Science Applications International Corp Q1 FY2024 Earnings Call

Hello, and thank you for being here. My name is Regina, and I will be your conference operator today. I would like to welcome everyone to SAIC's First Quarter Fiscal Year 2024 Earnings Conference Call. I will now turn the conference over to Joseph DeNardi, Vice President of Investor Relations and Strategic Ventures. Please proceed.

Good morning and thank you for joining SAIC's first quarter fiscal year 2024 earnings call. My name is Joe DeNardi, Vice President of Investor Relations and Strategic Ventures, and joining me today to discuss our business and financial results are Nazzic Keene, our Chief Executive Officer, and Prabu Natarajan, our Chief Financial Officer. Today we will discuss our results for the first quarter of fiscal year 2024 that ended May 5, 2023. Earlier this morning, we issued our earnings release, which can be found at investors.saic.com, where you will also find supplemental financial presentation slides to be utilized in conjunction with today’s call and a copy of management’s prepared remarks. These documents, in addition to our Form 10-Q to be filed later today, 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 reconciliations to the most comparable GAAP measures. The non-GAAP measures should be considered in addition to, and not a substitute for, financial measures in accordance with GAAP. It is now my pleasure to introduce our CEO, Nazzic Keene.

Thank you, Joe and good morning to those joining our call. Earlier today, we reported strong results for the first quarter and increased our guidance for revenue and EPS for fiscal year '24. Our performance represents a strong start to the year, and we remain on track to deliver on the financial targets we provided to you at our Investor Day on April 11. Before discussing our results in more detail, I want to continue my tradition of highlighting colleagues at SAIC for their contribution to our success. Though, this quarter, there will be a slight twist which I’ll get to shortly. As many of you know, May is Military Appreciation Month which is an especially meaningful time for SAIC given how foundational military personnel and their families are to our culture and our values. Over 30% of SAIC’s employees are military service members and veterans and our Military and Veterans Employee Resource Group is SAIC’s largest ERG. During the month of May, we recognize several important days for our country and our employees: V-E Day on May 8, Military Spouse Appreciation Day on May 12, Armed Forces Day on May 20, and, of course, Memorial Day on May 29. In addition, on May 10, SAIC gifted its 14th home through its partnership with Building Homes for Heroes. For over 10 years, SAIC and Building Homes for Heroes have partnered to provide homes to deserving veterans and raised over $600,000 in the process. Here’s where the twist comes in: we’ve included links in these prepared remarks and our earnings presentation slides where you can donate to support this outstanding cause and help fund future homes for our veterans. I want to recognize Mike Bramble, Stefanie Wall, and David Robinson for their leadership on this important program. Now, onto a review of our financial results and outlook. As I mentioned, our performance in the first quarter positions us well to meet our goals for the year and is a solid first step towards achieving the long-term financial targets we provided in April. Our revenue of $2 billion represented pro-forma growth of 3.5%. I remain encouraged by the performance we’ve delivered and expect revenue growth rates to further improve in both our second and third quarters. We delivered strong operating performance as reflected by our 9.3% adjusted EBITDA margin in the quarter. We remain on track to deliver at least 50 basis points of margin improvement in fiscal year '24 through a combination of our portfolio shaping and our organic initiatives. Our net bookings include $766 million from the DCSA One IT program which was re-awarded to us in the quarter and on which we have begun to ramp up; however, our bookings do not include any contribution from the TCloud contract which remains in the protest process. Looking ahead, our pipeline and backlog of submitted proposals remain strong with solid growth overall and within our GTAs, specifically. At the end of our first quarter, the value of our submitted proposals was $26 billion, an increase of 10% year-over-year while our total qualified pipeline was up approximately 8% year-over-year. Importantly, our pipeline continues to skew favorably towards the higher margin areas of our portfolio with approximately 50% of the contract award portion of our qualified pipeline aligning with our GTAs. Before turning the call over to Prabu, I want to highlight some encouraging trends we have seen of late in both talent retention and acquisition. While we attribute some of this to an industry-wide improvement in labor metrics, we believe SAIC is performing well against the industry benchmark for turnover and we are tracking ahead of our plan year-to-date on new hires and headcount. Obviously, there are a number of factors contributing to this including some of the employee well-being initiatives we’ve discussed previously. I also believe that the leadership SAIC has shown in fostering a culture based upon diversity, equity, and inclusion is a factor. It will continue to be a top priority for the company as we believe it best serves all of our stakeholders. I will now turn the call over to Prabu to discuss our results and improved outlook in greater detail.

