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 August 4, 2023.
“I am proud of the financial performance we delivered in the quarter with both strong organic revenue growth and margin expansion. We remain on track to achieve our three year financial targets and are off to a strong start,” said SAIC CEO Nazzic Keene. “Our focus remains on building and sustaining our high-performance culture to deliver value for our employees, customers, and shareholders.”
Second Quarter of Fiscal Year 2024: Summary Operating Results
|
|
Three Months Ended |
|||||||||
|
|
August 4, |
|
Percent change |
|
July 29, |
|||||
|
|
(in millions, except per share amounts) |
|||||||||
|
Revenues |
$ |
1,784 |
|
|
(3 |
)% |
|
$ |
1,831 |
|
|
Operating income |
|
362 |
|
|
190 |
% |
|
|
125 |
|
|
Operating income as a percentage of revenues |
|
20.3 |
% |
|
1,350 bps |
|
|
6.8 |
% |
|
|
Adjusted operating income(1) |
|
134 |
|
|
7 |
% |
|
|
125 |
|
|
Adjusted operating income as a percentage of revenues |
|
7.5 |
% |
|
70 bps |
|
|
6.8 |
% |
|
|
Net income |
|
247 |
|
|
234 |
% |
|
|
74 |
|
|
EBITDA(1) |
|
402 |
|
|
142 |
% |
|
|
166 |
|
|
EBITDA as a percentage of revenues |
|
22.5 |
% |
|
1,340 bps |
|
|
9.1 |
% |
|
|
Adjusted EBITDA(1) |
|
174 |
|
|
5 |
% |
|
|
166 |
|
|
Adjusted EBITDA as a percentage of revenues |
|
9.8 |
% |
|
70 bps |
|
|
9.1 |
% |
|
|
Diluted earnings per share |
$ |
4.56 |
|
|
251 |
% |
|
$ |
1.30 |
|
|
Adjusted diluted earnings per share(1) |
$ |
2.05 |
|
|
17 |
% |
|
$ |
1.75 |
|
|
Net cash provided by operating activities |
$ |
150 |
|
|
6 |
% |
|
$ |
141 |
|
|
Free cash flow(1) |
$ |
144 |
|
|
95 |
% |
|
$ |
74 |
|
|
Transaction-adjusted free cash flow(1) |
$ |
143 |
|
|
93 |
% |
|
$ |
74 |
|
|
(1)Non-GAAP measure, see Schedule 5 for information about this measure. |
Second Quarter Summary Results
Revenues for the quarter decreased $47 million or 3% compared to the same period in the prior year primarily due to the sale of the logistics and supply chain management business (Supply Chain Business) ($149 million), the deconsolidation of the Forfeiture Support Associates J.V. (FSA) ($34 million), and contract completions, partially offset by ramp up on existing and new contracts. Adjusting for the impact of the divestiture of the Supply Chain Business and the deconsolidation of FSA, revenues grew 8.3%.
Operating income as a percentage of revenues increased from the comparable prior year period primarily due to the gain recognized from the sale of the Supply Chain Business, improved profitability across our contract portfolio, and lower indirect costs.
Adjusted EBITDA(1) as a percentage of revenues for the quarter increased to 9.8% from 9.1% for the same period in the prior year primarily due to improved profitability across our contract portfolio and lower indirect costs.
Diluted earnings per share for the quarter was $4.56 compared to $1.30 in the prior year quarter. Adjusted diluted earnings per share(1) for the quarter was $2.05 compared to $1.75 in the prior year quarter. The weighted-average diluted shares outstanding during the quarter decreased to 53.9 million from 55.9 million during the prior year quarter.
Cash Generation and Capital Deployment
Cash flows provided by operating activities for the second quarter increased $9 million compared to the prior year quarter, primarily due to the timing of payroll payments, partially offset by higher cash provided by the MARPA Facility in the prior year and higher tax payments in the current year.
During the quarter, SAIC deployed $126 million of capital, consisting of $100 million of plan share repurchases, $20 million in cash dividends, and $6 million of capital expenditures.
