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What changed in Science Applications International Corp's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Science Applications International Corp's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+251 added−225 removedSource: 10-K (2024-03-20) vs 10-K (2023-04-03)

Top changes in Science Applications International Corp's 2025 10-K

251 paragraphs added · 225 removed · 170 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

48 edited+35 added−25 removed29 unchanged
Biggest changeTo deliver on this strategy, we seek to be a company that provides meaningful work and purpose by continuing to strengthen our diversity, equity and inclusion efforts; nurturing our people through every aspect of the talent lifecycle; creating a culture where our people are empowered to be their authentic selves and to do their best work; and providing benefits and programs that enhance the employee experience and their well-being. 5 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Advancing Diversity, Equity and Inclusion Our ongoing diversity, equity and inclusion efforts demonstrate our continuing commitment to hold ourselves accountable and to be transparent about both our progress and our areas of opportunity.
Biggest changeTo do this, we strive to be a company that provides meaningful work and purpose, which means delivering solutions to our customers' most 6 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION challenging problems; building our diversity, equity and inclusion efforts; providing opportunities for our employees to develop and enhance their careers through every phase of the talent lifecycle; and prioritizing employee flexibility and well-being.
Army 15 % 15 % 17 % U.S.
Army 17 % 15 % 15 % U.S.
This method of contracting may provide the contractor with greater certainty of the timing and amounts to be received at the time of contract award because it generally results in the customer contracting for a specific scope of work from the single successful awardee. 3 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Indefinite Delivery, Indefinite Quantity (IDIQ) Contracts.
This method of contracting may provide the contractor with greater certainty of the timing and amounts to be received at the time of contract award because it generally results in the customer contracting for a specific scope of work from the single successful awardee. 4 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Indefinite Delivery, Indefinite Quantity ("IDIQ") Contracts.
At the time an IDIQ contract is awarded (prior to the letting of any task orders), a contractor may have limited or no visibility as to the ultimate amount of services or solutions that the U.S. government will purchase under the contract, and, in the case of a multi-award IDIQ, the contractor from which such purchases may be made. U.S.
At the time an IDIQ contract is awarded (prior to the issuance of any task orders), a contractor may have limited or no visibility as to the ultimate amount of services or solutions that the U.S. government will purchase under the contract, and, in the case of a multi-award IDIQ, the contractor from which such purchases may be made. U.S.
The information on our website is not incorporated by reference into and is not a part of this report. You may also request hard copies of the materials referenced in the preceding paragraph, at no cost, by emailing investor relations at InvestorRelations@saic.com. 8 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
The information on our website is not incorporated by reference into and is not a part of this report. You may also request hard copies of the materials referenced in the preceding paragraph, at no cost, by emailing investor relations at InvestorRelations@saic.com. 9 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Key Customers In each of fiscal 2023, 2022 and 2021, 98% of our total revenues were attributable to prime contracts with the U.S. government or to subcontracts with other contractors engaged in work for the U.S. government. Substantially all of our revenues were earned by entities located in the United States. The U.S. Army and U.S.
Key Customers In each of fiscal 2024, 2023 and 2022, 98% of our total revenues were attributable to prime contracts with the U.S. government or to subcontracts with other contractors engaged in work for the U.S. government. Substantially all of our revenues were earned by entities located in the United States. The U.S. Army, U.S.
Some of our operations and service offerings involve our access to and use of personally identifiable information and protected health information, which activities are regulated by extensive federal and state privacy and data security laws requiring organizations to provide certain privacy protections and security safeguards for such information.
Some of our operations and service offerings involve our access to and use of personally identifiable information and protected health information, and these activities are regulated by extensive federal and state privacy and data security laws requiring organizations to provide certain privacy protections and security safeguards for such information.
The Company provides these services for large, complex projects with a targeted emphasis on higher-end, differentiated technology services and solutions that accelerate and transform secure and resilient digital environments through system development, modernization, integration, and sustainment to drive enterprise and mission outcomes. Our end-to-end enterprise IT offerings span the entire spectrum of our customers' IT infrastructure.
The Company provides these services for large, complex projects with a targeted emphasis on higher-end, differentiated technology services and solutions that accelerate and transform secure and resilient digital environments through systems design, development, modernization, integration, and sustainment to drive enterprise and mission outcomes. Our end-to-end enterprise IT offerings span the entire spectrum of our customers' IT infrastructure.
In fiscal 2022, to ensure our leadership reflects the diversity of the workforce, we established goals to achieve parity in the representation of women and people of color between our leader and non-leadership roles by the end of fiscal 2026.
In fiscal 2022, to ensure our leadership reflects the diversity of the workforce, we set goals to achieve parity in the representation of women and people of color between our leader and non-leadership roles by the end of fiscal 2026.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and contract profit for work performed when the U.S. government issues a termination for convenience.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and contract profit for work performed when the U.S. government terminates a contract for its convenience.
It is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions leading up to the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds, which may favorably impact our third fiscal quarter.
Seasonality The U.S. government’s fiscal year ends on September 30. It is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions leading up to the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds, which may favorably impact our third fiscal quarter.
Our principal competitors include the following: • the engineering and technical services divisions of large defense contractors that provide IT services in addition to other hardware systems and products, which include companies such as General Dynamics Corporation, Northrop Grumman Corporation, and Raytheon Technologies Corporation; • contractors focused principally on technical and IT services, such as Booz Allen Hamilton Inc., CACI International, Inc., Leidos Holdings, Inc., ManTech International Corporation, and Serco Group plc; • diversified commercial providers that also provide U.S. government IT services, such as Accenture plc and International Business Machines Corporation; and • contractors providing supply chain management and other logistics services, such as Agility Logistics Corporation and SupplyCore.
Our principal competitors include the following: • the engineering and technical services divisions of large defense contractors that provide IT services in addition to other hardware systems and products, which include companies such as General Dynamics Corporation, Northrop Grumman Corporation, and RTX Corporation; • contractors focused principally on technical and IT services, such as Booz Allen Hamilton Inc., CACI International, Inc., Leidos Holdings, Inc., ManTech International Corporation, and Serco Group plc; and • diversified commercial providers that also provide U.S. government IT services, such as Accenture plc and International Business Machines Corporation.
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors. In the case of some subcontracts that we perform, the prime contractor may also have certain rights to the programs and solutions that we develop under the subcontract.
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors. In the case of some subcontracts that we perform, the prime contractor may also have certain rights to the programs and solutions that we develop under the subcontract. People and Culture Overview Our company's success starts with our people.
Navy 12 % 12 % 11 % Other DoD 22 % 21 % 19 % Other federal government 49 % 50 % 51 % Total U.S. government 98 % 98 % 98 % Other 2 % 2 % 2 % Total 100 % 100 % 100 % 2 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Regulation Our business is heavily regulated and we must comply with and are affected by laws and regulations, including Federal Acquisition Regulations (FAR) and U.S. government Cost Accounting Standards (CAS), relating to the award, administration and performance of U.S. government and other contracts.
Navy 13 % 12 % 12 % Air Force 12 % 10 % 9 % Other DoD 10 % 12 % 12 % Other federal government 46 % 49 % 50 % Total U.S. government 98 % 98 % 98 % Other 2 % 2 % 2 % Total 100 % 100 % 100 % 3 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Regulation Our business is heavily regulated and we must comply with and are affected by laws and regulations, including Federal Acquisition Regulations ("FAR") and U.S. government Cost Accounting Standards ("CAS"), relating to the award, administration and performance of U.S. government and other contracts.
Navy each generated more than 10% of our revenues during each of the last three fiscal years. The percentages of total revenues for the U.S. government, its agencies and other customers, including those comprising more than 10% of total revenues for each of the periods presented were approximately: Year Ended February 3, 2023 January 28, 2022 January 29, 2021 U.S.
Navy and Air Force each generated more than 10% of our revenues during fiscal 2024. The percentages of total revenues for the U.S. government, its agencies and other customers, including those comprising more than 10% of total revenues for each of the periods presented were approximately: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 U.S.
Our compliance with these regulations is monitored by the Defense Contract Management Agency (DCMA) and the Defense Contract Audit Agency (DCAA). The U.S. government has the ability to cancel contracts at any time through a termination for the convenience of the U.S. government.
Our compliance with these regulations is monitored by the Defense Contract Management Agency ("DCMA") and the Defense Contract Audit Agency ("DCAA"). The U.S. government can cancel contracts at any time for its convenience.
Given the relative amount of risk assumed by the contractor, cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts.
Given 5 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION the relative amount of risk assumed by the contractor, cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts.
On T&M contracts, we assume the risk of providing appropriately qualified staff to perform these contracts at the hourly rates set forth in the contracts over their period of performance. • Firm-fixed price (FFP) contracts provide for a predetermined price for specific solutions.
On T&M contracts, we assume the risk of providing appropriately qualified staff to perform these contracts at the hourly rates set forth in the contracts over their period of performance.
Our long-standing customer relationships have enabled us to achieve an in-depth understanding of our customers’ missions and provide differentiated service offerings to meet our customers’ most complex requirements.
The Company is currently evaluating the impact of the reorganization on its segment reporting. Our long-standing customer relationships have enabled us to achieve an in-depth understanding of our customers’ missions and provide differentiated service offerings to meet our customers’ most complex requirements.
The Company's operating sectors are aggregated into one reportable segment for financial reporting purposes. For additional discussion and analysis related to recent business developments, see “Economic Opportunities, Challenges, and Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report.
For additional discussion and analysis related to recent business developments, see “Economic Opportunities, Challenges, and Risks” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report.
Nurturing the Talent Lifecycle At every point in the talent lifecycle, we are committed to creating an inclusive workforce culture that attracts highly skilled, exceptional talent and develops and sustains the critical skills of our employees to drive engagement and retention.
Nurturing the Talent Lifecycle At every opportunity in the talent lifecycle, we work to create an inclusive workforce culture that develops and sustains the critical skills of our employees to drive engagement and retention. When we need to hire externally, our efforts are designed to attract highly skilled and exceptional talent.
We also compete against smaller, more specialized companies that concentrate their resources on particular areas, as well as the U.S. government’s own capabilities. As a result of the diverse requirements of the U.S. government, we frequently collaborate with other companies to compete for large contracts and bid against these same companies in other situations.
As a result of the diverse requirements of the U.S. government, we frequently collaborate with other companies to compete for large contracts and bid against these same companies in other situations.
These contracts offer us potential increased profits if we can complete the work at lower costs than planned. While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to reduced profits or losses from increased or unexpected costs.
While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to reduced profits or losses from increased or unexpected costs.
These regulations and risks are described in more detail under “Risk Factors” in Part I, Item 1A of this report. We are committed to being a good steward of the environment through assessing, mitigating and reducing the impact we have on climate change and the physical environment in which we operate.
These regulations and risks are described in more detail under “Risk Factors” in Part I, Item 1A of this report. Our goal is to be a good steward of the environment, and we are committed to reducing and mitigating any adverse impacts on the environment.
Those strengths include: Enduring Customer Relationships and Mission-Orientation. We have strong and long-lasting customer relationships throughout the U.S. government. Our track record of serving the missions of our government customers spans decades, including several enduring customer relationships that have lasted 20 years or more.
We have strong and long-lasting customer relationships throughout the U.S. government. Our track record of serving the missions of our government customers spans decades, including several enduring customer relationships that have lasted 20 years or more. Our employees, many of whom are deployed at customer sites, work closely with our customers in fulfilling their missions.
We invest in our people through technical and professional skills training, leadership development programs, higher education programs and tuition assistance programs for continuing education or industry certification. In fiscal 2023, our employees completed approximately 129,000 hours of training that included over 7,800 hours of leadership specific development for aspiring managers.
We invest in our people through technical and professional skills training, leadership development programs, higher education programs and tuition assistance programs for continuing education or industry certification. In fiscal 2024, our employees completed approximately 155,000 hours of training, or nearly six and a half hours per employee. This time included over 9,100 hours of leadership development.
Company Website and Available Information Our corporate headquarters is located at 12010 Sunset Hills Road, Reston, VA 20190. Our phone number is (703) 676-4300 and our homepage is www.saic.com , which contains information about our Company and operations.
Our phone number is (703) 676-4300 and our homepage is www.saic.com , which contains information about our Company and operations.
