Core Insights - Science Applications International Corp. (SAIC) has formed a strategic partnership with Bluescape to provide an unlimited virtual workspace for the Department of Defense and other government agencies [1][2] - The collaboration aims to enhance mission coordination, knowledge sharing, and data analysis through a secure platform that complies with government standards [2][3] - Bluescape's platform is designed to support large-scale government organizations and facilitate real-time collaboration among dispersed teams [4] Company Overview - SAIC is a Fortune 500 company focused on delivering advanced technology solutions across defense, space, civilian, and intelligence markets, with annual revenues of approximately $7.5 billion [5][6] - The company employs around 24,000 individuals and is headquartered in Reston, Virginia [6] Technology and Features - Bluescape offers a secure, scalable collaborative operations platform that integrates mission applications and provides a centralized workspace for decision-making [3][4] - The platform is authorized to operate at FedRAMP Moderate+ and by the DoD at IL4/IL5 for Controlled Unclassified Information (CUI) data [2] - Bluescape's workspaces are persistent, allowing for the retention of information and actions taken during meetings, which aids in future project work [4]

Core Viewpoint - SAIC shares have increased by approximately 3.3% since the last earnings report, outperforming the S&P 500, raising questions about the sustainability of this positive trend leading up to the next earnings release [1] Group 1: Earnings and Estimates - Estimates for SAIC have trended upward over the past month, indicating positive sentiment among analysts [2] - The recent earnings report highlighted important catalysts that may influence future performance [1] Group 2: VGM Scores - SAIC has an average Growth Score of C, a Momentum Score of B, and a Value Score of A, placing it in the top quintile for the value investment strategy [3] - The aggregate VGM Score for SAIC is A, suggesting strong overall performance across multiple investment strategies [3] Group 3: Outlook - The upward trend in estimates and the magnitude of revisions are promising, contributing to SAIC's Zacks Rank of 2 (Buy) [4] - An above-average return is expected from SAIC in the upcoming months based on current trends [4]

Core Insights - Science Applications International Corp. (SAIC) has appointed Kathleen McCarthy as the new Executive Vice President and Chief Human Resources Officer, effective May 12, 2025 [1][2] - McCarthy will report to CEO Toni Townes-Whitley and will lead all human resources initiatives, focusing on employee engagement and talent acquisition [2][3] - McCarthy has extensive experience in human resources, previously serving as Chief Human Resources Officer at GE Aerospace and GE Aviation, and has held executive roles at American Express and Thomson Reuters [3][4] Company Overview - SAIC is a Fortune 500® mission integrator that focuses on technology and innovation across defense, space, civilian, and intelligence markets [7] - The company has approximately 24,000 employees and annual revenues of about $7.4 billion [8]

Core Insights - Science Applications International Corp. (SAIC) has launched ReadyOne™ Foundational, a cloud-based digital engineering ecosystem designed to meet the Department of Defense (DoD) Instruction 5000.97 mandate and government mission requirements [1][2] Group 1: Product Features - ReadyOne™ Foundational includes a digital thread accelerator that integrates various data, tools, and teams in real-time, facilitating the adoption of best practices in digital engineering [2] - The solution provides a credentialed cloud-based environment that addresses common digital engineering barriers, pre-loaded with data models, software tools, and connectors to enhance mission effectiveness and reduce lifecycle costs [2][3] Group 2: Market Context - The platform is positioned as essential for the Department of Defense as national security threats evolve, transitioning from traditional document-based engineering to model-based techniques for secure collaboration [3] - ReadyOne™ Foundational features a tool-agnostic digital thread architecture, reducing vendor lock-in and offering flexibility compared to traditional product lifecycle management (PLM) solutions [3] Group 3: Company Overview - SAIC is a Fortune 500 technology integrator with a focus on technology and innovation across defense, space, civilian, and intelligence markets, generating annual revenues of approximately $7.4 billion [5][6]

Group 1 - Science Applications International Corporation (SAIC) is a significant technology integrator for the U.S. government, focusing on engineering, digital, and mission-related services across defense, intelligence, and civilian sectors [1] - The company has a long-standing history and is committed to providing objective and unbiased research, particularly in the small- to mid-cap company space, while also identifying opportunities in larger companies [1]

