Core Insights - David Urban has been appointed to the Board of Directors of Science Applications International Corp. (SAIC), effective September 15, 2025, bringing extensive experience in policy, politics, and strategy [1][2] - Urban's expertise includes navigating public policy, strategic communications, corporate governance, risk management, and organizational leadership, which will be beneficial for SAIC [1][2] - His appointment increases SAIC's Board from eleven to twelve members and he will serve on the Board's Audit Committee [1] Company Overview - SAIC is a leading mission integrator in the United States, focusing on technology and innovation to serve defense, space, civilian, and intelligence markets [4] - The company has a robust portfolio that includes secure high-end solutions in mission IT, enterprise IT, engineering services, and professional services [4] - SAIC is headquartered in Reston, Virginia, and has approximately 24,000 employees with annual revenues of about $7.5 billion [5]

Core Insights - Science Applications International Corp. (SAIC) has announced a strategic collaboration with ServiceNow to enhance government risk reduction efforts for mission operations [1][2] - The partnership aims to shift IT risk management from a reactive approach to a proactive, autonomous resilience model, ensuring no-fail mission environments for U.S. armed forces and agencies [1][2] Group 1: Collaboration Details - The collaboration will leverage ServiceNow's AI Platform integrated into SAIC's mission labs, providing real-time intelligence for decision-making, issue prediction, and process automation [2][3] - The partnership focuses on enabling customers to rapidly develop, test, and deploy secure IT services, ensuring scalability and faster delivery of capabilities [2][3] Group 2: Strategic Goals - The collaboration aims to unlock efficiencies in government operations by combining SAIC's mission integration approach with ServiceNow's innovative AI technology [3][4] - The goal is to accelerate modernization efforts within defense and government sectors, enhancing user experiences and reducing technical debt [3][4] Group 3: Market Position - As an Elite partner of ServiceNow, SAIC is positioned to deliver transformative solutions at an enterprise scale across defense, civilian, and intelligence markets [4] - SAIC leads the largest federal implementation of ServiceNow through the Army Enterprise Service Management Platform, demonstrating its capability to operationalize complex solutions [4][6]

Company Overview - SAIC shares have increased by approximately 11.9% since the last earnings report, outperforming the S&P 500 [1] - The most recent earnings report is essential to understand the key drivers behind this performance [1] Earnings Estimates - Estimates for SAIC have trended upward over the past month, indicating positive sentiment among analysts [2][4] VGM Scores - SAIC has a strong Growth Score of A, but a low Momentum Score of F, while also receiving an A grade for value, placing it in the top quintile for this investment strategy [3] - The aggregate VGM Score for SAIC is A, which is significant for investors not focused on a single strategy [3] Industry Comparison - SAIC is part of the Zacks Computers - IT Services industry, where Wix.com has gained 6.2% over the past month [5] - Wix.com reported revenues of $473.65 million for the last quarter, reflecting a year-over-year increase of 12.8% [5] - Wix.com is expected to post earnings of $1.75 per share for the current quarter, representing a year-over-year change of 4.8% [6]

Core Insights - Science Applications International Corp. (SAIC) has been awarded a $928 million contract for the Hyper-Innovative Operational Prototype Engineering (HOPE) 2.0 to support the U.S. Air Force Tactical Exploitation of National Capabilities (AF TENCAP) [1][3] - The contract will span five years, starting in July 2025, and aims to enhance warfighting capabilities through rapid prototype development and mission integration [1][3][6] Company Overview - SAIC is a leading mission integrator with a focus on technology and innovation, serving defense, space, civilian, and intelligence markets [7] - The company has approximately 24,000 employees and annual revenues of about $7.5 billion [8] Contract Details - The HOPE 2.0 contract will integrate Intelligence Community capabilities with urgent Department of Defense (DoD) operational needs, providing comprehensive Research, Development, Test, and Evaluation (RDT&E) services [3][4] - SAIC will collaborate with over a dozen defense companies to deliver advanced technology to DoD Combatant Commands [5] Strategic Importance - The contract aligns with the DoD's Software Acquisition Pathway and addresses national priorities such as deterrence in the Pacific [6] - SAIC's efforts will focus on maintaining decision dominance through sensor and data fusion, improving command and control decisions, and enhancing battlespace awareness [9]

