Good day and welcome to the SAIC Fiscal year 2017 Quarter Two Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Paul Levi, Investor Relations. Please go ahead..

Good morning and thank you for joining us for SAIC second quarter fiscal year 2017 earnings call. This morning, we issued our earnings release. And joining me today to discuss our business and financial results are Tony Moraco, our CEO; and Maria Bishop, Interim CFO.

Today’s call is being webcast at investors.saic.com where you will also find the earnings release and supplemental financial presentation slides to be utilized in conjunction with today’s call.

Both of these documents, in addition to our Form 10-Q to be filed soon, should be utilized in evaluating our results and outlook along with the information provided on today's call.

Please note, 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 the statements made on this call.

I refer you to our SEC filings for a discussion of these risks, including Risk Factor section of our annual report on Form 10-K and quarterly reports, Form 10-Q. In addition, the 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. It is now my pleasure to introduce our CEO, Tony Moraco..

Thank you, Paul, and good morning. SAIC continued its solid customer performance and continued delivery of shareholder value creation in the second quarter of fiscal year 2017. Second quarter revenue of approximately $1.1 billion is essentially flat when compared to the prior year quarter.

Revenues from the ramp up of awarded programs in the federal civilian portfolio offset lower supply chain material volumes and the expected ramp down on our Marine Corps Assault Amphibious Vehicle, or AAV contract. Adjusted EBITDA margin was 7.8%, excluding acquisition and integration related cost.

This represents a 30 basis point improvement in our margins from the prior year quarter. Adjusted diluted earnings per share increased to $0.85 for the second quarter and operating cash flow of $23 million provided continued confidence in the execution of our capital deployment strategy.

Our view of the overall market remains unchanged, with customers executing their mission priorities in a stable budget environment, with consistent demand for the services that SAIC provides. However, as discussed previously, there are continued market and industry challenges we are addressing.

These include small business set asides, slow government acquisition cycles and related protest activity, and high demand for critical skills such as cyber and cleared personnel.

As we approach the end of September, we expect to see normative level of government award activity and expect to start the government fiscal year honoring and continuing resolution. We continue to expect modest growth in our markets for the next few years, consistent with our long-term financial targets.

Contract award activity of $1.3 billion in the second quarter translates to a book-to-bill of $1.2 billion. This is the strongest second quarter award performance we've had since separation.

The strong bookings in the second quarter contributed to a year-to-date book-to-bill of $1.1 billion, reflecting continued execution of our protect, expand, and grow strategy and customer recognition of SAIC's differentiated capabilities. Second quarter bookings included the $485 million NASA EAST 2 recompete award.

We were also successful in a recompete award of $86 million task order to provide the U.S. Air Force with technical, analytical, operational, and planning and subject matter expertise. Also contributing to this quarter's bookings were $221 million of task order awards on our U.S.

Army AMCOM EXPRESS vehicle, $130 million of orders in our supply chain business, and $115 million of Intelligence Community awards. The majority of these awards protect our revenue base, but with some new expand and grow opportunities to support modest growth.

As a result of strong bookings in the second quarter, SAIC's total contract backlog is $7.5 billion and funded backlog is $2 billion. The estimated value of SAIC's submitted proposals awaiting award has increased to $16.6 billion, up over $1 billion from last quarter, primarily from new IDIQ contract proposals.

Our value of submitted proposals now stands at an all-time high, an indication of a modestly improving environment and strong demand. To address the growing demand for innovative solutions, we're investing in leading edge technologies and methodologies in cyber, cloud, and data sciences.

Our new Cloud Migration Edge offering will enable our federal government customers to rapidly and securely leverage cloud technologies to improve delivery of their IT services.

This five-step solution encompasses specialized tools, processes, and best practices to guide the cloud migration lifecycle, allowing for cloud adoption on government premises, public cloud, or a hybrid of the two. Maria, over to you to provide more details on our financial results..

Thank you, Tony and good morning, everyone. Our second quarter revenues of approximately $1.1 billion are flat as compared to the second quarter of last fiscal year.

