Science Applications International Corporation (NYSE: SAIC), a leading
technology integrator providing high-end solutions in engineering, IT,
and mission solutions across the defense, space, civilian, and
intelligence markets, today announced results for the first quarter
ended May 3, 2019.
“SAIC is off to a strong start to fiscal year 2020, keeping our
attention on strong operational performance while continuing the
integration of Engility,” said SAIC CEO-Elect, Nazzic Keene. “The
transition of CEO responsibilities has gone smoothly while executing our
business strategy to accelerate sustained profitable growth through our
newly acquired capabilities, talent, and customer access.”
First Quarter of Fiscal Year 2020: |
||||||||||||||
Three Months Ended | ||||||||||||||
May 3, 2019 |
Percent change |
May 4, 2018 | ||||||||||||
(in millions, except per share amounts) | ||||||||||||||
Revenues | $ | 1,615 | 37 | % | $ | 1,175 | ||||||||
Operating income | 93 | 41 | % | 66 | ||||||||||
Operating income as a percentage of revenues | 5.8 | % | 20 | bps | 5.6 | % | ||||||||
Adjusted operating income(1) | 101 | 53 | % | 66 | ||||||||||
Adjusted operating income as a percentage of revenues | 6.3 | % | 70 | bps | 5.6 | % | ||||||||
Net income attributable to common stockholders | 55 | 12 | % | 49 | ||||||||||
EBITDA(1) | 126 | 66 | % | 76 | ||||||||||
EBITDA as a percentage of revenues | 7.8 | % | 130 | bps | 6.5 | % | ||||||||
Adjusted EBITDA(1) | 134 | 76 | % | 76 | ||||||||||
Adjusted EBITDA as a percentage of revenues | 8.3 | % | 180 | bps | 6.5 | % | ||||||||
Diluted earnings per share | $ | 0.92 | (19 | )% | $ | 1.13 | ||||||||
Adjusted diluted earnings per share(1) | $ | 1.36 | 11 | % | $ | 1.23 | ||||||||
Net cash provided by operating activities | $ | 178 | 102 | % | $ | 88 | ||||||||
Free cash flow(1) | $ | 169 | 106 | % | $ | 82 | ||||||||
(1)Non-GAAP measure, see Schedule 5 for information
about this measure.
Revenues for the quarter increased $440 million, or 37%, compared to the
prior year quarter due to the acquisition of Engility. Excluding
acquired revenues, revenues contracted 2.8%, attributable to
humanitarian relief materials in the prior year quarter and the effect
of acquisition related revenue dis-synergies.
Operating income as a percentage of revenues of 5.8%, increased from
5.6% in the comparable prior year period, due to the acquisition of
Engility, cost synergies related to the acquisition, and improved
performance across our portfolio, partially offset by higher costs
associated with the acquisition and integration of Engility.
Net income attributable to common stockholders for the quarter increased
$6 million as compared to the same period in the prior year primarily
due to increased operating income ($24 million, net of tax), partially
offset by higher interest expense and a higher effective tax rate.
Adjusted EBITDA(1) as a percentage of revenues for the
quarter increased to 8.3%, compared to 6.5% for the prior year quarter,
driven by the acquisition of Engility, cost synergies related to the
acquisition, and improved performance across our portfolio including
higher net favorable changes in estimates.
Diluted earnings per share was $0.92 for the quarter and adjusted
diluted earnings per share(1) was $1.36. The weighted-average
diluted shares outstanding during the quarter was 60 million shares.
(1)Non-GAAP measure, see Schedule 5 for information
about this measure.
Cash Generation and Capital Deployment
Cash flows provided by operating activities for the first quarter were
$178 million, compared to $88 million during the same period in the
prior year. The improvement is primarily due to customer collections
recouped from the U.S. federal government partial shutdown that occurred
in the prior quarter, strong customer collections across several
programs, and cash provided from the operating activities of Engility.
During the quarter, SAIC deployed $70 million of capital, consisting of
$44 million in plan share repurchases (591 thousand shares) under SAIC’s
previously announced share repurchase program, $23 million in cash
dividends, and a $3 million mandatory term loan repayment.
Quarterly Dividend Declared
Subsequent to quarter end, the Company’s Board of Directors declared a
cash dividend of $0.37 per share of the Company’s common stock payable
on July 26, 2019 to stockholders of record on July 12, 2019. SAIC
intends to continue paying dividends on a quarterly basis, although the
declaration of any future dividends will be determined by the Board of
Directors each quarter and will depend on earnings, financial condition,
capital requirements and other factors.
