Science Applications International Corp. [SAIC] Thursday reported lower earnings and flat sales in the second quarter of its fiscal year 2023 and the company raised its revenue and profit guidance based on results from the first two quarters.
Net income fell 11% to $73 million, or $1.30 earnings per share (EPS), from $82 million ($1.41 EPS) a year ago. Excluding acquisition, integration and restructuring costs, adjusted earnings of $1.75 per share in the quarter were 6 cents per share higher than consensus estimates.
Sales for the quarter were flat at $1.8 billion, although organic revenue was down nearly 2% due to one less business day in the quarter and, to a lesser extent, pressure related to losses on renewed contracts.
Orders in the quarter were $2.1 billion, a ratio of 1.1 times sales backlog to invoice, and increased the order backlog to $24.3 billion, up one percent from $24.1 billion at the end of fiscal year 2022. The bookings include an Air Force award of a $319 million contract to SAIC for the Air Operations Center Falconer program that had already been protested.
The company’s success rate so far this year is “well ahead of plan,” SAIC chief financial officer Prabu Natarajan said in a conference call with analysts.
SAIC is also awaiting the outcome of a corrective action by the Department of Defense on the nearly $900 million Defense Counterintelligence and Security Agency One computer program attributed to the company, but has been challenged by Deloitte Consulting.
Earnings and sales have been ahead of SAIC’s expectations so far this year, leading the company to raise its guidance for the year. The sales outlook is now between $7.5 billion and nearly $7.6 billion, up from the bottom of the previous range of between $7.4 billion and nearly $7.6 billion. dollars. The updated forecast represents annual growth of around 2% at the midpoint of the range.
Adjusted earnings are expected to be between $7 and $7.20 EPS, versus prior guidance of between $6.90 and $7.20 EPS. The adjusted margin forecast is still set at 8.9%, which corresponds to its level during the first two quarters of the year.
The free cash flow outlook is unchanged between $500 million and $530 million. Free cash flow in the second quarter was $74 million and was negatively impacted by approximately $25 million due to late payments from a single government payment agency that was undergoing software updates and changes of system and process, said Natarajan. Those payments have since been received by the company, he said.