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Science Applications (SAIC) Q1 Earnings Miss Estimates, Up Y/Y
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Science Applications (SAIC - Free Report) reported mixed results for first-quarter fiscal 2021, wherein its revenues topped the Zacks Consensus Estimate but earnings missed the same. Nonetheless, the company recorded year-over-year growth in both the metrics.
The company reported fiscal first-quarter adjusted earnings of $1.38 per share, which comes in a couple of cents higher than the year-ago quarter’s $1.36. The year-over-year upside was mainly driven by higher revenues and reduced outstanding share counts. However, quarterly earnings missed the Zacks Consensus Estimate of $1.41 per share.
Quarterly revenues jumped 9% from the year-ago period to $1.76 billion, surpassing the Zacks Consensus Estimate of $1.73 billion. Revenues realized from the acquisition of Unisys Federal mainly drove the top line. Solid performance of the company’s contract portfolio was a tailwind. Adjusting for the impact of acquired revenues, the metric was up 3%.
Science Applications International Corporation Price, Consensus and EPS Surprise
Science Applications stated that its business was resilient to the coronavirus pandemic-induced crisis. The crisis had limited impact on its fiscal first-quarter performance. It affected quarterly revenues and adjusted EBITDA by $33 million and $8 million, respectively. The company also stated that the coronavirus crisis had an immaterial impact on its net free cash flow.
Net bookings for the fiscal first quarter were $1.6 billion, reflecting a book-to-bill ratio of 0.9. The company’s fiscal first-quarter net booking amount excludes the single-award IDIQ contract worth $4.6 billion. Science Applications stated that these types of contracts do not immediately contribute to backlog per the company’s bookings policy and rather add to bookings for the next several years.
Science Applications’ estimated backlog of signed business deals was $16.6 billion, of which $1.5 billion represents contracts gained through acquiring Unisys Federal.
Non-GAAP operating income grew 5% year over year to $106 million. However, non-GAAP operating margin contracted 30 basis points to 6% mainly due to higher acquisition and integration costs, and impact of the coronavirus crisis.
Adjusted EBITDA marginally increased year over year to $137 million from $135 million in the year-ago quarter. However, adjusted EBITDA margin shrunk 60 bps to 7.8% chiefly due to the pandemic’s impact and lower current-quarter net profit write-ups.
Balance Sheet & Cash Flow
Science Applications ended the fiscal first quarter with cash and cash equivalents of $276 million, up from the prior quarter’s $188 million.
Operating cash flow was $367 million, significantly higher from the previous quarter’s $69 million. The robust improvement reflects cash provided from operating activities of Unisys Federal and $200 million of sales of receivables under the Master Accounts Receivable Purchase Agreement (MARPA). Free cash flow was $158 million compared with the $62 million witnessed in fourth-quarter fiscal 2020.
During the reported quarter, Science Applications deployed $39 million of capital, which includes $23 million in dividend payments and $16 million to mandatory debt repayment. The company stated that it did not make any voluntary debt repayment during the fiscal first quarter in an effort to preserve cash in light of the COVID-19 pandemic.
Guidance
For fiscal 2021, the company expects revenues between $7.1 billion and $7.3 billion, suggesting organic revenue growth of 1-4%. The top-line guidance includes 10.5 months of business operation of the recently-acquired Unisys Federal business and a negative impact of $150 million from the coronavirus pandemic. The Zacks Consensus Estimate for fiscal 2021 revenues is pegged at $7.24 billion.
For the full fiscal year, the company anticipates adjusted earnings in the $5.80-$6.10 per share range. The guided range includes a negative impact of approximately $25 million due to the COVID-19 crisis. The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $6.10 per share.
Free cash flow is expected to meet or exceed $500 million in fiscal 2021.
Zacks Rank & Stocks to Consider
Science Applications currently carries a Zacks Rank #3 (Hold).
The long-term earnings growth rate for NVIDIA, Apple and Fortinet is currently pegged at 16.9%, 10.7% and 14%, respectively.