The ramp up of revenues on contracts such as FAA, controller training, GSA Enterprise Operations, and the Marine Corp Amphibious Combat Vehicle contract offset decreased material value in our lower margin supply chain business, and the expected reduced activity on our Assault Amphibious Vehicle contract as we near the completion of the prototyping phase and deliver the vehicles to the Marine Corp.

Operating income of $70 million in the second quarter resulted in an operating margin of 6.4%, which was negatively impacted by $3 million of acquisition integration cost that if excluded, results in an adjusted operating margin of 6.7%. The second quarter acquisition integration costs are primarily due to severance expense.

Our strong margins this quarter were driven by solid program performance across the portfolio, lower acquisition integration cost, and decreased amortization of intangibles. For the second quarter, EBITDA as a percentage of revenues was 7.5%.

After adjusting for the integration related costs, adjusted EBITDA was 7.8%, up 30 basis points year-over-year. Higher second quarter margins were primarily due to continued strong profitability across our contract base and focus on cost control mainly in SG&A, which was driven by lower severance and employee-related expenses.

This results in strong margin performance of 7.4% through the first half of the year and on track to deliver on our goal of margin improvement from our fiscal year ‘16 baseline of 7.2%. Net income for the second quarter was $37 million and diluted earnings per share was $0.81 for the quarter.

Excluding acquisition integration costs, adjusted diluted earnings per share was $0.85 for the quarter. The tax rate for the quarter was approximately 36.5% and we expect this to be our normative rate going forward. Cash flow continues to be a cornerstone of SAIC's shareholder value proposition.

SAIC generated operating cash flow of $23 million and free cash flow of $19 million in the second quarter, which was consistent with our expectations. Day sales outstanding of 54 days is an improvement of two days from the first quarter and is within our normative operating range typically in the mid-50s.

The current quarter DSOs continue to be negatively impacted by three days as a result of the working capital investment on the AAV contract. We expect the AAV working capital investment will normalize as we complete the delivery of the vehicles and should generally be replaced by a similar working capital investment on the ACV contract by year-end.

Additionally, second quarter cash flow was negatively impacted by an extra payroll.

Similar to last fiscal year's cash generation profile, we expect the second half of the year to be stronger than the first half and remain confident that we can generate approximately $240 million of free cash flow annually with FY17 impacted by about $25 million due to the extra payroll week.

The second quarter ended with the cash balance of $115 million, which is consistent with our expectations. Our total debt is just over $1 billion, equating to a leverage ratio of under three times debt to adjusted bank EBITDA at the end of the second quarter. I will provide more on our debt and capital structure momentarily.

As mentioned previously on our first quarter call, we are no longer limited by our credit agreement on annual share repurchases at this leverage ratio.

During the second quarter we deployed $65 million of capital consisting of $13 million in cash dividends, $11 million of scheduled debt repayments and $41 million of share purchases, representing about 721,000 shares.

We remain confident in our cash generation along with our desire to return capital to shareholders and therefore we expect pay FY17 dividends of approximately $55 million along with our debt repayments and use the remainder of our cash in excess of our targeted average balance for other deployments such as share repurchases among other alternative.

With our normalized annual free cash flow of $240 million plus the additional cash we had at the end of last fiscal year. The cash in excess of our desired average cash balance for FY17 after dividends and debt repayments is estimated to be over $150 million.

I should note that our Board of Directors meet next week and will consider the approval of our quarterly dividends, which is typically payable at the end of October.

Subsequent to the end of the quarter and disclosed in August we refinanced our existing credit agreement to obtain more favorable terms and pricing, while extending the maturity of our term loan A and revolving credit facility.

We were able to lower our annual interest cost and extend the maturity of roughly half of our outstanding debt with no increase to the overall principal outstanding. The details of the amended credit agreement can be found in our Form 8K filed on August 25th.

However, in summary, we lowered our annual interest cost by approximately $8 million extended the maturity of term loan A to August 2021 and transferred approximately $130 million from term loan B to a lower interest rate term loan A.

