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. Uncertainty surrounding the Department of Government Efficiency (DOGE). 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 in 2024 and potentially declining in real terms in 2025, we expect the U.S. defense budget to remain robust. As SAIC continues to move away from more product-focused contracts, we believe cloud migrations will be a key area of potential growth. In terms of federal civilian business, which could come under pressure through the implementation of DOGE

...SAIC has opportunities for modest organic revenue growth but will face some top-line pressure. Despite flattening somewhat in 2024 and potentially declining in real terms in 2025, we expect the U.S. defense budget to remain robust. As SAIC continues to move away from more product-focused contracts, we believe cloud migrations will be a key area of potential growth. In terms of federal civilian business, which could come under pressure through the implementation of DOGE plans, SAIC's work with the Department of Veteran's Affairs should be safe as it has broad support. We expect SAIC to face some recompete headwinds over the next few years, with NASA being a customer that seems to favor incumbents less than others. The...

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