Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the SAIC's First Quarter Fiscal Year 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Joseph DeNardi, Vice President of Investor Relations and Strategic Ventures. Please go ahead.

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 thefinancial 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…

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…

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.

[Operator Instructions] Our first question will come from the line of Seth Seifman with JPMorgan. Apologies. 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 off and then certainly Prabu can add some color. I think consistent with the way we've been describing this market, we see the opportunity across the broad space domain, including DoD obviously, civilian and Intel to really leverage some of the key areas of GTA. So as an example, in IT modernization and being able to drive IT modernization across the space domain, in our SID strategy, being able to do systems integration and delivery in a very capital-light manner as the nation looks to expand and further strengthen the space domain. So I would say it's a key part of our strategy. We see key areas of continued opportunity as it relates to the GTA. And then, of course, we do some work in the SETA space as well in the space domain, and that's a key part of our -- certainly, our core business and allows us to have the sales and the competencies and past performance to further accelerate. Prabu, anything you want to add?

That's great, Nazzic. Thank you for the question, Tobey. Really big picture, about 1/5 of the portfolio has space exposure. And as Nazzic pointed out, that's a combination of civil space, military space and intel space. And the portfolio is pretty well balanced across the GTA areas as well as sort of the core mission engineering side of the portfolio. There's a fair amount of SETA inside our space business. And so there's -- that's predominantly in the Intel space area. So good exposure on the space side. We've flagged over the last couple of years or so some things we are taking on to the development side of our space business, not impacted by the OCI that you'll typically see on the SETA side. So the teams had some success building out a portfolio that is I would say, a little more biased towards the development side. And as Nazzic pointed out, there are a couple of neat things that are happening on the development side that hopefully we'll be able to update you all 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. So I'll take that one. So really big picture, I think we recognize that in order to build ROIC over the long term, we've got to consistently be able to grow the business profitably. And we believe we are demonstrating the capacity for this business to organically grow quarter-over-quarter. And we -- I believe we've done that pretty well over the last couple of years. But there's more here to do, and we're going to continue to do that. In addition to that, we recognize that there is a multiyear path for margin improvement inside this portfolio. So we have provided multiyear targets on the margin side at our Investor Day and we are firmly committed to ensuring that this portfolio continues to do well on operating margin, adjusted EBITDA. And finally, we have been biased towards our share buyback program, which is clearly adding value here. As I think about the buybacks over the last couple of years on a total share count basis, we've retired over 10% of our total share count, net of the equity issuances, I would say, in the high single-digit area in just two short years. So we believe the combination of growing the business, improving margins and favorably deploying capital to the long-term interest of our shareholders is going to allow us to be a leading generator of ROIC over the next couple of years relative to the peer set. And we actually have a chart in the earnings presentation that demonstrates the progress we're going to make over the next couple of years. So to me, that's sort of how we think about ROIC when we talk to our shareholders, they communicate to us how important this metric is for them. And this is sort of our mash to it to make sure that we are profitably growing the business and creating real economic value over the long term. 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?

Yes. Thanks, Matt. So I think as with everybody probably in the nation and certainly in our industry, we're really, really pleased that they were able to get a bipartisan bill passed and get it passed ahead of schedule. So very, very happy to hear that. This -- we were having discussions around this -- we happen to be doing our call on the day of when it was supposed to expire. So we're pleased that that's behind us. At a high level, we continue to see a very large addressable market, and we don't expect that to change materially as a result of this particular bill or any kind of near-term things that we're hearing about. The -- our position is we're very well diversified across defense, nondefense and intel. And so we believe that positions us well as we go into whatever the next few months might bring and certainly well positioned in both modernization as well as the statement. So very pleased to get passed, very pleased that got passed in a bipartisan way. I think it showed some encouraging trends, but we don't see any short-term hiccups or challenges with it, and we'll continue to monitor it just as everybody else does across the industry. I'm going to let Prabu provide a little color as well.

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.

Okay. Great. Thank you.

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 think one thing I would add to that, Prabu is, I think you hit the nail on the head, there certainly could be some short-term pressures, but the requirement and the necessity for the federal government across all of its kind of whether it's Defense, Intel, Civil to modernize is absolutely critical. So although we might see some short-term headwinds, if your scenario plays out, we still believe that modernization is key. It's required for the federal government to stay current in systems to deal with cyber pressures and all those things. So -- but I think Prabu put it well. We can navigate either way. We can support either way, and we're well positioned across the portfolio. On NASA, in particular, certainly, the contract is in going to the protest process. So I'm not going to discuss that in too much detail. But we do see continued opportunities in civil space. We see, obviously, the from an IT modernization, a continued need to do that. We see the ability to pivot in some of the other GTA areas, and for us, it's just focusing on those areas in which we can bring differentiation where we can set ourselves apart from the competition through solutions through innovation. And of course, we tend to see more sure when it's labor only and when it's priced and labor combined. And so it's really pivoting to those areas where we can bring differentiation leverage the competency that we're seeing maybe in some of the other areas of the space domain, drive pipeline and opportunity in the civil side.