New Business Awards
Contract awards for the quarter were $1.9 billion, including
approximately $300 million from single-award indefinite-delivery,
indefinite-quantity (IDIQ) value. Net bookings for the quarter were
approximately $1.4 billion, which reflects a book-to-bill ratio of 0.9.
Of the net bookings for the quarter, 70% were for new business. SAIC’s
estimated backlog of signed business orders at the end of the quarter
was approximately $13.6 billion of which $3.0 billion was funded.
SAIC was awarded the following contracts during the quarter:
U.S. Intelligence Community: SAIC was awarded a mix of recompete
and new business contracts and task orders valued at approximately $300
million, if all options are exercised, by the U.S. national security,
space, and intelligence customers. Although these customers and the
specific nature of these contracts are classified, they all encompass
strategic, end-to-end services that help bolster national security.
Notable Recompete Awards:
NASA: SAIC was awarded NASA’s Safety and Mission Assurance
Engineering Contract (SMAEC) II worth up to $292 million. Under this
contract, SAIC will continue to provide safety engineering, reliability
engineering, quality engineering, quality assurance, and software
assurance in support of NASA programs and projects. The contract has a
five year period of performance, if all options are exercised.
The U.S. Air Force: SAIC was awarded a $58 million contract by
the Air Force Research Laboratory to research laser bioeffects, advance
vision science, conduct modeling and simulation, and perform safety
engineering. The Optical Radiation Bioeffects and Safety contract
enhances airman combat survivability by enabling U.S. forces to counter
optical hazards and threats. The contract has a 75-month period of
performance.
The U.S. Navy: SAIC was awarded a prime position on a $98 million
multi-award IDIQ contract to provide support to the Department of
Defense Air Traffic Control and Landing Systems, as well as
developmental programs such as the Joint Precision Approach and Landing
Systems (JPALS). The company will compete for task orders to support the
Naval Air Warfare Center Aircraft Division at Patuxent River, Maryland.
The contract has a five-year ordering period.
Notable New Business Awards:
The Defense Threat Reduction Agency (DTRA): SAIC was awarded a
position on the $535 million DTRA IT Service Design multiple-award IDIQ
contract to integrate IT services across DTRA. As one of five awardees,
SAIC will compete for task orders over a 10-year period of performance,
if all options are exercised.
The U.S. Marine Corps: SAIC was awarded a prime position on the
Marine Air-Ground Task Force Training Systems Support multiple-award
IDIQ contact. The company will compete for task orders to support
pre-deployment training programs to Marine Corps operating forces to
improve Marine warfighting skills. The contract is valued at $245
million and has a 10-year period of performance.
Webcast Information
SAIC management will discuss operations and financial results in an
earnings conference call beginning at 8:00 a.m. Eastern time on June 6,
2019. The conference call will be webcast simultaneously to the public
through a link on the Investor Relations section of the SAIC website (http://investors.saic.com).
We will be providing webcast access only – “dial-in” access is no longer
available. Additionally, a supplemental presentation will be available
to the public through links to the Investor Relations section of the
SAIC website. After the call concludes, an on-demand audio replay of the
webcast can be accessed on the Investor Relations website.
About SAIC
SAIC® is a premier technology integrator solving our nation’s most
complex modernization and readiness challenges. Our robust portfolio of
offerings across the defense, space, civilian, and intelligence markets
includes high-end solutions in engineering, IT, and mission solutions.
Using our expertise and understanding of existing and emerging
technologies, we integrate the best components from our own portfolio
and our partner ecosystem to deliver innovative, effective, and
efficient solutions.
We are 23,000 strong; driven by mission, united by purpose, and inspired
by opportunities. Headquartered in Reston, Virginia, SAIC has pro forma
annual revenues of approximately $6.5 billion. For more information,
visit saic.com. For
ongoing news, please visit our newsroom.
Forward-Looking Statements
Certain statements in this release contain or are based on
“forward-looking” information within the meaning of the Private
Securities Litigation Reform Act of 1995. In some cases, you can
identify forward-looking statements by words such as “expects,”
“intends,” “plans,” “anticipates,” “believes,” “estimates,” “guidance,”
and similar words or phrases. Forward-looking statements in this release
may include, among others, estimates of future revenues, operating
income, earnings, earnings per share, charges, total contract value,
backlog, outstanding shares and cash flows, as well as statements about
future dividends, share repurchases and other capital deployment plans.