During fiscal 2023, we hired approximately 5,800 new e mployees and we are an industry leader in the retention of our employees. Employee referrals often result in some of our best performing new hires.
Employee referrals often result in some of our best performing new hires. In fiscal 2024, 32% of the approximately 5,900 new employees we hired came from an employee referral. We are an industry leader in the retention of our employees, consistently decreasing voluntary attrition as a percentage of employees.
As a key component of our culture and at the core of our commitment to our employees is the SAIC Foundation, a public 501(c)(3) organization to address the unforeseen financial impact on employees and their families.
A component of our culture and commitment to our employees is the SAIC Foundation, a public 501(c)(3) organization to address the unforeseen financial impact on employees and their families. The SAIC Foundation continues its work to help employees and their dependents by providing emergency funds to help them when financial hardships or natural disasters arise.
Additionally, on May 3, 2021, the Company acquired Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data.
On July 2, 2021, the Company completed the acquisition of Halfaker and Associates, LLC ("Halfaker"), a mission focused, pure-play health IT company, which grows the Company's digital transformation portfolio. Additionally, on May 3, 2021, the Company acquired Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data.
Enhancing Culture and Employee Experience Through our annual culture and engagement survey, we gather confidential feedback from our employees to learn and take action on how we can improve our efforts to create an authentic culture and provide an exceptional employee experience.
Enhancing Culture and Employee Experience Through our annual employee culture and engagement survey, we gather confidential feedback to learn and act on how we can continue to create and improve an authentic culture and an exceptional employee experience. Across the board, scores from our annual culture survey have improved and are either above or closely aligned to the national benchmark.
Due to the nature of our business, SAIC has limited exposure to environmental risks, yet we set self-imposed goals related to the reduction of greenhouse gas emissions, energy conservation, recycling and other important environmental initiatives.
We are exposed to limited environmental risks due to the nature of our business, yet we set self-imposed goals for the reduction of greenhouse gas emissions, energy conservation and other important environmental initiatives. We implement ISO 14001 environmental management standards, promote initiatives to reduce our direct environmental impacts and track and report key performance metrics.
We integrate technologies and deliver services that provide our customers with seamless end-to-end solutions. Our expertise includes initial requirements definition, development and integration services, training, logistics and sustainment. These full life cycle offerings, combined with deep customer knowledge, allow us to more effectively support our customers’ missions. Significant Scale and Diversified Contract Base.
Our strong customer relationships enable us to develop deep customer knowledge and translate our mission understanding into successful program execution that fosters continued demand for our services. Full Life Cycle Offerings. We integrate technologies and deliver services that provide our customers with seamless end-to-end solutions. Our expertise includes initial requirements definition, development and integration services, training, logistics and sustainment.
For the proportionate amount of revenues derived from each type of contract for the last three fiscal years, see “Other Key Performance Measures—Contract Types” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report. 4 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Competition Competition for contracts is intense and we often compete against a large number of established multinational companies, which may have greater name recognition, financial resources and larger technical staffs than we do.
For the proportionate amount of revenues derived from each type of contract for the last three fiscal years, see “Other Key Performance Measures—Contract Types” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of this report.
We generate revenues under several types of contracts, including the following: • Cost-reimbursement contracts provide for reimbursement of our direct contract costs and allocable indirect costs, plus a fee (contract profit). This type of contract is generally used when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract.
We generate revenues under several types of contracts, including the following: • Cost-reimbursement contracts include cost-plus-fixed-fee, award-fee and incentive-fee contracts. These contracts provide for reimbursement of our direct contract costs and allocable indirect costs, plus a fee (contract profit).
Our skilled workforce ranges from entry-level technicians to expert-level professionals in network engineering, software design and development, IT modernization, logistics, technology integration and systems engineering. Additionally, the majority of our workforce holds an active security clearance, which is required on many of our existing programs and future program opportunities.
The quality, training and knowledge of our employees are important competitive assets. Our skilled workforce ranges from entry-level technicians to expert-level professionals in network engineering, software design and development, IT modernization, logistics, technology integration and systems engineering.
Last year they volunteered more than 26,000 hours and donated both their time and money to causes circled around SAIC’s three pillars of focus: military heroes, community wellness, and science, technology, engineering and mathematics (STEM).
Employee volunteering and philanthropy demonstrate engagement and inclusion in a culture. Last year, our employees increased their volunteer hours by 10% by serving more than 29,000 hours in their communities. Our employees donated both their time and money to support SAIC’s three giving pillars of focus: military heroes, community wellness, and science, technology, engineering and mathematics ("STEM").
We hold certifications from the International Organization for Standardization (including ISO 9001, ISO/IEC 27001, and AS9100D), and from the Capability Maturity Model Integration Institute as a CMMI®-DEV Maturity Level 3 organization. The Company is organized as a matrix comprised of two customer facing operating sectors supported by an enterprise solutions and operations organization.
We deploy our tools and processes enterprise-wide and emphasize a consistent approach to planning, designing and delivering solutions and services to our customers. We hold certifications from the International Organization for Standardization ("ISO") (including ISO 9001, ISO/IEC 27001, and AS9100D), and from the Capability Maturity Model Integration Institute as a CMMI®-DEV Maturity Level 3 organization.
The two operating sectors are responsible for customer relationships, business development and program management, and delivery and execution, while the enterprise solutions and operations organization manages the development of our offerings, solutions and capabilities.
The two operating sectors are responsible for customer relationships, program management, delivery and execution, and, in collaboration with the enterprise organizations, manage the development of our offerings, solutions and capabilities which support our four strategic pivots — portfolio, go-to-market, culture and brand.
Third-parties acknowledge SAIC’s commitment to an inclusive workforce: We are very proud that SAIC was on Forbes 2022 list of 500 Best Employers for Diversity and its Best Employers for Veterans; LATINA Style’s Top 50 Best Companies for Latinas; and No.1 on DiversityInc’s 2022 Top Companies for Veterans.
Third parties acknowledge SAIC’s inclusive workforce: The Company was once again on Forbes list of 500 Best Employers for Diversity; LATINA Style’s Top 50 Best Companies for Latinas; Newsweek America's Greatest Workplaces for Diversity and DiversityInc’s (now Fair360) Top Companies for Veterans in 2023.
With approximately $7.7 billion in revenue in fiscal 2023, we are one of the largest pure-play technology service providers to the U.S. government. Our significant scale advantage enables us to serve as a prime systems integrator on large, complex programs and to allocate resources toward further developing and expanding our repeatable, proven solutions and differentiated technical capabilities.
Our significant scale advantage enables us to serve as a prime systems integrator on large, complex programs and to allocate resources toward further developing and expanding our repeatable, proven solutions and differentiated technical capabilities. Our diversified revenue base consists of programs ranging from research and development to operations and maintenance. Technical Experts Led by Experienced Management.
Our workforce is led by a talented and experienced senior leadership team with a long history of solving our customers’ most difficult challenges. Our executive team consists of members who have served as senior leaders in public companies and are recognized as leaders in their respective markets by customers and partners. Repeatable Methodologies and Certified Processes.
Our executive team consists of members who have served as senior leaders in public companies and are recognized as leaders in their respective markets by customers and partners. 2 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Repeatable Methodologies and Certified Processes. Our technical excellence is driven by our proven, repeatable, disciplined processes for management, engineering, technical support and services.
Cost-reimbursement contracts usually subject us to lower risk and generally require us to use our best efforts to accomplish the scope of the work within a specified time and amount of costs. • Time-and-materials (T&M) contracts typically provide for negotiated fixed hourly rates for specified categories of direct labor plus reimbursement of other direct costs.
These types of contracts are generally used when uncertainties involved in contract performance do not permit costs to be estimated with sufficient accuracy to use a fixed-price contract. Cost-reimbursement contracts usually subject us to lower risk and generally require us to use our best efforts to accomplish the scope of the work within a specified time and amount of costs.
As of February 3, 2023, our diversity representation was: SAIC Leaders 28% Women 23% People of Color SAIC Non-leader Employees 27% Women 33% People of Color We are committed to developing a diverse leadership team from within our existing workforce. Now in its second year, the Company’s AcceleratHER Women’s Leadership Academy program welcomed its second cohort in 2022.
As of February 2, 2024, our diversity representation was: SAIC Leaders 28% Women 25% People of Color SAIC Non-leader Employees 27% Women 34% People of Color We are developing a diverse leadership team from within our existing workforce by promoting a diverse slate of candidates for leadership roles; ensuring all our job descriptions, recruiting tools and processes help eliminate the potential for bias; and providing training, educational resources and leadership development programs, including our AcceleratHER Women’s Leadership Academy, Leadership 365 and Developing Frontline Leaders programs.
People and Culture Overview Our purpose is to advance the power of technology and innovation to serve and protect our world . We achieve our purpose with and through our people, who are fundamental to our success. Our values of passion, empowerment, integrity, inclusion and innovation underpin our culture and are at the heart of how we operate.
Our purpose is to advance technology and innovation to serve and protect our world. With our business focused on engineering, IT and integrated solutions, the need to acquire, develop and retain highly skilled talent is central to the Company's success. Our values of innovation, inclusion and integrity underpin our culture.
Our offerings include: engineering; technology integration; IT modernization; maintenance of ground and maritime systems; logistics; training and simulation; operation and program support services; and end-to-end services spanning the design, development, integration, deployment, management and operations, sustainment and security of our customers’ entire IT infrastructure. We serve our customers through approximately 1,900 active contracts and task orders.
Through our offerings, we provide end-to-end services spanning the design, development, integration, deployment, management and operations, sustainment and security of our customers’ entire IT infrastructure. Our offerings include: IT Modernization: We help defense, intelligence, and civilian agencies reimagine the way they accomplish their objectives through digital transformation by providing next-generation cloud computing, cybersecurity, and software capabilities.
In fiscal 2023, we achieved parity for women ahead of our committed timeline as we increased women in leadership to 28%. In addition, we have increased people of color in leadership 400 basis points over the past two years. To hold ourselves accoun table for our results, our executive compensation incentive plans are tied to meeting our diversity goals.
To hold ourselves accoun table for progress, our executive compensation incentive plans are tied to meeting our diversity goals.
Research and Development For information related to our research and development activities, see Note 1 to the consolidated financial statements contained within this report. Seasonality The U.S. government’s fiscal year ends on September 30.
We encourage employees to participate in health and wellness initiatives, and actively work to prevent workplace hazards. 8 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Research and Development For information related to our research and development activities, see Note 1—Business Overview and Summary of Significant Accounting Policies to the consolidated financial statements contained within this report.
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We have approximately 25,000 employees that are led by an experienced executive team of proven industry leaders. On July 2, 2021, the Company completed the acquisition of Halfaker and Associates, LLC (Halfaker), a mission focused, pure-play health IT company, which grows the Company's digital transformation portfolio.
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We serve our customers through approximately 1,800 active contracts and task orders. We have approximately 24,000 employees that are led by an experienced executive team of proven industry leaders. The Company is organized as a matrix comprised of two customer facing operating sectors supported by the enterprise organizations, including the Innovation Factory.
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On March 13, 2020, we completed the acquisition of Unisys Federal, a former operating unit of Unisys Corporation, which enhances our capabilities in government priority areas, expands our portfolio of intellectual property and technology-driven offerings, and increases our access to current and new customers. Our core strengths have supported our successful performance on programs of national importance.
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Effective February 3, 2024, the first day of fiscal 2025, the Company completed a business reorganization which replaces its current two operating sectors with five customer facing business groups supported by the enterprise organizations, including the Innovation Factory. The reorganization is designed to enhance management's involvement with customers and advance SAIC’s innovation and go-to-market strategy.
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Our employees, many of whom are deployed at customer sites, work closely with our customers in fulfilling their missions. Our strong customer relationships enable us to develop deep customer knowledge and translate our mission understanding into successful program execution that fosters continued demand for our services. Full Life Cycle Offerings.
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We modernize enterprise IT environments for government customers and then operate and maintain them via their preferred service delivery methods. Digital Engineering: Our digital engineering integrates industry-leading tools and processes for design; engineering; analytics; modeling, simulation and visualization; and manufacturing execution, all within a secure and collaborative ecosystem to ensure faster systems outcomes for our customers.