Thank you, Nazzic and good morning everyone. We reported strong fiscal first quarter results with revenue of $2.03 billion, up 3.5% year over year pro forma or roughly 2% when excluding supply chain sales. Revenue in the quarter benefited from the timing of certain materials sales previously planned for later in the fiscal year along with improved performance. Given some of the potential macro risks facing the industry, we are encouraged by the strong start to the year. The company’s first quarter adjusted EBITDA margin of 9.3% was also strong, benefiting from solid execution and the impact of ongoing margin improvement initiatives. Adjusted diluted earnings per share of $2.14 benefited from the stronger operating performance in the quarter and a lower effective tax rate. First quarter free cash flow was $76 million, ahead of our plan as the momentum we demonstrated at the end of fiscal year 2023 on cash collections has continued into fiscal year 2024. As we highlight in our earnings presentation, quarterly free cash flow in FY '24 will be impacted by the timing of payroll cycles with one additional payroll cycle in our first quarter representing a roughly $100 million headwind. We expect this to reverse in our second quarter, be a headwind again in our third quarter, and then reverse to a tailwind in our fourth quarter. I'll now discuss our updated outlook for fiscal year 2024. We now expect revenues in a range of $7.125 billion to $7.225 billion, a $50 million increase at the midpoint from our prior guidance, which now represents approximately 4% year-over-year growth. This increase is driven primarily by two factors: roughly $35 million of outperformance from our supply chain business in 1Q and roughly $15 million from net improvements elsewhere. In terms of the expected quarterly cadence of growth through the year, we continue to see low to mid-single digit growth rate in every remaining quarter of our fiscal year after adjusting Q4 for the five fewer working days this year. We have provided additional detail in our slides to assist with modeling. We are maintaining our adjusted EBITDA margin of 9.2% to 9.4% though, as I mentioned, I am encouraged by our strong start to the year and continue to see a multi-year path to further margin improvement. We are increasing our adjusted diluted EPS guidance to $7 to – $7.20 as a result of the improved operating performance and the expectation for lower interest expense going forward. We are maintaining our free cash flow guidance of $460 million to $480 million and continue to expect roughly $350 million to $400 million in share repurchases. We deployed about $70 million of cash to repurchase our shares in Q1 and have picked up the pace here in the second quarter. Note that our free cash flow guidance excludes roughly $82 million of cash taxes, transaction fees, and other costs we expect to pay related to our supply chain sale. While we expect to recognize the bulk of these costs in our Q3 and Q4 cash flow from operations, we are excluding these payments from our free cash flow guidance to provide investors with a clearer understanding of the business's underlying cash flow performance. In addition, we expect to record a gain as a result of the transaction in Q2 which we will exclude from our adjusted results. As Nazzic mentioned, results in the first quarter position us well to deliver upon the multi-year financial targets we provided at our investor day. This outlook will result in solid top line growth, adjusted EBITDA margins greater than 9.5%, and free cash flow per share of approximately $11 by fiscal year 2026. We intend to accomplish this while remaining true to our asset-light business model which we believe will result in SAIC driving an industry leading improvement in ROIC over the next few years. While we recognize that driving sustained profitable growth and increasing margins is a key priority, we believe that doing so while also being disciplined stewards of capital is in the best interest of our long-term shareholders. As a leadership team and as a company, we remain focused on maximizing long-term shareholder value. With that, I’ll now turn the call back over to Nazzic.

Thank you, Prabu. As we announced on May 18th, I will be retiring from my role as CEO effective October 2. The Board has appointed Toni Townes-Whitley to serve as SAIC’s next CEO, and I couldn’t be more supportive of their decision. Identifying the very best candidate and putting in place a smooth and orderly transition have been key priorities for the SAIC Board, and we are confident that we have achieved both. The plan we announced allows for an eight month transition to ensure this is a successful process for Toni, our employees, our customers, and our shareholders. I can say with confidence that the SAIC leadership team and I are incredibly excited to welcome Toni to the team and to further accelerate our strategy under her leadership. As I still have one more call with you all in September, let’s leave our goodbyes until then. With that, I’ll now turn the call over to the operator to begin Q&A.

Our first question will come from the line of Tobey Sommer with Truist Securities. Please go ahead.

