Science Applications International Corporation (SAIC) Earnings Call Transcript & Summary

Terrific. Thank you all for being here and joining us, and welcome. We're delighted to have with us next presentation, SAIC. And from SAIC, we have the CFO, Prabu Natarajan. Prabu, welcome. Thank you for joining us. Appreciate it.

Thanks so much, Cai, for having us.

So you've been CFO a little more than a year. You joined from Northrop Grumman. What do you see as SAIC's strengths over that period? Like what maybe needs to be improved?

Thanks for the question, Cai. Maybe I'll start with the strengths. I think we've got an incredibly talented workforce who have adopted really to a very challenging operating environment, over the past few years especially. And it's really allowed us to deliver solid financial performance despite significant disruptions in our markets. I think Nazzic, our Board and the rest of the executive leadership team have demonstrated that we are committed to delivering stronger financial performance and not accepting the status quo. That's evident, I think, in the leadership changes we made up and down the organization, adjustments we made to our incentive comp, and we want to reward material outperformance. Our legacy in the area of systems engineering and now the investments we're making to strengthen our capabilities in digital engineering, I think, really do provide us some competitive advantages. So as I think about the strengths, those 3 come to top of mind here. I also think, as an organization -- and this is really important, we really embrace the challenge to improve execute with intensity. And it's really contributed to, I think, solid results over the last 12 months. But clearly, no one, I say no one, on the SAIC team is satisfied with that. We want to do better, and it's really been encouraging to see that being broadly embraced by the team. Now in terms of what we can improve, I'd be the first to say there are lots of things to work on. We have realized the primary way we can increase value for our owners is to deliver sustained profitable growth. We feel good about what we've achieved this year, and we expect continued growth over the next 12 months. But if we really want to achieve our goal of delivering above-average industry growth, I really think we need to improve our ability to win new business with differentiation. That's something we're constantly looking at as an area to improve. We work on every aspect of our business. It really is a journey with a goal of continuous improvement over time. We've communicated that the high 8% EBITDA margin rate is a level off of which we can grow over time. In order to accomplish that, we need to stay disciplined on cost and execute flawlessly. The pandemic and the labor market have introduced challenges that we're working through to ensure we're able to deliver on our margin goals. And finally, in terms of what we can improve, I'd say we expect to generate roughly $1 billion of free cash flow combined between FY '22 and FY '23. The long-term success of our business -- and I cannot emphasize this more. The long-term success of our business and the value we're able to create for shareholders are determined in large part by how effectively we can invest our capital, both organically as well as via M&A. That's an area where we can continue to improve, and we are putting some new processes, sort of a long response to it, but lots of things we do well and plenty of opportunity for continued improvement, Cai.

When you say processes, sort of, like I'm thinking of Parsons, their new CEO actually from internal CEO and a number of sort of fairly dramatic change, not huge but changes in the personnel, changes in the incentives. Have there been any sort of meaningful, notable, I would say, changes in personnel or changes in how your folks are compensated?

Yes. So we've made plenty of changes to the team around Nazzic and the rest of the executive team. We've also made material changes to the incentive comp plans. We outlined those actually at this forum about a year ago. And the 2 most noteworthy is really, I'd say, the introduction of a non-linear payout, which encourages material outperformance versus plan and tying our compensation to performance metrics relative to our peer set. These were important changes we made at the start of FY '22, and we began to see some success from those newer incentive comp metrics. We also introduced CSR elements for senior leadership to continue to bring an external perspective to our metrics and add more skin in the game, if you will, in the form of equity that is tied to performance. We want our team -- and I never get tired of saying this. We want our team to think like shareholders of this business over the long term. From a margin standpoint, we've made changes to ensure that our business development resources are focused in areas that provide an appropriate return and that we make investments in the areas where we want to be longer term. And we don't invest -- and this is just as important. That we don't invest in areas where we don't want to be in. That's hard for some, especially in this business, but I think it is a necessary part of the shift in the culture. Now three, we challenged our team to improve cash conversion and for SAIC to become the industry leader on that metric. We're not there yet. But obviously we've got a plan as to where we want to be. Now those are the few that I'd like to mention. But to be clear, and this is really important, our current financial performance, even FY '22, does not fully reflect the full impact of these really important process and personnel and incentive comp changes we're making. Making sure that we're investing in areas that generate the highest returns and tracking and communicating that over time, improving the quality of our pipeline, ensuring that portfolio is always optimally aligned with the strategy, it takes time for those benefits to show up. So I would say that our expectation for continued growth next year and a high 8% margins, of which we can grow over time, we expect that our strategy and the changes we're making and will continue to make will drive stronger performance in the future.

