SAIC — Science Applications International Corporation

SAIC Q4 2026 Earnings Call Summary

1. Key Financial Results and Metrics:

• Q4 Revenue: $1.75 billion, a 6% organic contraction year-over-year, primarily due to a $60 million reduction from the low-margin Cloud One program and a $45 million headwind from a nonrecurring software license sale in the prior year.
• Full-Year Revenue: $7.26 billion, down 3% organically, significantly impacted by the decision to no-bid low-margin Cloud One revenue, which accounted for a $200 million headwind.
• Adjusted EBITDA: $181 million for Q4, with a margin of 10.3%. Full-year margin was 9.7%, slightly above guidance.
• Adjusted Diluted EPS: $2.62 for Q4, $10.75 for the full year.
• Free Cash Flow: $336 million in Q4, totaling $577 million for the year, exceeding guidance by 10%.

2. Strategic Updates and Business Highlights:

• Jim Reagan has been appointed as the permanent CEO, emphasizing continuity and operational excellence.
• The company is focusing on sharpening its business development (BD) efforts, hiring a new Chief Growth Officer to enhance win rates and prioritize higher-margin opportunities.
• SAIC plans to submit $25 billion to $28 billion in bids for FY 2027, aiming for growth while improving margins.
• The company is undergoing an enterprise transformation initiative to streamline processes and enhance operational efficiency.
• SAIC is investing in areas with high demand signals, including AI-powered solutions and mission-critical programs.

3. Forward Guidance and Outlook:

• FY 2027 Revenue Guidance: Expected in the range of $7.0 billion to $7.2 billion, reflecting an organic contraction of 2% to 4% due to recompete losses.
• Adjusted EBITDA Guidance: Projected between $705 million and $715 million, with margins between 9.9% and 10.1%.
• Adjusted Diluted EPS Guidance: Expected to be between $9.50 and $9.70.
• Free Cash Flow Guidance: At least $600 million, translating to over $14 per share.

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

• The company anticipates ongoing organic revenue contraction in FY 2027, primarily due to recompete losses, which are expected to create a $400 million headwind.
• The large enterprise IT market is shrinking, projected to drop from 17% of revenues in FY 2025 to 10% in FY 2027.
• Procurement delays and customer disruptions continue to impact revenue performance.
• There is uncertainty regarding the ramp-up of new business wins, with some large contracts progressing slower than expected due to budget constraints.

5. Notable Q&A Insights:

• CEO Jim Reagan highlighted the need to focus on areas where SAIC has a competitive advantage and customer retention is linked to innovation.
• The company is strategically deemphasizing low-margin, commoditized enterprise IT work to concentrate on mission-focused projects.
• Q&A discussions revealed that while the company is facing recompete headwinds, it is optimistic about future growth driven by a strong pipeline and favorable budget conditions.
• Concerns were raised about the timing of government procurement and the potential for a year-end spending surge, which could impact revenue positively in the latter half of FY 2027.

Overall, SAIC is navigating a challenging environment with a focus on strategic realignment, operational efficiency, and targeted investments to drive future growth amidst current headwinds.