Science Applications International Corp. [SAIC] on Thursday reported lower earnings and flat sales in the second quarter of its fiscal year 2023 and the company increased its top and bottom-line guidance based on results through the first two quarters.
Net income tumbled 11 percent to $73 million, $1.30 earnings per share (EPS), from $82 million ($1.41 EPS) a year ago. Excluding acquisition, integration and restructuring costs, adjusted earnings of $1.75 EPS in the quarter were 6 cents per share above consensus estimates.
Sales in the quarter were flat at $1.8 billion, although organic revenue was down nearly 2 percent due to one less working day in the quarter and to a lesser degree pressure related to losses on recompeted contracts.
Orders in the quarter were a healthy $2.1 billion, representing a 1.1 times sales book-to-bill ratio, and drove backlog to $24.3 billion, up a percent from $24.1 billion at the end of fiscal year 2022. Bookings include an Air Force award of a $319 million contract to SAIC for the Air Operations Center Falconer program that had previously been protested.
The company’s win rate so far this year is “nicely ahead of plan,” Prabu Natarajan, SAIC’s chief financial officer, said an earnings call with analysts.
SAIC is also awaiting the outcome of a corrective action being taken by the Defense Department on the nearly $900 million Defense Counterintelligence and Security Agency One IT program awarded to the company but was contested by Deloitte Consulting
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Earnings and sales so far this year are ahead of SAIC’s expectations, leading the company to increase guidance for the year. The outlook for sales is now between $7.5 billion and nearly $7.6 billion, up from the lower end of the prior range of between $7.4 billion and nearly $7.6 billion. The updated forecast represents about 2 percent annual growth at the mid-point of the range.
Adjusted earnings are projected to be between $7 and $7.20 EPS versus prior guidance of between $6.90 and $7.20 EPS. Adjusted margin guidance is still pegged at 8.9 percent, which is where it stands through the first two quarters of the year.
The outlook for free cash flow is unchanged at between $500 million and $530 million. Free cash flow in the second quarter was $74 million, and was negatively impacted by about $25 million due to payment delays from a single government payment agency that was undergoing software updates and system and process changes, Natarajan said. Those payments have since been received by the company, he said.