Science Applications International Corporation

Good day and thank you for standing by. Welcome to the SAIC FY 2025 Q4 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, please press star 1-1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Joe DiNardi, Senior Vice President, Investor Relations and Treasurer. Please go ahead.

Good morning, and thank you for joining SEIC's fourth quarter fiscal year 2025 earnings call. My name is Joe DiNardi, Senior Vice President of Investor Relations and Treasurer. And joining me today to discuss our business and financial results are Tony Towns-Whitley, our Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the fourth quarter of fiscal year 2025 that ended January 31st, 2025. 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. 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. It is now my pleasure to introduce our CEO, Toni Towns-Whitley.

Toni Towns- Thank you, Joe, and good morning to everyone on our call. I want to start with a heartfelt thank you to my colleagues at SAIC for their focus, dedication, and empathy amidst a dynamic operating environment for the company and our customers. The strong financial results we delivered to close the year reflect our commitment to driving improved mission outcomes for our customers. I'll now provide an update on current market conditions and our perspective on the risks and opportunities from the administration's focus on accelerating the deployment of technology to drive greater efficiency across the government. To date, the financial impact to SAIC from recent executive orders and program cancellations across the government has been nominal, and our conversations with the administration to date have been productive. However, given how dynamic the environment has been, we believe it prudent to be prepared should conditions change. Prabhu will discuss in greater detail in his remarks some of the actions we have taken to date. While our base case does not assume a meaningful change in the size of our addressable market in the coming years, we do expect changes to the procurement environment that will place a greater emphasis on mission criticality and the infusion of cutting-edge technology, as well as outcome-based contracting. We view this as an acceleration, perhaps a rapid acceleration of prior trends, and one that our strategy and investments are designed to address. On slide four of our earnings presentation, we have shared several examples of programs which demonstrate our ability to build and integrate technology at the speed of the mission. I would like to call out a few of those examples today. For customs and border protection on the TAS PD program, we've rolled out facial and touchless fingerprint technology to over 5,000 ICE agents fully integrated with our cloud. machine learning, and AI capabilities to rapidly identify shipments and travelers more efficiently and accurately for additional inspection. We have redesigned the license plate recognition system to a flexible open architecture system, which has relieved the agency from legacy vendor lock and has made 700 of these deployed systems configurable to weather conditions across more than 100 of the busiest land border crossings and U.S. border checkpoints nationwide. For the Space Force, on our GMAS program, we have leveraged our digital engineering and on-demand software development solutions to sustain and upgrade various radar systems in the United States and around the world at rates quicker and cheaper than the legacy providers. Our performance has contributed to GMAS ramping to full run rate revenue faster than we had originally anticipated. In our commercial operating sector, we have a menu of offerings that customers can purchase on commercial terms. Revenue from our commercial operating sector has increased from less than $1 million in fiscal year 22 to approximately 45 million in fiscal year 25, and a goal of approximately 100 million by fiscal year 28, with healthy margins consistent with commercial terms. Our top-selling offering is our DevSecOps Sprints, which provide a skilled team of software developers ready to deploy, rapidly fix, and leave when the project is complete, typically in two-week increments, making them cost-efficient and agile effectively sprints as a service. What makes our teams uniquely positioned to deliver this value is our role as a mission integrator with intimate and irreplaceable knowledge of customer missions. In other words, gritty tech which underpins our legacy and undergirds our future. Lastly, we are currently assessing our cost plus portfolio to determine with some specificity and appropriate guardrails How much of this work could transition to fixed-type contracting over time? As we have shared, we have performed quite well within our fixed-price portfolio over the years, beginning with our acquisition of Unisys Federal in fiscal year 21. Our initial view is that a significant portion could migrate to fixed-price over time, assuming that the scope of work is well-defined and opportunities for cost-plus carve-outs still exist. This is an opportunity for our industry and the right thing to do for our customers. I'll now provide an update on our enterprise growth strategy and business development trends. We delivered net bookings in the fourth quarter of $1.3 billion and $6.6 billion in fiscal year 25 for a book-to-bill of 0.9. Not included in fourth quarter bookings since it was awarded subsequent to quarter close, SAIC won the $1.8 billion system software lifecycle engineering contract, which is the next iteration of the software lifecycle development program, one of SAIC's largest programs by revenue. I am proud of our team at Huntsville for their efforts in securing this important program and for the continuation of our long-term partnership with the Army. As we show on slide five, we submitted bids totaling $28 billion in fiscal year 25, well ahead of our initial plan of $22 billion. Our backlog of submitted bids increased to just over $20 billion at year end on a trailing 12-month basis, over half of which is currently expected to award over the next two to three quarters. Our win on SSLE and our strong backlog of submitted bids provide visibility into driving our book-to-bill to our target of 1.2 by the first half of FY26. Of course, subject to the caveat that timing may be impacted by the ongoing uncertainty facing our customers. While there have been some recent examples of procurement timelines being extended, it has not been broad-based. In addition, it is important to remember that procurement delays, while generally a headwind to bookings, also prolong recompete schedules such that the net effect to revenue and earnings will be far less material. I will now provide a review of our fourth quarter and full year financial results. We reported fourth quarter revenue of $1.84 billion, an increase of 6% year over year, driven mainly by new program wins and on-contract growth, which offset program completions. Full year fiscal year 25 revenue of $7.48 billion, represented 3.1% organic growth, which is at the high end of the guidance we provided at the start of the year. Fourth quarter adjusted EBITDA of $177 million resulted in a margin of 9.6%. For the full year, adjusted EBITDA of $710 million produced a margin of 9.5%, which was 20 basis points ahead of guidance due primarily to strong program performance and lower incentive compensation expense compared to the prior year. Adjusted diluted earnings per share was $2.57 for the fourth quarter and $9.13 for the full year, benefiting from the strong operating performance and a lower effective tax rate. We delivered free cash flow of $236 million in the fourth quarter and $507 million for the year, resulting in free cash flow per share of just over $10. As Prabhu will discuss, We expect to achieve our target for free cash flow per share of $11 in fiscal year 26 and $12 in fiscal year 27, and believe we can accomplish this in various revenue scenarios. Again, I want to thank everyone at SAIC for the dedication they've shown to the company, one another, and our customers. With that, I will turn the call over to Prabhu.