Hi. Good morning. Thank you very much for the question. And I was wondering if you could talk to us about the opportunities that you're seeing develop in the space arena, something that we talk about periodically on these earnings calls. And if you could talk about them in terms of all the exposures, military, intel and the civil agency? Thanks.

Yes. This is Nazzic. Tobey, I'll start and then Prabu can provide additional insights. We continue to see opportunities across the broad space domain, including the Department of Defense, civilian sectors, and intelligence. This aligns well with our strategy in driving IT modernization within the space domain. In particular, our systems integration and delivery capabilities allow us to operate efficiently as the country seeks to enhance its space initiatives. I view this as a crucial aspect of our strategy, with ongoing opportunities related to our goals. Additionally, we are involved in the SETA space, which is integral to our core business and enables us to leverage our sales competencies and past performance for growth. Prabu, do you have anything to add?

Thank you for the question, Tobey. Overall, about one-fifth of our portfolio is related to space. As Nazzic mentioned, this includes civil, military, and intelligence space. The portfolio is well-diversified between the GTA areas and the core mission engineering aspects. There is a significant amount of SETA in our space operations, mainly within the intelligence sector. We have noted some initiatives in the development aspect of our space business that are not influenced by the typical OCI associated with SETA. The teams have made progress in establishing a development-focused portfolio. There are some exciting developments in this area that we hope to share in future calls.

Thank you. For a follow-up question, I'd like to talk to you about your plans to improve returns, ROIC. What do you see as the biggest risks to achieving that goal? And are you talking about growth or sort of change in ROIC being industry-leading or absolute percentage industry? Thank you.

Yes. I'll address that. From a big picture perspective, we understand that to build return on invested capital over the long term, we need to consistently grow the business profitably. We believe we are showing the ability for this business to grow organically from quarter to quarter, and I think we've performed well in that regard over the last couple of years. However, there is still more work to be done, and we plan to continue this effort. Additionally, we see a multiyear opportunity for margin improvement within our portfolio. We have outlined multiyear margin targets during our Investor Day and are committed to ensuring continued success in operating margin and adjusted EBITDA. Furthermore, we have prioritized our share buyback program, which is clearly adding value; over the last couple of years, we've retired more than 10% of our total share count, net of equity issuances, in the high single digits within just two years. We believe that the combination of business growth, margin improvement, and strategic capital deployment will position us as a leading generator of ROIC over the coming years compared to our peers. We also have a chart in the earnings presentation that illustrates the progress we expect to make. This outlines our approach to ROIC, which our shareholders have indicated is very important to them. Our focus is on profitably growing the business and creating real long-term economic value. Thank you.

Our next question will come from the line of Matt Akers with Wells Fargo. Please go ahead.

Yes. Hi. Thanks very much. Good morning. I wonder if you could just comment on your thoughts on the debt ceiling deal and how that sort of fits with the long-term assumptions in your long-term guidance?

Thank you, Matt. Like many others in the nation and our industry, we are very pleased that a bipartisan bill was passed ahead of schedule. It's great to have that behind us, especially since our call coincided with the expiration date. We believe the overall market opportunity remains substantial and is unlikely to change significantly due to this bill or any immediate developments we're aware of. Our diversified presence across defense, non-defense, and intelligence positions us well for whatever challenges may arise in the coming months, particularly in modernization and operations. We are optimistic about the bill's passage and the bipartisan support it received. We see encouraging trends, and we do not anticipate any short-term disruptions. We will continue to monitor the situation just as the rest of the industry will. I'll turn it over to Prabu for further insights.

Sure. Matt, thank you for the question. We've been messaging for probably three quarters now that we expect the long-term budget prognosis to reflect sort of this gridlock and potentially defense budgets growing in that low single-digit range. And I think this latest deal sort of memorializes that view, I think in terms of the direct impact of this particular budget deal relative to the guidance we provided on a multi-year basis, I would say it's fairly in line with what we've assumed. We have been communicating that, that 2% to 4% long-term revenue guide at the midpoint 3% reflects some modest element of market share capture, which is sort of reinforced by the deal that we have in place. The reality is we're going to have to watch the specific line items inside of the budget. What supplemental bills potentially could include and potentially what it means for modernization versus legacy systems. As Nazzic said, I think we are balanced in terms of our exposure to both legacy systems as well as modernization. To the extent you see dollars flowing back into legacy systems and away from modernization inside of FedCiv, in particular, I think our portfolio is actually rather well placed on that front as well. So again, I think we'll learn a lot. We'll discover even more things, I think, over the next six months. And we're just going to have to see how this plays out. But I'd say no real big change or impacts on the long-term revenue guide we provided.

