Document

“It is an honor to lead SAIC at a time of such convergence in protecting this country’s national security interests, embracing the ongoing acceleration of technological innovation, and charting this company’s course for continued success in the future,” said SAIC CEO Toni Townes-Whitley. "To ensure our leadership in the market, SAIC is focused on strategic pivots across four key dimensions of the business: innovation & solutions, go-to-market, culture, and brand. As we move out on this strategy, I’m encouraged by some early signs of success and look forward to sharing our progress against milestones in the coming quarters and years. We believe our financial results in the third quarter demonstrate that we are entering the next phase of our strategy from a position of strength."


	Three Months Ended
	November 3, 2023			Percent change		October 28, 2022
	(in millions, except per share amounts)
Revenues	$	1,895		(1)	%	$	1,909
Operating income	143			8	%	133
Operating income as a percentage of revenues	7.5		%	50	bps	7.0		%
Adjusted operating income(1)	144			6	%	136
Adjusted operating income as a percentage of revenues	7.6		%	50	bps	7.1		%
Net income	93			16	%	80
EBITDA(1)	177			5	%	168
EBITDA as a percentage of revenues	9.3		%	50	bps	8.8		%
Adjusted EBITDA(1)	178			5	%	170
Adjusted EBITDA as a percentage of revenues	9.4		%	50	bps	8.9		%
Diluted earnings per share	$	1.76		21	%	$	1.45
Adjusted diluted earnings per share(1)	$	2.27		19	%	$	1.90
Net cash provided by operating activities	$	101		(21)	%	$	128
Free cash flow(1)	$	97		(20)	%	$	122
Transaction-adjusted free cash flow(1)	$	148		21	%	$	122

Revenues for the quarter decreased $14 million or 1% compared to the same period in the prior year primarily due to the sale of the logistics and supply chain management business (Supply Chain Business) ($161 million), the deconsolidation of the Forfeiture Support Associates J.V. (FSA) ($35 million), and contract completions, partially offset by ramp up on existing and new contracts. Adjusting for the impact of the divestiture of the Supply Chain Business and the deconsolidation of FSA, revenues grew 10.6%.

Cash flows provided by operating activities for the third quarter decreased $27 million compared to the prior year quarter, primarily due to timing of payroll payments and higher tax payments in the current year, partially offset by timing of vendor payments and other changes in working capital. Transaction-adjusted free cash flow(1) was $148 million in the third quarter, an increase of $26 million compared to the prior year quarter, primarily due to increased earnings and improved working capital efficiency.

As previously announced, subsequent to quarter end, the Company's Board of Directors declared a cash dividend of $0.37 per share of the Company's common stock payable on January 26, 2024 to stockholders of record on January 12, 2024. SAIC intends to continue paying dividends on a quarterly basis, although the declaration of any future dividends will be determined by the Board of Directors each quarter and will depend on earnings, financial condition, capital requirements and other factors.

U.S. Space Force: SAIC was awarded a seven-year, $575 million contract by the United States Space Force to support its Ground Based Radar Maintenance and Sustainment Services (GMASS). Under the contract, SAIC will provide on-going sustainment and modification of the GMASS Contract-covered systems, including Upgraded Early Warning Radars (UEWR), the Precision Acquisition Vehicle Entry (PAVE) Phased Array Warning System (PAWS), and the Perimeter Acquisition Radar Attack Characterization System (PARCS) radars and all associated systems and equipment. In addition to sustaining operational capabilities, the contract will also utilize an integrated roadmap to highlight incremental opportunities and areas for innovation to promote backlog items and improve operational efficiencies. Through this work, SAIC will help further modernize critical missile warning and space domain awareness radars for key Space Force missions.

