Q2 2027 Science Applications International Corp Earnings Call Transcript
Key Points
- Science Applications International Corp (SAIC) delivered strong Q2 FY27 results with organic growth of approximately 5%, driven by broad-based strength and an improving outlay environment.
- Adjusted EBITDA margins reached 10.3%, reflecting strong program execution and continued benefits from cost efficiency efforts, leading to raised FY27 guidance for revenue, EBITDA, and EPS.
- The company achieved a recompete win rate of over 90% this quarter, securing key contracts in intel space, Army integration, and border security, which strengthens its base and supports future growth.
- Project ORBIT, a transformation initiative, is expected to generate approximately $150 million in annual run-rate savings by FY30, with a path to 11% margins, while also enabling investments in growth areas.
- Free cash flow remained robust at $131 million in the quarter, with net leverage falling to 3.0 times, providing financial flexibility for portfolio shaping and M&A opportunities.
- Book-to-bill was weak at 0.6x for the quarter (0.8x trailing twelve months), impacted by delays in large recompete awards and a slower RFP environment, with expectations to finish the year near 1.0x.
- The procurement environment remains uneven, with large opportunities slipping to the right as customers implement new guidelines, including fixed-price directives, causing uncertainty in award timing.
- Second-half margins are expected to step down to the high 9% range due to planned investments in high-priority areas, which could temper near-term profitability.
- Organic growth guidance for FY27 remains modest at -2% to flat, reflecting headwinds from the RITS contract roll-off and a slower submission environment.
- The company faces ongoing challenges from a slower RFP and award cycle, with submission volume down to $24 billion, and assumes a continuing resolution for the next fiscal year, which could limit growth opportunities.
Good day and thank you for standing by. Welcome to the SAIC fiscal year 2027 Q2 earnings conference call. (Operator Instructions) Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your speaker today, Jon Raviv, Vice President of Investor Relations. Please go ahead.
Good morning, and thank you for joining SAIC's second quarter fiscal year 2027 earnings call. My name is Jon Raviv, Vice President of Investor Relations. And joining me today to discuss our business and the financial results are Jim Reagan, our Chief Executive Officer; and Prabu Natarajan, our Chief Financial Officer and Executive Vice President of Enterprise Operations.
Today, we will discuss our results of the quarter ended July 31, 2026. Please note that we may make forward-looking statements on today's call that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from
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