SAIC(US:SAIC)2025-12-04 16:00Financial Data and Key Metrics Changes - Third quarter revenue was $1.87 billion, a decline of 5.6% year over year, impacted by a government shutdown which accounted for approximately one percentage point of the decline [5][12] - Adjusted EBITDA was $185 million, resulting in a margin of 9.9%, driven by strong program execution [5][12] - Adjusted diluted EPS was $2.58, reflecting strong margin performance and a favorable tax rate [5][12] - Free cash flow for the third quarter was $135 million, despite being affected by the government shutdown [6][12] Business Line Data and Key Metrics Changes - Net bookings for the third quarter were $2.2 billion, resulting in a book-to-bill ratio of 1.2x [12] - The civil business segment experienced a year-over-year decline of 7%, but the nine-month performance showed it was roughly flat with improved margins [26][27] - The company expects to submit bids totaling over $30 billion in FY27, despite a slowdown in proposal submissions due to the government shutdown [12][13] Market Data and Key Metrics Changes - The government shutdown has slowed the pace of proposal submissions, but normalization is expected in the near term [20][12] - The company anticipates continued pressure on civilian agency budgets, impacting growth in the civil sector [45][60] Company Strategy and Development Direction - The acquisition of SilverEdge is expected to enhance the company's capabilities and contribute positively to margins and EPS [4][25] - The company is focusing on improving execution, increasing business development throughput, and prioritizing quality in proposals [7][9] - Efforts are being made to identify over $100 million in annual spending to reinvest in higher ROI areas to improve margins [8][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to improve execution and deliver sustained profitable growth despite market uncertainties [17][60] - The company is committed to adapting to changes in procurement processes within the Department of War, aiming for greater speed and efficiency [31][32] - Future guidance reflects a cautious optimism, with expectations for revenue growth and margin improvement in FY27 [14][15] Other Important Information - The company plans to repurchase approximately $500 million in shares for both FY26 and FY27, representing about 25% of its market value [16] - The leadership transition is ongoing, with a search for a permanent CEO being conducted [11] Q&A Session Summary Question: What is the current procurement environment post-shutdown? - Management noted a slowdown in RFP activity due to the shutdown but expects normalization in Q4, which is typically a softer quarter for book-to-bill [20] Question: Any residual impact from DOGE and pricing environment? - Management indicated no material changes from previous disclosures regarding DOGE, with healthy margins and limited pricing pressure observed [22] Question: How will SilverEdge integrate into the portfolio? - Management expressed enthusiasm about SilverEdge's potential to enhance bid differentiation and overall portfolio value [24] Question: What is the outlook for civil spending? - Management anticipates continued pressure on civilian agency budgets, but believes they are positioned well within key agencies [45][60] Question: How does the company plan to utilize the $100 million in savings? - A substantial portion of the savings will be reinvested into business development and proposal improvement efforts to drive growth [39][40] Question: What is the company's stance on portfolio shaping? - Management remains open to portfolio shaping opportunities but emphasizes the need for organic growth before pursuing larger acquisitions [56][57]