SAIC Announces Second Quarter of Fiscal Year 2024 Results

Science Applications International Corporation (NYSE: SAIC), a premier Fortune 500® technology integrator driving our nation's digital transformation across the defense, space, civilian, and intelligence markets, today announced results for the second quarter ended August 4, 2023.

“I am proud of the financial performance we delivered in the quarter with both strong organic revenue growth and margin expansion. We remain on track to achieve our three year financial targets and are off to a strong start,” said SAIC CEO Nazzic Keene. "Our focus remains on building and sustaining our high-performance culture to deliver value for our employees, customers, and shareholders."

Second Quarter of Fiscal Year 2024: Summary Operating Results

Second Quarter Summary Results

Revenues for the quarter decreased $47 million or 3% compared to the same period in the prior year primarily due to the sale of the logistics and supply chain management business (Supply Chain Business) ($149 million), the deconsolidation of the Forfeiture Support Associates J.V. (FSA) ($34 million), and contract completions, partially offset by ramp up on existing and new contracts. Adjusting for the impact of the divestiture of the Supply Chain Business and the deconsolidation of FSA, revenues grew 8.3%.

Operating income as a percentage of revenues increased from the comparable prior year period primarily due to the gain recognized from the sale of the Supply Chain Business, improved profitability across our contract portfolio, and lower indirect costs.

Adjusted EBITDA⁽¹⁾ as a percentage of revenues for the quarter increased to 9.8% from 9.1% for the same period in the prior year primarily due to improved profitability across our contract portfolio and lower indirect costs.

Diluted earnings per share for the quarter was $4.56 compared to $1.30 in the prior year quarter. Adjusted diluted earnings per share⁽¹⁾ for the quarter was $2.05 compared to $1.75 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 53.9 million from 55.9 million during the prior year quarter.

Cash Generation and Capital Deployment

Cash flows provided by operating activities for the second quarter increased $9 million compared to the prior year quarter, primarily due to the timing of payroll payments, partially offset by higher cash provided by the MARPA Facility in the prior year and higher tax payments in the current year.

During the quarter, SAIC deployed $126 million of capital, consisting of $100 million of plan share repurchases, $20 million in cash dividends, and $6 million of capital expenditures.

Sale of Logistics and Supply Chain Management Business

On May 6, 2023, SAIC closed the sale of its logistics and supply chain management business to ASRC Federal Holding Company, LLC for $356 million in cash, including $355 million received at closing and a post-closing adjustment for working capital. The divestiture is consistent with SAIC’s broader strategy to focus on Growth & Technology Accelerants and on innovative, platform-agnostic solutions that add shareholder value. SAIC recorded a preliminary pre-tax gain of $233 million, net of $7 million of transaction costs, which is included within other operating income on the condensed and consolidated statements of income.

Quarterly Dividend Declared

On September 6, 2023, the Company's Board of Directors declared a cash dividend of $0.37 per share of the Company's common stock payable on October 27, 2023 to stockholders of record on October 13, 2023. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.

Backlog and Contract Awards

Net bookings for the quarter were approximately $0.7 billion, which reflects a book-to-bill ratio of 0.4 and a trailing twelve months book-to-bill ratio of 0.8. SAIC’s estimated backlog at the end of the quarter was approximately $22.5 billion. Of the total backlog amount, approximately $3.7 billion was funded.

Notable New Business Awards:

U.S. Department of Treasury: SAIC was awarded a $1.3 billion seven-year single-award indefinite delivery, indefinite quantity (IDIQ) contract by the Department of the Treasury to provide T-Cloud, a complete range of cloud and professional services. The T-Cloud contract supports Treasury’s adoption and transformation of a multi-cloud environment by centralizing management of the systems infrastructure, platform and software-as-a-service by a single broker. SAIC is responsible for delivering a shared service cloud infrastructure model that provides enterprise-wide efficiencies in access, contracting and security. SAIC will also provide services for business operations, technical, security, network, service desk, subject matter expert support and transition services. Net bookings and backlog for the quarter do not include any value related to T-Cloud. Consistent with the Company's policy, bookings and backlog related to this award will be recognized as the task orders under the IDIQ are received.

