SAIC raised its full-year guidance on every measure it guides, and the best case in the new organic growth range is still zero

SAIC raised its guidance four ways on Monday morning. Revenue for fiscal 2027 goes to a range of $7.2bn to $7.3bn from $7.0bn to $7.2bn. Adjusted EBITDA goes to $750m to $755m from $720m to $730m. The margin range moves up two tenths at both ends, and adjusted diluted earnings per share go to $10.65 to $10.75 from $9.90 to $10.10, a midpoint raise of 7.0 percent. Free cash flow guidance of more than $600m is unchanged.

The organic growth range moved too, from negative 4 to negative 2 percent up to negative 2 percent to zero. Read the top of it. The company's improved case for the year is that organic revenue does not shrink.

The quarter itself

Revenue for the three months to 31 July was $1,880m against $1,769m, up 6 percent, of which $20m came from the acquisition of SilverEdge Government Solutions. Strip that out and the company puts organic growth at about 5.3 percent, which sits oddly against a full-year organic range that tops out at zero and implies a considerably weaker second half.

Operating income rose 9 percent to $152m and the operating margin widened twenty basis points to 8.1 percent. Below that line the direction reverses. Net income fell 20 percent to $102m. Diluted earnings per share fell 12 percent to $2.38, and adjusted diluted earnings per share fell 17 percent to $3.01.

The gap between a 20 percent fall in net income and a 12 percent fall in per-share earnings is the buyback. Weighted-average diluted shares came down to 42.8 million from 46.8 million, which is 8.5 percent fewer, and the company spent $90m on plan repurchases in the quarter alongside $16m of dividends.

Two of the prior-year comparisons are not clean and SAIC says so. The year-ago quarter carried costs from the settlement of federal tax audits, which flatters this year's margin, and a recovery of costs from the settlement of a patent infringement matter, which does the opposite.

Bookings

Net bookings were approximately $1.2bn. Against $1.88bn of revenue that is a book-to-bill ratio of 0.6 for the quarter, and 0.8 over the trailing twelve months. Backlog stood at about $22.1bn, of which about $3.8bn was funded, or 17.2 percent.

The release names three in-quarter awards: an intelligence agency recompete of about $400m over five years, an Army award of about $330m, and a Navy electronic warfare testing contract of about $130m. It names two more that landed after the quarter closed and are therefore not in the 0.6. One is a Department of Homeland Security recompete of about $740m covering operations and maintenance for Customs and Border Protection systems. The other is a seat on the COMET multiple-award vehicle with the Missile and Space Intelligence Center, which the release values at an estimated $14bn.

That last figure is worth reading carefully rather than adding up. SAIC states in the same paragraph that backlog excludes revenue estimates from multiple-award indefinite-delivery contracts and that bookings are recorded only when task orders are awarded. A position on a $14bn vehicle is permission to compete, not work won.

The cash line

Operating cash flow rose 20 percent to $146m, which the company attributes mainly to lower usage of its receivables purchase facility and lower cash incentive payments. Free cash flow nevertheless fell 13 percent to $131m. On 14 August, after the quarter ended, SAIC raised the limit on that receivables facility from $300m to $400m. The board declared a quarterly dividend of $0.37 on 27 August, payable on 23 October.