Naval Information Warfare Center: SAIC was awarded a $375 million contract to continue providing Command, Control, Communications, Computers (C4) Intelligence, Surveillance and Reconnaissance (ISR) fielding and integration on land-based vehicle platforms in support to the Naval Information Warfare Center – Atlantic (NIWC LANT). Under the five-year contract, SAIC will support NIWC LANT with production-engineering, integration, installation, logistical and programmatic support required to enable C4ISR fielding and integration on land-based vehicle platforms such as Mine Resistant Ambush Protected (MRAP) and Joint Light Tactical Vehicle (JLTV) across multiple Department of Defense services at both continental U.S. and overseas locations. SAIC has invested in its Charleston facilities to enable the execution of vehicle fielding integration and support missions.

SAIC Announces New Data and AI Features To Improve Government Mission Outcomes: SAIC launched new offerings for Tenjin and additional features for Koverse. The innovative Tenjin offerings enable organizations to handle and store their complex sensitive data securely from the enterprise to the edge, as well as operationalize Artificial Intelligence (AI) while the additional Koverse features improve and accelerate the capacity for defense and civilian customers to unlock the value of their data.

SAIC Announces New Zero Trust Edge Capability: SAIC launched new, purpose-built Zero Trust security capabilities optimized for the government market, which provide a solution to answer the Zero Trust pillars addressing data, identity, devices, networks, applications and workloads. The new Zero Trust security capabilities have been tested and validated on an AWS Snowball Edge and AWS Snow Family device with on-board storage and compute power for select Amazon Web Services (AWS) capabilities. AWS Snowball Edge can support local processing and edge-computing workloads in addition to transferring data between a user’s local environment and AWS.

SAIC management will discuss operations and financial results in an earnings conference call beginning at 10:00 a.m. Eastern time on December 4, 2023. The conference call will be webcast simultaneously to the public through a link on the Investor Relations section of the SAIC website (http://investors.saic.com). We will be providing webcast access only – “dial-in” access is no longer available. Additionally, a supplemental presentation will be available to the public through links to the Investor Relations section of the SAIC website. After the call concludes, an on-demand audio replay of the webcast can be accessed on the Investor Relations website.

SAIC® is a premier Fortune 500® technology integrator driving our nation’s technology transformation. Our robust portfolio of offerings across the defense, space, civilian and intelligence markets includes secure high-end solutions in engineering, digital, artificial intelligence and mission solutions. Using our expertise and understanding of existing and emerging technologies, we integrate the best components from our own portfolio and our partner ecosystem to deliver innovative, effective and efficient solutions that are critical to achieving our customers' missions.

The Company does not provide a reconciliation of forward-looking adjusted diluted EPS to GAAP diluted EPS or adjusted EBITDA margin to GAAP net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate net income may vary significantly based on actual events, the Company is not able to forecast GAAP diluted EPS or GAAP net income with reasonable certainty. The variability of the above charges may have an unpredictable and potentially significant impact on our future GAAP financial results.

Certain statements in this release contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “guidance,” and similar words or phrases. Forward-looking statements in this release may include, among others, estimates of future revenues, operating income, earnings, earnings per share, charges, total contract value, backlog, outstanding shares and cash flows, as well as statements about future dividends, share repurchases and other capital deployment plans. Such statements are not guarantees of future performance and involve risk, uncertainties and assumptions, and actual results may differ materially from the guidance and other forward-looking statements made in this release as a result of various factors. Risks, uncertainties and assumptions that could cause or contribute to these material differences include those discussed in the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” sections of our Annual Report on Form 10-K, as updated in any subsequent Quarterly Reports on Form 10-Q and other filings with the SEC, which may be viewed or obtained through the Investor Relations section of our website at www.saic.com or on the SEC’s website at www.sec.gov. Due to such risks, uncertainties and assumptions you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to reflect subsequent events, actual results or changes in SAIC’s expectations. SAIC also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.


