SAIC - Science Applications International Corporation

12/04/2025 | Press release | Distributed by Public on 12/04/2025 11:25

Quarterly Report for Quarter Ending October 31, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations and quantitative and qualitative disclosures about market risk should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes. It contains forward-looking statements (which may be identified by words such as those described in "Risk Factors-Forward-Looking Statement Risks" in Part I of the most recently filed Annual Report on Form 10-K), including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations (including our financial targets discussed below under "Management of Operating Performance and Reporting" and "Liquidity and Capital Resources"); backlog; our industry; government budgets and spending; market opportunities; the impact of competition; and the impact of acquisitions and divestitures. Such statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. Risks, uncertainties and assumptions that could cause or contribute to these differences include those discussed below, in "Risk Factors" in Part II of this report and in Part I of the most recently filed Annual Report on Form 10-K. Due to such risks, uncertainties and assumptions, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update these factors or to publicly announce the results of any changes to our forward-looking statements due to future results or developments.
We use the terms "SAIC," the "Company," "we," "us" and "our" to refer to Science Applications International Corporation and its consolidated subsidiaries.
We utilize a 52/53 week fiscal year, ending on the Friday closest to January 31, with fiscal quarters typically consisting of 13 weeks. Fiscal 2026 began on February 1, 2025 and ends on January 30, 2026, while fiscal 2025 began on February 3, 2024 and ended on January 31, 2025.
Business Overview
We are a leading technology integrator providing full life cycle services and solutions in the technical, engineering and enterprise information technology ("IT") markets. We developed our brand by addressing our customers' mission critical needs and solving their most complex problems for over 50 years. As one of the largest pure-play technology service providers to the U.S. government, we serve markets of significant scale and opportunity. Our primary customers are the departments and agencies of the U.S. government. We serve our customers through approximately 1,700 active contracts and task orders and employ approximately 24,000 individuals who are led by an experienced executive team of proven industry leaders. Our long history of serving the U.S. government has afforded us the ability to develop strong and longstanding relationships with some of the largest customers in the markets we serve. Substantially all of our revenues and tangible long-lived assets are generated and located in the United States.
We have five customer facing business groups supported by the enterprise organizations, including the Innovation Factory. The five business groups, which are also our operating segments, are aggregated into two reportable segments for financial reporting purposes given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve. Our two reportable segments are the Defense and Intelligence segment and the Civilian segment.
The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the Department of War ("DoW", formerly referred to as the Department of Defense) and Intelligence Community of the United States Government.
The Civilian segment provides solutions to the civilian markets, encompassing federal, state, and local governments, in order to deliver services for citizen well-being, border security, and protecting lives. This includes integrating solutions into a spectrum of public service missions that impact travel, trade, health and the economy.
The offerings of both reportable segments entail the integration of emerging technologies into mission critical operations that modernize and enable national imperatives, including IT modernization, digital engineering, artificial intelligence ("AI"), mission systems support and advisory, training and simulation, and ground vehicles support. These services include end-to-end solutions spanning the design, development, integration, deployment, management and operations, sustainment and security of the customers' entire IT infrastructure.
-22-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Our Innovation Factory supports the operating segments by developing enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings through the operations of the business to meet complex customer needs and accelerate digital transformation. The Innovation Factory includes designated teams focused on AI, application development, network services, platforms and cloud, engineering, and cybersecurity. It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions and works with customers to enhance solutions going forward.
Costs associated with corporate functions that are not allocable to the reportable segments are presented as Corporate. See Note 11-Business Segments Information to the condensed consolidated financial statements contained within this report for additional information.
On October 15, 2025, we acquired SilverEdge Government Solutions ("SilverEdge"), an innovative provider of mission-driven technology solutions and products, for a preliminary purchase price of $203 million, net of $6 million cash acquired, subject to post-closing adjustments. The acquisition advances our strategy to provide mission focused, IP-based solutions and commercial products to our customers.
Economic Opportunities, Challenges, and Risks
During the three and nine months ended October 31, 2025, we generated 98% of our revenues from contracts with the U.S. government, including subcontracts on which we perform. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government. In March 2025, the President signed a continuing resolution ("CR") that extends government funding through the close of government fiscal year ("GFY") 2025. The measure provides budget certainty for agencies through September 30, 2025. The CR also provides flexibility for new starts on programs at the DoW, which are typically not allowed under CRs.
