Science Applications International Corporation

Operator: Good day, and thank you for standing by. Welcome to the Science Applications International Corporation fiscal year 2026 Q3 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, we will open up for questions. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like to hand the call over to your speaker today, Joseph DeNardi, Senior Vice President, Investor Relations and Treasurer. Please go ahead. Joseph DeNardi: Good morning, and thank you for joining Science Applications International Corporation's Third Quarter Fiscal Year 2026 Earnings Call. My name is Joseph DeNardi, Senior Vice President of Investor Relations and Treasurer. Joining me today to discuss our business and financial results are Jim Reagan, our interim Chief Executive Officer, and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the 2026 fiscal year that ended October 31, 2025. 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 our quarterly reports on Form 10-Q. 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 interim CEO, Jim Reagan. Jim Reagan: Thank you, Joseph. And thank you to everyone for joining our call. Before I begin, I want to take a moment and welcome SilverEdge to Science Applications International Corporation. Having personally spent time with leaders at SilverEdge, I am excited about the value we can create by combining their differentiated technology and commercial go-to-market approach with the breadth of Science Applications International Corporation. Building upon their success at bringing sought-after AI capabilities to life for the intelligence community, I expect strong continued growth as we deploy their incredibly talented people and solutions across the broader Science Applications International Corporation portfolio. This acquisition represents a good example of our ability to invest in differentiated IP capable of solving customer problems. I will begin with a brief review of our third-quarter results and updated outlook but will leave the more detailed walkthrough to Prabhu. I will then discuss my top priorities as interim CEO and the compelling potential to create value for our shareholders while investing to better serve our customers and create opportunities for our employees. Third-quarter revenue of $1.87 billion declined 5.6% year over year and included a roughly one-point headwind related to the government shutdown. Adjusting for this impact, revenue results were modestly ahead of our prior guidance as we have seen encouraging signs of stability across the market in recent months. Adjusted EBITDA of $185 million or a margin of 9.9% was driven by strong program execution. As I highlighted in the earnings release and as I will discuss in more detail, I see meaningful opportunities to further improve margins in the coming years while increasing internal investments to drive profitable growth. Adjusted diluted EPS was $2.58 reflecting our strong margin performance and a favorable tax rate in the quarter. Third-quarter free cash flow of $135 million was strong despite being impacted by the government shutdown which resulted in certain collections moving into our fourth fiscal quarter. Overall, the financial results we reported in the quarter were ahead of our prior guidance but I firmly believe that we can deliver stronger revenue performance over the long term. Since being appointed interim CEO by our board on October 23, my top priority has been to drive increased focus across the company and take decisive action that will position Science Applications International Corporation for long-term shareholder value creation. My prior industry experience and time on the board have allowed me to hit the ground running and I believe the actions we are taking will produce demonstrable results in the coming quarters. Let me provide greater detail and examples around what we are doing and how we are measuring impact. Science Applications International Corporation's legacy of innovation and commitment to US national security is undeniable and represents an incredibly valuable asset for the company. However, in recent years, we have struggled to convert this into revenue and EBITDA growth in line with the market due primarily to below-average business development and capture performance. The changes we have implemented over the past twenty-four months across business development are steps in the right direction and have contributed to our improved book-to-bill year to date. We are committed to building on this progress in three ways. First, sharpening our focus on execution to increase reinvestment in the business; second, more efficiently deploying our financial resources to drive growth; and third, prioritizing yield and bid quality across our business development function. We have discussed in the past that Science Applications International Corporation spends several hundred million dollars annually on indirect functions, including shared services, finance, human resources, marketing, communications, and others. We are implementing efficiencies across this category of spending, including our