Science Applications International Corp. (SAIC) Q2 Earnings Call

Science Applications (NASDAQ:SAIC) International Corp. (SAIC), a leader in technology integration, reported moderate organic revenue growth and strong free cash flow in its second quarter earnings call, while discussing the execution of its enterprise growth strategy. SAIC’s CEO, Toni Townes-Whitley, highlighted a 2% year-over-year organic revenue growth, an adjusted EBITDA of $170 million, and adjusted diluted earnings per share of $2.05.

The company showcased a robust free cash flow of $241 million for the quarter. SAIC remains committed to enhancing its business development processes and expects to see the fruits of its strategy within the next two to three quarters, aiming for a book-to-bill ratio of 1.2x by the first half of fiscal year 2026 and a 5% organic revenue growth by the end of the same fiscal year.

Key Takeaways

• SAIC reported a 2% year-over-year organic revenue growth and an adjusted EBITDA of $170 million.
• The company achieved a strong free cash flow of $241 million in the second quarter.
• SAIC is focused on improving bid submissions and expects results from its strategy execution in the upcoming quarters.
• The company reaffirmed its fiscal year guidance for revenue, adjusted EBITDA, and free cash flow.
• SAIC plans to exceed its share repurchase target of $350 million to $400 million.
• The company is targeting growth in the Civilian market and Enterprise and Mission IT.
• SAIC expects a book-to-bill ratio of 1.2x by the first half of fiscal year 2026 and 5% organic revenue growth by the end of fiscal year 2026.

Company Outlook

• SAIC aims for a book-to-bill ratio of 1.2x by the first half of fiscal year 2026.
• Targeting 5% organic revenue growth by the end of fiscal year 2026.
• Focusing on the Civilian sector and Enterprise and Mission IT for growth.
• Bidding more strategically with an emphasis on fixed-price contracts.

Bearish Highlights

• SAIC acknowledges risks related to contract protests and the impact of elections on their book-to-bill targets.
• The company experienced a drop in Civilian margins due to a one-time surge in revenue last year and lower margin start of new programs.

Bullish Highlights

• Executives expressed confidence in their strategy to drive sustainable growth and deliver value for shareholders.
• SAIC is satisfied with its improved bid velocity and quality.
• The company highlighted its space franchise for its growth and margin-producing capabilities.

Q&A Highlights

• The company discussed the impact of specific programs like DTAMM, TCloud, and an Air Force combat and command win on growth.
• The evolve contract is expect to impact late fiscal year ’26 or early fiscal year ’27.
• Confidence in performance and bid structure for significant contracts discussed.

SAIC’s second quarter earnings call reflected a company in a strategic transition, focusing on improving its bidding process and targeting key growth areas. With a solid book-to-bill ratio and a clear path to achieving its financial targets, SAIC remains a notable player in the technology integration market, poised for future growth.

InvestingPro Insights

Science Applications International Corp. (SAIC) has been making headlines with its strategic initiatives and financial performance. InvestingPro provides real-time data and expert analysis, highlighting:
– SAIC’s management has been actively involved in share buybacks.
– The company is acknowledged for its high shareholder yield.
– SAIC has a market cap of approximately $6.93 billion and a P/E ratio of 23.33.
– The PEG ratio stands at a low 0.33, hinting at potential undervaluation.
– Additional insights include consistent dividends for the past 12 years and positive analyst profitability predictions for the current year.

For more insights, visit InvestingPro.