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Our diversified revenue base consists of programs ranging from research and development to operations and maintenance. 1 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Technical Experts Led by Experienced Management. The quality, training and knowledge of our employees are important competitive assets.
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Artificial Intelligence ("AI"): We deploy and integrate AI solutions for customers, including AI solutions that assist with the design, deployment, and management of AI applications and allow customers to work with their complex and sensitive data to power the most demanding analytics, data science, and AI use cases.
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Our technical excellence is driven by our proven, repeatable, disciplined processes for management, engineering, technical support and services. We deploy our tools and processes enterprise-wide and emphasize a consistent approach to planning, designing and delivering solutions and services to our customers.
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Weapon Systems Support: We design, build, modify, integrate, and sustain weapon systems across all branches of the U.S. military, ensuring mission readiness on land, at sea, and in the air. Training and Simulation: We are invested in accelerating the adoption and application of immersive technologies that solve pressing human performance and operational efficiency challenges.
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Each of the Company’s two customer facing operating sectors is focused on providing both (1) growth and technology accelerating solutions and (2) core IT service offerings to one or more agencies of the U.S. federal government.
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Ground Vehicles Support: We integrate, modify, upgrade, and sustain ground vehicles for our nation's armed forces, leveraging commercial products and in-house solutions to address some of the toughest challenges 1 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION facing warfighters.
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Growth and technology accelerating solutions include the delivery of secure cloud modernization, outcome based enterprise IT as-a-service, and the integration, production and modernization of defense systems. Core IT services include systems engineering, the operation and maintenance of existing IT systems and networks, and logistics and supply chain solutions.
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Our experts in cybersecurity, enhanced surveillance, secure communications, mobility, and more apply core as well as emerging capabilities to address evolving mission needs. Our Innovation Factory develops superior enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings to meet complex customer needs and accelerate digital transformation.
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Attracting and retaining top talent is an essential element of our business strategy and part of our value proposition for our shareholders, customers and employees.
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The Innovation Factory includes designated teams focused on AI, application development, network services, platforms and cloud, and cyber. It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions quickly and works with customers to enhance solutions going forward.
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Diversity creates innovation and is critical to the delivery of exceptional business results. In fiscal 2023, we accomplished significant advancement of workforce diversity through internal development, talent acquisition and employee engagement at all levels of the enterprise.
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SAIC integrates emerging technology securely and in real-time into mission critical operations that modernize and enable national imperatives: Undersea Dominance: We deliver systems to ensure the US maintains proactive control over every threat in the undersea domain.
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This program is for high-performing, early to mid-career women who are on track to progress to leadership roles.
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Border of the Future: We support integrated systems across all ports of entry (i.e., land, sea, air) for all U.S. travel, trade, contraband detection, and immigration functions. Citizen Experience: We drive commercial-quality USG service delivery through scalable solutions that innovate mission outcomes of legacy systems.
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To meet our commitment to enhance our diversity, equity and inclusion in our hiring efforts, the Company continues to ensure our job descriptions, recruiting tools and processes help eliminate the potential for bias, and we actively promote diverse slates of candidates for leadership roles.
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All Domain Warfighting: We develop integrated conflict deterrence, combat preparedness, and data connectivity capabilities for the US Military and Intelligence Community. Next Generation Space: We integrate advanced solutions to enable the rapid deployment of future space missions. Our core strengths have supported our successful performance on programs of national importance. Those strengths include: Enduring Customer Relationships and Mission-Orientation.
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To cultivate inclusion, we have seven active Employee Resource Groups (ERGs) to allow our employees to foster connections with their fellow colleagues and bring their authentic selves to work. We encourage our employees to actively participate in these ERGs, and as a result in fiscal 2023, our ERGs experienced a 13% year-over-year increase in engagement, which ultimately strengthens employee retention.
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These full life cycle offerings, combined with deep customer knowledge, allow us to more effectively support our customers’ missions. Significant Scale and Diversified Contract Base. With approximately $7.4 billion in revenue in fiscal 2024, we are one of the largest pure-play technology service providers to the U.S. government.
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For the fourth consecutive year, SAIC received a score of 100% on the Human Rights Campaign Foundation’s 2021 Corporate Equality Index (CEI), which is the most recent year for this recognition and is the nation’s premier benchmarking survey and report measuring corporate policies and practices related to LGBTQ workplace equality.
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Additionally, the majority of our workforce holds an active security clearance, which is required on many of our existing programs and future program opportunities. Our workforce is led by a talented and experienced senior leadership team with a long history of solving our customers’ most difficult challenges.
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To ensure all levels of management understand employee sentiment, leaders receive aggregated results to develop an action plan to address their team’s needs.
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Acquisitions and Divestitures On May 6, 2023, SAIC closed the sale of its logistics and supply chain management business ("Supply Chain Business") to ASRC Federal Holding Company, LLC ("ASRC Federal"). The sale enables the Company to focus its resources on long-term strategic growth areas.
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Strengths and opportunities are identified, leading to focused investments to build on our cultural strengths and address areas for improvement. 6 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Inclusion and engagement are often witnessed through employee volunteering and philanthropy. Our people embrace our legacy of community involvement and philanthropy.
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On February 4, 2023, the Company sold 0.1% of its 50.1% majority ownership interest in Forfeiture Support Associates J.V. ("FSA") to its sole joint venture partner for a nominal amount.
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The SAIC Foundation continues its work to help employees and their dependents by providing emergency funds to help them when financial hardships or natural disasters arise. In fiscal 2023, the Foundation awarded 26 grants or $69,000 in direct support to our employees.
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As a result of the sale and amendment to the joint venture operating agreement of FSA, the Company no longer controls the joint venture and accounts for its retained interest as an equity method investment as of the date of the transaction.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf significant portions of our workforce are unable to work effectively due to illness, quarantines, government actions, facility closures or other reasons in connection with COVID-19 or similar outbreaks, our operations will likely be impacted. We may be unable to perform fully on our contracts and some of our costs may not be fully recoverable or adequately covered by insurance.
Biggest changeWe face various risks related to health epidemics, pandemics and similar outbreaks like the global outbreak of COVID-19. If significant portions of our workforce are unable to work effectively due to illness, quarantines, government actions, facility closures or other reasons in connection with an epidemic, our operations will likely be impacted.
We generated either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government 98% of our total revenues during each of the last three fiscal years from contracts with the U.S. government. We expect to continue to derive substantially all of our revenues from work performed under U.S. government contracts.
We generated 98% of our total revenues during each of the last three fiscal years from contracts with the U.S. government either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government. We expect to continue to derive substantially all of our revenues from work performed under U.S. government contracts.
A significant decline in overall U.S. government spending, a significant shift in spending priorities, the substantial reduction or elimination of particular defense-related programs or significant budget-related delays in contract or task order awards for large programs could adversely affect our future revenues and limit our growth prospects. 9 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION We face aggressive competition that can impact our ability to obtain contracts and may affect our future revenues, profitability and growth prospects.
A significant decline in overall U.S. government spending, a significant shift in spending priorities, the substantial reduction or elimination of particular defense-related programs or significant budget-related delays in contract or task order awards for large programs could adversely affect our future revenues and limit our growth prospects. 10 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION We face aggressive competition that can impact our ability to obtain contracts and may affect our future revenues, profitability and growth prospects.
Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect future financial results. 10 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Legal and Regulatory Risks Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
Changes in the underlying assumptions, circumstances or estimates could result in adjustments that may adversely affect future financial results. 11 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Legal and Regulatory Risks Our failure to comply with a variety of complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
As a result, audits and reviews have become more rigorous and the standards to which we are held are being more strictly interpreted, which has increased the likelihood of an audit or review resulting in an adverse outcome. 11 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds.
As a result, audits and reviews have become more rigorous and the standards to which we are held are being more strictly interpreted, which has increased the likelihood of an audit or review resulting in an adverse outcome. 12 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Government audits and reviews may conclude that our practices are not consistent with applicable laws and regulations and result in adjustments to contract costs and mandatory customer refunds.
Net operating loss carryforwards and other tax attributes are subject to various annual limitations under Sections 382 and 383 of the Internal Revenue Code, which restricts a corporation’s ability to use such carryforwards and attributes following an ownership change. 12 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
Net operating loss carryforwards and other tax attributes are subject to various annual limitations under Sections 382 and 383 of the Internal Revenue Code, which restricts a corporation’s ability to use such carryforwards and attributes following an ownership change. 13 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
Such misconduct could include fraud or other improper activities such as falsifying time or other records, failure to comply with our policies and procedures or violations of applicable laws and regulations. 13 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Business and Operational Risks A failure to attract, train, retain and utilize skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.
Such misconduct could include fraud or other improper activities such as falsifying time or other records, failure to comply with our policies and procedures or violations of applicable laws and regulations. 14 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Business and Operational Risks A failure to attract, train, retain and utilize skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.
While the impact to income taxes payable is most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six.
While the impact to income taxes payable was most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six.
These divestitures similarly require significant investment of time and resources and may disrupt our 14 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could adversely affect our financial results.
These divestitures similarly require significant investment of time and resources and may disrupt our 15 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION business, distract management from other responsibilities and may result in losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee or other financial arrangements, for a period of time following the transaction, which could adversely affect our financial results.
Particularly due to the technical nature of the services being performed and the length of certain performance obligations, this estimation process is complex and involves significant judgment. Adjustments to original estimates are often required as work progresses, experience is gained and additional information becomes known, even though the scope of the work required under the performance obligation may not change.
Particularly due to the technical nature of the services being performed and the length of certain contracts, this estimation process is complex and involves significant judgment. Adjustments to original estimates are often required as work progresses, experience is gained and additional information becomes known, even though the scope of the work required under the performance obligation may not change.
We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. A significant portion of our revenues are recognized on performance obligations using a cost input measure, which requires estimates of total costs at completion, fees earned, or both.
We use estimates in recognizing revenues and, if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. A significant portion of our revenues are recognized on contracts using a cost input measure, which requires estimates of total costs at completion, fees earned, or both.
In addition, it is possible that an impasse on policy issues could threaten continuous government funding past September 30, 2023 or result in another federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows and financial results.
In addition, it is possible that an impasse on policy issues could threaten continuous government funding through September 30, 2024 or result in another federal government shutdown, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows and financial results.
In addition, government agencies may bring legal actions against us for violation of or noncompliance with regulatory requirements relating to any unauthorized access to sensitive information including failure to make adequate and timely disclosure to the public, regulators or law enforcement agencies.
In addition, government agencies have investigated and may bring legal actions against us for violation of or noncompliance with regulatory requirements relating to any unauthorized access to and theft of sensitive information including failure to make adequate and timely disclosure to the public, regulators or law enforcement agencies.
Examples of events or changes in circumstances indicating that the carrying value of goodwill may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, loss of key contracts, customer relationships, or personnel that affect current and future operating cash flows of the reporting unit.
Examples of events or changes in circumstances indicating that the carrying value of goodwill may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, loss of key contracts, significant decrease in the Company's stock price, customer relationships, or personnel that affect current and future operating cash flows of the reporting unit.
Current U.S. government spending levels for defense-related and other programs may not be sustained beyond government fiscal year (GFY) 2023. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Current U.S. government spending levels for defense-related and other programs may not be sustained through government fiscal year ("GFY") 2024. Future spending and program authorizations may not increase or may decrease or shift to programs in areas in which we do not provide services or are less likely to be awarded contracts.
Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities. A reprioritization may reduce defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts or other factors. When the U.S.
Such changes in spending authorizations and budgetary priorities may occur as a result of shifts in spending priorities. A change in administrations or changing national priorities may reduce defense-related and other programs as a result of competing demands for federal funds and the number and intensity of military conflicts or other factors. When the U.S.
Furthermore, failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative or contractual sanctions, including fines, penalties or suspension or debarment from contracting with the U.S. government or could cause us to incur costs to change, upgrade, remediate and/or close 17 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION some of our operations or properties.
Furthermore, failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative or contractual sanctions, including fines, penalties or suspension or debarment from contracting with the U.S. government or could cause us to incur costs to change, upgrade, remediate and/or close some of our operations or properties.
While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues derived from FFP contracts represented approximately 25% of our total revenues for fiscal 2023.
While FFP contracts allow us to benefit from cost savings, these contracts also increase our exposure to the risk of cost overruns. Revenues derived from FFP contracts represented approximately 19% of our total revenues for fiscal 2024.
