PART I—FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements, including statements of income, comprehensive income, balance sheets, equity, and cash flows, along with detailed notes explaining business operations, accounting policies, and specific financial line items [Condensed Consolidated Statements of Income](index=3&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The company reported a significant increase in net income for the three months ended August 1, 2025, reaching $127 million, up from $81 million in the prior year, despite a slight decrease in revenues | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Revenues | $1,769 | $1,818 | $3,646 | $3,665 | | Cost of revenues | $1,554 | $1,608 | $3,222 | $3,242 | | Operating income | $139 | $134 | $260 | $265 | | Net income | $127 | $81 | $195 | $158 | | Basic EPS | $2.72 | $1.59 | $4.14 | $3.08 | | Diluted EPS | $2.71 | $1.58 | $4.12 | $3.06 | [Condensed Consolidated Statements of Comprehensive Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the three months ended August 1, 2025, was $125 million, an increase from $73 million in the prior year, primarily driven by higher net income | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Net income | $127 | $81 | $195 | $158 | | Net unrealized (loss) gain on derivative instruments | $(2) | $(8) | $(3) | $(5) | | Total other comprehensive (loss) income, net of tax | $(2) | $(8) | $(3) | $(5) | | Comprehensive income | $125 | $73 | $192 | $153 | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of August 1, 2025, total assets were $5,201 million, a slight decrease from $5,246 million at January 31, 2025, with current assets increasing | Metric | August 1, 2025 (in millions) | January 31, 2025 (in millions) | |---|---|---| | Cash and cash equivalents | $48 | $56 | | Receivables, net | $951 | $1,000 | | Total current assets | $1,204 | $1,154 | | Goodwill | $2,851 | $2,851 | | Intangible assets, net | $721 | $779 | | 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 Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Equity) Stockholders' equity decreased to $1,517 million as of August 1, 2025, from $1,577 million at January 31, 2025, primarily due to stock repurchases and cash dividends | Metric | Balance at January 31, 2025 (in millions) | Net income (in millions) | Cash dividends (in millions) | Repurchases of stock (in millions) | Balance at August 1, 2025 (in millions) | |---|---|---|---|---|---| | Total stockholders' equity | $1,577 | $195 | $(36) | $(234) | $1,517 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash provided by operating activities for the six months ended August 1, 2025, was $222 million, a decrease from $236 million in the prior year | Metric | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---| | Net income | $195 | $158 | | Depreciation and amortization | $71 | $69 | | Deferred income taxes | $109 | $(8) | | Net cash provided by operating activities | $222 | $236 | | Net cash used in investing activities | $(22) | $(16) | | Net cash used in financing activities | $(208) | $(267) | | Net decrease in cash, cash equivalents and restricted cash | $(8) | $(47) | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed disclosures on the company's business operations, significant accounting policies, financial performance metrics, and other financial instruments and obligations [Note 1—Business Overview and Summary of Significant Accounting Policies](index=9&type=section&id=Note%201%E2%80%94Business%20Overview%20and%20Summary%20of%20Significant%20Accounting%20Policies) The company is a leading provider of technical, engineering, and IT services primarily to the U.S. government, operating through Defense and Intelligence, and Civilian segments - The company is a leading provider of technical, engineering, and enterprise IT services primarily to the U.S. government. It integrates emerging technology into mission-critical operations, focusing on higher-end, differentiated technology services[22](index=22&type=chunk) - The company operates through two reportable segments: Defense and Intelligence (serving DoD and Intelligence Community) and Civilian (serving federal, state, and local governments)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Key offerings include IT modernization, digital engineering, artificial intelligence (AI), mission systems support, training and simulation, and ground vehicles support. The Innovation Factory develops enterprise-class solutions with teams focused on AI, application development, network services, platforms and cloud, engineering, and cybersecurity[26](index=26&type=chunk)[27](index=27&type=chunk) - The company adopted the annual disclosure requirements of ASU No. 2023-07, Segment Reporting, in fiscal 2025 and will adopt the interim disclosure requirements in fiscal 2026, enhancing disclosures about significant segment expenses[39](index=39&type=chunk) [Note 2—Earnings Per Share, Share Repurchases and Dividends](index=11&type=section&id=Note%202%E2%80%94Earnings%20Per%20Share,%20Share%20Repurchases%20and%20Dividends) Diluted EPS for the three months ended August 1, 2025, was $2.71, up from $1.58, with the company repurchasing 2.1 million shares for $231 million | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Basic weighted-average number of shares outstanding | 46.7 | 50.9 | 47.1 | 51.3 | | Diluted weighted-average number of shares outstanding | 46.8 | 51.2 | 47.3 | 51.7 | - During the six months ended August 1, 2025, the company repurchased approximately **2.1 million shares** of its common stock from the open market for approximately **$231 million**[45](index=45&type=chunk) - The company declared and paid a quarterly dividend of **$0.37 per share** during the three months ended August 1, 2025, and subsequently declared another quarterly dividend of **$0.37 per share** payable on October 24, 2025[46](index=46&type=chunk) [Note 3—Revenues](index=13&type=section&id=Note%203%E2%80%94Revenues) Revenues decreased slightly due to contract completions, with net favorable adjustments positively impacting operating income and diluted EPS, and the majority of revenues from U.S. government cost reimbursement contracts | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Net favorable (unfavorable) adjustments | $5 | $(1) | $3 | $0 | | Net favorable (unfavorable) adjustments, after tax | $6 | $(1) | $3 | $0 | | Diluted EPS impact | $0.13 | $(0.02) | $0.06 | $0.00 | | Customer (Three Months Ended Aug 1, 2025) | Defense and Intelligence (in millions) | Civilian (in millions) | Total SAIC (in millions) | |---|---|---|---| | Department of Defense | $920 | $2 | $922 | | Intelligence and other federal government agencies | $444 | $360 | $804 | | Commercial, state and local governments and international | $10 | $33 | $43 | | Total | $1,374 | $395 | $1,769 | | Contract Type (Three Months Ended Aug 1, 2025) | Defense and Intelligence (in millions) | Civilian (in millions) | Total SAIC (in millions) | |---|---|---|---| | Cost reimbursement | $1,093 | $13 | $1,106 | | Time and materials ("T&M") | $117 | $276 | $393 | | Firm-fixed price ("FFP") | $164 | $106 | $270 | | Total | $1,374 | $395 | $1,769 | - As of August 1, 2025, the company had approximately **$6.1 billion** in Remaining Performance Obligations (RPO), with **79%** expected to be recognized over the next 12 months and **89%** over the next 24 months[57](index=57&type=chunk) [Note 4—Goodwill and Intangible Assets](index=15&type=section&id=Note%204%E2%80%94Goodwill%20and%20Intangible%20Assets) Goodwill remained stable at $2,851 million, while net intangible assets decreased to $721 million due to amortization expense | Metric | August 1, 2025 (in millions) | January 31, 2025 (in millions) | |---|---|---| | Goodwill - Defense and Intelligence | $2,001 | $2,001 | | Goodwill - Civilian | $850 | $850 | | Total Goodwill | $2,851 | $2,851 | | Intangible Assets | Net carrying value (Aug 1, 2025, in millions) | Net carrying value (Jan 31, 2025, in millions) | |---|---|---| | Customer relationships | $716 | $774 | | Developed technology | $5 | $5 | | Trade name | $0 | $0 | | Total intangible assets | $721 | $779 | - Amortization expense related to intangible assets was **$29 million** for the three months and **$58 million** for the six months ended August 1, 2025[60](index=60&type=chunk) [Note 5—Income Taxes](index=16&type=section&id=Note%205%E2%80%94Income%20Taxes) The effective income tax rate significantly decreased to (17.2)% due to an IRS audit settlement benefit and the reinstatement of immediate R&D expensing | Metric | Three Months Ended Aug 1, 2025 | Three Months Ended Aug 2, 2024 | Six Months Ended Aug 1, 2025 | Six Months Ended Aug 2, 2024 | |---|---|---|---|---| | Effective income tax rate | (17.2)% | 19.6% | (0.4)% | 19.3% | - The significant decrease in the effective tax rate was primarily due to a **$47 million benefit** from an IRS audit settlement covering fiscal years 2016 through 2019 and decreases in liabilities for uncertain tax positions[62](index=62&type=chunk) - The "One Big Beautiful Bill Act," enacted July 4, 2025, permanently reinstated the immediate expensing of U.S. research and development expenditures, which the company expects will result in a cash tax benefit in the current year[63](index=63&type=chunk) [Note 6—Debt Obligations](index=17&type=section&id=Note%206%E2%80%94Debt%20Obligations) Total debt increased to $2,292 million, with the company actively managing its Revolving Credit Facility and remaining in compliance with covenants | Debt Type | August 1, 2025 (Net, in millions) | January 31, 2025 (Net, in millions) | Stated Interest Rate (Aug 1, 2025) | |---|---|---|---| | Term Loan A Facility due June 2027 | $1,074 | $1,120 | 5.71% | | Term Loan B3 Facility due February 2031 | $501 | $503 | 6.11% | | Senior Notes due April 2028 | $397 | $397 | 4.88% | | Revolving Credit Facility due June 2027 | $320 | $200 | 6.31% | | Total debt | $2,292 | $2,220 | | - During the six months ended August 1, 2025, the company borrowed **$1.3 billion** and repaid **$1.2 billion** under the Revolving Credit Facility[67](index=67&type=chunk) - The company was in compliance with the covenants under its Credit Facility as of August 1, 2025[68](index=68&type=chunk) [Note 7—Derivative Instruments Designated as Cash Flow Hedges](index=18&type=section&id=Note%207%E2%80%94Derivative%20Instruments%20Designated%20as%20Cash%20Flow%20Hedges) The company uses fixed interest rate swap instruments as cash flow hedges to manage interest rate risks, with the fair value of the swap asset decreasing to $2 million | Derivative Type | Notional Amount (Aug 1, 2025, in millions) | Fair Value of Asset (Aug 1, 2025, in millions) | Fair Value of Asset (Jan 31, 2025, in millions) | |---|---|---|---| | Interest rate swaps | $685 | $2 | $6 | - The company expects to reclassify **$2 million** of unrealized gains from accumulated other comprehensive income into earnings from August 2, 2025, until the interest rate swaps mature on October 31, 2025[71](index=71&type=chunk) [Note 8—Changes in Accumulated Other Comprehensive Income (Loss) by Component](index=19&type=section&id=Note%208%E2%80%94Changes%20in%20Accumulated%20Other%20Comprehensive%20Income%20(Loss)%20by%20Component) Accumulated other comprehensive income decreased to $9 million, primarily due to reclassifications from unrealized gains on interest rate swap cash flow hedges into earnings | Metric | Balance at January 31, 2025 (in millions) | Net other comprehensive loss (6 months ended Aug 1, 2025, in millions) | Balance at August 1, 2025 (in millions) | |---|---|---|---| | Total Accumulated other comprehensive income (loss) | $12 | $(3) | $9 | - Amounts reclassified from accumulated other comprehensive income into earnings for the six months ended August 1, 2025, were **$(5) million**, included in "Interest expense, net"[73](index=73&type=chunk) [Note 9—Sales of Receivables](index=20&type=section&id=Note%209%E2%80%94Sales%20of%20Receivables) The company utilizes a MARPA Facility to sell eligible U.S. government receivables, with $240 million outstanding as of August 1, 2025, incurring $7 million in purchase discount fees - The company has a Master Accounts Receivable Purchase Agreement (MARPA Facility) for the sale of up to **$300 million** of certain designated eligible receivables with the U.S. government[74](index=74&type=chunk) | Metric | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---| | Purchase discount fees | $7 | $7 | | Outstanding balance sold to Purchaser | $265 | $175 | | Remaining sold receivables | $240 | $144 | [Note 10—Business Segments Information](index=20&type=section&id=Note%2010%E2%80%94Business%20Segments%20Information) The company operates through Defense and Intelligence and Civilian segments, with performance evaluated based on revenues and adjusted operating income, and labor base as a significant expense - The company's two reportable segments are Defense and Intelligence and Civilian, defined by how the CEO (CODM) manages operations for resource allocation and performance assessment[78](index=78&type=chunk) - Segment operating performance is evaluated using "Revenues" and "Adjusted operating income (loss)," which excludes non-recurring transactions. Labor