RESTON, Va.--(BUSINESS WIRE)--Science Applications International Corp. (NYSE: SAIC) has been awarded a $80.5 million task order by the U.S. Navy for the completion of the MK710 TSTS design and then to produce and deliver MK 710 Torpedo System Test Sets (TSTS) to enhance the Navy’s capability to provide the Submarine force with high quality, tested and validated MK 48 heavyweight torpedoes. “SAIC looks forward to expanding our support to the Navy’s heavyweight torpedo program,” said Barbara Supplee, execu ...

Science Applications International Corporation (SAIC) has secured a $156 million contract to offer system support to the U.S. Army Reserve Command (“USARC”) under the United States Army Reserve Command Information Technology Support Services (USARC ITSS II) contract. Leveraging its extensive history of collaboration with the U.S. Army Reserve, Science Applications aims to deliver innovative, cost-effective and mission-oriented managed IT services.The contract focuses on consolidating global enterprise IT se ...

RESTON, Va.--(BUSINESS WIRE)--Science Applications International Corp. (NYSE: SAIC) has been awarded a $156 million contract to provide system support to the U.S. Army Reserve Command (USARC) through their United States Army Reserve Command Information Technology Support Services (USARC ITSS II) contract. “SAIC has a decades-long history of partnering with the U.S. Army Reserve to advance their mission,” said Josh Jackson, senior vice president, Army Business Group at SAIC. “We are proud to support their ...

Science Applications International (SAIC) has bagged a $375 million contract from the U.S. Navy. The contract is for extending the supply and integration of its Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4/ISR) systems for land-based vehicle platforms to support the Naval Information Warfare Center Atlantic (NIWC Atlantic).SAIC will use its professionals to install C4/ISR components in the tactical vehicles before NIWC Atlantic deploys them for critical oper ...

RESTON, Va.--(BUSINESS WIRE)--Science Applications International Corp. (NYSE: SAIC) has been selected to provide a range of Information Technology (IT) services on the Department of Veterans Affairs (VA) contracting vehicle called Transformation Twenty-One Total Technology Next Generation Two (T4NG2). “SAIC is ready to deliver best-in-class innovation and modernization in support of our nation’s heroes, the veteran community,” said Vishal Tulsian, senior vice president, Health, State and Local, and Feder ...

RESTON, Va.--(BUSINESS WIRE)--The U.S. Navy has awarded Science Applications International Corp. (NYSE: SAIC) a $375 million contract to continue providing Command, Control, Communications, Computers (C4) Intelligence, Surveillance and Reconnaissance (ISR) fielding and integration on land-based vehicle platforms to support Naval Information Warfare Center Atlantic (NIWC Atlantic). “SAIC is proud to continue supporting this important mission,” said Barbara Supplee, senior vice president, Navy Business Gro ...

RESTON, Va.--(BUSINESS WIRE)--Science Applications International Corp. (NYSE: SAIC) has been awarded a $63 million contract from the U.S. Navy to support hypersonics advanced concepts and strategic mission solutions for the Navy’s Strategic Systems Programs (SSP) and the Naval Surface Warfare Center (NSWC) Crane, Ind., Strategic Systems Hardware Division (GXW). “Every day, SAIC provides expertise in systems integration and delivery solutions in support of the U.S. Navy’s strategic priorities,” said Barba ...

It has been about a month since the last earnings report for SAIC (SAIC) . Shares have lost about 5.4% in that time frame, underperforming the S&P 500.Will the recent negative trend continue leading up to its next earnings release, or is SAIC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers. Science Applications Q3 Earnings & Sales Beat EstimatesScien ...

