Inquired about the origin of Project ORBIT, how the $150M savings are structured, and how efficiencies are driven in a labor-oriented business.

Jim Reagan explained ORBIT's genesis from employee feedback on operational inefficiencies and the need to operate faster. He emphasized it's a fundamental, crowdsourced effort, not just top-down targets. Prabu Natarajan added that ORBIT is about structural change, revenue maximization, and actively managing the total cost portfolio, with internal aspirations higher than the stated $150M. “this is not just taking targets and pushing them down and it's much more fundamental. And it is actually going out to the people that do the work and asking them to help us identify the opportunities to make things run better.”

Asked for clarification on the expected 100 bps step-down in second-half margins.

Prabu Natarajan stated that high 9s are expected for H2 margins, compared to 11% in H1. This reflects planned investments and an assumption that business group performance will be closer to 10% than mid-10s. He noted potential upside if core performance remains strong. “what we said in the script is that high 9s is how we see the second half of the year. The reality is we're sitting at 11% in the first half of the year.”

Inquired about the linearity and contour of margin improvement from ORBIT over the next few years (FY28-FY30).

Prabu Natarajan explained that while the target is 11% by FY30, the path is unlikely to be linear, with potential movement within 10-20 bps of 10.7%-10.8% over the next couple of years. He noted that winning more new business could pressure near-term margins but is an acceptable trade-off. Jim Reagan added that ORBIT is about self-disruption to enhance margins, reduce costs, and increase efficiency, ultimately enabling business growth. “Ideally, we would say we would want to get 20 to 30 bps higher in FY '29 and then get to 11% in FY '30. The reality is we know life is not linear.”

SAIC

Science Applications International (SAIC) Q2 FY27 earnings call: guidance and Q&A

Earnings call· Jul 2026 (Q2 FY27)· Information Technology· Aug 31, 2026

Source: earnings call transcript

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

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

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

Category	Target	Timeline	Confidence
Full-year FY27 Revenue	$7.25 billion midpoint, reflecting organic contraction of 2% to flat high materiality	FY27	High
Full-year FY27 Adjusted EBITDA	10.3% to 10.5% margins high materiality	FY27	High
Full-year FY27 Free Cash Flow	at least $600 million or $14 per share high materiality	FY27	High
FY28 Margin Target	mid-10s high materiality	FY28	Medium
FY30 Margin Target	approximately 11% high materiality	FY30	Medium
Project ORBIT Annual Run Rate Savings	$150 million high materiality	End of 3-year implementation period	High
Project ORBIT Savings Reinvestment	approximately 2/3 ($100 million) medium materiality	Ongoing	High
Second Half FY27 On-Contract Growth (OCG)	about a 5% clip medium materiality	H2 FY27	Medium
FY28 Submit Volume	circa $25 billion to $28 billion medium materiality	FY28	Medium
Recompete Win Rate Target	at or above 90% medium materiality	Ongoing	High
New Business Win Rate Target	at or above 30% medium materiality	Ongoing	High

SAIC operating KPIs by quarter

SAIC operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Jan 2026 Q4 FY26	Apr 2026 Q1 FY27	This call Jul 2026 Q2 FY27	Change vs prior quarter
Book-to-bill ratio	—	1.1 ratio This resulted in a quarterly book-to-bill of 1.1x or 1.0x on a trailing 12-month basis. Source: earnings call transcript	0.6 ratio This resulted in a quarterly book-to-bill of 0.6,x, or 0.8x on a trailing 12-month basis. Source: earnings call transcript	-45.5%
Employees	23K I think at least once or twice every week, I get an e-mail from one of our 23,000 employees applauding what we're doing and giving me some real-life examples of things that we could do differently to help them get their jobs done easier. Source: earnings call transcript	23K I want to recognize our 23,000 employees whose relentless commitment to execution excellence made these results possible sustaining strong margins and industry-leading cash flow reflects the team's discipline and focus in a dynamic environment. Source: earnings call transcript	—	0%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Book-to-bill ratio 0.6x Q2 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) 0.8x Q2 FY27

Intel Space Awards $1.6 billion H1 FY27

well ahead of recent trends

Funded Backlog continues to grow Q2 FY27

Risks & headwinds

Procurement Environment Unevenness Near-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-off H2 FY27

Approximately 350 basis point headwind.

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

Second-Half Margin Step-Down H2 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

On-contract growth (OCG)

H2 FY27

Current 9% in Q2 FY27; $240M from specific programs in H1 FY27

Target 5% 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.

Find out whether SAIC delivers this. Inve re-checks your case every morning.

Q&A highlights

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 read 6 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.