, I would like to take a moment to extend my sincere appreciation to our SAIC family. Your contributions, as demonstrated every day with your dedication to our nation and customers' missions, your engagement in the communities in which you live and work, and your support to each other is never taken for granted. I thank you all for what you do for SAIC. And to all of you that continue to take an interest in SAIC and participating in our call today, I wish you a very happy and healthy holiday season. I'll now turn the call over to Prabhu to discuss our financial results and increased guidance.