Financial Data and Key Metrics - Revenue for Q3 FY24 was $1.90 billion, an 11% increase YoY excluding FSA and supply chain revenue [18] - Adjusted EBITDA margin in Q3 was 9.4%, up 50 basis points YoY [18] - Adjusted diluted EPS was $2.27, a 19% increase YoY [18] - Free cash flow adjusted for transaction fees was $148 million in Q3 and $367 million YTD [18] - Net bookings of $2.5 billion resulted in a book-to-bill ratio of 1.3x for the quarter and 1x on a trailing 12-month basis [18] - FY24 adjusted EPS guidance increased to $7.70-$7.90, driven by improved operating results, lower interest expense, and a lower tax rate [19] - FY24 free cash flow guidance maintained at $460-$480 million [19] Business Line Data and Key Metrics - The company's solutions portfolio is majority at enterprise scale, with recent investments in digital engineering, secure data analytics, operational AI, and multilevel security [1] - Customers have cited these solutions in recent bids and recompete efforts, indicating differentiation and mission relevance [1] - The company is focusing on improving value creation processes post-contract to enhance profitability for both the company and customers [1] Market Data and Key Metrics - The company expects to double its revenue from the NASA NCAP program to $200 million annually if the new procurement is secured [8] - Backlog is currently at $23-$24 billion, providing a strong foundation for future growth [9] - The company is cautious about potential government funding disruptions in Q4 and FY25 [31] Company Strategy and Industry Competition - The company is focusing on four strategic pivots: solutions portfolio, go-to-market strategy, culture, and brand [20] - A new enterprise business development function is being established to standardize and optimize the go-to-market strategy [29] - The company aims to achieve sustainable organic growth above the 2%-4% framework provided at Investor Day [29] - The company is committed to a capital-light business model and differentiating itself in the market with mission-relevant, scalable, and differentiated solutions [16] Management Commentary on Operating Environment and Future Outlook - The company is confident in its ability to deliver growth rates consistently above mid-single digits, driven by strong program performance and cost efficiency initiatives [2][18] - Management is focused on driving outsized EBITDA growth and cash flow, while maintaining a cautious outlook for FY25 [6] - The company is optimistic about the potential for the NASA NCAP program to be accretive, but is also preparing for potential downside scenarios [8][9] Other Important Information - The company has hired Lauren Knausenberger as its first Chief Innovation Officer to manage the technology roadmap and maximize differentiation and long-term value [16] - The company is open to M&A but remains skeptical of larger transactions, focusing instead on shoring up its solutions portfolio with new technology [17] - The company is increasing its FY24 revenue guidance by 2% to $7.325-$7.35 billion, reflecting stronger operating performance and potential government funding pressures [31] Q&A Summary Question: How does the company plan to maintain its earnings trajectory given the current book-to-bill ratio? [4] - The company is focusing on delivering outsized EBITDA growth and cash flow, while maintaining a cautious outlook for FY25 [6] Question: What is the company's outlook on the NASA NCAP contract and its impact on growth? [7] - The company expects the NASA NCAP program to potentially double its revenue to $200 million annually if the new procurement is secured, but is also preparing for potential downside scenarios [8][9] Question: How is the company addressing recompete losses and improving its recompete win rate? [49] - The company is focusing on differentiation in its programs, rigorous business development execution, and applying lessons learned across the enterprise to improve recompete win rates [22] Question: What changes are being made to incentive compensation to drive growth? [64] - The company is focusing on aligning incentive compensation with both short-term and long-term performance, particularly in business development and program management [33][37] Question: What is the company's philosophy on M&A and the use of the balance sheet? [80] - The company is focused on organic growth and tightening internal processes before pursuing M&A, with a preference for smaller, capability-based tuck-ins [17][80] Question: How does the company view its tax rate and cash tax management going forward? [72] - The company has managed its tax rate effectively and is focused on maintaining strong cash tax management, with plans to increase cash taxes from $0 in FY23 to $100 million in FY26 [19][72]

PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed and consolidated financial statements, along with detailed notes on business overview, accounting policies, and financial instruments [Condensed and Consolidated Statements of Income](index=3&type=section&id=Condensed%20and%20Consolidated%20Statements%20of%20Income) Condensed and Consolidated Statements of Income (in millions, except per share amounts) | Metric | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :--------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Revenues | $1,895 | $1,909 | $5,707 | $5,736 | | Operating income | $143 | $133 | $662 | $383 | | Income before income taxes | $114 | $100 | $572 | $290 | | Net income | $93 | $80 | $438 | $228 | | Net income attributable to common stockholders | $93 | $80 | $438 | $226 | | Basic EPS | $1.79 | $1.45 | $8.19 | $4.06 | | Diluted EPS | $1.76 | $1.45 | $8.11 | $4.04 | [Condensed and Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20and%20Consolidated%20Statements%20of%20Comprehensive%20Income) Condensed and Consolidated Statements of Comprehensive Income (in millions) | Metric | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Net income | $93 | $80 | $438 | $228 | | Net unrealized (loss) gain on derivative instruments | $(3) | $29 | $(2) | $63 | | Total other comprehensive (loss) income, net of tax | $(3) | $29 | $(2) | $63 | | Comprehensive income | $90 | $109 | $436 | $291 | | Comprehensive income attributable to common stockholders | $90 | $109 | $436 | $289 | [Condensed and Consolidated Balance Sheets](index=6&type=section&id=Condensed%20and%20Consolidated%20Balance%20Sheets) Condensed and Consolidated Balance Sheets (in millions) | Asset/Liability/Equity | November 3, 2023 | February 3, 2023 | | :--------------------------------------- | :--------------- | :--------------- | | **ASSETS** | | | | Cash and cash equivalents | $311 | $109 | | Receivables, net | $1,010 | $936 | | Total current assets | $1,388 | $1,197 | | Goodwill | $2,851 | $2,911 | | Intangible assets, net | $923 | $1,009 | | Total assets | $5,658 | $5,543 | | **LIABILITIES AND EQUITY** | | | | Total current liabilities | $1,226 | $1,126 | | Long-term debt, net of current portion | $2,194 | $2,343 | | Total stockholders' equity | $1,828 | $1,704 | | Total liabilities and stockholders' equity | $5,658 | $5,543 | [Condensed and Consolidated Statements of Equity](index=7&type=section&id=Condensed%20and%20Consolidated%20Statements%20of%20Equity) Condensed and Consolidated Statements of Equity (in millions) | Metric | Balance at Feb 3, 2023 | Net Income (9 months) | Cash Dividends (9 months) | Repurchases of Stock (9 months) | Balance at Nov 3, 2023 | | :--------------------------------- | :--------------------- | :-------------------- | :------------------------ | :------------------------------ | :--------------------- | | Additional paid-in capital | $637 | — | — | $(276) | $395 | | Retained earnings | $1,035 | $438 | $(60) | — | $1,413 | | Accumulated other comprehensive income | $22 | $(2) | — | — | $20 | | Total stockholders' equity | $1,704 | $438 | $(60) | $(276) | $1,828 | [Condensed and Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20and%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed and Consolidated Statements of Cash Flows (Nine Months Ended, in millions) | Cash Flow Activity | November 3, 2023 | October 28, 2022 | | :--------------------------------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $333 | $387 | | Net cash provided by (used in) investing activities | $324 | $(23) | | Net cash used in financing activities | $(455) | $(417) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $202 | $(53) | | Cash, cash equivalents and restricted cash at end of period | $320 | $62 | [Notes to Condensed and Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20and%20Consolidated%20Financial%20Statements) [Note 1—Business Overview and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%E2%80%94Business%20Overview%20and%20Summary%20of%20Significant%20Accounting%20Policies) - SAIC is a leading provider of technical, engineering, and enterprise information technology (IT) services primarily to the U.S. government, focusing on higher-end, differentiated technology services and solutions such as secure cloud modernization, outcome-based enterprise IT as-a-service, and defense systems integration[22](index=22&type=chunk)[23](index=23&type=chunk) - The company adopted ASU 2022-04, Liabilities—Supplier Finance Programs, effective the first day of fiscal 2024, requiring annual and interim disclosures for entities using supplier finance programs[39](index=39&type=chunk)[40](index=40&type=chunk) - The FASB issued ASU 2023-07, Segment Reporting, effective for fiscal years beginning after December 15, 2023, to enhance disclosures about significant segment expenses[38](index=38&type=chunk) [Note 2—Earnings Per Share, Share Repurchases and Dividends](index=11&type=section&id=Note%202%E2%80%94Earnings%20Per%20Share,%20Share%20Repurchases%20and%20Dividends) Weighted-Average Number of Shares Outstanding (in millions) | Metric | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Basic