Parsons (NYSE:PSN) FY Conference February 18, 2026 03:35 PM ET Company ParticipantsCarey Smith - CEOMatt Ofilos - CFOConference Call ParticipantsAdam Seiden - Senior Equity Research AnalystAdam SeidenSo, thanks so much, guys, for joining us for the last session of the day, I believe. So joining us for this session is the Parsons folks. For those guys in the room, my name is Adam Seiden. I'm the U.S. Machinery and Construction Analyst. From Parsons, we have Carey, as well as Matt, joining us on stage, and of ...

Summary of Science Applications International (SAIC) FY Conference Call Company Overview - **Company**: Science Applications International Corporation (SAIC) - **Ticker**: NasdaqGS:SAIC - **Date of Call**: February 11, 2026 Key Points Industry and Market Context - The company operates in the defense and technology services sector, focusing on enterprise IT and mission-oriented engineering solutions [4][113]. - The macro environment is described as confusing, with uneven funding and slow contract execution impacting revenue growth [10][12]. Financial Performance and Guidance - SAIC initially projected revenue growth of flat to +3% for FY 2027 but revised guidance downwards due to contract losses, specifically: - Loss of the Army Corps of Engineers recompete (3% of revenue) - Loss of Cloud One recompete (1% of revenue) - The revised guidance indicates a nominal growth of approximately -1% for FY 2027 [4][22][24]. - Q4 revenue was reported to be light by about 2%, attributed to several factors including shutdown-related disruptions and delays in material availability [13][21]. Revenue Impact and Projections - The total impact from the two major contract losses is estimated at $275 million, with $200 million from CastleNet and $75 million from Cloud One [32][38]. - On-contract growth is expected to stabilize between 1% and 3% throughout the year, which is lower than historical averages [49][51]. - The company anticipates potential tailwinds from new contracts won, including: - Air Force TENCAP ($1 billion) - Navy ATSO ($350 million over 5 years) - Army OSINT ($75 million) [53][56]. Strategic Focus and Challenges - SAIC is focusing on being selective in bidding for contracts, particularly in the commoditized enterprise IT market, where margins are lower [113][120]. - The company aims to pivot towards fixed-price contracts and mission-oriented work, which have shown higher win rates [135][143]. - The backlog remains healthy, with expectations to finish FY 2026 with a book-to-bill ratio north of 1.0 [70][74]. Future Opportunities - The defense budget is projected to exceed $1 trillion, with SAIC focusing on mission data, cloud-based command and control, and modernization of legacy systems as key growth areas [184][191]. - The company is exploring M&A opportunities, particularly in data-focused AI and intelligence sectors, while being cautious about capital allocation due to stock valuation concerns [240][241]. Leadership and Culture - The search for a permanent CEO is ongoing, with a focus on finding an execution-oriented leader who can create shareholder value [276][280]. - The company is investing in employee training and development to retain top talent during its transformation process [302][310]. Risks and Considerations - The company faces risks related to recompete contracts, with approximately 1% of revenue up for recompete in the next 12 months [98][100]. - The procurement environment has shown signs of unpredictability, impacting submit volumes and contract negotiations [105][106]. Conclusion - SAIC is navigating a challenging environment with a focus on strategic growth areas and operational efficiency. The company is committed to transforming its portfolio and enhancing its competitive position in the defense sector while managing risks associated with contract recompetes and market dynamics [292][295].

