RESTON, Va., Dec. 16, 2025 (GLOBE NEWSWIRE) -- Science Applications International Corporation (NASDAQ: SAIC), a premier Fortune 500® company driving our nation's digital transformation across the defense, space, intelligence, and civilian markets, today announced the appointment of Ravi Dankanikote as the company’s Chief Growth Officer, effective immediately. He will report to Interim SAIC Chief Executive Officer Jim Reagan. In this role, Dankanikote will lead SAIC’s enterprise growth strategy and go-to-mar ...

Core Viewpoint - Science Applications International Corporation (SAIC) has demonstrated strong financial performance and strategic management, leading to positive investor sentiment and a robust market position. Financial Performance - SAIC's stock price surged by 16% following its Q3 FY26 earnings release, attributed to impressive margin growth and a return on equity (ROE) of 23.75% [2][6] - The company reported non-GAAP earnings of $2.58 per share, exceeding the Zacks Consensus Estimate of $2.07 by 24.6%, despite a slight decrease from the previous year's earnings of $2.61 per share [3][6] - Revenues for the quarter were $1.87 billion, slightly above the Zacks Consensus Estimate, although this reflects a 5.6% year-over-year decline [3] Strategic Initiatives - SAIC is reallocating $100 million in annual spending towards areas with higher returns on investment, aiming for margins approaching 10% in the near term [4][6] - The management has raised fiscal year 2026 guidance for higher revenue, EBITDA, and EPS expectations, indicating a positive outlook [4][6] Market Position - The company has net bookings of $2.2 billion and a book-to-bill ratio of 1.2, with a backlog of $23.8 billion at the end of the quarter [5] - Despite a recent stock price decrease of 1.16%, SAIC's market capitalization is approximately $4.63 billion, with a trading volume of 1,195,725 shares [5]

Group 1 - Robert F. Abbott has been managing family investments since 1995 and incorporated options trading in 2010, focusing on covered calls and collars with long stocks [1] - Abbott is a freelance writer with a project aimed at providing information for new and intermediate-level mutual fund investors [1] - He holds a Bachelor of Arts and a Master of Business Administration (MBA) degree [1]

Core Insights - Science Applications International (SAIC) reported non-GAAP earnings of $2.58 per share for Q3 fiscal 2026, exceeding the Zacks Consensus Estimate of $2.07 by 24.6%, although this represents a 1.1% decline from $2.61 per share in the same quarter last year [1][10] - The company’s revenues for the third quarter decreased by 5.6% year over year to $1.87 billion, slightly above the Zacks Consensus Estimate of $1.86 billion [2][10] - SAIC's shares rose by 16.3% following the earnings report, despite a year-to-date decline of 8.1%, which is better than the Zacks Computers – IT Services industry's decline of 14.4% [3] Financial Performance - Defence and Intelligence segment revenues, which made up 77.1% of total revenues, were $1.44 billion, down 5% year over year; Civilian revenues, accounting for 22.9%, totaled $427 million, down 7.4% year over year [4] - Net bookings for the quarter were approximately $2.2 billion, resulting in a book-to-bill ratio of 1.2, with an estimated backlog of $23.8 billion, of which $3.8 billion was funded [5][10] - Selling, general and administrative (SG&A) expenses increased by 21.7% to $101 million, with SG&A as a percentage of revenues rising to 5.4% from 4.2% in the previous year [6] - Non-GAAP operating income decreased to $183 million from $195 million year over year, with a non-GAAP operating margin of 9.8%, down 10 basis points [6][7] Cash Flow and Balance Sheet - The company ended the quarter with cash and cash equivalents of $45 million, down from $48 million in the previous quarter; long-term debt increased to $2.48 billion from $1.84 billion [8] - Operating cash flow for the quarter was $129 million, while free cash flow was $135 million; for the first three quarters of fiscal 2026, operating cash flow was $351 million and free cash flow was $241 million [9] Guidance and Future Outlook - SAIC raised its fiscal 2026 revenue guidance to between $7.275 billion and $7.325 billion, up from the previous range of $7.25 billion to $7.325 billion; the Zacks Consensus Estimate for fiscal 2026 revenues is $7.27 billion, indicating a year-over-year decline of 2.7% [11] - Adjusted EBITDA guidance was raised to approximately $695 million, with an expected adjusted EBITDA margin of 9.5%; adjusted EPS guidance was increased to a range of $9.80 to $10.00, up from $9.40 to $9.60 [12] - The company estimates free cash flow for fiscal 2026 to exceed $550 million [13]

