Good day. And welcome to the SAIC Fiscal Year 2018 Q1 Earnings Conference Call. As a reminder, today's conference is being recorded. At this time, I'd like to turn the conference over to Shane Canestra, Director of Investor Relations. Please go ahead..

Good afternoon. And thank you for joining SAIC’s first quarter fiscal year 2018 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 afternoon, 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-Q 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, 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.

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 afternoon. SAIC's first quarter results of fiscal year 2018 reflect increased investments as we execute our business strategy and position the Company for long-term shareholder value creation.

Charlie will provide you with the financial details, but I'd like to summarize the first quarter and discuss a few operational items that occurred in the quarter. First quarter revenues of approximately $1.1 billion demonstrate contraction of 2% after adjusting for the extra week in the prior year quarter.

Diluted earnings per share was $1.08, which was impacted by a favorable tax rate as a result of the required adoption of the new accounting standard associated with employee stock-based compensation.

Free cash flow generation of $84 million was strong and provides added confidence in our ability to deploy capital in the best interest of our shareholders.

EBITDA margin of 6.6% was impacted by increased cost and ongoing investments in our AAV and ACV platform integration programs, which are both still in the engineering, manufacturing, and development, or EMD phase.

We recognized $9 million of increased costs to support vehicle testing to meet mission requirements and are making additional investments on our platform integration capabilities. With regards specifically to AAV, we increased our cost estimates to conduct additional testing based on prototype vehicle test results.

As we complete the AAV EMD phase, we expect the customer decision this summer for low rate initial production that would start this fall. Moving to ACV, during development and delivery of this complex modern platform, we encountered technical challenges in our initial vehicle deliveries.

We've worked closely with our customers to identify and resolve the technical issues and are coordinating with the Marine Corps on a mutually agreed upon revised delivery schedule. We remain committed to providing the customers the robust and modern ACV that is fully protected and has superior maneuverability with amphibious ship-to-shore capability.

We're in the process of completing delivery of all 16 vehicles and we'll then enter about a one year test phase followed by a Marine Corp down-select contract decision.

In order to execute our platform integration strategy and address the multi-billion dollar pipeline and other integration programs, such as our recent Navy Mark 48 torpedo contract, we made additional investments to strengthen our platform integration capability in terms of facilities, systems, processes, and personnel.

This will allow us to further differentiate our solutions from the original equipment manufacturers and government services’ peer companies. With our last call on late March, the federal government has passed appropriations budget for their fiscal year 2017.

With the modest increase in the current year defense budget and stability in federal civilian budgets, our markets are improving and SAIC's $13.2 billion of proposals submitted and awaiting award represent the most expedient way for customers to obligate these funds before the government's fiscal year ends.

Note that near term awards will take time to convert to revenue. And while potentially having an impact on the latter part of this fiscal year, it'll likely have a positive impact on revenue growth in our fiscal year '19.

We are encouraged by the recent release of the government's fiscal year '18 budget request, there will certainly be modifications by Congress, but the budget request reflects priorities where SAIC's capabilities directly apply such as IT monetization, cyber security, and military readiness.

Therefore, our long-term outlook remains the same with expected modest growth in our markets for the next few years, consistent with our long-term financial targets. Contract award activity in the first quarter led to bookings of approximately $1.3 billion, which translates to a strong book to bill of 1.2 for the quarter.

First quarter bookings included a $237 million new business award for end user services at the Environment Protection Agency, $232 million of work for our Amcom customer, $222 million of awards from the Intelligence Community, $61 million Navy C4ISR engineering recompete award, and various other awards and contract modifications across the portfolio.

At the end of the first quarter, SAIC's total contract backlog increased to approximately $8.2 billion and funded contract backlog was $1.8 billion.

As mentioned earlier, the estimated value of SAIC’s submitted proposals awaiting award is approximately $13.2 billion, down from last quarter by $2.3 billion to the bookings mentioned and award decision on a few IDIQ contract vehicles in the expand category.

Subsequent to quarter end, we were successful in the takeaway award of the NASA Omnibus Multidisciplinary Engineering Services contract, commonly referred to as OMES II. Under the $620 million single award IDIQ contract, SAIC will provide engineering services to the Goddard Space Flight Center.

Note that this award was made possible by the synergistic combination of SAIC's NASA customer access and the qualifications and capabilities from our acquisition of Scitor two years ago.

This award further strengthens our leadership position in NASA as one of their leading contractors and expands our penetration of the increasingly important space domain market.