recent organizational restructuring, and will redeploy savings to fuel growth and improve profitability. We have identified over $100 million in annual spend that we are actively working to reinvest into higher ROI areas across our business and increase margins. This should result in a more efficient Science Applications International Corporation with increased investment directly driving growth and margins approaching 10% in the near term, with additional potential upside in FY '27 as we drive further efficiency across the business. In addition, I see an opportunity to refocus our attention on nearer-term execution and the aspects of our performance which we control. While there is value in aligning to a long-term corporate strategy, this needs to be balanced with a keen focus on executing to and delivering on our near-term commitments. My impression during my first several weeks as interim CEO is that our leaders want and will embrace this shift in priorities. I am challenging leaders across Science Applications International Corporation to focus on execution, make an impact on the business, and deliver results. And I am confident in their ability to step up. Lastly, we have shared with you our focus on increasing business development throughput and have shown strong progress against this having increased submit volumes from $17 billion in FY '24 to $28 billion in FY '25. While I believe this is an appropriate level for a business our size, we must now focus our shift from targeting throughput to prioritizing quality and alignment with the markets where we have the strongest right to win. This will drive improved decision-making, more efficient resource allocation, and a stronger Science Applications International Corporation in the long run. As I look at some of the larger business development pursuits that have not gone our way in recent years, and the lessons learned, there is substantial value to be created from turning up the focus and attention on the core fundamentals of this business. Before turning the call over to Prabhu, I want to take a moment to thank Toni Townes-Whitley, David Ray, Josh Jackson, and Lauren Knausenberger for their contributions and service to Science Applications International Corporation. The recent changes we made were necessary to position the company for longer-term success but required difficult decisions impacting some very high-quality individuals. I also want to acknowledge the tremendous honor it is to lead Science Applications International Corporation, a company with a deep legacy of supporting our country. I look forward to serving in this interim capacity, working with the leadership team to implement the priorities I just outlined, and assisting the board in its search for a permanent CEO. We have begun that process, which is being led by a search committee comprised of board members working in conjunction with a leading external search firm. Our ideal candidate will be someone who shares this company's commitment to serving our nation and our customers and has a proven track record of operating excellence and value creation. I can speak for our board in saying that we see significant opportunity to drive value for our shareholders, greater opportunities for our employees, and improved outcomes for our customers, our nation, and its allies. With that, I will now turn the call over to Prabhu. Prabhu Natarajan: Thank you, Jim, and good morning to those joining our call. I will discuss our business development results in the quarter followed by a review of our updated outlook, including some additional detail regarding the margin improvement efforts that Jim discussed. As you can see on slide four, we delivered 3Q net bookings of $2.2 billion resulting in a book-to-bill in the quarter and on a trailing twelve-month basis of 1.2x. Our 3Q awards included a five-year recompete with the Air Force, with a total contract value of $1.4 billion. And on the new business side, a five-year $413 million contract with the US Army for its open-source intelligence enterprise or OSINT program. In the third quarter, we submitted proposals with a total contract value of approximately $3 billion, bringing our year-to-date submissions to approximately $21 billion. While the government shutdown has slowed our pace of proposal submissions, we expect this to normalize in the near term and continue to target submitting bids totaling over $30 billion in FY '27. The incremental investments we expect to fund out of our cost efficiency efforts will go towards strengthening our solutions and overall bid quality. I will now turn to our updated outlook for FY '26 and FY '27. We are increasing our FY '26 total revenue guidance to reflect the acquisition of SilverEdge and reaffirming our organic revenue growth guidance despite the roughly one-point impact to 3Q revenues from the government shutdown. Our guidance continues to assume a roughly four-point contraction in organic revenue growth in the fourth quarter. We are increasing our guidance for FY '26 adjusted EBITDA margin by 10 basis points due primarily to our strong program performance year