SAIC reports growth, but the risk of COVID persists
In their conversation with investors in the second quarter, the management of Science Applications International Corp. highlighted two parts of the corporate strategy that were shown during the quarter: acquisitions and technology development.
However, COVID remains a wild card for the company’s growth prospects. The company reported 3.8 percent organic growth and said its acquisitions are driving that.
“Our acquisition of Halfaker and Associates has got off to a good start, is doing well and provides immediate access to strategic clients in the healthcare sector,” said Nazzic Keene, CEO of SAIC, to analysts on a conference call Thursday evening. SAIC closed this $ 250 million deal in July.
On the technology front, Keene wanted to educate investors about the success of its CloudScend suite of integrated cloud and digital tools. This solution is used to migrate legacy systems to cloud environments.
The example Keene used for investors was a project for the Army where SAIC 90 moved applications to a cloud environment using CloudScend.
For SAIC’s second fiscal quarter ended July 30, SAIC reported sales of $ 1.8 billion compared to $ 1.7 billion for the same period last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) rose from 9.5 percent in the quarter to 10.1 percent.
SAIC’s backlog also grew 25 percent to $ 24 billion.
For fiscal year 2022, SAIC forecasts annual sales of between $ 7.3 billion and $ 7.4 billion. That is a slight upward adjustment compared to the first quarter.
Keene said she was satisfied with the company’s performance, although some of the analysts pushed her and CFO Prabu Natarajan to weaker organic growth forecasts.
Natarajan said SAIC is awaiting its work this $ 3.6 billion software and systems engineering contract with the army to boot up in the second half of the company’s fiscal year.
COVID continues to impact SAIC’s business by $ 30 million to $ 35 million per quarter, Natarajan said. For the full fiscal year, the impact is estimated to be approximately $ 125 million.
One benchmark is SAIC’s logistics business, which typically has sales of $ 10 to 15 million per week. Right now, that deal is right in the middle, at $ 12.5 million to $ 13 million.
Natarajan said that when the logistics business gets closer to $ 15 million, “we will likely see the final effects of COVID.”
Due to the negative impact COVID could have on the run-up of contracts like the Army program, SAIC is cautious in its full-year growth projections.
“I think we have good visibility,” she said. “What we don’t, and most people don’t have, is the dynamics surrounding COVID and the impact you can see in the short term.”
Written by Nick Wakeman At 09/03/2021 at 10:51 a.m.