base is identified as a significant expense regularly provided to the CODM[83](index=83&type=chunk) | Segment (Three Months Ended Aug 1, 2025) | Revenues (in millions) | Labor base (in millions) | Adjusted operating income (loss) (in millions) | |---|---|---|---| | Defense and Intelligence | $1,374 | $410 | $124 | | Civilian | $395 | $124 | $54 | | Corporate | $0 | $0 | $4 | | Total SAIC | $1,769 | $534 | $182 | [Note 11—Legal Proceedings and Other Commitments and Contingencies](index=22&type=section&id=Note%2011%E2%80%94Legal%20Proceedings%20and%20Other%20Commitments%20and%20Contingencies) The company is involved in various legal proceedings, including a DOJ antitrust investigation and a patent infringement case that resulted in a favorable $15 million settlement - The company is cooperating with a U.S. Department of Justice, Antitrust Division criminal investigation, having received Federal Grand Jury Subpoenas in April 2022 and October 2023[89](index=89&type=chunk) - In July 2025, the company executed a favorable settlement agreement for a patent infringement complaint, recovering **$15 million** and recognizing **$9 million** as a recovery for previously incurred costs[90](index=90&type=chunk) - The company is routinely subject to government investigations, audits, and reviews, and believes it has adequately reserved for estimated net amounts to be refunded to customers for potential adjustments[91](index=91&type=chunk)[93](index=93&type=chunk)[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition, results of operations, and future outlook, detailing revenue trends, segment performance, and liquidity [Business Overview](index=24&type=section&id=Business%20Overview) SAIC is a leading technology integrator for the U.S. government, providing full life cycle services and solutions in technical, engineering, and IT markets through its Defense and Intelligence and Civilian segments - SAIC is a leading technology integrator providing full life cycle services and solutions in technical, engineering, and enterprise IT markets, primarily to the U.S. government[99](index=99&type=chunk) - The company serves customers through approximately **1,700 active contracts** and task orders and employs approximately **24,000 individuals**[99](index=99&type=chunk) - The company's two reportable segments are Defense and Intelligence (serving DoD and Intelligence Community) and Civilian (serving federal, state, and local governments), integrating emerging technologies like IT modernization, digital engineering, and AI[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) [Economic Opportunities, Challenges, and Risks](index=25&type=section&id=Economic%20Opportunities,%20Challenges,%20and%20Risks) The company's performance is highly dependent on U.S. government spending, with recent legislative actions providing funding certainty, but risks include potential government shutdowns and increased competition - **98%** of the company's revenues are generated from contracts with the U.S. government, making its business performance highly dependent on government spending and budget priorities[106](index=106&type=chunk) - A March 2025 continuing resolution extends government funding through GFY 2025, providing budget certainty and flexibility for new DoD program starts[106](index=106&type=chunk) - A July 2025 budget reconciliation package adds approximately **$150 billion** in new non-border defense spending and **$175 billion** in new border security and enforcement spending, increasing opportunities in areas like Naval operations and border surveillance[107](index=107&type=chunk) - Risks include potential government shutdowns, adverse fiscal and economic conditions (e.g., inflation, spending reductions), and increased competition from competitive bidding processes and small business prime set-aside contracts[108](index=108&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) [Management of Operating Performance and Reporting](index=26&type=section&id=Management%20of%20Operating%20Performance%20and%20Reporting) Management evaluates consolidated results using revenues, operating income, adjusted operating income, adjusted EBITDA, and operating cash flows, closely monitoring contract margin performance and cost mix - Primary financial measures for evaluating consolidated results include revenues, operating income, adjusted operating income, adjusted EBITDA, and operating cash flows[117](index=117&type=chunk) - Management monitors contract margin performance, updates estimates, and analyzes cost mix (labor, subcontractor, and materials) to understand operating margins, noting that programs with a higher proportion of SAIC labor are generally more profitable[116](index=116&type=chunk)[117](index=117&type=chunk) [Condensed Consolidated Results of Operations](index=27&type=section&id=Condensed%20Consolidated%20Results%20of%20Operations) Revenues decreased slightly, while operating income as a percentage of revenues increased for the three months but decreased for the six months, and net income significantly increased due to an IRS audit settlement benefit | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Revenues | $1,769 | $1,818 | $3,646 | $3,665 | | Operating income | $139 | $134 | $260 | $265 | | Operating income as a percentage of revenues | 7.9% | 7.4% | 7.1% | 7.2% | | Net income | $127 | $81 | $195 | $158 | - Revenues decreased **$49 million (3%)** for the three months and **$19 million (1%)** for the six months ended August 1, 2025, primarily due to contract completions and ramp-down in volume on existing contracts[120](index=120&type=chunk) - Operating income as a percentage of revenues increased for the three months due to improved profitability and a patent infringement settlement recovery, but decreased for the six months due to costs related to federal tax audit settlements and the indirect rates impact of state taxes related to the One Big Beautiful Bill Act[121](index=121&type=chunk)[122](index=122&type=chunk) - The effective income tax rate significantly decreased to **(17.2)%** for the three months and **(0.4)%** for the six months, primarily due to a **$47 million benefit** from an IRS audit settlement[123](index=123&type=chunk) [Segment and Corporate Results](index=28&type=section&id=Segment%20and%20Corporate%20Results) Defense and Intelligence segment revenues decreased, while Civilian segment revenues saw mixed results, with both segments showing improved adjusted operating income percentages due to better contract profitability | Segment (Three Months Ended Aug 1, 2025) | Revenues (in millions) | Adjusted Operating Income (in millions) | Adjusted Operating Income as % of Revenues | |---|---|---|---| | Defense and Intelligence | $1,374 | $124 | 9.0% | | Civilian | $395 | $54 | 13.7% | | Corporate | $0 | $4 | N/A | - Defense and Intelligence segment revenues decreased by **$41 million (3%)** for the three months and **$44 million (2%)** for the six months, primarily due to contract completions and ramp-downs[126](index=126&type=chunk)[127](index=127&type=chunk) - Civilian segment revenues decreased by **$8 million (2%)** for the three months but increased by **$25 million (3%)** for the six months, with adjusted operating income as a percentage of revenues increasing for both periods due to improved contract profitability[129](index=129&type=chunk)[130](index=130&type=chunk) - Corporate adjusted operating income was **$4 million** for the three months ended August 1, 2025, compared to an adjusted operating loss of **$1 million** in the prior year, primarily due to a recovery of costs from a patent infringement settlement[132](index=132&type=chunk) [Non-GAAP Measures](index=29&type=section&id=Non-GAAP%20Measures) The company uses non-GAAP measures like adjusted operating income and adjusted EBITDA to provide insights into ongoing operating performance, showing increases as a percentage of revenues due to improved contract profitability - Non-GAAP measures, including adjusted operating income, EBITDA, and adjusted EBITDA, are used to evaluate financial performance by excluding non-recurring transactions and activities not indicative of ongoing operations[134](index=134&type=chunk)[135](index=135&type=chunk)[137](index=137&type=chunk)[138](index=138&type=chunk) | Metric | Three Months Ended Aug 1, 2025 (in millions) | Three Months Ended Aug 2, 2024 (in millions) | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---|---|---| | Adjusted operating income | $182 | $169 | $340 | $334 | | Adjusted operating income as a percentage of revenues | 10.3% | 9.3% | 9.3% | 9.1% | | EBITDA | $177 | $169 | $333 | $336 | | Adjusted EBITDA | $185 | $170 | $342 | $336 | | Adjusted EBITDA as a percentage of revenues | 10.5% | 9.4% | 9.4% | 9.2% | - Adjusted operating income and adjusted EBITDA as a percentage of revenues increased for both three and six months ended August 1, 2025, driven by improved contract profitability and the patent infringement settlement recovery, partially offset by state tax impacts from the One Big Beautiful Bill Act[140](index=140&type=chunk)[141](index=141&type=chunk) [Other Key Performance Measures](index=31&type=section&id=Other%20Key%20Performance%20Measures) Total backlog increased to $23,172 million, with net bookings of $2.6 billion for the three months, and the company aims for higher profitability through a greater proportion of SAIC labor - Bookings and backlog are key measures for management and investors to evaluate potential future revenues[142](index=142&type=chunk) | Backlog Category | August 1, 2025 (in millions) | January 31, 2025 (in millions) | |---|---|---| | Funded backlog | $3,594 | $3,444 | | Negotiated unfunded backlog | $19,578 | $18,413 | | Total backlog | $23,172 | $21,857 | - Net bookings were an estimated **$2.6 billion** for the three months and **$5.0 billion** for the six months ended August 1, 2025[146](index=146&type=chunk) | Contract Type (Three Months Ended Aug 1, 2025) | Defense and Intelligence (%) | Civilian (%) | Total SAIC (%) | |---|---|---|---| | Cost reimbursement | 79% | 3% | 63% | | Time and materials ("T&M") | 9% | 70% | 22% | | Firm-fixed price ("FFP") | 12% | 27% | 15% | - Contracts performed with a higher proportion of SAIC labor are generally more profitable, and the company analyzes its cost mix (labor, subcontractor, and materials) to understand operating margin[150](index=150&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) The company expects to fund operations and investments using cash on hand, future operating cash flows, and borrowings from its Revolving Credit Facility and MARPA Facility, considering operating cash flows and financial leverage - The company expects to fund ongoing working capital, commitments, and discretionary investments with cash on hand, future operating cash flows, and borrowings under its **$1.0 billion Revolving Credit Facility** and **$300 million MARPA Facility**[151](index=151&type=chunk) - Future cash needs include working capital, capital expenditures, and contractual commitments, with the capital deployment strategy considering operating cash flows, free cash flow, and financial leverage[152](index=152&type=chunk) [Historical Cash Flow Trends](index=34&type=section&id=Historical%20Cash%20Flow%20Trends) Net cash provided by operating activities decreased by $14 million for the six months ended August 1, 2025, compared to the prior year, mainly due to timing of customer collections and vendor payments, partially offset by higher cash from the MARPA Facility and lower incentive-based compensation | Metric | Six Months Ended Aug 1, 2025 (in millions) | Six Months Ended Aug 2, 2024 (in millions) | |---|---|---| | Net cash provided by operating activities | $222 | $236 | | Net cash used in investing activities | $(22) | $(16) | | Net cash used in financing activities | $(208) | $(267) | | Net decrease in cash, cash equivalents and restricted cash | $(8) | $(47) | - Net cash provided by operating activities decreased **$14 million**, primarily due to timing of customer collections and vendor payments, partially offset by higher cash provided by the MARPA Facility and lower incentive-based compensation payments[154](index=154&type=chunk) - Net cash used in financing activities decreased **$59 million**, primarily due to lower plan share repurchases and higher proceeds from borrowings, net of principal payments[156](index=156&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) No changes to the company's critical accounting policies and estimates were reported during the six months ended August 1, 2025 - No changes to critical accounting policies and estimates were reported for the six months ended August 1, 2025[157](index=157&type=chunk) [Recently Issued But Not Yet Adopted Accounting Pronouncements](index=34&type=section&id=Recently%20Issued%20But%20Not%20Yet%20Adopted%20Accounting%20Pronouncements) Information on recently issued but not yet adopted accounting pronouncements is detailed in Note 1 to the condensed consolidated financial statements - Information on recently issued but not yet adopted accounting pronouncements is detailed in Note 1 of the condensed consolidated financial statements[158](index=158&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes to the company's market risks were reported from those discussed in its most recently filed Annual Report on Form 10-K - No material changes to market risks were reported compared to the most recently filed Annual Report on Form 10-K[159](index=159&type=chunk) [Item 4. Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, with the CEO and CFO's participation, concluded that the company's disclosure controls and procedures were effective as of August 1, 2025. No material changes in internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of August 1, 2025[160](index=160&type=chunk) - No material changes in internal control over financial reporting occurred during the quarterly period covered by this report[161](index=161&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company's legal proceedings information, including an update on government investigations and audits, is incorporated by reference from Note 11 to the condensed consolidated financial statements and the fiscal 2025 Annual Report on Form 10-K - Information about legal proceedings and government investigations/audits is updated in Note 11 to the condensed consolidated financial statements and incorporated by reference[163](index=163&type=chunk)[164](index=164&type=chunk) [Item 1A. Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported from the most recently filed Annual Report on Form 10-K. However, new risks related to trade restrictions, including tariffs and global political volatility, could adversely affect business operations and financial performance by increasing costs or hindering market access - No material changes from the risk factors disclosed in the most recently filed Annual Report on Form 10-K were reported[165](index=165&type=chunk) - New risks related to trade restrictions, including economic tariffs and trade war initiatives, may adversely affect business operations and financial performance by increasing costs for raw materials or hindering the capacity to procure materials from international suppliers or sell products in foreign markets[166](index=166&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 950,840 shares of common stock during the three months ended August 1, 2025, at an average price of $112.09 per share, under its established repurchase plans. As of August 1, 2025, approximately $2.3 billion worth of shares have been repurchased under the program | Period | Total Number of Shares Purchased | Average Price Paid per Share | |---|---|---| | May 3, 2025 - June 6, 2025 | 402,627 | $114.26 | | June 7, 2025 - July 4, 2025 | 284,578 | $107.06 | | July 5, 2025 - August 1, 2025 | 263,635 | $114.20 | | Total (3 months ended Aug 1, 2025) | 950,840 | $112.09 | - As of August 1, 2025, the company has repurchased approximately **26.6 million shares** of common stock for approximately **$2.3 billion** under its share repurchase plan[172](index=172&type=chunk) [Item 3. Defaults Upon Senior Securities](index=36&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No information is required in response to this item - No information is required in response to this item[169](index=169&type=chunk) [Item 4. Mine Safety Disclosures](index=36&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) No information is required in response to this item - No information is required in response to this item[170](index=170&type=chunk) [Item 5. Other Information](index=36&type=section&id=Item%205.%20Other%20Information) No director or officer adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" during the three months ended August 1, 2025 - No Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements were adopted or terminated by any director or officer during the three months ended August 1, 2025[171](index=171&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO under the Sarbanes-Oxley Act and interactive data files - Exhibits include certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, and Interactive Data Files[173](index=173&type=chunk)[175](index=175&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q2 2026 declined by 2.7% year over year, primarily due to a 3% headwind from Cloud WAN compute and store revenue, not fully offset by new business volume [16][18] - Adjusted EBITDA for Q2 was $185 million, resulting in an adjusted EBITDA margin of 10.5%, reflecting an increase of 180 basis points quarter over quarter and 80 basis points year over year [17] - Free cash flow improved to $150 million in Q2, despite challenges related to the timing of invoice payments [17][20] Business Line Data and Key Metrics Changes - On contract revenue growth slowed to 3% in Q2 from 8% in Q1, impacting overall revenue performance [16][18] - The company experienced program disruptions that contributed to the revenue decline, particularly in areas with significant government transformation initiatives [8][16] Market Data and Key Metrics Changes - The company anticipates organic revenue to decline by approximately 5.54% in Q3 and Q4 of FY 2026, with revised revenue guidance for FY 2026 set between $7.25 billion and $7.325 billion [18][19] - The outlook for FY 2027 assumes a more subdued contribution from on contract growth of 2% to 3% and a modest benefit from new business [18] Company Strategy and Development Direction - The company is focusing on cost efficiency initiatives to align its cost structure with the challenging revenue environment, aiming to mitigate the impact on EBITDA and free cash flow [10][19] - There is a strong emphasis on leveraging artificial intelligence to drive efficiency across core operations, which is expected to provide incremental benefits in the coming years [13][46] Management's Comments on Operating Environment and Future Outlook - Management noted a more challenging environment than previously forecasted, citing slower conversion of on contract growth opportunities, increased program disruptions, and delays in new business awards [6][9] - Despite current market volatility, management remains optimistic about the execution of their strategy and the potential for normalization in revenue growth over time [11][12] Other Important Information - The company is increasing its FY 2026 adjusted EPS guidance to a range of $9.4 to $9.6, benefiting from a favorable tax settlement [19][20] - The capital deployment plans remain focused on driving long-term value for shareholders, with a commitment to share repurchases and capability-focused M&A [20] Q&A Session Summary Question: Can you comment on the impacts on on contract growth? - Management indicated that delays in government transformation initiatives, particularly