RESTON, Va.–(BUSINESS WIRE)–Science Applications International Corporation (NYSE: SAIC), a premier Fortune 500 technology integrator driving our nation’s digital transformation across the defense, space, civilian, and intelligence markets, today announced results for the second quarter ended July 29, 2022.
“I am proud of the results we delivered in the quarter and fiscal year to date which contribute to our improved outlook for the year,” said SAIC CEO Nazzic Keene. “The investments we have made to build differentiated solutions in the areas of Secure Cloud and Systems Integration position us well to gain share in a growing market. Our focus remains on converting a strong pipeline of opportunities into sustained, profitable growth and increased value for our shareholders.”
Second Quarter of Fiscal Year 2023: Summary Operating Results
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Three Months Ended |
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Six Months Ended |
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July 29, 2022 |
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Percent change |
|
July 30, 2021 |
|
July 29, 2022 |
|
Percent change |
|
July 30, 2021 |
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(in millions, except per share amounts) |
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|
|
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Revenues |
$ |
1,831 |
|
|
— |
% |
|
$ |
1,836 |
|
|
$ |
3,827 |
|
|
3 |
% |
|
$ |
3,714 |
|
|
|
Operating income |
|
125 |
|
|
(6 |
)% |
|
|
133 |
|
|
|
250 |
|
|
(5 |
)% |
|
|
263 |
|
|
|
Operating income as a percentage of revenues |
|
6.8 |
% |
|
-40 bps |
|
|
7.2 |
% |
|
|
6.5 |
% |
|
-60 bps |
|
|
7.1 |
% |
|||
|
Adjusted operating income(1) |
|
125 |
|
|
(15 |
)% |
|
|
147 |
|
|
|
259 |
|
|
(10 |
)% |
|
|
287 |
|
|
|
Adjusted operating income as a percentage of revenues |
|
6.8 |
% |
|
-120 bps |
|
|
8.0 |
% |
|
|
6.8 |
% |
|
-90 bps |
|
|
7.7 |
% |
|||
|
Net income attributable to common stockholders |
|
73 |
|
|
(11 |
)% |
|
|
82 |
|
|
|
146 |
|
|
(10 |
)% |
|
|
163 |
|
|
|
EBITDA(1) |
|
166 |
|
|
(3 |
)% |
|
|
171 |
|
|
|
330 |
|
|
(5 |
)% |
|
|
346 |
|
|
|
EBITDA as a percentage of revenues |
|
9.1 |
% |
|
-20 bps |
|
|
9.3 |
% |
|
|
8.6 |
% |
|
-70 bps |
|
|
9.3 |
% |
|||
|
Adjusted EBITDA(1) |
|
166 |
|
|
(10 |
)% |
|
|
185 |
|
|
|
339 |
|
|
(8 |
)% |
|
|
369 |
|
|
|
Adjusted EBITDA as a percentage of revenues |
|
9.1 |
% |
|
-100 bps |
|
|
10.1 |
% |
|
|
8.9 |
% |
|
-100 bps |
|
|
9.9 |
% |
|||
|
Diluted earnings per share |
$ |
1.30 |
|
|
(8 |
)% |
|
$ |
1.41 |
|
|
$ |
2.59 |
|
|
(7 |
)% |
|
$ |
2.79 |
|
|
|
Adjusted diluted earnings per share(1) |
$ |
1.75 |
|
|
(11 |
)% |
|
$ |
1.97 |
|
|
$ |
3.62 |
|
|
(8 |
)% |
|
$ |
3.92 |
|
|
|
Net cash provided by operating activities |
$ |
141 |
|
|
53 |
% |
|
$ |
92 |
|
|
$ |
259 |
|
|
(8 |
)% |
|
$ |
281 |
|
|
|
Free cash flow(1) |
$ |
74 |
|
|
(13 |
)% |
|
$ |
85 |
|
|
$ |
187 |
|
|
(25 |
)% |
|
$ |
249 |
|
|
(1)Non-GAAP measure, see Schedule 5 for information about this measure.
Second Quarter Summary Results
Revenues for the quarter decreased $5 million compared to the same period in the prior year primarily due to contract completions, one fewer working day compared to the prior year period, lower net favorable changes in contract estimates, and higher accelerated amortization on certain off-market liability contracts during the prior year period, partially offset by ramp up on new and existing contracts and the acquisition of Halfaker (approximately $30 million). Adjusting for the impact of acquired and divested revenues, revenues contracted 1.8%.