Through the refinancing the required debt repayments are eliminated for the next 12 months, which provides more resources and flexibility in our capital deployment strategy.

In our third quarter financial results we expect to recognize approximately $5 million of expenses associated with the debt refinancing, which includes the right off of a portion of previously differed debt issuance cost. This will be offset by approximately $2 million of quarterly interest savings in the third quarter and each quarter thereafter.

We continue to have confidence in our long term financial targets and they remain unchanged. On average and overtime we expect low single-digit internal revenue growth and profitability improvement of 10 to 20 basis points annually. We expect generation of approximately $240 million of annual free cash flow.

As a reminder FY17 will be negatively impacted by roughly $25 million due to the extra by weekly payroll payment related to the extra week in our current fiscal year. But this will not impact our capital deployment activities. Tony, back to you for concluding remarks..

Thanks, Maria. And let me thank you for the outstanding job you've done as our interim CFO this quarter and leading the recent debt refinancing. Throughout the second quarter we continue to make progress in our comprehensive search for a CFO. We've conducted a number of interviews and will issue a press release at the appropriate time.

Operator, we are now ready to take your questions..

Thank you. [Operator Instructions]. We'll go first to Jon Raviv with Citi..

Hi, good morning guys.

How are you?.

Morning, John..

Good morning..

Hey, Tony. Could you address how -- what role of intelligence or Scitor played in the internal – the slight internal growth that you saw this quarter? Sounded like you got some awards there. I'm wondering what’s it doing on the sales line at this point..

We continue to develop the business development pipeline since the acquisition. We are starting to see some results from that as we work the synergies between the various service lines. On the ISR and space platforms that Scitor has provided historically, that's combined with the customer groups.

We've had some opportunities to apply those same technical skills into other areas, particularly in NASA and other areas, but also it is increased through IT services and our broader portfolio additional services that we are selling into that intelligence community market through the channels that were part of that Scitor acquisition.

So I think it's fundamentals on program activity, more solutioning that apply to the current install base of Scitor under the protect, expand, and grow. Lot of them were in expand categories of additional services and still a broad pipeline across all three dimensions..

It it fair to say that Scitor added to growth or was a drag on growth?.

I think it added to growth. We've had opportunities in Intel across the board, but it's a mix portfolio.

We've seen in the strong book-to-bill contributions from across the portfolio from Fed-Civ, different areas, so it’s pockets up and down, but I think our Intel is a development pipeline and in conversion continues to be strong and we’re confident we can continue to move that forward..

Okay, got it.

And then just a quick follow-up on cash deployment priorities in light of stock performance, would it be fair to say your repo program is still designed to generate some EPS growth going forward or what are those other alternatives that Maria mentioned the Board might enter next?.

I think we're being very consistent with the cash and the capital deployment. We've got the strong dividend. We've obviously managed through our debt services and very comfortable with that, with the refinancing.

The share repurchases have been a very effective tool for us to improve our overall EPS with the share count reductions that are affiliated with that. It's consistent with deploying the cash above our operating threshold that we've communicated.

We'll continue to look at M&A on a strategic basis, but it's just that it’s a strategic component with the capital deployment focused on a dividend and the share repurchases at this point..

Great, thank you..

You’re welcome. Thank you..

And we'll go next to Cai Von Rumohr with Cowen & Company..

Yeah, thanks so much.

Given that the bids submitted look to be up, can you give us some color on where you see the environment for orders and what kind of book-to-bill we might look at this quarter? And any kind of color as to a potential for decent organic growth next year or at least the low-single-digit that’s your target?.

Sure, Cai. Thanks, good morning. I think collectively, we're all looking at this modestly favorable outlook for the next five years, but note although we’re at the very front end of that cycle, it still takes some time to convert that.

I think the book-to-bills on the award activities represent both demand as well as opportunities for conversion of awards to revenue, but it does still take time.