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Financial Performance - Revenues for the three months ended October 31, 2025, decreased by $110 million (6%) to $1,866 million compared to the same period in the prior year, primarily due to a ramp down in volume on existing contracts and contract completions [139]. - Operating income for the three months ended October 31, 2025, was $128 million, representing a decrease of 20% from the prior year, with operating income as a percentage of revenues falling to 6.9% [139]. - Revenues for the Defense and Intelligence segment decreased by $76 million (5%) to $1,439 million for the three months ended October 31, 2025, compared to $1,515 million in the prior year [147]. - Revenues for the Civilian segment decreased by $34 million (7%) to $427 million for the three months ended October 31, 2025, compared to $461 million in the prior year [149]. - Consolidated adjusted operating income for the three months ended October 31, 2025, was $183 million, a decrease from $195 million in the same period last year [156]. - EBITDA for the three months ended October 31, 2025, was $168 million, down from $197 million in the same period last year, representing 9.0% of revenues [158]. - Adjusted EBITDA for the three months ended October 31, 2025, was $185 million, compared to $197 million in the same period last year, representing 9.9% of revenues [158]. Government Contracts and Revenue Sources - The company generated 98% of its revenues from contracts with the U.S. government during the three and nine months ended October 31, 2025 [125]. - For the three months ended October 31, 2025, 80% of revenues in the Defense and Intelligence segment were derived from cost reimbursement contracts, while 4% came from civilian contracts [167]. - The company is positioned to benefit from increased government spending and has a strong history of serving the U.S. government, which provides a competitive advantage [134]. Acquisitions and Investments - The acquisition of SilverEdge Government Solutions was completed on October 15, 2025, for a preliminary purchase price of $203 million, aimed at enhancing mission-focused, IP-based solutions [124]. - Cash used in investing activities increased by $222 million to $237 million for the nine months ended October 31, 2025, primarily due to the acquisition of SilverEdge [173]. Tax and Regulatory Impact - The effective income tax rate for the three months ended October 31, 2025, was 16.7%, an increase from 15.6% in the same period last year, primarily due to the One Big Beautiful Bill Act [143]. - The company anticipates that the OECD's 15% global minimum tax framework will not have a significant impact on its effective tax rate or financial results [146]. Backlog and Future Revenue Potential - As of October 31, 2025, the total backlog is estimated at $23.788 billion, with a funded backlog of $3.823 billion and a negotiated unfunded backlog of $19.965 billion [165]. - Net bookings for the three months ended October 31, 2025, were approximately $2.2 billion, and for the nine months, they totaled $7.2 billion [165]. Operating Cash Flow and Liquidity - Cash provided by operating activities for the nine months ended October 31, 2025, was $351 million, a decrease of $28 million compared to the prior year [172]. - The company expects to fund ongoing working capital and commitments with cash on hand, future operating cash flows, and borrowings under its $1.0 billion Revolving Credit Facility [168]. - The company believes existing cash, future operating cash flows, and access to financing will meet short-term liquidity and long-term capital needs [170]. Cost Structure and Expenses - Selling, general and administrative expenses increased by 22% to $101 million for the three months ended October 31, 2025, compared to $83 million in the prior year [139]. - The company’s cost of revenues as a percentage of revenues was 87.8% for the three months ended October 31, 2025, compared to 88.0% in the prior year [139]. - The labor-related cost of revenues for the three months ended October 31, 2025, was 57% in the Defense and Intelligence segment, while subcontractor-related costs accounted for 28% [167]. Strategic Focus and Market Position - The company is focused on enhancing its competitive position through strategic sourcing and developing repeatable offerings sold "as a service" to improve pricing competitiveness [135]. - The company operates with approximately 1,700 active contracts and employs around 24,000 individuals [117].

