Financial Performance - Revenues for the three months ended May 2, 2025, increased by $30 million to $1,877 million, a 2% rise compared to the same period in the prior year[110] - Operating income decreased by 8% to $121 million, with operating income as a percentage of revenues falling to 6.4% from 7.1% in the prior year[110] - Net income for the three months ended May 2, 2025, was $68 million, down 12% from $77 million in the prior year[110] - Revenues for the Defense and Intelligence segment decreased by $3 million to $1,433 million for the three months ended May 2, 2025, compared to $1,436 million in the prior year[116] - Civilian segment revenues increased by $33 million to $444 million for the three months ended May 2, 2025, compared to $411 million in the prior year, primarily due to ramp-up in volume on existing and new contracts[118] - Total revenues for the company were $1,877 million for the three months ended May 2, 2025, compared to $1,847 million in the prior year, reflecting an overall increase[126] Taxation - The effective income tax rate for the three months ended May 2, 2025, was 20.6%, up from 19.0% in the prior year, primarily due to lower tax benefits from employee share-based compensation[112] - The effective income tax rate increased to 20.6% for the three months ended May 2, 2025, compared to 19.0% in the prior year[112] - The company does not anticipate the OECD's 15% global minimum tax framework to have a significant impact on its effective tax rate or financial results[115] Backlog and Bookings - Net bookings for the three months ended May 2, 2025, were estimated at $2.4 billion, contributing to a total backlog of $22,343 million[133] - Funded backlog as of May 2, 2025, was $3,265 million, down from $3,444 million as of January 31, 2025[133] - Total backlog included $19,078 million in negotiated unfunded backlog, up from $18,413 million[133] - The total backlog as of May 2, 2025, was $22,343 million, consisting of $3,265 million in funded backlog and $19,078 million in negotiated unfunded backlog[133] Operating Income and EBITDA - Operating income increased by 18% to $40 million, with operating income as a percentage of revenues rising to 9.0% from 8.3%[118] - Adjusted operating income rose by 13% to $52 million, with adjusted operating income as a percentage of revenues increasing to 11.7%[118] - EBITDA for the three months ended May 2, 2025, was $156 million, representing 8.3% of revenues, down from 9.0% in the prior year[126] - Adjusted EBITDA was $157 million, accounting for 8.4% of revenues, a decrease from 9.0% in the prior year[126] - Operating loss in the corporate segment increased to $17 million, a 70% decline compared to the prior year[121] - Adjusted operating income for the Defense and Intelligence segment decreased by 7% to $115 million, representing 8.0% of revenues, down from 8.6% in the prior year[116] - Adjusted EBITDA for the three months ended May 2, 2025, was $157 million, a decrease from $166 million in the prior year, with adjusted EBITDA as a percentage of revenues at 8.4%[126] Cash Flow and Liquidity - The company expects to fund future cash needs through cash on hand, operating cash flows, and access to a $1.0 billion Revolving Credit Facility[136] - Net cash provided by operating activities increased by $2 million to $100 million for the three months ended May 2, 2025, compared to $98 million in the prior year[139] - Cash used in investing activities increased by $8 million to $15 million, primarily due to higher contributions to investments[140] - Cash used in financing activities decreased by $42 million to $94 million, mainly due to higher proceeds from borrowings[141] - The company expects to fund ongoing working capital and discretionary investments with cash on hand and future operating cash flows, supported by a $1.0 billion Revolving Credit Facility and a $300 million MARPA Facility[136] - The total cash decrease for the three months ended May 2, 2025, was $9 million, compared to a decrease of $45 million in the prior year[139] - Future cash needs will focus on working capital, capital expenditures, and contractual commitments, with a strategy based on cash provided by operating activities and free cash flow[137] - The company believes existing cash, future operating cash flows, and access to financing will meet short-term liquidity and long-term capital needs[138] Competition and Market Position - Approximately 98% of revenues were generated from contracts with the U.S. government, highlighting the company's reliance on government spending[98] - The company is positioned to benefit from new defense and border defense spending as Congress works on a budget reconciliation package[99] - The company anticipates that spending packages like the infrastructure bill and CHIPS and Science Act may provide additional opportunities in digital modernization and climate resiliency[103] - The company faces increased competition due to the U.S. government's reliance on competitive bidding processes, which may pressure pricing[104] - The company is implementing strategic sourcing and developing repeatable offerings to maintain competitiveness in pricing and service delivery[106] - The company has approximately 1,700 active contracts and employs around 24,000 individuals, indicating a strong operational capacity[91] Cost Structure - Labor-related cost of revenues accounted for 59% in both Defense and Intelligence and Total SAIC segments for the three months ended May 2, 2025[135] - The proportion of subcontractor-related cost of revenues was 29% for the Defense and Intelligence segment for the three months ended May 2, 2025[135] Accounting Policies - There have been no changes to critical accounting policies and estimates during the three months ended May 2, 2025[142]

