SAIC reports 2% organic growth in Q2 FY25; Prabu Natarajan on M&A and capital deployment plans

Scientific Applications International Corp. (Nasdaq stock: SAIC) revenues of $1.82 billion were recorded2% organic growth and $1.2 billion in net bookings, with a booking-to-billing ratio of 0.6 in Q2 FY25.

In an earnings statement released Thursday, the Reston, Virginia-based government technology services contractor said it ended the quarter with an estimated backlog of about $22.9 billion, of which about $4.2 billion was funded.

Known Contract Wins

During the quarter, SAIC won new and renewed contracts, including a $134 million potential order from the Department of the Treasury to support the Treasury Cloud program, a $206 million five-year supplemental order from the Department of Veterans Affairs to provide IT support for the VA Financial Services Center, and $250 million in contracts to support defense and space programs.

Implementation of SAIC’s growth strategy

On Thursday financial results conference call, Toni Townes-WhitleySAIC CEO and 2024 Candidate Wash 100 the winner presented current information on the company’s implementation of its business development strategy.

Townes-Whitley said that, in line with the strategy, SAIC continues to adapt to changes in its portfolio, go-to-market, brand and culture, and she expects the execution of the strategy to “initially translate into Bid More, Bid Better, Win More.”

“The first step, Bid More, significantly increases the total bid value to a level more aligned with our growth aspirations. … The second step, Bid Better, aligns our pipeline and bidding processes with key strategic and financial goals,” she told analysts.

The company’s CEO said that with the second step, the company will drive growth in the enterprise, IT and civilian sectors to strengthen its ability to increase market share.

“The third step, Win More, drives bookings and backlog growth and ultimately revenue growth more in line with our long-term goal. We will achieve this by increasing the volume and quality of bids, restoring our recompetition win rate to 90% and maintaining strong new business,” Townes-Whitley added.

CFO Prabu Natarajan on capital deployment strategy, mergers and acquisitions

During a telephone conversation, the CFO of SAIC Prabu Natarajan told analysts that the company returned about $220 million to shareholders in the second quarter, including $201 million from share repurchases.

He added that the contractor is on track to exceed the upper end of its previous goal of $350 million to $400 million in buybacks, while also maintaining ample M&A capacity.

SAIC’s executive vice president also noted that the company’s “capital strategy remains focused on maximizing long-term shareholder value” and that he expects this strategy to generate free cash flow growth “in excess of what is implied by current market valuations.”

“Given this view and the opportunity we see to significantly enhance our existing business, we expect our M&A threshold to remain high and capital deployments to remain focused on our repurchase program. However, we retain sufficient balance sheet flexibility to add differentiated businesses to our business if the opportunity meets our risk-adjusted threshold for returns,” Natarajan in addition.