Skip to content
    SAIC
    Earnings call· Jul 2026(Q2 FY27)

    Science Applications International Q2 FY27 earnings call SAIC

    Aug 31, 2026 Source

    Executive summary

    SAIC Q2 FY27 — Strong Performance Drives Raised Guidance and Strategic Transformation

    SAIC delivered strong Q2 FY27 results, exceeding expectations with 5% organic growth and robust cash flow, leading to raised full-year guidance. The company is embarking on Project ORBIT, a multi-year transformation initiative targeting $150 million in annual run-rate savings by FY30, with two-thirds reinvested for growth and margin expansion. Despite procurement unevenness and a low book-to-bill ratio this quarter, management remains confident in its pipeline and strategic direction, aiming for stronger growth in FY28.

    Highlights

    6

    • Organic revenue growth of approximately 5% in Q2 FY27.

    • Adjusted EBITDA of $193 million with margins of 10.3% in Q2 FY27.

    • Free cash flow of $131 million in Q2 FY27, maintaining peer-leading cash conversion.

    • Net leverage fell to 3.0x in Q2 FY27.

    • Recompete win rate over 90% in Q2 FY27.

    • Booked over $1.6 billion of intel space awards in H1 FY27.

    Concerns

    3

    • Book-to-bill of 0.6x in Q2 FY27, or 0.8x on a trailing 12-month basis, due to large opportunities slipping and slower RFPs/awards.

    • Applied second-half revenue contraction reflecting the RITS contract rolling off, creating an approximately 350 basis point headwind.

    • Second-half margins expected to step down to the high 9% range from 11% in H1 due to planned investments.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year FY27 Revenue
    $7.25 billion midpoint, reflecting organic contraction of 2% to flat
    high materiality
    High
    Full-year FY27 Adjusted EBITDA
    10.3% to 10.5% margins
    high materiality
    High
    Full-year FY27 Free Cash Flow
    at least $600 million or $14 per share
    high materiality
    High
    FY28 Margin Target
    mid-10s
    high materiality
    Medium
    FY30 Margin Target
    approximately 11%
    high materiality
    Medium
    Project ORBIT Annual Run Rate Savings
    $150 million
    high materiality
    High
    Project ORBIT Savings Reinvestment
    approximately 2/3 ($100 million)
    medium materiality
    High
    Second Half FY27 On-Contract Growth (OCG)
    about a 5% clip
    medium materiality
    Medium
    FY28 Submit Volume
    circa $25 billion to $28 billion
    medium materiality
    Medium
    Recompete Win Rate Target
    at or above 90%
    medium materiality
    High
    New Business Win Rate Target
    at or above 30%
    medium materiality
    High

    Operational metrics

    20
    Organic Revenue Growth
    5%
    Q2 FY27

    Organic growth for the second quarter.

    Adjusted EBITDA
    $193 millionup modestly year-over-year excluding prior year's favorable legal settlement
    Q2 FY27

    Adjusted EBITDA for the quarter.

    Adjusted EBITDA Margin
    10.3%
    Q2 FY27

    Reflecting strong program execution and continued benefit from cost efficiency efforts.

    Adjusted Diluted EPS
    $3.01down year-over-year due to favorable settlement in prior period, offset by lower share count
    Q2 FY27

    Adjusted diluted earnings per share for the quarter.

    Net Leverage
    3.0xfell this quarter
    Q2 FY27

    Net leverage ratio, continuing to naturally delever as EBITDA improves.

    Unplanned Material Purchases Contribution to Revenue Growth
    1%
    Q2 FY27

    Benefit to Q2 organic growth that is not expected to repeat.

    On-Contract Growth (OCG)
    9%well ahead of plan
    Q2 FY27

    On-contract growth for the quarter, maintaining momentum from Q1.

    OCG from FY25/FY26 Programs
    $240 million
    H1 FY27

    Contribution from a handful of programs won in FY25 and FY26 that ramped slowly last year, towards a $500 million full-year target.

    CapEx Spend
    $25 million
    H1 FY27

    Capital expenditure spent to support growth opportunities.

    Cost Reductions
    $100 million
    Last year

    Cost reduction programs successfully executed from late last year.

    Project ORBIT Annual Run Rate Savings
    $150 million
    By end of 3-year implementation period

    Expected annual run rate savings from Project ORBIT.

    Project ORBIT Savings Reinvestment
    2/3
    Ongoing

    Portion of Project ORBIT savings expected to be reinvested in the business.

    Project ORBIT Savings for Margin Expansion
    1/3
    Ongoing

    Portion of Project ORBIT savings expected to support margin expansion.

    Historical Recompete Headwinds
    5% to 8%
    Last 5 years

    Recompete headwinds experienced in almost every one of the last 5 years due to win rates materially below 90%.

    Historical Growth Rates
    3%, 2%, 7.5%, 3%, -3%
    Last 5 years

    Annual growth rates over the last 5 years.

    Submit Volume
    $24 billiondown from $25 billion to $28 billion
    Current year

    Current submit volume for the year, down from previous expectations.

    Fixed-Price Sales
    15% to 18%
    Current

    Current percentage of sales from fixed-price contracts.

    Fixed-Price Pipeline
    1/3
    Current

    Portion of the pipeline that is fixed-price, indicating a material change.

    Civil Business EBITDA Margins (FFP)
    north of 15%
    Current

    EBITDA margins in the Civil business, where most fixed-price exposure currently lies.

