Science Applications International Corp. [SAIC] last Thursday reported higher earnings and sales in its third quarter, overcoming headwinds from the coronavirus pandemic.
Sales increased 12 percent to $1.8 billion from$1.6 billion a year ago due to the acquisition earlier this year of the federal business of Unisys [UIS]. Excluding the acquisition, organic revenue was down nearly a percent due to an estimated $60 million impact from COVID-19 and the completion of certain contracts.
The hits to the top line from COVID reduced volume in supply chain business and training services for the Federal Aviation Administration, SAIC said.
Excluding the impacts from COVID, internal revenue grew 3 percent, marking the third straight quarter of organic growth, Nazzic Keene, SAIC’s CEO, said on Thursday evening’s earnings call.
Net income rose 9 percent to $60 million, $1.02 earnings per share (EPS), from $55 million (94 cents EPS) a year ago due to higher operating income, which was partially offset by higher interest expense. SAIC said its adjusted operating income was dampened due to COVID impacts.
Excluding acquisition and integration costs, adjusted earnings of $1.62 EPS topped consensus estimates by 9 cents a share.
Despite the sluggish—or negative when accounting for COVID—organic sales, SAIC’s business development machined churned out strong bookings, $5 billion worth, for a record 2.7 book to bill ratio. Backlog at the end of the quarter stood at $22.6 billion, up 48 percent from $15.3 billion at the end of the company’s 2020 fiscal year.
The business pipeline remains healthy as SAIC had $22.1 billion in submitted proposals at the end of the quarter, up $1.5 billion from the end of the second quarter, Charles Mathis, the company’s outgoing chief financial officer, said on the call.
Free cash flow in the quarter was $222 million.
SAIC narrowed its adjusted earnings guidance for the year to between $5.95 to $6.05 EPS from the prior outlook of between $5.80 to $6.10 EPS. The forecast for sales now stands at between $7.1 billion and nearly $7.2 billion versus a prior outlook that was $7.2 billion in the high-end of the range. Free cash flow is expected to meet or exceed $515 million versus previous guidance of at least $500 million.