in the Army and civilian sectors, have hindered on contract growth, attributing it to efficiency efforts by the government rather than a shift in market share [22][25] Question: How do you see the structure of the industry changing? - Management acknowledged the volatility in the market and the impact of reduced government personnel, suggesting that while it is too soon to determine structural changes, they expect normalization in FY 2027 [30][33] Question: What are your expectations for the government fiscal year end flush? - Management noted that the flush environment has been irregular and does not expect significant opportunities from it, while a continuing CR is anticipated [80][82] Question: How would a government shutdown impact the P&L? - Management indicated that a traditional shutdown would likely have a marginal impact on revenues but little to no impact on cash flow [82][83] Question: Has there been a change in customer attitudes towards procurement? - Management stated that while there hasn't been an incremental change in the last ninety days, delays in customer interactions and new business ramp-ups have been significant indicators for adjusting revenue guidance [88][92]

Financial Data and Key Metrics Changes - Revenue for Q2 2026 declined by 2.7% year over year, primarily due to slower conversion of on-contract growth opportunities into revenue and program disruptions [5][14][17] - Adjusted EBITDA for Q2 was $185 million, resulting in an adjusted EBITDA margin of 10.5%, reflecting an increase of 180 basis points quarter over quarter and 80 basis points year over year [15][18] - Free cash flow improved to $150 million in Q2, although challenges related to invoice payment timing were noted [16][19] Business Line Data and Key Metrics Changes - On-contract revenue growth slowed to 3% in Q2 from 8% in Q1, with a significant headwind from Cloud WAN compute and store revenue [14][17] - The company expects organic revenue to decline by approximately 5.54% in Q3 and Q4 of FY 2026 [17] Market Data and Key Metrics Changes - The company is experiencing a more challenging environment than previously forecasted, with delays in new business awards and increased scrutiny on government spending impacting revenue [6][7][12] - The pipeline of expected awards remains solid, with a year-to-date book-to-bill ratio of 1.4 [5][11] Company Strategy and Development Direction - The company is focusing on aligning its cost structure with the expected revenue environment, implementing cost efficiency initiatives to mitigate the impact on EBITDA and free cash flow [8][9] - There is an emphasis on leveraging artificial intelligence to drive efficiency and improve margins in the coming years [12][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current market volatility and its impact on near-term revenue but remains optimistic about long-term growth opportunities [10][12] - The company has revised its revenue guidance for FY 2026 to a range of $7.25 billion to $7.325 billion, reflecting a more subdued outlook [17][18] Other Important Information - The company is increasing its FY 2026 adjusted EPS guidance to a range of $9.4 to $9.6, benefiting from a favorable tax settlement [18][19] - The capital deployment plans remain focused on driving long-term value for shareholders, with a commitment to share repurchases and capability-focused M&A [19] Q&A Session Summary Question: Can you comment on the impacts on on-contract growth? - Management noted challenges in converting on-contract growth to revenue, particularly in areas undergoing significant transformation, such as the Army and the Department of Treasury [21][22][24] Question: How do you see the structure of the industry changing? - Management indicated that while there are new entrants in the market, the focus remains on mission integration, which is essential for operating within the government environment [28][32][54] Question: What are the expectations for government fiscal year-end flush? - Management expressed that the flush environment has been irregular and does not expect significant opportunities from it [80][81] Question: How would a government shutdown impact the P&L? - A traditional shutdown is expected to have a marginal impact on revenues, with little to no impact on cash flow [82][83] Question: What would it take to become more constructive on the outlook? - Key indicators include improvements in on-contract growth, timely adjudication of new business awards, and increased ramp-up velocity on existing programs [96][97]

Financial Performance - Q2 FY26 - Revenue decreased from $1.818 billion in FY25 to $1.769 billion in FY26[13], a decrease of approximately 2.7% - Adjusted EBITDA increased from $170 million in FY25 to $185 million in FY26[14], representing an increase of approximately 8.8% - Adjusted Diluted EPS increased significantly from $2.05 in FY25 to $3.63 in FY26[15] - Free Cash Flow decreased from $241 million in FY25 to $150 million in FY26[16] Fiscal Year 2026 Guidance - Revenue guidance is revised downwards to $7.250 billion - $7.325 billion, compared to the prior guidance of $7.60 billion - $7.75 billion[19] - Organic growth is expected to be approximately -2% to -3%[19] - Adjusted EBITDA is projected to be $680 million - $690 million, with a margin of 9.3% - 9.5%[19] - Adjusted Diluted EPS is expected to be $9.40 - $9.60[19] - Free Cash Flow is projected to be greater than $550 million[19] Business Development - The company is navigating near-term revenue pressure due to a challenging environment for on-contract growth and new business award delays [5] - The company is implementing cost efficiency initiatives, including artificial intelligence, to drive greater efficiency and leverage investments [5]

分组1 - SAIC reported quarterly earnings of $3.63 per share, exceeding the Zacks Consensus Estimate of $2.25 per share, and up from $2.05 per share a year ago, representing an earnings surprise of +61.33% [1] - The company posted revenues of $1.77 billion for the quarter ended July 2025, missing the Zacks Consensus Estimate by 4.81%, and down from $1.82 billion year-over-year [2] - Over the last four quarters, SAIC has surpassed consensus EPS estimates three times and topped consensus revenue estimates three times [2] 分组2 - The stock has added about 2.1% since the beginning of the year, underperforming the S&P 500's gain of 9.6% [3] - The current consensus EPS estimate for the coming quarter is $2.59 on revenues of $2.02 billion, and for the current fiscal year, it is $9.16 on revenues of $7.65 billion [7] - The Zacks Industry Rank for Computers - IT Services is currently in the bottom 39% of over 250 Zacks industries, indicating potential challenges for stock performance [8]