In July 2025, Congress passed a budget reconciliation package that will add approximately $150 billion in new non-border defense spending, and $175 billion in new border security and enforcement spending, among other provisions. This funding is available to agencies immediately, and can be used through GFY 2029. Portions of this new funding will increase spending in areas addressable to us, including new investments in Naval operations and border surveillance. The measure also extended and expanded key tax provisions that will positively impact our Company.
On October 1, 2025, the federal government shut down following the expiration of the March 2025 CR. On November 12, 2025, the President signed a spending agreement that officially reopened the government after 43 days. The agreement includes three full-year appropriations bills, including the Agriculture-FDA, Military Construction-Veterans Affairs, and Legislative Branch packages. All agencies and functions funded by those bills will now be covered in full through September 30, 2026, the close of GFY 2026.
All remaining agencies have resumed operations under a CR that runs through January 30, 2026. If Congress is not able to pass the remaining appropriations by that date, it could potentially lead to a partial or full government shutdown affecting any outstanding unfunded agencies. Any additional delay in funding could negatively impact our business operations, revenues, cash flows, and profitability.
As part of the budget reconciliation package signed into law in July 2025, the federal debt limit was increased by $5 trillion. This is expected to extend protection from a potential government default until at least the end of calendar year 2026.
The U.S. government administration has put in place a number of executive orders and actions which could affect our business. In addition, the Department of Government Efficiency is driving changes in the structure and priorities of Federal agencies. Agencies are conducting comprehensive reviews of existing and new contracting activity to identify potential efficiencies or nonalignment with new Administration priorities. Our contracts have been, and will continue to be, subject to these reviews. We have not experienced a material financial statement impact from recent executive orders or program cancellations across the government. However, ongoing reductions in personnel, changes in agency alignment, required reviews of new contracting activity, decreases or delays in new or existing contract awards and in government spending on the types of programs that we support, and terminations or stop-work-orders and delay in funding on government contracts on which we are currently performing could adversely affect our future revenues, cash flows, and profitability.
-23-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Adverse changes in fiscal and economic conditions could materially impact our business. Some changes that could have an adverse impact on our business include adverse regulations, the implementation of future spending reductions (including sequestration), government shut downs, delayed passage of appropriations bills resulting in temporary or full-year continuing resolutions, extreme inflationary increases adversely impacting fixed price contracts, and potential government shutdowns.
Spending packages, including the infrastructure bill, Inflation Reduction Act, and CHIPS and Science Act, as well as future potential spending packages, may provide additional opportunity in areas of our focus such as digital modernization, cyber, microelectronics support, and climate resiliency.
The U.S. government has increasingly relied on contracts that are subject to a competitive bidding process (including indefinite delivery, indefinite quantity ("IDIQ"), U.S. General Services Administration ("GSA") schedules, and other multi-award contracts), which has resulted in greater competition and increased pricing pressure. Additionally, the U.S. government has put renewed emphasis on increasing the number of small business prime set-aside contracts that further reduce the addressable market in some areas.
Despite the budget and competitive pressures affecting the industry, we believe we are well-positioned to protect and expand existing customer relationships and benefit from opportunities that we have not previously pursued. Our scale, size, and prime contractor leadership position are expected to help differentiate us from our competitors, especially on large contract opportunities. We believe our long-term, trusted customer relationships and deep technical expertise provide us with the sophistication to handle highly complex, mission-critical contracts. Our value proposition is found in the proven ability to serve as a trusted adviser to our customers. In doing so, we leverage our expertise and scale to help them execute their mission.
We succeed as a business based on the solutions we deliver, our past performance, and our ability to compete on price. Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best capabilities available. Our Innovation Factory develops superior enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings to meet complex customer needs and accelerate the digital transformation. Our past performance was achieved by employees dedicated to supporting our customers' most challenging missions. Our current cost structure and ongoing efforts to reduce costs by strategic sourcing and developing repeatable offerings sold "as a service" and as managed services in a more commercial business model are expected to allow us to compete effectively on price in an evolving environment. Our ability to be competitive in the future will continue to be driven by our reputation for successful program execution, competitive cost structure, development of new pricing and business models, and efficiencies in assigning the right people, at the right time, in support of our contracts.