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 1 quarter does not make a year.

Yes. A couple of things I'll just add. So on the labor side and the people side, that has been a core part of our strategy these last few years. Obviously, COVID gave us a little bit of hiccup, and we've all pivoted post COVID to adjusting to what the new normal is. But the ability to hire, attract and retain talent is fundamental to our overarching growth strategy. And so very pleased to see the positive momentum. But as Prabu stated, we watch it very closely, and we're really as good as our last quarter. So very pleased with what we're seeing relative to our industry peers, relative to the broader industry. But we also recognize that [technical difficulty]

…if it's not taken back and what kind of a ramp and homes, you lost it, it's in protest. When is the protest date and when would it transition and then Vanguard, maybe an update there. Thanks.

Okay. I'll let Prabu do the run through the few and then I'll add whatever color.

Sure. Cai, I appreciate the question. So DCSA One IT has begun to ramp and we're still in the early stages of that ramp and continuing to work with the incumbent there as we transition away from them and on to our labor base, and it's certainly helping the labor front as well. But in terms of the run rate on DCSA One IT, we expect it to get to probably, let's call it, $50 million run rate for this year, this fiscal year FY '24. And at full run rate, I think this program probably generates $100 million to $120 million of revenue and that's likely to come in next year. So a little less than 1% this year and let's call it about a 1.25% to 1.5% next year. TCloud remains in protest. We believe just based on kind of the time lines that are out there sometime towards the second half of June, we will see some resolution of that. And of course, there may be other steps from there who knows in this crazy environment. So -- but we are watching it we think the second half of June is sort of the -- when the clock runs out and we'll hopefully get some clarity here before the end of June. So to me, that's TCloud homes, obviously, in now. And unfortunately, we're unable to say a whole lot more than to say that if we are unfortunately in the position of not holding on to the contract, we are likely to see impacts from that transition beginning in our Q4. But of course, it goes without saying, Cai, that the updated revenue guidance we have provided accommodates and accounts for all possible scenarios that may happen with any one of those three contracts that I just talked about. So suffice it to say, we're comfortable with the updated guidance, but that is notionally the time frame 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, guys for the time, Nazzic and Prabu and Cai for being so kind of one question. So Prabu, you kind of talked about this answering a question that wasn't really asked, but profitability up 60 basis points year-over-year in Q1 at the midpoint of your guidance despite the lower margin supply chain business in there. So kind of can you talk to us about how much we should think about the supply chain helping margins in the next three quarters and then the indirect costs that really -- or lower costs that helped you get to a better profitability point this quarter?

Yes. I appreciate the question, Sheila. And supply chain on a full year basis, the divestiture of that business adds about 30 basis points to margin. And obviously, that business the sale closed at the end of Q1. So we've got potentially three quarters of tailwind, if you will, or margin expansion potential from that business. So I think somewhere between 10 to 20 basis points on a current year basis. That's sort of how we presented the view at Investor Day back in April. So to me, I think what this says is that to the extent that we continue to perform well and we continue to manage our cost base effectively. It gives us some opportunities for investments in some differentiated areas that allow us to impact our objectives to continue to grow this business profitably. In other words, it's a good place to be at the end of Q1, lots of variables, including the balance that the team has to go through in terms of margin expansion in the near term beyond what's implied in the guidance right now versus being able to reinvest some of that in the business to drive additional profitable growth down the road. As most companies go through, we go through a series of trades when we decide which investments to prioritize and which ones are on a, I'm going to call it air court regretless. And this is -- this performance allows us to sort of dust off, if you will, the regretless and say, are there things there that will continue to generate profitable growth for the organization, and that's a good position for us to be in. So pretty comfortable with the 9.2% to 9.4%. Obviously, Q1 performance biases us to somewhere higher than that. Obviously, if you just add the supply chain element to it, but it's an enviable amount of flexibility to have. So early in the year for us to think about reinvestment and continuing to drive this business beyond estimates that may be out there.

