Science Applications International Corp.

Overview Key strengths Key risks Continued strong government defense spending supports increasing revenue. Operates in the highly competitive U.S. defense services industry. Long-standing relationships with key intelligence and defense organizations. Tight labor supply may constrain expansion. Stable margins and minimal capital expenditure (capex) requirements support strong free operating cash flow (FOCF). Willingness to increase leverage for strategic acquisitions. Despite flattening somewhat, the U.S.' fiscal-year 2024 defense budget remains robust. In addition, the budget's focus on information technology (IT) services matches the kinds of contracts that SAIC is seeking to win. The company has a long track record of providing strong performance for the Department of Veterans Affairs and was just awarded a contract to provide IT services to the agency.

...SAIC will likely pursue organic growth, primarily through services contracts with the U.S. Department of Defense (DoD). Despite flattening somewhat, the U.S.' fiscal-year 2024 defense budget remains robust. In addition, the budget's focus on information technology (IT) services matches the kinds of contracts that SAIC is seeking to win. The company has a long track record of providing strong performance for the Department of Veterans Affairs and was just awarded a contract to provide IT services to the agency. As SAIC attempts to move away from more product-focused contracts, we believe cloud migrations will be a key area of potential growth. Some of the company's small acquisitions over the past couple of years have provided it with additional data analytics capabilities that it believes will differentiate its offerings from those of its peers when pursuing contracts....

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