Such statements are not guarantees of future performance and involve
risk, uncertainties and assumptions, and actual results may differ
materially from the guidance and other forward-looking statements made
in this release as a result of various factors. Risks, uncertainties and
assumptions that could cause or contribute to these material differences
include those discussed in the “Risk Factors,” “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” and
“Legal Proceedings” sections of our Annual Report on Form 10-K, as
updated in any subsequent Quarterly Reports on Form 10-Q and other
filings with the SEC, which may be viewed or obtained through the
Investor Relations section of our website at www.saic.com
or on the SEC’s website at www.sec.gov.
Due to such risks, uncertainties and assumptions you are cautioned not
to place undue reliance on such forward-looking statements, which speak
only as of the date hereof. SAIC expressly disclaims any duty to update
any forward-looking statement provided in this release to reflect
subsequent events, actual results or changes in SAIC’s expectations.
SAIC also disclaims any duty to comment upon or correct information that
may be contained in reports published by investment analysts or others.
Schedule 1: |
||||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED AND CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
||||||||||
Three Months Ended | ||||||||||
May 3, 2019 | May 4, 2018 | |||||||||
(in millions, except per share amounts) | ||||||||||
Revenues | $ | 1,615 | $ | 1,175 | ||||||
Cost of revenues | 1,435 | 1,074 | ||||||||
Selling, general and administrative expenses | 77 | 35 | ||||||||
Acquisition and integration costs | 10 | — | ||||||||
Operating income | 93 | 66 | ||||||||
Interest expense | 25 | 12 | ||||||||
Other (income) expense, net | (2 | ) | (1 | ) | ||||||
Income before income taxes | 70 | 55 | ||||||||
Provision for income taxes | (14 | ) | (6 | ) | ||||||
Net income | $ | 56 | $ | 49 | ||||||
Net income attributable to non-controlling interest | 1 | — | ||||||||
Net income attributable to common stockholders | $ | 55 | $ | 49 | ||||||
Weighted-average number of shares outstanding: | ||||||||||
Basic | 59.3 | 42.4 | ||||||||
Diluted | 60.0 | 43.4 | ||||||||
Earnings per share: | ||||||||||
Basic | $ | 0.93 | $ | 1.16 | ||||||
Diluted | $ | 0.92 | $ | 1.13 | ||||||
Schedule 2: |
||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED AND CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||||
May 3, 2019 | February 1, 2019 | |||||||
(in millions) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 151 | $ | 237 | ||||
Receivables, net | 1,039 | 1,050 | ||||||
Inventory, prepaid expenses and other current assets | 127 | 146 | ||||||
Total current assets | 1,317 | 1,433 | ||||||
Goodwill | 2,120 | 2,120 | ||||||
Intangible assets, net | 778 | 803 | ||||||
Property, plant, and equipment, net | 103 | 103 | ||||||
Other assets | 289 | 104 | ||||||
Total assets | $ | 4,607 | $ | 4,563 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 714 | $ | 632 | ||||
Accrued payroll and employee benefits | 259 | 241 | ||||||
Long-term debt, current portion | 37 | 24 | ||||||
Total current liabilities | 1,010 | 897 | ||||||
Long-term debt, net of current portion | 1,902 | 2,065 | ||||||
Other long-term liabilities | 222 | 102 | ||||||
Total common stockholders’ equity | 1,462 | 1,485 | ||||||
Non-controlling interest | 11 | 14 | ||||||
Total stockholders’ equity | 1,473 | 1,499 | ||||||
Total liabilities and stockholders’ equity | $ | 4,607 | $ | 4,563 | ||||
Schedule 3: |
||||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED AND CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
||||||||||
Three Months Ended | ||||||||||
May 3, 2019 | May 4, 2018 | |||||||||
(in millions) | ||||||||||
Cash flows from operating activities: | ||||||||||
Net income | $ | 56 | $ | 49 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||||
Depreciation and amortization | 36 | 11 | ||||||||