Okay. Great. That's helpful color. And then I guess, can you talk about how do you see book-to-bill coming in for the year. Obviously, you've been pretty steady at kind of 1x level. It sounds like the pipeline is pretty healthy. I mean should we expect book-to-bill to come in above one for the year, do you think?

Yes. So this question actually coincidentally came up on the last earnings call. Look, I think at a midpoint of that 2% to 4% revenue guide on a multiyear basis, we would expect book-to-bill over time to be comfortably over 1.0. And I think, obviously, we don't guide to book-to-bill on a quarterly basis, and you all recognize how lumpy it can be and how inherent practices are different across the different registrants. And therefore, I would just say comfortably over one is the long-term objective, and I think we're doing a nice job right now to delivering backlog that is going to help us continue to grow this business.

Your next question will come from the line of Bert Subin with Stifel. Please go ahead.

Hi. Good morning.

Good morning.

Good morning, Bert.

Hi, Nazzic and Prabu. Maybe following up to Tobey's question, what are you expecting on the Civil side of space? Just following a couple of Nazzic contract headwinds and then more broadly, Prabu, it sounds like your view towards FEDSIM is that it's pretty in line with what you were previously thinking. Where do you expect some of that pressure will show up in Fed because it looks like those budgets are going to be the ones that are experienced the most pressure when we look to next year?

Sure. Maybe I'll take the second part first, Bert. So on FEDSIM side, as I said, there's good balance between legacy systems and modernization. To the extent we see budget dollars move away from modernization, you could see some impacts on programs that are starting to ramp potentially. And again, we do have a fair amount of legacy systems that will actually be the beneficiary of any impacts on the modernization accounts, if you will. Now the caveat to all of this is this presumes that all well appropriation bills will actually get asked by early January. And the reality is we all know that if that does not happen, oddly enough FEDSIM is likely to see more money than they would in sort of the standard deal, if you will. That's in place right now. So I think that's why I think it's important to be methodical and a little careful about how this plays out over the next six months. But we do see some impact to potential modernization if the priority becomes maintaining legacy systems, and the reality is, we are well exposed to the legacy systems as well. And therefore, we think we can manage and navigate our way through any potential shifts in funding that we see over the next six or eight months.

Yes, I would add that while there may be some short-term pressures, the need for the federal government to modernize across all sectors, including Defense, Intelligence, and Civil, is absolutely essential. Even if we face some short-term challenges, we believe that modernization remains crucial for the government to keep up with current systems in dealing with cyber threats and other issues. We are confident in our ability to adapt and support various scenarios, and our portfolio is well-positioned for this. Regarding NASA, the contract is undergoing a protest process, so I won’t provide too much detail. However, we continue to see opportunities in civil space and a consistent need for IT modernization. We can pivot to other areas and focus on those where we can differentiate ourselves from the competition through innovative solutions. We typically find more certainty in labor-only engagements and when pricing combines both labor and materials. Therefore, our focus is on areas where we can showcase our unique capabilities and drive opportunities in the civil sector.

Okay. Okay. Great. Maybe just as a follow-up. Really strong first quarter performance. And Nazzic, you had some positive commentary there on the hiring front and it sounds like that's going well. So can you maybe just help us bridge the gap thinking about on-contract growth? Because I imagine that's a pretty solid tailwind and then just putting that into the context of sort of a pretty modest revenue increase after a pretty strong first quarter?

So Bert, I'll take that one. So I think we signaled on the Q4 earnings call that we are seeing attrition start to flatten out. And I think we're pleased to report that, that trend has continued. So attrition is certainly trending better than where it has been over the last couple of years. Our hiring has been pretty good as well. And especially with DCSA One IT starting to ramp, we think there is potentially continued upward bias, if you will, on the labor generation side. Now the flip side of having good labor generation is that it actually makes us a little more affordable because we have a broader labor base against which to spread our fixed cost, if you will. And therefore, that is certainly starting to come through on the margin side, which is certainly part of the reason why we delivered a 9.3% margin rate in spite of a good portion of that beat coming from our supply chain business, which we all know and we've communicated historically that is a lower margin business for us. So to me, I think when we think about the mix here, and the fact that labor is trending well, it bodes well for on-contract growth on a full year basis. But having said that, in spite of the good strong first quarter, there's three quarters late year and we've got to go to our share of the work. And we'll keep you all posted. As I said, our commitment is to keep you calibrated on what we're seeing internally and the update we provided on the Q1 call is our first attempt to do that this year. And hopefully, we'll have some good things to report on labor and margin and hopefully growth, but we have to go see how this plays out over the nine months, and we've got to go execute. And we're really proud of what we've done, but one quarter does not make a year.