Financial Data and Key Metrics Changes - In FY 2025, the company achieved a total revenue growth of 12% and an organic revenue growth of 8%, excluding a confidential contract [4][22] - Adjusted EBITDA expanded by 60 basis points to a record margin of 9.6%, building on a previous expansion of 50 basis points in 2024 [4][24] - Free cash flow conversion reached 100%, exceeding the high end of FY 2025 cash flow guidance [4][22] Business Line Data and Key Metrics Changes - Critical Infrastructure segment reported 10% organic growth, while Federal Solutions segment achieved 7% organic growth, both excluding the confidential contract [4] - In Q4, Critical Infrastructure revenue increased by 12% year-over-year, driven by organic growth of 9% and contributions from recent acquisitions [25] - Federal Solutions segment saw a 9% increase in revenue for Q4, with a 6% organic growth, but total revenue including the confidential contract decreased by 22% [27] Market Data and Key Metrics Changes - The company reported strong demand in both North America and Middle East markets, with double-digit revenue growth in both regions [16][19] - The backlog at the end of Q4 totaled $8.7 billion, with a funded backlog of $6.4 billion, representing the highest level since the IPO [31] Company Strategy and Development Direction - The company aims to achieve mid-single digit or better annual organic revenue growth supplemented by accretive acquisitions, targeting double-digit margins by 2028 [8][32] - The focus remains on integrated solutions to move up the value chain and win larger, more strategic programs [7][19] - The company is well-positioned to capitalize on unprecedented global infrastructure spending and a favorable federal budget environment [18][34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a robust pipeline of opportunities and strong total and funded backlog [36][37] - The company anticipates a positive procurement environment in Federal Solutions, with expectations of achieving a book-to-bill ratio over 1.0 in H1 2026 [44][65] Other Important Information - The company completed three acquisitions in FY 2025 and has a strong balance sheet with a net debt leverage ratio of 1.3 times [29][30] - The acquisition of Applied Sciences Consulting and Altamira Technologies Corporation is expected to enhance the company's capabilities and market presence [14][15] Q&A Session Summary Question: Expectations for Critical Infrastructure margins - Management confirmed that legacy adjustments are behind them and expects continued margin expansion in Critical Infrastructure, with a focus on North America [40] Question: Order activity in Federal Solutions post-government shutdown - Management noted a positive trend in order activity and anticipates achieving a book-to-bill ratio over 1.0 in H1 2026 [44] Question: Addressable market for DroneArmor system - Management highlighted the unique capabilities of the DroneArmor solution and its potential applications across various federal departments [50] Question: Demand for mega projects in the Middle East - Management reported ongoing strong demand for major projects in the Middle East, particularly in Saudi Arabia, with a focus on key upcoming global events [54] Question: Federal Solutions revenue guidance adjustments - Management acknowledged previous revenue guidance revisions due to procurement delays and expressed confidence in a positive procurement environment moving forward [64] Question: Margin outlook and potential for upside - Management indicated that while there are headwinds from a confidential program, there are opportunities for margin expansion through product growth and accretive M&A [72]