Management of Operating Performance and Reporting
Our business and program management process is directed by professionals focused on serving our customers by providing high quality services in achieving program requirements. These professionals carefully monitor contract margin performance by constantly evaluating contract risks and opportunities. Throughout each contract's life cycle, program managers review performance and update contract performance estimates to reflect their understanding of the best information available.
The primary financial measures used to evaluate our consolidated results of operations include revenues, operating income, adjusted operating income(1), adjusted EBITDA(1), and operating cash flows. Given that revenues fluctuate on our contract portfolio over time due to contract awards and completions, changes in customer requirements, and increases or decreases in ordering volume of materials, we evaluate significant trends and fluctuations resulting from these factors. Whether performed by our employees or by our subcontractors, we primarily provide services and, as a result, our cost of revenues are predominantly variable. We also analyze our cost mix (labor, subcontractor and materials) in order to understand operating margin because programs with a higher proportion of SAIC labor are generally more profitable. Changes in cost of revenues as a percentage of revenues other than from revenue volume or cost mix are normally driven by fluctuations in shared or corporate costs, or cumulative revenue adjustments due to changes in estimates.
Changes in operating cash flows are described with regard to changes in cash generated through the provision of services, significant drivers of fluctuations in assets or liabilities and the impacts of changes in timing of cash receipts or disbursements.
(1) Non-GAAP measure, see "Non-GAAP Measures" section below for additional information about this measure.
-24-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Condensed Consolidated Results of Operations
The following table summarizes our condensed consolidated results of operations:
Three Months Ended Nine Months Ended
October 31,
2025 		Percent
change 		November 1,
2024 		October 31,
2025 		Percent
change 		November 1,
2024
(dollars in millions)
Revenues $ 1,866 (6 %) $ 1,976 $ 5,512 (2 %) $ 5,641
Cost of revenues 1,639 (6 %) 1,739 4,861 (2 %) 4,981
As a percentage of revenues 87.8 % 88.0 % 88.2 % 88.3 %
Selling, general and administrative expenses
101 22 % 83 265 8 % 245
Other operating (income) expense
(2) (67 %) (6) (2) (80 %) (10)
Operating income 128 (20 %) 160 388 (9 %) 425
As a percentage of revenues 6.9 % 8.1 % 7.0 % 7.5 %
Income tax (expense) benefit (16) (20 %) (20) (15) (74 %) (57)
Net income
$ 78 (26 %) $ 106 $ 273 3 % $ 264
Revenues. Revenues decreased $110 million and $129 million for the three and nine months ended October 31, 2025, respectively, as compared to the same period in the prior year primarily due to ramp down in volume on existing contracts, including approximately $16 million attributable to the government shutdown, and contract completions, partially offset by new contracts. Revenues recognized from the acquisition of SilverEdge for the three months ended October 31, 2025 were immaterial.
Operating Income. Operating income as a percentage of revenues for the three months ended October 31, 2025 decreased from the comparable prior year period primarily due to executive transition costs, net of recoveries, and the favorable resolution of the Assault Amphibious Vehicle ("AAV") contract termination in the prior year ($14 million), partially offset by timing and volume mix in our contract portfolio.
Operating income as a percentage of revenues for the nine months ended October 31, 2025 decreased from the comparable prior year period primarily due to executive transition costs, net of recoveries, the favorable resolution of the AAV contract termination in the prior year ($14 million), and costs related to the settlement of federal tax audits, partially offset by a recovery of costs from the settlement of a patent infringement matter (see Note 12-Legal Proceedings and Other Commitments and Contingencies for additional information) and timing and volume mix in our contract portfolio.
Income Taxes. Our effective income tax rate was 16.7% and 5.2% for the three and nine months ended October 31, 2025 and 15.6% and 17.8% for the three and nine months ended November 1, 2024, respectively. The effective tax rate for the three months ended October 31, 2025 increased compared to the same period last year, primarily due to the impacts of the One Big Beautiful Bill Act ("the Act"). The effective tax rate for the nine months ended October 31, 2025 decreased compared to the same period last year primarily due to a $47 million benefit from an IRS audit settlement, pending final administrative approvals, covering fiscal years 2016 through 2019, and reductions in liabilities for uncertain tax positions for the remaining open tax years.
Additionally, our effective tax rate further differs from the statutory tax rate due to research and development tax credits and tax benefits from employee share-based compensation.