As communicated previously, our largest contracts, Army AMCOM EXPRESS, is being recompeted by the customer and transitioning to individual task orders on the GSA OASIS contract. Three large task orders individually, known as virtual systems, strategic systems, and battle field systems, are in various stages of the procurement process by the customer.

I am pleased to update you on our virtual systems task order. Originally awarded to SAIC in February, the competitor protest was denied and we’ve been confirmed as the awardee of this $400 million task order. We anticipate this award being included in our second quarter bookings.

The second task order, known as strategic systems, was awarded to a competitor last week, and depending on the potential of an award protest, results in approximately $30 million to $50 million of reduced revenues this year and about $120 million on an annual basis.

In fiscal year '18, the combination of the EPA end user services and NASA OMES contract awards help offset the impact from the strategic systems loss and thus does not change our revenue outlook for the year.

The third and largest task order recompete, known as battlefield systems with nominal revenue of $1 billion over a three year execution period, has been submitted to the customer and is expected to be awarded in August.

As SAIC looks to the future, we recently completed a thorough review of our business strategy, including an assessment of our markets, capabilities, strategic priorities, and aspirations. Our long-term strategy was finalized, and implementation has begun under the banner of Ingenuity 2025.

Our strategic priorities are aligned in four market areas; engineering, integration, emission services, information technology, platform integration and logistics, readiness and sustainment. Our investment decisions and pipeline development will be aligned to these markets to achieve sustained profitable growth.

One initial example of the implementation of Ingenuity 2025 is the recent announcement of our first technology integration gateway, a low cost delivery center in Cookeville, Tennessee that will expand our work force, increase competitiveness, and improve profitability. Charlie, over to you to provide more details on our financial results..

Thank you, Tony, and good afternoon, everyone. Our first quarter revenues of approximately $1.1 billion reflect contraction of 2% after adjusting for the extra week in the first quarter of the last fiscal year.

Revenue performance was impacted by the DHS integration program recompete of mentioned last quarter and other net declines across the portfolio due to customer budget constraints. These decreases were partially offset by higher revenues on programs such as the ACV platform integration program and the Army HITS program won late last year.

First quarter adjusted EBITDA was $73 million, equating to 6.6% as a percentage of revenues compared to first quarter adjusted EBITDA of 7.1% in the prior year quarter. This quarter EBITDA was impacted by higher net unfavorable contract estimates of $11 million, which included the $9 million on our platform integration programs that Tony mentioned.

This impact was partially offset by a reduction of $7 million, an estimated lease exit cost, as we rationalize our facilities in the National Capital Region.

Adjusted operating income of $63 million in the first quarter resulted in an adjusted operating margin of 5.7% compared to 6% in the prior year quarter, primarily due to platform integration program impacts, offset by the reduction in estimated lease exit costs.

Net income for the first quarter was $49 million and diluted earnings per share was $1.08 for the quarter. The effective tax rate for the quarter was approximately 6%, primarily due to the previously communicated adoption of the new accounting standard for excess tax benefits on stock-based compensation.

As I mentioned in our March call, the adoption of the new standard primarily affects or tax rate for the first quarter due to the timing of equity awards that predominantly vest in the first quarter and is based on our stock price at that time.

In the first quarter, we recognized the tax benefit of $16 million as a result of adopting the new accounting standard. The tax benefit, combined with lower profitability, produced the tax rate of 6% lower than our previous estimate of 10% to 15% for the first quarter.

Looking to the full fiscal year, we estimate our fiscal year 2018 tax rate to be approximately 26% to 28%. We anticipate the second quarter effective tax rate to be approximately 30%, and then in the mid-30% range for the second half of the year.

SAIC continues to deliver strong cash flow generation and underpinning of our value preposition and capital-to-deployment strategy. Our strong quarter of collections and cash management resulted in first quarter operating cash flow of $88 million and free cash flow of $84 million.

Contributing to this strong cash performance was day sales outstanding of 48 days, consistent with last quarter and one less payroll as compared to the prior year quarter. Also contributing to the cash performance was the previously discussed $16 million of recognized excess tax benefit from employee stock-based compensation.

Looking forward to the rest of the year, we expect our DSOs to return to the low 50s as the accelerated payments received in the fourth quarter of last fiscal year do not reoccur in the current year. The first quarter ended with cash balance of $207 million, above our average operating cash balance target of $150 million.

