Core Insights - Science Applications International Corp. (SAIC) has secured a prime position on the $1.8 billion Personnel and Readiness Infrastructure Support Management (PRISM) Multiple Award Task Order Contract (MATOC) to support the Department of Defense (DoD) [1] - The PRISM contract aims to provide innovative and cost-effective services, significantly reducing acquisition lead time and increasing flexibility in the acquisition process [2] - SAIC's commitment under the PRISM MATOC includes enhancing operational capabilities, optimizing readiness, and ensuring a resilient defense personnel framework through advanced data integration and analytics [3] Company Overview - SAIC is a Fortune 500 technology integrator with annual revenues of approximately $7.4 billion, focusing on technology and innovation across defense, space, civilian, and intelligence markets [5] - The company employs around 24,000 individuals and emphasizes a culture of diversity, equity, and inclusion [5] - SAIC integrates emerging technology into mission-critical operations to modernize and enable national imperatives [4]

Financial Data and Key Metrics Changes - The company reported third quarter organic revenue growth of 4.3%, with adjusted EBITDA of $197 million and a margin of 10% [8][9] - Adjusted diluted earnings per share increased to $2.61, benefiting from strong profitability and a 16% effective tax rate [8][9] - Free cash flow was $9 million, lower than typical due to an additional payroll cycle and strong collections in the previous quarter [9] Business Line Data and Key Metrics Changes - The backlog of submitted bids increased to nearly $19 billion, up from $17 billion in the previous quarter [11] - Bookings for the quarter were $1.5 billion, resulting in a trailing 12-month book-to-bill ratio of 0.9% [11] - The company expects to submit over $25 billion in bids for the full year, up from the prior target of $22 billion [10] Market Data and Key Metrics Changes - The company anticipates a revenue growth of 3% for the full fiscal year, slightly ahead of previous guidance [9][24] - The company is preparing for potential changes in the market due to the incoming administration's focus on efficiency, which may impact funding in certain markets [12][13] Company Strategy and Development Direction - The company is focused on an enterprise growth strategy to "bid more, bid better, and win more," with an emphasis on mission IT and enterprise IT [10][14] - The strategy includes a shift towards fixed-price contracts, which are expected to provide better margins and align with government efficiency goals [14][55] - The company plans to manage its cost structure and investments to maximize long-term value while ensuring earnings and cash flow durability [15][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the uncertainty created by the incoming administration, emphasizing the importance of technology in driving efficiency [12][13] - The company expects to see improved margins in the civilian segment, projecting a low point of 12% for civilian segment margins [104][106] - Management indicated that the company is well-positioned to capitalize on opportunities arising from the government's focus on efficiency [15][31] Other Important Information - The company has a new $1.2 billion share repurchase authorization approved by the Board, with plans to repurchase approximately $500 million of shares this year [30] - The company is scenario planning for potential changes in the market, maintaining a highly variable cost structure to adapt to different revenue environments [26][28] Q&A Session Summary Question: Impact of AAV contract resolution - The AAV contract resolution had a revenue impact of about $13 million to $14 million, less than 1% of revenue for the quarter [35] Question: Guidance for fiscal year 2025 - The company expects a 3% growth at the midpoint for fiscal year 2025, with recompete headwinds expected to be a little over 2% [36][39] Question: Recompete win rate - The recompete win rate is currently below target, but management is implementing a new centralized business development process to improve it [42][44] Question: Shift to fixed-price contracts - The majority of the company's work is still cost-plus, but there is a track record of transitioning to fixed-price contracts, which are more efficient for the government [49][51] Question: Book-to-bill target of 1.2% - Management believes they can achieve the 1.2% book-to-bill target by the first half of fiscal year 2026, despite potential timing risks from the administration transition [57][61] Question: Margin profile of backlog - The company has raised internal hurdle rates for contracts, expecting higher margins in the backlog compared to current reported margins [114][116]

