Science Applications Q2 Adj Profit Tops View, But Revenues Miss

(RTTNews) - Information technology services provider Science Applications International Corp. (SAIC) reported Tuesday that profit for the second quarter declined from last year, despite revenue growth, reflecting lower operating margins and increased interest expense.

However, adjusted earnings per share topped analysts' expectations, while quarterly revenues missed their estimates.

Science Applications, which provides scientific and engineering services mainly to the U.S. defense department, commenced operations in the third quarter of fiscal 2014 after spinning off from its former parent SAIC, Inc., which was renamed as Leidos Holdings Inc.

SAIC completed its acquisition of Scitor Holdings, Inc. on May 4, 2015, at the beginning of the quarter, and accordingly, the results presented reflect that of the combined company since acquisition.

"The second quarter fiscal 2016 results demonstrate our commitment to continuing the execution of our market strategy and shareholder value creation proposition. The acquisition of Scitor provides strategic market access and incremental, strong cash flow characteristics," CEO Tony Moraco said.

The McLean, Virginia-based company reported net income of $22 million or $0.46 per share for the second quarter, lower than $34 million or $0.70 per share in the prior-year quarter.

Excluding acquisition and integration costs, adjusted net income for the latest quarter was $0.66 per share. On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $0.60 per share for the quarter. Analysts' estimates typically exclude special items.

However, total revenues for the quarter increased 16 percent to $1.10 billion from $952 million in the same quarter last year, but missed six Wall Street analysts' consensus estimate of $1.12 billion.

The acquired Scitor contributed revenues of $147 million to total revenues during the quarter.

Operating income margin for the quarter contracted 150 basis points to 4.8 percent from last year's 6.3 percent, primarily driven by costs associated with the acquisition and integration of Scitor.

Net bookings for the quarter were about $1.0 billion and include Scitor contract awards since the acquisition date, which reflects a combined book-to-bill ratio of about 0.9.

SAIC's estimated backlog of signed business orders at the end of the second quarter stood at about $7.14 billion, of which $1.93 billion was funded. The total backlog at the end of the quarter includes about $1 billion of backlog obtained through the acquisition of Scitor.

"We continue to serve our existing customers and expand market opportunities while effectively deploying capital for our shareholders," Moraco added.

SAIC closed Monday's regular trading session at $48.77, down $0.05 on a volume of 0.43 million shares.