to date. We are increasing our FY '26 adjusted diluted earnings per share guidance by $0.04 largely due to the increased earnings and a lower tax rate as we now assume a roughly 10% effective tax rate for the year. We are maintaining our FY '26 free cash flow guidance of greater than $550 million. For FY '27, we are increasing our revenue guidance by approximately one point to include the acquisition of SilverEdge and are reaffirming our organic revenue growth guidance of 0% to 3%. This outlook reflects an assumed contribution from recent new business wins, including TenCap Hope and OSINT. Partially offset by known recompete headwinds of approximately 1% to 2%. As we have discussed, we are in the recompete phase for one of our largest programs, which represents just over 3% of annual revenue, with an expected award in the next few months. A favorable outcome on this would position us well in the 0% to 3% range, while a loss would likely make the lower end of the range more likely based on what we know today. We are increasing FY '27 margin guidance by 20 basis points at the midpoint to a range of 9.7% to 9.9%. The key drivers behind this are the acquisition of SilverEdge, which adds roughly 10 basis points, and the initial 10 basis points impact from cost actions taken to date. Our bias for adjusted EBITDA margins in FY '27 and beyond remains to the upside as we see meaningful opportunities to drive efficiency and improve performance which are not reflected in our updated guidance. As we return to revenue growth in the coming quarters, we anticipate that the efficiency efforts being implemented now will strengthen our ability to increase EBITDA faster than revenue. We are increasing our FY '27 adjusted EPS guidance by $0.50 reflecting the addition of SilverEdge, increased operating margins, and a lower share count. We are maintaining our guidance for FY '27 free cash flow of greater than $600 million or approximately $13.5 per share. As a reminder, FY '26 and FY '27 free cash flow benefits from changes related to section 174 under the One Big Beautiful Bill Act, which results in minimal cash taxes this year and next. Given our strong free cash flow, clear visibility into margin improvement, and a return to revenue growth, we see returning cash to shareholders via our repurchase program as a compelling investment. And now expect to repurchase approximately $500 million in each of FY '26 and FY '27. This $1 billion of total share repurchases represents approximately 25% of our market value. As Jim indicated, we see opportunities to create significant value for shareholders and are acting decisively to execute on our plans. While we appreciate the market's awareness with some of the uncertainty facing our end market, our FY '26 revenue performance, and our leadership transition, we have conviction in our ability to further improve execution, deliver sustained profitable growth, and create long-term shareholder value. Realizing the potential of Science Applications International Corporation requires focus, and a commitment to delivering on what we say. I am confident that we can accomplish this and demonstrate clear progress against this in the coming quarters. I will now turn the call over for Q&A. Operator: Thank you. And as a reminder, to ask a question, you will need to press 11 on your telephone. Wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we compile the Q&A roster. One moment for our first question. Gautam Khanna: Our first question will come from the line of Gautam Khanna from TD. Yeah. Thank you. I wanted to ask if you could maybe find what you are seeing in the procurement environment more broadly right now post the shutdown and, you know, with respect to our incoming RFPs, pace of adjudication, and the like. Prabhu Natarajan: Sure. Hey. Good morning, Gautam. Thank you for the question. In big picture, as we alluded to the point in the earnings script, I think we did see a slowdown in submit activity. And a slowdown in the RFPs coming through the door as a result of the shutdown. We do expect that to normalize I would say, over the course of the fourth quarter recognizing that Q4 tends to be the, you know, softest book-to-bill quarter for the industry in general. So I would say it is getting back to normal. I do not think fundamentally if you normalize for the shutdown, it has not materially changed from where it was in the Q2 time frame where award decisions are taking a little bit longer, but the RFP activity has stayed more or less on pace. Gautam Khanna: Gotcha. And I also wanted to ask if there was any residual impact from Doge. I know it has been a while since we have talked about that, but Doge and just the pricing environment broadly. Prabhu Natarajan: Yeah. On the Doge environment, I would say no material changes to what we have disclosed before. We said about 1% of full-year revenues for this year, so that really has not changed. And we also alluded to you know, the broader dose effort, I would say, has morphed into sort of more mini dose reviews inside of the different agencies and the departments based on their funding