Financial Performance - Revenues for the three months ended November 1, 2024, were $1,976 million, a 4.3% increase from $1,895 million for the same period last year[8]. - Operating income for the nine months ended November 1, 2024, was $425 million, down 35.8% from $662 million for the same period last year[8]. - Net income for the three months ended November 1, 2024, was $106 million, representing a 14.0% increase compared to $93 million for the same period last year[11]. - Basic earnings per share for the three months ended November 1, 2024, were $2.15, up 20.1% from $1.79 for the same period last year[8]. - Comprehensive income for the three months ended November 1, 2024, was $105 million, compared to $90 million for the same period last year[11]. - Net income for the nine months ended November 1, 2024, was $264 million, compared to $438 million for the same period in 2023, representing a decrease of 39.7%[23]. - For the three months ended November 1, 2024, total revenues reached $1,976 million, an increase from $1,895 million in the same period last year, representing a growth of approximately 4.3%[110]. - For the nine months ended November 1, 2024, total revenue reached $5,641 million, compared to $4,465 million for the same period in the previous year, marking a year-over-year increase of 26.3%[61]. Assets and Liabilities - Total current assets as of November 1, 2024, were $1,160 million, an increase from $1,131 million as of February 2, 2024[15]. - Total liabilities as of November 1, 2024, were $3,663 million, a decrease from $3,529 million as of February 2, 2024[15]. - Cash and cash equivalents decreased to $46 million as of November 1, 2024, down from $94 million as of February 2, 2024[15]. - Accounts payable increased to $714 million as of November 1, 2024, compared to $567 million as of February 2, 2024[15]. - Retained earnings increased to $1,602 million as of November 1, 2024, from $1,432 million as of February 2, 2024[15]. - The company reported a decrease in receivables by $108 million for the nine months ended November 1, 2024, compared to a decrease of $142 million for the same period in 2023[23]. - The company reported a remaining performance obligation (RPO) of approximately $5.7 billion as of November 1, 2024, with an expectation to recognize revenue on about 81% of this amount over the next 12 months[65]. Cash Flow and Investments - Net cash provided by operating activities increased to $379 million for the nine months ended November 1, 2024, compared to $333 million for the same period in 2023, an increase of 13.8%[23]. - The company reported a net increase of $95 million to cash flows from operating activities from sold receivables for the nine months ended November 1, 2024, compared to no net impact in the prior year[103]. - Cash used in investing activities for the nine months ended November 1, 2024 was $15 million, a significant decrease from $324 million in the prior year, primarily due to the $356 million cash proceeds from the sale of the Supply Chain Business in the previous period[202]. - The company executed a $510 million senior secured term loan credit facility (Term Loan B3 Facility) due February 2031, which was fully borrowed to pay off previous loans[86]. - The company borrowed $975 million and repaid $860 million under the Revolving Credit Facility during the nine months ended November 1, 2024[91]. Shareholder Returns - Cash dividends paid were $57 million for the nine months ended November 1, 2024, compared to $60 million for the same period in 2023, reflecting a decrease of 5%[23]. - The company declared a quarterly dividend of $0.37 per share during the three months ended November 1, 2024[53]. - The company has authorized a share repurchase program of up to $1.2 billion, effective December 16, 2024[129]. - The company repurchased approximately 23.4 million shares under its repurchase plan, with a total authorized repurchase of approximately 24.4 million shares[52]. Business Segments - The Defense and Intelligence segment provides a diverse portfolio of national security solutions to U.S. government agencies, while the Civilian segment focuses on solutions for federal, state, and local governments[27]. - The Defense and Intelligence segment generated revenues of $1,515 million, while the Civilian segment contributed $461 million for the same quarter, indicating a strong performance in both areas[110]. - The operating income for the Defense and Intelligence segment was $344 million for the nine months ended November 1, 2024, compared to $336 million in the same period last year, showing a modest increase[115]. - The Civilian segment's operating income was $105 million for the nine months ended November 1, 2024, compared to $139 million in the same period last year, reflecting a decrease of approximately 24.5%[115]. Operational Changes - The company completed a business reorganization effective February 3, 2024, transitioning from two customer-facing operating sectors to five business groups, enhancing operational efficiency[104]. - The company completed a business reorganization effective February 3, 2024, creating five customer-facing business groups[134]. Tax and Compliance - The effective income tax rate for the three months ended November 1, 2024, was 15.6%, a decrease from 18.0% for the same period in 2023, primarily due to the non-recurrence of a gain from the disposition of the Supply Chain Business[80][83]. - The company is currently subject to ongoing investigations by the U.S. Department of Justice, which may impact future financial results[121]. Future Outlook - The company expects to recognize revenue from a substantial portion of its funded backlog within the next twelve months[189]. - The fiscal year 2025 budget includes a 1% growth for defense budgets and an overall 1% growth for non-defense budgets[140]. - The company anticipates future cash needs for working capital, capital expenditures, and contractual commitments, evaluating cash provided by operating activities and free cash flow[197].