Core Viewpoint - Science Applications International (SAIC) presents a compelling investment opportunity following a significant decline in share price, attributed to initial uncertainties regarding government spending, which have since been alleviated [2][8]. Financial Performance - SAIC reported net revenue of $1.88 billion for Q1 2025, marking a 1.6% increase year-over-year, slightly surpassing consensus estimates [8]. - The company anticipates revenue for the year to be between $7.6 billion and $7.75 billion, with a projected organic growth rate of 2.5% [10]. Shareholder Returns - The company offers a dividend yield of 1.43% with a payout ratio of 16%, complemented by aggressive share buybacks, which are expected to total approximately $375 million, or about 7.6% of market capitalization [5][6]. - Share buybacks reduced the share count by an average of 8.25% in FQ1 2026, with plans to maintain this pace through the end of the year [6]. Market Sentiment and Analyst Ratings - Analysts have mixed responses to SAIC's results, with price targets ranging from $100 to $137, indicating a potential upside of 20% to over 30% from recent lows [13][14]. - The overall analyst rating for SAIC is currently a Hold, with an improving sentiment trend over the past year [10][14]. Strategic Positioning - The company's growth trajectory aligns with the White House's budget proposal, which emphasizes critical segments such as the Navy, Air Force, and Space Development Agency [12]. - SAIC's business is well-positioned to benefit from ongoing government contracts, with a favorable book-to-bill ratio indicating strong future business prospects [10].

Core Insights - Science Applications International (SAIC) reported its first-quarter fiscal 2026 results, with non-GAAP earnings of $1.92 per share, missing the Zacks Consensus Estimate of $2.14 by 10.28% and showing flat year-over-year profits [1][9] - Revenues for the fiscal first quarter rose 2% year over year to $1.877 billion, slightly surpassing the Zacks Consensus Estimate of $1.864 billion by 0.71%, driven by increased contract volumes [2][9] - Despite the revenue growth, SAIC shares fell 13% following the earnings miss, contributing to a year-to-date decline of 9.8%, underperforming the Computers – IT Services industry [3] Financial Performance - Defence and Intelligence segment revenues, accounting for 76.3% of total revenues, decreased 0.2% year over year to $1.43 billion, while Civilian revenues rose 8% year over year to $444 million, constituting 23.7% of total revenues [4] - Net bookings for the quarter were approximately $2.4 billion, resulting in a book-to-bill ratio of 1.3, with an estimated backlog of $22.3 billion at the end of the quarter [5] - Selling, general and administrative (SG&A) expenses decreased 4.7% to $89 million, while non-GAAP operating income fell to $158 million from $165 million year over year, leading to a non-GAAP operating margin contraction of 50 basis points to 8.4% [6] EBITDA and Cash Flow - Adjusted EBITDA declined 5.42% to $157 million, with an adjusted EBITDA margin of 8.4%, down from 9% in the prior-year quarter, impacted by seasonal investment costs [7] - The company ended the fiscal first quarter with cash and cash equivalents of $47 million, down from $56 million in the previous quarter, and long-term debt decreased to $1.876 billion [8] Guidance and Outlook - SAIC reaffirmed its fiscal 2026 guidance, projecting revenues in the range of $7.60-$7.75 billion and adjusted earnings between $9.10-$9.30 per share, with adjusted EBITDA expected to be approximately $715-$735 million [11]

Group 1 - On June 2nd, shareholders of Science Applications International Corporation (NASDAQ: SAIC) experienced a significant decline, with shares dropping by 13.3% [1] - The company specializes in providing technical, engineering, and enterprise information technology solutions [1] Group 2 - Crude Value Insights offers an investing service focused on oil and natural gas, emphasizing cash flow and companies that generate it [1] - The service aims to identify value and growth prospects within the sector [1]

Core Viewpoint - SAIC reported disappointing quarterly results due to the government's efficiency drive, leading to a significant drop in share price by 13% [1][3]. Financial Performance - SAIC earned $1.92 per share in fiscal Q1 2026 on revenue of $1.88 billion, missing analyst expectations of $2.12 per share and $1.87 billion in sales [3]. - Net income decreased by 12% year-over-year to $68 million, and the operating margin fell by 70 basis points to 6.4% [4]. Operational Challenges - The newly formed Department of Government Efficiency (DOGE) is scrutinizing spending, causing procurement delays and extended award timelines [4]. - CEO Toni Townes-Whitley indicated that while the operating environment has stabilized, higher turnover rates among customers are contributing to ongoing challenges [4][6]. Future Outlook - SAIC expects the impact of DOGE on full-year revenue to be less than 1% and booked $2.4 billion in future business, indicating potential for recovery [5]. - The company reiterated its full-year guidance, suggesting confidence in regaining profit losses in upcoming quarters [5]. Market Position - Following the recent decline, SAIC is trading at approximately 10 times future earnings, nearing a historical low, which may present a buying opportunity for long-term investors [7].

