SAIC(SAIC) - 2026 Q2 - Quarterly Results

Executive Summary This section provides an overview of SAIC's Q2 FY2026 performance, highlighting CEO commentary, key financial results, and revised fiscal year guidance Announcement and CEO Commentary SAIC announced its Q2 FY2026 results, with CEO Toni Townes-Whitley highlighting strong program performance and booking momentum, but acknowledging a challenging revenue environment due to slower on-contract growth and delays in new business awards - CEO highlights strong program performance and booking momentum, but acknowledges a challenging revenue environment due to slower on-contract growth and delays in new business awards[3] - SAIC is aligning its cost structure and sustaining key investments to drive long-term value creation, adopting a more cautious outlook for FY2026[3] Second Quarter Fiscal Year 2026 Highlights SAIC reported Q2 FY2026 revenues of $1.77 billion, a 3% contraction, but achieved significant growth in net income (57% to $127 million) and adjusted diluted EPS (77% to $3.63) Q2 FY2026 Key Financial Highlights | Metric | Value (Q2 FY2026) | Change YoY | | :-------------------------------- | :---------------- | :--------- | | Revenues | $1.77 billion | (3)% | | Net Income | $127 million | 57% | | Adjusted EBITDA | $185 million | 9% | | Adjusted EBITDA as % of revenues | 10.5% | +110bps | | Diluted EPS | $2.71 | 72% | | Adjusted Diluted EPS | $3.63 | 77% | | Net Bookings | $2.6 billion | N/A | | Book-to-bill ratio (Q2) | 1.5 | N/A | | Book-to-bill ratio (TTM) | 1.0 | N/A | | Cash flows from operating activities | $122 million | (12)% | | Free cash flow | $150 million | (38)% | - Management lowered revenue and adjusted EBITDA guidance but increased free cash flow and adjusted diluted earnings per share guidance for FY2026[5] Detailed Second Quarter Fiscal Year 2026 Financial Performance This section provides an in-depth analysis of SAIC's Q2 FY2026 consolidated operating results, cash flow, capital deployment, and backlog, detailing revenue, profitability, and contract awards Consolidated Operating Results SAIC's Q2 FY2026 revenues decreased by 3% YoY to $1.77 billion due to contract completions and volume ramp-downs, yet the company improved profitability with increased operating income and adjusted EBITDA margins Revenue Performance This subsection details SAIC's Q2 FY2026 revenue performance, showing a 3% year-over-year decrease to $1,769 million Q2 FY2026 Revenue Performance | Metric | Q2 FY2025 (millions) | Q2 FY2024 (millions) | Change ($ millions) | Change (%) | | :------- | :------------------- | :------------------- | :--------- | :--------- | | Revenues | $1,769 | $1,818 | ($49) | (3)% | - Revenue decrease primarily due to contract completions and ramp-down in volume on existing contracts, partially offset by new contracts[6] Profitability Metrics (Operating Income, EBITDA) This subsection presents SAIC's Q2 FY2026 profitability metrics, including operating income, EBITDA, and their respective margins, showing improvements across the board Q2 FY2026 Profitability Metrics | Metric | Q2 FY2025 (millions) | Q2 FY2024 (millions) | Change ($ millions) | Change (%) | Change (bps) | | :-------------------------------- | :------------------- | :------------------- | :--------- | :--------- | :----------- | | Operating income | $139 | $134 | $5 | 4% | +50bps | | Operating income as % of revenues | 7.9% | 7.4% | N/A | N/A | +50bps | | Adjusted operating income | $182 | $169 | $13 | 8% | +100bps | | Adjusted operating income as % of revenues | 10.3% | 9.3% | N/A | N/A | +100bps | | EBITDA | $177 | $169 | $8 | 5% | +70bps | | EBITDA as % of revenues | 10.0% | 9.3% | N/A | N/A | +70bps | | Adjusted EBITDA | $185 | $170 | $15 | 9% | +110bps | | Adjusted EBITDA as % of revenues | 10.5% | 9.4% | N/A | N/A | +110bps | - Improved profitability across the contract portfolio and a recovery of costs from a patent infringement settlement were primary drivers for increased operating income and Adjusted EBITDA margins[7][8] - Partially offset by costs related to the settlement of federal tax audits and the indirect rates impact of state taxes[7][8] Earnings Per Share This subsection outlines SAIC's Q2 FY2026 earnings per share, highlighting a significant increase in both diluted and adjusted diluted EPS Q2 FY2026 Earnings Per Share | Metric | Q2 FY2025 | Q2 FY2024 | Change (%) | | :-------------------------- | :-------- | :-------- | :--------- | | Diluted earnings per share | $2.71 | $1.58 | 72% | | Adjusted diluted earnings per share | $3.63 | $2.05 | 77% | | Weighted-average diluted shares outstanding | 46.8 million | 51.2 million | (8.6)% | - Significant increase in EPS primarily due to a decrease in weighted-average diluted shares outstanding[8] Cash Flow and Capital Deployment Net cash provided by operating activities decreased by 