SAIC raises full-year outlook after Q2 beat as contract conversion accelerates
Science Applications International Corporation (NASDAQ: SAIC) exceeded its own expectations in fiscal 2027's second quarter, reporting $1.9 billion in revenue on 5% organic growth and lifting full-year revenue guidance to $7.25 billion. The next confirmable milestone is a December earnings call where management said it will provide a broader strategy and portfolio update, including findings from an ongoing merger-and-acquisition review.
Key takeaways
- SAIC reported $1.9 billion in fiscal 2027 second-quarter revenue on 5% organic growth and raised full-year revenue guidance to $7.25 billion.
- Adjusted EBITDA was $193 million (10.3% margin), adjusted diluted EPS was $3.01, free cash flow was $131 million, and net leverage fell to 3.0 times.
- The RITS contract rolling off is expected to create a roughly 350-basis-point second-half headwind, putting full-year organic revenue at negative 2% to flat.
- On-contract growth ran at 9% in the quarter, though the quarterly book-to-bill ratio was 0.6 (0.8 trailing 12 months).
- Project ORBIT, a three-year efficiency program, targets about $150 million in annual run-rate savings, with roughly $100 million to be reinvested in the business.
Science Applications International Corporation (NASDAQ: SAIC) exceeded its own expectations in fiscal 2027's second quarter, reporting $1.9 billion in revenue on 5% organic growth and lifting full-year revenue guidance to $7.25 billion. The next confirmable milestone is a December earnings call where management said it will provide a broader strategy and portfolio update, including findings from an ongoing merger-and-acquisition review.
The numbers
Adjusted EBITDA for the quarter was $193 million, producing a 10.3% margin. Adjusted diluted earnings per share came in at $3.01, below the prior year's figure because that period included a favorable legal settlement, though a lower share count partially offset the decline. Free cash flow reached $131 million, and net leverage declined to 3.0 times.
Chief Executive Officer Jim Reagan said results reflected the team's focus on program performance and operational efficiency. Chief Financial Officer Prabu Natarajan said second-half margins are expected to settle in the high-9% range as the company makes targeted investments, with approximately $25 million in capital expenditures already deployed in the first half.
The full-year guidance raise carries a caveat. The RITS contract rolling off is expected to create a roughly 350-basis-point headwind in the second half, pushing full-year organic revenue to a range of negative 2% to flat. The updated EBITDA margin outlook is 10.3% to 10.5%, 20 basis points above the prior forecast, and free cash flow guidance is at least $600 million, or $14 per share for the year.
On-contract throughput and the procurement gap
On-contract growth ran at 9% during the quarter, ahead of plan. Roughly half of the year's expected on-contract growth, management said, is coming from programs won in fiscal 2025 and 2026 that ramped slowly last year. Those programs produced about $350 million in revenue last year and are expected to generate approximately $500 million in fiscal 2027, with about $240 million already recognized in the first half. Federal customers have been moving money onto existing contracts more quickly, management noted, supporting the conversion pace.
The procurement side is less clean. SAIC reported a quarterly book-to-bill ratio of 0.6 and a trailing 12-month ratio of 0.8. Natarajan said the quarterly figure would have been closer to 1.0 if a large recompete award that landed two days after the quarter ended had been counted in time. Slower proposal requests have pushed more activity toward contract extensions and ceiling utilization. The company's recompete win rate exceeded 90% during the quarter, and management is targeting new-business win rates of at least 30%.
SAIC booked more than $1.6 billion in intelligence and space awards in the first half of fiscal 2027, ahead of recent trends, Reagan said. After the quarter ended, the company secured a border-security program recompete, extending its role providing an integrated software and hardware solution.
Project ORBIT, the company's three-year efficiency program, is entering implementation. Built from roughly 3,500 employee-generated ideas, with procurement changes described by management as the largest and longest-term opportunity, the initiative targets approximately $150 million in annual run-rate savings. About $100 million of that is expected to be reinvested in the business, with the remainder supporting margin expansion. Management sees mid-10% margins as achievable next year and a path toward approximately 11% by fiscal 2030.
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Filed by the newsroom of MarketPR on September 1, 2026. Source: finance.yahoo.com. Indicative figures are not investment advice.