situation, but that is frankly, a feeling that we are used to navigating historically speaking. So I would say, you know, it has remained fairly stable, I would say. And, you know, so I would say not a lot. And in terms of pricing pressure, you know, our margins were very healthy in Q3. We really have not seen a ton of pricing pressure either via the RFPs that are coming out. We are seeing a little more fixed price in some areas, but I would not call that a trend broadly. But really have not seen a ton of pricing pressure at this point. Gautam Khanna: Thank you. Sure. Operator: Thank you. One moment for our next question. Our next question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open. Sheila Kahyaoglu: Good morning, guys, and thank you for the time. And congratulations, Jim. Maybe just on SilverEdge as it becomes embedded into the portfolio, you know, how do we think about the opportunity of SilverEdge and integration with Science Applications International Corporation? Jim Reagan: Yeah. Thanks for the question, Sheila. It is good to hear from you. I would tell you after being here for, you know, nine or ten weeks, I am wildly enthusiastic about what SilverEdge is going to be able to do not just as a, you know, a standalone part of our business, but as we integrate it into the portfolio, what it can do to accelerate the differentiation of a lot of the bids that we have. Not just within our intelligence community customers, but more broadly across the whole portfolio. We expect that SilverEdge will be accretive next year. Both on a, it will push our margins up a bit, but also be accretive on EPS. And provide and I think that the broader portfolio of opportunities within our company gives great opportunity not just for us to win more, and deliver better solutions, but also great opportunities for the employees of SilverEdge that are now part of the family. Sheila Kahyaoglu: Great. Thank you so much. And maybe if I could just ask on the civil growth or the civil decline in the quarter, that segment appears to be down 7% year on year. You just provide more detail on those programs? Was it a few specific programs? Or are you seeing across the board? And how do you think about the trajectory over the next few quarters? Prabhu Natarajan: Hi, Sheila. Prabhu here. Thank you for the question. I would say big picture, you know, I think within every quarter, you are going to have a little bit of seasonality that creates a little bit of lumpiness. If you zoomed out a little and looked at the nine months, for the first nine months of the year, our civil business has been roughly flat and margins are up pretty materially. I would say there are no single program-related drivers in the civil business. I would say the nine-month story is probably a better reflection of where that portfolio is rather than the three months. Because the three-month story is always, I think, harder to explain given, you know, changes in compute and store volume, etcetera. So I would just say, think of the nine months as a better reflection. We are in agencies that are seeing some incremental funding, whether that is CBP, DHS, or frankly, the FAA. And I am really proud of what the team is doing on margins. We said a couple of years ago that the mid-12% is probably the trough for this business. That we would expect to get the business back to the 14% range and they are driving hard towards it. They were having to make some hard decisions. But they are doing all the right things we want them to do to get this portfolio back growing again next year also getting margins back up to about 14%. Sheila Kahyaoglu: Great. Thank you. Operator: Thank you. One moment for our next question. Our next question will come from the line of Jonathan Siegman from Stifel. Your line is open. Jonathan Siegman: Hoping you could share thoughts on the Department of War's announced reforms and talk about some of the available options the team has to pivot the business to better align with those aspirations. And then to follow on to that, just I would love to hear from you, Jim. Just given how dynamic the environment is. What drove the decision to change direction of the company now given all the moving pieces? And nice to engage with you again. Thank you. Jim Reagan: Yeah. John, thanks for the question. First, you know, in terms of how the Department of War has been making some announced changes and how it is going to do procurement. We are ready to help the Department of War implement the changes that it needs to make. We welcome the opportunity to see greater speed in the procurement process, which is really their objective. To put the department more on a faster war footing to keep us ready for all adversaries. The use of different contracting vehicles, for example, OTAs, that is something that we have been doing for some time and we are ready to expand the use of those kinds of alternative or innovative contracting vehicles that will provide greater speed, of not just the procurement process, but greater speed of implementing solutions. You know, one of the things that is interesting that we have been hearing