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, certainly, Sheila, getting a lot of press these days in AI across, I think, every industry, including ours. So I think a couple of points I want to make. This is an area -- this is a market that we've been investing in for several years. And certainly, the discussion from coming out of the federal government is -- appears to be that we're near a tipping point, and the customers seem to be more interested these days in looking at driving an advantage through using AI. So we feel good about our position in the market and our ability to do that. I think it's also important to know that the way that we think about AI in addition to AI for AI's sake is it's clearly embedded in so many of our solutions that we bring to market. And so it's very hard to quantify what we do in AI because many of our solutions have AI embedded and many of our programs have AI embedded. So it would be very difficult for me to try to measure that. One good example I'll give you is the acquisition of Koverse that we did a couple of years ago. Again, just evidence that we've been thinking about this market, investing in this market for a while, and that broadened our exposure to both AI and data analytics. And we've been really pleased with the customer feedback we've received on the solution, and it has already contributed to several winning -- several hundred million dollars of wins across both the civilian space and the defense space. So very pleased with that as part of our portfolio. Then we've been investing in asset called [10-Gen], which is an AI tool as well. So and then we have an innovation factory that is focused on AI, and you guys got a chance to meet some of our innovation factory leaders in New York. And so again, that continues to be a core part of our strategy. And we see opportunities and whether it's Counter-UAS, Secure Cloud, JADC2. So again, it's hard to pull out just AI, but we see it embedded in those types of programs and solutions. And then last but not least, I'll just mention that just a few quarters ago, we were named a JADC2 company to watch. It's one of the things that I highlighted, and it was really called out because of our experience in both data analytics and AI. So we recognize this is an important part of our industry, important part of our market and our ability to differentiate our solutions, leveraging AI for our customers is something that we're very focused on. And we'll continue to invest in as our government customers get more mature in the way they acquire.

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. And I think you captured it well. There's -- with anything that's a huge change or huge institution into the market and our federal government is considering some of these types of competencies and pledges. It's both a threat as well as an opportunity. And so we're navigating that on both sides. Certainly, on the threat side, you could see AI have the potential of reducing headcount on certain programs and so much of the way that our industry measures revenue and profit is on a headcount. And so we're certainly sensitive to that. We're aware of that. But we also -- our preference is to understand what that is and when it makes sense for us to be the disruptor and drive the performance and drive the competencies and solutions in our programs in partnership with our customers. So you're absolutely right. It is both. We want to make sure we manage it on both dimensions. But I will say it's relatively early days in the federal government's adoption. And so I think there's a lot of maturity that can come, and we intend to be a leader and driver in those areas where, again, where we've carved out our strategy and where we believe it could make a difference in our solutions.

Okay. Great. And you have to excuse the delay. I'm sensing that my IT set up 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.

Got it. I appreciate the question there, Jason. A couple of things. Really big picture. We delivered solid book-to-bill Q1, 1.1, and we expect to be comfortably over 1 on a full year basis. We've got a few larger needle-moving things in the pipeline, which we expect to hear over the course of maybe the second half of this year. So it's certainly an area we continue to watch. Obviously, as Nazzic mentioned in her prepared remarks, TCloud is actually not in the book or the book-to-bill numbers we reported. So obviously, we're watching that space as well. So we feel pretty good about what that seasonality looks like right now. Again, I think Q2, Q3 probably higher than where Q4 is likely to be if I had to put a finer point on the quarterly distribution of backlog and book-to-bill. But that's sort of how we are seeing things right now. I think as Nazzic mentioned in her prepared remarks, to the broader question around the depth of the pipeline, the value of the submitted proposals has gone up to about $26 billion. That's certainly an increase from the last time we've talked to the Street about it. And therefore, that's a healthy sign. Hopefully means some good things for book-to-bill and then the qualified pipeline that's -- that's the total qualified pipeline is also up 8% year-over-year. So I think those two data points continue to tell us that the pipeline is deeper perhaps than a year ago, the number of qualified bids out there that we are waiting to hear from is also higher than it was and most importantly, that the mix of GTA and core is really skewing to ride a 50-50 right now, which is also a pretty healthy sign. Logically, we assume that GTAs may come in at a lower win rate, especially if new lower than kind of normal sort of takeaways just because it is more differentiated, especially in a market that we are trying to break through. So we're taking into account all of that sort of relative factoring in order to come up with our estimates. But Q2 and Q3 should be solid and Q4 seasonality will impact likely kind of some softness in the Q4 bookings as we probably saw at year end of last year. Yes, Jason, the only thing I would remind you of is, as we've said before, TCloud was structured as an IDIQ. So we're not going to book the full value if and when that gets resolved in our favor, we'll book kind of as we go. So that's just one factor to consider for the year.

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.