Financial Data and Key Metrics Changes - The company reported revenue of $1,877 million for Q1 FY 2026, representing growth of approximately 2% year-over-year due to the ramp-up of new and existing programs [11] - Adjusted EBITDA for the quarter was $157 million, resulting in an adjusted EBITDA margin of 8.4% [11] - Adjusted diluted earnings per share were flat year-over-year at $1.92, impacted by a higher tax rate and lower adjusted EBITDA [12] - Free cash flow was negative $44 million, affected by the timing of receivables on two programs [12] Business Line Data and Key Metrics Changes - The company secured net bookings of $2,400 million for a book-to-bill ratio of 1.3, including key recompete contracts [10] - The backlog of pending awards remained steady at approximately $20,000 million, providing visibility into future bookings [10] - The company expects to achieve a trailing twelve-month book-to-bill ratio of 1.2 in the coming quarters [11] Market Data and Key Metrics Changes - The Department of Defense (DoD) is expected to see stronger budget support, particularly for the Navy, Air Force, and Space Force, while the Army may face challenges [6][7] - The company noted over $1 billion in additional budget for the Department of Transportation and over $40 billion for the Department of Homeland Security [9] Company Strategy and Development Direction - The company is pivoting its portfolio towards mission and enterprise IT, aligning with the new administration's strategic priorities [8] - The strategy includes leveraging proven expertise in mission integration and digital engineering to drive program success [8] - The company aims for sustained profitable growth and is focused on executing its strategy in the coming quarters [13] Management's Comments on Operating Environment and Future Outlook - The operating environment has stabilized, but there are still procurement delays and higher turnover rates among customers [5] - The company is cautiously optimistic about future growth, expecting to achieve revenue guidance of $7.6 billion to $7.75 billion for FY 2026 [15] - Management highlighted the importance of adapting to the evolving budget environment and maintaining a focus on contract growth [55][56] Other Important Information - The company repurchased approximately $125 million of shares in Q1 and targets annual repurchases of $350 million to $400 million [17][18] - The company is not seeing significant risks from recent DoD communications regarding contracting practices [75] Q&A Session Summary Question: Update on operating environment and budget priorities - Management noted that the operating environment has stabilized, with significant turnover in acquisition personnel affecting procurement processes [22] Question: Competitiveness in procurement environment - Management acknowledged increased competitiveness but expressed confidence in their submission pipeline and win rates [25][26] Question: Known headwinds from recompetes - The only significant known recompete headwind is the NASA program loss, which will conclude in Q3 [30][32] Question: Nature of cost overruns in space program - Management explained that cost overruns were due to challenges in the tech development phase, but they expect to recover as the program transitions to the sustainment phase [34][35] Question: Overview of end markets and opportunities - Management provided insights into the civilian and defense sectors, highlighting growth opportunities in various agencies and programs [44][46] Question: Impact of continuing resolutions on awards - Management indicated that while there are some delays, the solicitation of proposals remains robust, and they are optimistic about future awards [53][54] Question: Margin trajectory and expectations - Management expects civil margins to improve and defense margins to remain stable, with a focus on executing at higher bid thresholds [86]

