Science Applications International Corp. [SAIC] on Tuesday posted solid fourth quarter results with net income and sales both higher than a year ago even though the federal government is still taking longer to make awards.
Net income increased 9 percent to $36 million, 75 cents earnings per share (EPS), from $33 million (66 cents EPS), topping consensus estimates by four cents per share. The increase was due to higher operating margins and lower tax expense due to the retroactive reinstatement of the federal research and development tax credit.
Sales edged up a percent to $952 million from $941 million, driven by higher volume on supply chain contracts and from revenues on newly awarded programs.
“From a market standpoint there have been no significant shifts in the environment, which is generally good news,” Tony Moraco, SAIC’s CEO, said on the company’s earnings call. “There appears to be optimism as a result of the president’s budget recommendation for fiscal 2016 and early feedback from congressional committee deliberations. However, there is also caution as demonstrated by our customers as the pace of contract awards has not changed.”
Moraco also said that “As it reflects on our business, we’re still seeing fairly high demand for the technical expertise that the customer continues to seek across the portfolio and the diversification of the portfolio helps in meeting both their IT (information technology) program upgrades but also the system engineering and mission capability.”
The company has bids in on $12.7 billion worth of business, up from just over $11 billion at the end of the third quarter, Moraco said. The increase is due solely to the company rebidding on NASA’s potential $1.8 billion Health and Human Performance Contract, which it won last spring but then saw the award evaporate following a successful protest by Wyle Laboratories. The agency renewed the competition and SAIC’s new bid was submitted in January.
SAIC’s total backlog at the end of its fiscal year stood at $6.2 billion, down $500 million from a year ago, while funded backlog stood at $1.7 billion, up $100 million from a year ago. Bookings in the quarter were 700 million and free cask flow was $89 million.
For the year, SAIC’s net income increased 25 percent to $141 million ($2.91 EPS) from $113 million ($2.27 EPS) despite a 6 decrease in sales to $3.9 billion from $4.1 billion. Bookings were $3.4 billion and free cash flow $255 million.
SAIC, which is a year removed from spinning off a part of its business that is now called Leidos [LDOS], doesn’t provide detailed guidance but said its long-term targets are intact. Those targets include annual organic growth in the low-single digits, operating margin improvements between 10 to 20 basis points annually beginning in the low 6 percent range, and achieving free cash flow in excess of net income. Operating margin for the quarter and year was 6.3 percent.
SAIC spent $25 million on share repurchases and $12 million on dividends in the quarter.