Good morning and thank you for joining SAIC’s fourth quarter and full fiscal year 2017 earnings call. My name is Shane Canestra, Director of Investor Relations. And joining me today to discuss our business and financial results are, Tony Moraco, our Chief Executive Officer; Charlie Mathis, our Chief Financial Officer; and other members of our management team. This morning we issued our earnings release which can be found at investors.saic.com where you'll also find supplemental financial presentation slides to be utilized in conjunction with today’s call. Both of these documents, in addition to our Form 10-K to be filed soon, should be utilized in evaluating our results and outlook along with information provided on today’s call. 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 a discussion of these risks, including the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q. In addition, these 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. In addition, we will discuss non-GAAP financial measures and other metrics, which we believe provide useful information for investors, and both our press release and supplemental financial presentation slides include the reconciliations to the most comparable GAAP measures. It is now my pleasure to introduce our CEO, Tony Moraco.

Thank you, Shane, and good morning. SAIC's fourth quarter and full fiscal year 2017 results demonstrate continued execution of our business strategy and delivery on our shareholder value proposition. Charlie will discuss the financial results in detail, but I'd like to summarize the fourth quarter and provide highlights from fiscal year 2017. Fourth quarter revenues of approximately $1 billion demonstrate contraction of 4% as compared to the prior year quarter as bookings and conversion of revenue only partially offset isolated contract reductions. Adjusted EBITDA margin of 7.1% demonstrated SAIC’s ability to effectively manage our investments, costs and profitability. For full fiscal year 2017, revenue of approximately $4.5 billion reflects 3% total growth and 2% internal revenue contraction over the prior year. While below our long-term target of annual low single-digit internal revenue growth, SAIC’s diversified contract portfolio was resilient against several market challenges and remains a stable portfolio well-aligned to market demands. Full fiscal year adjusted EBITDA margin was 7.4%, excluding acquisition and integration related costs. This represents a 20 basis-point increase from the prior year in alignment with our long-term margin improvement target. Fiscal year 2017 adjusted diluted earnings per share was $3.35 and full year free cash flow of $258 million was significantly above our communicated target, and at the heart of our shareholder value proposition. Underpinning these results is a solid foundation of contract performance and continued execution of our business strategy. We continue to be confident in our alignment of SAIC’s capabilities to market needs and stand ready to assist customers as they execute their mission objectives. Regardless of a speculation about changes in federal government budget priorities, our overall market remains large, attractive and recurring with the potential of an improved outlook. With support for increased military readiness, SAIC is well-aligned to respond with offerings…

Thank you, Tony, and good morning, everyone. During my remarks, I will primarily focus on SAIC’s fourth quarter performance with references to full year results from specific areas. Our fourth quarter revenues of approximately $1 billion reflect contraction of 4%, as compared to the fourth quarter of last fiscal year. Revenue performance was impacted primarily due to one less productive day, reduced volume from our AMCOM customer contracts, the recompete loss of an IT integration program for the Department of Homeland Security and delays on the Marine Corp IT services program. These decreases were partially offset by revenues on previously awarded programs such as ACV and GSA GEO. Operating income of $61 million in the fourth quarter resulted in operating margin of 5.9%, up from 5% in the prior year quarter, primarily due to lower acquisition and integration expenses, lower intangible amortization and additional cost savings initiatives. These impacts were partially offset by higher bid and proposal investments to support our strong pipeline of contract opportunities. Fourth quarter EBITDA as a percentage of revenues was 7.1% and is typically our lowest margin quarter of the year due to holidays and associated employee vacation time. This resulted in full fiscal year adjusted EBITDA margin of 7.4%, a 20 basis points increase from the prior year and meets our long-term target of 10 to 20 basis points of annual margin improvement. This improvement was accomplished while increasing our investments and business development activities. Net income for the fourth quarter was $36 million and diluted earnings per share was $0.79 for the quarter, up 7% from adjusted diluted earnings per share in the prior year quarter. The effective tax rate for the quarter was approximately 30%, which includes the finalization of research and development tax credit reported last quarter. With regard to our…

Thanks, Charlie. I would like to announce that our Annual Shareholder Meeting will take place on June 7th. In a change from historical practice, we will be conducting a virtual shareholder meeting whereby we will no longer conduct an in-person shareholder meeting at our corporate headquarters. We rather encourage all shareholders to participate online. Instructions on how to participate virtually will be included with the proxy voting ballot as well as on our investor website. In conclusion, SAIC is well-positioned as a result of the accomplishments in fiscal year 2017 and continues to be a market leader in the federal government services market. The talented women and men of SAIC provide our customers with the essential skills to meet our customers’ most difficult challenges, and I thank them for their dedication to SAIC and our country. Operator, we are now ready to take your questions.