Financial Data and Key Metrics Changes - The company reported revenue of $1,877 million for Q1 FY 2026, representing growth of approximately 2% year-over-year due to the ramp-up of new and existing programs [11] - Adjusted EBITDA for the quarter was $157 million, resulting in an adjusted EBITDA margin of 8.4% [11] - Adjusted diluted earnings per share were flat year-over-year at $1.92, impacted by a higher tax rate and lower adjusted EBITDA [12] - Free cash flow was negative $44 million, affected by the timing of receivables on two programs [12] Business Line Data and Key Metrics Changes - The company secured net bookings of $2,400 million with a book-to-bill ratio of 1.3, including key recompete contracts [10] - The backlog of pending awards remained steady at approximately $20,000 million, providing visibility into future bookings [10] - The company expects to achieve a trailing twelve-month book-to-bill ratio of 1.2 in the coming quarters [11] Market Data and Key Metrics Changes - The Department of Defense (DoD) is expected to see stronger budget support, particularly for the Navy, Air Force, and Space Force, while the Army may face challenges [6] - The company noted over $1 billion in additional budget for the Department of Transportation and over $40 billion for the Department of Homeland Security [9] - The company’s revenue from its top five civilian agency customers represents over 70% of total revenue for the civilian segment [9] Company Strategy and Development Direction - The company is pivoting its portfolio towards mission and enterprise IT, aligning with the new administration's priorities [7] - The strategy includes leveraging proven expertise in mission integration and digital engineering to drive program success [8] - The company is focused on executing its growth strategy while navigating procurement delays and changes in the operating environment [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment stabilizing, despite ongoing procurement delays and turnover among customers [5] - The company anticipates continued growth driven by new business ramping up and modest headwinds from contract transitions [14] - Management reiterated guidance for revenue growth of approximately 2.5% at the midpoint for FY 2026 [14] Other Important Information - The company repurchased approximately $125 million of shares in Q1 and continues to target annual repurchases of $350 million to $400 million [17] - The company is also exploring additional capacity for mergers and acquisitions or incremental share repurchases [17] Q&A Session Summary Question: Update on operating environment and budget priorities - Management noted that the operating environment has stabilized, with significant turnover among acquisition personnel affecting procurement processes [20][22] Question: Competitiveness in procurement environment - Management acknowledged increased competitiveness but expressed confidence in their submission pipeline and win rates [24][25] Question: Known headwinds from recompetes - The only significant known recompete headwind is the NASA program loss, which will conclude in Q3 [28][31] Question: Nature of cost overruns in fixed-price programs - Management explained that cost overruns were due to challenges in the tech development phase, but they expect to recover as the program transitions to the sustainment phase [33][34] Question: Overview of end markets and opportunities - Management provided insights into the civilian and defense markets, highlighting growth opportunities in various sectors, including command and control capabilities [41][44] Question: Impact of continuing resolutions on awards - Management indicated that while there are delays in larger awards, the overall solicitation of proposals remains robust [49][50] Question: Margin trajectory and expectations - Management expects civil margins to improve and defense margins to stabilize, with a focus on executing transitions effectively [82][88]

Core Insights - Science Applications International Corporation (SAIC) reported a revenue increase of 2% in the first quarter of fiscal year 2026, totaling $1.877 billion compared to $1.847 billion in the same period last year [3][4][7] - The company experienced a decline in operating income, net income, and EBITDA, attributed to contract completions and timing and volume mix in its contract portfolio [4][5][34] - SAIC's backlog at the end of the quarter was approximately $22.3 billion, with net bookings of $2.4 billion, reflecting a book-to-bill ratio of 1.3 [10][11] Financial Performance - Revenues for the quarter increased by $30 million or 2% year-over-year, primarily due to ramp-up in volume in existing and new contracts [4] - Operating income decreased by 8% to $121 million, with an operating margin of 6.4%, down from 7.1% in the prior year [3][4][33] - Net income was $68 million, a decrease of 12% from $77 million in the previous year [3][6] - Adjusted EBITDA was $157 million, representing 8.4% of revenues, down from 9.0% in the prior year [3][5] Cash Flow and Capital Deployment - Cash flows from operating activities increased to $100 million, up from $98 million in the prior year [7][52] - Free cash flow was negative at $(44) million, a significant decline from $13 million in the same quarter last year [3][52] - The company deployed $152 million in capital, including $125 million for share repurchases and $19 million in cash dividends [8] Contract Awards and Backlog - SAIC secured notable contracts, including a $1.8 billion contract with the U.S. Army and a $327 million contract with the Pension Benefit Guaranty Corporation [11][12] - The estimated backlog included approximately $3.3 billion in funded contracts, with a total backlog of $22.3 billion [10][38] Fiscal Year 2026 Guidance - Management reaffirmed fiscal year 2026 guidance, projecting revenues between $7.60 billion and $7.75 billion, with adjusted EBITDA between $715 million and $735 million [14][15]