12% to $122 million in Q2 FY2026, with free cash flow also declining significantly, while SAIC deployed $130 million primarily through share repurchases and dividends Q2 FY2026 Cash Flow | Metric | Q2 FY2025 (millions) | Q2 FY2024 (millions) | Change ($ millions) | Change (%) | | :-------------------------------- | :------------------- | :------------------- | :--------- | :--------- | | Net cash provided by operating activities | $122 | $138 | ($16) | (12)% | | Free cash flow | $150 | $241 | ($91) | (38)% | - Decrease in operating cash flow primarily due to timing of customer collections and vendor payments, partially offset by lower cash outflows from MARPA Facility usage[9] - SAIC deployed $130 million of capital, including $106 million in share repurchases and $17 million in cash dividends[10] - The Board declared a quarterly cash dividend of $0.37 per share, payable October 24, 2025[11] Backlog and Contract Awards SAIC reported strong Q2 FY2026 bookings of $2.6 billion, resulting in a book-to-bill ratio of 1.5, with an estimated total backlog of $23.2 billion, bolstered by several significant contract wins Bookings and Total Backlog This subsection details SAIC's Q2 FY2026 bookings, book-to-bill ratios, and the estimated total and funded backlog at quarter-end Q2 FY2026 Bookings and Backlog | Metric | Value | | :-------------------------------- | :---------------- | | Net bookings (Q2) | $2.6 billion | | Book-to-bill ratio (Q2) | 1.5 | | Net bookings (YTD) | $5.0 billion | | Book-to-bill ratio (YTD) | 1.4 | | Trailing twelve months book-to-bill ratio | 1.0 | | Estimated total backlog (end of Q2) | $23.2 billion | | Funded backlog (end of Q2) | $3.6 billion | Key Contract Wins This subsection highlights several significant contract awards secured by SAIC across defense, civilian, and intelligence sectors during Q2 FY2026 - Awarded $928 million HOPE 2.0 contract for U.S. Air Force AF TENCAP for RDT&E mission engineering services over five years[13] - Secured a three-year, $728 million task order to continue providing essential cloud services for the Department of Treasury[14][15] - Awarded a five-year, $202 million contract for U.S. Navy training solutions, including modernized virtual and synthetic environments[16] - Received a two-year, $547 million contract extension on the Vanguard program for IT services with the U.S. Department of State[17] - Awarded a five-year, approximately $360 million contract with a Navy customer for electronic warfare and active emitter systems development and modernization[18] - Secured a $164 million contract to continue delivering IT managed services for Orange County, California, over five years with options[19] - Awarded approximately $150 million in contracts from the U.S. Space and Intelligence Community, combining new business and recompetes[20] Fiscal Year 2026 Guidance Update This section provides an update on SAIC's revised financial guidance for Fiscal Year 2026, reflecting adjustments to revenue, EBITDA, EPS, and free cash flow expectations Fiscal Year 2026 Guidance SAIC revised its FY2026 guidance, lowering revenue and Adjusted EBITDA expectations due to a challenging operating environment, while simultaneously increasing its Adjusted Diluted EPS and Free Cash Flow guidance Fiscal Year 2026 Guidance Comparison | Metric | Current FY2026 Guidance | Prior FY2026 Guidance | | :-------------------------- | :---------------------- | :-------------------- | | Revenue | $7.250B - $7.325B | $7.60B - $7.75B | | Adjusted EBITDA | $680M - $690M | $715M - $735M | | Adjusted EBITDA Margin % | 9.3% - 9.5% | 9.4% - 9.6% | | Adjusted Diluted EPS | $9.40 - $9.60 | $9.10 - $9.30 | | Free Cash Flow | >$550M | $510M - $530M | - The revised guidance assumes a stable operating environment but does not anticipate improvement this year[3] Segment Operating Results This section analyzes the Q2 FY2026 operating performance of SAIC's Defense and Intelligence, Civilian, and Corporate segments, detailing revenue changes and adjusted operating margins Overview of Segment Performance In Q2 FY2026, both SAIC's Defense and Intelligence and Civilian segments experienced revenue decreases but demonstrated improved adjusted operating margins, with the Corporate segment also showing a positive shift Q2 FY2026 Segment Operating Results | Segment | Q2 FY2025 Revenues (millions) | Q2 FY2024 Revenues (millions) | Revenue Change (%) | Q2 FY2025 Adj. Op. Income (millions) | Q2 FY2024 Adj. Op. Income (millions) | Adj. Op. Income Change (%) | Q2 FY2025 Adj. Op. Margin (%) | Q2 FY2024 Adj. Op. Margin (%) | Margin Change (bps) | | :---------------------- | :---------------------------- | :---------------------------- | :----------------- | :----------------------------------- | :----------------------------------- | :--------------------------- | :---------------------------- | :---------------------------- | :------------------ | | Defense and Intelligence | $1,374 | $1,415 | (3)% | $124 | $124 | 0% | 9.0% | 8.8% | +20bps | | Civilian | $395 | $403 | (2)% | $54 | $46 | 17.4% | 13.7% | 11.4% | +230bps | | Corporate | N/A | N/A | N/A | $4 | ($1) | N/A | N/A | N/A | N/A | | Total | $1,769 | $1,818 | (3)% | $182 | $169 | 7.7% | 10.3% | 9.3% | +100bps | Defense and Intelligence Segment The Defense and Intelligence segment's revenues decreased by 3% YoY to $1.374 billion, primarily due to contract completions, but its adjusted operating income as a percentage of revenues increased - Revenue decrease primarily due to contract completions and ramp down in volume on existing contracts, partially offset by new contracts[35] - Adjusted operating income as a percentage of revenues increased due to timing and volume mix in the contract portfolio[35] Civilian Segment The Civilian segment experienced a 2% YoY revenue decrease to $395 million, mainly due to contract completions, but showed significant improvement in profitability with increased adjusted operating income margins - Revenue decrease primarily due to contract completions and ramp down in volume on existing contracts[36] - Adjusted operating income as a percentage of revenues increased due to improved profitability across the contract portfolio[36] Corporate Segment The Corporate segment reported an adjusted operating income of $4 million for Q2 FY2026, a positive turnaround from a prior-year loss, largely attributed to a patent infringement settlement recovery - Adjusted operating income was $4 million, up from a $1 million loss in the prior year, primarily due to a recovery of costs from a patent infringement settlement[37] - Partially offset by higher other selling, general and administrative expenses[37] Financial Statements This section presents SAIC's condensed consolidated financial statements for Q2 FY2026, including statements of income, balance sheets, and cash flows Condensed Consolidated Statements of Income The condensed consolidated statements of income for Q2 FY2026 show a slight revenue decline to $1,769 million, but net income significantly increased to $127 million, and diluted EPS rose to $2.71 Condensed Consolidated Statements of Income (Three Months Ended) | Metric | August 1, 2025 (millions) | August 2, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Revenues | $1,769 | $1,818 | | Cost of revenues | $1,554 | $1,608 | | Operating income | $139 | $134 | | Income before income taxes | $108 | $100 | | Net income | $127 | $81 | | Diluted earnings per share | $2.71 | $1.58 | Condensed Consolidated Balance Sheets As of August 1, 2025, SAIC's total assets were $5,201 million, with current assets increasing to $1,204 million, while total liabilities slightly decreased to $3,684 million Condensed Consolidated Balance Sheets (Selected Items) | Metric | August 1, 2025 (millions) | January 31, 2025 (millions) | | :-------------------------- | :------------------------ | :-------------------------- | | Total current assets | $1,204 | $1,154 | | Goodwill | $2,851 | $2,851 | | Total assets | $5,201 | $5,246 | | Total current liabilities | $1,447 | $1,396 | | Debt, net of current portion | $1,844 | $1,907 | | Total stockholders' equity | $1,517 | $1,577 | | Total liabilities and stockholders' equity | $5,201 | $5,246 | Condensed Consolidated Statements of Cash Flows For Q2 FY2026, net cash provided by operating activities was $122 million, a decrease from the prior year, with cash and cash equivalents remaining stable at $56 million Condensed Consolidated Statements of Cash Flows (Three Months Ended) | Metric | August 1, 2025 (millions) | August 2, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Net cash provided by operating activities | $122 | $138 | | Net cash used in investing activities | ($7) | ($9) | | Net cash used in financing activities | ($114) | ($131) | | Net increase (decrease) in cash | $1 | ($2) | | Cash, cash equivalents and restricted cash at end of period | $56 | $56 | Supplemental Information This section provides additional context about SAIC, details for webcast and investor information, and explanations of non-GAAP financial measures and forward-looking statements About SAIC SAIC is a Fortune 500 technology integrator specializing in secure high-end solutions across defense, space, civilian, and intelligence markets, employing approximately 24,000 individuals - SAIC is a premier Fortune 500 technology integrator for defense, space, civilian, and intelligence markets[24] - Offers secure high-end solutions in mission IT, enterprise IT, engineering services, and professional services[24] - Approximately 24,000 employees with annual revenues of about $7.5 billion[24] Webcast and Investor Information SAIC provided details for its Q2 FY2026 earnings conference call, held on