So when you mentioned non-linear performance, are you talking -- because we could measure performance by revenues. We can measure it by bookings. We can measure it by profitability. So any changes in terms of the weighting of those 3 in particular in the incentives that you've done or that you're still considering going forward?

So we -- this is about the time of the year where we do consider changes to our incentive metrics. About a year ago, we went to revenue, adjusted EBITDA and cash as our 3 metrics and we weighted them equally. And then we introduced other elements such as sort of peer comparability to the metrics. And we're always adding, as I said, a little more skin in the game for the senior leadership team so that there's almost higher reward for better performance against the peer set, but also candidly less of a payout for underperformance against the peer set. And I think those changes are starting to take root. As to what other changes we make, I think we wouldn't want to get ahead of our comp committee, but those are conversations we have every year with them around this time. And we're going to continue to ensure that we're leaning forward on comp so that the team up and down the organization understands that there is a reward for good performance actually and a better reward for better performance against the peer set. That's how we're thinking about it.

Right. Right. Do you feel that book-to-bill needs higher weighting? You've mentioned revenues, adjusted EBITDA and cash, but I think if 1 looks at your performance and say 1 area that you might improve, it would be really in kind of the capture element. Has that become a more important focus for you?

So we're doing a couple of things. As far as the metrics themselves are concerned, book-to-bill is not an incentive compensation metric. However, we are thinking about book-to-bill and capture metrics as an important part of the compensation scheme for folks that are in sales and business development. So there is sort of a nuanced approach for a subset of the organization that is responsible for capture. Now I think if I sort of step back and thought of our business development, I'd say it's a fair characterization to say that our experience this year was mixed. I think we certainly wanted to win more than we actually did. Having said that, I think we had some phenomenal book-to-bill quarters over the course of FY '21. And we're likely to finish the year on a strong note on book-to-bill. So I think we're doing the things we need to. I'd love to see the volume of the wins go up, frankly see us bid a little more. Even if that comes at the expense of win rates, I think we really want to ramp the volume of the things that we're going after and, again, making sure that the things we go after are core and very much in line with the strategy we've outlined.

Got it. So I think 1 of the challenges SAIC has had and the others have had that we talked before the meeting began is that you've been in an extraordinarily difficult environment. CACI and Booz both reported quite disappointing December quarters, lots and lots of headwinds and sort of a combination of customer delays due to the CR. And one that, sort of, I mean, a number of people have mentioned more is the DoD occupancy limits at the Pentagon and other facilities, basically creating a situation where, even if you've won the business, it's harder to kind of get it off the launch pad. So what's your take on all these issues? What's it going to take to get them resolved? And are we setting up for sort of worse results near term and then basically a real catch-up? I think it's quite confusing.

