Science Applications International Corp SEC 10-K Report

• March 17, 2025

Science Applications International Corp (SAIC), a leading provider of national security, engineering, and IT solutions, has released its Form 10-K report for fiscal 2025. The report highlights the company's financial performance, business reorganization, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

Revenues: SAIC reported revenues of $7,479 million, marking an increase of $35 million from fiscal 2024. This growth was primarily driven by the ramp-up in volume from existing and new contracts.

Operating Income: The company recorded an operating income of $563 million, a decrease of 24% from the previous fiscal year. This decline was mainly due to a $233 million gain recognized from the sale of the Supply Chain Business in fiscal 2024.

Net Income: Net income for fiscal 2025 was $362 million, down 24% from fiscal 2024. The decrease was attributed to the gain from the divestiture of the Supply Chain Business and associated non-deductible goodwill in the prior year.

Diluted EPS: Not explicitly stated in the provided text.

Business Highlights

Business Reorganization: Effective February 3, 2024, SAIC reorganized its business structure from two operating sectors to five customer-facing business groups, aggregated into two reportable segments: Defense and Intelligence, and Civilian. This reorganization aims to enhance customer focus and operational efficiency.

Defense and Intelligence Segment: This segment provides a diverse portfolio of national security solutions to the Department of Defense and the Intelligence Community. It focuses on integrating emerging technologies into mission-critical operations, including IT modernization, digital engineering, AI, and mission systems support.

Civilian Segment: This segment delivers solutions to civilian markets, including federal, state, and local governments. It focuses on services for citizen well-being, border security, and public service missions impacting travel, trade, health, and the economy.

Innovation Factory: SAIC's Innovation Factory supports the operating segments by developing enterprise-class solutions, focusing on AI, application development, network services, platforms and cloud, engineering, and cybersecurity. It uses a cloud-hosted toolset to rapidly build, test, and deploy solutions.

Key Customers: In fiscal 2025, 98% of SAIC's total revenues were attributable to prime contracts with the U.S. government or subcontracts with other contractors engaged in work for the U.S. government. The Department of Defense accounted for approximately 52% of total revenues.

Contract Types: SAIC generates revenues under several types of contracts, including cost-reimbursement, time-and-materials, and firm-fixed-price contracts. The mix of contract types affects profitability, with cost-reimbursement and T&M contracts generally having lower profitability than FFP contracts.

Geographical Performance: Substantially all of SAIC's revenues and tangible long-lived assets are generated and located in the United States, reflecting its focus on serving U.S. government customers.

Future Outlook: SAIC anticipates opportunities from U.S. government spending packages, such as the infrastructure bill and the CHIPS and Science Act, which may provide additional opportunities in areas like digital modernization, cyber, and climate resiliency. However, potential challenges include budgetary pressures, procurement reforms, and competitive bidding processes.

Strategic Initiatives

Strategic Initiatives: SAIC completed a business reorganization effective February 3, 2024, transitioning from two operating sectors to five customer-facing business groups, which are aggregated into two reportable segments: Defense and Intelligence, and Civilian. This reorganization aims to enhance focus on customer needs and accelerate digital transformation through the Innovation Factory, which supports the operating segments by developing enterprise-class solutions.

Capital Management: SAIC's capital management activities included the repurchase of approximately 4.2 million shares of common stock for $527 million during fiscal 2025, under a share repurchase plan authorized by the Board of Directors in December 2024 for up to $1.2 billion. The company also declared and paid cash dividends of $0.37 per share each quarter during fiscal 2025, totaling $1.48 per share for the year. Additionally, SAIC maintains a $1.0 billion Revolving Credit Facility and a $300 million Master Accounts Receivable Purchase Agreement to support liquidity needs.

Future Outlook: SAIC anticipates funding future cash needs for working capital, capital expenditures, and commitments with cash on hand, future operating cash flows, and borrowings under existing credit facilities. The company plans to continue its share repurchase program and maintain its dividend policy, while focusing on strategic growth areas following the divestiture of its Supply Chain Business. SAIC also aims to leverage its scale and technical expertise to expand customer relationships and pursue new opportunities in digital modernization, cyber, and climate resiliency.

Challenges and Risks

Challenges and Risks: SAIC's business is heavily reliant on U.S. government contracts, with 98% of revenues derived from such contracts. This dependency poses a risk if there are changes in government spending priorities or budgetary constraints. The company has reorganized its business structure to better align with customer needs, which may present integration challenges.

SAIC faces several industry and economic risks, including potential reductions in U.S. government defense spending, changes in acquisition priorities, and delays in government appropriations. The competitive bidding process for government contracts is intense, with increased pricing pressure and the risk of contract protests. Legal and regulatory risks include compliance with organizational conflicts of interest (OCIs) and potential changes in procurement rules. The company is also subject to government audits and investigations, which could impact profitability and cash flows. Cybersecurity threats pose a significant risk, with potential impacts on reputation and financial results if sensitive information is compromised.

The company is navigating economic challenges such as potential sequestration and changes in federal agency priorities driven by the Department of Government Efficiency. The Federal debt ceiling and potential government shutdowns present additional risks. Despite these challenges, SAIC believes its scale and expertise position it well to maintain and expand customer relationships. The company is focused on aligning its offerings with government budget priorities and leveraging its Innovation Factory to drive digital transformation.

SAIC is exposed to market risks related to changes in government spending and procurement processes. The company is also subject to risks from potential changes in tax laws and regulations, which could affect financial results. Additionally, the reliance on government contracts means that any changes in government procurement practices or budget allocations could significantly impact the company's revenue and growth prospects.

SEC Filing: Science Applications International Corp [ SAIC ] - 10-K - Mar. 17, 2025