Thank you. [Operator Instructions] And we’ll take our first question from a Jon Raviv.

Hi. Good morning, guys. Charlie, could you clarify just some of the cash flow dynamics this year and next, specifically how much of the FY17 onetime items reverse in FY18? It sounds like we had a $20 million working capital benefit; I think had a $25 million payroll negative. If those reverse, it seems like free cash flow should be flat year-over-year, but I think I just heard you say $220 million. How does that compare to what the target was for this year which is $240 million underlying? Sorry for the long question, but can you just sort of bridge all those moving pieces for us?

Yes, I would be happy to. So, let me start with the 240 that is $240 million cash flow target that we gave. We had an extra week of payroll of roughly $25 million. So, the fiscal year 2017 target was $250 million. It came in at roughly $260 million for 2017. $20 million of that excess in 2017 will reverse in 2018, so the $240 million free cash flow target in 2018 is now $220 million due to the reversal of the cash we received early; it’ s really timing related. Did that help?

Yes, that’s helpful. Thanks. And then, just on growth visibility. I know you reiterated your long-term targets. Can you just give us a sense for what sales are doing in FY18? And I know you don’t give specific guidance, but it sounds like you have a few headwinds. Could you quantify that lost IT recompete and then also give us a sense for the full year GAAP headwind from the extra week, also that’s another 200 basis points. So I guess the question is can GAAP sales grow or GAAP sales will probably be negative in FY18?

Yes, this is Tony, Jon. Right now, to one of your questions, the recompete is in $40 million, $50 million range year-over-year, so that will create a bit of a headwind going into this year. Our expectation is the FY18 revenue run rate is going to be comparable to 2017 results there is upside in Q3, Q4 in particular based on pending decisions, timing of future awards off of the submitted proposals that are up 15 billion. Third of those are in actual contract award and/or task orders, so confident that that pipeline is in place subject to some of the customer decision points. Long-term outlook still remains the same, low-single-digit growth is unchanged overall. The variability that we experienced year-over-year tends to still be around the supply chain and materials within the supply chain, as well as materials on some of the IT programs, that was a component of the variability year-over-year as well. So, we’ll track that. But overall, I’d say with the -- the strength of the portfolio where we sit today, even with the headwinds and the carryover that we should see FY18 results in line with 2017 and we still probably see that plus or minus 1% or 2 of variability based on materials in the contract award activity.

And we’ll take our next question Cai Von Rumohr.

Yes. Thank you very much. So, maybe getting back to Jon’s question on the cash flow, I mean if your DSOs go up to the low-50s, it looks like that’s a negative swing approximately $100 million. Is there something else that’s kind of getting you to this cash flow number, because it looks like that would be a pretty significant headwind?

Cai, this is Charlie. The DSOs going from 48 to 50 -- call it 50, that’s roughly the $20 million swing, not a $100 million. So that’s really the impact that we’re talking about; that’s $20 million.

Okay. And then, could you give us some color on your bookings outlook for the first quarter? I mean, we’re transitioning to a new administration. What are we seeing there in terms of first quarter, tone looks good and what do you expect later on in the year?

I think that we’ll see, as we’ve talked about with the transition, the larger deals there, I think there is still going to be a modest delay to probably mid-year to late Q2, because of the large programs, again submitted proposals in large part, those do require senior level support and award decision are really those that will be caught up until the undersecretaries administration show up and realign and reaffirm what their spending strategies are. So, I think we’ll still see a general flow of task orders, the ongoing activities will be supported and funded. Try and quantify that, we’ve seen 0.8, 0.9 tends to be something that’s sustainable given the short duration of some of those contracts. We tend to get those higher book-to-bills when the large multi-hundred million dollar contracts are awarded; we have a number of those in the pipeline. But again, I think those are the ones that are subject most to some delay and at this point, about a quarter or so. There are still some awards coming out. I think the outlook is consistent. And as we come out of a soft Q4 historically, Q1 may modestly improve from that but very much in line with -- probably below 1.0 for a quarter or so until you get some of those multi-hundred million dollar programs awarded and moving through the system. But overall, pretty much in line with general activities.

And the last one would be, there has been talk of some cuts to stay in health and human services et cetera. Could you talk about any exposure, your fed-civil business might have to proposed cuts? Thanks so much.

