[Management View]
Revenue: $1.877 billion, up approximately 2% in Q1 FY2026, driven by program ramp-ups including tCloud, IMDC2, and GMAS.
Adjusted EBITDA: $157 million with a margin of 8.4%, impacted by investment seasonality and a fixed-price program cost overrun in the space segment.
Adjusted Diluted EPS: $1.92, flat year over year.
Free Cash Flow: Negative $44 million, affected by $70 million of receivables shifted out of the quarter.
Net Bookings: $2.4 billion for a book-to-bill of 1.3.
Contract Awards: Over $2 billion in total contract value awarded post-Q1 FY2026.
Backlog: Approximately $20 billion, with trailing twelve-month book-to-bill targeted at 1.2.

[Outlook]
Revenue Guidance: FY2026 revenue guidance reaffirmed at $7.6 billion to $7.75 billion, reflecting about 2.5% organic growth at the midpoint.
Adj. EBITDA Margin Guidance: Full-year adjusted EBITDA margin guidance maintained at 9.4% to 9.6%.
Adj. Diluted EPS Guidance: $9.10 to $9.30, incorporating an effective tax rate of 23%.
Free Cash Flow Guidance: $510 million to $530 million, or about $11 per share.
Strategic Positioning: Ongoing portfolio pivot toward mission and enterprise IT aligned with administration and DoD technology adoption priorities.

[Financial Performance]
YoY Trends: Revenue up 2%, Adjusted EBITDA margin at 8.4%, Adjusted Diluted EPS flat.
QoQ Trends: Free cash flow negative due to receivables timing, but recovery expected.

[Q&A Highlights]
Question 1: Did the operating environment stabilize, and what are the budget priorities from the DoD?
Answer: The operating environment has stabilized post-GSA audit. Significant turnover in acquisition personnel and new processes at agencies are noted. Executive orders from DoD align with SAIC's strategic pivot towards enterprise mission solutions.

Question 2: Has the procurement environment become more competitive?
Answer: SAIC expects a more competitive environment due to the new administration and the type of work being bid. Historical win rates are higher than the industry average, and the company is confident in its submission pipeline.

Question 3: What are the known headwinds over the next twelve to twenty-four months?
Answer: The NASA program loss will round out in Q3, and the conscious decision to no-bid the lower margin CloudOne program is reflected in Q1 results. No other known recompete risks are expected to impact FY2026 financials.

Question 4: Can you frame the nature of the cost overrun in the space program?
Answer: The fixed-price program with the Space Development Agency faced technical challenges, but progress has been made. The EAC captures additional costs, and option period extensions provide relief. The program is expected to move into the sustainment phase soon.

Question 5: Can you discuss the atmospherics in each end market (civilian, army, air force, space, navy)?
Answer: Civilian business is expected to grow with margin improvement. The army business faces budget pressures, but air force, space, and navy segments are well-positioned for growth. The portfolio's diversity offsets risks and supports guidance.

Question 6: How does the full-year CR impact bookings and awards?
Answer: The CR provides flexibility, and the solicitation of proposals remains robust. Delays are seen in larger awards, but on-contract growth is strong. The company is cautiously optimistic about achieving its trailing twelve-month book-to-bill target.

Question 7: How do you reconcile the trailing twelve-month book-to-bill of 0.8 with the guidance for mid-single-digit growth?
Answer: The tough Q1 compare affected the trailing twelve-month book-to-bill. The company expects to achieve the 1.2 target by H1, supported by on-contract growth and new business wins.

Question 8: How do you view the risk of DoD contracts being made directly from service providers?
Answer: SAIC's work is not management consulting and is mission-critical. The company is well-positioned with commercial models and does not see significant risk from recent DoD communications.

Question 9: How has the budget process informed future new business capture and bidding activity?
Answer: The strategy to pivot towards enterprise and mission IT solutions aligns with current priorities. The company is expediting efforts to offer commercial solutions and leveraging venture programs for new technologies.

Question 10: How should we think about defense and civil margin trajectories versus multiyear targets?
Answer: Civil margins are expected to improve, and defense margins are bid higher with disciplined execution. The commercial segment is growing, contributing to overall margin expansion.

Question 11: How do you view the shift to outcomes-based and fixed-price contracts?
Answer: SAIC is prepared for fixed-price contracts, particularly in IT infrastructure. The company has a track record of delivering in a fixed-price environment and sees this as an opportunity for improved margins.

Question 12: How much more on-contract growth can you achieve if new business slides to the right?
Answer: On-contract growth was 5-6% last year and is expected to continue at that level. This supports the revenue guide even if new business ramps slower.

[Sentiment Analysis]
Analysts: Cautiously optimistic, focused on procurement environment and margin improvement.
Management: Confident in strategic positioning, addressing challenges proactively.

[Quarterly Comparison]
| Metric | Q1 FY2026 | Q1 FY2025 |
|-------------------------|-----------|-----------|
| Revenue | $1.877B | $1.84B |
| Adjusted EBITDA | $157M | $160M |
| Adjusted EBITDA Margin | 8.4% | 8.7% |
| Adjusted Diluted EPS | $1.92 | $1.92 |
| Free Cash Flow | -$44M | $50M |
| Net Bookings | $2.4B | $2.5B |

[Risks and Concerns]
- Higher customer turnover contributing to procurement delays.
- Fixed-price program cost overruns in the space segment.
- Potential budget pressures within the Army.

[Final Takeaway]
Science Applications International Corporation (SAIC) reported solid Q1 FY2026 results with strategic wins and a robust backlog. Despite procurement delays and cost overruns in the space segment, the company remains confident in its guidance and strategic positioning. The diverse portfolio and proactive management approach are expected to drive sustained growth and margin improvement in the coming quarters.