Core Insights - Science Applications International (SAIC) reported better-than-expected fourth-quarter fiscal 2025 results, with non-GAAP earnings of $2.57 per share, exceeding the Zacks Consensus Estimate by 28.5% and showing a year-over-year increase of 79.7% driven by higher revenues and effective cost management [1][2] Financial Performance - Fiscal fourth-quarter revenues rose 5.8% year over year to $1.838 billion, slightly surpassing the Zacks Consensus Estimate of $1.804 billion by 1.88%, primarily due to increased volume on new and existing contracts [3] - Segment-wise, Defense and Intelligence revenues accounted for 74% of total revenues, amounting to $1.36 billion with a year-over-year increase of 0.6%, while Civilian revenues, making up 26%, totaled $478 million, rising 24.2% year over year [5] - Non-GAAP operating income increased to $176 million from $124 million in the prior year, with a non-GAAP operating margin expansion of 250 basis points to 9.6% [8] - Adjusted EBITDA advanced 39.4% to $177 million, with an adjusted EBITDA margin of 9.6% compared to 7.3% in the prior year [9] Cost Management - Selling, general and administrative (SG&A) expenses decreased by 17.5% to $94 million, with SG&A as a percentage of revenues declining from 6.6% to 1.4% year over year [7] Cash Flow and Shareholder Returns - The company generated operating cash flow of $115 million and free cash flow of $236 million in the fiscal fourth quarter, with total operating cash flow and free cash flow for fiscal 2025 at $494 million and $499 million, respectively [11] - During the fiscal fourth quarter, SAIC repurchased shares worth $130 million and paid $18 million in dividends [12] Guidance - For fiscal 2026, SAIC projects revenues in the range of $7.60-$7.75 billion and adjusted earnings between $9.10-$9.30 per share, with the Zacks Consensus Estimate for revenues at $7.65 billion and non-GAAP earnings at $9.05 per share [13]

Financial Data and Key Metrics Changes - The company reported fourth-quarter revenue of $1.84 billion, an increase of 6% year-over-year, driven mainly by new program wins and on-contract growth [18] - Full-year fiscal year 2025 revenue reached $7.48 billion, representing 3.1% organic growth, which is at the high end of the guidance provided at the start of the year [19] - Fourth-quarter adjusted EBITDA was $177 million, resulting in a margin of 9.6%, while full-year adjusted EBITDA was $710 million with a margin of 9.5% [19][20] - Adjusted diluted earnings per share for the fourth quarter was $2.57 and $9.13 for the full year, benefiting from strong operating performance and a lower effective tax rate [19] Business Line Data and Key Metrics Changes - Revenue from the commercial operating sector increased from less than $1 million in fiscal year 2022 to approximately $45 million in fiscal year 2025, with a goal of reaching approximately $100 million by fiscal year 2028 [12] - The company delivered net bookings of $1.3 billion in the fourth quarter and $6.6 billion for fiscal year 2025, resulting in a book-to-bill ratio of 0.9% [15] Market Data and Key Metrics Changes - The company submitted bids totaling $28 billion in fiscal year 2025, exceeding the initial plan of $22 billion, with a backlog of submitted bids increasing to just over $20 billion at year-end [16] - The company expects to drive its book-to-bill ratio to the target of 1.2% by the first half of FY 2026, contingent on ongoing uncertainties facing customers [17] Company Strategy and Development Direction - The company is focusing on transitioning from cost-plus contracts to fixed-price contracts, which is expected to improve margins while maintaining revenue levels [46][50] - The strategy emphasizes mission-critical programs and the infusion of cutting-edge technology, aligning with government efficiency initiatives [9][56] - The company is assessing its cost-plus portfolio to determine how much work could transition to fixed-type contracting over time [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the financial impact from recent executive orders and program cancellations has been nominal, but they remain prepared for potential changes in the operating environment [8] - The company anticipates a headwind of approximately $200 million related to low-margin Air Force CloudOne compute and store revenue, which they chose to no-bid [24] - Management expressed confidence in achieving free cash flow targets of $11 per share in fiscal year 2026 and $12 in fiscal year 2027 [20][26] Other Important Information - The company plans to repurchase between $350 million to $400 million in FY 2026 and 2027 while maintaining capacity for capability-focused M&A or additional share repurchases [26] - Several members of the executive leadership team have indicated an intent to make discretionary purchases of company shares to align interests with shareholders [28] Q&A Session Summary Question: Impact of the $1.8 billion recompete on future book-to-bill - Management indicated that the win would bring them close to a trailing twelve-month book-to-bill ratio of 1.0% [32] Question: Details on the incremental $6 billion in submitted bids - The increase is attributed to a combination of standardized business development functions and a balanced pipeline of new business and recompete opportunities [35] Question: Nature of budget dollars in the bid pipeline - Management believes the current pipeline is competitive and can be funded, with a focus on mission-critical areas [41] Question: Transition from cost-plus to firm fixed price contracts - Management sees potential for higher margins with fixed-price contracts but does not expect a significant revenue decline [48] Question: Risks and opportunities related to DOD budget cuts - Management emphasized the importance of focusing on mission-critical programs to mitigate risks associated with budget reallocations [56] Question: Impact of federal workforce layoffs on business - Management has not seen significant impacts but is prepared to support customers as personnel changes occur [66] Question: Backlog and organic growth expectations - A high percentage of the expected organic growth is already in backlog, with a focus on contract growth rather than relying heavily on new business [75] Question: Confidence in guidance despite uncertainty - Management expressed confidence based on past performance and ongoing efforts to drive organic growth [90] Question: Strategy regarding civil versus defense work - The company has not shifted its strategy and continues to focus on mission-critical areas in both civil and defense sectors [104]