Our total debt continues to be just over $1 billion, equating to a bank EBITDA leverage ratio of less than 3 times at the end of the first quarter.

During the first quarter, we deployed $61 million of capital, consisting of $38 million of planned share repurchases, representing about 474,000 shares, $14 million in cash dividends, and $9 million for debt repayment. We are committed to our long-term financial targets and they remain unchanged.

With regards to fiscal year '18, specifically, we expect full-year profitability, as measured by EBITDA margin, to be 10 basis points lower than the prior year due to the impact of the platform integration programs, which is expected to be 30 basis points for the full year.

Without the impact of the platform integration programs, our margins for the core business, is in line with long term profitability improvement targets. With regards to full year cash flow, I previously gave a fiscal '18 outlook of approximately $220 million of free cash flow.

With the excess tax benefits on stock based compensation, estimated approximately $20 million for the full year, our outlook is now $240 million of free cash flow for the year. This significant cash flow generation, along with the access cash we carried at the end of fiscal '17, allows us to execute our capital deployment strategy.

In fiscal year '18, we expect to pay dividends of about $55 million, make total debt payments of approximately $25 million with the remainder of cash in excess of $150 million available for further share repurchase and strategic M&A should it arise.

As announced in our press release today, our Board of Directors has approved a quarterly cash dividend of $0.31 a share payable to shareholders on July 28th. Tony, back to you for concluding remarks..

Thanks, Charlie. Last week, we announced two significant items; first, Nazzic Keene has been appointed Chief Operating Officer of SAIC, effective June 8th as announced in our press release.

Retaining her roles is President of the global markets emissions sector, Nazzic expanded her responsibilities and we’ll increase her market leadership and accelerate the execution of our long term strategy Ingenuity 2025 for sustained profitable growth.

Additionally, last week we also announced the pending move of our corporate headquarters in July to Reston, Virginia, a short distance away from our current headquarters location in the McLean, Virginia. The new headquarters will be in a building we’ve occupied since our 2015 acquisition of Scitor.

Last week, we held our Annual Stockholder Meeting and the proposals outlined in our proxy statements were overwhelmingly approved by our stockholders. Thanks to all who participated in our first virtual shareholder meeting, and do with success, we anticipate conducting future stockholder meetings in the same manner.

Operator, we’re now ready to take your questions..

[Operator Instruction] And we’ll take our first question from Cai Von Rumohr with Cowen & Company..

So maybe, give us a little bit more color on the $9 million charge, when you figured it out, is this all of it ? And then some commentary on the other $2 million net negative? Thanks so much..

So the $9 million that relates to the platform integration program were cost or investments that we decided to make in Q1. In addition to that, we expect another $3 million of impact for the full year. So the total full year impact from platform integration will be $12 million or 30 basis points as I’ve stated..

So you’ve had a couple of wins. You have the AMCOM loss. Maybe tell us where are you regarding the AMCOM in terms of a protest or not? And if you can give us any color on any of your outstanding bids that would be terrific..

Let me just cover the three business, in particular, that we've been discussing.

Very pleased with the virtual systems award that was revolution of the contract protest that was just recently announced to maintain our service to our customers; a little disappointed in the strategic systems award decision; we had factored our revenues as a subcontractor to Bluevalen Hamilton on that bid; and that reduced our FY '18 estimated revenues by $80 million, which contributed to our FY '18 full year revenue of being flat as we’ve communicated last quarter.

So the impact that we described is to mitigate in part to our planning process and our bid strategies. The last and largest battlefield systems, that award was submitted with SAIC as a prime and is expected to have award decision later this summer.

So the contracts awards like EPA and NASA OMES have offset to strategic systems loss, our planning has in fact we think accommodated some of that. And as far as the other bids this year, probably Centcom recomplete for their enterprise IT support is probably our next largest contract recomplete and we expect that award sometime in late Q2..

And the last one, can you comment, NASA OMES kind of came out of you know -- we didn't – weren’t aware, some of us weren’t aware - that you've kind of had that bid.

Do you have any other large significant bids like that that would be takeaways or that you'd care to talk about either in specificity or in general?.

In general, we typically have in the large submitted waiting award proposal set, a combination of those contract award and IDIQs, there’s a handful, I’d say about half a dozen of more than $100 million programs that we in pursuit on.

It will be up to timing of when those actually move forward as we’ve discussed last quarter, pleasantly surprised that the EPA award came out in Q1, expected some slowness in the bookings. We do see that picking up as the customer now with budget bills in place, lot of conversation around trying to accelerate some of the award activities.