Financial Performance - Revenues for the first quarter of fiscal year 2026 were $1.88 billion, representing a 2% increase compared to $1.85 billion in the same period last year[5]. - Net income decreased to $68 million, down 12% from $77 million in the prior year quarter[6]. - Adjusted EBITDA was $157 million, accounting for 8.4% of revenues, a decrease from 9.0% in the prior year[8]. - Adjusted diluted earnings per share for the quarter was $1.92, unchanged from the prior year[8]. - Net income for the three months ended May 2, 2025, was $68 million, a decrease of 11.7% from $77 million in the same period of 2024[28]. - Operating income decreased to $121 million, down 7.6% from $131 million in the prior year, with an overall operating margin of 6.4% compared to 7.1%[30]. - Income before income taxes for the three months ended May 2, 2025, was $86 million, down from $95 million in the same period in 2024, a decrease of 9.5%[43]. - The company incurred restructuring and impairment costs of $3 million for the three months ended May 2, 2025, compared to $2 million in the same period in 2024[43]. Cash Flow and Dividends - Free cash flow for the quarter was $(44) million, a significant decrease from $13 million in the prior year[6]. - The company expects net cash provided by operating activities for FY26 to be between $545 million and $565 million, with free cash flow projected to be between $510 million and $530 million[46]. - The company declared a cash dividend of $0.37 per share, payable on July 25, 2025[11]. Bookings and Backlog - Net bookings for the quarter were approximately $2.4 billion, resulting in a book-to-bill ratio of 1.3[12]. - The estimated backlog at the end of the quarter was approximately $22.3 billion, with $3.3 billion funded[12]. - Funded backlog as of May 2, 2025, was $3,265 million, a decrease from $3,444 million as of January 31, 2025[34]. - Total backlog increased to $22,343 million, up from $21,857 million in the previous quarter, indicating growth in future revenue potential[34]. Segment Performance - The Defense and Intelligence segment reported revenues of $1,433 million, a slight decrease of 0.2% from $1,436 million year-over-year[30]. - Civilian segment revenues increased by $33 million, or 8%, primarily due to ramp-up in volume on existing and new contracts[31]. Corporate Activities - SAIC was awarded a $1.8 billion contract for the U.S. Army Combat Capabilities Development Command during the quarter[13]. - Principal payments on borrowings increased significantly to $689 million from $310 million, reflecting a strategic shift in financing activities[28]. - Corporate operating loss increased to $17 million, up from $10 million in the prior year, attributed to higher selling, general, and administrative expenses[32]. Expenditures and Provisions - Expenditures for property, plant, and equipment for the three months ended May 2, 2025, were $8 million, up from $6 million in the same period in 2024[46]. - The company reported a provision for income taxes of $18 million for both the three months ended May 2, 2025, and May 3, 2024[43]. - The recovery of acquisition and integration costs and restructuring and impairment costs contributed to the adjusted diluted earnings per share calculation[43]. Guidance - Management reaffirmed fiscal year 2026 guidance, projecting revenues between $7.60 billion and $7.75 billion[18].