Science Applications International Corporation (NASDAQ:SAIC) Q4 2025 Earnings Conference Call March 17, 2025 10:00 AM ET Company Participants Joe DeNardi - Senior Vice President, Investor Relations & Treasurer & Treasurer Toni Townes-Whitley - Chief Executive Officer Prabu Natarajan - Chief Financial Officer Conference Call Participants Colin Canfield - Cantor Fitzgerald Jason Gursky - Citi Matt Akers - Wells Fargo Gavin Parsons - UBS Ellen Page - Jefferies Gautam Khanna - TD Cowen Josh Korn - Barclays Tobe ...

Revenue Sources - In fiscal 2025, 98% of total revenues were attributable to prime contracts with the U.S. government or subcontracts with other contractors engaged in work for the U.S. government[32]. - Approximately 52% of total revenues in fiscal 2025 were from the Department of Defense, while 46% were from Intelligence and other federal government agencies[33]. - In fiscal 2023, 49% of total revenues were from both the Department of Defense and Intelligence and other federal government agencies[34]. - The company generated 98% of total revenues from U.S. government contracts over the last three fiscal years, highlighting dependency on government spending[74]. - In fiscal 2025, revenue breakdown included approximately 16% from fixed-price contracts, 22% from time and materials contracts, and 62% from cost-reimbursable contracts[82]. - Revenues for fiscal 2025 were $7,479 million, a slight increase of $35 million from fiscal 2024, primarily due to ramp-up in volume in existing and new contracts, partially offset by the sale of the Supply Chain Business[193]. - Revenues decreased by $91 million from fiscal 2024 to fiscal 2025, primarily due to the sale of the Supply Chain Business ($188 million) and contract completions, but adjusted revenues grew by 1.7% when excluding the divestiture[207]. - The revenue mix for fiscal 2025 included 79% from cost reimbursement contracts, 10% from time and materials, and 11% from firm-fixed price contracts[233]. Employee and Talent Management - As of January 31, 2025, the company employed approximately 24,000 individuals, including over 6,000 active military or veterans[57]. - The company achieved its highest overall score in five years in the fiscal 2025 culture survey, exceeding national benchmarks by 6%[59]. - In fiscal 2025, the company invested in talent development with over 140,000 training hours completed, averaging nearly 6 hours per employee[61]. - More than 21% of approximately 5,000 new employees were hired through employee referrals, indicating strong internal talent attraction[63]. - The voluntary attrition rate was approximately 13%, demonstrating industry-leading employee retention[63]. - More than 450 employees participated in leadership development programs, totaling nearly 8,500 hours of training[62]. - The company is committed to employee well-being, offering wellness programs and an Employee Assistance Program to support mental and financial health[65]. Financial Performance - Cost of revenues for fiscal 2025 was $6,587 million, an increase of $15 million from fiscal 2024, driven by ramp-up in volume on existing and new contracts[195]. - Selling, general and administrative expenses decreased to $339 million in fiscal 2025, down $34 million from fiscal 2024, mainly due to lower incentive-based compensation[197]. - Operating income for fiscal 2025 was $563 million, a decrease of 24% compared to fiscal 2024, with operating income as a percentage of revenues at 7.5%[193]. - Net income attributable to common stockholders for fiscal 2025 was $362 million, a decrease of 24% from fiscal 2024[193]. - Adjusted EBITDA for fiscal 2025 was $710 million, with an adjusted EBITDA margin of 9.5%, an increase from 9.0% in fiscal 2024[224]. - The effective income tax rate for fiscal 2025 is lower than fiscal 2024, primarily due to the gain from the