weighted-average number of shares outstanding | 52.8 | 55.0 | 53.5 | 55.6 | | Diluted weighted-average number of shares outstanding | 53.3 | 55.5 | 54.0 | 56.0 | - As of November 3, 2023, the Company had repurchased approximately **19.6 million** shares of common stock under its existing repurchase plan, which was increased by 8.0 million shares in June 2022[43](index=43&type=chunk) - A quarterly dividend of $0.37 per share was declared and paid during the three months ended November 3, 2023, and another $0.37 per share dividend was declared payable on January 26, 2024[44](index=44&type=chunk) [Note 3—Revenues](index=12&type=section&id=Note%203%E2%80%94Revenues) Disaggregated Revenues by Customer (in millions) | Customer | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Department of Defense | $992 | $969 | $2,982 | $2,799 | | Other federal government agencies | $863 | $903 | $2,611 | $2,827 | | Commercial, state and local | $40 | $37 | $114 | $110 | | Total | $1,895 | $1,909 | $5,707 | $5,736 | Disaggregated Revenues by Contract Type (in millions) | Contract Type | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :------------------ | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Cost reimbursement | $1,207 | $1,071 | $3,424 | $3,201 | | Time and materials (T&M) | $382 | $363 | $1,107 | $1,077 | | Firm-fixed price (FFP) | $306 | $475 | $1,176 | $1,458 | | Total | $1,895 | $1,909 | $5,707 | $5,736 | - As of November 3, 2023, the Company had approximately **$5.5 billion** of remaining performance obligations, with 80% expected to be recognized over the next 12 months and 90% over the next 24 months[53](index=53&type=chunk) [Note 4—Divestitures](index=15&type=section&id=Note%204%E2%80%94Divestitures) - On February 4, 2023, SAIC sold 0.1% of its majority ownership in Forfeiture Support Associates J.V. (FSA), leading to deconsolidation and a **$7 million** gain from remeasuring the retained equity method investment[56](index=56&type=chunk)[57](index=57&type=chunk) - On May 6, 2023, SAIC sold its logistics and supply chain management business for **$356 million** in cash, recording a pre-tax gain of **$233 million**, to focus resources on strategic growth areas[58](index=58&type=chunk) [Note 5—Goodwill and Intangible Assets](index=16&type=section&id=Note%205%E2%80%94Goodwill%20and%20Intangible%20Assets) Goodwill and Intangible Assets (in millions) | Asset | November 3, 2023 | February 3, 2023 | | :---------------------- | :--------------- | :--------------- | | Goodwill | $2,851 | $2,911 | | Intangible assets, net | $923 | $1,009 | - Goodwill decreased by **$60 million** due to the sale of the Supply Chain Business, with no impairments recorded during the periods presented[60](index=60&type=chunk) - Amortization expense for intangible assets was **$86 million** for the nine months ended November 3, 2023, down from **$94 million** in the prior year period[61](index=61&type=chunk) [Note 6—Income Taxes](index=16&type=section&id=Note%206%E2%80%94Income%20Taxes) Effective Income Tax Rates | Period | November 3, 2023 | October 28, 2022 | | :-------------------------- | :--------------- | :--------------- | | Three Months Ended | 18.0% | 20.3% | | Nine Months Ended | 23.4% | 21.3% | - The nine-month effective tax rate increased primarily due to the gain from the disposition of the Supply Chain Business and associated non-deductible goodwill, partially offset by higher tax benefits from stock-based compensation and foreign-derived intangible income[64](index=64&type=chunk) - Unrecognized tax benefits increased to **$225 million** as of November 3, 2023, from **$156 million** as of February 3, 2023, mainly due to research tax credits and capitalized R&D costs under the TCJA[66](index=66&type=chunk) [Note 7—Debt Obligations](index=17&type=section&id=Note%207%E2%80%94Debt%20Obligations) Long-Term Debt (in millions) | Debt Type | November 3, 2023 (Net) | February 3, 2023 (Net) | | :-------------------------- | :--------------------- | :--------------------- | | Term Loan A Facility | $1,211 | $1,225 | | Term Loan B Facility | $423 | $485 | | Term Loan B2 Facility | $233 | $268 | | Senior Notes | $396 | $396 | | Total long-term debt, net | $2,194 | $2,343 | - During the nine months ended November 3, 2023, the Company made **$15 million** in scheduled principal payments and **$100 million** in prepayments on its Term Loan Facilities[69](index=69&type=chunk) - The Company borrowed and repaid **$160 million** under its **$1.0 billion** Revolving Credit Facility, with no outstanding balance as of November 3, 2023, and was in compliance with covenants[69](index=69&type=chunk) [Note 8—Derivative Instruments Designated as Cash Flow Hedges](index=18&type=section&id=Note%208%E2%80%94Derivative%20Instruments%20Designated%20as%20Cash%20Flow%20Hedges) Fair Value of Derivative Instruments (in millions) | Derivative | Notional Amount (Nov 3, 2023) | Fair Value of Asset (Nov 3, 2023) | Fair