SAIC — Science Applications International Corporation

SAIC Q3 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Revenue: $1.87 billion, a decline of 5.6% year-over-year, with a 1-point impact attributed to the government shutdown.
• Adjusted EBITDA: $185 million, reflecting a margin of 9.9%.
• Adjusted Diluted EPS: $2.58, supported by strong margins and a favorable tax rate.
• Free Cash Flow: $135 million, impacted by the government shutdown, but overall strong.
• Net Bookings: $2.2 billion, resulting in a book-to-bill ratio of 1.2x.
• Proposal Submissions: Approximately $3 billion in Q3, with year-to-date submissions totaling around $21 billion.

2. Strategic Updates and Business Highlights:

• SAIC welcomed the acquisition of SilverEdge, which is expected to enhance AI capabilities and drive growth within the intelligence community.
• The company is focusing on improving business development and execution, with a commitment to increase investments in high-return areas.
• A restructuring initiative aims to identify over $100 million in annual savings, which will be redirected to growth and margin improvement efforts.
• The leadership transition is underway, with a search for a permanent CEO ongoing.

3. Forward Guidance and Outlook:

• FY '26 revenue guidance has been increased due to the SilverEdge acquisition, with reaffirmed organic growth expectations despite a projected 4% contraction in Q4.
• Adjusted EBITDA margin guidance for FY '26 has been raised by 10 basis points, while adjusted diluted EPS guidance has increased by $0.04.
• FY '27 revenue guidance has also been increased by approximately one point, with expectations of organic growth between 0% to 3%.
• Free cash flow guidance for FY '26 is maintained at over $550 million, with FY '27 guidance set at over $600 million.

4. Bad News, Challenges, or Points of Concern:

• Revenue decline of 5.6% year-over-year raises concerns about growth sustainability.
• The government shutdown's impact on revenue and proposal submissions indicates potential volatility in the procurement environment.
• The civil segment reported a 7% decline year-over-year, with no specific program-related drivers identified, raising questions about future performance.
• Ongoing pressure on federal civil spending is anticipated, which may hinder growth in that segment.

5. Notable Q&A Insights:

• Management acknowledged a slowdown in the procurement environment due to the government shutdown but expects normalization in Q4.
• There is no significant pricing pressure observed currently, and margins remain healthy.
• The company is focused on aligning its portfolio with the Department of War's procurement reforms, emphasizing speed and efficiency.
• Leadership expressed confidence in the potential of SilverEdge to enhance overall capabilities and drive future growth.
• Concerns were raised about the long-term pressure on federal civil budgets, with management preparing for continued challenges in that area.

Overall, while SAIC's Q3 results showed some positive metrics and strategic initiatives, the company faces challenges in revenue growth and civil spending pressures that could impact future performance.