divestiture of the Supply Chain Business[202]. - Operating loss for the Corporate segment was $45 million in fiscal 2025, a significant decrease from an operating income of $147 million in fiscal 2024[216]. - The adjusted operating income for the Corporate segment improved to a loss of $20 million in fiscal 2025, compared to a loss of $51 million in fiscal 2024[214]. Risks and Challenges - The company faces risks from potential reductions in U.S. government defense spending, which could adversely affect future revenues and cash flows[75]. - The company is subject to rigorous government audits, which could lead to adjustments in contract costs and mandatory customer refunds, potentially impacting profitability and cash flows[93]. - The company may face civil or criminal penalties if investigations reveal improper activities, which could include contract terminations and reputational harm[96]. - The U.S. government has the right to terminate or modify contracts at any time, which could adversely affect revenue growth and profitability[97]. - The company faces risks related to health epidemics, which could disrupt operations and impact financial performance[110]. - The company may engage in acquisitions or divestitures that could disrupt operations and pose financial risks if not managed properly[105]. - The company faces potential liabilities and negative publicity if its detection systems fail, particularly regarding tsunami buoys deployed by the U.S. National Oceanic and Atmospheric Administration[121]. - Climate change poses risks to the company's operations, as extreme weather events could disrupt contractual obligations and affect business performance[117]. - Cybersecurity threats are a significant concern, with potential impacts on business operations and customer trust if sensitive information is compromised[132]. - The company has experienced cybersecurity incidents, but none have materially impacted operations to date; however, future incidents could harm reputation and financial performance[136]. Strategic Initiatives - The company completed a business reorganization effective February 3, 2024, transitioning from two operating sectors to five customer-facing business groups[172]. - The sale of the Supply Chain Business in May 2023 allowed the company to focus on long-term strategic growth areas[187]. - The company anticipates that spending packages related to digital modernization and climate resiliency may provide additional opportunities[183]. - The company expects continued ramp-up in volume on existing and new contracts to drive future revenue growth despite challenges from contract completions[209]. - The company is actively monitoring changes in environmental laws and implementing sustainability initiatives to mitigate risks associated with climate change[91]. Backlog and Future Outlook - As of January 31, 2025, the total backlog was estimated at $21.857 billion, a decrease from $22.763 billion on February 2, 2024[232]. - Net bookings for fiscal 2025 were approximately $6.6 billion, compared to $6.7 billion in fiscal 2024[232]. - Funded backlog for government contracts was $3.444 billion as of January 31, 2025, down from $3.539 billion in the previous year[232]. - The company anticipates that ongoing reforms in the U.S. government acquisition process could lead to delays in contract awards and increased competition[89].

FINANCIAL RESULTS FY25 4Q SUPPLEMENTAL FINANCIAL PRESENTATION March 17, 2025 Forward Looking Statements In addition, these slides should be read in conjunction with our earnings press release dated March 17, 2025 along with listening to or reading a transcript of the management comments delivered in an earnings conference call held on March 17, 2025. All information in these slides are as of March 17, 2025. SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to ...