Financial Data and Key Metrics Changes - In fiscal year 2025, the company achieved a total revenue growth of 12% and an organic revenue growth of 8%, excluding a confidential contract [4][24] - Adjusted EBITDA increased by 1% to a record $609 million, with an adjusted EBITDA margin expansion of 60 basis points to 9.6% [25][33] - Free cash flow conversion reached 100%, exceeding the high end of the fiscal year 2025 cash flow guidance range [4][30] Business Line Data and Key Metrics Changes - Critical Infrastructure segment saw a revenue increase of 12% in Q4 2025, driven by 9% organic growth and contributions from recent acquisitions [26] - Federal Solutions segment reported a 9% revenue increase in Q4, excluding the confidential contract, but total revenue decreased by 22% including it [27][29] - For the full year, Critical Infrastructure revenue increased by 15%, while Federal Solutions revenue increased by 9% excluding the confidential contract [26][29] Market Data and Key Metrics Changes - The company reported strong demand in both North America and the Middle East, with double-digit revenue growth in both regions for four consecutive years [17][18] - The funded backlog reached a record $6.4 billion, representing 73% of total backlog, which is also a company record [32] Company Strategy and Development Direction - The company aims for mid-single digit or better annual organic revenue growth supplemented by accretive acquisitions, targeting double-digit adjusted EBITDA margins by 2028 [8][36] - The focus on integrated solutions and strategic contracts is expected to drive long-term shareholder value [6][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a robust pipeline of opportunities and alignment with government spending priorities [22][37] - The company anticipates challenges from domestic budget uncertainty and a competitive labor market but sees strong tailwinds from global infrastructure spending [34] Other Important Information - The company completed three acquisitions in 2025 and plans to continue strategic acquisitions to enhance its portfolio [5][15] - The company was recognized as the number one program management firm globally and received accolades for its ethical practices and leadership [5] Q&A Session Summary Question: Expectations for Critical Infrastructure margins - Management confirmed that legacy adjustments are behind them and expects continued margin expansion in Critical Infrastructure, with a focus on North America [38] Question: Order activity in Federal Solutions post-government shutdown - Management noted a positive procurement environment and anticipates a book-to-bill ratio over 1.0 for Federal Solutions in the first half of 2026 [39] Question: Addressable market for DroneArmor system - Management highlighted the broad market opportunities for DroneArmor, including potential contracts with the Department of Homeland Security and FAA [40] Question: Demand for mega projects in the Middle East - Management reported ongoing strong demand for major projects in the Middle East, particularly in Saudi Arabia, with a focus on urban development and defense sectors [42][43] Question: Changes in Federal Solutions revenue guidance - Management acknowledged previous downward revisions but expressed confidence in a strong procurement environment moving forward [46] Question: Outlook for FAA customer revenue - Management expects growth from the FAA technical support services contract, which was recently extended [60]

Core Viewpoint - V2X Inc. (NYSE:VVX) is identified as an undervalued stock with potential for long-term investment, particularly following its strategic partnership with Amazon to enhance government warehouse operations [1][2]. Company Overview - V2X Inc. is a defense contractor that provides services in operations and logistics, aerospace, training, and technology markets to various clients, including national security and defense [4]. Strategic Partnership - On January 29, V2X entered a strategic partnership with Amazon, which will involve the deployment of Amazon's warehouse automation technology and AI models in V2X-managed government warehouses, aimed at improving workflows and inventory management [1]. - The partnership is expected to enhance system readiness for federal agencies by leveraging Amazon's advanced technologies [2]. Market Analysis - Truist downgraded V2X from Buy to Hold on January 14, maintaining a price target of $65. The downgrade was attributed to the company's current valuation after a 20% increase in share price over the past month [3]. - Analysts noted that V2X has less exposure to potential benefits from the proposed One Big Beautiful Bill compared to its peers [3].

Core Insights - V2X, Inc. is resuming work on the $4.3 billion T-6 Contractor Operated and Maintained Base Supply (COMBS) contract after the U.S. Court of Federal Claims upheld the Air Force's selection of V2X, confirming that its proposal was the best solution for the mission [1][2][3] Group 1: Contract Details - The T-6 COMBS contract provides supply support for T-6 aircraft to meet the daily flight schedules of the U.S. Air Force, Navy, and Army [2] - V2X was initially awarded the contract in July 2025, but work was halted due to a formal protest [2] - The contract's period of performance extends through July 2034 [4] Group 2: Company Statements and Commitment - The decision by the U.S. Court of Federal Claims validates the government's confidence in V2X and reconfirms the value of its offering for the T-6 program [3] - V2X's leadership expressed readiness to deliver on commitments to excellence, reliability, and mission support [3] - The company is coordinating closely with the Air Force to ensure a seamless restart process and is committed to safety, efficiency, and high-quality standards [3] Group 3: Company Overview - V2X builds innovative solutions that integrate physical and digital environments, enhancing readiness and optimizing resource management [5] - The company employs approximately 16,000 professionals and leverages AI and machine learning capabilities to address challenges across various operational domains [5]

Group 1 - Leidos Holdings announced the acquisition of ENTRUST Solutions Group for approximately $2.4 billion to enhance its engineering capabilities [1] - The acquisition is part of Leidos' strategy to expand its offerings in the power design sector [1] - ENTRUST Solutions Group is currently owned by private equity firm Kohlberg [1]

