Executive Summary
SAIC reported solid Q2 FY2025 results, underscoring resilience in a government IT services environment despite recompete pressures. Organic revenue growth of 2% y/y was supported by new business wins and on-contract growth, while a roughly 5 percentage point headwind from contractor transitions tempered overall growth. Adjusted EBITDA was $170 million with a 9.4% margin, reflecting constructive program execution and a margin trajectory that management expects to improve as the enterprise growth strategy matures. Free cash flow in the quarter reached $241 million, contributing to a first-half FCF of $262 million, more than half of the full-year guidance. The company reaffirmed FY25 guidance, raised adjusted diluted EPS by $0.10 to $8.10–$8.30, and maintained revenue growth guidance of 1.5%–3.5% pro-forma organic, factoring in roughly 5% recompete headwinds. Management reiterated its four-pivot enterprise growth strategy (Portfolio, Go-to-market, Culture, Brand) and signaled that the early indicators—larger submitted bid volume ($14.5B in H1 vs. $17B in FY24) and an expanding qualified pipeline—support a healthier bookings trajectory toward a 1.2x book-to-bill by H1 FY26. The call emphasizes disciplined capital deployment (continued buybacks with capacity for M&A) and a focus on higher-margin, higher-value programs, particularly in Civilian and Enterprise/Mission IT. Investors should monitor: the progression of fixed-price bid execution, recompete timing (NCAPS and Army S-1 as notable headwinds), Civilian margin normalization, and the cadence of backlog conversion into revenue.
Key Performance Indicators
Key Insights
Revenue: $1.818B in Q2 (USD); YoY growth +1.9%, QoQ -1.6%. Gross margin 11.56%; EBITDA $165M; EBITDA margin ~9.1%; Operating income $134M; operating margin ~7.37%; Net income $81M; net margin ~4.46%; EPS (diluted) $1.58–$1.59; Weighted avg shares ~50.9–51.2M; Free cash flow (FCF) $132M for the quarter; Operating cash flow $138M; Capex $6M; Cash/receivables dynamics contributed to working capital efficiency; Cash at end of period ~$56M; Total debt $2.325B; Net debt ~$2.278B; Total assets $5.2...
Financial Highlights
Revenue: $1.818B in Q2 (USD); YoY growth +1.9%, QoQ -1.6%. Gross margin 11.56%; EBITDA $165M; EBITDA margin ~9.1%; Operating income $134M; operating margin ~7.37%; Net income $81M; net margin ~4.46%; EPS (diluted) $1.58–$1.59; Weighted avg shares ~50.9–51.2M; Free cash flow (FCF) $132M for the quarter; Operating cash flow $138M; Capex $6M; Cash/receivables dynamics contributed to working capital efficiency; Cash at end of period ~$56M; Total debt $2.325B; Net debt ~$2.278B; Total assets $5.25B; Total liabilities $3.625B; Stockholders’ equity $1.625B; Debt/equity ~1.43; Interest coverage ~4.32x; ROA ~1.54%; ROE ~4.98%. YoY metrics show net income down -67% but QoQ up +5%; revenue up +1.9% and gross margin down -2.78% YoY.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.82B |
1.91% |
-1.57% |
| Gross Profit |
210.00M |
-2.78% |
-1.41% |
| Operating Income |
134.00M |
0.75% |
2.29% |
| Net Income |
81.00M |
-67.21% |
5.19% |
| EPS |
1.59 |
-65.58% |
6.71% |
Key Financial Ratios
operatingProfitMargin
7.37%
operatingCashFlowPerShare
$2.71
freeCashFlowPerShare
$2.59
dividendPayoutRatio
23.5%
Management Commentary
Key insights from the earnings call and management remarks: - Strategy execution: SAIC is executing on Bid More, Bid Better, Win More, with a goal to lift submission value and win rates; CEO Toni Whitley emphasized margin trajectory due to disciplined bid thresholds and improved shot selection. - Growth vectors: Civilian, Enterprise IT, Mission IT, and Space/Defense are the four growth pillars. Civilian is viewed as a durable, bipartisan-funded area with upside opportunity; Defense is expected to remain flat but with shares gained from tech-enabled differentiators. - Bookings and pipeline: Net bookings of $1.2B in Q2; book-to-bill in the quarter 0.6x and 1.1x trailing 12 months; submitted bids around $6.5B in the quarter and ~$14.5B year-to-date, with a target of >$22B for the year. - Margin commentary: Adjusted EBITDA margin of 9.4% in Q2; on-track to improve margins over the next several years as bid strategy and portfolio transitions take hold. - Capital allocation: The company repurchased $201M in shares in the quarter; total share repurchases in the period were $220M; FY24–FY25 repurchase program remains a priority with capacity for M&A. - Near-term outlook: Reaffirmed revenue guidance of 1.5%–3.5% organic growth and adjusted EBITDA of $680–$700M; FCF guidance $490–$510M; EPS guidance raised to $8.10–$8.30 for the year. - Recompete risks: NCAPS (~1% headwind) and timing of Army S-1 recompete remain key variables; management indicated a bias toward later than earlier awards, with potential earnings impact in FY2026 if recompetes delay.
"Bid More is significantly increasing the total value of submissions to a level more aligned with our growth aspirations."
— Toni Townes-Whitley
"We are reaffirming our prior guidance for revenue, adjusted EBITDA, and free cash flow. We are increasing our guidance for adjusted diluted earnings per share by $0.10 to a range of $8.10 to $8.30"
— Prabu Natarajan
Forward Guidance
Management maintains a constructive long-term outlook anchored in a higher-quality, higher-margin pipeline. Key takeaways: - Revenue: 1.5%–3.5% organic growth in FY25, with progress in H2 anticipated from on-contract growth and ramp-ups on previously won programs. - Margins: Adjusted EBITDA margin guided to 9.2%–9.4%; margin improvement expected as the BD process yields better-quality bids and the enterprise operating model enhances execution. - Backlog and bookings: Book-to-bill expected to improve to roughly 1.2x by H1 FY26; ongoing emphasis on expanding Civilian and Enterprise/Mission IT work. - FCF and capital return: Free cash flow projected at $490M–$510M, with a continued bias toward buybacks while maintaining M&A capacity. Key factors to monitor: trajectory of recompete wins (NCAPS and Army S-1), the speed of Civilian portfolio ramp, fixed-price bid performance, and the cadence of award timing in a potentially volatile political environment. Overall assessment: favorable if the BD momentum translates into higher-quality backlog and the reimbursement of recompete headwinds remains modest; risk centers on timing and execution of large recompetes and any adverse shifts in government budgets.”