Notable Recompete Awards:

Naval Air Warfare Center Weapons Division: SAIC was awarded a multiple-award IDIQ contract with a $249 million ceiling from the U.S. Navy to continue supporting the Naval Air Warfare Center Weapons Division (NAWCWD)’s combat instrumentation platforms used for training and test evaluation ranges. Under the new contract, SAIC will perform systems design and integration, hardware and software upgrades or modifications for the Combat Environment Instrumentation Systems (CEIS). SAIC will also provide services to support global position system-based range equipment, airborne electronic warfare (EW) systems, warning & countermeasures systems and range Radio-Frequency/Electro-Optical Tracking systems. The Company will deliver test support and instrumentation for unmanned aerial vehicle (UAV) and telemetry systems.

Notable Space and Intelligence Community Awards:

U.S. Space and Intelligence Community: During the quarter, SAIC was awarded approximately $520 million of contract awards by space and intelligence community organizations. These awards represent a combination of new business and recompetes.

SAIC was awarded the following contracts subsequent to the end of the quarter which are not included in the current quarter net bookings and book-to-bill:

U.S. Space Force: SAIC was awarded a seven-year, $575 million contract by the United States Space Force to support its Ground Based Radar Maintenance and Sustainment Services (GMASS). Under the contract, SAIC will provide on-going sustainment and modification of the GMASS Contract-covered systems, including Upgraded Early Warning Radars (UEWR), the Precision Acquisition Vehicle Entry (PAVE) Phased Array Warning System (PAWS), and the Perimeter Acquisition Radar Attack Characterization System (PARCS) radars and all associated systems and equipment. In addition to sustaining operational capabilities, the contract will also utilize an integrated roadmap to highlight incremental opportunities and areas for innovation to promote backlog items and improve operational efficiencies. Through this work, SAIC will help further modernize critical missile warning and space domain awareness radars for key Space Force missions.

Fiscal Year 2024 Guidance

The table below summarizes fiscal year 2024 guidance and represents the Company's views as of September 7, 2023.

Webcast Information

SAIC management will discuss operations and financial results in an earnings conference call beginning at 10:00 a.m. Eastern time on September 7, 2023. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of the SAIC website (http://investors.saic.com). We will be providing webcast access only – “dial-in” access is no longer available. Additionally, a supplemental presentation will be available to the public through links to the Investor Relations section of the SAIC website. After the call concludes, an on-demand audio replay of the webcast can be accessed on the Investor Relations website.

About SAIC

SAIC® is a premier Fortune 500® technology integrator driving our nation’s technology transformation. Our robust portfolio of offerings across the defense, space, civilian and intelligence markets includes secure high-end solutions in engineering, digital, artificial intelligence and mission solutions. Using our expertise and understanding of existing and emerging technologies, we integrate the best components from our own portfolio and our partner ecosystem to deliver innovative, effective and efficient solutions that are critical to achieving our customers' missions.

We are approximately 24,000 strong; driven by mission, united by purpose, and inspired by opportunities. SAIC is an Equal Opportunity Employer, fostering a culture of diversity, equity and inclusion, which is core to our values and important to attract and retain exceptional talent. Headquartered in Reston, Virginia, SAIC has annual revenues of approximately $6.9 billion. For more information, visit saic.com. For ongoing news, please visit our newsroom.

GAAP to Non-GAAP Guidance Reconciliation

The Company does not provide a reconciliation of forward-looking adjusted diluted EPS to GAAP diluted EPS or adjusted EBITDA margin to GAAP net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate net income may vary significantly based on actual events, the Company is not able to forecast GAAP diluted EPS or GAAP net income with reasonable certainty. The variability of the above charges may have an unpredictable and potentially significant impact on our future GAAP financial results.

Forward-Looking Statements

Certain statements in this release contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “guidance,” and similar words or phrases. Forward-looking statements in this release may include, among others, estimates of future revenues, operating income, earnings, earnings per share, charges, total contract value, backlog, outstanding shares and cash flows, as well as statements about future dividends, share repurchases and other capital deployment plans. Such statements are not guarantees of future performance and involve risk, uncertainties and assumptions, and actual results may differ materially from the guidance and other forward-looking statements made in this release as a result of various factors. Risks, uncertainties and assumptions that could cause or contribute to these material differences include those discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” sections of our Annual Report on Form 10-K, as updated in any subsequent Quarterly Reports on Form 10-Q and other filings with the SEC, which may be viewed or obtained through the Investor Relations section of our website at www.saic.com or on the SEC’s website at www.sec.gov. Due to such risks, uncertainties and assumptions you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to reflect subsequent events, actual results or changes in SAIC’s expectations. SAIC also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.