8-K: SAIC Reports Strong Fiscal Year 2024 Results, Announces Reorganization

Science Applications International Corporation (SAIC) announced its fourth quarter and full fiscal year 2024 results, showcasing revenue growth and a strategic reorganization.

Summary

• SAIC reported a 7.7% organic revenue growth for the fourth quarter of fiscal year 2024, reaching $1.74 billion, and a 7.4% organic revenue growth for the full fiscal year, totaling $7.44 billion.
• The company's net income for Q4 FY24 was $39 million, with an adjusted EBITDA of $127 million, or 7.3% of revenue, while full year net income was $477 million, with an adjusted EBITDA of $668 million, or 9.0% of revenue.
• Diluted earnings per share for Q4 FY24 were $0.74, with an adjusted diluted EPS of $1.43, and for the full year, diluted EPS was $8.88, with an adjusted diluted EPS of $7.88.
• Cash flows from operating activities were $63 million for the quarter and $396 million for the full year, with transaction-adjusted free cash flow at $119 million and $486 million, respectively.
• SAIC's backlog at the end of fiscal year 2024 was approximately $22.8 billion, with $3.5 billion funded.
• The company has updated its FY25 guidance, projecting higher revenue and free cash flow.
• SAIC announced a business reorganization effective February 3, 2024, replacing two operating sectors with five customer-facing business groups.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, organic growth, and a strategic reorganization. While there are some negative aspects, the overall tone is optimistic and forward-looking.

Positives

• SAIC experienced strong organic revenue growth in both the fourth quarter and the full fiscal year.
• The company's full year operating income as a percentage of revenues increased to 10.0% from 6.5% in the prior fiscal year.
• Adjusted EBITDA margin for the full year increased to 9.0% from 8.8% in the prior fiscal year.
• Diluted earnings per share for the year increased to $8.88 compared to $5.38 in the prior year.
• The company deployed $463 million of capital during the year, including share repurchases and dividends.
• SAIC secured several notable contract awards, including a $444 million contract with the U.S. Space Force subsequent to the period end.

Negatives

• Revenues for the quarter decreased by $231 million compared to the prior year quarter, primarily due to divestitures and deconsolidation.
• Net income for the quarter decreased by 47% compared to the prior year quarter.
• Cash flows provided by operating activities decreased by $82 million in the quarter and $136 million for the full year compared to the prior year.
• The company's book-to-bill ratio for the quarter was approximately 0.8, indicating that new bookings did not fully replace revenue.

Risks

• The company's financial results were impacted by the sale of the logistics and supply chain management business and the deconsolidation of Forfeiture Support Associates J.V.
• Higher incentive-based compensation expenses, including accelerated stock-based compensation, affected profitability.
• A reserve on a customer receivable related to a program completed prior to FY2022 also impacted results.
• The company's future performance is subject to risks and uncertainties detailed in their SEC filings.

Future Outlook

SAIC's FY25 guidance projects revenue between $7.35B and $7.50B, adjusted EBITDA margin between 9.2% and 9.4%, adjusted diluted EPS between $8.00 and $8.20, and free cash flow between $490M and $510M.

Management Comments

• Toni Townes-Whitley, SAIC Chief Executive Officer, stated that the company delivered strong financial results in the quarter with revenue, earnings per share and free cash flow ahead of expectations.
• The CEO also expressed confidence that investments in Fiscal Year 2025 will accelerate the company's ability to drive value for all stakeholders.

Industry Context

SAIC's results reflect the ongoing demand for technology integration services in the defense, space, civilian, and intelligence markets, and the company's reorganization is aimed at better aligning with customer needs and driving growth in these sectors.

Comparison to Industry Standards

• SAIC's organic revenue growth of 7.7% in Q4 and 7.4% for the full year is a strong performance compared to some of its peers in the government contracting sector, such as Leidos which reported 3.9% organic revenue growth in their most recent quarter.
• The adjusted EBITDA margin of 9.0% for the full year is competitive with other large government contractors, although some companies with higher-margin software or technology offerings may achieve higher margins.
• SAIC's backlog of $22.8 billion is a significant indicator of future revenue potential, and is comparable to other large players in the industry such as General Dynamics.
• The company's focus on digital transformation and emerging technologies aligns with industry trends and customer demands.

Stakeholder Impact

• Shareholders will benefit from the strong financial results, share repurchases, and dividends.
• Employees will be impacted by the business reorganization and the company's focus on innovation.
• Customers will benefit from the company's enhanced customer engagement and focus on mission integration.
• Suppliers and creditors will be impacted by the company's financial performance and capital deployment.

Next Steps

• SAIC will continue to execute its new corporate strategy to become the premier mission integrator.
• The company will focus on investments in Fiscal Year 2025 to drive value for stakeholders.
• SAIC will continue to pay dividends on a quarterly basis, subject to Board approval.
• The company will continue to modernize the space launch range instrumentation under the U.S. Space Force contract.

Key Dates

Keywords

SAIC, revenue, EBITDA, earnings per share, free cash flow, backlog, government contracts, defense, space, technology, reorganization