However, we do not know the outcome of any ongoing or future audits or whether future adjustments will exceed our reserves for potential adjustments. Our business is subject to governmental review and investigation, which could adversely affect our profitability, cash position and growth prospects. We are routinely subject to governmental investigations relating to our contracts and operations.
However, we do not know the outcome of any ongoing or future audits or whether future adjustments will exceed our reserves for potential adjustments. Our business is subject to governmental review and investigation, which could adversely affect our profitability, cash position and growth prospects.
However, because of the evolving nature of these security threats, there can be no assurance that our policies, procedures and other controls will detect or prevent them, and we cannot predict their full impact.
Because of the rapidly evolving nature of these threats, there can be no assurance that our policies, procedures and security controls will detect or prevent them, mitigate their affects and we cannot predict their full impact.
In the event of unauthorized access to sensitive information for which we are responsible under customer contracts, our customers, their employees, or third parties may seek to hold us liable for any costs or other damages associated with the unauthorized access.
Actual or perceived vulnerabilities may lead to claims against us and in the event of unauthorized access to sensitive information for which we are responsible under customer contracts, our customers, their employees, or third parties may seek to hold us liable for any costs or other damages associated with the unauthorized access.
In the course of conducting our business, we may inadvertently infringe the intellectual property rights of others, resulting in claims against us or our customers. Our contracts generally indemnify our customers for third-party claims for intellectual property infringement by the services and solutions we provide.
In the course of conducting our business, we may inadvertently infringe the intellectual property rights of others, resulting in claims against us or our customers. Our contracts generally indemnify our customers for third-party claims for intellectual property infringement by the services and solutions we provide. The expense of defending these claims may adversely affect our financial results.
Goodwill and intangible assets are tested for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
Goodwill is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.
As of February 3, 2023, we have estimated $296 million of gross net operating loss carryforwards and tax basis in our acquired amortizable goodwill and other intangible assets of approximately $1.4 billion.
As of February 2, 2024, we have estimated $251 million of gross net operating loss carryforwards and tax basis in our acquired amortizable goodwill and other intangible assets of approximately $1.2 billion.
Although we believe that the expectations reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance or achievements.
Although we believe that the expectations 20 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION reflected in the forward-looking statements are reasonable when made, we cannot guarantee future results, levels of activity, performance or achievements.
We depend on our teaming arrangements and relationships with other contractors and subcontractors. If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected.
If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected.
For additional information related to our pension funding and costs, see Note 9 to the consolidated financial statements contained within this report. 18 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Goodwill and intangible assets represent a significant amount of our total assets and any impairment of these assets would negatively impact our results of operations.
For additional information related to our pension funding and costs, see Note 10—Retirement Plans to the consolidated financial statements contained within this report. Goodwill and intangible assets represent a significant amount of our total assets and any impairment of these assets would negatively impact our results of operations.
In addition, local conditions and regulations may delay the return of employees to business sites, which could impede our ability to meet the client’s requirements or our contractual obligations. The ability of individual employees, based on how severely the climate-related event has impacted them, may also impede our ability to meet the client’s requirements or our contractual obligations.
In addition, local conditions and regulations may delay the return of employees to business sites, which could impede our ability to meet the client’s requirements or our contractual obligations.
Severe storms, increased precipitation and flooding, heat waves and other weather-related obstacles due to climate change could adversely affect our ability to execute our strategy and may disrupt our operations.
We face risks related to climate change if associated increases in extreme weather events prohibit or adversely affect our employees’ ability to work. Severe storms, increased precipitation and flooding, heat waves and other weather-related obstacles due to climate change could adversely affect our ability to execute our strategy and may disrupt our operations.
If our customers, suppliers, insurers, joint venture partners, sureties, or other parties with whom we do business with are affected by issues in the banking industry it may have an adverse impact on our operational and financial performance. Forward-Looking Statement Risks You may not be able to rely on forward-looking statements.
If our customers, suppliers, insurers, joint venture partners, sureties, or other parties 19 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION with whom we do business with are affected by issues in the banking industry it may have an adverse impact on our operational and financial performance.
Although our international operations have historically generated a small proportion of our revenues, we do not know the impact that these regulatory, geopolitical and other factors may have on our business in the future and any of these factors could adversely affect our business.
Although our international operations have historically generated a small proportion of our revenues, we do not know the impact that these regulatory, geopolitical and other factors may have on our business in the future and any of these factors could adversely affect our business. 18 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Pension funding and costs are dependent upon several economic assumptions, which if changed may cause our future earnings and cash flow to fluctuate significantly.
Any material loss that we may experience in the future could have a material adverse effect on our financial position and could materially impact our ability to pay our operational expenses or make other payments. Banking institution failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us.
If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. Any material loss that we may experience in the future could have a material adverse effect on our financial position and could materially impact our ability to pay our operational expenses or make other payments.
Any such event could cause serious harm to our reputation and prevent us from having access to or being eligible for further work on such systems and networks. Our errors and omissions liability insurance may be inadequate to compensate us for all of the damages that we may incur and, as a result, our future results could be adversely affected.
Any such event could cause serious harm to our reputation and prevent us from having access to or being eligible for further work on such systems and networks.
This report contains forward-looking statements that are based on our management’s belief and assumptions about the future in light of information currently available to our management.
Any remediation costs, damages or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means. Forward-Looking Statement Risks You may not be able to rely on forward-looking statements. This report contains forward-looking statements that are based on our management’s belief and assumptions about the future in light of information currently available to our management.
Any future impairment of goodwill or other intangible assets would have a negative impact on our profitability and financial results. We maintain our cash at financial institutions, often in balances that exceed federally insured limits. The majority of our cash is held in accounts at U.S. banking institutions that we believe are of high quality.
We maintain our cash at financial institutions, often in balances that exceed federally insured limits. The majority of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation ("FDIC") insurance limits.
We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows. We face various risks related to health epidemics, pandemics and similar outbreaks, including the global outbreak of COVID-19.
Our use of AI solutions could be limited or subject to regulatory action or legal liability under proposed rules or legislation regarding privacy, intellectual property and other laws. We face various risks related to health epidemics, pandemics and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations and/or cash flows.
It is also possible that the continued spread of COVID-19 may also cause disruption in our supply chain; cause delay, or limit the ability of, the U.S. government and other customers to perform, including making timely payments to us; impact investment performance; and cause other unpredictable events. 15 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION In addition, the resulting volatility in the global capital markets could restrict our access to capital and/or increase our cost of capital.
Re-occurrence of an epidemic may also cause disruption in our supply chain; cause delay, or limit the ability of, the U.S. government and other customers to perform, including making timely payments to us; impact investment performance; and cause other unpredictable events.
Pension funding and costs are dependent upon several economic assumptions, which if changed may cause our future earnings and cash flow to fluctuate significantly. As a result of the acquisition of Engility Holdings, Inc. (Engility) in fiscal 2019, we assumed the obligations under Engility's defined benefit pension plan (the Pension Plan).
As a result of the acquisition of Engility Holdings, Inc. ("Engility") in fiscal 2019, we assumed the obligations under Engility's defined benefit pension plan (the "Pension Plan").
Our customers, both government and civil, may shift priorities, requirements and business processes in response to climate change, which could affect our business and revenues.
The ability of individual employees, based on how severely the climate-related event has impacted them, may also impede our ability to meet the client’s requirements or our contractual obligations. 17 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Our customers, both government and civil, may shift priorities, requirements and business processes in response to climate change, which could affect our business and revenues.
Although we work cooperatively with our customers to seek to minimize the impacts of cyber and other security threats, we must usually rely on the safeguards used or required by those customers.
Adversaries that acquire unauthorized access to customer accounts can use that information to compromise data and inadequate account security practices which could potentially result in malicious activity effecting customer use of our solutions. We work cooperatively with our customers to seek to address cybersecurity threats and often must rely on the safeguards used or required by those customers.
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While the federal government is currently funded in full through the end of GFY 2023, there is a strong possibility that GFY 2024 will begin under a continuing resolution lasting several weeks or months.
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We are routinely subject to governmental investigations relating to all aspects of our business including our contracts and operations.
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We will incur direct and indirect costs as a result of the acquisitions of Unisys Federal, Halfaker, and Koverse.
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We use and deploy AI solutions for our customers which may result in harm to our reputation or liability if they do not function as predicted.
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We will incur substantial expenses in connection with and as a result of the acquisitions and, over a period of time following the completion of the acquisitions, we expect to incur substantial expenses in connection with coordinating our businesses, operations, policies and procedures.
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We deploy and integrate AI solutions for our business operations and for customers, including AI solutions that assist with the design, deployment, and management of AI applications and allow customers to work with their complex and sensitive data to power the most demanding analytics, data science, and AI use cases.
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While we have assumed that a certain level of transaction expenses will be incurred, factors beyond our control could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately. Our business and financial results could be negatively affected by cyber or other security threats.
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These AI solutions may be vulnerable to misuse, or cyberattack and because this technology is developing so rapidly we may be unable to keep up with new AI developments. The AI solutions we use are developed by us and obtained from third parties.
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As a U.S. government contractor and a provider of IT services operating in multiple regulated industries and geographies, we handle a variety of sensitive information including personally identifiable information, personnel information, protected health information, classified information and controlled unclassified information, and financial information, concerning our business and employees and those of our customers.
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The development methods and algorithms of these solutions could be flawed, and the datasets could contain incorrect or biased information. Content or code generated by AI systems may be vulnerable to cyber attack, require human review, be unreliable, illegal, or offensive, and could result in the AI solution not working as intended.
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We are continuously exposed to cyber and other security threats, including malware/computer viruses, ransomware, phishing attacks, insider threats and physical break-ins. Any unauthorized electronic or physical intrusion or other security threat may jeopardize the protection of sensitive or other information stored or transmitted through our IT systems and networks.
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If we deploy AI solutions that have unintended consequences or are more controversial than we anticipate, our customers may seek redress and we may experience reputational harm which could affect our business or financial results.
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This could lead to disruptions in mission-critical systems, unauthorized release of sensitive information and the theft or corruption of data.
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We may be unable to perform fully on our contracts and some of our costs may not be fully recoverable or adequately covered by insurance.
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Although we have implemented and regularly update and improve policies, procedures and other controls to monitor, protect against, detect and mitigate cyber and other security threats, attempts to gain unauthorized access to our IT systems and networks are becoming more prevalent and sophisticated. We, however, proactively seek to detect, investigate, mitigate and remediate all security events.
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In addition, the resulting volatility in the global capital markets could restrict our access to capital and/or increase our cost of capital. Customer systems failures could damage our reputation and adversely affect our revenues and profitability.
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In addition, we work with the defense industrial base industry and the U.S. government to gather and share threat intelligence and promote increased awareness and enhanced protections against cybersecurity threats.
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Our errors and omissions liability insurance may be inadequate to compensate us for all of the damages that we may incur and, as a result, our future results could be adversely affected. 16 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION We depend on our teaming arrangements and relationships with other contractors and subcontractors.
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We may experience similar security threats to the IT systems that we develop, install or maintain under customer contracts, including customer contracts under which we may have access to or management responsibility for customer databases or networks that contain sensitive information relating to our customers, their employees or related third parties.
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Intangible assets with finite lives are assessed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the asset group level. Any future impairment of goodwill or other intangible assets would have a negative impact on our profitability and financial results.
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Occurrence of any unauthorized access caused by these security threats could adversely affect our reputation, business operations including contract terminations, ability to win work on future contracts, and impact our financial results.
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Banking institution failures, or changes in legislation and regulation, may adversely impact other entities that would, in turn, impact us.
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Any remediation costs, damages or other liabilities related to unauthorized access of sensitive information of ours or our customers caused by cyber or other security threats may not be fully insured or indemnified by other means or our insurers.
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Cybersecurity Risks Our business and financial results could be negatively affected by cyber or other security threats. We encounter cybersecurity and physical security threats as part of the work we do for our customers and our internal business.
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We continue to monitor the ongoing situation relating to COVID-19, to assess further possible implications to our business, supply chain and customers, and to take actions in an effort to mitigate adverse consequences.