Sure. Well, we’ve talked a lot about the Department of State programs, large enterprise IT program, Vanguard. That we don’t think is subject to the budget cuts in the context of day-to-day mission operations and enterprise IT across the globe. So that’s the largest contract but I wouldn’t say that is subject to the budget cuts overall. We’re not highly concentrated in any one agency. So, we hear the various budgets today; we’re tracking that but we are seeing our customers continue to execute in the mission activities. The enterprise IT is very stable as operations and maintenance type of monies. I think the budgets cuts will likely come and new programs or potential strategic shifts through those agencies, but I’d say, our exposure is low; it’s across the various agencies and our alignment on what is more of an O&M, mission operation related work is pretty high and will offset any potential budget changes that would occur in say over the course of the next year. But a lot are expressed online on how the budget really takes shape and so lot of variances in that. But I think overall portfolio, I don’t see material swing one way or the other, given what we’re hearing today.

[Operator Instructions] We’ll take our next question from Ed Caso.

Hey. Good morning. It’s actually Rick Eskelsen on for Ed. My first question is just thinking about this current government fiscal year, if you get a near-term omnibus or even full year CR, do you think that there could be a surge in spending for the catch-up of stuff being delayed or do you see it as kind of continuing at the current pace?

I’d say probability wise, I’d probably lean towards those current pace than a big swing in the one flow or another. The CR itself has some constraints. We collectively manage through that each year. So, I don’t see there is going to be a fundamental problem in this year. The potential catch-up, if you will, will likely occur in our FY19. We may see some uptick as this government year ends, a lot of that is again subject to perhaps the defense bill. If that goes through and we clear a CR, that does probably free up more monies than full year CR. We’re hearing perhaps that there is some momentum to try and get the defense bill through given the administration’s priorities. But overall, I think we’ve got to an omnibus or CR, at least the impact to us will be relatively modest in this current fiscal year; we may some activities as the new government starts our Q4 and then both of the activities will probably ramp up on awards that we’ve already submitted, look at awards in FY19 where I think you’ll see any catch-up or increase in spend aligned with administration priorities.

Thanks. On the AMCOM Express, can you just give a little more details on the expectations and timing for the other two pieces, the big pieces that are moving to OASIS, I think the SSES and BSCS pieces?

Sure. The AMCOM contract under the current blanket purchase agreement, the collective task orders that we have represent few hundred million dollars a year and activities; those are the larger ones are going through a restructure. We’ve messaged on those going through the GSA OASIS contract vehicle. The customers executing their procurement strategies and we bid amidst of submitting proposals. We did, in fact, win the first large virtual systems task order that was a part of that reconstruction of the contract. That was protested. We expect that protest to resolve in the June timeframe. But we continue to operate under the BPA. We’ll continue support to the customer. We expect those large task order proposals and decisions to occur between now and into the summer months and will be posted by next quarter with more color on the results of those task order recompetes.

Thanks. Just last one going back on the free cash flow side. Can you just remind us, is there any working capital dynamic this year for the AAV and ACV? I think that there was a bill -- one was ramping down and the other was building last year, so what the dynamics look like for this year and how is that for the 220 you talked about? Thank you.

So, there’s the expectation of the AAV LRIP award in the fall of which, there will be some use of working capital for the full year, on the platform integration; there’s probably $10 million for the full year basis. The other thing I would like to say on the cash flow is our cash flow expectations do not change our capital deployment strategy at all. The amount of capital deployment for fiscal 2018 will be very similar to 2017 with dividends and the remainder to be considered for share repurchase.

And we’ll take our next question from Brian Ruttenbur.

Yes. Thank you very much. A couple of questions. First of all, let me summarize what you’ve told me and please tell me if I’m incorrect. Revenue in 2018 is going to be flattish; the tax rate, we should be assuming is 26% on the year, obviously, lower than that in the first quarter, 10% to 15%; share count will probably go down, depending on if you use the cash to make acquisitions or repurchase shares; your debt is going to go down by $25 million. I didn’t hear anything about operating margins in there, any kind of guidance; did you to talk about margins being up, down, flat?

Yes. We continue to have confidence in the margin extension in the 10 to 20 basis points, which is in line with our own range target. And the other substances are pretty close to what we described pretty close to your assumption base. Thanks.

Okay. So, in terms of, just switching gears now, I understand that vaulting on to some other questions. On the CR and Trump’s delays, you’re anticipating delays kind of through the first half of your fiscal year and then the second half things picking up. Is that primarily due to the CR, due to Trump, due to just breaking loose of some contracts? What is the primary driver in the second half of the fiscal year?