On July 4, 2025, the Act was enacted, introducing several significant changes to U.S. corporate income tax law. One key provision of the Act is the permanent reinstatement of the immediate expensing of U.S. research and development expenditures. Based on our interpretation, the Act results in an increase to our income taxes receivable with an offsetting decrease to our deferred tax assets and an immaterial increase to our effective tax rate for the year. These changes are reflected in our current period effective tax rate. We are awaiting interpretive guidance from the IRS, and therefore the current estimated impacts of the Act are subject to change.
-25-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
In December 2021, the Organisation for Economic Co-operation and Development (OECD) enacted a 15% global minimum tax framework ("Pillar Two") which became effective in certain jurisdictions beginning in fiscal 2024. While U.S. adoption is uncertain, several countries where we operate have implemented it, and others are in the process of adopting. We do not anticipate Pillar Two to have a significant impact on our effective tax rate or our condensed consolidated results of operations, financial position, and cash flows.
Segment and Corporate Results
The primary financial performance measures we use to manage our reportable segments and monitor results of operations are revenues and adjusted operating income. Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs.
The following tables summarize our results of operations by reportable segment:
Defense and Intelligence Three Months Ended Nine Months Ended
October 31,
2025 		Percent
change 		November 1,
2024 		October 31,
2025 		Percent
change 		November 1,
2024
(dollars in millions)
Revenues $ 1,439 (5 %) $ 1,515 $ 4,246 (3 %) $ 4,366
Adjusted operating income
$ 118 (20 %) $ 148 $ 357 (10 %) $ 396
As a percentage of revenues 8.2 % 9.8 % 8.4 % 9.1 %
Revenues. Revenues decreased $76 million and $120 million for the three and nine months ended October 31, 2025, respectively, as compared to the same period in the prior year primarily due to contract completions and ramp down in volume on existing contracts, partially offset by new contracts.
Adjusted operating income. Adjusted operating income as a percentage of revenues for the three and nine months ended October 31, 2025 decreased compared to the comparable prior year period primarily due to timing and volume mix in our contract portfolio and the favorable resolution of the AAV contract termination in the prior year ($14 million).
Civilian
Three Months Ended Nine Months Ended
October 31,
2025 		Percent
change 		November 1,
2024 		October 31,
2025 		Percent
change 		November 1,
2024
(dollars in millions)
Revenues $ 427 (7 %) $ 461 $ 1,266 (1 %) $ 1,275
Adjusted operating income
$ 62 27 % $ 49 $ 168 19 % $ 141
As a percentage of revenues 14.5 % 10.6 % 13.3 % 11.1 %
Revenues. Revenues decreased $34 million and $9 million for the three and nine months ended October 31, 2025, respectively, as compared to the same period in the prior year primarily due to ramp down in volume on existing contracts and contract completions, partially offset by new contracts.
Adjusted operating income. Adjusted operating income as a percentage of revenues for the three and nine months ended October 31, 2025 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio.
Corporate
Three Months Ended Nine Months Ended
October 31,
2025 		Percent
change 		November 1,
2024 		October 31,
2025 		Percent
change 		November 1,
2024
(dollars in millions)
Adjusted operating income (loss)
$ 3 (250 %) $ (2) $ (2) (75 %) $ (8)
-26-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Adjusted operating income (loss). Adjusted operating income was $3 million for the three months ended October 31, 2025, compared to an adjusted operating loss of $2 million during the same period in the prior year primarily due to lower other selling, general and administrative expenses.
Adjusted operating loss decreased $6 million for the nine months ended October 31, 2025 as compared to the same period in the prior year primarily due to a recovery of costs from the settlement of a patent infringement matter, partially offset by higher other selling, general and administrative expenses.
Non-GAAP Measures
Consolidated adjusted operating income, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and adjusted EBITDA are non-GAAP financial measures. While we believe that these non-GAAP financial measures are also useful for management and investors in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below. Other companies may define similar measures differently.
Adjusted operating income. Adjusted operating income is a performance measure that primarily excludes the impact of non-recurring transactions and activities that we do not consider to be indicative of our ongoing operating performance. Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs. Acquisition, integration, restructuring and impairment costs represent costs incurred related to acquisitions, the reorganization, facilities optimization efforts, and impairments of long-lived assets, along with associated depreciation. Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards. Depreciation of property, plant, and equipment relates to property, plant, and equipment specifically identifiable for each segment. Adjusted operating income also excludes amortization of intangible assets because we do not have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and the related amortization term are unique to each acquisition. Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019. Executive transition costs, net of recoveries, represent costs associated with the immediate departure of our CEO and other executives, net of the portion recovered through our indirect rates in accordance with Cost Accounting Standards. We believe that this performance measure provides management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.
