Core Insights - Accenture and Science Applications International Corporation (SAIC) are two prominent companies in the Zacks Computers – IT Services industry, with SAIC primarily serving the U.S. government [1] - Accenture's revenue increased by 7.4% in fiscal 2025, driven by investments in digital, cloud, and security strategies [2] - SAIC has a strong backlog of $22.6 billion and a significant $1.4 billion COBRA contract, indicating robust demand in defense technology [10] Accenture Highlights - Accenture is leveraging the expansion of Generative AI to enhance its consulting services, focusing on long-term growth through technology and talent investment [3] - The company has adopted a buyout strategy to enhance capabilities and expertise in high-growth areas, exemplified by the launch of Cyber.AI for AI-driven cybersecurity [4] - Accenture generated $10.9 billion in free cash flow in fiscal 2025, a 26.2% increase year-over-year, reflecting strong financial health [6] - In the second quarter of fiscal 2026, Accenture reported earnings of $2.93 per share, surpassing estimates by 2.5%, with total revenues of $18 billion, an 8.3% year-over-year increase [7][8] Science Applications Highlights - Science Applications is experiencing increased demand for its technology solutions due to ongoing digital transformation in various sectors [12] - The company has made strategic acquisitions, including SilverEdge Government Solutions for $205 million, enhancing its capabilities in cybersecurity and AI [13] - Science Applications secured a $1.4 billion COBRA task order, demonstrating its strong position in defense modernization, supported by a $22.6 billion backlog [14] - In the fourth quarter of fiscal 2026, Science Applications reported adjusted earnings of $2.62 per share, beating estimates by 13.42%, although revenues declined by 5% year-over-year to $1.75 billion [15][16] Comparative Analysis - SAIC's stock performance has outpaced Accenture's over the past six months, with SAIC shares gaining while Accenture's shares declined [17] - Valuation metrics indicate that SAIC is more attractive than Accenture based on the price-to-sales ratio [20] - Overall, SAIC is viewed as the more favorable investment option at this time, despite both companies holding a Zacks Rank 3 (Hold) [22][23]

Core Insights - Science Applications International (SAIC) reported mixed results for Q4 fiscal 2026, with non-GAAP earnings of $2.62 per share exceeding the Zacks Consensus Estimate of $2.31 by 13.42%, while revenues of $1.75 billion fell short of the estimate of $1.76 billion [1][2][9] Financial Performance - Q4 revenues declined 5% year over year to $1.75 billion, missing the Zacks Consensus Estimate [2] - Defence and Intelligence segment revenues, which made up 76.3% of total revenues, were $1.34 billion, down 1.8% year over year; Civilian revenues, accounting for 23.7%, totaled $415 million, down 13.2% year over year [3] - Non-GAAP operating income increased to $179 million from $176 million year over year, with an operating margin of 10.2%, up 60 basis points [5] - Adjusted EBITDA rose 2% to $181 million, with a margin of 10.3% compared to 9.6% in the prior year [6] Cash Flow and Shareholder Returns - Operating cash flow for Q4 was $258 million, and free cash flow was $336 million; for fiscal 2026, operating cash flow was $609 million and free cash flow was $577 million [8] - The company repurchased shares worth $97 million in Q4 and $422 million for the entire fiscal year, along with $17 million in dividends paid in Q4 and $70 million for the fiscal year [8] Guidance and Future Outlook - For fiscal 2027, SAIC expects revenues between $7 billion and $7.2 billion, with adjusted EBITDA anticipated in the range of $705-$715 million and adjusted EPS between $9.50 and $9.70 [9][10] - The Zacks Consensus Estimate for fiscal 2026 revenues is $7.25 billion, indicating a slight year-over-year decline of 0.2% [9]