Yes. It is a complex operating environment and 1 of the tougher 12-months or so that we've seen in a fair amount of time. As you know, we report earnings on March 28. So vis-a-vis sort of our own Q4, I'd say, we'd be in a position to discuss that financial performance and outlook in greater detail on that call. On our Q3 call, just to remind folks, we guided to a top line of $7.350 billion to $7.4 billion with -- and we said there's a bias towards the higher end of that range. And that's really all we're going to say right now. We were, I would say, amongst a very small group of companies that did not take down guidance and, in fact, consistently raised guidance over the course of the year, I think a testimony to the resilience of the team and the consistency that we saw from the SAIC team in FY '22. If you look at the broad trends that we're seeing in the business, back to your question, over the past few quarters especially and really the trend across the industry, it's been somewhat lower-than-expected revenues, offset by higher-than-expected margins. And frankly, there have been a number of factors contributing to the dynamic, COVID clearly is 1 and all of the indirect effects stemming from COVID, including employee -- customer productivity, indirect costs, ability to attract and retain talent. Now we've got supply chain disruptions and, of course, the extended CR. So if you put all of that together, it certainly has made it a tougher operating environment. But I would just remind folks that we said $7.350 billion to $7.4 billion with a bias towards the higher end of the guide range, and that's really all we're going to see right now. I think it's a challenge. As we work through the current environment, I think COVID is going to be a significant factor in our lives. I said that in March of last year. I said this virus seems to have a step ahead of us at every turn. And I'm certainly of the view that we are going to see continued disruption from COVID in our lives. I think people are doing a phenomenal job making the best of what is a tough operating environment right now. But that's sort of how we see this. And I think, eventually, we'll get resolution on the CR, and we'll get some clarity on the funding side of the equation. There are some delays. We're seeing nothing structural or systemic. Things just seem to be taking longer than they should or they have in the past. But I think, candidly, the best that the teams can do is stay committed to what we need to go do, focus on the mission and execute and deliver to the ceiling that we have in front of us, and that's what we're really doing quarter in, quarter out.

Got it. So as you look forward, I mean -- so I think this is -- I guess, a fair question is not reporting, but just what percent of your revenues are up for recompete in '23? Is this an above-average year, a light year? And give us any color on the large recompetes or any large things we should be watching that you're not already the incumbent on?

Sure, sure. So I guess from a recompete perspective, we're seeing roughly 15% to 20% of our revenues next year coming from recompetes. And actually, I would say that's fairly consistent with where the historical norm has been for SAIC. FY '22 was actually a lower percentage year from a recompete standpoint. And so in some ways, we had less risks as we get into FY '22, then we have going into FY '23. So it's 15% to 20%. In terms of the specific things that are out there, I wouldn't want to get too specific other than to say we're waiting on the outcome of the NASA NEX protest. And we're not going to say a whole lot about it other than to say we're hopeful we'll learn in the next week or 2 on what happens there. The Vanguard contract with the State Department is one that is going through a recompete cycle right now. We're on year 12 or 13 of that 10-year contract. And it is going through a complex procurement process. So it will take some time for that to get sorted out. And then I would say the PVMRO business within the supply chain portfolio that is also going through a recompete cycle, less of a pressure on FY '23 revenue. I think we're going to be funded probably through the rest of the FY '23 fiscal year. But the outcome on the recompetes will potentially impact FY '24 and beyond. So those are probably the big ones out there. But again, as I said, 15% to 20%, it's hard to avoid the math, and we can algorithmically figure out what win rates are for recompetes and how much new business we have to go win. And so that's sort of how we think about FY '23.

Got it. So my understanding on Vanguard that it's going to be split into several pieces. So therefore, even if you win it, so to speak, it will be difficult to retain exactly the same amount of business you have today? Is that a fair assessment?

It's a little early for us to offer a ton of detail on it. There's still some questions in terms of our addressable work on that contract. I think it's a fair characterization to say it will have multiple pieces to it. And on balance, we expect the total pie to be bigger than where our current position is on that particular contract. We wouldn't expect that to get adjudicated until later this year, but we definitely expect to have some clarity by the time we go to earnings in Q2 or Q3 of this year. But it's a very complex procurement process and we're doing the best we can just like everybody else and all the competitive trades are happening as we speak. And I guess there's more to come.