Adjusted operating income for the periods presented were calculated as follows:
Three Months Ended Nine Months Ended
October 31,
2025 		November 1,
2024 		October 31,
2025 		November 1,
2024
(dollars in millions)
Revenues
$ 1,866 $ 1,976 $ 5,512 $ 5,641
Operating income
$ 128 $ 160 $ 388 $ 425
Operating income as a percentage of revenues
6.9 % 8.1 % 7.0 % 7.5 %
Depreciation of property, plant and equipment
9 6 22 17
Amortization of intangible assets
29 29 87 87
Acquisition, integration, restructuring and impairment costs
1 - 5 2
Recovery of acquisition, integration, restructuring and impairment costs(1)
- - (2) (2)
Costs related to the settlement of federal tax audits
- - 7 -
Executive transition costs, net of recoveries
16 - 16 -
Adjusted operating income
$ 183 $ 195 $ 523 $ 529
Adjusted operating income as a percentage of revenues
9.8 % 9.9 % 9.5 % 9.4 %
(1) Adjustment reflects the portion of acquisition, integration, restructuring and impairment costs recovered through our indirect rates in accordance with U.S. government Cost Accounting Standards.
-27-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
EBITDA and Adjusted EBITDA. EBITDA is a performance measure that is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization. Adjusted EBITDA is a performance measure that excludes the impact of non-recurring transactions and activities that we do not consider to be indicative of our ongoing operating performance. Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition, integration, restructuring and impairment costs, and any other material non-recurring costs. Acquisition, integration, restructuring and impairment costs represent costs incurred related to acquisitions, the reorganization, facilities optimization efforts, and impairments of long-lived assets, along with associated depreciation. Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards. Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019. Executive transition costs, net of recoveries, represent costs associated with the immediate departure of our CEO and other executives, net of the portion recovered through our indirect rates in accordance with Cost Accounting Standards.
We believe that EBITDA and adjusted EBITDA provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.
EBITDA and adjusted EBITDA for the periods presented were calculated as follows:
Three Months Ended Nine Months Ended
October 31,
2025 		November 1,
2024 		October 31,
2025 		November 1,
2024
(dollars in millions)
Revenues
$ 1,866 $ 1,976 $ 5,512 $ 5,641
Net income $ 78 $ 106 $ 273 $ 264
Interest expense, net and loss on sale of receivables
36 36 104 108
Income tax expense (benefit)
16 20 15 57
Depreciation and amortization 38 35 109 104
EBITDA 168 197 501 533
EBITDA as a percentage of revenues 9.0 % 10.0 % 9.1 % 9.4 %
Acquisition, integration, restructuring and impairment costs
1 - 5 2
Recovery of acquisition, integration, restructuring and impairment costs(1)
- - (2) (2)
Costs related to the settlement of federal tax audits
- - 7 -
Executive transition costs, net of recoveries
16 - 16 -
Adjusted EBITDA $ 185 $ 197 $ 527 $ 533
Adjusted EBITDA as a percentage of revenues 9.9 % 10.0 % 9.6 % 9.4 %
(1) Adjustment reflects the portion of acquisition, integration, restructuring and impairment costs recovered through our indirect rates in accordance with U.S. government Cost Accounting Standards.
Adjusted operating income and adjusted EBITDA as a percentage of revenues for the three months ended October 31, 2025 decreased compared to the same period in the prior year primarily due to the favorable resolution of the AAV contract termination in the prior year ($14 million), partially offset by timing and volume mix in our contract portfolio.
Adjusted operating income and adjusted EBITDA as a percentage of revenues for the nine months ended October 31, 2025 increased compared to the same period in the prior year primarily due to a recovery of costs from the settlement of a patent infringement matter and timing and volume mix in our contract portfolio, partially offset by the favorable resolution of the AAV contract termination in the prior year ($14 million).
-28-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Other Key Performance Measures
In addition to the financial measures described above, we believe that bookings and backlog are useful measures for management and investors to evaluate our potential future revenues. We also consider measures such as contract types and cost of revenues mix to be useful for management and investors to evaluate our operating income and performance.