is in the interest of speed, you know, 80%, 90% adherence to requirements instead of 100% is becoming acceptable. Now how they are going to implement that, you know, there is a lot of guidance that still needs to be issued, but we are planning on spending a lot of time with our customers to help them implement this in a way that achieves their objectives of speed and efficiency. You also asked about the dynamic environment. We are ready and, you know, I would say that the acquisition of SilverEdge is just one proof point of the things that we are doing to be ready for increased AI content in solutions that our customers are looking for. And we are always looking for ways to continue innovation in our business. The spend our spend on innovation is going to be more clearly mapped to opportunities in the pipeline and what the customers are telling us they are looking for. And then the third thing I think you asked about was why change now? I think that the focus of this business and the marching orders that I have received from our board is to double down our focus on execution not just execution and how we deliver solutions and our program results to customers, but also in listening more carefully to customers so that when we submit a proposal, our likelihood of winning is higher and that our ability to accelerate growth into the next couple of years will be kind of a proof point coming out of that focus. Jonathan Siegman: Thank you for the comments. Operator: Thank you. Thank you, John. One moment for our next question. Our next question will come from the line of Seth Seifman from JPMorgan. Your line is open. Seth Seifman: Hey. Thanks very much, and good morning, everyone. I wonder, Jim, or Prabhu, you know, you mentioned the $100 million of savings that you were looking at. How should we think about how much of that gets diverted toward investment? And, you know, new bids on work that should drive growth and be accretive to margin. How much of it should flow through to the bottom line? And how much of that contributed to the increase in the EBITDA expectation for next year? Jim Reagan: It is a great question, Seth, and thanks for asking it. The way I would take the question that you have asked, the last part of it first. The guidance that we have in for next year reflects the work that we have already done to exit the current fiscal year at a lower cost run rate. It does not next year's number does not include more work that we think we need to do and are undertaking at the beginning of the calendar year. We are launching a new program in January. That will continue the work that we have been doing around the consolidation of our business groups and taking out a lot of the overhead in connection with that. So the amount of reinvestment of the $100 million number that we are talking about will be what does not go to improving margins. So I would call it there. There will be a substantial amount of that $100 million that will go to resources that we need to add to the business around account management, more business development leadership, as well as some improvement that we want to fund in the actual process of developing winning proposals. I hope that that answers your question. Seth Seifman: Yeah. Yeah. Absolutely. That is helpful. And, you know, as a follow-up, you know, I think you talked about business development and execution as areas of improvement. I guess when you look at the portfolio and you think about the core competencies, of Science Applications International Corporation and, you know, the things that really can drive value in the business and the core of what is there. You know, what do you see that you like? Jim Reagan: You know what I see that I like is a lot of very deep understanding of what the customer's pain points are in delivering mission. You know, science is part of our name. And we are a company of strong scientists, strong development, and application integration capability, and people that understand mission. The passion for what we do runs deep in the fifty-seven-year history of our company, and it is something that I am very proud of. So I think so, you know, I have and I have already had some conversations with customers who acknowledge our ability to help them be successful. I think that what we can do better is, as I have said, get a more intense focus on marrying the investments that we make in innovation, the investments that we make in R&D, to the opportunities that our customers are putting in front of us, that we are going to be bidding on in the next twenty-four months. So we are going to improve that as well as doing a little bit better job of listening to our customers tell us not what they need today, on programs that we are executing, but really what are they going to look to us to do tomorrow that is different from what we are doing today? Everything we are capable of doing but in listening to that, they I need them to see our listening showing up in the proposals that we submit. Seth Seifman: Excellent. Great. Thanks very much. Operator: Thanks, Seth. One moment for our next question. Our next question