Release Date: June 02, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SAIC reported revenue growth of approximately 2% in the first quarter, driven by the ramp-up of new and existing programs.
- The company secured net bookings of $2.4 billion, resulting in a book-to-bill ratio of 1.3, indicating strong business development efforts.
- SAIC was awarded a new cost-plus program role in Q1 as part of a $55 million contract with the Space Development Agency, highlighting its expertise in mission integration and digital engineering.
- The company has a robust pipeline with proposals totaling $7 billion submitted in the first quarter, and expects to reach $28 billion to $30 billion for the full year.
- SAIC's civilian segment, representing over 70% of total revenue, is well-supported by budget allocations, particularly in areas like the Department of Transportation and Department of Homeland Security.
Negative Points
- SAIC experienced procurement delays and award timelines moving to the right due to higher turnover rates among customers.
- Free cash flow was negative $44 million in the first quarter, impacted by the timing of receivables on two programs.
- Adjusted EBITDA margin was 8.4%, affected by seasonality of investments and higher costs on a fixed price program in the space business.
- The company faces potential challenges with the Army's budget outlook, which may be more constrained compared to other branches.
- SAIC's trailing 12-month book-to-bill ratio was 0.8, indicating a need for improvement to meet growth targets.
Q & A Highlights
Q: Can you provide an update on the current operating environment and budget priorities from the Department of Defense (DoD)?
A: Toni Townes-Whitley, CEO, explained that while the operating environment has stabilized, there are still new directives from the DoD. The company has responded to audits and identified its mission-critical roles. There is significant turnover in acquisition personnel, which affects procurement processes. The DoD is focusing on lethality and mission-critical work, aligning with SAIC's strategic pivot towards enterprise mission IT solutions.
Q: How competitive is the procurement environment, and how is SAIC positioned?
A: Toni Townes-Whitley noted that the procurement environment is competitive, especially as SAIC focuses on mission enterprise IT. The company is selective with bids and maintains a strong submission pipeline. Prabu Natarajan, CFO, added that procurement remains best value-focused, with no significant shift towards lowest price technically acceptable (LPTA) trends.
Q: What are the known headwinds for SAIC over the next 12 to 24 months?
A: Toni Townes-Whitley mentioned the NASA program loss as a headwind, which will conclude in Q3. The decision to no-bid the Cloud One program also impacts revenue. However, there are no other significant recompete risks. The company is monitoring potential impacts from DoD budget priorities, particularly in the Army sector.
Q: Can you discuss the cost overrun on the fixed price program in the space business?
A: Toni Townes-Whitley explained that the cost overrun was due to challenges in the tech development phase of a unique fixed price program with the Space Development Agency. The company has addressed the additional costs and received option period extensions, which should improve financial performance as the program moves into the sustainment phase.
Q: How does SAIC view the potential shift towards more outcomes-based and fixed price contracts?
A: Toni Townes-Whitley stated that while there is discussion about outcomes-based contracts, SAIC has not seen a significant shift yet. The company is prepared for fixed price opportunities, particularly in enterprise IT, and has a track record of maintaining solid margins in such environments. SAIC views this as a potential tailwind for profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