Operating income as a percentage of revenues decreased from the comparable prior year period primarily due to lower net favorable changes in contract estimates, higher accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period, partially offset by lower acquisition and integration costs and higher benefit from net favorable settlement of prior indirect rate years in the current year period.
Adjusted EBITDA(1) as a percentage of revenues for the quarter decreased to 9.1% from 10.1% for the same period in the prior year primarily due to lower net favorable changes in contract estimates, higher revenue resulting from accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period, partially offset by higher benefit from net favorable settlement of prior indirect rate years in the current year period.
Diluted earnings per share for the quarter was $1.30 compared to $1.41 in the prior year quarter. Adjusted diluted earnings per share(1) for the quarter was $1.75 compared to $1.97 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 55.9 million from 58.4 million during the prior year quarter.
Cash Generation and Capital Deployment
Cash flows provided by operating activities for the second quarter were $141 million, an increase of $49 million compared to the prior year quarter, primarily due to higher cash provided by the MARPA Facility, partially offset by timing of customer collections.
Free cash flow(1) for the second quarter decreased by $11 million from the prior year quarter to $74 million, primarily due to timing of customer collections.
During the quarter, SAIC deployed $89 million of capital, consisting of $62 million of plan share repurchases, $20 million in cash dividends, and $7 million of capital expenditures.
Debt Refinancing
During the quarter, SAIC executed a successful refinancing of its Credit Agreement, consolidating some existing loans into an upsized $1.23 billion 5-year Term Facility maturing June 2027 and increasing the Revolving Credit Commitment from $400 million to $1.0 billion. The refinancing reduced the applicable interest rate margins under the Term Facility to a range from 0.75% to 1.75% per annum for SOFR loans, resulting in initial interest savings of 0.50%. Incremental proceeds of $400 million of were used to repay a portion of the higher interest rate Term Loan B Facility due October 2025. The transaction was recognized by Bloomberg for the inclusion of three minority-owned banks that joined SAIC’s syndicated bank group and committed capital to the refinancing.
Quarterly Dividend Declared
As previously announced, subsequent to the end of the quarter, the Company’s Board of Directors declared a cash dividend of $0.37 per share of the Company’s common stock payable on October 28, 2022 to stockholders of record on October 14, 2022. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.
(1)Non-GAAP measure, see Schedule 5 for information about this measure.
Backlog and Contract Awards
Net bookings for the quarter were approximately $2.1 billion, which reflects a book-to-bill ratio of 1.1 and a trailing twelve months book-to-bill ratio of 1.0. SAIC’s estimated backlog at the end of the quarter was approximately $24.3 billion. Of the total backlog amount, approximately $3.6 billion was funded.
Notable New Business Awards:
Air Force Air Operations Center: SAIC was awarded a $319 million Falconer Air Operations Center (AOC) Weapon System Sustainment contract by the U.S. Air Force. The Falconer program assists Air Force component commanders in planning, directing, and assessing air, space, and cyberspace operations. The AOC ingests, analyzes, and disseminates command, control, and intelligence data to support operations.
U.S. Army Forces Command G-2 Intelligence: SAIC has been awarded a $200 million single-award task order by the U.S. Army to conduct research, analysis, and assessments for the Forces Command (FORSCOM) G-2-Intelligence, Intelligence Warfighting Function (IWF). Under this task order, SAIC will develop and provide valuable training and recommend readiness procedures to increase the timeliness and accuracy of intelligence, weather and security for the warfighter and mission commanders.
U.S. Navy: SAIC was awarded a $163 million contract by the U.S. Navy to support design, development, integration, modernization, sustainment and life cycle support to shore networks, network components and network service solutions for the Naval Information Warfare Center (NIWC) Pacific Shore Networks Branch located in San Diego, CA. Under the contract, SAIC will maintain Naval Enterprise Networks for all shore based U.S. Navy commands and personnel critical to the Navy’s day-to-day operations, as well as supporting command and control of U.S. Navy units deployed by operational commanders.
Notable Recompete Awards:
U.S. Department of State: SAIC was awarded a contract extension, valued at $104 million, to continue providing engineering and design services, security, and operation and maintenance services for critical IT infrastructure.