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Science Applications (SAIC) Q1 Earnings Miss Estimates, Up Y/Y
Science Applications (SAIC - Free Report) reported mixed results for first-quarter fiscal 2021, wherein its revenues topped the Zacks Consensus Estimate but earnings missed the same. Nonetheless, the company recorded year-over-year growth in both the metrics.
The company reported fiscal first-quarter adjusted earnings of $1.38 per share, which comes in a couple of cents higher than the year-ago quarter’s $1.36. The year-over-year upside was mainly driven by higher revenues and reduced outstanding share counts. However, quarterly earnings missed the Zacks Consensus Estimate of $1.41 per share.
Quarterly revenues jumped 9% from the year-ago period to $1.76 billion, surpassing the Zacks Consensus Estimate of $1.73 billion. Revenues realized from the acquisition of Unisys Federal mainly drove the top line. Solid performance of the company’s contract portfolio was a tailwind. Adjusting for the impact of acquired revenues, the metric was up 3%.
Science Applications International Corporation Price, Consensus and EPS Surprise
Science Applications International Corporation price-consensus-eps-surprise-chart | Science Applications International Corporation Quote
Quarter in Detail
Science Applications stated that its business was resilient to the coronavirus pandemic-induced crisis. The crisis had limited impact on its fiscal first-quarter performance. It affected quarterly revenues and adjusted EBITDA by $33 million and $8 million, respectively. The company also stated that the coronavirus crisis had an immaterial impact on its net free cash flow.
Net bookings for the fiscal first quarter were $1.6 billion, reflecting a book-to-bill ratio of 0.9. The company’s fiscal first-quarter net booking amount excludes the single-award IDIQ contract worth $4.6 billion. Science Applications stated that these types of contracts do not immediately contribute to backlog per the company’s bookings policy and rather add to bookings for the next several years.
Science Applications’ estimated backlog of signed business deals was $16.6 billion, of which $1.5 billion represents contracts gained through acquiring Unisys Federal.
Non-GAAP operating income grew 5% year over year to $106 million. However, non-GAAP operating margin contracted 30 basis points to 6% mainly due to higher acquisition and integration costs, and impact of the coronavirus crisis.
Adjusted EBITDA marginally increased year over year to $137 million from $135 million in the year-ago quarter. However, adjusted EBITDA margin shrunk 60 bps to 7.8% chiefly due to the pandemic’s impact and lower current-quarter net profit write-ups.
Balance Sheet & Cash Flow
Science Applications ended the fiscal first quarter with cash and cash equivalents of $276 million, up from the prior quarter’s $188 million.
Operating cash flow was $367 million, significantly higher from the previous quarter’s $69 million. The robust improvement reflects cash provided from operating activities of Unisys Federal and $200 million of sales of receivables under the Master Accounts Receivable Purchase Agreement (MARPA). Free cash flow was $158 million compared with the $62 million witnessed in fourth-quarter fiscal 2020.
During the reported quarter, Science Applications deployed $39 million of capital, which includes $23 million in dividend payments and $16 million to mandatory debt repayment. The company stated that it did not make any voluntary debt repayment during the fiscal first quarter in an effort to preserve cash in light of the COVID-19 pandemic.
Guidance
For fiscal 2021, the company expects revenues between $7.1 billion and $7.3 billion, suggesting organic revenue growth of 1-4%. The top-line guidance includes 10.5 months of business operation of the recently-acquired Unisys Federal business and a negative impact of $150 million from the coronavirus pandemic. The Zacks Consensus Estimate for fiscal 2021 revenues is pegged at $7.24 billion.
For the full fiscal year, the company anticipates adjusted earnings in the $5.80-$6.10 per share range. The guided range includes a negative impact of approximately $25 million due to the COVID-19 crisis. The Zacks Consensus Estimate for fiscal 2021 earnings is pegged at $6.10 per share.
Free cash flow is expected to meet or exceed $500 million in fiscal 2021.
Zacks Rank & Stocks to Consider
Science Applications currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader technology sector are NVIDIA Corporation (NVDA - Free Report) , Apple Inc. (AAPL - Free Report) and Fortinet, Inc. (FTNT - Free Report) , all carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for NVIDIA, Apple and Fortinet is currently pegged at 16.9%, 10.7% and 14%, respectively.
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
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