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SAIC, Inc. (SAI)

Q3 2011 Earnings Call

December 8, 2010 5:00 PM ET

Executives

Paul Levi – Senior Vice President, Investor Relations

Walt Havenstein – Chief Executive Officer

Mark Sopp – Chief Financial Officer

Analysts

Jeremy Devaney – BB&T Capital Markets

Jason Kupferberg – UBS

Cai von Rumohr – Cowen and Company

Rica Mendoza – JPMorgan

Edward Caso – Wells Fargo

Tim Quillin – Stephens Incorporated

Eric Leeper – Pacific Crest Securities

Bill Loomis – Stifel, Nicolaus

Presentation

Operator

Good afternoon. My name is [Regina], and I will be your conference facilitator today. Welcome to SAIC’s Third Quarter Fiscal Year 2011 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)

Today’s conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call, Paul Levi, Senior Vice President of Investor Relations. Please proceed, sir.

Paul Levi

Thank you, Regina and welcome everyone. Here on today’s call are Walt Havenstein, our CEO; Mark Sopp, our CFO and other members of our leadership team.

During this call, we will make forward-looking statements to assist you in understanding the company and our expectations about its future financial and operating performance. These statements are subject to a number of risks that could cause actual events to differ materially and I refer you to our SEC filings for a discussion of these risks.

In addition, the statements represent our views as of today. We anticipate that subsequent events and developments will 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.

I would like now to turn the call over to Walt Havenstein, our CEO.

Walt Havenstein

Thank you, Paul and good afternoon, everyone. During our third quarter, we continued to make progress in implementing our strategy. As you will recall, our strategy anticipated ever-increasing headwinds in our government market and considering that, our belief of the importance of expanding our business development efforts. These efforts are succeeding.

We continue to expand our pipeline of new opportunities and the volume of our submitted proposals and wins have increased at double-digit growth rates over a year ago. That said, the market environment in terms of generating revenues has proved more difficult than anticipated.

That environment continues to be challenging and is manifesting itself in unexpected delays and a longer cycle for the conversion of awards to revenues which has led to growth below my expectations. For the call today, I’ll provide highlights of our recent business development results, cover market conditions and ongoing efforts to implement our strategy and close with acquisitions and recognitions. Then Mark Sopp will provide a recap of our overall financial performance and outlook.

Regarding our overall business development results, bookings totaled $3.1 billion in the third quarter, with a book-to-bill of 1.1. On a year-to-date basis, bookings are up 14% over the first three quarters of last fiscal year and book-to-bill is 1.1. We ended Q3 with $16.3 billion in total backlog of which $6.3 billion is funded backlog, an increase of $500 million during the quarter.

As mentioned in my opening remarks, we are continuing to expand the volume of submitted proposals. Year-to-date submittals for definitive delivery contracts are up $5.4 billion or 28% compared with the same period a year ago, reflecting our more aggressive business development objectives.

We began the third quarter with $18.8 billion in outstanding submittals for delivery -- for defined delivery and IDIQ contracts combined. During the third quarter, we added $16.5 billion in new submittals, leaving us with $23.1 billion in submitted proposals awaiting decisions at the end of the quarter. That’s up $4.3 billion from last quarter and up 48% compared with a year ago.

Over 50% of the $23.1 billion is for non-IDIQ opportunities. In addition, on a year-over-year basis, our pipeline is up about 30%. The combination of increases in outstanding proposals and new business pipeline are the engines for future growth in this challenging environment.

In terms of key wins in third quarter, SAIC won the NASA information technology infrastructure integration program. This is a follow-on for enterprise applications work performed by SAIC under the Unified NASA Information Technology Services or UNITeS contract on which SAIC has been the prime contractor since January of 2004.

Under the I3P EAST contract which we just won, we will provide all the services necessary to operate and maintain NASA’s set of integrated enterprise applications systems supporting all 10 NASA field centers, NASA headquarters in Washington D.C. and the NASA shared service center in St. Louis, Mississippi.

This potential $321 million recompete win underlines our competitive strength in a challenging procurement environment and illustrates the high quality of our past work and ongoing relationship with NASA, a key long-term customer who we look forward to serving in this and other significant capacities for many years to come.

To put our business development performance in context, I think it’s important to share with you that we have achieved the third quarter book-to-bill of 1.1 despite market headwinds that are buffeting our fast-growing pipeline of $100 million plus opportunities. Many of those on the call today joined us for the investor conference we held in early October.

At that time, we said we had won 21 $100 million plus opportunities in FY’11, through 7 October. And we expected decisions on 41 more by the end of the year. Since then, two of those 21 wins are in the stalled status, one due to a subsequent competitor protest which still remains unresolved and the other simply due to a lengthy and ongoing delay in getting a signed contract in place.

Read the rest of this transcript for free on seekingalpha.com