Core Viewpoint - SAIC's stock appears undervalued despite recent challenges, with a significant increase in share price following a strong earnings report, indicating potential for future growth if the company can resume its growth trajectory [1][2]. Financial Performance - SAIC reported fiscal Q3 2026 earnings that exceeded analyst expectations, achieving $2.58 per share in profit against a forecast of $2.15, with sales matching the expected $1.87 billion [1]. - However, sales declined by 6% and operating profit fell by 20%, leading to a 120-basis-point decrease in operating margin [2]. - Net profit, calculated under GAAP, decreased by 21% to $1.69 per diluted share, despite adjusted bottom-line profits only falling by 1% [2]. Cash Flow and Guidance - The company significantly increased its free cash flow, generating $135 million in the quarter, surpassing both reported operating income and net income [3]. - SAIC's book-to-bill ratio stands at 1.2x, indicating potential for sales growth, with management slightly raising sales guidance to approximately $7.3 billion for the year [5]. - Adjusted profit is projected to be between $9.80 and $10 per share, with free cash flow expected to exceed $550 million [5]. Valuation Metrics - SAIC's market capitalization is around $4 billion, with a price-to-free cash flow ratio of 8.9 based on the expected $550 million in free cash flow [6]. - Even when considering debt, the enterprise value to free cash flow ratio is 13.3x, suggesting that the stock is reasonably priced and does not require rapid growth to justify its valuation [6].

Financial Data and Key Metrics Changes - Third quarter revenue was $1.87 billion, a decline of 5.6% year-over-year, impacted by a government shutdown which accounted for approximately one percentage point of the decline [6][7] - Adjusted EBITDA was $185 million, resulting in a margin of 9.9%, driven by strong program execution [7][8] - Adjusted diluted EPS was $2.58, reflecting strong margin performance and a favorable tax rate [7] - Free cash flow for the third quarter was $135 million, despite being affected by the government shutdown [8][19] Business Line Data and Key Metrics Changes - Net bookings for the third quarter were $2.2 billion, resulting in a book-to-bill ratio of 1.2x [15] - The civil business segment experienced a year-over-year decline of 7%, but margins improved significantly over the first nine months of the year [32][33] Market Data and Key Metrics Changes - The government shutdown slowed proposal submissions, but normalization is expected in the near term [15][22] - The company anticipates submitting bids totaling over $30 billion in FY 2027 [15][16] Company Strategy and Development Direction - The acquisition of SilverEdge is expected to enhance the company's capabilities and contribute positively to margins and EPS [5][31] - The company is focusing on improving execution, resource allocation, and prioritizing bid quality to drive growth [9][10] - There is a commitment to reinvest over $100 million in annual spending into higher ROI areas to improve profitability [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to improve execution and deliver sustained profitable growth despite market uncertainties [20] - The company is prepared to adapt to changes in procurement processes within the Department of War, aiming for greater speed and efficiency [37][39] - The outlook for FY 2026 and FY 2027 includes increased revenue guidance due to the acquisition of SilverEdge and reaffirmed organic growth expectations [17][19] Other Important Information - The company plans to repurchase approximately $500 million in shares for both FY 2026 and FY 2027, totaling $1 billion, which represents about 25% of its market value [19] - Management is actively seeking a permanent CEO to lead the company forward [13] Q&A Session Summary Question: What is the current procurement environment post-shutdown? - Management noted a slowdown in submit activity and RFPs due to the shutdown, but expects normalization in Q4 [22] Question: Any residual impact from DOGE and pricing environment? - Management indicated no material changes from previous disclosures regarding DOGE, and margins remained healthy with minimal pricing pressure [24][25] Question: Opportunities and integration of SilverEdge? - Management expressed enthusiasm about SilverEdge's integration, expecting it to enhance bid differentiation and contribute positively to margins and EPS [30][31] Question: Civil growth decline and future trajectory? - Management stated that the civil business has been roughly flat over nine months, with no specific program-related drivers for the recent decline [32][33] Question: Thoughts on Department of War's reforms? - Management is ready to assist with procurement changes and is focusing on execution to align with the Department's objectives [37][39] Question: How to allocate savings from cost efficiencies? - Management indicated that a substantial portion of the $100 million savings will be reinvested into business development and proposal improvement [44][45] Question: Expectations on federal civil spending? - Management anticipates continued pressure on civilian agency budgets, but remains optimistic about their positioning within key agencies [51][52] Question: Portfolio shaping and defense budget growth? - Management is open to portfolio shaping but is currently focused on organic growth, with expectations of upward pressure on the DoD budget [62][65]