Company Overview - SAIC is expected to report quarterly earnings of $2.14 per share, reflecting a year-over-year increase of +11.5% [3] - Revenues are anticipated to reach $1.86 billion, which is a 0.9% increase from the previous year [3] - The earnings report is scheduled for June 2, 2025, and the stock may react positively if results exceed expectations [2] Earnings Estimates and Trends - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analyst expectations [4] - The Most Accurate Estimate for SAIC is lower than the Zacks Consensus Estimate, resulting in an Earnings ESP of -5.46%, suggesting a bearish outlook from analysts [10] - SAIC currently holds a Zacks Rank of 3, making it challenging to predict an earnings beat [11] Historical Performance - In the last reported quarter, SAIC had an earnings surprise of +28.50%, posting earnings of $2.57 per share against an expectation of $2.00 [12] - Over the past four quarters, SAIC has beaten consensus EPS estimates three times [13] Comparative Industry Analysis - Nutanix, another player in the IT Services industry, is expected to report earnings of $0.38 per share, indicating a year-over-year change of +35.7% [17] - Nutanix's revenues are projected to be $626.12 million, up 19.4% from the previous year [17] - Nutanix has a positive Earnings ESP of 5.26% and has consistently beaten consensus EPS estimates in the last four quarters [18]

Core Points - Science Applications International Corp. (SAIC) is set to release its first quarter fiscal year 2026 results on June 2, 2025, before market opening [1] - A conference call to discuss the operational and financial results will take place at 10:00 a.m. Eastern time on the same day [1] - The conference call will be available via webcast only, with no dial-in access provided [2] Company Overview - SAIC is a Fortune 500 mission integrator focused on technology and innovation across defense, space, civilian, and intelligence markets [3] - The company offers a robust portfolio including mission IT, enterprise IT, engineering services, and professional services [3] - SAIC employs approximately 24,000 people and has annual revenues of around $7.5 billion [4]

Core Insights - SAIC is positioned to potentially continue its earnings-beat streak in upcoming reports, having a history of surpassing earnings estimates, particularly in the last two quarters with an average surprise of 24.39% [1][4] Earnings Performance - In the last reported quarter, SAIC achieved earnings of $2.57 per share, exceeding the Zacks Consensus Estimate of $2 per share, resulting in a surprise of 28.50% [2] - For the previous quarter, SAIC's earnings were $2.61 per share against an expected $2.17 per share, delivering a surprise of 20.28% [2] Earnings Estimates and Predictions - Estimates for SAIC have been trending higher, influenced by its history of earnings surprises, and the stock currently has a positive Zacks Earnings ESP of +0.23%, indicating bullish sentiment among analysts [4][7] - The combination of a positive Earnings ESP and a Zacks Rank of 2 (Buy) suggests a strong possibility of another earnings beat [7] Statistical Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 (Hold) or better have a nearly 70% chance of producing a positive surprise [5] - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, with the Most Accurate Estimate reflecting the latest analyst revisions [6]

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

Core Viewpoint - Tesla's sales in the European Union have significantly declined, with a 49% drop in new registrations in January and February compared to the same period last year, attributed to competition and the brand's image issues related to Elon Musk's political affiliations [3][4][8]. Sales Performance - New Tesla registrations in the EU fell to 19,046 units in the first two months of 2025, marking a 49% decrease year-over-year [3]. - In Germany, Tesla sales plummeted by 76% in February, following a nearly 60% drop in January [8][10]. - Despite the overall electric vehicle market in the EU growing by 28.4% to 255,489 units, Tesla's market share has dwindled to just 1.1% in early 2025 [4][9]. Market Competition - Tesla faces increasing competition from newer electric models from Chinese and European manufacturers, which may be contributing to its declining sales [4][8]. - The brand's aging models, particularly the Model 3 and Model Y, are perceived as less competitive, with concerns about reliability and a significant recall of Cybertrucks impacting consumer perception [9]. Brand Image and Political Influence - Elon Musk's support for far-right political movements in Germany has negatively affected Tesla's brand image, leading to consumer backlash and vandalism incidents involving Tesla vehicles [5][7]. - Analysts suggest that the impact of Musk's political views on Tesla's brand may be temporary, but it is currently difficult to assess the long-term effects [6]. Market Trends - The overall new car registrations in the EU decreased by 3% to 1.7 million units in January and February, with hybrid-electric vehicles leading the market segment at a 35.2% share [12]. - The electric vehicle market is expanding in Germany, Belgium, and the Netherlands, but demand for battery electric vehicles remains below necessary levels for a transition to zero-emission mobility [11].