Value of Asset (Feb 3, 2023) | | :------------------ | :---------------------------- | :-------------------------------- | :-------------------------------- | | Interest rate swaps 1 | $685 | $22 | $16 | | Interest rate swaps 2 | — | — | $9 | | Total | $685 | $22 | $25 | - Interest Rate Swaps 2, with a notional value of **$450 million**, matured during the three months ended November 3, 2023[74](index=74&type=chunk) [Note 9—Changes in Accumulated Other Comprehensive Income (Loss) by Component](index=19&type=section&id=Note%209%E2%80%94Changes%20in%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%20by%20Component) Changes in Accumulated Other Comprehensive Income (Loss) (in millions) | Component | Balance at Feb 3, 2023 | Net Other Comprehensive Loss (9 months) | Balance at Nov 3, 2023 | | :--------------------------------------- | :--------------------- | :-------------------------------------- | :--------------------- | | Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges | $18 | $(2) | $16 | | Defined Benefit Obligation Adjustment | $4 | — | $4 | | Total | $22 | $(2) | $20 | - Net other comprehensive loss for the nine months ended November 3, 2023, was **$(2) million**, a decrease from net other comprehensive income of **$63 million** in the prior year period[77](index=77&type=chunk) [Note 10—Sales of Receivables](index=20&type=section&id=Note%2010%E2%80%94Sales%20of%20Receivables) - The Company has a Master Accounts Receivable Purchase Agreement (MARPA Facility) with MUFG Bank, Ltd. for the sale of up to **$300 million** of certain eligible U.S. government receivables[78](index=78&type=chunk) Purchase Discount Fees (in millions) | Period | November 3, 2023 | October 28, 2022 | | :-------------------------- | :--------------- | :--------------- | | Nine Months Ended | $7 | $4 | [Note 11—Legal Proceedings and Other Commitments and Contingencies](index=20&type=section&id=Note%2011%E2%80%94Legal%20Proceedings%20and%20Other%20Commitments%20and%20Contingencies) - The Company received a Federal Grand Jury Subpoena in April 2022 and October 2023 from the U.S. Department of Justice, Antitrust Division, in connection with a criminal investigation, and is fully cooperating[82](index=82&type=chunk) - The Assault Amphibious Vehicle (AAV) contract was terminated for convenience by the Marine Corps in October 2018, and the Company is continuing to negotiate cost recovery[83](index=83&type=chunk) - The Company is routinely subject to government investigations, audits, and reviews (e.g., DCAA) and believes it has adequately reserved for estimated net amounts to be refunded to customers for potential adjustments[84](index=84&type=chunk)[86](index=86&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, business overview, economic factors, operational results, and liquidity [Business Overview](index=22&type=section&id=Business%20Overview) - SAIC is a leading technology integrator and one of the largest pure-play technology service providers to the U.S. government, operating through approximately 1,900 active contracts and employing about 24,000 individuals[90](index=90&type=chunk) [Economic Opportunities, Challenges, and Risks](index=22&type=section&id=Economic%20Opportunities,%20Challenges,%20and%20Risks) - **98%** of SAIC's revenues are derived from U.S. government contracts, making its business performance highly dependent on government spending levels and budget priorities[91](index=91&type=chunk) - Potential adverse impacts include spending reductions, delayed appropriations, inflationary increases, and government shutdowns, while new spending packages (e.g., infrastructure, Inflation Reduction Act, CHIPS and Science Act) may offer opportunities in digital modernization, cyber, microelectronics, and climate resiliency[92](index=92&type=chunk)[93](index=93&type=chunk) - Increased reliance on competitive bidding and small business prime set-aside contracts has intensified competition and pricing pressure in the industry[94](index=94&type=chunk) - SAIC differentiates itself through its scale, prime contractor leadership, long-term customer relationships, deep technical expertise, and an 'Innovation Factory' to deliver superior enterprise-class solutions[95](index=95&type=chunk)[96](index=96&type=chunk) [Management of Operating Performance and Reporting](index=23&type=section&id=Management%20of%20Operating%20Performance%20and%20Reporting) - Management monitors contract margin performance by evaluating risks, updating estimates, and analyzing revenue drivers and cost mix (labor, subcontractor, materials), noting that programs with a higher proportion of SAIC labor are generally more profitable[97](index=97&type=chunk)[98](index=98&type=chunk) [Results of Operations](index=24&type=section&id=Results%20of%20Operations) Summary of Results of Operations (in millions) | Metric | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Revenues | $1,895 | $1,909 | $5,707 | $5,736 | | Cost of revenues | $1,666 | $1,688 | $5,027 | $5,070 | | Selling, general and administrative expenses | $87 | $87 | $259 | $272 | | Operating income | $143 | $133 | $662 | $383 | | Net income attributable to common stockholders | $93 | $80 | $438 | $226 | | Net cash provided by operating activities | $101 | $128 | $333 | $387 | - Revenues decreased by **$14 million** (3 months) and **$29 million** (9 months) year-over-year, primarily due to the sale of the Supply Chain Business and the deconsolidation of FSA; adjusting for these, revenues grew **10.6%** (3 months) and **7.3%** (9 months)[100](index=100&type=chunk)[101](index=101&type=chunk) - Operating income increased **8%** (3 months) and **73%** (9 months) year-over-year, with the nine-month increase significantly driven by a **$233 million** gain from the Supply Chain Business sale and a **$7 million** gain from the deconsolidation of FSA[100](index=100&type=chunk)[106](index=106&type=chunk) - Net cash provided by operating activities decreased **$54 million** for the nine months ended November 3, 2023, primarily due to higher tax payments associated with Section 174 of the Internal Revenue Code and the Supply Chain Business sale, partially offset by timing of vendor payments[107](index=107&type=chunk) [Non-GAAP Measures](index=25&type=section&id=Non-GAAP%20Measures) EBITDA and Adjusted EBITDA Reconciliation (in millions) | Metric | Three Months Ended Nov 3, 2023 | Three Months Ended Oct 28, 2022 | Nine Months Ended Nov 3, 2023 | Nine Months Ended Oct 28, 2022 | | :--------------------------------------- | :----------------------------- | :----------------------------- | :---------------------------- | :---------------------------- | | Net income | $93 | $80 | $438 | $228 | | EBITDA | $177 | $168 | $773 | $498 | | EBITDA as a percentage of revenues | 9.3% | 8.8% | 13.5% | 8.7% | | Adjusted EBITDA | $178 | $170 | $541 | $509 | | Adjusted EBITDA as a percentage of revenues | 9.4% | 8.9% | 9.5% | 8.9% | - Adjusted EBITDA as a percentage of revenues increased to **9.4%** for the three months and **9.5%** for the nine months ended November 3, 2023, from **8.9%** in the comparable prior year periods, driven by improved contract profitability and lower indirect costs[113](index=113&type=chunk) [Other Key Performance Measures](index=26&type=section&id=Other%20Key%20Performance%20Measures) Total Backlog (in millions) | Backlog Type | November 3, 2023 | February 3, 2023 | | :-------------------------- | :--------------- | :--------------- | | Funded backlog | $4,036 | $3,554 | | Negotiated unfunded backlog | $19,102 | $20,248 | | Total backlog | $23,138 | $23,802 | - Net bookings were an estimated **$2.5 billion** for the three months and **$5.3 billion** for the nine months ended November 3, 2023[118](index=118&type=chunk) Contract Type Mix (as a % of revenues, Nine Months Ended) | Contract Type | November 3, 2023 | October 28, 2022 | | :------------------ | :--------------- | :--------------- | | Cost reimbursement | 60% | 56% | | Time and materials (T&M) | 19% | 19% | | Firm-fixed price (FFP) | 21% | 25% | | Total | 100% | 100% | - The change in contract mix reflects a decrease in firm-fixed price contracts due to the divestiture of the Supply Chain Business, which historically had a higher proportion of these contracts[119](index=119&type=chunk) Cost of Revenues Mix (as a % of total cost of revenues, Nine Months Ended) | Cost Component | November 3, 2023 | October 28, 2022 | | :--------------------------------------- | :--------------- | :--------------- | | Labor-related cost of revenues | 54% | 54% | | Subcontractor-related cost of revenues | 31% | 29% | | Supply chain materials-related cost of revenues | 3% | 7% | | Other materials-related cost of revenues | 12% | 10% | | Total | 100% | 100% | - The decrease in supply chain materials-related costs in the cost of revenues mix is attributed to the divestiture of the Supply Chain Business[120](index=120&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - SAIC expects to fund ongoing working capital, commitments, and discretionary investments using cash on hand, future operating cash flows, and borrowings under its **$1.0 billion** Revolving Credit Facility and **$300 million** MARPA Facility[121](index=121&type=chunk) - The capital deployment strategy prioritizes dividends, share repurchases, debt prepayments, or strategic acquisitions when cash generation exceeds the target average minimum cash balance[122](index=122&type=chunk) - The Tax Cuts and Jobs Act of 2017, requiring capitalization and amortization of R&D costs, is estimated to increase income taxes payable by approximately **$77 million** for fiscal 2024[124](index=124&type=chunk) [Historical Cash Flow Trends](index=29&type=section&id=Historical%20Cash%20Flow%20Trends) Summary of Cash Flows (Nine Months Ended, in millions) | Cash Flow Activity | November 3, 2023 | October 28, 2022 | | :--------------------------------------- | :--------------- | :--------------- | | Net