Deferred income taxes | 9 | — | ||||||||
Stock-based compensation expense | 8 | 8 | ||||||||
Increase (decrease) resulting from changes in operating assets and liabilities: |
||||||||||
Receivables | 11 | 8 | ||||||||
Inventory, prepaid expenses and other current assets | 16 | 7 | ||||||||
Other assets | 11 | (6 | ) | |||||||
Accounts payable and accrued liabilities | 20 | (24 | ) | |||||||
Accrued payroll and employee benefits | 18 | 34 | ||||||||
Other long-term liabilities | (7 | ) | 1 | |||||||
Net cash provided by operating activities | 178 | 88 | ||||||||
Cash flows from investing activities: | ||||||||||
Expenditures for property, plant, and equipment | (9 | ) | (6 | ) | ||||||
Purchases of marketable securities | (21 | ) | — | |||||||
Net cash used in investing activities | (30 | ) | (6 | ) | ||||||
Cash flows from financing activities: | ||||||||||
Dividend payments to stockholders | (23 | ) | (14 | ) | ||||||
Principal payments on borrowings | (153 | ) | (8 | ) | ||||||
Issuances of stock | 2 | 2 | ||||||||
Stock repurchased and retired or withheld for taxes on equity awards | (56 | ) | (53 | ) | ||||||
Debt issuance costs | — | (1 | ) | |||||||
Distributions to non-controlling interest | (4 | ) | — | |||||||
Net cash used in financing activities | (234 | ) | (74 | ) | ||||||
Net (decrease) increase in cash, cash equivalents and restricted cash | (86 | ) | 8 | |||||||
Cash, cash equivalents and restricted cash at beginning of period | 246 | 152 | ||||||||
Cash, cash equivalents and restricted cash at end of period | $ | 160 | $ | 160 | ||||||
Schedule 4: | ||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION BACKLOG (Unaudited) |
||||||||
The estimated value of our total backlog as of the dates presented |
||||||||
May 3, 2019 | February 1, 2019 | |||||||
Funded backlog | $ | 2,982 | $ | 2,753 | ||||
Negotiated unfunded backlog | 10,587 | 11,048 | ||||||
Total backlog | $ | 13,569 | $ | 13,801 | ||||
Backlog represents the estimated amount of future revenues to be
recognized under negotiated contracts and task orders as work is
performed and excludes contract awards which have been protested by
competitors until the protest is resolved in our favor. SAIC segregates
backlog into two categories, funded backlog and negotiated unfunded
backlog. Funded backlog for contracts with government agencies primarily
represents contracts for which funding is appropriated less revenues
previously recognized on these contracts, and does not include the
unfunded portion of contracts where funding is incrementally
appropriated or authorized by the U.S. government and other customers
even though the contract may call for performance over a number of
years. Funded backlog for contracts with non-government agencies
represents the estimated value of contracts which may cover multiple
future years under which SAIC is obligated to perform, less revenues
previously recognized on these contracts. Negotiated unfunded backlog
represents the estimated future revenues to be earned from negotiated
contracts for which funding has not been appropriated or authorized,
and unexercised priced contract options. Negotiated unfunded backlog
does not include any estimate of future potential task orders expected
to be awarded under indefinite delivery, indefinite quantity (IDIQ),
U.S. General Services Administration (GSA) schedules or other master
agreement contract vehicles.
Schedule 5:
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
NON-GAAP
FINANCIAL MEASURES
(Unaudited)
This schedule describes the non-GAAP financial measures included in this
earnings release. While we believe that these non-GAAP financial
measures may be useful in evaluating our financial information, they
should be considered as supplemental in nature and not as a substitute
for financial information prepared in accordance with GAAP.
Reconciliations, definitions, and how we believe these measures are
useful to management and investors are provided below. Other companies
may define similar measures differently.
