Science Applications International Corp (SAIC) Q1 2027 Earnings Call Highlights: Strong Margins ...

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Revenue: USD1.9 billion, representing organic growth of 0.5%. Adjusted EBITDA: USD222 million, with a margin reflecting strong program execution and cost efficiency efforts. Adjusted Diluted EPS: USD3.23, benefiting from better margins and a lower share count. Free Cash Flow: USD118 million, maintaining peer best cash conversion. Net Leverage: 3.1x, within target range. Net Bookings: USD2.1 billion, resulting in a quarterly book-to-bill of 1.1x. Pipeline: USD85 billion, more focused with enterprise IT comprising a smaller share. Adjusted EBITDA Margin Guidance: Increased to 10.1% to 10.3% for the full year. Adjusted EPS Guidance: Increased to USD9.90 to USD10.10. Free Cash Flow Guidance: Greater than USD600 million for the year.

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Release Date: June 01, 2026

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Science Applications International Corp (NASDAQ:SAIC) reported a strong start to the fiscal year with record margins and robust cash flow, demonstrating operational excellence. The company has a focused pipeline of approximately USD85 billion, with a greater emphasis on mission and engineering businesses, which are outgrowing the rest of the portfolio. SAIC is leveraging AI to modernize legacy systems and enhance capabilities, positioning itself well for future growth in defense, intelligence, and civilian sectors. The company achieved a book-to-bill ratio of 1.1x for the quarter, indicating strong demand and successful contract wins. SAIC raised its EBITDA guidance for the year, reflecting confidence in its ability to sustain strong financial performance.

Negative Points

SAIC faces challenges in achieving sustained organic growth, with a cautious outlook due to uncertainties and potential headwinds from recompete roll-offs. The company is undergoing a portfolio review, indicating potential instability as it realigns its focus away from commoditized enterprise IT markets. There are environmental factors slowing down RFPs and submissions, which could impact the timing of future contract awards. SAIC's guidance remains conservative, reflecting concerns about potential unknowns and market volatility that could affect performance. The departure of a key executive, Srini Attili, from the civilian business group may create temporary leadership gaps during the transition period.

Q & A Highlights

Q: Can you elaborate on the organic growth outlook and whether there's upside to the guidance? A: Prabu Natarajan, CFO, explained that while Q1 had tougher comps, they are being cautious due to past volatility. They are nudging guidance up slightly but will revisit it in Q2. The strong start with 5% on-contract growth is promising, but they remain conservative given the uncertainties ahead.

Story Continues

Q: Could you provide more details on the portfolio review and potential changes? A: CEO James Reagan mentioned that they are focusing on strategy, particularly in areas where they can meet customer needs for speed and agility. They plan to reduce investments in commoditized enterprise IT areas and are reviewing the entire portfolio to align with customer demands and strategic growth opportunities.

Q: Where are you seeing improvements in appropriations and on-contract growth? A: Prabu Natarajan noted improvements in the Navy and Army businesses, particularly in next-gen command control programs and loitering munitions. They are also seeing benefits in space and Intel programs, such as digital range modernization and radar sustainment, with cautious optimism for continued appropriations flow.

Q: How are you approaching capital allocation, especially with recent share repurchases? A: James Reagan stated that buybacks were timely and prudent, but they are also exploring market opportunities aligned with their strategy. Prabu Natarajan added that they remain disciplined in capital deployment, focusing on internal investments and opportunistic buybacks, with a plan for USD400 million in buybacks this year.

Q: Can you discuss the potential growth in hardware-related areas like command and control and radars? A: James Reagan emphasized a disciplined, capital-light approach, focusing on rapid prototyping and scaling production rates to meet customer demands. Prabu Natarajan added that their strength lies in the intersection of hardware and software, leveraging engineering expertise to differentiate in sustainment and production contracts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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