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By Nick Wakeman

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Nick Wakeman

SAIC reports growth but COVID risk continues

In their second quarter call with investors, Science Applications International Corp. management highlighted two parts of the company's strategy that were on display during the quarter: acquisitions and technology development.

But COVID remains a wild card for the company’s growth outlook.. The company reported 3.8-percent organic growth and said its acquisitions are fueling that.

“Our acquisition of Halfaker and Associates is off to a good start performing well and providing immediate access to strategic health sector customers,” SAIC CEO Nazzic Keene told analysts in a Thursday evening conference call. SAIC closed that $250 million deal in July.

On the technology front, Keene wanted investors to know about the success of its CloudScend suite of integrated cloud and digital tools. That solution is used to migrate legacy systems to cloud environments.

The example Keene used for investors was one project for the Army, where SAIC moved 90 applications to a cloud environment using CloudScend.

For SAIC's fiscal second quarter that ended July 30, SAIC reported $1.8 billion in revenue versus $1.7 billion for the same period last year. Earnings before interest, taxes, depreciation and amortization margin (EBITDA) rose to 10.1 percent from 9.5 percent for the quarter.

SAIC’s backlog also grew 25 percent to $24 billion. 

For its fiscal 2022, SAIC projects annual revenue between $7.3 billion and $7.4 billion. That is a slight upward adjustment from the first quarter.

Keene said she is pleased with the company’s performance, though some of the analysts pushed her and Chief Financial Officer Prabu Natarajan on what the analyst felt were weaker organic growth projections.

Natarajan said SAIC expects its work on this $3.6 billion software and systems engineering contract with the Army to ramp up in the second half of the company's fiscal year. 

COVID continues to have an impact on SAIC’s business to the tune of between $30 million and $35 million a quarter, Natarajan said. For the entire fiscal year, the impact is estimated at about $125 million.

One gauge is SAIC’s logistics business, which usually accounts for $10 million-to-$15 million in revenue a week. Right now, that business is right in the middle at $12.5 million-to-$13 million.

Natarajan said that when the logistics business is back closer to $15 million, then “we’re probably seeing the last effects of COVID."

Because of the negative impact that COVID could have on the ramping up of contracts such as the Army program, SAIC is being cautious in its growth projections for the entire years.

“I think we have good visibility,” she said. “What we don’t have and most people don’t is the dynamics around COVID and the impacts you can see on a near-term basis.”

Posted by Nick Wakeman on Sep 03, 2021 at 10:51 AM

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