Science Applications International Corp. [SAIC] last Thursday posted higher earnings and sales in its third quarter due to federal contracts in its defense and civilian portfolios and lower interest expense.
Net income eked out a 2 percent gain to $43 million, 98 cents earnings per share (EPS), from $42 million (91 cents EPS) a year ago, topping consensus estimates by 11 cents per share. SAIC attributed the improvement to lower interest expense as a result of refinancing its long-term debt.
Operation margins slipped 30 basis points to 6.3 percent.
Sales in the quarter were up 3 percent to $1.1 billion. A year ago sales were also in the $1.1 billion range. The growth was organic.
SAIC said sales were higher due to contracts with NASA, the Army and the Environmental Protection Agency.
Orders were a record $2.3 billion, the second straight quarter of record bookings, for a book-to-bill of 2.6 times sales. Total backlog stood at $10.7 billion at the end of the quarter, up from $8 billion at the end of its fiscal year 2017, with funded backlog at $2.6 billion versus $1.8 billion three quarters ago.
Free cash flow was $72 million.
Tony Moraco, SAIC’s CEO, said on the company’s earnings call Thursday evening that it has $15 billion in bids outstanding. Despite the federal government continuing to operate under a continuing resolution more than two months into fiscal year 2018, he told investors “The majority of our customers are awarding contracts with relative budget confidence and investing in their operations after many years of a more conservative spending profile.”
This confidence is demonstrated by the company’s second straight quarter of record bookings, he said.
SAIC highlighted three contracts to new customers that it said will help drive growth. Once, a potential $93 million task order from U.S. Cyber Command, and the other, a potential $272 million award from Virginia to modernize the state’s information technology infrastructure.
The company continues to expect sales this fiscal year to be up slightly and to be profitable.