SAIC Earnings Call: Mixed Results and Optimistic Outlook

Science Applications International Corp. ((SAIC)) has held its Q3 earnings call. Read on for the main highlights of the call.

TipRanks Cyber Monday Sale

• Claim 60% off TipRanks Premium for data-backed insights and research tools you need to invest with confidence.
• Subscribe to TipRanks' Smart Investor Picks and see our data in action through our high-performing model portfolio - now also 60% off

Science Applications International Corp. (SAIC) recently held its fiscal year 2026 Q3 earnings call, which revealed a mixed performance. The company showcased promising developments, particularly through the acquisition of SilverEdge and strong business development results. However, it also faced challenges, such as a revenue decline and execution issues in business development. Despite these hurdles, SAIC’s proactive steps towards cost efficiency and margin improvement suggest a positive outlook for the future.

Acquisition of SilverEdge

The acquisition of SilverEdge is a significant move for SAIC, expected to be accretive next year. This acquisition is anticipated to push margins up and be accretive on EPS, enhancing the differentiation of bids not only within the intelligence community but also across SAIC’s broader portfolio.

Strong Business Development Results

SAIC reported strong business development results, with third-quarter net bookings of $2.2 billion, resulting in a book-to-bill ratio of 1.2x. Major awards included a five-year recompete with the Air Force worth $1.4 billion and a five-year $413 million contract with the US Army, highlighting the company’s robust position in securing significant contracts.

Improved Financial Performance

The company demonstrated improved financial performance with an adjusted diluted EPS of $2.58, reflecting strong margin performance and a favorable tax rate. SAIC reported a free cash flow of $135 million for the third quarter, with expectations of exceeding $550 million for fiscal year 2026 and over $600 million for fiscal year 2027.

Cost Efficiency Initiatives

SAIC has identified over $100 million in annual spending to be reinvested in higher ROI areas to drive growth and increase margins. These cost efficiency initiatives include implementing efficiencies across shared services and other indirect functions, aiming to enhance overall financial health.

Decline in Third-Quarter Revenue

SAIC experienced a 5.6% decline in third-quarter revenue year-over-year, partly due to a government shutdown which contributed to a one-point headwind. This decline highlights some of the challenges the company is facing in maintaining its revenue growth trajectory.

Civil Segment Decline

The civil segment saw a 7% year-on-year decline during the quarter, attributed to seasonality and lumpiness. Despite this, the nine-month performance remained flat with improved margins, indicating some resilience in this segment.

Challenges in Business Development Execution

SAIC has faced challenges in converting innovation into revenue and EBITDA growth due to below-average business development and capture performance. This highlights the need for improved execution strategies to capitalize on the company’s innovative capabilities.

Forward-Looking Guidance

SAIC provided updated financial guidance during the earnings call. For fiscal year 2026, the company expects a minor revenue increase due to the SilverEdge acquisition and reaffirmed its organic growth targets. The adjusted EBITDA margin guidance was increased by 10 basis points, and adjusted EPS guidance was raised by $0.04. Looking ahead to fiscal year 2027, SAIC projects a 0% to 3% organic revenue growth, with a slight increase in revenue guidance due to recent acquisitions and business wins. The company also plans to repurchase approximately $1 billion of shares over fiscal years 2026 and 2027, representing about 25% of its market value.

In conclusion, the SAIC earnings call presented a mixed but cautiously optimistic outlook. While the company faces challenges such as revenue decline and execution issues, its strategic acquisitions, strong business development results, and cost efficiency initiatives paint a promising picture for future growth. Investors and stakeholders will be keenly watching how these strategies unfold in the coming quarters.