Financial Performance - Revenues for the three months ended May 2, 2025, increased by $30 million to $1,877 million, a 2% rise compared to the same period in the prior year[110] - Operating income decreased by 8% to $121 million, with operating income as a percentage of revenues falling to 6.4% from 7.1% in the prior year[110] - Net income for the three months ended May 2, 2025, was $68 million, down 12% from $77 million in the prior year[110] - Revenues for the Defense and Intelligence segment decreased by $3 million to $1,433 million for the three months ended May 2, 2025, compared to $1,436 million in the prior year[116] - Civilian segment revenues increased by $33 million to $444 million for the three months ended May 2, 2025, compared to $411 million in the prior year, primarily due to ramp-up in volume on existing and new contracts[118] - Total revenues for the company were $1,877 million for the three months ended May 2, 2025, compared to $1,847 million in the prior year, reflecting an overall increase[126] Taxation - The effective income tax rate for the three months ended May 2, 2025, was 20.6%, up from 19.0% in the prior year, primarily due to lower tax benefits from employee share-based compensation[112] - The effective income tax rate increased to 20.6% for the three months ended May 2, 2025, compared to 19.0% in the prior year[112] - The company does not anticipate the OECD's 15% global minimum tax framework to have a significant impact on its effective tax rate or financial results[115] Backlog and Bookings - Net bookings for the three months ended May 2, 2025, were estimated at $2.4 billion, contributing to a total backlog of $22,343 million[133] - Funded backlog as of May 2, 2025, was $3,265 million, down from $3,444 million as of January 31, 2025[133] - Total backlog included $19,078 million in negotiated unfunded backlog, up from $18,413 million[133] - The total backlog as of May 2, 2025, was $22,343 million, consisting of $3,265 million in funded backlog and $19,078 million in negotiated unfunded backlog[133] Operating Income and EBITDA - Operating income increased by 18% to $40 million, with operating income as a percentage of revenues rising to 9.0% from 8.3%[118] - Adjusted operating income rose by 13% to $52 million, with adjusted operating income as a percentage of revenues increasing to 11.7%[118] - EBITDA for the three months ended May 2, 2025, was $156 million, representing 8.3% of revenues, down from 9.0% in the prior year[126] - Adjusted EBITDA was $157 million, accounting for 8.4% of revenues, a decrease from 9.0% in the prior year[126] - Operating loss in the corporate segment increased to $17 million, a 70% decline compared to the prior year[121] - Adjusted operating income for the Defense and Intelligence segment decreased by 7% to $115 million, representing 8.0% of revenues, down from 8.6% in the prior year[116] - Adjusted EBITDA for the three months ended May 2, 2025, was $157 million, a decrease from $166 million in the prior year, with adjusted EBITDA as a percentage of revenues at 8.4%[126] Cash Flow and Liquidity - The company expects to fund future cash needs through cash on hand, operating cash flows, and access to a $1.0 billion Revolving Credit Facility[136] - Net cash provided by operating activities increased by $2 million to $100 million for the three months ended May 2, 2025, compared to $98 million in the prior year[139] - Cash used in investing activities increased by $8 million to $15 million, primarily due to higher contributions to investments[140] - Cash used in financing activities decreased by $42 million to $94 million, mainly due to higher proceeds from borrowings[141] - The company expects to fund ongoing working capital and discretionary investments with cash on hand and future operating cash flows, supported by a $1.0 billion Revolving Credit Facility and a $300 million MARPA Facility[136] - The total cash decrease for the three months ended May 2, 2025, was $9 million, compared to a decrease of $45 million in the prior year[139] - Future cash needs will focus on working capital, capital expenditures, and contractual commitments, with a strategy based on cash provided by operating activities and free cash flow[137] - The company believes existing cash, future operating cash flows, and access to financing will meet short-term liquidity and long-term capital needs[138] Competition and Market Position - Approximately 98% of revenues were generated from contracts with the U.S. government, highlighting the company's reliance on government spending[98] - The company is positioned to benefit from new defense and border defense spending as Congress works on a budget reconciliation package[99] - The company anticipates that spending packages like the infrastructure bill and CHIPS and Science Act may provide additional opportunities in digital modernization and climate resiliency[103] - The company faces increased competition due to the U.S. government's reliance on competitive bidding processes, which may pressure pricing[104] - The company is implementing strategic sourcing and developing repeatable offerings to maintain competitiveness in pricing and service delivery[106] - The company has approximately 1,700 active contracts and employs around 24,000 individuals, indicating a strong operational capacity[91] Cost Structure - Labor-related cost of revenues accounted for 59% in both Defense and Intelligence and Total SAIC segments for the three months ended May 2, 2025[135] - The proportion of subcontractor-related cost of revenues was 29% for the Defense and Intelligence segment for the three months ended May 2, 2025[135] Accounting Policies - There have been no changes to critical accounting policies and estimates during the three months ended May 2, 2025[142]