September 4, 2025, accessible via webcast, with supplemental materials available online - Earnings conference call held on September 4, 2025, at 10:00 a.m. Eastern time via webcast[23] - Supplemental presentation and on-demand audio replay available on the Investor Relations section of the SAIC website[23] Non-GAAP Financial Measures and Forward-Looking Statements This section details SAIC's non-GAAP financial measures, providing definitions and reconciliations, and includes a standard disclosure on forward-looking statements Adjusted Operating Income This subsection provides the reconciliation and definition of Adjusted Operating Income, a non-GAAP measure excluding non-recurring transactions Adjusted Operating Income Reconciliation (Three Months Ended) | Metric | August 1, 2025 (millions) | August 2, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Operating income | $139 | $134 | | Depreciation of property, plant and equipment | $6 | $5 | | Amortization of intangible assets | $29 | $29 | | Acquisition, integration, restructuring and impairment costs | $1 | $2 | | Costs related to the settlement of federal tax audits | $7 | $0 | | Adjusted operating income | $182 | $169 | - Adjusted operating income is a non-GAAP measure that primarily excludes the impact of non-recurring transactions and activities not indicative of ongoing operating performance[42] EBITDA and Adjusted EBITDA This subsection presents the reconciliation and definition of EBITDA and Adjusted EBITDA, non-GAAP performance measures excluding specific financial items and non-recurring transactions EBITDA and Adjusted EBITDA Reconciliation (Three Months Ended) | Metric | August 1, 2025 (millions) | August 2, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Net income | $127 | $81 | | Interest expense, net and loss on sale of receivables | $34 | $35 | | Income tax expense (benefit) | ($19) | $19 | | Depreciation and amortization | $35 | $34 | | EBITDA | $177 | $169 | | Acquisition, integration, restructuring and impairment costs | $1 | $2 | | Costs related to the settlement of federal tax audits | $7 | $0 | | Adjusted EBITDA | $185 | $170 | - EBITDA is a performance measure that is calculated by taking net income and excluding interest, income taxes, and depreciation and amortization. Adjusted EBITDA further excludes non-recurring transactions[45] Adjusted Diluted Earnings Per Share This subsection provides the reconciliation and definition of Adjusted Diluted Earnings Per Share, a non-GAAP performance measure excluding non-recurring transactions Adjusted Diluted EPS Reconciliation (Three Months Ended) | Metric | As Reported (Aug 1, 2025) | Acquisition, integration, restructuring and impairment costs | Amortization of intangible assets | Costs related to the settlement of federal tax audits | Non-GAAP Results | | :-------------------------- | :------------------------ | :------------------------------------------------------- | :-------------------------------- | :--------------------------------------------------- | :--------------- | | Net income (millions) | $127 | $1 | $35 | $7 | $170 | | Diluted EPS | $2.71 | $0.02 | $0.75 | $0.15 | $3.63 | - Adjusted diluted earnings per share is a performance measure that excludes the impact of non-recurring transactions and activities not indicative of ongoing operating performance[48] Free Cash Flow This subsection details the reconciliation and definition of Free Cash Flow, a non-GAAP measure calculated from operating activities less capital expenditures and MARPA Facility cash flows Free Cash Flow Reconciliation (Three Months Ended) | Metric | August 1, 2025 (millions) | August 2, 2024 (millions) | | :-------------------------------- | :------------------------ | :------------------------ | | Net cash provided by operating activities | $122 | $138 | | Expenditures for property, plant, and equipment | ($7) | ($6) | | Cash used from (provided by) MARPA Facility | $35 | $109 | | Free cash flow | $150 | $241 | - Free cash flow is calculated by taking cash flows provided by operating activities less expenditures for property, plant, and equipment and less cash flows from the MARPA Facility[54] Backlog Definition This subsection defines SAIC's backlog, categorizing it into funded and negotiated unfunded components, and provides a table of backlog figures Backlog as of August 1, 2025 | Category | Defense and Intelligence (millions) | Civilian (millions) | Total SAIC (millions) | | :-------------------------- | :-------------------------------- | :------------------ | :-------------------- | | Funded backlog | $2,646 | $948 | $3,594 | | Negotiated unfunded backlog | $15,994 | $3,584 | $19,578 | | Total backlog | $18,640 | $4,532 | $23,172 | - Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts and task orders, segregated into funded and negotiated unfunded categories[39]