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Our IT systems contain a variety of sensitive and classified information which attract adversaries including nation-state threat actors and we face cybersecurity threats including attempts to disrupt our critical systems, gain unauthorized access to data, release or corrupt sensitive information, and interfere with operations.
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At this time, we cannot predict the overall impact of COVID-19, but it could have a material adverse effect on our business, financial position, results of operations and/or cash flows. Customer systems failures could damage our reputation and adversely affect our revenues and profitability.
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Our solutions include custom software code we develop and may include open source or AI-generated code which may make our products susceptible to cyberattacks.
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The expense of defending these claims may adversely affect our financial results. 16 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION We face risks related to climate change if associated increases in extreme weather events prohibit or adversely affect our employees’ ability to work.
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We also face cybersecurity threats from our supply chain through threat actors who may seek and gain access to our systems through our business partners and suppliers. Our information security staff manage cybersecurity risks by implementing security controls in accordance with industry standards and conducting regular employee cybersecurity training.
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Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation (FDIC) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations.
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Our cybersecurity policies, procedures and maturity are subject to review and audit by third parties. Although we have implemented and regularly update cybersecurity controls, there can be no assurance that these measures will successfully prevent or mitigate cybersecurity incidents. Cybersecurity incidents, disruptions and data loss have occurred including attacks targeting customer data and our systems and data.
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We report cybersecurity incidents to involved customers and applicable regulatory authorities including the DOD and the FBI to support national security initiatives. Such incidents did not have a material adverse impact on our financial condition or the results of our operations.
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However, future cybersecurity incidents could damage our reputation, exposing us to liability, or prevent us from winning future work from government customers and could have a material adverse impact on our business.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of February 3, 2023, we conducted our operations in approximately 140 offices located in 29 states, the District of Columbia, and various foreign countries. We consider our facilities suitable and adequate for our present needs, which are generally limited to office, integration, warehouse and computer laboratory spaces. 19 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Biggest changeAs of February 2, 2024, we conducted our operations at approximately 114 properties located in 24 states, the District of Columbia, and various foreign countries. We consider our facilities suitable and adequate for our present needs, which are generally limited to office, integration, warehouse and computer laboratory spaces.
Item 2. Properties We occupy approximately 4 million square feet of floor space, substantially all of which is leased. Our corporate headquarters is located in Reston, Virginia. Our principal locations outside of Reston, Virginia include Chantilly, Virginia; Huntsville, Alabama; Oak Ridge, Tennessee; El Segundo, California; Annapolis Junction, Maryland; Indianapolis and Bedford, Indiana; and Charleston, South Carolina.
Item 2. Properties We occupy approximately 3 million square feet of floor space, substantially all of which is leased. Our corporate headquarters is located in Reston, Virginia. Our principal locations outside of Reston, Virginia include Chantilly and Arlington, Virginia; Huntsville, Alabama; Oak Ridge, Tennessee; El Segundo, California; Indianapolis and Bedford, Indiana; and Charleston, South Carolina.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings We have provided information about legal proceedings in which we are involved in Note 17 to the consolidated financial statements contained within this report. We are also routinely subject to investigations and reviews relating to compliance with various laws and regulations.
Biggest changeItem 3. Legal Proceedings We have provided information about legal proceedings in which we are involved in Note 18—Legal Proceedings and Other Commitments and Contingencies to the consolidated financial statements contained within this report. We are also routinely subject to investigations and reviews relating to compliance with various laws and regulations.
Additional information regarding such investigations and reviews is described under the heading “Government Investigations, Audits and Reviews” in Note 17 to the consolidated financial statements contained within this report.
Additional information regarding such investigations and reviews is described under the heading “Government Investigations, Audits and Reviews” in Note 18—Legal Proceedings and Other Commitments and Contingencies to the consolidated financial statements contained within this report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange under the ticker symbol “SAIC”. As of March 10, 2023, there were approximately 23,000 holders of record of our common stock.
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Through closing of trading on March 4, 2024, our common stock was listed on the New York Stock Exchange under the ticker symbol "SAIC." Effective as of the opening of trading on March 5, 2024, the Company voluntarily transferred the listing of its shares of common stock to The Nasdaq Stock Market LLC.
Securities and Exchange Commission (SEC), based upon historical data and are not intended to forecast or be indicative of possible future performance of our common stock. 21 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Purchases of Equity Securities We may repurchase shares on the open market in accordance with established repurchase plans.
Securities and Exchange Commission ("SEC"), based upon historical data and are not intended to forecast or be indicative of possible future performance of our common stock. 23 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Purchases of Equity Securities We may repurchase shares on the open market in accordance with established repurchase plans.
Stock Performance Graph The following graph compares the total cumulative return on our common stock, from the beginning of fiscal year 2018 through fiscal year 2023, to two indices: (i) the Russell 1000 Index and (ii) the Dow Jones US Computer Services Index.
Stock Performance Graph The following graph compares the total cumulative return on our common stock, from the beginning of fiscal year 2019 through fiscal year 2024, to two indices: (i) the Russell 1000 Index and (ii) the Dow Jones US Computer Services Index.
(3) In June 2022, the number of shares that may be purchased increased by 8.0 million shares, bringing the total authorized shares to be repurchased under the plan to approximately 24.4 million shares. As of February 3, 2023, we have repurchased approximately 17.0 million shares of our common stock under the program.
(3) In June 2022, the number of shares that may be purchased increased by 8.0 million shares, bringing the total authorized shares to be repurchased under the plan to approximately 24.4 million shares. As of February 2, 2024, we have repurchased approximately 20.3 million shares of our common stock under the program.
The graph assumes an initial investment of $100 on February 2, 2018 and that dividends have been reinvested. The comparisons in the graph are required by the U.S.
The graph assumes an initial investment of $100 on February 1, 2019 and that dividends have been reinvested. The comparisons in the graph are required by the U.S.
(2) Includes shares purchased on surrender by stockholders of previously owned shares to satisfy minimum statutory tax withholding obligations related to stock option exercises and vesting of stock awards in addition to shares purchased under our publicly announced plans or programs.
Our fiscal quarters typically consist of one five-week period and two four-week periods. (2) Includes shares purchased on surrender by stockholders of previously owned shares to satisfy minimum statutory tax withholding obligations related to vesting of stock awards in addition to shares purchased under our publicly announced plans or programs.
The number of holders of record of our common stock may not be representative of the number of beneficial owners due to shares that may be held by depositories, brokers or nominees.
The Company’s common stock will continue to trade under the symbol “SAIC." As of March 8, 2024, there were approximately 23,000 holders of record of our common stock. The number of holders of record of our common stock may not be representative of the number of beneficial owners due to shares that may be held by depositories, brokers or nominees.
The following table presents repurchases of our common stock during the three months ended February 3, 2023: Period (1) Total Number of Shares (or Units) Purchased (2) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) October 29, 2022 - December 2, 2022 187,084 $ 109.04 187,084 7,725,678 December 3, 2022 - January 6, 2023 176,522 110.74 176,522 7,549,156 January 7, 2023 - February 3, 2023 155,458 103.88 155,458 7,393,698 Total 519,064 $ 108.07 519,064 (1) Date ranges represent our fiscal periods during the current quarter.
The following table presents repurchases of our common stock during the three months ended February 2, 2024: Period (1) Total Number of Shares (or Units) Purchased (2) Average Price Paid per Share (or Unit) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Number of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (3) November 4, 2023 - December 8, 2023 324,744 $ 117.22 321,821 4,564,183 December 9, 2023 - January 5, 2024 196,140 125.12 194,078 4,370,105 January 6, 2024 - February 2, 2024 192,128 128.55 192,128 4,177,977 Total 713,012 $ 122.45 708,027 (1) Date ranges represent our fiscal periods during the current quarter.
Removed
Our fiscal quarters typically consist of one five-week period and two four-week periods. However, the fourth quarter of fiscal 2023 consisted of two five-week periods and one four-week period.
Added
We declared and paid cash dividends on our common stock of $0.37 per share each quarterly period of fiscal 2024, 2023 and 2022. Total dividends declared and paid during fiscal 2024, 2023 and 2022 were $1.48 per share. Quarterly cash dividends are typically paid in April, July, October and January, for the first, second, third and fourth quarters, respectively.
Added
We currently intend to continue paying quarterly cash dividends in the near future, although the declaration of any future dividends and the amount thereof will be determined by our Board of Directors and will depend on many factors, including our financial condition, capital requirements, available cash, results of operations, and other factors our Board of Directors may deem relevant.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

61 edited+26 added−13 removed58 unchanged
Biggest changeWe believe that EBITDA and adjusted EBITDA provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding the long-term financial performance of the Company. 26 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION EBITDA and adjusted EBITDA for the periods presented were calculated as follows: Year Ended February 3, 2023 January 28, 2022 January 29, 2021 (in millions) Net income $ 303 $ 279 $ 211 Interest expense and loss on sale of receivables 128 107 124 Interest income (2) — (1) Provision for income taxes 72 79 60 Depreciation and amortization 157 165 179 EBITDA 658 630 573 EBITDA as a percentage of revenues 8.5 % 8.5 % 8.1 % Acquisition and integration costs 13 56 54 Restructuring and impairment costs 24 2 4 Depreciation included in acquisition and integration costs and restructuring and impairment costs (3) (1) (1) Recovery of acquisition and integration costs and restructuring and impairment costs (1) (12) (1) (3) Adjusted EBITDA $ 680 $ 686 $ 627 Adjusted EBITDA as a percentage of revenues 8.8 % 9.3 % 8.9 % (1) Adjustment reflects the portion of acquisition and integration costs and restructuring and impairment costs recovered through the Company's indirect rates in accordance with U.S. government Cost Accounting Standards.
Biggest changeEBITDA and adjusted EBITDA for the periods presented were calculated as follows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (2) (in millions) Revenues $ 7,444 $ 7,704 $ 7,394 Net income 477 303 279 Interest expense, net and loss on sale of receivables 129 126 107 Provision for income taxes 143 72 79 Depreciation and amortization 142 157 165 EBITDA 891 658 630 EBITDA as a percentage of revenues 12.0 % 8.5 % 8.5 % Acquisition and integration costs 1 13 56 Restructuring and impairment costs 23 24 2 Depreciation included in acquisition and integration costs and restructuring and impairment costs (1) (3) (1) Recovery of acquisition and integration costs and restructuring and impairment costs (1) (6) (12) (1) Gain on divestitures, net of transaction costs (240) — — Adjusted EBITDA $ 668 $ 680 $ 686 Adjusted EBITDA as a percentage of revenues 9.0 % 8.8 % 9.3 % (1) Adjustment reflects the portion of acquisition and integration costs and restructuring and impairment costs recovered through the Company's indirect rates in accordance with U.S. government Cost Accounting Standards.
It contains forward-looking statements (which may be identified by words such as those described in “Risk Factors—Forward-Looking Statement Risks” in Part I, Item 1A of this report), including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations; backlog; our industry; government budgets and spending; market opportunities; the impact of competition; and the impact of acquisitions.
It contains forward-looking statements (which may be identified by words such as those described in “Risk Factors—Forward-Looking Statement Risks” in Part I, Item 1A of this report), including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations; backlog; our industry; government budgets and spending; market opportunities; the impact of competition; and the impact of acquisitions and divestitures.
Net Bookings and Backlog. Net bookings represent the estimated amount of revenues to be earned in the future from funded and negotiated unfunded contract awards that were received during the period, net of adjustments to estimates on previously awarded contracts.
Net bookings represent the estimated amount of revenues to be earned in the future from funded and negotiated unfunded contract awards that were received during the period, net of adjustments to estimates on previously awarded contracts.
The Company’s dividends and share repurchases may be limited under certain leverage ratios, and we may be required to make an annual debt prepayment based on our cash flows from operating activities. See Note 11 to the consolidated financial statements contained within this report for a more complete understanding of our Credit Facility.
The Company’s dividends and share repurchases may be limited under certain leverage ratios, and we may be required to make an annual debt prepayment based on our cash flows from operating activities. See Note 12—Debt Obligations to the consolidated financial statements contained within this report for a more complete understanding of our Credit Facility.
We generate revenues by providing a customized mix of services to our customers.
Cost of Revenues Mix. We generate revenues by providing a customized mix of services to our customers.