	Three Months Ended				Nine Months Ended
	November 3, 2023		October 28, 2022		November 3, 2023		October 28, 2022
	(in millions, except per share amounts)
Revenues	$	1,895	$	1,909	$	5,707	$	5,736
Cost of revenues	1,666		1,688		5,027		5,070
Selling, general and administrative expenses	87		87		259		272
Acquisition and integration costs	—		1		1		11
Other operating income	(1)		—		(242)		—
Operating income	143		133		662		383
Interest expense	31		30		97		87
Other (income) expense, net	(2)		3		(7)		6
Income before income taxes	114		100		572		290
Provision for income taxes	(21)		(20)		(134)		(62)
Net income	$	93	$	80	$	438	$	228
Net income attributable to non-controlling interest	—		—		—		2
Net income attributable to common stockholders	$	93	$	80	$	438	$	226
Weighted-average number of shares outstanding:
Basic	52.8		55.0		53.5		55.6
Diluted	53.3		55.5		54.0		56.0
Earnings per share:
Basic	$	1.79	$	1.45	$	8.19	$	4.06
Diluted	$	1.76	$	1.45	$	8.11	$	4.04


	November 3, 2023		February 3, 2023
	(in millions)
ASSETS
Current assets:
Cash and cash equivalents	$	311	$	109
Receivables, net	1,010		936
Inventory, prepaid expenses and other current assets	67		152
Total current assets	1,388		1,197
Goodwill	2,851		2,911
Intangible assets, net	923		1,009
Property, plant, and equipment, net	89		92
Operating lease right of use assets	136		158
Other assets	271		176
Total assets	$	5,658	$	5,543
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	840	$	767
Accrued payroll and employee benefits	317		328
Long-term debt, current portion	69		31
Total current liabilities	1,226		1,126
Long-term debt, net of current portion	2,194		2,343
Operating lease liabilities	132		152
Other long-term liabilities	278		218
Equity:
Total common stockholders' equity	1,828		1,694
Non-controlling interest	—		10
Total stockholders' equity	1,828		1,704
Total liabilities and stockholders' equity	$	5,658	$	5,543


	Three Months Ended				Nine Months Ended
	November 3, 2023		October 28, 2022		November 3, 2023		October 28, 2022
	(in millions)
Cash flows from operating activities:
Net income	$	93	$	80	$	438	$	228
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	34		37		106		118
Amortization of off-market customer contracts	(1)		(6)		(5)		(12)
Amortization of debt issuance costs	—		2		4		8
Deferred income taxes	(8)		(7)		(33)		(29)
Stock-based compensation expense	15		12		42		35
Gain on sale of long-lived assets	—		—		(3)		—
Gain on divestitures	—		—		(247)		—
Increase (decrease) resulting from changes in operating assets and liabilities, net of the effect of divestitures:
Receivables	(52)		(23)		(142)		(44)
Inventory, prepaid expenses and other current assets	5		—		13		7
Other assets	8		—		5		5
Accounts payable and accrued liabilities	68		(50)		120		(21)
Accrued payroll and employee benefits	(13)		59		(4)		32
Income taxes payable	(53)		23		21		59
Operating lease assets and liabilities, net	(1)		(1)		(3)		(1)
Other long-term liabilities	6		2		21		2
Net cash provided by operating activities	101		128		333		387
Cash flows from investing activities:
Expenditures for property, plant, and equipment	(4)		(6)		(16)		(18)
Purchases of marketable securities	(1)		(1)		(6)		(5)
Sales of marketable securities	1		1		5		3
Proceeds from sale of long-lived assets	—		—		3		—
Proceeds from divestitures	1		—		356		—
Cash divested upon deconsolidation of joint venture	—		—		(8)		—
Other	(7)		—		(10)		(3)
Net cash (used in) provided by investing activities	(10)		(6)		324		(23)
Cash flows from financing activities:
Dividend payments to stockholders	(19)		(21)		(60)		(63)
Principal payments on borrowings	(15)		(205)		(275)		(780)
Issuances of stock	5		4		13		12
Stock repurchased and retired or withheld for taxes on equity awards	(103)		(60)		(293)		(208)
Proceeds from borrowings	—		115		160		630
Debt issuance costs	—		(1)		—		(6)
Distributions to non-controlling interest	—		—		—		(2)
Net cash used in financing activities	(132)		(168)		(455)		(417)
Net (decrease) increase in cash, cash equivalents and restricted cash	(41)		(46)		202		(53)
Cash, cash equivalents and restricted cash at beginning of period	361		108		118		115
Cash, cash equivalents and restricted cash at end of period	$	320	$	62	$	320	$	62

Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts and task orders as work is performed and excludes contract awards which have been protested by competitors until the protest is resolved in our favor. SAIC segregates backlog into two categories, funded backlog and negotiated unfunded backlog. Funded backlog for contracts with government agencies primarily represents contracts for which funding is appropriated less revenues previously recognized on these contracts, and does not include the unfunded portion of contracts where funding is incrementally appropriated or authorized by the U.S. government and other customers even though the contract may call for performance over a number of years. Funded backlog for contracts with non-government agencies represents the estimated value of contracts which may cover multiple future years under which SAIC is obligated to perform, less revenues previously recognized on these contracts. Negotiated unfunded backlog represents the estimated future revenues to be earned from negotiated contracts for which funding has not been appropriated or authorized, and unexercised priced contract options. Negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under indefinite delivery, indefinite quantity (IDIQ), U.S. General Services Administration (GSA) schedules or other master agreement contract vehicles, with the exception of certain IDIQ contracts where task orders are not competitively awarded and separately priced but instead are used as a funding mechanism, and where there is a basis for estimating future revenues and funding on future anticipated task orders.

This schedule describes the non-GAAP financial measures included in this earnings release. While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below. Other companies may define similar measures differently.


	Three Months Ended						Nine Months Ended
	November 3, 2023			October 28, 2022			November 3, 2023			October 28, 2022
	(in millions)
Net income	$	93		$	80		$	438		$	228
Interest expense and loss on sale of receivables	33			32			104			91
Interest income	(4)			(1)			(9)			(1)
Provision for income taxes	21			20			134			62
Depreciation and amortization	34			37			106			118
EBITDA(1)	177			168			773			498
EBITDA as a percentage of revenues	9.3		%	8.8		%	13.5		%	8.7		%
Acquisition and integration costs	—			1			1			11
Restructuring and impairment costs	2			5			8			7
Depreciation included in acquisition and integration costs and restructuring and impairment costs	—			(1)			—			(1)
Recovery of acquisition and integration costs and restructuring costs	(1)			(3)			(1)			(6)
Gain on divestitures, net of transaction costs	—			—			(240)			—
Adjusted EBITDA(1)	$	178		$	170		$	541		$	509
Adjusted EBITDA as a percentage of revenues	9.4		%	8.9		%	9.5		%	8.9		%


Operating income	$	143		$	133		$	662		$	383
Operating income as a percentage of revenues	7.5		%	7.0		%	11.6		%	6.7		%
Acquisition and integration costs	—			1			1			11
Restructuring and impairment costs	2			5			8			7
Recovery of acquisition and integration costs and restructuring costs	(1)			(3)			(1)			(6)
Gain on divestitures, net of transaction costs	—			—			(240)			—
Adjusted operating income(1)	$	144		$	136		$	430		$	395
Adjusted operating income as a percentage of revenues	7.6		%	7.1		%	7.5		%	6.9		%

EBITDA is a performance measure that is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization. Adjusted EBITDA and adjusted operating income are performance measures that exclude the impact of non-recurring transactions that we do not consider to be indicative of our ongoing operating performance. The acquisition and integration costs relate to the Company's acquisitions. The gain on divestitures includes gains associated with the deconsolidation of FSA and the sale of the logistics and supply chain management business, net of transaction costs. We believe that these performance measures provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding the long-term financial performance of the Company.


