SAIC Q3 2012 Earnings Conference Call Highlights: Super Committee and Outlook
Rick Eskelson, Wells Fargo Securities LLC, asked: Could you give some thoughts about the super committee now that they’ve come back and said they’re not going to find the savings? Do clients see an impact or did you see an impact to your clients on decision making? Has there been a change now that they came out and said, we are not going to find the savings?
Walter P. Havenstein, CEO, responded: I think in the context of their inability to reach a decision with regard to that committee, it’s disappointing, but I don’t think it’s having a damaging impact to our business simply because the pace is based upon the FY ’12 continuing resolution.
That’s what we expected to see for this quarter. I think I am reasonably bullish that they will actually get to Omnibus (meaning, the government’s Omnibus for the balance of government’s fiscal ’12) before the end of this quarter.
And as we kind of said two quarters ago, we thought by the end of this calendar year we would see things normalize within the government. I think frankly that’s regardless of the results of the super committee.
Looking Ahead to Next Year – Flat or Down Year?
Cai von Rumohr, Cowen and Company, asked: I know you didn’t provide guidance for next year, but L-3 today provided guidance for their services business to be down 19% next year. Lockheed recently said at a conference their services business will be down next year.
Is there any chance of a flat year or is it more likely to be down? L-3 talked about the OCO as a particular area of weakness. What are you seeing in your Iraq and Afghanistan-related work?
Havenstein responded: We won’t give guidance either up or down right now for next fiscal year, simply because I still think there is some priority shifting; that’s ongoing for the balance of fiscal ’12.
I think the best indicator we have is our win rate and our increasing backlog. The fact that we have such a large number of proposals that are in the submit stage awaiting reward, I am bullish on the performance we’ve seen in the third quarter as an indicator of what next year should look like.
Rumohr asked: You mentioned there was some slowdown early in this government fiscal year; you are about halfway through year quarter. Can you give us any color regarding whether bookings have slowed for you so far in the fourth quarter or color at all?
Havenstein responded: We saw on the last few weeks of September an uptick in orders, which represented the first part of our Q3. Then we saw the first couple of periods of our next couple of periods of our Q3, which represented the first month and a half or so of current fiscal year return to the normalcy we saw during the early parts of the summer and late spring.
I would say the normalcy we saw for most of 2012 is pretty much continuing. We are seeing more RFPs right now in some of our areas like cyber security, and most recently, we have seen some 100 million wins in the last few weeks.
I think it will be more comparable to what we saw in our second quarter as opposed to the end of our third quarter.