We serve our customers through approximately 1,900 active contracts and task orders and employ approximately 25,000 individuals who are led by an experienced executive team of proven industry leaders. Our long history of serving the U.S. government has afforded us the ability to develop strong and longstanding relationships with some of the largest customers in the markets we serve.
We serve our customers through approximately 1,800 active contracts and task orders and employ approximately 24,000 individuals who are led by an experienced executive team of proven industry leaders. Our long history of serving the U.S. government has afforded us the ability to develop strong and longstanding relationships with some of the largest customers in the markets we serve.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations, and quantitative and qualitative disclosures about market risk should be read in conjunction with our consolidated financial statements and the related notes included in this Form 10-K, as well as Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended January 28, 2022, which provides additional information on comparisons of fiscal 2022 and 2021.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations, and quantitative and qualitative disclosures about market risk should be read in conjunction with our consolidated financial statements and the related notes included in this Form 10-K, as well as Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended February 3, 2023, which provides additional information on comparisons of fiscal 2023 and 2022.
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see “Business—Contract Types” in Part I, Item 1 of this report.
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we 30 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION generate revenues, see “Business—Contract Types” in Part I, Item 1 of this report.
During the second quarter of fiscal 2023, we amended our Credit Facility. See Note 11 to the consolidated financial statements contained within this report for additional information. Upon the acquisition of Halfaker in fiscal 2022, we drew $100 million on our incremental senior secured Term Loan A2 Facility due October 2023. The proceeds were used for the purchase of Halfaker.
See Note 12—Debt Obligations to the consolidated financial statements contained within this report for additional information. Upon the acquisition of Halfaker in fiscal 2022, we drew $100 million on our incremental senior secured Term Loan A2 Facility due October 2023. The proceeds were used for the purchase of Halfaker.
Certain assets and liabilities may be specifically identified and assigned to a reporting unit based on the information contained within our financial systems; whereas, other assets and liabilities may be allocated using measurable relationships or other basis for allocation.
Certain assets and liabilities may be specifically identified and assigned to a reporting unit based on the information contained within 35 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION our financial systems; whereas, other assets and liabilities may be allocated using measurable relationships or other basis for allocation.
For additional information related to changes in estimates on contracts, including gross favorable and unfavorable adjustments as well as the impact to earnings per share, see Note 3 to the consolidated financial statements contained within this report. Business Combinations.
For additional information related to changes in 34 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION estimates on contracts, including gross favorable and unfavorable adjustments as well as the impact to earnings per share, see Note 3—Revenues to the consolidated financial statements contained within this report. Business Combinations.
Our current cost structure and ongoing efforts to reduce costs by strategic sourcing and developing repeatable offerings sold "as a service" and as managed services in a more commercial business model are expected to allow us to compete effectively on price in an evolving environment.
Our past performance was achieved by employees dedicated to supporting our customers' most challenging missions. Our current cost structure and ongoing efforts to reduce costs by strategic sourcing and developing repeatable offerings sold "as a service" and as managed services in a more commercial business model are expected to allow us to compete effectively on price in an evolving environment.
Our ability to be competitive in the future will continue to be driven by our reputation for successful program execution, competitive cost structure, development of new pricing and business models, and efficiencies in assigning the right people, at the right time, in support of our contracts. On July 2, 2021, we completed the acquisition of Halfaker and Associates, LLC (Halfaker).
Our ability to be competitive in the future will continue to be driven by our reputation for successful program execution, competitive cost structure, development of new pricing and business models, and efficiencies in assigning the right people, at the right time, in support of our contracts.
Recently Issued But Not Yet Adopted Accounting Pronouncements For information on recently issued but not yet adopted accounting pronouncements, see Note 1 to the consolidated financial statements contained within this report.
Recently Issued But Not Yet Adopted Accounting Pronouncements For information on recently issued but not yet adopted accounting pronouncements, see Note 1—Business Overview and Summary of Significant Accounting Policies to the consolidated financial statements contained within this report.
Additionally, we do not include in backlog contract awards that are under protest until the protest is resolved in our favor. 27 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION We segregate our backlog into two categories as follows: • Funded Backlog.
Additionally, we do not include in backlog contract awards that are under protest until the protest is resolved in our favor. We segregate our backlog into two categories as follows: • Funded Backlog.
The estimated value of our total backlog as of the dates presented was: February 3, 2023 January 28, 2022 (in millions) Funded backlog $ 3,554 $ 3,491 Negotiated unfunded backlog 20,248 20,601 Total backlog $ 23,802 $ 24,092 We had net bookings worth an estimated $7.4 billion and $9.4 billion during fiscal 2023 and 2022, respectively. Contract Types.
The estimated value of our total backlog as of the dates presented was: February 2, 2024 February 3, 2023 (in millions) Funded backlog $ 3,539 $ 3,554 Negotiated unfunded backlog 19,224 20,248 Total backlog $ 22,763 $ 23,802 We had net bookings worth an estimated $6.7 billion and $7.4 billion during fiscal 2024 and 2023, respectively. Contract Types.
Non-GAAP Measures Earnings before interest, taxes, depreciation and amortization (EBITDA), and adjusted EBITDA are non-GAAP financial measures. While we believe that these non-GAAP financial measures are also useful for management and investors in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP.
While we believe that these non-GAAP financial measures are also useful for management and investors in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below.
The following table summarizes our results of operations: Year Ended February 3, 2023 Percent change January 28, 2022 Percent change January 29, 2021 (dollars in millions) Revenues $ 7,704 4 % $ 7,394 5 % $ 7,056 Cost of revenues 6,816 4 % 6,535 4 % 6,264 As a percentage of revenues 88.5 % 88.4 % 88.8 % Selling, general and administrative expenses 374 9 % 344 (2) % 352 Acquisition and integration costs 13 (77) % 56 4 % 54 Other operating income — (100) % (3) (25) % (4) Operating income 501 8 % 462 18 % 390 As a percentage of revenues 6.5 % 6.2 % 5.5 % Net income attributable to common stockholders $ 300 8 % $ 277 33 % $ 209 Cash flows provided by operating activities $ 532 3 % $ 518 (31) % $ 755 Revenues.
The following table summarizes our results of operations: Year Ended February 2, 2024 Percent change February 3, 2023 Percent change January 28, 2022 (dollars in millions) Revenues $ 7,444 (3) % $ 7,704 4 % $ 7,394 Cost of revenues 6,572 (4) % 6,816 4 % 6,535 As a percentage of revenues 88.3 % 88.5 % 88.4 % Selling, general and administrative expenses 373 — % 374 9 % 344 Acquisition and integration costs 1 (92) % 13 (77) % 56 Gain on divestitures, net of transaction costs (240) 100 % — (100) % (2) Other operating income (3) 100 % — (100) % (1) Operating income 741 48 % 501 8 % 462 As a percentage of revenues 10.0 % 6.5 % 6.2 % Net income attributable to common stockholders $ 477 59 % $ 300 8 % $ 277 Cash flows provided by operating activities $ 396 (26) % $ 532 3 % $ 518 Revenues.
Other Key Performance Measures In addition to the financial measures described above, we believe that bookings and backlog are useful measures for management and investors to evaluate our potential future revenues. We also consider measures such as contract types and cost of revenues mix to be useful for management and investors to evaluate our operating income and performance.
We also consider measures such as contract types and cost of revenues mix to be useful for management and investors to evaluate our operating income and performance. Net Bookings and Backlog.
We estimate the fair value of our reporting units using either a market approach, income approach, or a combination of both. For our annual impairment analysis, we reconcile the aggregate fair value of all of our reporting units to our market capitalization as of the measurement date.
When performing a quantitative assessment for our annual impairment analysis, we reconcile the aggregate fair value of all of our reporting units to our market capitalization as of the measurement date.
Refer to “Results of Operations” above for a discussion of the changes in cash provided by operating activities between fiscal 2023 and 2022. Cash Used in Investing Activities. Cash used in investing activities decreased in fiscal 2023 compared to the prior year period primarily due to cash paid for the acquisitions of Halfaker and Koverse in the prior year period.
Refer to “Results of Operations” above for a discussion of the changes in cash provided by operating activities between fiscal 2024 and 2023. Cash Provided by (Used in) Investing Activities.
We expect to fund our ongoing working capital, commitments and any other discretionary investments with cash on hand, future operating cash flows and, if needed, borrowings under our $1.0 billion Revolving Credit Facility and $300 million MARPA Facility. We anticipate that our future cash needs will be for working capital, capital expenditures, and contractual and other commitments.
Liquidity and Capital Resources As a services provider, our business generally requires minimal infrastructure investment. We expect to fund our ongoing working capital, commitments and any other discretionary investments with cash on hand, future operating cash flows and, if needed, borrowings under our $1.0 billion Revolving Credit Facility and $300 million MARPA Facility.
Under the swap agreements, we pay the fixed rate and the counterparties to the agreement pay a floating interest rate. 29 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Our Credit Facility contains customary terms and conditions including financial covenants and covenants restricting the Company's ability to merge or consolidate with another entity or undertake other fundamental changes, enter into property sale and leaseback transactions, and incur liens.
Our Credit Facility contains customary terms and conditions including financial covenants and covenants restricting the Company's ability to merge or consolidate with another entity or undertake other fundamental changes, enter into property sale and leaseback transactions, and incur liens.
We developed our brand by addressing our customers’ mission critical needs and solving their most complex problems for over 50 years. As one of the largest pure-play technology service providers to the U.S. government, we serve markets of significant scale and opportunity. Our primary customers are the departments and agencies of the U.S. government.
As one of the largest pure-play technology service providers to the U.S. government, we serve markets of significant scale and opportunity. Our primary customers are the departments and agencies of the U.S. government.
We have not experienced a significant impact to our liquidity or access to capital as a result of the COVID-19 pandemic.
As of February 2, 2024, we have not experienced a significant impact to our liquidity or access to capital, and we have not been required to obtain additional financing or make significant modifications to our capital deployment strategy, as a result of the COVID-19 pandemic.
Cash flows provided by operating activities were $532 million for fiscal 2023, which represented an increase of $14 million from fiscal 2022.
Cash Flows Provided by Operating Activities. Cash flows provided by operating activities were $396 million for fiscal 2024, which represented a decrease of $136 million from fiscal 2023.
Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below. Other companies may define similar measures differently. EBITDA and Adjusted EBITDA. The performance measure EBITDA is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization.
Other companies may define similar measures differently. EBITDA and Adjusted EBITDA. The performance measure EBITDA is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization. Adjusted EBITDA is a performance measure that excludes costs that we do not consider to be indicative of our ongoing performance.
In addition, determining the carrying value of each reporting unit requires judgment and involves the assignment of assets and liabilities to the reporting units based on a systematic and rational allocation methodology.
We analyze historical acquisitions in our industry to estimate a control premium that we incorporate into the fair value estimate of a reporting unit under the market approach. Determining the carrying value of each reporting unit requires judgment and involves the assignment of assets and liabilities to the reporting units based on a systematic and rational allocation methodology.
The following table presents cost mix for the periods presented: Year Ended February 3, 2023 January 28, 2022 January 29, 2021 (as a % of total cost of revenues) Labor-related cost of revenues 53 % 54 % 55 % Subcontractor-related cost of revenues 29 % 29 % 29 % Supply chain materials-related cost of revenues 8 % 8 % 8 % Other materials-related cost of revenues 10 % 9 % 8 % Total 100 % 100 % 100 % Liquidity and Capital Resources As a services provider, our business generally requires minimal infrastructure investment.
The following table presents cost mix for the periods presented: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (as a % of total cost of revenues) Labor-related cost of revenues 55 % 53 % 54 % Subcontractor-related cost of revenues 31 % 29 % 29 % Supply chain materials-related cost of revenues 2 % 8 % 8 % Other materials-related cost of revenues 12 % 10 % 9 % Total 100 % 100 % 100 % The change in cost of revenues mix for fiscal 2024 reflects a decrease in supply chain materials-related costs due to the divestiture of the Supply Chain Business.
The following table summarizes revenues by contract type as a percentage of revenues for the periods presented: Year Ended February 3, 2023 January 28, 2022 January 29, 2021 Cost reimbursement 56 % 54 % 54 % Time and materials (T&M) 19 % 20 % 22 % Firm-fixed price (FFP) 25 % 26 % 24 % Total 100 % 100 % 100 % 28 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Cost of Revenues Mix.
