Science Applications International Corporation

Good day and thank you for standing by. Welcome to SAIC's fourth quarter fiscal year 2026 earnings 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 the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising 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'd now like to hand the conference over to John Raviv, Vice President of Investor Relations. Please go ahead.

Good morning, and thank you for joining SEIC's fourth quarter fiscal year 2026 earnings call. My name is John Raviv, Vice President of Investor Relations, and joining me today to discuss our business and financial results are Jim Regan, our Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the quarter that ended January 30th. 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. In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information for investors. These non-GAAP measures should be considered in addition to, and not a substitute for, financial measures in accordance with GAAP. A more fulsome explanation of these measures can also be found in our SEC filings. It is now my pleasure to turn the call over to our CEO, Jim Regan.

Thank you, John, and thanks to everyone for joining our call. I'm happy to be here as CEO, and I'm grateful to our board, to our team, and to all of our stakeholders for the faith that they've put in me to continue the critical work of sharpening our focus, strengthening our execution, and driving better results. After a thorough search for a permanent CEO by a leading national executive search firm, the board concluded that, among other things, maintaining continuity and leadership, along with deep industry knowledge, was essential to SAIC's long-term success. After careful consideration, they selected me for the role. And honestly, when I stepped in as interim CEO in October, I didn't expect to enjoy the role as much as I have. One of the most rewarding aspects has been working alongside an outstanding team, supporting critical customer missions, and creating value for our stakeholders. This includes my partnership with our CFO, Prabhu Natarajan, whose leadership has been invaluable. So while accepting the permanent role was not my original intention, I'm humbled and honored to have this opportunity. Since joining the board in 2023, my appreciation for SAIC's past achievements, current strengths, and future potential grew even deeper. With a career focused on operational excellence and value creation across this industry, I'm excited to continue building on our strong foundation to deliver meaningful results to all of our stakeholders. FY27 is a year of commitment. We are committed to our strategy to align and focus the portfolio. We are committed to improving our internal processes and external results. And as always, we are committed to serving our customers' most important missions, including elevated operational tempo around the globe. The tragic reality of war underscores the importance of mission expertise and customer intimacy that companies like SAIC have cultivated over many years. It also demands that our industry continue to invest and innovate to deliver capabilities and capacity. This is what we've done for decades, and this is what we will continue to do. SAIC's legacy of innovation and commitment to high-value customer priorities are valuable assets. At times, we may have struggled to convert these assets into consistent performance, but we're making discrete changes across the company to improve our results. I want to focus briefly on business development, where we recently hired a seasoned chief growth officer to the leadership team to prioritize BD and drive higher win rates for recompete and new business. This involves being selective as we approach cost-plus, less differentiated work. and it means leaning into the pursuit of opportunities where we have a greater right to win and higher rates of customer retention. This is addition by subtraction. Being selective in some areas frees up resources to pursue others. This means that we're going to be more focused with our bidding in FY27, and we're now aiming for $25 to $28 billion of submissions where we expect to support our dual goals of growing the top line and improving margins. The team is also performing well on our existing book of business, removing indirect costs and achieving higher growth in higher margin programs. This supports double-digit margins going forward. And as I said last quarter, we're committed to building on this progress in three ways. First, sharpening our focus on execution to increase capacity for investment in the business. Second, more efficiently deploying our financial resources to drive growth. And third, prioritizing yield and bid quality across our business development function, which taken together enables us to inject speed and innovation into our core capabilities to drive better growth and continued margin expansion. Turning to results, as we discussed in our pre-announcement last month, fourth quarter revenue was below our initial expectations, largely due to procurement delays and customer disruptions as the environment continues to be uneven. However, I'm encouraged by our margin performance despite this top-line choppiness with FY26 margin of 9.7%. And we see improvement ahead as we guide to 10% adjusted EBITDA margin at the midpoint for FY27, the first time the company is guiding to double-digit margin on a full-year basis. Cash flow continues to be exceptional thanks to efforts across the organization. And despite revenue fishing about 5% below our initial guidance from last year, our free cash flow exceeded our guidance by 10%. This demonstrates strong execution as well as the resilience of our business model. We expect another year of organic contraction in FY27 largely due to recent recompete losses in the large enterprise IT market. While we're encouraged to hear senior leaders emphasize fixed-price, outcome-oriented contracting, we have yet to see these laudable goals translate into reality evenly across our customers as some continue to use acquisition approaches where it's hard to differentiate. Instead, we are focused on opportunities where clients establish clear outcomes that enable SAIC to deliver innovation and measurable value throughout the life of the program. Across our civilian enterprise IT portfolio, these principles have driven stronger performance and elevated win rates. Our successful work with Treasury, Commerce, Transportation, and the State of Texas demonstrates our cost-effective strategy for modernizing and supporting vital networks. By continually evaluating new technologies and delivering enhancements, we sustain long-term partnerships, like the State Department's Vanguard program, which we've supported for 15 years. Looking ahead, we're collaborating with clients to pilot and implement AI-powered agents to stabilize and secure critical networks. The speed of these innovations is essential for helping our customers address the evolving threat landscape and meet affordability objectives. While this large enterprise IT market has weighed on our results, it's a shrinking piece of the pie, from 17% of company revenues in FY25 to an expected 10% in FY27. And we have good visibility into most of this remaining portfolio. It includes the T-Cloud takeaway, which has four years of performance remaining, and includes the Vanguard program, which is performing exceptionally well. These are both fixed-price, or T&M, enterprise IT contracts, the kind of work where we can differentiate and have the greater right to win. In the meantime, we continue to be excited about what made SAIC great to begin with, delivering innovative science, technology, and engineering solutions in support of the security of the United States and its allies. For instance, our GMAS program sustains and upgrades radars critical to homeland defense. Our DHS work delivers integrated hardware and software solutions to help secure the border. Our JRE data link router provides real-time battle space awareness. Our recent COBRA and 10-cap HOPE awards support multi-domain war fighting by enabling rapid technology insertion, integration, and innovation. and our munitions programs enhance combat capability and capacity. These are all customer priorities for securing the present and winning the future. We're also investing in areas with the highest and clearest demand signals, whether it is expanding production capacity on key programs or investment for greater innovation and differentiation. We are currently engaging with customers at the highest levels to increase our throughput across multiple efforts. And our continued focus on executing against the $100 million in cost reduction targets is expected to provide us with operational and financial flexibility to continue to invest in areas with the greatest return potential while continuing to improve our margins. Our recently announced Enterprise Transformation Initiative is the first time the company has done a bottoms-up review of its processes and procedures since the split in 2013. We have some of our best people committed to this project, which should result in a more efficient SAIC with increased investment capacity to support innovation, growth, and margins. We're also encouraged that we will be making this journey in a supportive budget environment marked by large appropriations already in place with expectations for further budget growth ahead. I can speak for our board in saying that we see significant opportunity to drive value for our shareholders, create greater opportunities for our employees, and most importantly, continue the mission of supporting our customers and our country. And with that, I'll turn the call over to Prabhu.