Science Applications International Corp. [SAIC] plans to deliver higher organic growth on a sustained basis than it forecast earlier this year with an initial focus on improving business development and wring more out of existing contracts, the company’s new top executive said this week.
In April, SAIC under then CEO Nazzic Keene, forecast sustained organic growth targets between 2 and 4 percent with internal aspirations higher. Toni Townes-Whitley, who succeeded Keene as CEO in October, told investors on Monday that “We as a leadership team, are aligned with a goal to establish a new normal for SAIC, sustainable organic growth rate above the 2 to 4 percent framework we provided in April, while delivering increased earnings and free cash flow.”
Townes-Whitley said that SAIC is centralizing its business development to ensure more standardization and bid quality to boost win rates for recompetes and new contracts to historical levels. Even though the company faces revenue headwinds in its next fiscal year due to losses on contracts where it was the incumbent, the ramp up on new contract wins combined with an enterprise approach to business development and capture fuels confidence SAIC will grow next year, she said during the company’s third quarter earnings call for fiscal year 2024.
Net income jumped 16 percent to $93 million, $1.76 earnings per share (EPS), in the quarter from $80 million ($1.45 EPS) a year ago. Adjusting for interest expense and income, taxes, depreciation and amortization, per share earnings of $2.27 topped consensus estimates by 58 cents.
Sales in the quarter fell a percent to just under $1.9 billion from just over $1.9 billion a year ago due to the divestiture of the company’s logistics and supply chain management business and to a lesser extent the deconsolidation of the Forfeiture Support Associates Joint Venture. Excluding these two items, organic growth was up nearly 11 percent.
SAIC increased its sales guidance for FY ’24 by about 2 percent to between $7.3 billion and $7.4 billion, with organic growth expected to be 6 percent higher versus a year ago. The increase is driven by better third quarter performance and the potential for short-term government funding disruptions, Prabu Natarajan, the company’s chief financial officer, said during the call.
With a focus on organic growth, Townes-Whitley said the company’s mergers and acquisition strategy has “healthy skepticism toward larger transaction” and that the focus will be on “shoring up or solutions portfolio with new technology as well as maximizing long-term returns.”
Since coming aboard, Townes-Whitley said SAIC’s leadership team has been focused on four strategic pivots, which include the solutions portfolio, go-to-market, culture, and brand. The centralization and standardization efforts for business development are part of the go-to-market strategy.
In October, SAIC hired Lauren Knausenberger as its chief innovation officer. She previously was the chief information officer for the Air Force, overseeing enterprise information technology, data and artificial intelligence, and cybersecurity. She also worked in private equity and industry, including at CACI International
[CACI].
Townes-Whitley said Knausenberger was hired to strengthen the company’s focus on having a portfolio of solutions that is “mission-relevant, scalable, differentiated and aligned with our strategy to drive sustainable organic growth in our key markets.” Knausenberger will oversee SAIC’s Innovation Factories, its technology roadmap, and “ensuring that the investments we make maximize differentiation and long-term value,” she said.
Townes-Whitley said SAIC’s Innovation Factories are already helping the company provide unique solutions to the market and that Knausenberger will ensure the company’s technology discriminators are incorporated across its business lines.
As for culture, she said SAIC will “operationalize an enterprise first mindset while driving a stronger sense of entrepreneurial execution,” she said. This will be achieved in part by changes to compensation incentives to drive accountability and “align our objectives with shareholder value,” she said.
After being named as SAIC’s incoming CEO earlier this year, Townes-Whitley said the received congratulations from senior government, military, and business leaders, and SAIC alumni, many of whom said the company’s brand is recognized as a “national asset.” The goal is to further capitalize on the value of the brand by making sure customers are aware of all the company’s capabilities, she said.