Core Insights - Science Applications International Corporation (SAIC) aims to achieve a revenue target of $7 billion to $7.2 billion in fiscal year 2027, indicating a strategic focus on portfolio enhancement and margin expansion [2] Management Perspective - CEO James Reagan has been appointed as the permanent CEO, emphasizing the importance of continuity and deep industry knowledge for SAIC's long-term success [2] - The management has highlighted a sharpened focus on the company's portfolio, which is expected to drive future growth and profitability [2]

Group 1 - The company reported fourth-quarter adjusted earnings per share of $2.62, exceeding analyst expectations of $1.98 by $0.64, while revenue was $1.75 billion, slightly below the estimate of $1.77 billion and down 5% from $1.84 billion in the same quarter last year [1][2] - The revenue decline was attributed to reduced volume on existing contracts, impacts from a government shutdown, and the completion of certain contracts [2] - The adjusted EBITDA margin improved to 10.3% from 9.6% year-over-year, driven by lower selling, general, and administrative expenses [2] Group 2 - For the full fiscal year 2026, the company generated revenue of $7.26 billion, a 3% decrease year-over-year, while adjusted earnings per share increased by 18% to $10.75 from $9.13 in fiscal 2025 [2] - The company provided fiscal 2027 guidance, projecting revenue between $7.0 billion and $7.2 billion and adjusted EPS of $9.50 to $9.70, with the midpoint of $9.60 being lower than the fiscal 2026 result of $10.75 [3] - The company expects an adjusted EBITDA margin between 9.9% and 10.1% and free cash flow exceeding $600 million, with net bookings during the quarter totaling $0.6 billion, resulting in a book-to-bill ratio of 0.3 [3]

Core Insights - The company reported a decline in revenue but achieved an adjusted EBITDA of $181 million for the quarter, reflecting a 10.3% margin, attributed to strong program execution and cost efficiency measures [1] - Full-year revenue was $7.26 billion, down approximately 3% organically, primarily due to the decision to no-bid low-margin Cloud One revenue, which was a $200 million headwind for fiscal 2026 [2] - The company expects fiscal 2027 revenue to be between $7.0 billion and $7.2 billion, indicating an organic contraction of 2% to 4% due to recompete losses, with an anticipated $400 million headwind [7] Financial Performance - Adjusted diluted EPS for the quarter was $2.62, and $10.75 for the year, benefiting from stronger margins and a favorable tax rate [1] - Free cash flow was reported at $336 million for the quarter and $577 million for the year, exceeding guidance by about 10% [6] - Adjusted EBITDA guidance for fiscal 2027 is set at $705 million to $715 million, implying a margin of 9.9% to 10.1% [8] Business Development Strategy - The company is adopting a more selective approach in business development, focusing on opportunities with a "greater right to win" and higher customer retention [4] - The hiring of a chief growth officer is part of the strategy to enhance business development efforts [4] - The company aims for $25 billion to $28 billion in proposal submissions for fiscal 2027 to support growth and margin improvement [4] Operational Initiatives - The company is undergoing an enterprise transformation initiative aimed at improving speed and execution [6] - Management has set a target for $100 million in cost reductions to provide flexibility for investment and margin improvement [19] - The company is prepared to adjust capital expenditures based on demand signals and is focusing on operational efficiency [16] Market Position and Challenges - The large enterprise IT market is expected to decline from 17% of revenue in fiscal 2025 to 10% in fiscal 2027, with a focus on opportunities that demonstrate measurable value [13] - The company has experienced challenges in recompete losses, particularly in cost-plus work, which has made differentiation difficult [12] - Improved proposal quality and discipline are expected to influence win rates within six months, although government sales cycles can be lengthy [14]

Core Insights - The company is intentionally reducing focus on 'commoditized' cost-plus enterprise IT work, where differentiation is challenging and customer retention is lower [1] - Q4 performance was affected by procurement delays and customer disruptions, but margins remained resilient due to aggressive cost-management efforts [1] - The company is pursuing an 'addition by subtraction' strategy in business development, concentrating resources on a pipeline valued between $25 billion and $28 billion with higher 'right to win' potential [1] - A new bottoms-up enterprise transformation initiative is being implemented to eliminate inefficiencies from legacy processes and enhance investment capacity for innovation [1] - Strategic focus is shifting towards mission-critical engineering and AI-enabled solutions, leveraging the SilverEdge acquisition to better serve intelligence customers [1] - Recent organic contraction is primarily attributed to recompete losses in large enterprise IT, a segment projected to decline from 17% to 10% of revenue by FY2027 [1]

