SAIC(SAIC) - 2023 Q3 - Quarterly Report

Part I Financial Information Item 1. Financial Statements Presents unaudited condensed and consolidated financial statements for Q3 FY2023, detailing income, balance sheets, cash flows, and notes Condensed and Consolidated Statements of Income | Metric | Three Months Ended Oct 28, 2022 ($M) | Three Months Ended Oct 29, 2021 ($M) | Nine Months Ended Oct 28, 2022 ($M) | Nine Months Ended Oct 29, 2021 ($M) | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,909M | $1,898M | $5,736M | $5,612M | | Operating Income | $133M | $114M | $383M | $377M | | Net Income | $80M | $71M | $228M | $235M | | Diluted EPS | $1.45 | $1.22 | $4.04 | $4.01 | - Revenues for the third quarter increased slightly to $1,909 million from $1,898 million year-over-year. Net income attributable to common stockholders grew to $80 million, or $1.45 per diluted share, compared to $71 million, or $1.22 per diluted share, in the prior-year period[6] Condensed and Consolidated Balance Sheets | Metric | October 28, 2022 ($M) | January 28, 2022 ($M) | | :--- | :--- | :--- | | Total Current Assets | $1,247M | $1,263M | | Goodwill | $2,911M | $2,913M | | Total Assets | $5,628M | $5,746M | | Total Current Liabilities | $1,230M | $1,352M | | Long-term Debt, net | $2,358M | $2,370M | | Total Stockholders' Equity | $1,696M | $1,629M | | Total Liabilities and Stockholders' Equity | $5,628M | $5,746M | - As of October 28, 2022, total assets were $5.63 billion, a slight decrease from $5.75 billion at the end of fiscal 2022. Total stockholders' equity increased to $1.70 billion from $1.63 billion over the same period, primarily due to retained earnings[12] Condensed and Consolidated Statements of Cash Flows | Cash Flow Activity | Nine Months Ended Oct 28, 2022 ($M) | Nine Months Ended Oct 29, 2021 ($M) | | :--- | :--- | :--- | | Net cash provided by operating activities | $387M | $415M | | Net cash used in investing activities | ($23M) | ($272M) | | Net cash used in financing activities | ($417M) | ($176M) | | Net decrease in cash | ($53M) | ($33M) | - For the nine months ended October 28, 2022, net cash from operating activities was $387 million, down from $415 million in the prior year. Investing activities used significantly less cash ($23 million vs. $272 million) due to the absence of major acquisitions in the current period. Financing activities used more cash ($417 million vs. $176 million) mainly due to debt repayments and increased share repurchases[16] Notes to Condensed and Consolidated Financial Statements - The company is a leading provider of technical, engineering, and enterprise IT services, primarily to the U.S. government, operating as a single reportable segment[17][18] - Acquisition and integration costs were $1 million and $11 million for the three and nine months ended October 28, 2022, respectively, a significant decrease from $12 million and $36 million in the prior-year periods[30] - The company declared and paid a quarterly dividend of $0.37 per share during the third quarter of fiscal 2023[38] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q3 FY2023 financial performance, highlighting revenue and operating income growth, key metrics, and liquidity Results of Operations | Metric | Three Months Ended Oct 28, 2022 ($M) | Change vs. Prior Year | Nine Months Ended Oct 28, 2022 ($M) | Change vs. Prior Year | | :--- | :--- | :--- | :--- | :--- | | Revenues | $1,909M | 1% | $5,736M | 2% | | Operating Income | $133M | 17% | $383M | 2% | | Operating Margin | 7.0% | +1.0 ppt | 6.7% | 0.0 ppt | - Q3 revenue increased by $11 million (1%) year-over-year, primarily due to the ramp-up of new and existing contracts, partially offset by contract completions[99] - Q3 operating income as a percentage of revenues increased to 7.0% from 6.0% in the prior year, mainly due to lower acquisition and integration costs and indirect costs[103] Non-GAAP Measures | Metric | Three Months Ended Oct 28, 2022 ($M) | Three Months Ended Oct 29, 2021 ($M) | Nine Months Ended Oct 28, 2022 ($M) | Nine Months Ended Oct 29, 2021 ($M) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $80M | $71M | $228M | $235M | | EBITDA | $168M | $159M | $498M | $505M | | Adjusted EBITDA | $170M | $171M | $509M | $540M | | Adjusted EBITDA Margin | 8.9% | 9.0% | 8.9% | 9.6% | - Adjusted EBITDA for the nine months ended October 28, 2022, decreased to $509 million from $540 million in the prior year, with the margin contracting to 8.9% from 9.6%, primarily due to lower net favorable changes in contract estimates[112] Other Key Performance Measures - Net bookings were an estimated $2.0 billion for the third quarter and $6.1 billion for the first nine months of fiscal 2023[117] | Backlog Category | October 28, 2022 ($M) | January 28, 2022 ($M) | | :--- | :--- | :--- | | Funded Backlog | $4,019M | $3,491M | | Negotiated Unfunded Backlog | $20,413M | $20,601M | | Total Backlog | $24,432M | $24,092M | Liquidity and Capital Resources - The company expects to fund ongoing operations with cash on hand, future operating cash flows, its $1.0 billion Revolving Credit Facility, and its $300 million MARPA (receivables sale) Facility[120] - Net cash from operating activities decreased by $28 million to $387 million for the nine months ended October 28, 2022, compared to the prior year, due to timing of customer collections and other working capital changes[105][125] - The Tax Cuts and Jobs Act of 2017, requiring capitalization of R&D costs, is expected to decrease cash flows from operations in fiscal 2023 by a minimum of $90 million if not deferred or repealed by Congress[124] Item 3. Quantitative and Qualitative Disclosures About Market Risk Reports no material changes to market risks from those disclosed in the most recent Annual Report on Form 10-K - There have been no material changes to the company's market risks from those discussed in the most recently filed Annual Report on Form 10-K[130] Item 4. Controls and Procedures Management concluded disclosure controls were effective as of October 28, 2022, with no material changes to internal controls - Management concluded that as of October 28, 2022, the company's disclosure controls and procedures were operating and effective[131] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are likely to materially affect, internal controls[132] Part II Other Information Item 1. Legal Proceedings Refers to Note 11 for legal proceedings, indicating no material adverse effects from normal business claims - Information regarding legal proceedings is provided in Note 11 to the condensed and consolidated financial statements[134] Item 1A. Risk Factors Reports no material changes from the risk factors disclosed in the most recent Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the most recently filed Annual Report on Form 10-K[136] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details Q3 common stock repurchases and remaining authorized shares under the repurchase program | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 30 - Sep 2, 2022 | 226,413 | $93.86 | | Sep 3 - Sep 30, 2022 | 205,791 | $91.84 | | Oct 1 - Oct 28, 2022 | 196,770 | $95.07 | | Total | 628,974 | $93.57 | - As of October 28, 2022, approximately 7.9 million shares may yet be purchased under the publicly announced repurchase program[138][139] Item 6. Exhibits Lists exhibits filed with Form 10-Q, including CEO/CFO certifications and the Interactive Data File (Inline XBRL) - Exhibits filed with the report include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[143]