Financial Data and Key Metrics Changes - Third quarter revenue was $1.87 billion, a decline of 5.6% year over year, impacted by a government shutdown which accounted for approximately one percentage point of the decline [5][12] - Adjusted EBITDA was $185 million, resulting in a margin of 9.9%, driven by strong program execution [5][12] - Adjusted diluted EPS was $2.58, reflecting strong margin performance and a favorable tax rate [5][12] - Free cash flow for the third quarter was $135 million, despite being affected by the government shutdown [6][12] Business Line Data and Key Metrics Changes - Net bookings for the third quarter were $2.2 billion, resulting in a book-to-bill ratio of 1.2x [12] - The civil business segment experienced a year-over-year decline of 7%, but the nine-month performance showed it was roughly flat with improved margins [26][27] - The company expects to submit bids totaling over $30 billion in FY27, despite a slowdown in proposal submissions due to the government shutdown [12][13] Market Data and Key Metrics Changes - The government shutdown has slowed the pace of proposal submissions, but normalization is expected in the near term [20][12] - The company anticipates continued pressure on civilian agency budgets, impacting growth in the civil sector [45][60] Company Strategy and Development Direction - The acquisition of SilverEdge is expected to enhance the company's capabilities and contribute positively to margins and EPS [4][25] - The company is focusing on improving execution, increasing business development throughput, and prioritizing quality in proposals [7][9] - Efforts are being made to identify over $100 million in annual spending to reinvest in higher ROI areas to improve margins [8][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to improve execution and deliver sustained profitable growth despite market uncertainties [17][60] - The company is committed to adapting to changes in procurement processes within the Department of War, aiming for greater speed and efficiency [31][32] - Future guidance reflects a cautious optimism, with expectations for revenue growth and margin improvement in FY27 [14][15] Other Important Information - The company plans to repurchase approximately $500 million in shares for both FY26 and FY27, representing about 25% of its market value [16] - The leadership transition is ongoing, with a search for a permanent CEO being conducted [11] Q&A Session Summary Question: What is the current procurement environment post-shutdown? - Management noted a slowdown in RFP activity due to the shutdown but expects normalization in Q4, which is typically a softer quarter for book-to-bill [20] Question: Any residual impact from DOGE and pricing environment? - Management indicated no material changes from previous disclosures regarding DOGE, with healthy margins and limited pricing pressure observed [22] Question: How will SilverEdge integrate into the portfolio? - Management expressed enthusiasm about SilverEdge's potential to enhance bid differentiation and overall portfolio value [24] Question: What is the outlook for civil spending? - Management anticipates continued pressure on civilian agency budgets, but believes they are positioned well within key agencies [45][60] Question: How does the company plan to utilize the $100 million in savings? - A substantial portion of the savings will be reinvested into business development and proposal improvement efforts to drive growth [39][40] Question: What is the company's stance on portfolio shaping? - Management remains open to portfolio shaping opportunities but emphasizes the need for organic growth before pursuing larger acquisitions [56][57]

Financial Performance - SAIC's FY26 3Q revenue was $1.866 billion, a decrease compared to $1.976 billion in FY25 [13, 14] - Adjusted EBITDA for FY26 3Q was $185 million, representing 9.9% of revenue, compared to $197 million, or 10.0% of revenue, in FY25 [14] - Adjusted diluted EPS for FY26 3Q was $2.58, slightly lower than $2.61 in FY25 [15] - Free cash flow for FY26 3Q was $135 million, compared to $143 million in FY25 [18] Guidance and Targets - FY26 revenue guidance is $7.275 billion - $7.325 billion, with an organic growth rate of -2% to -3% [19] - Adjusted EBITDA guidance for FY26 is approximately $695 million, with a margin of approximately 9.5% [19] - Adjusted diluted EPS guidance for FY26 is $9.80 - $10.00 [19] - Free cash flow guidance for FY26 is greater than $550 million [19] Business Development - The TCV (Total Contract Value) of submitted bids for FY27 is projected to be greater than $30 billion [8] - The company has identified over $100 million of annual savings to reallocate to drive growth and improve margins [5] Capital Deployment - The majority of capital deployment is expected to be allocated to the share repurchase program [5] - Approximately $500 million is allocated to share repurchases for FY26 [22]