    Single-Award IDIQ Wins
    $2 billion to $2.5 billion
    Last couple of years

    Cumulative value of single-award IDIQ wins over the last couple of years, not fully reflected in backlog but contributing to OCG.

    Orderbook & backlog

    4
    Book-to-bill ratio0.6xQ2 FY27

    Would have been closer to 1.0x if not for a delay in a large recompete award booked 2 days after quarter closed.

    Book-to-bill ratio (Trailing 12-month)0.8xQ2 FY27
    Intel Space Awards$1.6 billionH1 FY27

    well ahead of recent trends

    Funded Backlogcontinues to growQ2 FY27

    Risks & headwinds

    4
    Procurement Environment UnevennessNear-term, impacting Q2 and potentially H2 FY27.

    Q2 book-to-bill of 0.6x (0.8x TTM); large opportunities slipping.

    Mitigation: Strong qualified pipeline, increased submissions planned, high win rates, contract extensions, and increased ceiling utilization to provide execution pathways for customers.

    RITS Contract Roll-offH2 FY27

    Approximately 350 basis point headwind.

    Mitigation: Strong year-to-date performance and on-contract growth.

    Second-Half Margin Step-DownH2 FY27

    Expected step-down to high 9% range in H2 FY27 from 11% in H1.

    Mitigation: Planned targeted investments in high-priority areas where customer demand and strategic relevance are accelerating.

    Continuing Resolution (CR)Start of next fiscal year

    Government budget figures of $850 billion-$900 billion mentioned as context for CR discussion.

    Mitigation: Focus on controllable factors and opportunities within the current budget, not relying on a $1 trillion budget.

    What to watch in Q3 FY27

    5

    On-contract growth (OCG)

    H2 FY27
    Current9% in Q2 FY27; $240M from specific programs in H1 FY27
    Target5% clip in H2 FY27; $500M from specific programs for FY27

    Why it matters

    OCG is a key driver of revenue growth, especially given procurement delays. Verifying the 5% clip and the $500M target will indicate underlying business health and execution.

    our assumption for the second half of the year is that we will see OCG at about a 5% clip.

    Q&A highlights

    6

    Asked about the drivers of the 9% OCG, the second-half assumptions, and whether it's market improvement or company actions. Also clarified the $300M OCG plan vs. $250M achievement.

    Jim Reagan attributed OCG strength to broad-based customer ability to move money faster and successful program execution, expecting velocity to continue. Prabu Natarajan clarified the full-year OCG plan for specific programs is $500M, with $240M achieved in H1, and assumes a 5% OCG clip for H2. He also noted the 3-4 month lag from outlays to revenue and the impact of single-award IDIQ wins on OCG.

    “our assumption for the second half of the year is that we will see OCG at about a 5% clip.”

    asked by Jonathan Siegmann · answered by Prabu Natarajan

    2 min read6 chapters

    Detailed Narrative

    01

    Operational Efficiency and Transformation (Project ORBIT)

    SAIC is implementing "Project ORBIT" (Optimizing Resources for a Better Impact Tomorrow), a 3-year initiative to drive structural change, improve efficiency, and support growth. This includes a new procurement system for smarter buying, an enhanced onboarding system to accelerate candidate placement, and generative AI tools for mission delivery. The project aims for quick wins initially, with more transformative changes like procurement rethinking taking longer, and is expected to generate approximately $150 million in annual run-rate savings by the end of its implementation period.

    02

    Strategic Portfolio Review

    The company is conducting a portfolio and strategy review to identify areas of strongest "right to win" and growth potential. This review is expected to sharpen SAIC's strategic direction, focusing on doubling down and investing in critical mission areas, including potential M&A opportunities. Management emphasizes that this is more than a refresh but not a 180-degree turn, and expects to share more details on the December earnings call.

    03

    Procurement Environment and Book-to-Bill Dynamics

    The procurement environment has shown unevenness, with large opportunities slipping due to procurement offices doing "more with less" and implementing new guidelines, including fixed-price directives. This led to a Q2 book-to-bill of 0.6x (0.8x TTM). However, a large recompete award was booked two days after quarter-end, which would have brought book-to-bill closer to 1.0x. Slower RFPs also drove contract extensions and increased ceiling utilization, providing execution pathways for customers.

    04

    On-Contract Growth (OCG) Drivers

    Q2 organic growth of 5% was significantly driven by 9% OCG, well ahead of plan. This momentum is attributed to an improving outlay environment, faster customer money movement onto contracts, and successful execution of programs. Roughly half of this year's OCG comes from FY25/FY26 programs that ramped slowly last year, now contributing approximately $240 million in H1 FY27 towards a $500 million full-year target. Management expects OCG to continue at about a 5% clip in the second half of FY27.

    05

    Fixed-Price Contracting Evolution

    SAIC's fixed-price (FFP) sales currently represent 15% to 18% of total sales, but the pipeline is inflecting, with about one-third now being fixed-price opportunities. This shift, particularly in the Civil business where FFP margins are north of 15%, is seen as a potential lever for future margin expansion. The company is actively training teams and adapting delivery models to prepare for a broader market transition towards outcome-oriented fixed-price contracts, viewing it as a longer-term change rather than a near-term fix.

    06

    Government Budget and CR Assumptions

    The company assumes a Continuing Resolution (CR) to start the next fiscal year. Management emphasizes that growth is achievable within the current budget environment, focusing on controllable factors rather than relying on a $1 trillion budget. The RFP process is still moving in fits and starts, and the company is not banking on material improvements in the contracting environment for the remainder of the current fiscal year.

    AI-generated summary of the company’s earnings call. Not investment advice.