Yes. I'll add a couple of points. The labor and people aspect has been crucial to our strategy over the past few years. While COVID posed some challenges, we've adapted to the new normal. Our ability to hire, attract, and retain talent is essential for our overall growth strategy. I'm happy to see the positive momentum, but as Prabu mentioned, we monitor it closely since we are only as strong as our last quarter. I'm encouraged by what we're experiencing compared to our industry peers and the broader market. However, we also acknowledge the uncertainties ahead regarding transitions and updates related to future plans. Thank you. Okay. I'll let Prabu do the run through the few and then I'll add whatever color.

Sure, Cai, thank you for the question. DCSA One IT has started to increase, and we're still in the initial phases of that ramp as we transition from our incumbent to our own labor force, which is definitely assisting us on the labor side as well. Regarding the run rate for DCSA One IT, we anticipate it will reach approximately a $50 million run rate for the current fiscal year, FY '24. At full capacity, this program is expected to generate between $100 million and $120 million in revenue, likely in the next year. So, we project a little under 1% this year and around 1.25% to 1.5% next year. TCloud remains under protest, and we believe that based on existing timelines, we should see some resolution in the second half of June, though there may be additional steps given the uncertain environment. We expect the second half of June to be critical for clarity. Unfortunately, we cannot provide much more detail at this time, but if we do not retain the contract, we could see transition impacts beginning in Q4. It's important to note that our updated revenue guidance considers all potential scenarios related to the three contracts I mentioned. Consequently, we are confident in the updated guidance, and that outlines the expected timeframe for the transition in Q4 this year.

And then I think on Vanguard, we expect to have nothing really material happening this year as it relates to the existing contract, the customer is going through their procurement cycle. We did, as we reported out, have an extension a few months ago. And so it's hard to predict because it's a very complicated procurement, but could see some things start to happen mid next year on Vanguard, Cai. And I just want to reiterate the comment that Prabu made. Obviously, these are all big contracts. We watch them all very closely. But the revenue guidance that we provided in April really took into consideration various scenarios of all of these and we remain confident in that guidance that we provided.

Terrific. I had a huge question, so I will pass from my side.

Okay. Thanks Cai.

Next question will come from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.

Thank you both for your time. Prabu, you mentioned something not directly asked, but profitability increased by 60 basis points year-over-year in Q1 at the midpoint of your guidance, despite the lower margins in the supply chain business. Can you elaborate on how much we should expect the supply chain to improve margins in the next three quarters, as well as the indirect costs or lower costs that contributed to your improved profitability this quarter?

I appreciate the question, Sheila. On a full year basis, the divestiture of that business contributes about 30 basis points to margin. Since the sale closed at the end of Q1, we have potentially three quarters of margin expansion from that business. I believe it will provide between 10 to 20 basis points for the current year, as we indicated at Investor Day in April. This suggests that as long as we continue performing well and managing our costs effectively, we will have opportunities to invest in differentiated areas that can help us achieve our growth objectives profitably. It’s a favorable situation at the end of Q1, with many variables to consider regarding margin expansion and reinvestment for future growth. We often face a series of decisions about which investments to prioritize, and this performance enables us to revisit our strategy and identify opportunities for profitable growth. I feel confident with our margin estimate of 9.2% to 9.4%, especially considering the Q1 performance. Adding the supply chain aspect gives us considerable flexibility early in the year for reinvestment and driving the business beyond existing estimates.

Sure. That's helpful. And I know you guys talked about this at Analyst Day a little bit. But just given it's such a hot topic now, can you quantify your AI exposure? And maybe talk about one example how you're using it internally and how you think the DoD will take it in as a customer?