The following table summarizes revenues by contract type as a percentage of revenues for the periods presented: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 Cost reimbursement 61 % 56 % 54 % Time and materials ("T&M") 20 % 19 % 20 % Firm-fixed price ("FFP") 19 % 25 % 26 % Total 100 % 100 % 100 % The change in contract mix for fiscal 2024 reflects a decrease in firm-fixed price type contracts due to the divestiture of the Supply Chain Business which historically had a higher proportion of these contracts.
Acquisition and integration costs decreased $43 million from fiscal 2022 to fiscal 2023 primarily due to the acquisitions of Halfaker and Koverse in the prior year period. Operating Income.
Acquisition and integration costs decreased $12 million from fiscal 2023 to fiscal 2024 due to no acquisitions in the current year. Operating Income.
As discussed in “Liquidity and Capital Resources” we believe that our existing cash on hand, generation of future operating cash flows, and access to bank financing and capital markets will provide adequate resources to meet our short-term liquidity and long-term capital needs.
Nevertheless, we believe that our existing cash on hand, generation of future operating cash flows, and access to bank financing and capital markets will provide adequate resources to meet our short-term liquidity and long-term capital needs. 31 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION During the second quarter of fiscal 2023, we amended our Credit Facility.
Fiscal 2023 began on January 29, 2022 and ended on February 3, 2023, fiscal 2022 began on January 30, 2021 and ended on January 28, 2022, and fiscal 2021 began on February 1, 2020 and ended on January 29, 2021.
Fiscal 2024 began on February 4, 2023 and ended on February 2, 2024, fiscal 2023 began on January 29, 2022 and ended on February 3, 2023, and fiscal 2022 began on January 30, 2021 and ended on January 28, 2022. Fiscal 2024 consisted of 52 weeks, and fiscal 2023 and 2022 consisted of 53 weeks and 52 weeks, respectively.
Commitments and Contingencies We are subject to a number of reviews, investigations, claims, lawsuits and other uncertainties related to our business. For a discussion of these items, see Note 17 to the consolidated financial statements contained within this report.
Commitments and Contingencies We are subject to a number of reviews, investigations, claims, lawsuits and other uncertainties related to our business.
The following table summarizes our principal contractual commitments as of February 3, 2023: Total Due in Fiscal 2024 (in millions) Long-term debt including current portion $ 2,390 $ 31 Interest payments on long-term debt (1) 489 149 Operating lease obligations 211 48 Estimated purchase obligations (2) 94 71 Other liabilities (3) 186 17 Total contractual obligations $ 3,370 $ 316 (1) Amounts include an estimate of future variable interest payments on the Term Loan Facilities based on scheduled outstanding principal amounts, current applicable margin and projected 1-month Term SOFR as of February 3, 2023.
Since the program’s inception in December of 2013, we have repurchased 20.3 million shares for $1,548 million. 32 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION The following table summarizes our principal contractual commitments as of February 2, 2024: Total Due in Fiscal 2025 (in millions) Long-term debt including current portion $ 2,109 $ 77 Interest payments on long-term debt (1) 344 126 Operating lease obligations 210 45 Estimated purchase obligations (2) 109 59 Other liabilities (3) 156 33 Total contractual obligations $ 2,928 $ 340 (1) Amounts include an estimate of future variable interest payments on the Term Loan Facilities based on scheduled outstanding principal amounts, current applicable margin and projected 1-month Term SOFR as of February 2, 2024.
Some changes that could have an adverse impact on our business include adverse regulations, the implementation of future spending reductions (including sequestration), delayed passage of appropriations bills resulting in temporary or full-year continuing resolutions, extreme inflationary increases adversely impacting fixed-price contracts, inability to increase or suspend the Federal debt ceiling, and potential government shutdowns. 23 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Spending packages, including the infrastructure bill, Inflation Reduction Act, and CHIPS and Science Act, as well as future potential spending packages, may provide additional opportunity in areas of SAIC focus such as digital modernization, cyber, microelectronics support, and climate resiliency.
Some changes that could have an adverse impact on our business include adverse regulations, the implementation of future spending reductions (including sequestration), delayed passage of appropriations bills resulting in temporary or full-year continuing resolutions, extreme inflationary increases adversely impacting fixed-price contracts, and potential government shutdowns.
Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles.
For a discussion of these items, see Note 18—Legal Proceedings and Other Commitments and Contingencies to the consolidated financial statements contained within this report. 33 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Critical Accounting Policies and Estimates Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with U.S. generally accepted accounting principles.
While the impact to income taxes payable is most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six. During fiscal 2023, we repurchased approximately 2.6 million shares of our common stock for $245 million from the open market in connection with our existing share repurchase program.
While the impact to income taxes payable was most significant in fiscal 2023, this impact will decrease over the five-year amortization period and is anticipated to be immaterial in year six.
Changes in operating cash flows are described with regard to changes in cash generated through the rendering of services, significant drivers of fluctuations in assets or liabilities and the impacts of changes in timing of cash receipts or disbursements.
Changes in operating cash flows are described with regard to changes in cash generated through the provision of services, significant drivers of fluctuations in assets or liabilities and the impacts of changes in timing of cash receipts or disbursements. 27 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Results of Operations The primary financial performance measures we use to manage our business and monitor results of operations are revenues, operating income and cash flows from operating activities.
Substantially all of our revenues and tangible long-lived assets are generated and located in the United States. Economic Opportunities, Challenges, and Risks In fiscal 2023, we generated 98% of our revenues from contracts with the U.S. government, including subcontracts on which we perform.
Economic Opportunities, Challenges, and Risks In fiscal 2024, we generated 98% of our revenues from contracts with the U.S. government, including subcontracts on which we perform. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government.
Adjusting for the impact of acquired and divested revenues and the estimated impact of the additional four working days in fiscal 2023, revenues grew approximately 1.5%. Cost of Revenues.
Adjusting for the impact of the divestiture, deconsolidation and estimated impact of the additional five working days in the prior year period, revenues grew approximately 7.4%. Cost of Revenues.
Integration costs are costs to integrate acquired companies including costs of strategic consulting services, facility consolidation and employee related costs such as retention and severance costs. The acquisition and integration costs relate to the Company’s acquisitions. See Note 1 and Note 5 to the consolidated financial statements contained within this report for information related to our restructuring and impairment costs.
Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition and integration costs, impairments, restructuring costs, and any other material non-recurring costs. Integration costs are costs to integrate acquired companies including costs of strategic consulting services, facility consolidation and employee related costs such as retention and severance costs. The acquisition and integration costs relate to the Company’s acquisitions.
Many of the Company's contracts recognize revenue using a cost input measure (cost-to-cost), which requires estimates of total costs at completion. For contracts using a cost input measure, when total expected contract costs exceed total estimated contract revenues, the Company recognizes the total estimated loss in the quarter identified.
For contracts using a cost input measure, when total expected contract costs exceed total estimated contract revenues, the Company recognizes the total estimated loss in the quarter identified. Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss.
These estimates of costs can span several years and take into account many factors including the availability, productivity and cost of labor, potential delays in our performance and the level of future indirect cost allocations. 31 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Many of our contracts include forms of variable consideration such as reimbursable costs, award and incentive fees, usage-based pricing, service-level penalties, performance bonuses, and other provisions that can either increase or decrease the transaction price.
These estimates of costs can span several years and take into account many factors including the availability, productivity and cost of labor, potential delays in our performance and the level of future indirect cost allocations.
The acquisition of Halfaker, in alignment with our long-term strategy, grows the Company's digital transformation portfolio while expanding its ability to support the government's healthcare mission. On March 13, 2020, we completed the acquisition of Unisys Federal, a former operating unit of Unisys Corporation.
The acquisition of Halfaker, in alignment with our long-term strategy, grows the Company's digital transformation portfolio while expanding its ability to support the government's healthcare mission. Additionally, on May 3, 2021, the Company acquired Koverse, a software company that provides a data management platform enabling artificial intelligence and machine learning on complex sensitive data.
Revenues increased $310 million from fiscal 2022 to fiscal 2023 due to ramp up on new and existing contracts, four additional working days in the current year period, and the acquisition of Halfaker (approximately $72 million), partially offset by contract completions and lower net favorable changes in contract estimates.
Cost of revenues decreased $244 million from fiscal 2023 to fiscal 2024 primarily due to the sale of the Supply Chain Business ($461 million) and the deconsolidation of FSA ($132 million), contract completions and five additional working days in the prior year period. This was partially offset by ramp up in volume on existing and new contracts.
Operating income as a percentage of revenues increased from fiscal 2022 to fiscal 2023 primarily due to improved profitability across our contract portfolio and lower acquisition and integration costs, partially offset by higher restructuring costs and lower net favorable changes in contract estimates. Cash Flows Provided by Operating Activities.
Operating income as a percentage of revenues increased from fiscal 2023 to fiscal 2024 primarily due to a $233 million gain recognized from the sale of the Supply Chain Business, a $7 million gain recognized from the deconsolidation of FSA, improved profitability across our contract portfolio and lower acquisition and integration costs, partially offset by higher incentive-based compensation expense, including acceleration of stock-based compensation related to the reorganization and executive transition.
Variable amounts are generally determined upon our achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion.
Many of our contracts include forms of variable consideration such as reimbursable costs, award and incentive fees, usage-based pricing, service-level penalties, performance bonuses, and other provisions that can either increase or decrease the transaction price. Variable amounts are generally determined upon our achievement of certain performance metrics, program milestones or cost targets and may be based upon customer discretion.
See respective notes to the consolidated financial statements contained within this report for further information about our long-term debt (Note 11), lease payment obligations (Note 15), liabilities for unrecognized tax benefits (Note 10), and letters of credit and surety bonds (Note 17). 30 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Historical Cash Flow Trends The following table summarizes our cash flows: Year Ended February 3, 2023 January 28, 2022 January 29, 2021 (in millions) Net cash provided by operating activities $ 532 $ 518 $ 755 Net cash used in investing activities (36) (292) (1,231) Net cash (used in) provided by financing activities (493) (301) 464 Total increase (decrease) in cash, cash equivalents and restricted cash $ 3 $ (75) $ (12) Cash Provided by Operating Activities.
Historical Cash Flow Trends The following table summarizes our cash flows: Year Ended February 2, 2024 February 3, 2023 January 28, 2022 (in millions) Net cash provided by operating activities $ 396 $ 532 $ 518 Net cash provided by (used in) investing activities 314 (36) (292) Net cash used in financing activities (725) (493) (301) Total (decrease) increase in cash, cash equivalents and restricted cash $ (15) $ 3 $ (75) Cash Provided by Operating Activities.
Cash used in financing activities increased in fiscal 2023 compared to the prior year period primarily due to borrowings obtained to finance the Halfaker acquisition in the prior year period of $100 million, a $90 million voluntary principal prepayment during the third quarter of fiscal 2023, and higher share repurchases of $37 million, partially offset by a $35 million voluntary principal prepayment during the fourth quarter of fiscal 2022.
Cash Used in Financing Activities. Cash used in financing activities increased in fiscal 2024 compared to the prior year period primarily due to higher principal payments, net of proceeds received from borrowings of $131 million and higher plan share repurchases of $112 million in the current year.
If the fair value is less than the carrying value, the amount of impairment expense is equal to the difference between the reporting unit’s fair value and the reporting unit’s carrying value. 32 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Determining the fair value of each reporting unit involves judgment and the use of estimates and assumptions.
The Company may additionally perform a quantitative assessment in which the estimated fair value of each reporting unit is compared to its respective carrying value including goodwill. If the fair value is less than the carrying value, the amount of impairment expense is equal to the difference between the reporting unit’s fair value and the reporting unit’s carrying value.
We consider various financial measures when we develop and update our capital deployment strategy, which include evaluating cash provided by operating activities, free cash flow and financial leverage. When our cash generation enables us to exceed our target average minimum cash balance, we intend to deploy excess cash through dividends, share repurchases, debt prepayments or strategic acquisitions.
We anticipate that our future cash needs will be for working capital, capital expenditures, and contractual and other commitments. We consider various financial measures when we develop and update our capital deployment strategy, which include evaluating cash provided by operating activities, free cash flow and financial leverage.