	Three Months Ended				Nine Months Ended
	November 3, 2023		October 28, 2022		November 3, 2023		October 28, 2022
Diluted earnings per share	$	1.76	$	1.45	$	8.11	$	4.04

Acquisition and integration costs and restructuring and impairment costs, divided by diluted 'weighted-average number of shares outstanding' (WASO)	0.01		0.05		0.15		0.21
Tax effect of acquisition and integration costs and restructuring and impairment costs, divided by diluted WASO	—		(0.01)		(0.02)		(0.04)
Net effect of acquisition and integration costs and restructuring and impairment costs, divided by diluted WASO	0.01		0.04		0.13		0.17

Amortization of intangible assets, divided by diluted WASO	0.53		0.52		1.59		1.68
Tax effect of amortization of intangible assets, divided by diluted WASO	(0.09)		(0.11)		(0.29)		(0.36)
Net effect of amortization of intangible assets, divided by diluted WASO	0.44		0.41		1.30		1.32

Gain on divestitures, net of transaction costs, divided by diluted WASO	—		—		(4.44)		—
Tax effect of gain on divestitures, net of transaction costs, divided by diluted WASO	0.06		—		1.35		—
Net effect of gain on divestitures, net of transaction costs, divided by diluted WASO	0.06		—		(3.09)		—

Adjusted diluted earnings per share(1)	$	2.27	$	1.90	$	6.45	$	5.53

Adjusted diluted earnings per share is a performance measure that excludes the impact of non-recurring transactions that we do not consider to be indicative of our ongoing operating performance. The acquisition and integration costs relate to the Company's acquisitions. The gain on divestitures includes gains associated with the deconsolidation of FSA and the sale of the logistics and supply chain management business, net of transaction costs. Adjusted diluted earnings per share also excludes amortization of intangible assets because we do not have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and the related amortization term are unique to each acquisition. We believe that this performance measure provides management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding the long-term financial performance of the Company.


	Three Months Ended				Nine Months Ended
	November 3, 2023		October 28, 2022		November 3, 2023		October 28, 2022
	(in millions)
Net cash provided by operating activities	$	101	$	128	$	333	$	387
Expenditures for property, plant, and equipment	(4)		(6)		(16)		(18)
Cash used (provided) by MARPA Facility	—		—		—		(60)
Free cash flow(1)	$	97	$	122	$	317	$	309
L&SCM divestiture transaction fees	—		—		7		—
L&SCM divestiture cash taxes	56		—		56		—
L&SCM divestiture transition services	(5)		—		(13)		—
Transaction-adjusted free cash flow(1)	$	148	$	122	$	367	$	309

Free cash flow is calculated by taking cash flows provided by operating activities less expenditures for property, plant, and equipment and less cash flows from our Master Accounts Receivable Purchasing Agreement (MARPA Facility) for the sale of certain designated eligible U.S. government receivables. Under the MARPA Facility, the Company can sell eligible receivables up to a maximum amount of $300 million. Transaction-adjusted free cash flow excludes cash taxes, transaction fees, and other costs related to the divestiture of the logistics and supply chain management business from free cash flow as previously defined. We believe that free cash flow and transaction-adjusted free cash flow provides management and investors with useful information in assessing trends in our cash flows and in comparing them to other peer companies, many of whom present similar non-GAAP liquidity measures. These measures should not be considered as a measure of residual cash flow available for discretionary purposes.


	CURRENT	PRIOR
	Fiscal Year	Fiscal Year
	2024 Guidance	2024 Guidance
Revenue	$7.325B - $7.350B	$7.20B - $7.25B
Adjusted EBITDA Margin(1)	9.3% - 9.4%	9.3% - 9.4%
Adjusted Diluted EPS(1)	$7.70 to $7.90	$7.20 to $7.40
Transaction-Adjusted Free Cash Flow(1)	$460M - $480M(2)	$460M - $480M


	November 3, 2023		August 4, 2023		February 3, 2023
	(in millions)
Funded backlog	$	4,036	$	3,716	$	3,554
Negotiated unfunded backlog	19,102		$	18,808	20,248
Total backlog	$	23,138	$	22,524	$	23,802