So I think we have a very strong submitted pipeline, and would expect our share of those submitted to convert to awards.

A lot of that transitions and the like may not have a huge impact on the rest of the fiscal year, but definitely will help drive the growth in FY '19, so everyone expects to have very strong bookings and subsequent revenues given the performance that we have with our customer sets; so 5 billion is in contract awards of the $13 billion that’s submitted awaiting awards..

We'll go next to Ed Caso with Wells Fargo..

Just couple of metric things, cost plus fixed price time of materials is a percent of revenue and what the direction has been and where you think it is heading.

And is that good or bad news for margins?.

Right now, it's still pretty consistent mix across the three, each about a third or so. And as you look at the fixed price components, again, I would remind folks on the supply chain component of our full fixed-price service work is really a smaller component, probably in 15% to 20% range as opposed to a full third.

We're seeing shifts in some cases of contracts that is moving from a time and materials basis to cost across reimbursable. But say, on our portfolio, we’re seeing one trend of the labor services contract moving from T&M across reimbursable.

But in turn would also increase in our pipeline pursuit of fixed price activities both in enterprise IT and in the platform integration work that we've been talking about, not only for the Marine Corps but the Navy programs, recently announced $60 million award for further tactical integration that we've done over the last number of years and decades, so it's a combination.

So IT and platforms are increasing the fixed price portfolio, lot of labor services now offer, a portion of labor services are converting from T&Ms across reimbursable..

Can you give us a sense on trends in direct labor adjusted for the week versus ODCs? Thanks..

It's been pretty consistent as far as our mix of about 60% or so of our content, labor content on our bids and activities in relationship to our portfolio as a whole and the subcontract activity, it’s still pushing out a fair amount of materials with the technology integrator.

So at this point, I don't see any trend or shift in any major direction given the current portfolio, more in the pipeline that we've submitted that will move on a rapid basis, it'll occur over multiple quarters..

So did the charge for your platform AAV and ACV efforts or was it just ACV.

Is that changed you're thinking on how you approach this opportunity, maybe less willingness to go aggressively at it or maybe a need for more conservatism in your assumptions? Just trying to figure out that you're changing your enthusiasm towards this part of your business?.

Still very enthusiastic about the opportunities, let me give you little color. On the platform integration work with the Marine Corps, as we've said before, bit disruptive on the business services side.

The combination of completion of the testing on the AAV for operational assessments has been out-focused to get that to closure in the EMD phase, working with the customer.

The completion of the ACV 16 prototype vehicles is underway in parallel, much more productions and tests in AAV, and that's really the drive, making sure that we can get the vehicle in place in advance of the Marine Corps test schedule and ensure that it is a still competitive bid our program that we can in part deliver innovative and increase mission capabilities that address the survivability, mobility and reliability for the customers.

The third component in the investments is really around preparation for transition from AAV EMD phase to low rate production-based on our milestone fee decision late this summer and then LRIP occurring later in the fall. And so collectively I still have very strong enthusiasm for the platform integration business.

It is our opportunity to increase our fixed price portfolio for your earlier question at higher margins. It's supportive of other programs beyond these two then talked about the Navy Sea for our tactical vehicle programs, the Navy's Mark 48 torpedo program, and avionics weapon systems support.

So collectively, although currently a small portion of our portfolio, we do see the margin expansion and revenue growth opportunity coming out of platform integration. Our strategy, I think, is focused on recognizing the distinction between production and technical services work.

Our strategy reflects their positions at our business models, and we’re putting in the resources to work, the supply chain logistics and production capacity, necessary to run these types of programs. We're focused on the investments, ensuring that we get an ROI that’s valuable for us and for shareholders.

But I'm still very bullish on the platform business as we move forward with our portfolio..

We’ll go next to Jon Raviv of Citi..

Tony, when you’re thinking about the year, sales cadence seems pretty lumpy just given down 2% organic, and you’re looking for flattish for the year.

How should we think about different comps as we go through the rest of the year? And with the implied exit run rate, give us fair way to think about going forward and exceeding the low slow digit growth? Or is that to the AMCOM contract still kind of part of the consideration there?.

Well, I think that the capital is going forward, is all very consistent with what we've done to-date. As you recognize the puts and takes, AMCOM always disappoint in any recompete loss.