We're very confident in high-quality BD pipeline that we've developed or the competitive win rates, and those things contribute to the fundamentals of conversion of revenue, still subject to the customer decision point, obviously, we would expect, as I mentioned in the market, CR moving forward that really doesn't have a big impact on our run rates in both bookings and revenue.

But with the administration crossover, some I would speculate that perhaps we may see a slight pause in big deals as the administration converts over the next six months. Most of that stuff is flowing through, we’re seeing some maybe moving ahead of that. The administration transitions do take time and it's by agency.

So I think overall though, we still expect long-term financial targets we met with low-single-digit revenue growth.

Quarter-to-quarter, we'll have some variability based on those large contract awards as we move through the large task order volume that we have, but again confident that we'll move that forward with strong book-to-bills, but they'll hover back and forth around that 1.0 I think for a period of time..

And then a follow-up to John's question on cash deployment, given that you no longer have to make near-term debt repayment, what are your targets for minimum cash, I know you've been very aggressive in kind of using pretty much all of your available cash beyond debt repayments for either dividends or share repurchase.

Should we continue that? Or might you be building a little bit of a cushion to do M&A?.

Thanks, Cai. This is Maria. So the debt refinancing was a very successful project. And as we mentioned that the first 12 months, we'll have those additional resources since we don't have the mandatory debt repayment. So we'll continue to work with our Board. We meet with them quarterly to determine how best to utilize our capital deployment strategy.

And as we stated before, we don't plan to accumulate cash above our $115 million average target balance, but rather, we expect to deploy it to continue maximizing shareholder value..

Thank you..

And we'll go next to Amit Singh with Jefferies..

Hi, guys. Thank you for taking my questions. Just a quick sort of follow-up to the previous question that was asked. As we look at revenue and growth, if you think about this year, I think previously you had mentioned that you still expect sort of a low single-digit internal revenue growth for this year.

Is that still the case that I believe around $50 million to $100 million headwind from supply chain activity? And as you talk about the growth for the year, if you could talk about what you're expecting for sort of organic non-Scitor and Scitor business?.

Yeah, I think as we've said our expectations are still on the long-term financial not low single-digits. The quarter-to-quarter expectations, I'm still confident that we can get there. We do have the variability of the supply chain management portfolio that we've discussed in the past.

That's probably our biggest variability that could have a $20 million to $30 million swing in any given quarter based on what we do, we saw some of that push last year. So I'd say the overall portfolio we've had some successes the momentum of the large programs from last year.

I think we've offset a number of recomplete and minor contractions in some of the portfolio to stay near flat with upside to get to the low single-digit marks. Revenues in run-rates I think are really solid and we expect those to continue. I think we'll just see that variability.

So we're not really talking about specific timing, but as we believe that we will continue to see slight to modest revenue growth as we go forward over the next few quarters..

Okay, great. And then on margins, I know your long-term target is 10 to 20 basis points improvement. But as we look at your second quarter adjusted EBITDA margin you're already significantly above last year level.

So are you expecting sort of margins for the rest of the quarters and the year to be below this level or below second quarter level? Or could we see sort of more than 10 to 20 basis point improvement in margins this year?.

Thanks, Amit. This is Maria. So we did have a great quarter and we expect strong performance to continue into second half of the year. And we typically see seasonal headwinds in Q4 with the holidays and employees taking vacation, which does impact our margins.

So bottom-line we expect to deliver the year-over-year margin improvement of 10 to 20 basis points..

Alright, thank you very much..

Thank you..

And we'll next to Ed Caso with Wells Fargo..

Good morning, congratulations. With the larger players in the industry consolidating to $4 billion plus and seemingly all chasing larger size transactions here. Can you talk about any change in the competitive situation in the market and any implications that might have on pricing? Thank you..

Sure, thanks for that. Good morning. Well I think more consolidations will continue. I think folks are making trade between focused on elements of their portfolio and shaping those for better focus. I think the combination of larger companies, so we're comfortable being in that top five or so amongst the broad set of competitors.