Core Viewpoint - SAIC reported quarterly earnings of $2.61 per share, exceeding the Zacks Consensus Estimate of $2.17 per share, and showing an increase from $2.27 per share a year ago, representing an earnings surprise of 20.28% [1][2] Financial Performance - The company achieved revenues of $1.98 billion for the quarter ended October 2024, surpassing the Zacks Consensus Estimate by 2.32% and up from $1.9 billion year-over-year [2] - Over the last four quarters, SAIC has exceeded consensus EPS estimates two times and topped consensus revenue estimates four times [2] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call [3] - Current consensus EPS estimate for the upcoming quarter is $2.07 on revenues of $1.8 billion, and for the current fiscal year, it is $8.21 on revenues of $7.4 billion [8] Industry Context - The Computers - IT Services industry, to which SAIC belongs, is currently ranked in the top 20% of over 250 Zacks industries, indicating a favorable outlook [9] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [6]

Core Insights - Science Applications International Corporation (SAIC) reported revenues of $1.98 billion for the third quarter, reflecting a 4.3% growth compared to the previous year [1][3] - The company achieved a net income of $106 million and an adjusted EBITDA of $197 million, which is 10.0% of revenues [1][5] - SAIC's diluted earnings per share increased to $2.13, up 21% from $1.76 in the prior year [1][6] - The company has increased its Fiscal Year 2025 guidance for revenue and adjusted diluted EPS, now expecting revenue between $7.425 billion and $7.475 billion [1][18] Financial Performance - Revenues increased by $81 million or 4% year-over-year, driven by higher volumes on existing and new contracts [3][31] - Operating income rose to $160 million, a 12% increase from the previous year, with an operating margin of 8.1% [2][30] - Adjusted operating income was $195 million, representing a 10% increase, with an adjusted operating margin of 9.9% [2][30] - Net cash provided by operating activities was $143 million, a 42% increase compared to the prior year [9][29] Cash Generation and Capital Deployment - SAIC deployed $142 million in capital during the quarter, including $115 million for share repurchases and $18 million in cash dividends [10][11] - The Board of Directors authorized a $1.2 billion share repurchase program, representing 20% of the company's market value [1][11] - A cash dividend of $0.37 per share was declared, payable on January 24, 2025 [12] Backlog and Contract Awards - Net bookings for the quarter were approximately $1.5 billion, resulting in a book-to-bill ratio of 0.7 [1][13] - The estimated backlog at the end of the quarter was approximately $22.4 billion, with $4.5 billion funded [1][13] - Notable contract awards included a $229 million contract from the U.S. Department of Defense and a $118 million task order from the Department of Transportation [14][15] Strategic Partnerships and Future Outlook - SAIC announced an expanded strategic partnership with Wind River to enhance technology integration for government customers [17] - The company expects to exceed $25 billion in submissions for the year, up from a prior target of $22 billion, indicating a positive outlook for growth [2][18]

Financial Performance - Revenues for Q3 FY2025 were $1.98 billion, representing a 4.3% increase year-over-year[2] - Net income for the quarter was $106 million, with diluted earnings per share of $2.13, up 21% from $1.76 in the prior year[4] - Adjusted EBITDA was $197 million, accounting for 10.0% of revenues, an increase from 9.4% in the same period last year[4] - Total revenues for the quarter increased to $1,976 million, up 4.3% from $1,895 million in the same period last year[26] - Total operating income for the quarter was $160 million, compared to $143 million in the same period last year, reflecting a 11.9% increase[26] - Adjusted operating margin for the total increased to 9.9%, up from 9.4% in the prior year[28] - Net income for the three months ended November 3, 2023, was $93 million, compared to $106 million for the same period in 2024, reflecting a decrease of 12.3%[39] - Adjusted diluted earnings per share for the three months ended November 1, 2024, was $2.61, compared to $2.13 for the same period last year, reflecting a 22.5% increase[49] - Net income for the three months ended November 1, 2024, was $130 million, up from $106 million, representing a 22.6% year-over-year growth[49] - Diluted EPS for the three months ended November 3, 2023, was $2.27, up from $1.76, indicating a 28.9% increase year-over-year[50] - For the nine months ended November 1, 2024, adjusted diluted EPS was $6.56, compared to $5.17 for the same period last year, reflecting a 27% increase[53] Cash Flow and Expenditures - Cash flows from operating activities increased by $42 million to $143 million compared to the prior year[6] - Free cash flow for the quarter was $9 million, a decrease of 91% from $97 million in the prior year[4] - Cash and cash equivalents at the end of the period were $54 million, down from $320 million at the beginning of the period[25] - The company reported a net cash used in financing activities of $146 million, compared to $132 million in the same quarter last year[25] - The company expects net cash provided by operating activities to be between $520 million and $540 million for the upcoming period[56] - Total expenditures for property, plant, and equipment are projected to be approximately $30 million[56] - The company reported a net cash provided by operating activities of $379 million for the nine months ended November 1, 2024, compared to $333 million in the prior year[56] - Transaction-adjusted free cash flow for the nine months ended November 1, 2024, was $271 million, down from $367 million in the previous year[56] Backlog and Bookings - Net bookings for the quarter totaled approximately $1.5 billion, resulting in a book-to-bill ratio of 0.7[10] - The estimated backlog at the end of the quarter was approximately $22.4 billion, with $4.5 billion funded[10] - Total backlog as of November 1, 2024, is estimated at $22,387 million, with funded backlog at $4,466 million and negotiated unfunded backlog at $17,921 million[37] - The company reported a total backlog of $22,763 million as of February 2, 2024, with funded backlog at $3,539 million and negotiated unfunded backlog at $19,224 million[37] Segment Performance - Defense and Intelligence segment revenues rose by $36 million or 2% compared to the prior year, driven by ramp-up in volume on existing and new contracts[31] - Civilian segment revenues increased by $45 million or 11% year-over-year, primarily due to ramp-up in volume on existing contracts[33] Guidance and Shareholder Actions - The company increased its FY2025 revenue guidance to $7.425 billion - $7.475 billion and adjusted diluted EPS guidance to $8.50 - $8.65[16] - A $1.2 billion share repurchase program was authorized, representing 20% of the company's market value[2] Other Financial Metrics - Free cash flow for the three months ended November 1, 2024, was $9 million, a significant decrease from $97 million in the prior year[56] - Adjusted EBITDA for the nine months ended November 3, 2023, was $541 million, representing an adjusted EBITDA margin of 9.5%[39] - Adjusted operating income for the three months ended November 3, 2023, was $178 million, with a non-GAAP operating margin of 9.4%[42] - The company incurred restructuring and impairment costs of $2 million for the three months ended November 3, 2023[42] - The company reported a net loss on divestitures of $240 million for the nine months ended November 3, 2023[42]