will come from the line of Tobey Sommer from Truist. Your line is open. Tobey Sommer: Thank you. Curious if you and the Board expect the pressure on federal civil spending to largely conclude in 2025 or do you consider this a longer-term headwind that you are planning for? Jim Reagan: I think that there is probably going to be continued pressure on civilian agency budgets. That is just, you know, a fact of life that we see going forward. As the federal budget priorities do put greater emphasis on improving readiness and that will show up in bigger budgets for the DOD. That said, as Prabhu had mentioned a little bit earlier, we believe that we are kind of in the fast current of the civilian agencies. The places we are at are the faster currents of civilian agencies. Spend are. Things like CBP and FAA are the two good examples that Prabhu mentioned earlier. So I feel really good about where we are placed. Within the civilian agency space. But and I am also very pleased at how we are executing there in terms of delivery of results for customers that are reflective of expanding margins. Tobey Sommer: Thank you. And given that response, how do you feel about and think about portfolio shaping to increase the probability of being able to achieve your organic growth margin objectives? Jim Reagan: You know, there are always opportunities to shape the portfolio, and, you know, we have done that a couple of cases in the last, you know, three or four years. And, I am never going to say never. I would not say that there is a target that you can expect to hear us announcing a portfolio shaping move in the next couple of quarters. But we are always looking at opportunities to do that. Prabhu Natarajan: And, Tobey, the only thing I would add to that is that to the extent that you know, we are reviewing the portfolio and looking at areas of the portfolio that are unable to be transformed. In other words, where they tend to be predominantly lower-end services oriented. I think that you will see us actively think about that conversation because I think the capacity to transform is just as important to make sure the portfolio stays fresh. Tobey Sommer: Last question, if I could sneak in a third one in. Given the turbulence in the end markets and budget, of this year potentially going forward in civil. Would you like to toggle the leverage down a bit over time? Or are you going to stick with this leverage target? Because I think the group is down a bit over the last year and a half or so. Prabhu Natarajan: Yeah. Fair question, Tobey. I mean, look. We actively talk about the leverage both inside the company as well as with our board. Three dot o is, you know, sort of a leverage area that we are roughly comfortable with. We try to stress test our assumptions on EBITDA and cash flow. To ensure that we can deliver and stay at that 3.0. We routinely talk about, you know, whether deleveraging is appropriate to do in the environment. I think, I would say, you know, given the M&A market where, you know, I would say, by and large, it still has tended to be a seller's market, it is very hard, I think, to justify, you know, acquiring businesses at, you know, 12, 13, 14 times when we are being traded at eight, nine, 10 times. So I think you will see us stay disciplined on that front. But, frankly, I think we tend to, you know, be in the way we manage our capital. Share repurchases are always market conditions permitting. And where we tend to see, you know, I am going to say a higher return on the buybacks, we will see us deploy capital that way. But where we think that the incremental return from that buyback is, perhaps lower than maybe just levering down, you will see us make that trade. The reality is we have to be nimble and agile. There is no formula to buybacks other than we are trying to generate as much value as we can for our shareholders. And fundamentally, we have incredible visibility into the cash flow. So that is what gives us confidence in the current capital allocation policy. Tobey Sommer: Thank you. Operator: Thank you. One moment for our next question. Our next question will come from the line of Colin Canfield from Cantor. Your line is open. Colin Canfield: Thank you for the question. Going back to maybe the portfolio shaping conversation, can you just maybe talk about how you think about either pairing or adding pieces in terms of the magnitude of portfolio shaping? And then maybe kind of if you want to talk about kind of some of the larger private assets and that round how you think about maybe adding to larger defense and intelligence capabilities versus going after the more some of the more civil exposure. And then just want kind of within that construct, if you can maybe talk about kind of how you think about defense budget growth, not so much the outlays, right? The outlays are baked in, but the defense budget growth over the kind of multiyear period versus the civil budget growth and how you kind of, like, weigh that risk-reward to the upcoming midterms? Thank you. Jim Reagan: Yeah. There is a lot to unpack in that question, Colin. I think the way I would