Revenue Sources - In fiscal 2026, 98% of total revenues were attributable to prime contracts with the U.S. government or subcontracts with other contractors engaged in work for the U.S. government[32]. - Approximately 52% of total revenues in fiscal 2026 were from the Department of War, while 46% were from Intelligence and other federal government agencies[33]. - In fiscal 2026, the company generated 98% of its revenues from contracts with the U.S. government, indicating a strong reliance on government spending[181]. - Revenues for the year ended January 30, 2026, were $7,262 million, a decrease from $7,479 million in the previous year[221]. - Revenues in the Defense and Intelligence segment decreased by $145 million to $5,581 million, a decline of 3% from fiscal 2025[208]. - Civilian segment revenues decreased by $72 million to $1,681 million, a 4% decline compared to fiscal 2025[210]. - Cost reimbursement contracts accounted for 79% of revenues in the Defense and Intelligence segment for the year ended January 30, 2026[229]. Financial Performance - Revenues for the year ended January 30, 2026, decreased by $217 million to $7,262 million, a decline of 3% compared to fiscal 2025[200]. - Cost of revenues also decreased by $197 million to $6,390 million, reflecting a 3% decline from fiscal 2025[201]. - Operating income fell to $521 million, down 7% from $563 million in fiscal 2025, with operating income as a percentage of revenues decreasing to 7.2%[200][203]. - Net income for fiscal 2026 was $358 million, a slight decrease of 1% from $362 million in fiscal 2025[200]. - Adjusted operating income for fiscal 2026 was $702 million, representing 9.7% of revenues, compared to 9.4% in fiscal 2025[217]. - Selling, general and administrative expenses increased by $11 million to $350 million, primarily due to executive transition costs[202]. - The effective income tax rate for fiscal 2026 was 7.5%, down from 15.5% in fiscal 2025, influenced by a $47 million tax benefit from an IRS audit settlement[204]. - Adjusted EBITDA for the year ended January 30, 2026, was $708 million, representing 9.7% of revenues, an increase from 9.5% in the previous year[221]. Employee and Workforce - The company employed approximately 23,000 individuals as of January 30, 2026, including over 5,800 active military or veterans, representing 25% of the workforce[58]. - In fiscal 2026, employees completed more than 175,000 training hours, averaging just over 7.5 hours per employee[62]. - The company has a commitment to employee development, investing in talent development initiatives accounting for nearly 4,000 hours in fiscal 2026[62]. - The voluntary attrition rate for fiscal 2026 was just under 12%, demonstrating strong employee retention[65]. - The company invested over 3,200 hours in leadership development programs, with more than 320 employees participating[63]. Business Operations and Strategy - The company completed a business reorganization effective February 3, 2024, consolidating its two operating sectors into five customer-facing business groups[175]. - The company acquired SilverEdge Government Solutions on October 15, 2025, to enhance its mission-focused solutions and commercial products[192]. - The company sold its logistics and supply chain management business to ASRC Federal on May 6, 2023, to concentrate on strategic growth areas[193]. - The company operates approximately 1,700 active contracts and task orders, employing around 23,000 individuals[174]. - The company anticipates that ongoing evaluations of federal agency structures and priorities may impact its contracts and future revenues[186]. Market and Regulatory Environment - The U.S. government may revise procurement practices, which could adversely impact profitability and the ability to win new business[36]. - The company operates in a heavily regulated environment, subject to various laws and regulations, including the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS)[34][35]. - The competition for contracts is intense, with a focus on cost competitiveness and affordability leading to fewer sole-source awards[53]. Financial Position and Cash Flow - Operating cash flow for fiscal 2026 was $609 million, an increase of $115 million from fiscal 2025[245]. - Cash used in investing activities increased by $213 million in fiscal 2026, primarily due to $203 million paid for the acquisition of SilverEdge[246]. - Cash used in financing activities decreased by $263 million in fiscal 2026, attributed to higher proceeds from borrowings and a decrease in stock repurchases[247]. - Total contractual obligations as of January 30, 2026, amounted to $3,606 million, with $258 million due in fiscal 2027[241]. - Total increase in cash, cash equivalents, and restricted cash for fiscal 2026 was $126 million, contrasting with a decrease of $39 million in fiscal 2025[245]. Backlog and Bookings - Total backlog as of January 30, 2026, was $22,622 million, up from $21,857 million as of January 31, 2025[228]. - Net bookings for fiscal 2026 were estimated at $7.8 billion, compared to $6.6 billion in fiscal 2025[228]. - Funded backlog for contracts with government agencies was $3,572 million as of January 30, 2026, compared to $3,444 million in the previous year[228].