But as we move forward, the battlefield systems paid itself and that recompete surely is a swing for us, confident in our -- again capture on that recompete, but that is a large program that has impacts.

We had message last quarter, the impact from some losses late last year and the headwinds that we're looking to overcome and expected, that’s why we up the message on the flatter side, we've factored in the AMCOM, the strategic systems knowing that even upon the success, we would add about 2% headwind on revenues.

While we do think that the quality of the pipeline has demonstrated with the EPA and NASA wins afford us opportunities to close those gaps and then overcome that. The market dynamics are favorable.

We believe that we will overcome that as well through later this year, and we expect to realize our FY19 goals that would be in that low single digit growth on the revenue side as we increase the margins.

So I think the cadence on proposals is the same, expectations on transitions we're prepared for and we’ll make investments really for the long-term if you think about some of the platform activities on the integration side..

And follow up on the investment comments.

How do you think about how you might modulate those investments if you see greater and greater opportunities on the platform integration side?.

Well, I think we’ve got a good profile now based on the pipeline of award activity, so we don’t want too far in front of it. But I do think that the investment tracks that we’re on through the working capital investments to-date, the processes and tools to move from a prototype environment into production is definitely a step function.

So it's very appropriate for us to make that investment now well ahead of the production requirements that are there. While lessons learned from prototype units lot of engineering and design went into that, a lot of work with our suppliers to manage the entire supply chain.

And we’ve tried to demonstrate for our customers our ability to do production by using the same environment. Although, we need a handful of systems to get some of the extra capacity, so we can scale it up collectively.

So we are still investing in other areas, the training and stimulation areas, the cyber, security components also very important with modest R&D and reliance on strategic alliance partners as we bring technology from commercial markets into the federal space. So it's spread around.

We’re trying to be very diligent in that utility of it but confident that were aligned and Ingenuity 20 25 strategy, allows us to further focus those resources on the areas that we think have the highest potential for revenue growth at higher margins..

And then the last one from me, I was sort of keeping on that, on the investment conversation. The low cost onshore strategy you talked about when you’re referencing Tennessee opening.

How might that impact your CapEx metrics as a percentage of sales?.

Very minimal impact on CapEx, it is truly a low cost center very light on the infrastructure. It's really a large part to have a distributed workforce at a lower cost.

A lot of the -- particularly enterprise IT programs affords themselves for distributed workforce, whether it would be in cyber, our application development as opposed to physically being onsite with customers in the context of weapon system and the like. So we're focused on that.

Tennessee is step-up into to the very good partner, and our ability to stand up that facility that really we think increase our competitiveness and expand the workforce of demands of assets and resources people to do the work always a challenge.

And so we think to go to them in some cases and we’re trying to convince our customers that in lot of cases we do not need the physical presence at a government location that we can be cost effective with the distributive workforce and we can manage that effectively.

So I think there’s lot of -- many opportunities, others are working through that same process. And so we’re talking about partnering up with Tennessee, Tennessee Tech and grow that workforce there, and you should kind of see..

We’ll now go to Tobey Sommer with SunTrust..

I was wondering if you could talk about the margin differential as you look at your pipeline, and book-to-bill versus the operating results in the margins that you just put forth for the quarter. So as you look at your higher margin fixed price IT and platform, stuff that you in the pipeline.

What were kind of spread that we’re looking at between the quarterly results and what that looks like?.

Well, as we've get it messaged across the board, the 10 to 20 basis points is really that long-term approach in that, we've demonstrated our ability to do that since the spend. As I mentioned, it's very important for us to invest in a new business area that will give us further growth.

But absent the platform looks specifically; we still have line of sight on the pipeline that we’re delivering to move our margins up on a consistent basis; the similar levers applied, increase our fixed price content by delivering repeatable solution on a fixed price basis; increase our labor content through selective sub-contracting so that we can in fact we would get a return on our own labor and minimize the material pass through components where possible.

But as an integrator with the large vehicles that we have we can only manage that to some degree, which we’re going to carry much more material as an integrator in some of our non-peer and service providers. So I think that the line of sight in the pipeline to-date is very consistent with what we’ve seen in 10 to 20 basis points.

We’re still in a recomplete of about 20%, 25% of portfolio over the year. So it takes time to roll through the contract awards in the past quarters.

So we have seen and we will continue to see incremental improvement, and we believe across the portfolio, we put 100 basis points of headwinds over the course of next two years to move forward and the platform integration will only compliment that further on a fixed price basis with margins up closer to the low double digits and then the teams at when we get into a larger production lines..