On one hand the consolidations generate or at lease reduce the number of prime contractors. So you could have seen perhaps eight primes bidding on something three years ago maybe that's now five. So that's one dynamic, I don't think it has a huge swing still the same elements competing.

But maybe this year number of large proposals as primes may change slightly. I think the price pressures, our -- impart going to be consistent with what we've seen with the customers budget constraints. Price has become obviously a very critical criteria and price sensitivity is still paramount.

I think now we're seeing time to market and ability to deliver capability sooner within those budget constraints is another component. So and I think that leads to a bit of a better value than price alone. But relatively competitive landscape, the market consolidations I don't see huge swing in pricing driven by consolidations.

It's more pricing pressures based on customer budgets and just the competitive nature of trying to take away work from others in this flat environment..

On the other end of the spectrum, can you talk about the pressure from all the small business requirements both from a prime perspective and a required subcontracting mode and is that impacting contracts as they come up or recompete are they have being broken up and given more to small business? And on the subcontracting requirement does that put any pressure on your margins? Thank you..

Small business environment does create headwinds on the prime side. Let me address the subcontract side first. I don't think we've seen any dramatic changes in the amount of small business requirements on our large contracts.

Those tender run in the 30%, 40% range on a subcontractor plan to accommodate the small, we favor that, I think we are a good prime under the [indiscernible] project programs as well as just the broad prime contract base that we have.

So I don't see as much concern as on the subcontractor side, but there are substantial headwinds that has impacted some of our recompetes in probably two ways; one, a full set aside where incumbent work has been converted to a small business prime.

Set aside in another case where components of contracts are getting broken up so that the recompete still make a large but a component has broken off for a small. That creates the challenges as you expect when the small becomes the prime.

We tend to follow the small and then those are selective and who we then back if in fact the government elects to make the conversion. So we stay close that increases our base. But it does obviously put pressure on top-line.

We are working a lot with the congressional leaders and the folks in the Pentagon, the administrators to help address that in one area that we’re collectively promoting I think is industry is to have the government take a more proactive view and a positive view to count their small business incentives at the subcontract level.

And that legislation that administration on acquisition is the fundamental challenge that we are trying to offset. So if we are successful collectively in the acquisition community to give the acquisition officials credit for not just prime contracts, but the subcontract work.

We think that will reduce some of the pressure to carve out small business set aside and provide a more full and open competitive landscape going forward and that would be in our favor. But it is a headwind we had some impacts, but we do trying to maximize our ability to sustain the work through partners with the small..

Thank you..

You're welcome..

And we'll go next to Tobey Sommer with SunTrust..

Thank you.

I'm curious with the better margins in book-to-bill in recent quarters, is the Cloud Migration Edge launch that you note in the press release indicative of other investments that you may be able to be making in what is an improved environment? And is this kind of a one off development or do you think we’ll be hearing more about the fruits of investments that you are making internally..

Great question and I think you'll see continued discussions on outcomes and investments that we are making, Cloud Migration Edge is a good example of past performance refinement of our implementation methodology to enhance our ability to migrate customers from their current IT architectures to the next generation technologies.

So in that case it’s a combination of both technical tools and partnerships and a methodology for implementation as a technology integrator. I think it's one dimension as in a high demand area.

The government collectively continues to ask for more innovative solutions, we’re seeing a slight move to that solution based outcome whether it be as a service business models more fixed price. So we are making further investments in other areas beyond the IT and cyber domain.

You think about training and simulation and other areas where we can leverage a platform, leverage repeatable solutions and then deliver that to our customers either under the current services model or perhaps more as a solution with the outcome based contract vehicle..

How important is the -- would growth in the repeatable services and the solutions business be as a contributor to your long-term margin goals?.

I think it's a key contributor. I think maybe one, facilitate our ability to differentiate to win the work, increases our competitive advantage. And two, those outcome-based programs I think in terms of the broad fixed price and our ability to assume some of that modest risk, and it’s also turns to higher margins.

And so on a repeatable basis, with confidence, we can continue to deliver as we've done across the portfolio. We think those repeatable solutions and technology advancements very much contribute to our ability to grow margins.