Financial Data and Key Metrics Changes - Fourth quarter revenue was $1.75 billion, representing an organic contraction of approximately 6% due to a $60 million reduction from the low margin Cloud One program and a $45 million headwind from a non-recurring software license sale in the prior year [28] - Full year revenue was $7.26 billion, declining approximately 3% organically, primarily due to the decision to no bid low margin Cloud One revenue, which was a $200 million headwind for the year [28] - Adjusted EBITDA for the fourth quarter was $181 million, resulting in a margin of 10.3%, contributing to a full year margin of 9.7%, which is roughly 20 basis points ahead of guidance [29] - Free cash flow was $336 million in the quarter and $577 million for the full year, demonstrating strong execution and resilience of the business model [30] Business Line Data and Key Metrics Changes - The company is focusing on higher margin programs and has seen improved performance in its civilian enterprise IT portfolio, which has driven stronger performance and elevated win rates [19] - The large enterprise IT market is expected to shrink from 17% of company revenues in fiscal year 2025 to an expected 10% in fiscal year 2027 [20] Market Data and Key Metrics Changes - The company expects total revenue in fiscal year 2027 to be in the range of $7 to $7.2 billion, representing an organic contraction of 2% to 4% due to recompete losses [34] - The guidance for adjusted EBITDA in fiscal year 2027 is in the range of $705 to $715 million, reflecting margins between 9.9% to 10.1% [35] Company Strategy and Development Direction - The company is committed to aligning and focusing its portfolio, improving internal processes, and enhancing external results [10] - A new chief growth officer has been hired to prioritize business development and drive higher win rates for recompetes and new business [12] - The company is focusing on areas where it has a greater right to win and higher rates of customer retention, aiming for $25 to $28 billion of submissions in fiscal year 2027 [13] Management's Comments on Operating Environment and Future Outlook - Management noted that fourth quarter revenue was below expectations due to procurement delays and customer disruptions, but expressed optimism about margin performance with a fiscal year 2026 margin of 9.7% [16] - The company expects another year of organic contraction in fiscal year 2027, largely due to recompete losses in the large enterprise IT market [17] - Management emphasized the importance of mission expertise and customer intimacy, stating that the industry must continue to invest and innovate to deliver capabilities and capacity [11] Other Important Information - The company is undergoing a multi-year enterprise transformation initiative to unlock significant value and eliminate outdated business processes [36] - The company is actively engaging with customers to pilot and implement AI-powered agents to stabilize and secure critical networks [20] Q&A Session Summary Question: What is the single most significant portfolio pivot required to align the company with the next 10 years of government budget priorities? - Management indicated the need to focus on areas where the company has the right to win and where customer retention rewards innovation and strong performance [46] Question: Thoughts on fiscal year 2027 guidance and CapEx? - Management stated that the CapEx is adequate to meet current demand signals and emphasized flexibility in the business model to ramp up production as needed [57][60] Question: How long does it take to build momentum in business development and convert that to revenue? - Management noted that while the sales cycle can be long, improvements in win rates on existing proposals could be seen within six months [71] Question: What has changed in enterprise IT work and how does the company plan to get on the offensive? - Management explained that customers are increasingly looking for more standardized solutions, making it harder to differentiate, and the company is focusing on mission IT work where it can excel [85][88]

