Price Target Asia Software Technologies Boris Van +852 2123 2617 boris.van@bernsteinsg.com Kingdee Software Rating Outperform 268.HK 18.00 HKD 10 June 2025 Positive development in the push for higher quality revenue: The key point is less in the price increase but Kingdee progressing to improve the revenue/gross margin structural relationship impacted by the large percentage of services revenue in the Cloud business. By "penalizing" additional customization, it enables better management of implementation he ...

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]