So it's contributory to what we're doing today in the last like we have for the long-term target on that 10 to 20 basis points. We’re also seeing investments along the way..

Thank you..

You’re welcome. Thanks..

And we'll go next to Bill Loomis with Stifel..

Good morning, Bill..

Hi, thank you. Good morning. Good quarter.

Can you talk a little bit about the vehicle programs, just how the AAV declined and the ACV ramp will impact revenues in fiscal ‘17? And then on ACV, when are those prototypes developed? And when do you go for the next phase?.

Sure, just both of those, on AAV and ACV collectively, I think the run rates in the aggregate is pretty steady going forward, although maybe a slight uptick going forward. We are seeing, more specifically, we're through the majority of the AAV deliveries under the engineering design phase. So they're being delivered to the Marine Corp.

That's, if you will, the ramp down as those go through formal delivery over the next month or so. And then they all go in Marine Corp will then use those 10 vehicles for testing. We'll do some level of support of that testing, but it won't be at the revenue levels that we've experienced.

But in turn, the Amphibious Combat Vehicle program has begun to ramp up and we expect our continued revenue streams and move that forward over the next three quarters, as we begin to deliver those early vehicles. Recall, the ACV is still in a competitive phase in a down select, but we'll follow fairly similar trajectory on prototype delivery.

And then, slight revenue reductions as we look at the testing phase beyond each of these programs. AAV, we'll look through the test process and then anticipate and look forward to low rate production beyond that as we will competitively want that for the long-term..

And just can you give us on timing on what, like for example, let's go to ACV for example, when are those prototypes delivered? When do you I guess with BAE, when do you have the run off with them? When do they decide on to get the billion plus full production?.

That'll be next fiscal year. I think next spring, summer, I don't know the exact date on when that test phase ends, but we are going to -- it'll be probably a Q2, maybe in the Q3 time frame where we'll start seeing those deliveries and likely transition to those efforts in the test phase..

Okay.

And then, see on the bid outstanding, $16.6 billion you said it increased by $1 billion to IDIQ, can you just remind us what you're putting in there in terms of IDIQ ceiling versus expected task orders? What's the value that increased by $1 billion?.

We -- in the submitted, we do include both the IDIQ contract vehicle ceilings, what we will then -- what we are pursuing as well as the non-IDIQ contract award submittals. So it's both in our submitted proposal numbers that you see forward. So it's a combination.

Typically, about a third of that is in contract award, and about two-thirds in IDIQ market access vehicles. That's a good way to think about the $16 billion.

But again, as a reminder, our bookings and book-to-bill are limited to specifically contract awards, non-IDIQ and/or task orders formally awarded under that without any ceiling, and we do exclude any protested efforts. Those are also not included in our booking numbers until they're resolved..

Okay, great. Thank you..

You’re welcome..

And we'll go next to Michael French with Drexel Hamilton..

Good morning. Hi, good morning. Congratulations on the strong performance. Just have a couple of quick ones here for you.

How many shares left do you have under your existing authorization to repurchase?.

About 3 million..

Okay, all right good.

And on regarding the refi should we expect debt issuance to cost to hit in 3Q and if so about how much should we expect there?.

Yeah. As I previously said, we expect about $5 million transaction cost to hit in Q3 and that will be offset by about $2 million of interest savings in the quarter and then each quarter thereafter..

That's great. Sorry I missed that. And then to follow-up on what you -- Tony what you were just talking on the vehicle programs specifically the AAV. So I understand there is going to be the period of testing the prototypes that you've built. And then at some point we into LRIP.

How long is that testing period expected to last and when should we expect LRIP to ramp up?.

As testing phase is currently scheduled for about a year from figure about around now. So it will carry through next summer. We may see or we will see result of that testing that does allow us to modify and revisit any engineering requirements by the mission requirements. So that's the outcome and then that informs then the production phase.