Right . And then do you have something $720 million NASA recompete for Oms too? Is that expected in April?

We do -- we feel good about it. I think the process there has been delayed a little bit, which is why I didn't mention it the last time for the last question, rather. So I'd say it's probably more of an FY '24 event in all likelihood. But where we are right now, we feel good about that particular program.

Got it. And then you mentioned supply chain. I mean basically, you said supply chain margins are well below average, and you sort of want a good return. I know that's a capital-light business, but on the other hand, it's also a return-light business. So as you look at your business, is there any thought because I mean you could get above 8 plus quite easily just getting rid of that business. How do you think about that business in terms of adding to the value of the share of the SAIC portfolio?

Yes, you're exactly right. It is a capital-light business and our margins there are below our regular corporate averages for margins. So certainly, we have those conversations internally. Here's what I'd perhaps say about the supply chain business. So that business a few years back was about $700 million. And we disclosed that number in the past. We've also disclosed that volume from that business is around $600 million right now. So as we think about where the recompete cycles are, I'd say there's probably some legs for that business to grow. It is not bounced back as quickly as one would hope from COVID because COVID is still here with us. There is some disruption there. But that business is not contracting. It's flattened out and the volume from that business is fairly predictable. I've actually put publicly numbers like $10 million to $15 million a week, fairly predictable. A good week would be closer to $15 million, and an average week is about $12.5 million, and a bad week is $9.5 million or $10 million. So I mean, we could -- we've got 3 years worth of data that actually tells us on a weekly basis what volume in that business looks like. The DSO on that business, because it is capital-light, is fantastic. And therefore, as we think about all the trades involved in the picture, including the potential for near-term growth, I think we're comfortable with what we have there right now. But again, I think it's always an integral part of the conversation with Nazzic and the team here to talk about the portfolio in an active way. And we talk about other parts of the portfolio as well. So this is just 1 of many pieces we talk about. And we're always doing the trades internally and I guess there's nothing else to say at this point on that business.

So one of the things -- and refresh my memory because with all the companies I've done today, I forget exactly. I seem to remember you guys at 1 point laid out a number in the order of magnitude of $125 million impact from COVID. And I know people are sort of backing away from [ med comp ] because that's sort of -- it's always there. It changes, but it's sort of -- is that an issue like you've got $125 million in next year if basically Omicron goes off relatively early in the year, you pick up $100 million? Is that the right way to think about it or not? .

Yes. I mean, so it's really hard. The COVID pictures is simply complicated. I think what we communicated back in December was we are not expecting that business to bounce back, especially in FY '23. We are challenging the teams internally to deliver growth, sufficient to offset the weakness we may see from the supply chain business. So to me, I think that's sort of the rulebook and the playbook we have internally. As we quantify COVID headwinds, we're really talking about supply chain but it's frankly also become a little bit of Afghanistan, change in administration, broader supply chain. So it really isn't just about COVID and supply chain. It's 4 other things right now. So there's a certain commingling of it. Having said all of that, it is not our expectation that we will recover $125 million next year. I think we've been pretty clear about that. We're expecting some modest improvement from the business next year, but nowhere near the $125 million in tailwind potentially in FY '23. But we're optimistic about the business getting back to historical run rates over the next few years.

Got it. And then you've just mentioned Afghanistan. Has that -- pulling out of Afghanistan, is that an impact on you? I can't recall that you've mentioned details of that before.

Not a material impact for us, Cai.

Got it. And then there's been this talk of the focus shift from the Mid East, although it seems like whenever we try to shift the focus, it gets shifted back for us. But the shift in focus to China and a number of folks have talked about the potential depending on what happens in the Ukraine of sort of maybe more focus on Europe. Any of those sort of changes have a big impact on SAIC?