It could be tied to contract awards that are for proposal events submitted, that will be tied to the administration priorities making their way in budget proposals that move forward. That will provide confidence both for near-term spend and long-term spend for the larger programs that will be aligned with the arrival of let’s say mid to senior tier administration officials. So, those are being filled real time. So, it fluctuates a bit by agency; they are on slightly different pace. And for those reasons, we feel that Q1, Q2 for us is relatively steady and that we’re positioned to take advantage of the award activities in Q3, Q4 and that’s what we would expect possible revenue growth in those two quarters compared to the first two.

Okay. And then last question on interest expense. Have you assumed anything in your -- that you will have higher interest expense going forward or should we be using kind of where you shook out in the fourth quarter as kind of going forward level? I assume by paying down some debt you’re assuming maybe some creep in interest rates?

I would use the fourth quarter going forward rate, roughly 40 million interest expense for the year.

And we’ll take our next question from Krishna Sinha.

Hi. Thanks for taking my questions. Can you just elaborate, and sorry to beat dead horse on this. But, on the top-line, are you -- so, it sounds like a flattish guidance for next year. How does the prospect of a full year CR affect that? Are you kind of gunning for that outcome and therefore, you’re saying that things could ramp up, if you win more on the top-line on your projects? I’m sorry the $15 billion in bids outstanding that you have? And then can you talk about your trailing 12 months book-to-bill has 1.2, which is pretty solid. Over the next 12 months, are the programs that you’re winning longer ramping programs? I guess, why aren’t we seeing that translate into the top-line over the next 12 months based on your flat guide, can you just elaborate on that?

Sure. On the strong book-to-bills, there are some longer term programs, the AAV, ACV programs are good example of platform integration work, MK48 we announced last year. All those programs in the technology integration domain, and these engineering phases as they precede low rate and full rate production, it’s not the straight line as some of the traditional services work, where you can spread that contract value over the full tiered performance on a consistent way. So there are slower ramps on some of those larger programs. So, the conversion of a large book-to-bill is delayed slightly. The good news in that story though is that we have long-term backlog and well-positioned, by those contracts are also fixed price and that gives us confidence in alliance and margin improvement going forward. So overall, the long-term programs do stretch that book-to-bill to revenue but does provide higher confidence for execution in the long-run. From that we can then with the additional award activities -- kind of getting to your first part of your question on the impact of CRs and budgets that as we are operating in say relatively consistent task order flow on the CR, our expectations are that the budgets materialize, they’re approved that would tend to release the decision authorities and customers will begin to award some of those larger contracts or add new scope of work to our current contracts. So, that’s another dynamic that does pick up with some budget certainties. So, we see that again slight delays in the near-term but we do see the upside going forward. And then that’s why we still believe that we can align towards our long-term topline targets of low single digit growth and also have the opportunity to continue the margin expansion that we’ve done for last three years.

And we’ll take our next question from Tobey Sommer.

Thanks. In your prepared remarks, you talked about the investments you’ve made in bidding proposal. I was wondering if you can evaluate the level of investments there, seeing opportunities to increase it to kind of propel a higher book-to-bill and better organic growth. And then, I wanted to ask you again if you could talk about the sort of product and solutions business, the low rate production stuff that you are on now, are you seeing more opportunities for that with your business approach and kind of how do you think about reaching out to try gather more of that business.

Sure. First part of your question on the bid proposal spend, very comfortable with our investment portfolio, the balance between bidding proposal, the entire lifecycle is captured. So, I think we are well positioned with the very high quality business development pipeline, expect that to continue. We have aligned those bids against strategic filters in what we think are higher growth markets, those that are best aligned for our probability of the win. I think our competitive win rate in a couple of markets represents the quality of what we bid, aligned to our probabilities of win across the board. We also have the line of sight as a leading indicator that those bids also are at higher fees, so that again gives us some additional confidence on the margin expansion as well. So, I don’t see at this point -- and we came out and refined our bid and proposal investments in a pretty effective way. So, I don’t believe we need to make a significant shift in that. We do make modest shift now and then and we try also to fund, to kind of transition to your second question, to actually spend R&D money to make sure that we can in fact develop repeatable solutions that are part of this outcome, more outcome based service delivery. We’re honoring the services business model. We can increase repeatability of our solutions through R&D that in turn allows us to sell fixed price on a more regular basis, also contributes to our win rates and that we can be very aggressive in our task performance in our solution set and in turn bid and expect higher margins on that portfolio. So, that’s working together. We are focused on expanding that product and solution that we’ve had a consistent approach to broad, high-end services complemented by products and solutions that we sell. And I think that’s fundamental to our market brand as a technology integrator than just a service provider or system engineering organization. So, the product and solutions, we would expect to continue to explore, both on mission areas like the platforms we talk about with AAV and ACV and modernization of programs. That’s well aligned we think to the readiness initiative from the administration. On the defense side, we continue to see repeatable solutions, opportunities in enterprise IT in the form of cloud migration and cyber security solutions. So, I think we have good balance. So if we’re shifting in investments, I’d say it’s more on the solution side with consistent quality alignment on the business development side.