Like we’re working through the various testing both in the water and on land on the various components, each vehicle kind of go through its own test cycle. So it will be recurring engineering through the test phase. And that will culminate in a final production package that we’ll start delivering on probably a year from now..

Okay, very good. Thank you. And then finally again on ramping up, so you obviously had a great quarter for bookings. Are any of these programs expected to start ramping immediately? And what should we look forward for the next quarter or two new programs like NASA EAST and AMCOM. Thank you..

Yeah I think given the breadth of the task orders and volumes both goes through a fairly logical transition phase. Recompetes obviously just are sustained. So there is very little variant to the revenue stream and then the puts and takes on the awards I think move forward. So I think you will see very consistent revenue run rates.

We still got the mass variability on supply chain. But I think overall we're still confident in those long-term targets given the recent awards and expectations on conversion as part of that $16 billion recurring basis. So we'll keep track of that, but we expect it would be very similar with some modest upside..

Very good. Thank you and best of luck..

Thanks..

And we'll next to Jon Raviv with Citi..

Hey, thanks for taking the follow-up guys. Can you give us an update on some of the upcoming recompetes you have. I believe you might have a Fulcrum decision coming through? And also [indiscernible] express finding their ways contract vehicles. Give us a sense of timing, sizing, potential impact and the long-term goals? Thanks..

Sure on the recomplete side with Fulcrum it’s a defense logistics agency contract. it's a recompete. We expect that to be awarded perhaps in the Q4 timeframe fairly soon. We don't expect it to have a material impact in FY17 results as that plays out. But confident we've submitted a very competitive proposal and we’ll see how that goes.

So we'll report on that based on its outcome, but no impact really to 2017. With the NASA EAST award in the past we've really retired a lot of the recompete challenges this year. In reference to AMCOM as we've talked about the Army is pursuing a broader acquisition strategy in converting some of the AMCOM task orders impart to the GSA OASIS vehicle.

We've been successful in tracking two of those transitions from AMCOM to OASIS. And we're working with the customer and attending those and the like to follow their subsequent acquisition process and conversion. That will still play out probably over the next year as they work to divide up the task order volume.

There is a wide number of task orders under the AMCOM BPA. We can sustain a lot of our revenues through that, so not all of it is in the migration mode. But some of the larger ones that we've talked about are being realigned and with some movement to OASIS.

So fairly steady revenue streams on AMCOM, very solid and we're just working through the acquisition process to further secure that work under the different vehicle and that will take prior a year to start through..

Two quick follow ups on that, could you size in terms of dollars what Fulcrum is worth today and maybe what's the transition into the AMCOM are worth through today? And then the second follow-up is the [indiscernible] transition AMCOM now, you’ve pointed all the thesis that had transitioned employees last year or is it kind of the same process?.

Let me address the Fulcrum and I'll just restate that second part. Fulcrum runs in that $125 million range. It's in that ballpark, just north of $100 million the volume obviously fluctuates. But on an annual basis it tends to deliver that much material volume, just to give you a ballpark.

I'm sorry, what was the second part of the question, Jon?.

The second part of the question just on the AMCOM transitions, what difference with these upcoming transitions over the next year compared to I believe you had some transition from the past with AMCOM not always [indiscernible].

Is this with the same process that you've already gone through?.

Yeah, very similar process as the government both on the mission side as well as the acquisition offices redefine the scope. So it's a fairly consistent process in AMCOM and it’s actually very consistent with our other customers as they look to recompete certain work. Sometimes the statements of work are very similar.

In this case they are electing to realign if you will repackage mission areas slightly differently and then put those out as individual task orders under OASIS as oppose to operating under subcomponents with the large task order that we've been offering on there. So very consistent process, it's one that we've seen before that they've utilized.

It's really just the different set of scope that we're very familiar with..

Thanks so much..

Sure..

It appears there are no further questions at this time. Mr. Levi I would like to turn the conference back to you for any additional or closing remarks..

Thank you very much. I would like to thank you all for your interest in SAIC and participating in the call today. Have a good day..

This does conclude today's conference. We thank you for your participation. You may now disconnect..