Core Insights - Booz Allen Hamilton reported a strong earnings beat, with shares rising 9.2% following the announcement [1] - The company missed sales forecasts, reporting revenue of $2.6 billion against an expectation of $2.7 billion, but exceeded earnings expectations with $1.77 per share compared to a forecast of $1.27 [2] - The Q3 2026 sales declined by 10%, attributed partly to delays from a previous government shutdown, indicating that revenues were postponed rather than lost [4] Financial Performance - The book-to-bill ratio for the quarter was low at 0.3, suggesting potential challenges for near-term revenue growth, although the trailing-12-month ratio was a healthier 1.1 [5] - Profit margins improved, with earnings growing by 7% in Q3, and free cash flow reached $248 million, an increase of 85% [5] - Management has lowered revenue and free cash flow forecasts but anticipates generating free cash flow between $825 million and $900 million by year-end [6] Investment Considerations - The stock is valued at approximately 14 times free cash flow at the high end of the forecast and just over 15 times at the low end, which is considered a decent price for a government contracting business with a 2.3% dividend yield [6] - Analysts suggest a "hold" rating rather than a "buy" due to the mixed performance in earnings and sales [7] - Booz Allen Hamilton was not included in a list of top stock recommendations by The Motley Fool Stock Advisor, which identified 10 better investment opportunities [8]

Core Viewpoint - Voyager Technologies (NYSE: VOYG) stock surged 8.1% following President Trump's announcement of a proposed $1.5 trillion defense budget for 2027, which is expected to significantly benefit the company due to its reliance on defense contracts [1][4]. Group 1: Defense Budget Impact - President Trump proposed increasing the military budget from $1 trillion to $1.5 trillion, aiming to enhance national security and build a "Dream Military" [1]. - Voyager Technologies derives over half of its revenue from defense contracts, positioning it to gain from the increased defense spending [3][4]. - The defense business of Voyager is experiencing rapid growth, with a 57% increase in revenue so far this year, indicating a strong alignment with the proposed budget increase [4]. Group 2: NASA Contract - Voyager Technologies received a contract from NASA under the Create Hardware (HUNCH) program, which provides high school students with hands-on experience in designing and fabricating hardware for NASA [3]. - Although the contract size was not disclosed, it is expected to contribute to building a skilled workforce for future engineering and technical roles, potentially enhancing Voyager's reputation among students [3]. Group 3: Investment Considerations - Despite the positive developments, Voyager Technologies was not included in a recent list of the top 10 stocks recommended by The Motley Fool Stock Advisor, which may suggest caution for potential investors [5][6].

Economic Overview - The U.S. economy is described as "K-shaped," where wealthier Americans benefit from a strong stock market, while poorer consumers face challenges due to a weak labor market and high inflation [1] - Consumer spending, which constitutes about 70% of U.S. GDP, is at risk of declining, potentially leading to a sharp deceleration in economic growth by 2026 [2] Investment Opportunities - The Schwab US Dividend Equity ETF (SCHD) may outperform the stock market significantly if negative economic scenarios unfold, as it offers a sizeable dividend yield that could attract investors during market downturns [2] - SCHD's large investments in sectors such as energy, healthcare, and industrials position it well for strong performance in 2026, regardless of broader market conditions [3] ETF Holdings - Nearly 37% of SCHD's holdings are in consumer defensive or healthcare stocks, which are typically resilient during economic downturns [4] - Key holdings include major pharmaceutical companies like AbbVie, Amgen, Pfizer, and Bristol Myers, as well as consumer staples like Coca-Cola and PepsiCo [4] Interest Rate Impact - Economic downturns often lead the Federal Reserve to lower interest rates, which could further benefit SCHD, especially if rates drop significantly [5] - The potential nomination of a Fed chair who supports aggressive rate cuts could enhance SCHD's attractiveness due to its 3.73% dividend yield [5]