Science Applications International Corp.

Overview Key strengths Key risks Continued robust government defense spending to drive revenue growth. Operates in a highly competitive U.S. defense services industry. Good near-term revenue visibility and inorganic growth because of contribution from recent acquisitions. Tight labor supply may constrain growth. Minimal capital expenditure requirements support strong free operating cash flow. Financial policy incorporates willingness to raise leverage for strategic acquisitions. Demand for the company's services is highly correlated to the U.S. defense budget, and federal intelligence and defense organizations are among the company's key customers. We anticipate that defense budgets will remain robust over the next two years, given ongoing external geopolitical threats. We also view SAIC's capabilities in systems integration, application modernization, and cloud migration as well-aligned

...Robust defense spending and recent acquisitions position Science Applications International Corp. (SAIC) for continued revenue growth over the next two years. Demand for the company's services is highly correlated to the U.S. defense budget, and federal intelligence and defense organizations are among the company's key customers. We anticipate that defense budgets will remain robust over the next two years, given ongoing external geopolitical threats. We also view SAIC's capabilities in systems integration, application modernization, and cloud migration as well-aligned with spending priorities. The company gained a foothold in the federal health care market with the acquisition of Halfaker in 2021, which we view as having favorable growth prospects and attractive margins compared to other government contracting segments. We anticipate sales will grow 2%-4% in fiscal 2022 (ending Jan. 31, 2022) through organic and acquisition-related expansion, and 1%-3% per year thereafter because of new...

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