8-K: SAIC Announces Strong Q4 and Full Fiscal Year 2025 Results, Exceeds Guidance

Science Applications International Corporation (SAIC) reports robust Q4 and full fiscal year 2025 results, surpassing previous guidance and highlighting significant contract wins.

Summary

• SAIC announced its financial results for the fourth quarter and full fiscal year ended January 31, 2025.
• Q4 FY25 revenues reached $1.84 billion, reflecting 5.8% organic growth.
• FY25 revenues totaled $7.48 billion, with 3.1% organic growth after adjusting for divestitures.
• Q4 FY25 net income was $98 million, with an adjusted EBITDA of $177 million, or 9.6% of revenue.
• FY25 net income amounted to $362 million, and adjusted EBITDA was $710 million, or 9.5% of revenue.
• Q4 FY25 diluted earnings per share (EPS) stood at $2.00, while adjusted diluted EPS was $2.57.
• FY25 diluted EPS was $7.17, with an adjusted diluted EPS of $9.13.
• Q4 FY25 cash flows from operating activities were $115 million, with a free cash flow of $236 million.
• FY25 cash flows from operating activities were $494 million, and free cash flow was $499 million.
• Net bookings for Q4 FY25 were $1.3 billion, resulting in a book-to-bill ratio of 0.7.
• The trailing twelve months book-to-bill ratio was 0.9.
• FY26 guidance was introduced, exceeding prior targets for revenues, adjusted EBITDA, adjusted EBITDA margin, and adjusted diluted EPS.
• Subsequent to the quarter's close, SAIC secured a $1.8 billion award for the System Software Lifecycle Engineering program.
• The company's backlog of submitted bids is valued at approximately $20 billion.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, exceeding guidance, and significant contract wins. While there are some risks and uncertainties, the overall tone is optimistic.

Positives

• SAIC's Q4 and full-year results exceeded previous guidance.
• The company achieved organic revenue growth of 5.8% in Q4 and 3.1% for the full year.
• Adjusted EBITDA margins improved, indicating enhanced profitability.
• SAIC secured a significant $1.8 billion contract after the quarter's end.
• The company has a substantial backlog of submitted bids valued at approximately $20 billion.
• The company deployed $163 million of capital in Q4, including $130 million in share repurchases and $18 million in cash dividends.
• SAIC intends to continue paying dividends on a quarterly basis.

Negatives

• The book-to-bill ratio for Q4 FY25 was 0.7, which is below 1, indicating that bookings were less than revenue for the quarter.
• Operating income as a percentage of revenues for the fiscal year decreased compared to the prior year primarily due to a $233 million gain recognized from the sale of the Supply Chain Business and a $7 million gain recognized from the deconsolidation of FSA in the prior year.

Risks

• The company's forward-looking statements are subject to risks, uncertainties, and assumptions that could cause actual results to differ materially.
• These risks are detailed in SAIC's filings with the SEC, including the Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q.
• The company expressly disclaims any duty to update forward-looking statements.

Future Outlook

SAIC anticipates revenues between $7.60 billion and $7.75 billion, adjusted EBITDA between $715 million and $735 million, adjusted EBITDA margin between 9.4% and 9.6%, adjusted diluted EPS between $9.10 and $9.30, and free cash flow between $510 million and $530 million for fiscal year 2026.

Management Comments

• I am proud of the results we delivered in the quarter with revenue, adjusted EBITDA, adjusted earnings per share, and free cash flow ahead of guidance, said Toni Townes-Whitley, SAIC Chief Executive Officer.
• I want to thank the team for a strong finish to the year and for their commitment and dedication to our customers' mission during these uncertain times.

Industry Context

SAIC's performance reflects the ongoing demand for technology integration and digital transformation services within the defense, space, civilian, and intelligence markets. The company's focus on securing and executing contracts in these sectors positions it well within the competitive landscape.

Comparison to Industry Standards

• SAIC's adjusted EBITDA margin of 9.5% for FY25 is comparable to other government technology contractors such as Leidos (typically in the 10-12% range) and Booz Allen Hamilton (around 10-11%).
• The book-to-bill ratio of 0.9 indicates a slight lag in securing new business relative to revenue recognition, which is an area that SAIC will likely focus on improving.
• The $1.8 billion System Software Lifecycle Engineering contract win is a significant achievement, demonstrating SAIC's ability to secure large-scale, long-term projects, similar to contracts won by competitors like General Dynamics and Lockheed Martin.
• SAIC's free cash flow generation of $499 million is a positive sign of financial health and operational efficiency, aligning with industry benchmarks for companies of its size and scope.

Stakeholder Impact

• Shareholders will benefit from the strong financial performance, share repurchases, and dividend payments.
• Employees are recognized for their commitment and dedication.
• Customers will benefit from SAIC's continued focus on delivering high-end solutions and integrating emerging technology.

Next Steps

• SAIC management will discuss operations and financial results in an earnings conference call on March 17, 2025.
• The company intends to continue paying dividends on a quarterly basis, subject to Board of Directors approval.
• SAIC will focus on executing its FY26 guidance and capitalizing on its backlog and submitted bids.

Key Dates