Thanks. If I could sneak in one more. Could you comment on what growth has been like and what the outlook is here in this fiscal year for cyber and the Scitor business?

Sure. On the cyber side, we’re seeing continued demand in the context of our enterprise IT work. Cyber security solutions tend to be bundled with some of those larger IT programs. Our recent contract activities and awards related to, CYBERCOM and market access as those cyber security programs also, I think, are maturing and customer demand is very high. Cyber is inherent and everything that we sell at this point with IT as well as on the mission side as everything is pretty well connected overall. Transitioning on the intelligence community side, as you know, the foundation through the market access and the Scitor acquisition, continue to expand that business development pipeline. We’ve expanded some scope on some particular contracts. We continue to do a sell-through strategy of legacy SAIC capabilities through those same Scitor channels and in turn, leverage the legacy Scitor experiences in some of the other programs, principally around state systems in a broad sense from system engineering to states operations.

[Operator Instructions] We’ll take our next question from Jon Raviv.

Hey, guys. Thanks for taking the follow-up. Just, Tony, can you just, forgive the question but just run maybe postmortem on the lost DHS IT recompete? What did you see happening there and what changes might have to be made to the business or is it a function of just the market and competitiveness? What do you think happened there?

That’s still a very competitive marketplace; companies are continuing to position. We’re up against competitive bids each and every day, probably 1,000 plus each year. So there’s a broad portfolio. I think it’s fairly balanced. We don’t win every contract. We have a very high recompete win rate, but it’s not 100%. And so, we do our best to stay aligned and task performance is still fundamental. Always disappointing when you lose a recompete, but in turn, I think we’re very strong in working towards aligning further with those customers. But restructuring of contracts, the market dynamics, we still see some large contracts being fragmented and computed differently. We still see various contracts coming together and consolidating. So the dynamics still occur and sometimes positions overall change. In this case, it was fairly steady and was a major restructure shift. But, I would say it’s just competitive dynamics that we are unfortunately not as successful awardee, but no real changes to the business overall or the portfolio as a result of that particular action.

Understood. And then just maybe one more, from your perspective philosophically almost, how do you feel like companies like SAIC or industry fit in the new DC environment? Business from the administration, what could that mean for policy changes that could impact your business? At the same time, the costs which could impact programs but on the flip side, how does SAIC help agencies save money?

So, I think philosophically the policy side, I think the sense of pro-business environment whether it be on tax or let’s say deregulation, the slowdown on added regulation in the context of compliance or the pullback of some compliance in let’s say contracting domain, we’ve seen a significant uptick in supply chain compliance management, which does affect us as a technology integrator. As you know, a third or so of our portfolio moves through that procurement side of the house. So that puts the cost demand on us; it’s a modest amount, but it’s tangible dollars that we would potentially be able to reinvest in areas like R&D as I mentioned earlier. So I think pro-business helps us. Tax, will affect everyone, so will be a net neutral to our peers. But I think the compliance side we’ll think advantage of that if that in fact does improve. With the budget challenges and some cost cuts, who’s a bill payer, who’s not, we still believe that we’re well positioned in the portfolio to be very responsive to the changing requirements. I don’t think we’re -- dependent upon areas where those cuts may go, given the diversity of the portfolio. So overall, I think there is from a private sector perspective, I think there is optimism that through this next few years that the administration is in a support of capacity. As we know and we see the overall budgets like 1% to 2% overall federal budget trend should continue. And so, we expect through Congress and the bills, we’ll track that day-to-day, quarter-to-quarter. But overall, the trend is slightly positive, consistent with and hopefully post sequestration slightly more favorable business environment in the private sector. And the government’s dependency on the private sector technology innovation to help them run their businesses each day, gain efficiencies in their IT systems and modernize the mission systems and capabilities that they need, I think the sector is in a very strong position going forward with modest upside growth if you will for the macroeconomics. We’ll get the management portfolio account to account as we do every day.

And that concludes today’s question-and-answer session. Mr. Canestra, at this time, I will turn the conference back to you for any additional or closing remarks.

Thank you, Maria. I would like to thank you very much for your participation in SAIC’s fiscal year 2017 fourth quarter and year-end earnings call. This concludes the call and we thank you very much for your continued interest in SAIC.

And this concludes today’s call. Thank you for your participation. You may now disconnect.