Science Applications International Corporation (NYSE:SAIC) Q3 2023 Earnings Call Transcript

Nazzic Keene: Well, I can certainly say that €“ I don’t know that I would use the word easy, but I will tell you that we’re focused on all of the above. And so you’re exactly right. there is multiple levers as Prabu outlined. We are continuously looking at our cost structure and ensuring that we are spending our precious dollars in those areas that support our strategy of sustained organic growth. And so that is ongoing and continuous. And we recognize that absolutely has to be a lever and part of conversations. As we think about the portfolio, GTA drives in general, greater profitability. So the further we mature our strategy in GTA as in balanced against core, we see that as an opportunity as well. And then even in the current €“ in the existing business, where there is opportunities to cross-sell solutions and bring some of the higher value work into the current contracts and drive on-contract growth, we look for those opportunities.

So I think it’s very fair to say we look at every lever and we never sit idle and assume that either our overhead structure is where it needs to be or our pipeline is where it needs to be. We are always looking at the opportunity to drive, again, consistent with our strategy, sustained profitable organic growth. But just please note that we are looking at all those levers.

Bert Subin: Thank you very much.

Operator: Your next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.

Sheila Kahyaoglu: Hi, good morning, guys. And thank you for the time. Maybe going back to Gavin’s question, I wanted to go over how you guys are thinking about the budget growth over the time frame sort of listed on Slide 6 €“ Slide 14. And then how you think about your different verticals growing, you had significant space in Intel awards, if you could maybe talk about your end markets and what’s driving that?

Nazzic Keene: Yes, a couple of comments. On the budgets, obviously, we will enter with the CR. It’s a little early to tell. But I think in general, we assume low single-digit budget growth at the macro level and in some areas growing more than others. And then obviously, the federal government is dealing with the same challenges that industry is and looking at inflation, which creates some headwinds on the budget as well. So I think, Sheila, in general, we’re not looking for any dramatic change in the budget environment. To the extent that good things happen, that’s good for industry. And to the extent that there is challenges obviously, we will navigate that. But I think it’s just fair to say, stepping back, looking at the macro view, we’re not seeing anything that we view as very significantly changes our approach to our strategy.

As it relates to our end markets, we do see modest growth opportunities across the portfolio. So obviously, increased focus at the federal level on DoD, improves our access to the DoD market, the balance of some of the civilian programs obviously helps as well and then, of course, Intel. And so I would say, it’s relatively balanced across the macro verticals that we operate in. But obviously, there is €“ as with any given portfolio, there is some pockets of the business that we expect more growth out of than others. And we’ve made reference to that as we think about the GTA areas as it relates to core. We expect and we position the company to grow across the board, but disproportionately over the next several years, we look the growth to come out of the GTA part of our portfolio.

Prabu, do you want to add anything?

Prabu Natarajan: That’s perfect.

Nazzic Keene: Does that answer your question, Sheila?

Sheila Kahyaoglu: Yes. No, that does. And then maybe going to free cash flow, if I could ask about working capital efficiencies, how you think about those? And then I’ll stop there because I’m being greedy, and I’ll get back in the queue.