Core Viewpoint - Science Applications International Corporation (SAIC) reported a challenging revenue environment for the second quarter of fiscal year 2026, with a decrease in revenues and a cautious outlook for the remainder of the year [2][4][5]. Financial Performance - Revenues for the quarter were $1.769 billion, a decrease of 3% compared to $1.818 billion in the same period last year [3][4]. - Operating income increased by 4% to $139 million, with an operating income margin of 7.9%, up from 7.4% [3][6]. - Net income rose significantly by 57% to $127 million, compared to $81 million in the prior year [3][5]. - Adjusted EBITDA was $185 million, representing 10.5% of revenues, an increase from 9.4% in the prior year [3][7]. - Diluted earnings per share increased to $2.71 from $1.58, while adjusted diluted earnings per share rose to $3.63 from $2.05 [3][8]. Cash Flow and Capital Deployment - Net cash provided by operating activities decreased by 12% to $122 million, while free cash flow dropped by 38% to $150 million [3][9]. - The company deployed $130 million in capital, primarily for share repurchases and dividends [10]. Backlog and Contract Awards - Net bookings for the quarter were approximately $2.6 billion, with a book-to-bill ratio of 1.5, and year-to-date net bookings reached $5.0 billion [5][12]. - The estimated backlog at the end of the quarter was approximately $23.2 billion, with $3.6 billion funded [12][40]. - Notable contract awards included a $928 million contract with the U.S. Air Force and a $728 million task order for the Department of Treasury [13][14]. Guidance - The company revised its fiscal year 2026 guidance, projecting revenues between $7.250 billion and $7.325 billion, down from the previous range of $7.60 billion to $7.75 billion [21][22]. - Adjusted EBITDA guidance was also lowered to a range of $680 million to $690 million, compared to the prior range of $715 million to $735 million [22].

[Executive Summary](index=1&type=section&id=Executive%20Summary) 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](index=1&type=section&id=Announcement%20and%20CEO%20Commentary) 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](index=3&type=chunk) - SAIC is aligning its cost structure and sustaining key investments to drive long-term value creation, adopting a more cautious outlook for FY2026[3](index=3&type=chunk) [Second Quarter Fiscal Year 2026 Highlights](index=1&type=section&id=Second%20Quarter%20Fiscal%20Year%202026%20Highlights) 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](index=5&type=chunk) [Detailed Second Quarter Fiscal Year 2026 Financial Performance](index=1&type=section&id=Detailed%20Second%20Quarter%20Fiscal%20Year%202026%20Financial%20Performance) 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](index=1&type=section&id=Consolidated%20Operating%20Results) 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](index=1&type=section&id=Revenue%20Performance) 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 | **($49)** | **(3)%** | - Revenue decrease primarily due to contract completions and ramp-down in volume on existing contracts, partially offset by new contracts[6](index=6&type=chunk) [Profitability Metrics (Operating Income, EBITDA)](index=1&type=section&id=Profitability%20Metrics%20%28Operating%20Income%2C%20EBITDA%29) This subsection presents SAIC's Q2 FY2026 profitability metrics, including operating income, EBITDA, and their respective margins, showing improvements across the board Q2 FY2026 Profitability Metrics | Metric | Q2 FY2025 (millions) | Q2 FY2024 (millions) | Change ($ 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](index=7&type=chunk)[8](index=8&type=chunk) - Partially offset by costs related to the settlement of federal tax audits and the indirect rates impact of state taxes[7](index=7&type=chunk)[8](index=8&type=chunk) [Earnings Per Share](index=1&type=section&id=Earnings%20Per%20Share) 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](index=8&type=chunk) [Cash Flow and Capital Deployment](index=2&type=section&id=Cash%20Flow%20and%20Capital%20Deployment) 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](index=9&type=chunk) - SAIC deployed **$130 million** of capital, including **$106 million in share repurchases** and **$17 million in cash dividends**[10](index=10&type=chunk) - The Board declared a quarterly cash dividend of **$0.37 per share**, payable October 24, 2025[11](index=11&type=chunk) [Backlog and Contract Awards](index=2&type=section&id=Backlog%20and%20Contract%20Awards) 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](index=2&type=section&id=Bookings%20and%20Total%20Backlog) 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](index=2&type=section&id=Key%20Contract%20Wins) 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](index=13&type=chunk) - Secured a three-year, **$728 million task order** to continue providing essential cloud services for the Department of Treasury[14](index=14&type=chunk)[15](index=15&type=chunk) - Awarded a five-year, **$202 million contract** for U.S. Navy training solutions, including modernized virtual and synthetic environments[16](index=16&type=chunk) - Received a two-year, **$547 million contract extension** on the Vanguard program for IT services with the U.S. Department of State[17](index=17&type=chunk) - Awarded a five-year, approximately **$360 million contract** with a Navy customer for electronic warfare and active emitter systems development and modernization[18](index=18&type=chunk) - Secured a **$164 million contract** to continue delivering IT managed services for Orange County, California, over five years with options[19](index=19&type=chunk) - Awarded approximately **$150 million in contracts** from the U.S. Space and Intelligence Community, combining new business and recompetes[20](index=20&type=chunk) [Fiscal Year 2026 Guidance Update](index=3&type=section&id=Fiscal%20Year%202026%20Guidance%20Update) 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](index=3&type=section&id=Fiscal%20Year%202026%20Guidance) 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](index=3&type=chunk) [Segment Operating Results](index=8&type=section&id=Segment%20Operating%20Results) 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](index=8&type=section&id=Overview%20of%20Segment%20Performance) 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](index=8&type=section&id=Defense%20and%20Intelligence%20Segment) 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](index=35&type=chunk) - Adjusted