Science Applications International Corporation (NYSE:SAIC) Q3 2019 Earnings Conference Call Transcript

Dec 06, 2018 • 04:30 pm ET

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Science Applications International Corporation (NYSE:SAIC) Q3 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the SAIC Fiscal Year 2019 Q3 Earnings Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Shane Canestra, SAIC's Director of IR. Please go ahead, sir.

Executive
Shane Canestra

Good afternoon, my name is Shane Canestra, SAIC's Director of IR, and thank you for joining our third quarter fiscal year 2019 earnings call. Joining me today to discuss our business and financial results are Tony Moraco, SAIC's CEO; Nazzic Keene, our COO; Charlie Mathis, our CFO; and other members of our management team.

This afternoon, we issued our earnings release, which can be found at investors.saic.com, where you'll also find supplemental financial presentation slides to utilize in conjunction with today's call. Both of these documents, in addition to our Form 10-Q, that we filed this evening should be utilized in evaluating our results and outlook along with information provided on today's call.

(Forward-Looking Cautionary Statements)

In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information for investors in both our press release and supplemental financial presentation slides, including reconciliation to the most comparable GAAP measures.

It is now my pleasure to introduce our CEO, Tony Moraco.

Executive
Tony Moraco

Thank you, Shane, and good afternoon. As we prepare for the future, we continue to focus on delivering strong performance across our contract portfolio as evidenced by our third quarter results. SAIC's third quarter performance of fiscal year 2019 continues to reflect sustained revenue growth and improved profitability. In alignment with our long-term strategy, Ingenuity 2025, our current performance and investments for the future are guided by a disciplined approach to address a favorable market environment. Areas of strategic importance and focus are IT modernization, cyber security, data analytics, readiness and training, space systems and machine application development.

With the fifth consecutive quarter of year-over-year revenue growth, the third quarter delivered internal revenue growth of 3% as compared to the prior-year quarter. Year-over-year growth was primarily attributable to sustaining our recompete contracts combined with newly awarded contracts across the customer portfolio including fixed price IT modernization program in the state and local market and an IT support contract to a new customer to Department of Health and Human Services. Also providing growth in the quarter were increased orders in our supply chain portfolio supporting the military's increased focus on readiness and sustainment.

Strong adjusted EBITDA margins of 8.3% for the third quarter, up 90 basis points from last year, resulted from improved program performance across the portfolio. Strong cash flow performance was improved from the second quarter and a year ago in line with our expectations. Charlie will expand further on the financial results in a few minutes.

We continue to be in a favorable market as we begin the new government fiscal year. A majority of our customers are operating with appropriated budgets and continue their investment decisions with confidence from the end of government fiscal year 2018. Our customers that are operating