No, I would say not at this point. I'd say we typically end up working fairly closely with our customers on their missions. And I'd say that's sort of how we see this play out so far. I'd say near-term, probably not a material driver. Of course, the situation is fairly dynamic. And so we're going to monitor this with the rest of them. But at this point, probably not a significant driver. I think candidly, we know that threat levels are probably a better determinant of funding. And I think to the extent that we see the funding, we'll certainly see some benefit from it. But at this point, not a material driver one way or the other.

Got it. And hiring has become more complicated in the COVID environment. So what are you doing to get and keep the talent you need? Is this a limiting factor to your growth? Do you feel you're gaining share in terms of the talent you want?

Yes. So hiring in our markets and the skill sets that we want have become a challenge. And -- but it has been a strategic priority for Nazzic and the team for a couple of years now. So it's really not a recent phenomenon. I think you're right that COVID and the labor market tightness has certainly complicated the process a little more. We've adapted to that, I think, remarkably well by promoting flexibility, what we're really calling internally as bring on flexibility, keeping benefit costs flat, adding Juneteenth as a holiday and creating real flexibility for our employees on other days of the week. We truly understand that our employees have choices, and it is important for us to recognize that there's a real fight for talent out there. We're seeing some success, I'd say, from some recent investments we've made in talent acquisition. We saw some good progress on hiring trends to close out the year and it will obviously be an area of focus for us in FY '23. But we have to acknowledge that it is a tight labor market, and we are doing the very best we can. Finally, I'd say we live in a predominantly cost-plus program mix. And therefore, to the extent we are seeing higher labor costs, we candidly have the flexibility within the portfolio to be able to pass the additional costs over. And that's on the cost-plus side, and we continue to remain very creative on our fixed-price programs in terms of our labor and our solutions mix. So we're doing the best we can with the challenges in the labor market. It is tough, but I think the team is doing a really nice job. Again, pick your priorities, invest heavily and stay committed and keep the game plan simple because it is incredibly dynamic out there right now.

What about your geographic mix? What percent of your labor force is outside of the D.C. area?

Quite a bit actually, a fair amount, and we are going out of our way to not just talk to the folks internally but also with the customers to continue to have the flexibility to be able to staff and execute on programs on a remote basis. And if that's an evolution, we're not there. But we are making every effort to ensure that we are continuing to leverage the cost differential we have in different parts of the country so that we're more effectively providing the solutions that our customers need in a geographically differentiated way. And candidly it also gives our workforce the ability to flexibly work and execute on what they need to do. So we're trying to do it all. We're trying to be very creative about all of this. We've got focus on hiring teams and such. But again, proof's going to be in the pudding. We know how much head count we have to add over the course of the next 12 months. We've got some real, very specific plans on gross hiring, net hiring, attrition rates via multiple models. We know what the game plan has to look like. And if Q4 was any indication, I think we're getting our arms around the ramps that we need on head count to ensure that we continue to stay ahead on our organic revenue growth plan. So the team is actually coming well. But I'm never satisfied with the quarter's execution. We've got to do this consistently. And hopefully, we'll continue to do that in FY '23.

So when you say a lot of people outside of D.C., I mean, some people have said like, we have 50%. I mean, the number for a lot of these guys used to be like 70%, 80% in the D.C. area. I mean, can you quantify it at all? Is it about half outside of the D.C. area? Is it 20% -- I mean just rough...

It's probably over half outside the D.C. area.

Okay. Okay. That's good to know. That's good to know. And so 1 of the things you've done a good job on, SAIC is generating cash flow with mid-50s DSOs. Now you mentioned there's substantially better than in the supply chain business, which is a fair size. But I mean outside of the supply chain business, is it also like in the mid-50s or relatively close to that in total?

