Science Applications International Corp. ((SAIC)) has held its Q4 earnings call. Read on for the main highlights of the call.
Science Applications International Corp. (SAIC) recently held its earnings call, revealing a generally positive sentiment despite some challenges. The company showcased strong financial performance and strategic wins, although it acknowledged potential risks from recompete headwinds and procurement delays. The guidance provided reflects cautious optimism, with a focus on leveraging backlog and new work for growth.
Strong Q4 and Full-Year Financial Performance
SAIC reported impressive financial results for the fourth quarter and the full fiscal year 2025. The fourth-quarter revenue reached $1.84 billion, marking a 6% increase year-over-year. For the full year, the revenue was $7.48 billion, representing a 3.1% organic growth at the high end of their guidance. These figures underscore the company’s robust financial health and its ability to meet and exceed expectations.
Commercial Operating Sector Growth
The commercial sector of SAIC has seen significant growth, with revenue increasing from less than $1 million in FY 2022 to approximately $45 million in FY 2025. The company has set an ambitious goal of reaching $100 million by FY 2028, highlighting its strategic focus on expanding its commercial operations.
Strategic Contract Wins and Backlog
SAIC achieved notable success in securing strategic contracts, with net bookings of $1.3 billion in Q4 and $6.6 billion for FY 2025. A significant highlight was winning a $1.8 billion system software lifecycle engineering contract. The backlog of submitted bids has also increased to over $20 billion, positioning the company well for future growth.
Guidance for FY 2026
Looking ahead, SAIC has provided guidance for FY 2026, projecting revenues between $7.6 billion and $7.75 billion, indicating approximately 3% organic growth at the midpoint. The company expects an EBITDA margin range of 9.4% to 9.6% and adjusted diluted EPS between $9.10 and $9.30. Free cash flow is anticipated to be between $510 million and $530 million, translating to about $11 per share.
Recompete and Procurement Challenges
SAIC faces challenges related to recompete headwinds, particularly with the exit from a NASA program. Additionally, procurement delays and extended timelines have been observed, although these issues are not widespread. The company remains vigilant in addressing these challenges to maintain its competitive edge.
Government Efficiency Initiative Impacts
Potential risks from government efficiency initiatives, including workforce reductions and contract scrutiny, could impact SAIC’s future revenue and operations. The company is aware of these risks and is strategizing to mitigate their effects.
Lower Backlog Year-over-Year
The company reported a year-over-year decrease in backlog, raising concerns about its reliance on new work to achieve growth targets. SAIC is focused on securing new contracts to bolster its backlog and support its growth objectives.
Challenges with Cost-Plus to Fixed Price Transition
SAIC is transitioning from cost-plus to fixed-price contracts, which poses challenges requiring customer cooperation and could impact revenue. The company is working closely with its clients to ensure a smooth transition and minimize potential disruptions.
Forward-Looking Guidance
SAIC’s forward-looking guidance for FY 2026 reflects a strategic focus on growth and efficiency. The company aims to achieve a book-to-bill ratio of 1.2 by the first half of FY 2026, aligning its strategy with market trends and customer needs. This guidance highlights SAIC’s commitment to maintaining its growth trajectory while navigating potential challenges.
In conclusion, Science Applications International Corp.’s earnings call conveyed a positive outlook, underscored by strong financial performance and strategic contract wins. While challenges such as recompete headwinds and procurement delays exist, the company’s guidance reflects cautious optimism. SAIC’s focus on leveraging its backlog and securing new work will be crucial in sustaining its growth momentum.