Science Applications International Corp (SAIC) SEC Filing 10-Q Quarterly report for the period ending Friday, November 2, 2018

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Exhibit 99.1
saicrilogorrgbsm.jpg
SAIC Announces Third Quarter of Fiscal Year 2019 Results
 
Revenues: $1.2 billion
Diluted earnings per share: $1.11; Adjusted diluted earnings per share(1): $1.35
Net income: $48 million
Adjusted EBITDA(1) as a % of revenues: 8.3%
Cash flows provided by operating activities: $86 million
Book-to-bill ratio of 1.0, excluding $1.2 billion of single-award IDIQ ceiling value
RESTON, VA, December 6, 2018—Science Applications International Corporation (NYSE: SAIC), a leading technology integrator providing full life-cycle services and solutions in the technical, engineering, intelligence, and enterprise information technology markets, today announced results for the third quarter ended November 2, 2018.
“As we prepare for the future, we continue to focus on delivering strong performance across our contract portfolio, as evidenced by our third quarter results. Our fifth consecutive quarter of revenue growth and the highest profitability in our five year history are proof points of the disciplined execution of our strategy,” said SAIC CEO Tony Moraco. "We look forward to accelerating the execution of our long term strategy, Ingenuity 2025, with the acquisition of Engility. We will enter next year with increased customer access, more investments in competitive and differentiated solutions, along with improved cash flow to enhance opportunities for shareholder value creation."
Third Quarter of Fiscal Year 2019: Summary Operating Results
 
 
Three Months Ended
 
Nine Months Ended
 
 
November 2, 2018

 
Percent
change
 
November 3, 2017

 
November 2, 2018

 
Percent
change
 
November 3, 2017

 
 
(in millions, except per share amounts)
Revenues
 
$
1,177

 
3
 %
 
$
1,145

 
$
3,467

 
4
%
 
$
3,326

Operating income
 
73

 
1
 %
 
72

 
213

 
10
%
 
194

Operating income as a percentage of revenues
 
6.2
%
 
-10
 bps
 
6.3
%
 
6.1
%
 
30
bps
 
5.8
%
Adjusted operating income(1)
 
87

 
19
 %
 
73

 
227

 
15
%
 
197

Adjusted operating income as a percentage of revenues
 
7.4
%
 
100
 bps
 
6.4
%
 
6.5
%
 
60
bps
 
5.9
%
Net income
 
48

 
12
 %
 
43

 
146

 
14
%
 
128

EBITDA(1)
 
84

 
 %
 
84

 
244

 
7
%
 
227

EBITDA as a percentage of revenues
 
7.1
%
 
-20
 bps
 
7.3
%
 
7.0
%
 
20
bps
 
6.8
%
Adjusted EBITDA(1)
 
98

 
15
 %
 
85

 
258

 
12
%
 
230

Adjusted EBITDA as a percentage of revenues
 
8.3
%
 
90
 bps
 
7.4
%
 
7.4
%
 
50
bps
 
6.9
%
Diluted earnings per share
 
$
1.11

 
13
 %
 
$
0.98

 
$
3.37

 
18
%
 
$
2.86

Adjusted diluted earnings per share(1)
 
$
1.35

 
36
 %
 
$
0.99

 
$
3.61

 
24
%
 
$
2.90

Net cash provided by operating activities
 
$
86

 
8
 %
 
$
80

 
$
162

 
22
%
 
$
133

Free cash flow(1)
 
$
80

 
11
 %
 
$
72

 
$
138

 
17
%
 
$
118


(1)Non-GAAP measure, see Schedule 5 for information about this measure.


