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Science Applications (SAIC) is trading sharply higher after its Q1 (Apr) results this morning. The government technology and mission-integration contractor delivered a large EPS beat, while revenue increased 1.5% yr/yr to $1.91 bln, also above expectations and marking a return to growth after three consecutive quarters of declines. Additionally, SAIC raised its FY27 adjusted EBITDA and EPS guidance, with its EPS outlook now nicely above expectations, while reaffirming its revenue guidance of $7.0-7.2 bln.

• Revenue growth did get a boost from the recent SilverEdge Government Solutions acquisition, which contributed $19 mln in the quarter. Excluding SilverEdge, revenue increased 0.5%, supported by ramping volume on existing and new contracts, partially offset by contract completions.
• Its core Defense and Intelligence segment led the growth, with revenue increasing 2.3% yr/yr to $1.46 bln, while Civilian revenue decreased 1.0% yr/yr to $440 mln.
• SAIC also highlighted several customer wins during the quarter, with most of the larger awards coming from the Space and Intelligence Community, including three seven-year recompete awards totaling roughly $970 mln. Other notable awards included a $200 mln Department of Homeland Security recompete, a $192 mln Air Force contract, and a $123 mln Navy contract.
• Net bookings totaled $2.1 bln in the quarter, resulting in a book-to-bill ratio of 1.1. Backlog increased 1.0% yr/yr to $22.86 bln, including $18.62 bln in Defense and Intelligence and $4.24 bln in Civilian.
• Adjusted operating margin expanded sharply, up 320 bps yr/yr to 11.6%, reflecting improved profitability across its contract portfolio. Adjusted EBITDA increased 41% yr/yr to $222 mln, with adjusted EBITDA margin expanding to 11.6% from 8.4%.
• SAIC now expects adjusted EBITDA of $720-730 mln, up from $705-715 mln, and EPS of $9.90-10.10, up from $9.50-9.70. The reaffirmed revenue guidance of $7.0-7.2 bln still implies an organic contraction of 4% to 2%.

Briefing.com Analyst Insight

This was a more encouraging update from SAIC after its Q4 report raised concerns around FY27 organic revenue contraction, recompete losses, procurement delays, and constrained bookings. SAIC has continued to deliver large EPS beats as margins improve, but Q1 also showed some stabilization on the top line. Revenue returned to growth after three consecutive quarters of declines, organic growth was positive at 0.5%, and book-to-bill improved to 1.1. The report still does not signal a major revenue inflection, as SAIC reaffirmed FY27 revenue guidance that implies an organic contraction of 4% to 2%. However, stronger contract profitability, better execution, and improved bookings supported a raise to adjusted EBITDA and EPS guidance, giving investors more confidence that SAIC is making progress with its portfolio repositioning strategy while it works toward sustained organic growth.