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Thursday, June 06, 2019 2:00:12 PM

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SAIC’s first quarter gets an Engility bounce

Amid the torch-passing between outgoing CEO Tony Moraco and CEO-elect Nazzic Keene on Thursday’s first quarter earnings call, Science Applications International Corp. (NYSE: SAIC) delivered stout revenue growth fostered by its acquisition of Engility Holdings Inc.

The Reston-based technology contractor reported $1.6 billion in revenue for the quarter, a 37% increase from the prior year, fueled largely by growth attributed to the Engility buy, which closed in January.

While SAIC officials didn’t breakout Engility’s earnings for the quarter, they did note that business units of the former engineering and logistics services company helped offset a revenue contraction of 2.8% caused by revenue dis-synergies resulting from the acquisition and humanitarian aid SAIC provided to Puerto Rico.

The company also saw a surge in free cash flow for the quarter, netting $169 million, a 106% increase over the prior year and included $25 million in delayed payments resulting from the 35-day partial government shutdown.

That sets up Keene, who will officially become CEO on July 31, with a strong start to both her tenure and fiscal 2020, as SAIC and Engility’s operations integrate and the company continues to work through its cost synergy plan.

“I’m very excited to be leading a stronger SAIC as we continue to build momentum in the marketplace,” Keene said on the earnings call. “The combination of our expanded market presence, increased capabilities, greater access to a skilled, talented workforce and a strengthened financial profile, all provide a great opportunity to sustain profitable growth.”

But alongside those gains, SAIC is also looking to restock its pipeline of contracts with new business development. The company’s book-to-bill for the quarter was 0.9, with $1.9 billion in contract awards — 70% of which was new business.

SAIC logged a trailing 12-month book-to-bill of 1.1, but its backlog has grown to $13.6 billion, $3 billion of which is funded. Keene added the company will look to nearly double its contract proposals in the second quarter to $6 billion.
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When asked about the low book-to-bill, Keene said SAIC was forecasting a low recompete year — though the company did secure a $292 million recompete of NASA’s Mission Assurance Engineering Contract (SMAEC) II contract, as well as a $58 million recompete of the Air Force’s Optical Radiation Bioeffects and Safety contract during the quarter. She said the ramp-up in new proposals would help offset the recompete environment as SAIC continues to target more growth.

“We are really trying to focus on the new business,” she said. “As we go through the year, we’ll try to provide that visibility. Because book-to-bill is certainly an indicator, but not the only indicator for momentum in the business development arena.”

The company is also awaiting ruling on a $655 million Air Force contract for engineering, development, integration and sustainment (EDIS). SAIC won that contract in January, but Peraton Inc. protested the award in January. Keene said a ruling on that contract should come down in the next 10 days.

Revenue for the quarter largely met Wall Street’s expectations, with SAIC’s stock up more than 6% following the earnings call, trading at $84.60.
https://www.bizjournals.com/washington/news/2019/06/06/saic-s-first-quarter-gets-an-engility-bounce.html?ana=yahoo&yptr=yahoo

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