EBITDA, Adjusted EBITDA and Adjusted |
||||||||||
Three Months Ended | ||||||||||
May 3, 2019 | May 4, 2018 | |||||||||
(in millions) | ||||||||||
Net income attributable to common stockholders | $ | 55 | $ | 49 | ||||||
Interest expense | 25 | 12 | ||||||||
Interest income | (1 | ) | (1 | ) | ||||||
Provision for income taxes | 14 | 6 | ||||||||
Depreciation and amortization | 33 | 10 | ||||||||
EBITDA(1) | 126 | 76 | ||||||||
EBITDA as a percentage of revenues | 7.8 | % | 6.5 | % | ||||||
Acquisition and integration costs | 10 | — | ||||||||
Recovery of acquisition and integration costs | (2 | ) | — | |||||||
Adjusted EBITDA(1) | $ | 134 | $ | 76 | ||||||
Adjusted EBITDA as a percentage of revenues | 8.3 | % | 6.5 | % | ||||||
Operating income | $ | 93 | $ | 66 | ||||||
Operating income as a percentage of revenues | 5.8 | % | 5.6 | % | ||||||
Acquisition and integration costs | 10 | — | ||||||||
Recovery of acquisition and integration costs | (2 | ) | — | |||||||
Adjusted operating income(1) | $ | 101 | $ | 66 | ||||||
Adjusted operating income as a percentage of revenues | 6.3 | % | 5.6 | % | ||||||
EBITDA is a performance measure that is calculated by taking net
income attributable to common stockholders and excluding interest,
provision for income taxes, and depreciation and amortization. Adjusted
EBITDA and adjusted operating income are performance measures that
exclude acquisition and integration costs that we do not consider to be
indicative of our ongoing operating performance. The acquisition and
integration costs relate to the Company’s significant acquisition of
Engility. The recovery of acquisition and integration costs relate to
acquisition and integration costs recovered through the Company’s
indirect rates in accordance with Cost Accounting Standards. We believe
that these performance measures provide management and investors with
useful information in assessing trends in our ongoing operating
performance and may provide greater visibility in understanding the
long-term financial performance of the Company.
(1)Non-GAAP measure, see above for definition.
Schedule 5 (continued): | ||||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION | ||||||||||
NON-GAAP FINANCIAL MEASURES | ||||||||||
(Unaudited) | ||||||||||
Adjusted Diluted Earnings Per Share |
||||||||||
Three Months Ended | ||||||||||
May 3, 2019 | May 4, 2018 | |||||||||
Diluted earnings per share | $ | 0.92 | $ | 1.13 | ||||||
Acquisition and integration costs, divided by diluted ‘weighted-average number of shares outstanding’ (WASO) |
0.13 | — | ||||||||
Tax effect of acquisition and integration costs, divided by diluted WASO |
(0.03 | ) | — | |||||||
Net effect of acquisition and integration costs, divided by diluted WASO |
0.10 | — | ||||||||
Amortization of intangible assets, divided by diluted WASO | 0.42 | 0.12 | ||||||||
Tax effect of amortization of intangible assets, divided by diluted WASO |
(0.08 | ) | (0.02 | ) | ||||||
Net effect of amortization of intangible assets, divided by diluted WASO |
0.34 | 0.10 | ||||||||
Adjusted diluted earnings per share(1) | $ | 1.36 | $ | 1.23 | ||||||
Adjusted diluted earnings per share is a performance measure that
excludes acquisition and integration costs that we do not consider to be
indicative of our ongoing operating performance. The acquisition and
integration costs relate to the Company’s recent acquisition of Engility
and is net of the recovery of acquisition and integration costs
recovered through the Company’s indirect rates in accordance with Cost
Accounting Standards. Adjusted diluted earnings per share also
excludes amortization of intangible assets because we do not have a
history of significant acquisition activity, we do not acquire
businesses on a predictable cycle, and the amount of an acquisition’s
purchase price allocated to intangible assets and the related
amortization term are unique to each acquisition. We believe that this
performance measure provides management and investors with useful
information in assessing trends in our ongoing operating performance and
may provide greater visibility in understanding the long-term financial
performance of the Company.
(1)Non-GAAP measure, see above for definition.
Schedule 5 (continued): |
||||||||||
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NON-GAAP FINANCIAL MEASURES (Unaudited) |
||||||||||
Free Cash Flow |
||||||||||
Three Months Ended | ||||||||||
May 3, 2019 |
May 4, 2018 |
|||||||||
(in millions) | ||||||||||
Net cash provided by operating activities | $ | 178 | $ | 88 | ||||||
Expenditures for property, plant, and equipment | (9 | ) | (6 | ) | ||||||
Free cash flow(1) | $ | 169 | $ | 82 | ||||||
Free cash flow is calculated by taking cash flows provided by
operating activities less expenditures for property, plant, and
equipment. We believe that free cash flow provides management and
investors with useful information in assessing trends in our cash flows
and in comparing them to other peer companies, many of whom present a
similar non-GAAP liquidity measure. This measure should not be
considered as a measure of residual cash flow available for
discretionary purposes.
(1)Non-GAAP measure, see above for definition.
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