Net Bookings and Backlog. Net bookings represent the estimated amount of revenues to be earned in the future from funded and negotiated unfunded contract awards that were received during the period, net of adjustments to estimates on previously awarded contracts. We calculate net bookings as the period's ending backlog plus the period's revenues less the prior period's ending backlog and initial backlog obtained through acquisitions.
Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts as work is performed. We do not include in backlog estimates of revenues to be derived from IDIQ contracts, but rather record backlog and bookings when task orders are awarded on these contracts. Given that much of our revenue is derived from IDIQ contract task orders that renew annually, bookings on these contracts tend to refresh annually as the task orders are renewed. Additionally, we do not include in backlog contract awards that are under protest until the protest is resolved in our favor.
We segregate our backlog into two categories as follows:
•Funded Backlog.Funded backlog for contracts with government agencies primarily represents estimated amounts of revenue to be earned in the future from contracts for which funding is appropriated less revenues previously recognized on these contracts. It does not include the unfunded portion of contracts in which funding is incrementally appropriated or authorized on a quarterly or annual basis by the U.S. government and other customers even though the contract may call for performance over a number of years. Funded backlog for contracts with non-government customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on these contracts.
•Negotiated Unfunded Backlog.Negotiated unfunded backlog represents estimated amounts of revenue to be earned in the future from negotiated contracts for which funding has not been appropriated or otherwise authorized and from unexercised priced contract options. Negotiated unfunded backlog does not include any estimate of future potential task orders expected to be awarded under IDIQ, GSA Schedules or other master agreement contract vehicles, with the exception of certain IDIQ contracts where task orders are not competitively awarded and separately priced but instead are used as a funding mechanism, and where there is a basis for estimating future revenues and funding on future anticipated task orders.
We expect to recognize revenue from a substantial portion of our funded backlog within the next twelve months. However, the U.S. government can adjust the scope of services of or cancel contracts at any time. Similarly, certain contracts with commercial customers include provisions that allow the customer to cancel prior to contract completion. Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees (contract profit) for work performed.
The estimated value of our total backlog as of the dates presented was:
October 31, 2025 January 31, 2025
Defense and Intelligence
Civilian
Total SAIC
Defense and Intelligence
Civilian
Total SAIC
(in millions)
Funded backlog $ 2,696 $ 1,127 $ 3,823 $ 2,599 $ 845 $ 3,444
Negotiated unfunded backlog 16,753 3,212 19,965 15,341 3,072 18,413
Total backlog $ 19,449 $ 4,339 $ 23,788 $ 17,940 $ 3,917 $ 21,857
We had net bookings worth an estimated $2.2 billion and $7.2 billion during the three and nine months ended October 31, 2025, respectively.
-29-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Contract Types. Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see "Business - Contract Types" in Part I, Item 1 of the most recently filed Annual Report on Form 10-K. The following table summarizes revenues by contract type as a percentage of each reportable segment and total SAIC revenues for the periods presented:
Three Months Ended
October 31, 2025
November 1, 2024
Defense and Intelligence
Civilian
Total SAIC
Defense and Intelligence
Civilian
Total SAIC
Cost reimbursement 80 % 4 % 62 % 82 % 6 % 64 %
Time and materials ("T&M")
9 % 67 % 23 % 8 % 62 % 21 %
Firm-fixed price ("FFP")
11 % 29 % 15 % 10 % 32 % 15 %
Total 100 % 100 % 100 % 100 % 100 % 100 %
Nine Months Ended
October 31, 2025
November 1, 2024
Defense and Intelligence
Civilian
Total SAIC
Defense and Intelligence
Civilian
Total SAIC
Cost reimbursement 80 % 4 % 62 % 79 % 6 % 63 %
Time and materials ("T&M")
9 % 68 % 23 % 10 % 64 % 22 %
Firm-fixed price ("FFP")
11 % 28 % 15 % 11 % 30 % 15 %
Total 100 % 100 % 100 % 100 % 100 % 100 %
Cost of Revenues Mix. We generate revenues by providing a customized mix of services to our customers. The profit generated from our service contracts is affected by the proportion of cost of revenues incurred from the efforts of our employees (which we refer to below as labor-related cost of revenues), the efforts of our subcontractors and the cost of materials used in the performance of our service obligations under our contracts. Contracts performed with a higher proportion of SAIC labor are generally more profitable. The following table presents cost mix as a percentage of each reportable segment and total SAIC revenues for the periods presented:
Three Months Ended
October 31, 2025
November 1, 2024
Defense and Intelligence
Civilian
