Business Context and Reporting Period
Company: Science Applications International Corporation (SAIC)
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal Year ended January 31, 2025 (52 weeks)
Business Overview: SAIC is a leading provider of technical, engineering, and enterprise IT services primarily to the U.S. government. Effective February 3, 2024, the company reorganized into two reportable segments: Defense and Intelligence (serving DoD and Intelligence Community) and Civilian (serving federal, state, and local governments). The company serves approximately 1,700 active contracts with a workforce of roughly 24,000 employees.
Key Financial Metrics (Fiscal 2025)
| Metric | Fiscal 2025 | Fiscal 2024 | Fiscal 2023 |
|---|---|---|---|
| Revenues | $7,479 million | $7,444 million | $7,704 million |
| Operating Income | $563 million | $741 million | $501 million |
| Operating Margin | 7.5% | 10.0% | 6.5% |
| Net Income (Attributable to Common Stockholders) | $362 million | $477 million | $300 million |
| Diluted EPS | $7.17 | $8.88 | $5.38 |
| Adjusted EBITDA | $710 million | $668 million | $680 million |
| Adjusted EBITDA Margin | 9.5% | 9.0% | 8.8% |
| Operating Cash Flow | $494 million | $396 million | $532 million |
| Total Debt (Principal) | $2,228 million | $2,109 million | N/A |
| Cash and Cash Equivalents | $56 million | $94 million | N/A |
Material Changes vs. Prior Period
- Revenue Stability: Revenues increased slightly by $35 million (0.5%) year-over-year. Adjusted for the prior year's divestiture of the Supply Chain Business, organic revenue grew approximately 3.1%.
- Operating Income Decline: Operating income decreased 24% to $563 million. This decline is primarily attributable to the absence of a $233 million gain from the sale of the Supply Chain Business and a $7 million gain from the deconsolidation of a joint venture (FSA) recognized in fiscal 2024.
- Segment Performance:
- Defense and Intelligence: Revenues decreased 2% to $5.726 billion; Operating income increased 1% to $440 million.
- Civilian: Revenues increased 8% to $1.753 billion; Operating income increased 6% to $168 million.
- Contract Mix: Cost-reimbursement contracts comprised 62% of total revenues in fiscal 2025, up from 61% in fiscal 2024, reflecting the divestiture of the Supply Chain Business which historically held a higher proportion of firm-fixed price contracts.
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Government Funding: The company notes that a Continuing Resolution (CR) signed in March 2025 extends government funding through September 30, 2025, providing budget certainty. However, a 1% sequestration may apply to agencies operating under CRs after April 30, 2025.
- Efficiency Initiatives: The Department of Government Efficiency (DOGE) is reviewing federal agencies and contracts, which may slow new awards but could present opportunities for efficiency-focused contractors.
- Debt Ceiling: The U.S. reached the debt ceiling in January 2025; potential default or funding reductions in summer 2025 pose risks to the addressable market.
Key Risks & Contingencies:
- Customer Concentration: 98% of revenues are derived from U.S. government contracts. Changes in defense spending, budget priorities, or government shutdowns could materially impact results.
- Regulatory & Audit Risk: The company is subject to rigorous audits by the DCAA and DCMA. Adverse findings could lead to cost disallowances, penalties, or debarment.
- Legal Proceedings: The company is cooperating with a DOJ Antitrust Division investigation (subpoenas received in 2022 and 2023). No material adverse effect is currently expected, but outcomes are uncertain.
- AAV Settlement: A $21 million termination settlement regarding the Assault Amphibious Vehicle contract was reached in fiscal 2025, resolving a long-standing contingency.
Investor Verification Checklist
- Divestiture Impact: Verify the organic growth rate of 3.1% by excluding the $188 million revenue impact from the prior year's Supply Chain Business sale.
- One-Time Gains: Confirm that the 24% drop in operating income is driven by the absence of the $240 million net gain on divestitures from fiscal 2024, rather than operational deterioration.
- Debt Structure: Review the $2.228 billion total debt principal, noting the $200 million outstanding on the Revolving Credit Facility classified as current, and the recent refinancing of Term Loan B facilities into Term Loan B3 (due 2031).
- Backlog Visibility: Assess the $21.857 billion total backlog, noting that $18.413 billion is "Negotiated Unfunded," which is subject to future appropriation and potential cancellation.
- DOJ Investigation: Monitor updates regarding the DOJ Antitrust Division investigation to assess potential future liabilities or reputational impact.