SAIC [SAI] on Tuesday said it swung to a loss in its third quarter due to a $232 million charge provision stemming from investigations into a workforce management contract with New York City amid flat sales.
Excluding the charge, operating income was still down due to a separate $19 million impairment charge related to the acquisition of the cyber security firm CloudShield Technologies last year and higher interest expense.
On the bright side, bookings in the quarter were strong, $3.8 billion for a 1.3 book-to-bill ratio, Walt Havenstein, SAIC’s CEO, said on Tuesday evening’s earnings call. He also said that the company has increased its wins this year of contracts worth more than $100 million by 55 percent and is maintaining a high win rate on its bids.
Total backlog at the end of the quarter was $18.7 billion, up 16 percent from a year ago, and funded backlog stood at $6.3 billion, up 2 percent from a year ago. Havenstein said that the pipeline of opportunities continues to increase and the potential value of SAIC’s submitted proposals that are still pending a decision are $30.6 billion, up $7.6 billion from a year ago.
Havenstein said that budget uncertainty continues to negatively impact the federal acquisition process, which led to the $2.8 billion in flat revenues, although organically sales were down 2 percent. Still, J.P. Morgan defense analyst Joseph Nadol said these results were better than expected considering SAIC’s peers have experienced an 8 to 9 percent decline in organic sales in the latest reporting period.
Havenstein, who will retire as CEO next June, said he still believes there will be nominal growth in select areas, specifically intelligence, surveillance and reconnaissance, cyber security, logistics, readiness and sustainment, and energy and healthcare information technology.
SAIC’s Intelligence and Cybersecurity Solutions business had a 5 percent uptick in sales in the quarter to $936 million, all of it organic, and Healthcare, Energy and Civil was up 6 percent to $758 million, 1 percent of it organic. The Defense Solutions segment fell 8 percent to $1.1 billion.
The net loss was $89 million, 27 cents earnings per share (EPS), versus net income of $173 million (46 cents EPS) a year ago. Income from continuing operations excluding the provision on the CityTime contract with New York City was $119 million (35 cents EPS), which beat consensus estimates by a penny. Free cash flow was a strong $405 million.
SAIC maintained its sales guidance for the fiscal year at between $10.6 billion and $11 billion while earnings guidance was lowered to between 70 and 80 cents EPS to account for the CityTime charge. The outlook for cash flow remains at or above $600 million assuming no CityTime payments.