operating income as a percentage of revenues increased due to timing and volume mix in the contract portfolio[35](index=35&type=chunk) [Civilian Segment](index=8&type=section&id=Civilian%20Segment) 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](index=36&type=chunk) - Adjusted operating income as a percentage of revenues increased due to improved profitability across the contract portfolio[36](index=36&type=chunk) [Corporate Segment](index=8&type=section&id=Corporate%20Segment) 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](index=37&type=chunk) - Partially offset by higher other selling, general and administrative expenses[37](index=37&type=chunk) [Financial Statements](index=5&type=section&id=Financial%20Statements) 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](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) 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](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) 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](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) 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](index=3&type=section&id=Supplemental%20Information) 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](index=4&type=section&id=About%20SAIC) 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](index=24&type=chunk) - Offers secure high-end solutions in mission IT, enterprise IT, engineering services, and professional services[24](index=24&type=chunk) - Approximately **24,000 employees** with annual revenues of about **$7.5 billion**[24](index=24&type=chunk) [Webcast and Investor Information](index=3&type=section&id=Webcast%20and%20Investor%20Information) 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](index=23&type=chunk) - Supplemental presentation and on-demand audio replay available on the Investor Relations section of the SAIC website[23](index=23&type=chunk) [Non-GAAP Financial Measures and Forward-Looking Statements](index=4&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Forward-Looking%20Statements) 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](index=10&type=section&id=Adjusted%20Operating%20Income) 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](index=42&type=chunk) [EBITDA and Adjusted EBITDA](index=11&type=section&id=EBITDA%20and%20Adjusted%20EBITDA) 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](index=45&type=chunk) [Adjusted Diluted Earnings Per Share](index=12&type=section&id=Adjusted%20Diluted%20Earnings%20Per%20Share) 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](index=48&type=chunk) [Free Cash Flow](index=14&type=section&id=Free%20Cash%20Flow) 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](index=54&type=chunk) [Backlog Definition](index=9&type=section&id=Backlog%20Definition) 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](index=39&type=chunk)

Core Points - Science Applications International Corp. (SAIC) is set to release its second quarter fiscal year 2026 results on September 4, 2025, before market open [1] - A conference call to discuss the operational and financial results will take place at 10:00 a.m. Eastern time, which will be webcast to the public [2] - SAIC is a Fortune 500 mission integrator with a focus on technology and innovation across defense, space, civilian, and intelligence markets [3] - The company has approximately 24,000 employees and annual revenues of about $7.5 billion [4]

Core Viewpoint - U Power Limited has signed a Memorandum of Understanding (MOU) with SAIC Hongyan and UNEX EV to deploy battery-swapping compatible electric heavy trucks in Thailand, addressing the demand for green and sustainable transportation solutions in the logistics industry [1][2]. Group 1: Partnership Details - The collaboration involves deploying 3,000 electric heavy-duty tractors for long-haul transportation and 1,200 electric heavy-duty port-specific short-distance trucks in Thailand [2]. - U Power will lead the development and manufacture of battery-swapping stations and provide operational services, while UNEX EV will adapt SAIC Hongyan's heavy trucks for battery swapping and promote sales in Thailand [3]. - SAIC Hongyan will supply heavy truck prototypes and provide technical support to ensure compatibility with U Power's battery-swapping stations [3]. Group 2: Market Focus and Expansion - The initiative aims to promote the adoption of green commercial heavy trucks in Thailand, focusing on major highway transportation enterprises and container port operators [4]. - The partnership is exploring expansion opportunities into additional markets, including Southeast Asia, Latin America, Europe, Hong Kong SAR, and Macau SAR [2]. Group 3: Strategic Insights - The collaboration reflects a shared commitment to accelerating the shift toward zero-emission logistics, with a focus on creating a scalable and sustainable heavy truck electrification model [5]. - U Power has previously launched Southeast Asia's first operational smart battery-swapping station in Phuket, Thailand, and aims to enhance its presence in the Thailand market [5].

Core Insights - Radiance Technologies has appointed Mr. Tony Moraco to its Board of Directors, bringing significant experience from his tenure as CEO of Science Applications International Corporation (SAIC) [1][2] - Mr. Moraco's expertise includes national security, space systems, cybersecurity, and government contracting, which aligns with Radiance's focus on serving defense and intelligence markets [2][3] Company Overview - Radiance Technologies is an employee-owned prime contractor founded in 1999, with over 1,200 employee-owners serving the Department of Defense and other government agencies [7] - The company specializes in cybersecurity, systems engineering, prototyping and integration, and operational and strategic intelligence [7] Leadership Experience - Mr. Moraco led SAIC through a significant transformation, including the separation of a $10 billion entity into Leidos Corporation and a refocused SAIC, and grew SAIC's revenue from $4 billion to $6.5 billion through strategic acquisitions [3][4] - Under his leadership, SAIC's stock price more than doubled, indicating strong improvements in profitability and free cash flow [3] Post-Retirement Activities - After retiring from SAIC, Mr. Moraco has provided consulting services to AEA Investors and GLG, and he currently serves on the board of Curtiss-Wright Corporation [5][6] - He holds advanced degrees in Geodetic Sciences and Civil and Environmental Engineering from Virginia Tech and has been recognized as a distinguished alumnus [6]