Sale of Logistics and Supply Chain Management Business
On May 6, 2023, SAIC closed the sale of its logistics and supply chain management business to ASRC Federal Holding Company, LLC for $356 million in cash, including $355 million received at closing and a post-closing adjustment for working capital. The divestiture is consistent with SAIC’s broader strategy to focus on Growth & Technology Accelerants and on innovative, platform-agnostic solutions that add shareholder value. SAIC recorded a preliminary pre-tax gain of $233 million, net of $7 million of transaction costs, which is included within other operating income on the condensed and consolidated statements of income.
Quarterly Dividend Declared
On September 6, 2023, the Company’s Board of Directors declared a cash dividend of $0.37 per share of the Company’s common stock payable on October 27, 2023 to stockholders of record on October 13, 2023. 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 $0.7 billion, which reflects a book-to-bill ratio of 0.4 and a trailing twelve months book-to-bill ratio of 0.8. SAIC’s estimated backlog at the end of the quarter was approximately $22.5 billion. Of the total backlog amount, approximately $3.7 billion was funded.
Notable New Business Awards:
U.S. Department of Treasury: SAIC was awarded a $1.3 billion seven-year single-award indefinite delivery, indefinite quantity (IDIQ) contract by the Department of the Treasury to provide T-Cloud, a complete range of cloud and professional services. The T-Cloud contract supports Treasury’s adoption and transformation of a multi-cloud environment by centralizing management of the systems infrastructure, platform and software-as-a-service by a single broker. SAIC is responsible for delivering a shared service cloud infrastructure model that provides enterprise-wide efficiencies in access, contracting and security. SAIC will also provide services for business operations, technical, security, network, service desk, subject matter expert support and transition services. Net bookings and backlog for the quarter do not include any value related to T-Cloud. Consistent with the Company’s policy, bookings and backlog related to this award will be recognized as the task orders under the IDIQ are received.
Notable Recompete Awards:
Naval Air Warfare Center Weapons Division: SAIC was awarded a multiple-award IDIQ contract with a $249 million ceiling from the U.S. Navy to continue supporting the Naval Air Warfare Center Weapons Division (NAWCWD)’s combat instrumentation platforms used for training and test evaluation ranges. Under the new contract, SAIC will perform systems design and integration, hardware and software upgrades or modifications for the Combat Environment Instrumentation Systems (CEIS). SAIC will also provide services to support global position system-based range equipment, airborne electronic warfare (EW) systems, warning & countermeasures systems and range Radio-Frequency/Electro-Optical Tracking systems. The Company will deliver test support and instrumentation for unmanned aerial vehicle (UAV) and telemetry systems.
Notable Space and Intelligence Community Awards:
U.S. Space and Intelligence Community: During the quarter, SAIC was awarded approximately $520 million of contract awards by space and intelligence community organizations. These awards represent a combination of new business and recompetes.
SAIC was awarded the following contracts subsequent to the end of the quarter which are not included in the current quarter net bookings and book-to-bill:
U.S. Space Force: SAIC was awarded a seven-year, $575 million contract by the United States Space Force to support its Ground Based Radar Maintenance and Sustainment Services (GMASS). Under the contract, SAIC will provide on-going sustainment and modification of the GMASS Contract-covered systems, including Upgraded Early Warning Radars (UEWR), the Precision Acquisition Vehicle Entry (PAVE) Phased Array Warning System (PAWS), and the Perimeter Acquisition Radar Attack Characterization System (PARCS) radars and all associated systems and equipment. In addition to sustaining operational capabilities, the contract will also utilize an integrated roadmap to highlight incremental opportunities and areas for innovation to promote backlog items and improve operational efficiencies. Through this work, SAIC will help further modernize critical missile warning and space domain awareness radars for key Space Force missions.
Fiscal Year 2024 Guidance
The table below summarizes fiscal year 2024 guidance and represents the Company’s views as of September 7, 2023.
|
|
CURRENT |
PRIOR |
|
|
Fiscal Year |
Fiscal Year |
|
|
2024 Guidance |
2024 Guidance |
|
Revenue |
$7.20B – $7.25B |
$7.125B – $7.225B |
|
Adjusted EBITDA Margin(1) |
9.3% – 9.4% |
9.2% – 9.4% |
|
Adjusted Diluted EPS(1) |
$7.20 to $7.40 |
$7.00 to $7.20 |
|
Transaction-Adjusted Free Cash Flow(1) |
$460M – $480M(2) |
$460M – $480M |
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 24,000 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 $6.9 billion. For more information, visit saic.com.