The following information was filed by Science Applications International Corp on Thursday, December 6, 2018 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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  • 18489020_94
    Revenue - Product
    -25- -25- EBITDA and adjusted EBITDA for the periods presented were calculated as follows: Adjusted EBITDA for the three months ended November 2, 2018 increased to 8.3% of revenues from 7.4% of revenues for the prior year driven by improved performance across our portfolio and higher net favorable changes in estimates related to performance obligations satisfied over time, partially offset by an increase in our inventory provision.
  • 18489020_79
    Financial - Income
    Operating income as a percentage of revenues of 6.2% for the three months ended November 2, 2018 was consistent with 6.3% in the comparable prior year period, due to improved performance across our portfolio, higher net favorable changes in estimates related to performance obligations satisfied over time, offset by an increase in our inventory provision and costs associated with the acquisition and integration of Engility ($14 million).
  • 18489020_95
    Revenue - Product
    Adjusted EBITDA for the nine months ended November 2, 2018 increased to 7.4% of revenues from 6.9% of revenues for the prior year, driven by improved performance across our portfolio and the realization of cost efficiencies resulting from our restructuring activities in fiscal 2018, and higher net favorable changes in estimates related to performance obligations satisfied over time, partially offset by an increase in our inventory provision.
  • 18489020_80
    Financial - Income
    Operating income as a percentage of revenues increased to 6.1% for the nine months ended November 2, 2018 from 5.8% in the comparable prior year period primarily due to improved performance across our portfolio and the realization of cost efficiencies resulting from our restructuring activities in fiscal 2018, partially offset by an increase in our inventory provision and costs associated with the acquisition and integration of Engility ($14 million).
  • 18489020_70
    Other - Other
    These improvements were partially offset by an increase in our inventory provision ($25 million).
  • 18489020_73
    Other - Other
    These improvements were partially offset by an increase in our inventory provision ($25 million).
  • 18489020_50
    Other - Other
    Adjusted EBITDA is a non-GAAP financial measure described in more detail in "Non-GAAP Measures" below.
  • 18489020_90
    Financial - Expense
    The restructuring costs relate to the Company's plan in fiscal 2018 to restructure certain aspects of its operations and is the only significant restructuring since we began operating as an independent company five years ago.
  • 18489020_49
    Revenue - Product
    These financial targets include: low single digit annual revenue growth percentage, adjusted EBITDA margin expansion of 10 to 20 basis points annually, and return of capital in excess of operating needs.
  • 18489020_96
    Revenue - Product
    In addition to the financial measures described above, we believe that bookings and backlog are useful measures for management and investors to evaluate our potential future revenues.
  • 18489020_126
    Financial - Expense
    The following table presents changes in cost mix for the periods presented: Cost of revenues mix for the three and nine months ended November 2, 2018 reflects an increase in supply chain material content.
  • 18489020_17
    MA - Other
    At the effective time of the Merger, each outstanding share of Engility common stock will be converted into the right to receive 0.450 shares of SAIC common stock.
  • 18489020_93
    Other - Other
    We believe that EBITDA and adjusted EBITDA 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.
  • 18489020_72
    Financial - Expense
    Cost of revenues as a percentage of revenues decreased from 90.9% in the prior year period to 90.1%, driven by improved contract performance to include the effect of our restructuring efforts in fiscal 2018 ($35 million), and higher net favorable changes in estimates related to performance obligations satisfied over time ($15 million).
  • 18489020_42
    Financial - Expense
    Our ability to be competitive in the future will continue to be driven by our reputation of successful program execution, competitive cost structure and efficiencies in assigning the right people, at the right time, in support of our contracts.
  • 18489020_3
    Other - Other
    Risks, uncertainties and assumptions that could cause or contribute to these differences include those discussed below, in "Risk Factors" in Part II of this report and in Part I of the most recently filed Annual Report on Form 10-K.
  • 18489020_170
    Revenue - Product
    At contract inception, we estimate the transaction price and may include variable consideration in the transaction price only to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
  • 18489020_1
    MA - Other
    It contains forward-looking statements (which may be identified by words such as those described in "Risk Factors-Forward-Looking Statement Risks" in Part I of the most recently filed Annual Report on Form 10-K), including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations (including our financial targets discussed below under "Management of Operating Performance and Reporting" and "Liquidity and Capital Resources"); backlog; our industry; government budgets and spending; market opportunities; the impact of competition; and the impact of the Scitor acquisition.