start with is you in your question about portfolio shaping. I think that our appetite for portfolio shaping in terms of magnitude it is going to be more focused on it could anything that we do is going to be more focused on what opportunities got unlocked because we are refocusing the business in other areas. And or, you know, maybe taking out, you know, an area of the business that causes conflict in our ability to grow in other parts. It is hard for me to put a dollar figure on that at this point. And I will ask Prabhu to also pile on with any thoughts that he has got. But in just in terms of where the defense budget is going, I think that the stated objectives and the ways that the current Department of War has articulated what it needs to be ready for. For the next, you know, three or four years. Is really going to put some upward pressure on the DOD budget. If you think about the budget, as a percentage of GDP, it really, you know, even at the targets that have been announced, it really is not too far out of line with what you have seen in the last hundred years. So it might feel like it is a big increase, but in terms of the needs that the department has today to increase readiness for where it sees the potential conflicts going over the next five. I think that there is going to be plenty of opportunity for us and our industry to be growing their businesses as a result. Prabhu Natarajan: Thank you, Jim. That was perfect. On the first part of the question, Colin, on PE-owned assets, I mean, look. I think, you know, we have to demonstrate that we can organically grow this business. As Jim said, the focus is tuck-ins that can help us accelerate our growth rate. At this point, our cup runneth over in terms of M&A, and so I think we are just going to be astute in terms of what we are focused on there, and we are not looking at scale-based M&A at this point. On the DOD budget, the only thing I would add is, you know, base budget, you know, flat to slightly up. And then we are going to need some reconciliation money to get closer to that $1 trillion. And how frequently that happens over this year and the next year. Is going to drive, I think, the health of the defense budgets. I think to Jim's earlier comment, I think which currents you are part of whether that is FET SIB or DOD, is going to be a really important consideration, and we appreciate the fact that the Department of War has given priority areas out there, whether they are tech areas or mission areas. And we are just ensuring that the portfolio is as well aligned to those areas as we can possibly be over the next couple of years. But, that is our prognosis. Our guidance for next year assumes that things do not change dramatically to the upside or the downside. Things are going to be stable. More stable than they have been this year. Colin Canfield: Got it. Got it. And then in terms of the civil budget growth, how do you kind of think about FY 2027's comparison to, call it, FY 2019? Right, where it was initial kind of deficit hawk focus, taking a backseat to defense hawks. And then in order to get kind of key policy objectives done, the Defense Hawks working with kind of, you know, across the aisle to drive dollar-for-dollar deals of discretionary defense and nondefense spending. So maybe just kind of a little bit on how you think about the multiyear civil budget growth outlook and how that is shaping where you are kind of approaching the savings plan? Thank you. Prabhu Natarajan: Yeah. Appreciate the question, and it is a complex one to be sure. And I am going to leave some folks that are way better qualified to answer it. I think our baseline assumption is that civil budgets will continue to be pressured. And your level of pressure is going to be dependent on what baseline you use to compare. If you compared it to the 19 baseline versus the 24, 25 baseline, you may get to a slightly different place. But our assumption is nothing changes in the near term. But civil budgets will be pressured, you know, recognizing that there is a real need for modernization within the civilian agencies. But I think in this environment, we just do not see a ton of opportunity for real budget growth. And whether the one-for-one happens that is going to be a function of things that are way out of our control, and we are just going to monitor it and see where it goes. But our assumption for next year is budgets will remain pressured. We are telling our teams internally that assume things will remain hard for the next twelve to eighteen months on the budget front, and how can you consistently deliver good performance and on-contract growth. To me, it is going to be very much a blocking and tackling exercise. Because there are elements of this conversation that are beyond our ability to control, and the message coming into this call was to focus on what we can control as an enterprise. Colin Canfield: Got it. Thank you for the color, and welcome back, Jim. Jim Reagan: Thank you very much, Colin. Operator: Thank you. And with that, this concludes the question and answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.