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Science Applications (SAIC) Q2 Earnings & Revenues Beat, Up Y/Y

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Science Applications (SAIC - Free Report) reported strong second-quarter fiscal 2022 results, wherein both earnings and revenues topped the Zacks Consensus Estimates. The company reported adjusted earnings of $1.97 per share surpassing the Zacks Consensus Estimate of $1.47 per share. The bottom line improved 21% year over year.

Revenues increased 4.1% from the year-ago quarter’s level to $1.8 billion, outpacing the consensus mark of $1.79 billion. Revenues increased by $100 million due to the acquisition of Halfaker and Associates. Solid performance of the company’s contract portfolio acted as a tailwind. Adjusting for the impact of acquired revenues, the metric moved up 3.8%.

During the second quarter, Science Applications benefited from its software portfolio expansion through the acquisition of Koverse, which provides a data management platform that enables AI and ML on complex and sensitive data.

Quarter in Detail

Net bookings for the fiscal second quarter were $1.6 billion, reflecting a book-to-bill ratio of 0.9. Science Applications’ estimated backlog of signed business deals was $24 billion, of which $3.3 billion was funded.

Non-GAAP operating income surged 28% year over year to $147 million, primarily driven by solid contract portfolios, and lower integration and indirect costs. Non-GAAP operating margin expanded 150 basis points (bps) to 8.0%.

Adjusted EBITDA increased 11% year over year to $185 million. Adjusted EBITDA margin expanded 60 bps to 10.1%.

Balance Sheet & Cash Flow Details

Science Applications ended the fiscal second quarter with cash and cash equivalents of $133 million, down from the prior quarter’s $261 million. As of July 30, 2021, its long-term debt (net of current portion) was $2.5 billion.

The company generated operating cash flows of $92 million in the second quarter and $281 million in the first half of fiscal 2022. Excluding the MARPA facility, free cash flow was $85 million in the second quarter and $249 million in the first half of fiscal 2022.

Both free cash flow and cash through operating activities reflected benefits from payroll tax deferral under the CARES Act.

In the fiscal second quarter, Science Applications deployed $310 million of capital, which includes $22 million for dividend payments, $37 million for planned share repurchases, $244 million for acquisitions and $7 million for capital expenditure. The company made $22 million of mandatory debt repayment during the quarter.

Separately, the company announced that its board of directors has authorized a quarterly cash dividend of 37 cents per share to be payable on Oct 29 to the shareholders of record date as of Oct 15.

Guidance

Assuming that the CARES Act support will sustain through the fiscal 2022 end, Science Applications updated its fiscal 2022 guidance. It anticipates revenues between $7.30 billion and $7.40 billion, up from the previous guidance of $7.15-$7.30 billion.

The top-line guidance indicates a negative impact of $125 million on the supply chain portfolio, stemming from the coronavirus pandemic.

The company expects adjusted earnings in the $6.50-$6.70 per share range, up from the previous range of $6.15-$6.40 per share. The projected adjusted EBITDA margin is anticipated to be 8.9-9.0%, up from previously estimated 8.7-8.8%.

Free cash flow is still expected between $430 million and $470 million for fiscal 2022.

Zacks Rank & Other Stocks to Consider

Science Applications currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader technology sector include Avnet (AVT - Free Report) , Teradata Corporation (TDC - Free Report) and Shopify (SHOP - Free Report) , all sporting a Zacks Rank #1 (Strong Buy), at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Avnet, Teradata Corporation and Shopify is currently pegged at 25.4%, 27.4% and 25%, respectively.