  • 18489020_59
    Financial - Expense
    In addition to cost mix, changes in costs of revenues as a percentage of revenue can also be driven by fluctuations in shared or corporate costs or cumulative revenue adjustments due to changes in estimates.
  • 18489020_171
    Revenue - Product
    When developing these estimates, we consider the customer, contract terms, the complexity of the work and related risks, the extent of customer discretion, historical experience and the potential of a significant reversal of revenue.
  • 18489020_51
    Other - Other
    Our business and program management process is directed by professional managers focused on satisfying our customers by providing high quality services in achieving program requirements.
  • 18489020_125
    Financial - Earnings
    Contracts performed with a higher proportion of SAIC labor are generally more profitable.
  • 18489020_69
    Financial - Expense
    Cost of revenues as a percentage of revenues decreased from 90.5% in the prior year quarter to 89.0%, driven by improved performance across our portfolio ($28 million), inclusive of newly awarded contracts, and higher net favorable changes in estimates related to performance obligations satisfied over time ($14 million).
  • 18489020_60
    Financial - Cash Flow
    Changes in operating cash flows are described with regard to changes in cash generated through the delivery of services, significant drivers of fluctuations in assets or liabilities and the impacts of changes in timing of cash receipts or disbursements.
  • 18489020_144
    Other - Other
    Cash used in investing activities for the nine months ended November 2, 2018 increased compared to the prior year period due to higher capital expenditures for property, plant, and equipment.
  • 18489020_91
    Other - Other
    While we believe that these non-GAAP financial measures may be useful in evaluating our financial information, it should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP.
  • 18489020_58
    Financial - Expense
    We also analyze our cost mix (labor, subcontractor or materials) in order to understand operating margin because programs with a higher proportion of SAIC labor are generally more profitable.
  • 18489020_75
    Financial - Expense
    SG&A; increased $5 million for the three months ended November 2, 2018 as compared to the same period in the prior year primarily due to higher employee-related and consulting costs.
  • 18489020_76
    Financial - Expense
    SG&A; increased $5 million for the nine months ended November 2, 2018 as compared to the same period in the prior year primarily due to higher employee-related and consulting costs.
  • 18489020_23
    Revenue - Product
    In fiscal 2018, we generated greater than 95% of our revenues from contracts with the U.S. government, including subcontracts on which we perform.
  • 18489020_131
    Financial - Dividend
    When our cash generation enables us to exceed our target average minimum cash balance of $150 million, we intend to deploy excess cash through dividends, share repurchases, debt prepayments or strategic acquisitions.
  • 18489020_61
    Revenue - Product
    -23- -23- The primary financial performance measures we use to manage our business and monitor results of operations are revenues, operating income, and cash flows from operating activities.
  • 18489020_92
    Other - Other
    Other companies may define similar measures differently.
  • 18489020_130
    Financial - Cash Flow
    We consider various financial measures when we develop and update our capital deployment strategy, which includes evaluating cash provided by operating activities, free cash flow and financial leverage.
  • 18489020_107
    Other - Other
    It does not include the unfunded portion of contracts in which funding is incrementally appropriated or authorized on a quarterly or annual basis by the U.S. government and other customers even though the contract may call for performance over a number of years.
  • 18489020_89
    MA - Other
    The acquisition and integration costs relate to the Company's pending significant acquisition of Engility.
  • 18489020_63
    Revenue - Product
    Revenues increased $32 million or 2.8% for the three months ended November 2, 2018 as compared to the same period in the prior year due to newly awarded contracts ($54 million), which includes information technology (IT) integration contracts supporting state and local customers, and increased orders in our supply chain portfolio ($24 million).
  • 18489020_65
    Revenue - Product
    Revenues increased $141 million or 4.2% for the nine months ended November 2, 2018 as compared to the same period in the prior year due to revenue on new contracts primarily supporting NASA, the Environmental Protection Agency (EPA) and state and local customers ($128 million), as well as increased orders in our supply chain portfolio ($120 million).

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  • Form Type: Quarterly
  • Number of times amended: 0
  • Accession Number: 0001571123-18-000079
  • Submitted to the SEC: Thursday, December 6, 2018 5:19:58 PM EST
  • Accepted by the SEC: Thursday, December 6, 2018
  • Period ending: November 2018
  • Industry: Computer Integrated Systems Design