And hence the renewed emphasis that we’ve been hearing about on readiness by military customers; does that manifested itself in a material way in contract awards, or is that still a function of perspective activity in pipeline?.

It's still a little early. The messages are there on readiness as the military budgets get aligned. So we are preparing for the training and stimulation activities, in particular.

We will see perhaps also from a training perspective couple of increases that we might see early indications on our supply chain, our activities where we do support extendable items, from tires to petroleum and chemicals. So there are some early indications that we would expect to see.

I would say that the -- there has not been a step function in training and readiness. We’ve done a lot of planning but not as much execution where most of the money tends to flow. But we’re confident that it will occur. The Pentagon has been very supportive, Congress has been very supportive is the Whitehouse.

So we think it's just a matter of time and now with the budget dollars in place and the contract vehicles in place, we would expect training and readiness relative services to move through fairly quickly on the front end of that curve.

And as we had with sequestration and services, they tend to go quick on a sequestration side down, but they’re also run at really places that we can put money on contract, and that puts you quickly outside of the traditional platform programs. So we’re optimistic about that and hope it’ll turn up relatively soon..

And then last from me.

Could you just review the -- your margin expectations for the year, because I think you segmented out with and without the investments?.

Yes, so we expect 10 basis points, to be down 10 basis points from last year's 7.4%. So this is due to the 30 basis points of the $12 million negative impact on the platform integration program. As I mentioned, $9 million of the cost incurred and $3 million is expected to be incurred throughout the year..

[Operator Instruction] We’ll now go to Brian Ruttenbur with Drexel Hamilton..

First of all, back to the Cookeville tech center.

Can you talk about when that’s going to be open, the size of it, how quick it's going to ramp? And are you going to be taking bodies from other places and putting down there, or these could be new bodies?.

Cookeville is open and operational. The plan is to have 300 employees in that location over the next few years. We have a pipeline of programs that are already preparing to hire into that we have 20-college add of Tennessee Tech starts weeks ago.

I was down there myself with the governor, and a wide range of support folks that have been for not only getting that up and running. So is operational; good pipeline; the facility itself is in same states, in the same building as they finished the build out on a much more open and collaborative environment.

And so the actual formal facility long term will open end of the month early next, but we are operational. The people are two local hires, folks returning to that part of Tennessee.

We are relocating some folks within our own programs from San Diego in the locations as we think about our sister organization in Oakridge where we have our shared services center; but is intended to have new hires located in Cookeville, mainly in the software development application development domain, as well as IT helpdesk services as part of a very cost effective workforce center out at Cookeville..

So right now you have sub-50 employees or something like that now planning you to go to 300. Is that fair....

That's correct..

And then my other question was major recompetes coming up; anything of the size of AMCOM or anything large coming up over the next 12 months that we need to keep our eyes on on the recomplete side?.

So, the largest one I’ve mentioned is AMCOM. It is over $300 million in total award. It's a five year period of performance, so it's in, let's say, $60 million range on an annual basis. That's quite hard next, the largest outside of battlefield systems at any particular scale. There is some multiple IDIQs with the specs that move through the system.

But that's probably the next one that's in our baseline..

And the timing?.

I expect that award sometime in late quarter two..

And we'll go back to Ed Caso with Wells Fargo..

Tony, I was wondering, is the message here that you're trying to increase your business development expenses and focus more on growth? It’s been -- you’ve done a moderate level of share repurchase in the last few quarters.

Are we shifting more to growth at the expense of maybe the very aggressive share repurchase activity you did early on in your public life?.

No, I don't think so, Ed. I don't see the direct impact of cash generation, which we've been very consistent with and our ability to deploy that in a very consistent way to bring the share count down. The business development investments, we really do try and balance across our G&A accounts between B&P and R&D resources in our internal processes.

So I do think that we can strike a balance on our business development growth to secure much larger pipeline. And I think that is separable from a share repurchase program on the capital deployment side, because we have a very consistent cash generation business states.

So I really don't think that the investments are going to perturb it even if we shift a few dollars across the strategy..

And it appears there are no further questions, at this time. I'd now like to turn the conference back to Mr. Canestra for any additional or closing remarks..

Thank you very much for your participation in SAIC's first quarter fiscal year 2018 earnings call. This concludes the call, and we thank you for your continued interest in SAIC..

And ladies and gentlemen, this does conclude today's conference call. Thank you for your participation..