Yes. So our last reported DSO at the total company level was about 60 days. Now we do see opportunities to increase our cash flow power by improving working capital. We outlined a plan on the December earnings call, and we have a strategy and a set of goals and that we're executing too. Operating cash is an incentive comp metric. We have crystallized the objectives for the team down to the program working capital level. So our program managers are sort of incredibly engaged in driving better operating cash performance at the program level. And what we've done is therefore decomposed our working capital levers to a number of fairly specific things that the teams are working to execute. There are components of which that give us confidence that as we're executing to it, we can really improve free cash flow. We said about 10% in FY '23 and grow off of that at similar levels in FY '24. That's what we committed in our Q3 earnings call. And the team is executing well to the plan that we have outlined there. And look, I think, we're a good generator of cash, and we can do better.

Okay. And then so if we think about your net debt was 3.4% at the end of Q3. At what point do you feel SAIC will be ready to consider a more aggressive cash deployment?

Yes, yes, fair question. I'd say our [Technical Difficulty] with capital deployment right now is to invest in areas that provide the highest long-term rate of return. The first priority for us as a team is invest internally in the business and make sure those investments are always aligned with the strategy and in areas that provide the best opportunity for long-term profitable growth. As we then look at deploying free cash flow, our view continues to be that our valuation reflects skepticism from the market around our ability to generate sustained organic growth. We have confidence in our plans to do that, and we view repurchasing shares as providing a good return for our shareholders right now. We assess that. Having said that, we reassess it regularly. And if there -- if we see better uses for the cash, we will consider those. I wouldn't think our leverage as being the only gating factor on capital deployment. If by aggressive you mean perhaps M&A, that really has to offer a superior return for us and our shareholders over other uses of our capital, mainly kind of a repurchase program. So if and when it does materialize, we'll be incredibly opportunistic about it. But again, fundamentally, we're pretty confident we can grow this business, and we're confident in our ability to grow cash flow of this business. And we like to own our equity at these prices. And those are the best we made through the course of the first 3 quarters in FY '22.

Right. If you look at -- so a number of your peers have come out with 3 year. We feel that we can grow 5% to 6%, 5% to 8% over this period, organic growth. Are you guys thinking about -- I mean I assume internally you have a plan. Do you have, I mean -- any thoughts of -- at any point kind of laying out what the longer-term intermediate 2, 3-year growth plan might be?

Yes. So plenty of conversations and we do have solid internal plans that talk to what the team's aspirations are. And I think it's really important to be measured. We're not offering longer-term guidance on top line. I think we'll probably reserve the specific answer to your question for an Investor Day hopefully at some point in FY '23, COVID permitting. But I think we do have some tough internal aspirations, and that means we're going to stretch the team. And we're looking to consistently grow this business organically and improve margins and deliver, as I said, at least 10% improvement in cash over the next few years. And therefore, I think the focus is there. The intensity is there. And instead of putting targets like mid- to high-single digits or low-to-mid-single digits, suffice it to say we recognize where the market is going. We recognize what our peers are saying. And because we have incentives that are aligned to doing better than our peer set, I will reassure you and anybody listening that the commitment of the team is let's keep the focus on continue to grow the business and let's do this 1 quarter at a time, and that's where the focus is right now.

Got it. And when you also think of that period, your current net debt-to-EBITDA was 3.4% (sic) [ 3.4 ]. What's your target? What's the level -- I mean, because, obviously, your business is much more consistent cash flow. So what's your -- where do you think that, that could be comfortably?

Yes. I mean what we've shared in the past is we're targeting about a 3 turn and said there may be times where, candidly, we may be just under 3. There may be times where we're just over. We ended Q3 at about 3.4. And so as I step back about, the 3 handle is about the right -- feels like the right optimal capital structure for our business. But again, I'd say we're not being too dogmatic about it. And -- but again, we've got enough scale in the business, transactions that lever up the company to astronomical heights. We're not quite thinking about those things right now. We like what we're executing to, and we're going to stay committed to what we're doing right now.

Got it. And when you consider M&A, I mean, you've basically expanded the areas in which you're a player. I mean, Halfaker brought you into the health care area. Are there any areas you feel you might want to get into?

