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

Seth Seifman: I just wanted to ask one quick one, just to kind of level set about the growth expectation. And I think when you talk about the underlying market growing at kind of like this low-single digit pace, we look at the overall budget, that grew a little bit faster than that in €˜22. We will see what comes out of the Congress this month, but there is a decent chance it’s going to grow faster than that in €˜23. So, the €“ I guess the sort of low-single digit view, is that based on the fact that a lot of that budget growth is headed toward the weapons accounts whereas your view of your particular end markets and those of your closest peers is more in that low-single digit range within this kind of robust overall budget growth environment?

Prabu Natarajan: Yes. Seth, Prabu here. That’s a fair way to think about it. I would say the other dynamic that we are working our way through is there are sort of nominal growth rates in the budgets and sort of real increases in the budget ex-inflation. And so we tend to think about the world in sort of a qualitative way as well as a quantitative way. In real terms, we think of budget growth as being in that low-single digit growth rate, nominally, it’s a little bit higher, as you just mentioned. And the reality is, we are also seeing some element of, I would say, bias would probably be a harsh way to describe it, but certainly directionally, a view that it’s tending to go towards the hardware side, more than the services side or the system side recognizing that there is an incredible amount of demand for these underlying services on the services side. But that’s sort of our view of where the budgets are trending at least as we sit here right now.

Seth Seifman: Alright. Okay.

Nazzic Keene: I think one thing I will add is, we touched on this earlier. Certainly, the government is dealing with some of the impacts of inflation as well. So, we are continuing to watch that. And I know that Prabu reminded all of us early in the call, but we have tried to provide some early guidance into next year, but we look forward to the opportunity in March to further develop that. And certainly, there are some things that can change the guidance up or down. As always, that Prabu pointed out, but there are some very, very great opportunities. We have great pipeline that supports our ability to grow, and we have demonstrated the last couple of years to be able to grow in the low-single digits. So, we certainly wanted to put forth an early view of what we think next year looks like, but we will provide more color and more dimension on that as we get to the March timeframe.

Seth Seifman: Okay. Thanks very much. And then maybe as a really quick follow-up, Prabu, I think you mentioned in the press release year-on-year, there were some headwind EACs. Was that because they were exceptionally high in the year ago period, or is there anything about any particular contract performance in this period to be aware of?

Prabu Natarajan: Yes. Fair question. I think we had about negative 6% in EAC adjustments for the quarter. Most of it was related to a single program where the period of performance has ended. So, I would say not a recurring thing, but it’s in the process of cleaning up these things that we had the adjustment, but that was it.

Seth Seifman: Thanks. Okay. Thanks very much for taking my question.