Core Viewpoint - SAIC is anticipated to report a year-over-year decline in earnings despite an increase in revenues for the quarter ending October 2024, with the actual results being a significant factor influencing its near-term stock price [1][2]. Earnings Expectations - The upcoming earnings report is expected to reveal quarterly earnings of $2.17 per share, reflecting a year-over-year decrease of 4.4% [3]. - Revenues are projected to reach $1.93 billion, which is an increase of 1.9% compared to the same quarter last year [4]. Estimate Revisions - The consensus EPS estimate has been revised 1.47% higher in the last 30 days, indicating a collective reassessment by analysts [5]. - The Most Accurate Estimate for SAIC is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -4.46%, suggesting a bearish outlook from analysts [11][12]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that a positive or negative reading can predict the deviation of actual earnings from consensus estimates, with a positive reading being a strong predictor of an earnings beat [8][9]. - However, the current negative Earnings ESP reading for SAIC complicates the prediction of an earnings beat [13]. Historical Performance - In the last reported quarter, SAIC exceeded the expected earnings of $1.86 per share by delivering $2.05, resulting in a surprise of +10.22% [14]. - Over the past four quarters, SAIC has beaten consensus EPS estimates twice [15]. Conclusion - While SAIC does not appear to be a strong candidate for an earnings beat, investors should consider other factors when making decisions regarding the stock ahead of the earnings release [18].

RESTON, Va., Nov. 22, 2024 (GLOBE NEWSWIRE) -- Science Applications International Corp. (NASDAQ: SAIC) today announced the appointment of U.S. Army veteran and former Deputy Secretary of the U.S. Department of Homeland Security, John K. Tien, Jr., to its Board of Directors, effective December 2, 2024. Tien has extensive background across government, military, private and public sectors, and will bring that expertise to his board position at SAIC. Mr. Tien has been appointed to serve on the Board’s Nominatin ...

Core Viewpoint - The article emphasizes the importance of value investing and highlights Science Applications International (SAIC) as a strong candidate for value investors due to its favorable financial metrics and Zacks Rank [2][4][7] Company Summary - Science Applications International (SAIC) currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating strong potential for value investors [4] - SAIC's P/E ratio stands at 17.30, significantly lower than the industry's average of 39.44, suggesting it may be undervalued [4] - The stock's Forward P/E has fluctuated between 13.35 and 17.94 over the past year, with a median of 15.57, indicating stable earnings expectations [4][6] - SAIC has a P/S ratio of 1, compared to the industry's average P/S of 2.18, reinforcing the notion of undervaluation [5] - The P/CF ratio for SAIC is 18.21, which is attractive when compared to the industry's average P/CF of 72.14, further supporting its undervalued status [6] - Overall, the financial metrics suggest that SAIC is likely undervalued and stands out as one of the market's strongest value stocks [7]

Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on ke ...