Yes. So I'd say it's -- broadly speaking, it really is our job as a management team to consistently assess whether we're in the right markets. And so you should really assume we're doing that on an active basis. But both in terms of strengthening our position in areas, health, for example, civil market, for example, there are areas where we continue to want to get stronger. But just as importantly, it is important to exit areas where we're not doing well. I think we owe this to our owners, our shareholders, to make sure we're thinking about that and hold a sixth sense. So we want to make sure that the businesses that we're in are strategically important. They allow us to generate solid growth rates. And frankly, they are the ones we want to invest in that will help us maximize value for our shareholders. We will not be afraid and we are not afraid of having those discussions internally and consistently strive to build a better portfolio because, ultimately, that gives you the best competitive advantage, I believe, over time.

Got it. And so we almost are through. But 1 last question is if a portfolio manager comes to you and says "Prabu, I'm looking at your industry. Why should I pick you over Leidos, Booz, whatever?" What's your argument from my dollars for defense IT they go to SAIC as opposed to someone else?

Great question, Cai. And we really do have this conversation, what truly separates us from the other players in the industry? So let me focus on giving you my perspective on it. So I'll focus on what gives me personally confidence in our ability to generate long-term value for our shareholders. So we're aligned with increasing demand from our customers to adopt and benefit from new technology. So secular tailwinds in our business mix, I believe, will help us. Two, we expect that we will continue to drive growth in our addressable market over time, which will benefit from us being able to offer the best solution at the right price in the markets we choose to be competitive. And that's really important. We have a remarkably dedicated group of employees who are navigating this journey with us. Three, we're actually getting really better at making choices on what markets to focus and where our investments should be targeted. That's a change in our process that we are committed to and the team has completely embraced. Fourth, we're incredibly clear, right, about the ROI from the investments we make, organic or inorganic, and we remain committed to thinking, and I've said this a couple of times, thinking like shareholders of this business. And I think it truly will separate us from companies in our space. We generate really strong free cash flow, over 10% of our equity value currently, as you mentioned. And we're very thoughtful about how we are going to deploy that free cash flow that we generate. And finally, here's what I would say we're very cognizant. And this is a mea culpa of sorts that we have frustrated investors at times over the past several years by underperforming and not meeting targets we provided. We are focused on improving both of these, both delivering superior performance and meeting the commitments that we make to our owners. That's worth a separate conversation in and of itself at some point. We are proud really of the journey we've begun and we will hold ourselves, I believe, accountable as we make the journey. So if I put all of that together, those are the reasons why we would say we're a good investment for somebody that doesn't know us and for our current shareholders because here are the things that we're committed to doing and we're executing with intensity. And we're truly committed to being transparent about the progress we're making, our successes and our failures and you will see Nazzic and I step up and say that worked and this did not worked. And that's what we're committed to doing, ensuring people have the transparency, so we can make decisions. So to me that's the reason I think investors should choose SAIC over other companies in our industry.

So 1 thing you've mentioned, I guess, a couple of times is making choices of what markets and with the idea that there might be portfolio shaping, I'm not going to ask you, are you picking this area, that area because, obviously, you wouldn't tell me or you shouldn't. But is there a reasonable chance over the next 12 months that you would sort of exit a business via a divestiture? I mean, because 1 way you can exit is just stop bidding on business.

Is there a reasonable sense? Sure. But I think we take those decisions incredibly seriously. We look at the return on the investment, alternative uses of the cash, delevering, buying back shares, all of that is in the trade space, inorganic M&A as a way to replace parts of the portfolio. So I think all of that is getting debated. Is there a reasonable chance that we might do something? Sure. But we never comment on what's the detail of that. But that is -- I think we owe that to our own shareholders to ensure we're always crystallized about the portfolio we have.

Terrific. Well, thank you so much for being with us and very insightful comments and very honest also. So I think that was great. Thank you.

Thanks a lot for having us, Cai, and I wish you the best. Thanks so much.

Okay. Likewise, likewise.