Therefore, we cannot ensure that such financing will be available to us on acceptable terms or that such financing will be available at all. Nevertheless, we believe that our existing cash on hand, generation of future operating cash flows, and access to bank financing and capital markets will provide adequate resources to meet our short-term liquidity and long-term capital needs.
Therefore, we cannot ensure that such financing will be available to us on acceptable terms or that such financing will be available at all.
Total estimated losses are inclusive of any unexercised options that are probable of award, only if they increase the amount of the loss. Aggregate net changes in contract estimates increased operating income by $4 million, $13 million and $9 million for fiscal 2023, 2022 and 2021, respectively.
Aggregate net changes in contract estimates had an immaterial impact on operating income in fiscal 2024. Aggregate net changes in contract estimates increased operating income by $4 million and $13 million for fiscal 2023 and 2022, respectively.
In October 2021, the Federal debt ceiling was increased by $480 billion and in December 2021 was further increased by $2.5 trillion. In January 2023, the Federal debt ceiling was reached and the U.S. Department of the Treasury is currently operating under “extraordinary measures.” Adverse changes in fiscal and economic conditions could materially impact our business.
Department of the Treasury will return to operating under "extraordinary measures." Adverse changes in fiscal and economic conditions could materially impact our business.
Fiscal 2023 consisted of 53 weeks with the extra week occurring in the fourth quarter, while fiscal 2022 and 2021 consisted of 52 weeks. Business Overview We are a leading technology integrator providing full life cycle services and solutions in the technical, engineering and enterprise information technology (IT) markets.
Business Overview We are a leading technology integrator providing full life cycle services and solutions in the technical, engineering and enterprise information technology ("IT") markets. We developed our brand by addressing our customers’ mission critical needs and solving their most complex problems for over 50 years.
Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government. Appropriations measures passed in December 2022 provided full funding for the federal government through the end of government fiscal year 2023.
Appropriations measures passed in December 2022 provided full funding for the federal government through the end of government fiscal year ("GFY") 2023. 25 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION In March 2024, the President signed appropriation measures that provide funding for GFY 2024 for non-defense departments of the U.S. government.
The increase was primarily due to higher cash provided by the Master Accounts Receivable Purchase Agreement (MARPA Facility) (see Note 14 to the consolidated financial statements), the timing of collections and other changes in working capital, partially offset by tax payments associated with Section 174 of the Internal Revenue Code and cash payments during the year associated with certain change in control provisions related to the acquisition of Halfaker (see Note 4 to the consolidated financial statements).
The decrease was primarily due to lower cash provided by the Master Accounts Receivable Purchase Agreement ("MARPA Facility") (see Note 15—Sale of Receivables to the consolidated financial statements contained within this report for additional information) and higher tax payments in the current year, partially offset by lower incentive-based compensation payments in the current year and other changes in working capital. 28 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Non-GAAP Measures Earnings before interest, taxes, depreciation and amortization ("EBITDA"), and adjusted EBITDA are non-GAAP financial measures.
These instruments are accounted for as cash flow hedges.
These instruments are accounted for as cash flow hedges. Under the swap agreements, we pay the fixed rate and the counterparties to the agreement pay a floating interest rate.
Cost of revenues increased $281 million from fiscal 2022 to fiscal 2023 primarily due to ramp up on new and existing contracts, four additional working days in the current year period, and the acquisition of Halfaker. Selling, General and Administrative Expenses (SG&A).
Revenues decreased $260 million from fiscal 2023 to fiscal 2024 primarily due to the sale of the Supply Chain Business ($493 million) and the deconsolidation of FSA ($143 million) (see Note 5—Divestitures), contract completions and five additional working days in the prior year period. This was partially offset by ramp up in volume on existing and new contracts.
Adjusted EBITDA as a percentage of revenues decreased to 8.8% for fiscal 2023, compared to 9.3% for fiscal 2022, primarily due to lower net favorable changes in contract estimates and higher indirect expenses, partially offset by improved profitability across our contract portfolio.
Adjusted EBITDA as a percentage of revenues increased to 9.0% for fiscal 2024, compared to 8.8% for fiscal 2023, primarily due to improved profitability across our contract portfolio, partially offset by higher incentive-based compensation expense, including acceleration of stock-based compensation related to the reorganization and executive transition. 29 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Other Key Performance Measures In addition to the financial measures described above, we believe that bookings and backlog are useful measures for management and investors to evaluate our potential future revenues.
Removed
Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best capabilities available. Our past performance was achieved by employees dedicated to supporting our customers' most challenging missions.
Added
Substantially all of our revenues and tangible long-lived assets are generated and located in the United States. Effective February 3, 2024, the first day of fiscal 2025, the Company completed a business reorganization which replaces its current two operating sectors with five customer facing business groups supported by the enterprise organizations, including the Innovation Factory.
Removed
The acquisition of Unisys Federal, in alignment with our long-term strategy, positions SAIC as a leading government services technology integrator in digital transformation, and is highly accretive across all key financial metrics. See “Risk Factors” in Part I, Item 1A of this report for additional discussion of our industry and regulatory environment.
Added
The reorganization is designed to enhance management's involvement with customers and advance SAIC’s innovation and go-to-market strategy. The new business group leaders will report directly to the Company's CEO who will continue to be the chief operating decision maker ("CODM"). The Company is currently evaluating the impact of the reorganization on its segment reporting.
Removed
Impacts of the COVID-19 Pandemic While we are continuing to monitor the ongoing outbreak of COVID-19, the pandemic did not have a material impact to revenues and operating income during fiscal 2023.
Added
Congress is currently in the process of considering legislation for the remaining federal budget which will include the Department of Defense, the Department of State and the Department of Homeland Security.
Removed
The full extent of the impact of COVID-19 on our business and our operational and financial performance will depend on future developments, including the duration and spread of the pandemic, all of which are uncertain and cannot be predicted.
Added
If Congress is not able to pass the remaining GFY 2024 funding measures by the end of April 2024, it could result in the U.S. government operating on additional continuing resolutions, potentially lead to a partial or full government shutdown, and a cut to defense spending for GFY 2024 as prescribed in the Fiscal Responsibility Act of 2023.
Removed
As of February 3, 2023 we were in compliance with our debt covenants and we have not been required to obtain additional financing, or make significant modifications to our capital deployment strategy, as a result of the COVID-19 pandemic. 24 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Management of Operating Performance and Reporting Our business and program management process is directed by professionals focused on serving our customers by providing high quality services in achieving program requirements.
Added
In March 2024, the President submitted the GFY 2025 budget request which adheres to the Fiscal Responsibility Act of 2023. In January 2023, the Federal debt ceiling was reached and the U.S.
Removed
Results of Operations The primary financial performance measures we use to manage our business and monitor results of operations are revenues, operating income and cash flows from operating activities.
Added
Department of the Treasury was operating under "extraordinary measures." In June 2023, the President signed the Fiscal Responsibility Act of 2023 which suspends the Federal debt ceiling until January 1, 2025, postponing the threat of a federal government default. If a new debt ceiling agreement is not reached by January 2025, the U.S.
Removed
SG&A increased $30 million from fiscal 2022 to fiscal 2023 primarily due to higher restructuring costs (see Note 5 to the consolidated financial statements contained within this report) and the acquisition of Halfaker. 25 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Acquisition and integration costs.
Added
Spending packages, including the infrastructure bill, Inflation Reduction Act, and CHIPS and Science Act, as well as future potential spending packages, may provide additional opportunity in areas of SAIC focus such as digital modernization, cyber, microelectronics support, and climate resiliency.
Removed
Adjusted EBITDA is a performance measure that excludes costs that we do not consider to be indicative of our ongoing performance. Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition and integration costs, impairments, restructuring costs, and any other material non-recurring costs.
Added
Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best capabilities available. Our Innovation Factory develops superior enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings to meet complex customer needs and accelerate digital transformation.
Removed
Upon the acquisition of Unisys Federal in fiscal 2021, we drew $600 million on our incremental senior secured Term Loan B2 Facility due March 2027 and issued $400 million of Senior Notes due 2028. In addition, in February 2020 we sold $200 million of accounts receivable under our MARPA Facility. The proceeds were used for the purchase of Unisys Federal.
Added
On May 6, 2023, SAIC closed the sale of its logistics and supply chain management business ("Supply Chain Business") to ASRC Federal Holding Company, LLC ("ASRC Federal").
Removed
This provision resulted in an increase to income taxes payable of approximately $94 million, offset by a corresponding increase to net deferred tax assets in fiscal 2023.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−0 removed6 unchanged
Biggest changeUnder the swap agreements, we pay a fixed rate and the counterparties to the agreements pay a floating interest rate based on 1-month Term SOFR. A hypothetical 50 bps change in the 1-month Term SOFR curve would change the fair value of the fixed interest rate swaps up to $7 million.
Biggest changeAs of February 2, 2024, the fair value of our fixed interest rate swaps was $15 million (asset). Under the swap agreements, we pay a fixed rate and the counterparties to the agreements pay a floating interest rate based on 1-month Term SOFR.
Approximately 56% of our revenues for fiscal 2023 were derived from cost-reimbursement type contracts, which have limited inflation risk because our contracts generally entail the provision of labor on a reimbursable basis, and, when materials are acquired, they provide for billing to the customer during the period in which the materials were received.
Approximately 61% of our revenues for fiscal 2024 were derived from cost-reimbursement type contracts, which have limited inflation risk because our contracts generally entail the provision of labor on a reimbursable basis, and, when materials are acquired, they provide for billing to the customer during the period in which the materials were received.
Our financial risk management objective is to reduce variability in earnings from changes in interest rates, which we may manage through operational means or the use of financial instruments, such as interest rate swaps. We have approximately $2.0 billion of variable rate debt. The fair value of our outstanding long-term debt obligations approximates its carrying value.
Our financial risk management objective is to reduce the negative impact to earnings from changes in interest rates, which we may manage through operational means or the use of financial instruments, such as interest rate swaps. We have approximately $1.7 billion of variable rate debt. The fair value of our outstanding long-term debt obligations approximates its carrying value.
Since the substantial majority of our business is conducted in U.S. dollars, a 10% change in any foreign currency exchange rates would not have a material impact to our financial condition or results of operations. 33 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Interest Rate Risk Debt obligations.
Since the substantial majority of our business is conducted in U.S. dollars, a 10% change in any foreign currency exchange rates would not have a material impact to our financial condition or results of operations. Interest Rate Risk Debt obligations.
Inflation Risk For each of the most recent three fiscal years ended February 3, 2023, inflation has not had a significant impact on revenues or costs.
Inflation Risk For each of the most recent three fiscal years ended February 2, 2024, inflation has not had a significant impact on our revenues or costs.
We regularly evaluate our outstanding debt and swap agreements to meet our risk management objective. A hypothetical 50 basis points (bps) change to interest rates would not materially change our results of operations or cash flows.
We regularly evaluate our outstanding debt and swap agreements to meet our risk management objective. A hypothetical 50 basis points ("bps") change to interest rates would have a net impact of $5 million on our results of operations or cash flows.
For additional information related to calculating the fair value of our interest rate swaps, see Note 12 to the consolidated financial statements included in this report. Cash equivalents.
We do not hold or issue derivative financial instruments for trading or speculative purposes. For additional information related to calculating the fair value of our interest rate swaps, see Note 13—Derivative Instruments Designated as Cash Flow Hedges to the consolidated financial statements included in this report. Cash equivalents.
Since the interest rate swaps are accounted for as cash flow hedges, the change in fair value is reported as a component of equity (accumulated other comprehensive income or loss). We do not hold or issue derivative financial instruments for trading or speculative purposes.
A hypothetical 50 bps change in the 1-month Term SOFR curve would change the fair value of the fixed interest rate swaps up to $5 million. Since the interest rate swaps are accounted for as cash flow hedges, the change in fair value is reported as a component of equity (accumulated other comprehensive income or loss).
For additional information related to our debt and interest rate swap agreements, see Note 11 and Note 12, respectively, to the consolidated financial statements contained in this report. Derivatives. As of February 3, 2023, the fair value of our fixed interest rate swaps was $25 million (asset).
For additional information related to our debt and interest rate swap agreements, see Note 12—Debt Obligations and Note 13—Derivative Instruments Designated as Cash Flow Hedges, respectively, to the consolidated financial statements contained in this report. 36 Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION Derivatives.

Other SAIC 10-K year-over-year comparisons