cash provided by operating activities | $333 | $387 | | Net cash provided by (used in) investing activities | $324 | $(23) | | Net cash used in financing activities | $(455) | $(417) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $202 | $(53) | - Net cash provided by investing activities significantly increased to **$324 million** for the nine months ended November 3, 2023, from cash used of **$23 million** in the prior year, primarily due to **$356 million** in cash proceeds from the sale of the Supply Chain Business[126](index=126&type=chunk) - Net cash used in financing activities increased to **$(455) million**, primarily due to higher share repurchases, partially offset by lower term loan principal payments[127](index=127&type=chunk) [Critical Accounting Policies and Estimates](index=29&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - There have been no material changes to the Company's critical accounting policies and estimates during the nine months ended November 3, 2023, from those disclosed in its most recently filed Annual Report on Form 10-K[128](index=128&type=chunk) [Recently Issued But Not Yet Adopted Accounting Pronouncements](index=29&type=section&id=Recently%20Issued%20But%20Not%20Yet%20Adopted%20Accounting%20Pronouncements) - Information on recently issued but not yet adopted accounting pronouncements is provided in Note 1 to the condensed and consolidated financial statements[129](index=129&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to the company's market risks have occurred since the last Annual Report on Form 10-K - There have been no material changes to the Company's market risks from those discussed in its most recently filed Annual Report on Form 10-K[130](index=130&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes to internal controls - Management, with the participation of the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were operating and effective as of November 3, 2023[131](index=131&type=chunk) [Changes in Internal Control Over Financial Reporting](index=30&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) - There have been no changes in the Company's internal control over financial reporting during the quarterly period covered by this report that materially affected, or are likely to materially affect, its internal control over financial reporting[132](index=132&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Updated information on legal proceedings and government investigations is incorporated by reference from Note 11 - Updated information regarding legal proceedings and government investigations, audits, and reviews is incorporated by reference from Note 11 to the condensed and consolidated financial statements[135](index=135&type=chunk)[136](index=136&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the Company's most recently filed Annual Report on Form 10-K[137](index=137&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Details of common stock repurchases, including shares and average price, for the three months ended November 3, 2023 Common Stock Repurchases (Three Months Ended November 3, 2023) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------------------------------------- | :----------------------------- | :--------------------------- | | August 5, 2023 - September 8, 2023 | 265,748 | $117.59 | | September 9, 2023 - October 6, 2023 | 324,822 | $107.75 | | October 7, 2023 - November 3, 2023 | 313,654 | $110.78 | | Total | 904,224 | $111.69 | - As of November 3, 2023, approximately **4.89 million** shares remained authorized for repurchase under the existing plan[139](index=139&type=chunk)[140](index=140&type=chunk) [Item 3. Defaults Upon Senior Securities](index=31&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No information is required regarding defaults upon senior securities - No information is required in response to this item[141](index=141&type=chunk) [Item 4. Mine Safety Disclosures](index=31&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No information is required regarding mine safety disclosures - No information is required in response to this item[142](index=142&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended November 3, 2023 - No director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended November 3, 2023[143](index=143&type=chunk) [Item 6. Exhibits](index=32&type=section&id=Item%206.%20Exhibits) Exhibits filed with Form 10-Q include CEO/CFO certifications and interactive data files - The report includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Interactive Data Files (Exhibits 101, 104)[144](index=144&type=chunk) [Signatures](index=33&type=section&id=Signatures) The report was signed by Prabu Natarajan, Executive Vice President and Chief Financial Officer, on December 4, 2023 - The report was signed by Prabu Natarajan, Executive Vice President and Chief Financial Officer, on December 4, 2023[147](index=147&type=chunk)