Yes, absolutely, Sheila. AI is receiving a lot of attention across various industries, including ours. I want to emphasize that we’ve been investing in this market for several years. The recent discussions from the federal government indicate we are nearing a tipping point, and customers seem increasingly interested in leveraging AI for competitive advantage. We feel optimistic about our market position and our capability to meet this demand. It's also crucial to note that we integrate AI into many of our solutions, making it challenging to quantify our AI-specific contributions since many of our programs incorporate AI technology. A good example of our investment in this area is the acquisition of Koverse a couple of years ago, showcasing our long-standing commitment to the AI and data analytics market. We have received favorable customer feedback on this solution, which has already led to several hundred million dollars in wins within both civilian and defense sectors. Additionally, we are investing in an AI tool called [10-Gen], and we have established an innovation factory focused on AI. You had the opportunity to meet some of our innovation factory leaders in New York, which reflects our ongoing commitment to this area. We see AI embedded in our initiatives like Counter-UAS, Secure Cloud, and JADC2. Lastly, I’d like to mention that just a few quarters ago, we were recognized as a JADC2 company to watch, highlighting our expertise in data analytics and AI. We understand the significance of AI in our industry, and our goal is to differentiate our solutions by leveraging AI for our customers. We will continue to invest in this area as our government clients become more advanced in their acquisition processes.

Great. Thank you.

Thanks Sheila.

Thank you, Sheila.

Your next question will come from the line of Jason Gursky with Citi. Please go ahead.

Hi, good morning, everybody. I wanted to stick with the generative AI question. Can you hear me okay?

Yes, we can hear you, Jason.

We can hear you.

You can. Okay. Great. Sorry about that. Okay. Great. So on general you talked a lot about the opportunities. I wanted to see if there are any threats to the current book of business and just kind of making sure we're balanced and understand what this all represents. I know this is moving very quickly. So I suspect that from opportunities as well as some potential threats to the business. So I was wondering if you could kind of balance it out for us and tell us a little bit from your perspective where you think the threats might be?

Absolutely, I think you captured it well. With any significant change or major introduction to the market, especially with the federal government considering these competencies and pledges, there are both threats and opportunities. We're managing both aspects. From the threat perspective, AI could potentially lead to a reduction in headcount for certain programs, and since our industry measures revenue and profit largely based on headcount, we are mindful of that. However, our focus is to understand when it makes sense for us to be the disruptor, enhancing performance and delivering solutions in collaboration with our customers. You're correct in noting that it is a dual-sided issue, and we aim to manage it effectively on both fronts. It's still early in the federal government's adoption of these innovations, and I see significant potential for growth and maturation in this area. We plan to be a leader and driving force where we've established our strategy and believe it can significantly impact our solutions.

Okay. Great. And you have to excuse the delay. I'm sensing that my IT setup here isn't great. So you might be getting this next question late, but Prabu, you had mentioned earlier in the year that you thought that there was potential for some seasonality in bookings this year. I know you've answered quite a few questions on bookings this year, but I just want to have everybody kind of understand from a big picture perspective, how you are currently seeing the pipeline kind of developing from a seasonal perspective. I think earlier in the year, you suggested that we could see some softness if everybody gets ready for a potential CR. We just had a debt feel that maybe clean some of that out. But I just want to give you an opportunity to kind of update some comments that you made earlier in the year on seasonality related to bookings.

I appreciate the question, Jason. Looking at the overall picture, we had a solid book-to-bill ratio of 1.1 in Q1 and expect to comfortably exceed 1 for the full year. We have some significant projects in the pipeline that we anticipate updates on in the latter half of this year. As Nazzic mentioned earlier, TCloud is not included in our current book or book-to-bill figures, and we are monitoring that area too. We feel positive about the seasonal trends, with Q2 and Q3 likely outperforming Q4 based on our backlog and book-to-bill distribution. Nazzic also noted that the value of our submitted proposals has increased to around $26 billion, which is a positive sign compared to our last discussion. Additionally, our total qualified pipeline has grown 8% year-over-year. These indicators suggest that the pipeline is not only deeper than a year ago, but we also have more qualified bids waiting for updates. The distribution between GTA and core projects is currently balanced at approximately 50-50, which is encouraging. We anticipate that GTAs might have a lower win rate, especially if new deals have atypical characteristics since they are more specialized in a competitive environment. We are factoring in all these elements as we refine our estimates. We expect Q2 and Q3 to be strong, while Q4 might experience some softness in bookings, similar to what we observed last year. As a reminder, TCloud operates as an IDIQ, meaning we will not book its full value at once if we win that contract; we will recognize revenue incrementally.

Great. Thank you, everybody. Appreciate it.

Thank you. We have no further questions at this time. That will conclude today's meeting. We thank you all for joining. You may now disconnect.