Total SAIC
Defense and Intelligence
Civilian
Total SAIC
Labor-related cost of revenues 57 % 59 % 58 % 55 % 55 % 55 %
Subcontractor-related cost of revenues 28 % 31 % 28 % 29 % 30 % 29 %
Other materials-related cost of revenues 15 % 10 % 14 % 16 % 15 % 16 %
Total 100 % 100 % 100 % 100 % 100 % 100 %
Nine Months Ended
October 31, 2025
November 1, 2024
Defense and Intelligence
Civilian
Total SAIC
Defense and Intelligence
Civilian
Total SAIC
Labor-related cost of revenues 58 % 59 % 59 % 56 % 58 % 56 %
Subcontractor-related cost of revenues 29 % 32 % 29 % 29 % 31 % 30 %
Other materials-related cost of revenues 13 % 9 % 12 % 15 % 11 % 14 %
Total 100 % 100 % 100 % 100 % 100 % 100 %
Liquidity and Capital Resources
As a services provider, our business generally requires minimal infrastructure investment. We expect to fund our ongoing working capital, commitments and any other discretionary investments with cash on hand, future operating cash flows and, if needed, borrowings under our $1.0 billion Revolving Credit Facility and $300 million MARPA Facility.
-30-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
We anticipate that our future cash needs will be for working capital, capital expenditures, and contractual and other commitments. We consider various financial measures when we develop and update our capital deployment strategy, which include evaluating cash provided by operating activities, free cash flow and financial leverage.
Our ability to fund these needs will depend, in part, on our ability to generate cash in the future, which depends on our future financial results. Our future results are subject to general economic, financial, competitive, legislative and regulatory factors that may be outside of our direct control. Although we believe that the financing arrangements in place will permit us to finance our operations on acceptable terms and conditions for at least the next year, our future access to, and the availability of financing on acceptable terms and conditions will be impacted by many factors (including our credit rating, capital market liquidity and overall economic conditions). Therefore, we cannot ensure that such financing will be available to us on acceptable terms or that such financing will be available at all. Nevertheless, we believe that our existing cash on hand, generation of future operating cash flows, and access to bank financing and capital markets will provide adequate resources to meet our short-term liquidity and long-term capital needs.
During the third quarter of fiscal 2026, we issued unsecured senior notes through a private offering and amended our Credit Facility. See Note 7-Debt Obligations to the condensed consolidated financial statements contained within this report for additional information.
Historical Cash Flow Trends
The following table summarizes our cash flows:
Nine Months Ended
October 31,
2025 		November 1,
2024
(in millions)
Net cash provided by operating activities $ 351 $ 379
Net cash used in investing activities
(237) (15)
Net cash used in financing activities (125) (413)
Net decrease in cash, cash equivalents and restricted cash
$ (11) $ (49)
Net Cash Provided by Operating Activities. Cash flows provided by operating activities for the nine months ended October 31, 2025 decreased $28 million compared to the prior year primarily due to timing of vendor payments, lower cash inflows from the usage of the Master Accounts Receivable Purchase Agreement ("MARPA Facility") in the current year, and other changes in working capital, partially offset by timing of customer collections, lower cash taxes paid, and lower incentive-based compensation payments in the current year.
Net Cash Used in Investing Activities. Cash used in investing activities for the nine months ended October 31, 2025 increased $222 million compared to the prior year primarily due to $203 million of cash paid in the current year for the acquisition of SilverEdge, net of cash acquired (see Note 4 to the condensed consolidated financial statements) and proceeds from the sale of equity method investments in the prior year.
Net Cash Used in Financing Activities. Cash used in financing activities for the nine months ended October 31, 2025 decreased $288 million compared to the prior year period primarily due to higher proceeds from borrowings, net of principal payments and debt issuance costs, and lower plan share repurchases in the current year.
Critical Accounting Policies and Estimates
There have been no changes to our critical accounting policies and estimates during the nine months ended October 31, 2025 from those disclosed in our most recently filed Annual Report on Form 10-K.
Recently Issued But Not Yet Adopted Accounting Pronouncements
For information on recently issued but not yet adopted accounting pronouncements, see Note 1 to the condensed consolidated financial statements contained within this report.
-31-
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
SAIC - Science Applications International Corporation published this content on December 04, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on December 04, 2025 at 17:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]