Financial Data and Key Metrics Changes - Fourth quarter revenue was $1.75 billion, representing an organic contraction of approximately 6% due to a $60 million reduction from the low-margin Cloud One program and a $45 million headwind from a non-recurring software license sale in the prior year [17] - Full year revenue was $7.26 billion, declining approximately 3% organically, primarily due to the decision to no-bid low-margin Cloud One revenue, which was a $200 million headwind for the year [17] - Adjusted EBITDA for the fourth quarter was $181 million, resulting in a margin of 10.3%, contributing to a full year margin of 9.7%, which is roughly 20 basis points ahead of guidance [18] - Free cash flow was $336 million in the quarter and $577 million for the full year, demonstrating strong cash conversion [18] Business Line Data and Key Metrics Changes - The company is focusing on higher-margin programs and has seen improved performance in its civilian enterprise IT portfolio, which has driven stronger win rates [11] - The large enterprise IT market is expected to shrink from 17% of company revenues in FY 2025 to an anticipated 10% in FY 2027, indicating a strategic shift away from low-margin work [11] Market Data and Key Metrics Changes - The company expects total revenue in FY 2027 to be in the range of $7 billion to $7.2 billion, representing an organic contraction of 2%-4% primarily due to recompete losses [20] - The guidance for adjusted EBITDA in FY 2027 is projected to be between $705 million and $715 million, reflecting margins between 9.9%-10.1% [20] Company Strategy and Development Direction - The company is committed to aligning and focusing its portfolio, improving internal processes, and enhancing external results, with a focus on mission expertise and customer intimacy [5][6] - A new chief growth officer has been hired to prioritize business development and drive higher win rates for recompetes and new business [6] - The company aims for $25 billion-$28 billion in submissions for FY 2027, focusing on opportunities with a greater right to win and higher customer retention [8] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the operating environment remains uneven, with procurement delays and customer disruptions impacting revenue [9] - The company is optimistic about achieving a 10% adjusted EBITDA margin for FY 2027, marking the first time it has guided to a double-digit margin on a full-year basis [9] - Management emphasized the importance of innovation and investment in capabilities to meet evolving customer needs and address the threat landscape [12] Other Important Information - The company is undergoing a multi-year enterprise transformation initiative aimed at unlocking significant value and eliminating outdated business processes [21] - The leadership team is focused on executing against a $100 million cost reduction target to provide operational and financial flexibility [13] Q&A Session Summary Question: What is the most significant portfolio pivot required to align with government budget priorities? - Management indicated a need to focus on areas where the company has a right to win and where customer retention rewards innovation and strong performance [30] Question: Thoughts on FY 2027 guidance and CapEx? - Management stated that the current CapEx is adequate to meet demand signals and that they are prepared to increase capacity if customer demand arises [39][40] Question: How long will it take to build momentum in the business development process? - Management noted that while the sales cycle can be lengthy, improvements in win rates could be seen within six months [48] Question: What is the status of recompetes and their impact on revenue? - The largest recompete is the Department of State Vanguard program, with management feeling confident about retaining most of the work [97][99]

FINANCIAL RESULTS FY26 4Q SUPPLEMENTAL FINANCIAL PRESENTATION MARCH 16, 2026 SAIC PROPRIETARY INFORMATION I © SAIC. ALL RIGHTS RESERVED FORWARD LOOKING STATEMENTS Certain statements in this presentation are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "may," "will," "should," "expects," "intends," "projects," "plans," "believes," "estimates," "targets," "anticipates," and similar expressions identify forward-looking statements in this ...