Financial Data and Key Metrics Changes - The company reported revenue of $1,877 million for Q1 FY 2026, representing growth of approximately 2% year-over-year due to the ramp-up of new and existing programs [11] - Adjusted EBITDA for the quarter was $157 million, resulting in an adjusted EBITDA margin of 8.4% [11] - Adjusted diluted earnings per share were flat year-over-year at $1.92, impacted by a higher tax rate and lower adjusted EBITDA [12] - Free cash flow was negative $44 million, affected by the timing of receivables on two programs [12] Business Line Data and Key Metrics Changes - The company secured net bookings of $2,400 million for a book-to-bill ratio of 1.3, including key recompete contracts [10] - The backlog of pending awards remained steady at approximately $20,000 million, providing visibility into future bookings [10] - The company expects to achieve a trailing twelve-month book-to-bill ratio of 1.2 in the coming quarters [11] Market Data and Key Metrics Changes - The Department of Defense (DoD) is expected to see stronger budget support, particularly for the Navy, Air Force, and Space Force, while the Army may face challenges [6][7] - The company noted over $1 billion in additional budget for the Department of Transportation and over $40 billion for the Department of Homeland Security [9] Company Strategy and Development Direction - The company is pivoting its portfolio towards mission and enterprise IT, aligning with the new administration's strategic priorities [8] - The strategy includes leveraging proven expertise in mission integration and digital engineering to drive program success [8] - The company aims for sustained profitable growth and is focused on executing its strategy in the coming quarters [13] Management's Comments on Operating Environment and Future Outlook - The operating environment has stabilized, but there are still procurement delays and higher turnover rates among customers [5] - The company is cautiously optimistic about future growth, expecting to achieve revenue guidance of $7.6 billion to $7.75 billion for FY 2026 [15] - Management highlighted the importance of adapting to the evolving budget environment and maintaining a focus on contract growth [55][56] Other Important Information - The company repurchased approximately $125 million of shares in Q1 and targets annual repurchases of $350 million to $400 million [17][18] - The company is not seeing significant risks from recent DoD communications regarding contracting practices [75] Q&A Session Summary Question: Update on operating environment and budget priorities - Management noted that the operating environment has stabilized, with significant turnover in acquisition personnel affecting procurement processes [22] Question: Competitiveness in procurement environment - Management acknowledged increased competitiveness but expressed confidence in their submission pipeline and win rates [25][26] Question: Known headwinds from recompetes - The only significant known recompete headwind is the NASA program loss, which will conclude in Q3 [30][32] Question: Nature of cost overruns in space program - Management explained that cost overruns were due to challenges in the tech development phase, but they expect to recover as the program transitions to the sustainment phase [34][35] Question: Overview of end markets and opportunities - Management provided insights into the civilian and defense sectors, highlighting growth opportunities in various agencies and programs [44][46] Question: Impact of continuing resolutions on awards - Management indicated that while there are some delays, the solicitation of proposals remains robust, and they are optimistic about future awards [53][54] Question: Margin trajectory and expectations - Management expects civil margins to improve and defense margins to remain stable, with a focus on executing at higher bid thresholds [86]