Notable Space and Intelligence Community Awards:
U.S. Space and Intelligence Community: SAIC was awarded approximately $400 million of contract awards by space and intelligence community organizations which excludes the AOC Falconer program mentioned previously. These awards represent a combination of new business and recompetes.
Other Notable News
SAIC Publishes 3rd Annual Corporate Responsibility Report: SAIC has published its 3rd annual Corporate Responsibility Report, highlighting the Company’s ongoing commitment to improving our world, communities and people’s lives. The report features continued progress in areas such as reducing energy consumption and greenhouse gas emissions, elevating the Company’s commitment to leadership and workforce diversity, expanding workplace flexibility, and focusing philanthropy in three areas important to the Company: military heroes; community wellness; and science, technology, engineering and mathematics (STEM) efforts. Similar to previous reports, the current publication is accompanied by SAIC’s response to the Global Reporting Index (GRI). Reflecting the Company’s continued progress, this year’s response is expanded to include the Company’s first Taskforce on Climate-related Financial Disclosure (TCFD) report as well as an ESG Reporting Framework and Standards Index, which has been prepared in accordance with the GRI, the Sustainability Accounting Standards Board (SASB), and the United Nations Sustainable Development Goals (UN SDGs).
SAIC Ranked #1 in Gartner Market Share: Gartner’s new Market Share report on IT services ranked SAIC as the #1 provider by revenue of IT services to the U.S. government in two categories: application managed services and infrastructure implementation and managed services. This is the second consecutive year the Company was ranked #1 for application managed services. Additionally Gartner’s report also ranked SAIC as the #2 provider of application implementation and managed services, and for the second year in a row #3 for technology consulting, and the #3 overall IT services provider by revenue in all segments for the U.S. government.
SAIC Donated $100,000 to Fund Alabama A&M University Scholarship: SAIC has made a $100,000 scholarship donation in partnership with Alabama A&M University. This year’s donation will finance the education of two incoming freshmen pursuing a career in the historically Black university’s College of Engineering, Technology and Physical Sciences in Huntsville, Alabama. This is the first year SAIC has worked alongside Alabama A&M to provide opportunities for passionate and driven students to pursue opportunities through the College of Engineering, Technology and Physical Sciences (CETPS) and the AAMU-RISE Foundation, which facilitates research and development efforts with the school, industry and government partners.
Koverse, an SAIC Company, Introduces Zero Trust Data Platform: Koverse, Inc., an SAIC company, announced availability of Koverse Data Platform (KDP) 4.0, a security-first data platform that introduces attribute-based access controls (ABAC) to enforce Zero Trust for data, allowing customers to safely work with complex and sensitive information to power the most demanding analytics, data science, and AI use cases. KDP 4.0 creates an incredibly flexible, unified security model across data at the dataset and record level, increasing the value and utilization of all data within an organization, particularly of mixed sensitivities, by delivering fine-grained control to ensure authorized use.
Fiscal Year 2023 Guidance
The table below summarizes fiscal year 2023 guidance and represents our views as of September 1, 2022.
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|
Current Fiscal Year |
Prior Fiscal Year |
|
|
2023 Guidance |
2023 Guidance |
|
Revenue |
$7.50 billion to $7.55 billion |
$7.43 billion to $7.55 billion |
|
Adjusted EBITDA Margin(1) |
Approximately 8.9% |
Approximately 8.9% |
|
Adjusted Diluted EPS(1) |
$7.00 to $7.20 |
$6.90 to $7.20 |
|
Free Cash Flow(1) |
$500 million to $530 million |
$500 million to $530 million |
About SAIC
SAIC® is a premier Fortune 500® technology integrator driving our nation’s technology transformation. Our robust portfolio of offerings across the defense, space, civilian and intelligence markets includes secure high-end solutions in engineering, digital, artificial intelligence and mission solutions. Using our expertise and understanding of existing and emerging technologies, we integrate the best components from our own portfolio and our partner ecosystem to deliver innovative, effective, and efficient solutions that are critical to achieving our customers’ missions.
We are approximately 26,000 strong; driven by mission, united by purpose, and inspired by opportunities. SAIC is an Equal Opportunity Employer, fostering a culture of diversity, equity and inclusion, which is core to our values and important to attract and retain exceptional talent. Headquartered in Reston, Virginia, SAIC has annual revenues of approximately $7.4 billion. For more information, visit saic.com.
