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In its second year on the Fortune 500, the governmental services and information technology support company is up 54 places from last year's list. In May, SAIC was awarded a $200 million contract with the Defense Intelligence Agency.

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Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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SAIC is one of the largest tech contractors for the U.S. government. Its work crosses military and civilian agencies, from digital services to advanced technologies in space or deep in the ocean. Sixty-three percent of its 24,000 employees have some level of security clearance.

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Science Applications International (SAIC): Company Profile, Stock Price, News, Rankings

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Science Applications International

science applications international

Good day and thank you for standing by. Welcome to the SAIC FY twenty twenty five Q4 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Joe DeNardi, Senior Vice President, Investor Relations and Treasurer. Please go ahead.

Good morning, and thank you for joining SAIC's fourth quarter fiscal year twenty twenty five earnings call. My name is Joe DeNardi, Senior Vice President of Investor Relations and Treasurer. And joining me today to discuss our business and financial results are Tony Townes Whitley, our Chief Executive Officer and Prabhu Natarajan, our Chief Financial Officer. Today, we will discuss our results for the fourth quarter of fiscal year twenty twenty five that ended 01/31/2025. Please note that we may make forward looking statements on today's call that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from statements made on this call.

I refer you to our SEC filings for a discussion of these risks, including the Risk Factors section of our annual report on Form 10 K. In addition, the statements represent our views as of today, and subsequent events may cause our views to change. We may elect to update the forward looking statements at some point in the future, but we specifically disclaim any obligation to do so. It is now my pleasure to introduce our CEO, Toni Townes Whitley.

Thank you, Joe, and good morning to everyone on our call. I want to start with a heartfelt thank you to my colleagues at SAIC for their focus, dedication and empathy amidst a dynamic operating environment for the company and our customers. The strong financial results we delivered to close the year reflect our commitment to driving improved mission outcomes for our customers. I'll now provide an update on current market conditions and our perspective on the risks and opportunities from the administration's focus on accelerating the deployment of technology to drive greater efficiency across the government. To date, the financial impact to SAIC from recent executive orders and program cancellations across the government has been nominal and our conversations with the administration to date have been productive.

However, given how dynamic the environment has been, we believe it prudent to be prepared should conditions change. Prabhu will discuss in greater detail in his remarks some of the actions we have taken to date. While our base case does not assume a meaningful change in the size of our addressable market in the coming years, we do expect changes to the procurement environment that will place a greater emphasis on mission criticality and the infusion of cutting edge technology as well as outcome based contracting. We view this as an acceleration, perhaps a rapid acceleration of prior trends and one that our strategy and investments are designed to address. On Slide four of our earnings presentation, we have shared several examples of programs which demonstrate our ability to build and integrate technology at the speed of the mission.

I would like to call out a few of those examples today. For Customs and Border Protection, on the TASPD program, we've rolled out facial and touchless fingerprint technology to over 5,000 ICE agents fully integrated with our cloud, machine learning and AI capabilities to rapidly identify shipments and travelers more efficiently and accurately for additional inspection. We have redesigned the license plate recognition system to a flexible open architecture system, which has relieved the agency from legacy vendor lock and has made 700 of these deployed systems configurable to weather conditions across more than 100 of the busiest land border crossings and U. S. Border checkpoints nationwide.

For the Space Force, on our GMAS program, we have leveraged our digital engineering and on demand software development solutions to sustain and upgrade various radar systems in The United States and around the world at rates quicker and cheaper than the legacy providers. Our performance has contributed to GMAS ramping to full run rate revenue faster than we had originally anticipated. In our commercial operating sector, we have a menu of offerings that customers can purchase on commercial terms. Revenue from our commercial operating sector has increased from less than $1,000,000 in fiscal year 'twenty two to approximately $45,000,000 in fiscal year 'twenty five and a goal of approximately $100,000,000 by fiscal year 'twenty eight with healthy margins consistent with commercial terms. Our top selling offering is our DevSecOps Sprints, which provide a skilled team of software developers ready to deploy, rapidly fix and leave when the project is complete, typically in two week increments, making them cost efficient and agile, effectively sprints as a service.

What makes our teams uniquely positioned to deliver this value is our role as a mission integrator with intimate and irreplaceable knowledge of customer missions. In other words, gritty tech, which underpins our legacy and undergirds our future. Lastly, we are currently assessing our cost plus portfolio to determine with some specificity and appropriate guardrails, how much of this work could transition to fixed type contracting over time. As we have shared, we have performed quite well within our fixed price portfolio over the years, beginning with our acquisition of Unisys Federal in fiscal year 'twenty one. Our initial view is that a significant portion could migrate to fixed price over time, assuming that the scope of work is well defined and opportunities for cost plus carve outs still exist.

This is an opportunity for our industry and the right thing to do for our customers. I'll now provide an update on our enterprise growth strategy and business development trends. We delivered net bookings in the fourth quarter of $1,300,000,000 and $6,600,000,000 in fiscal year 'twenty five for a book to bill of 0.9. Not included in fourth quarter bookings since it was awarded subsequent to quarter close, SAIC won the $1,800,000,000 System Software Lifecycle Engineering contract, which is the next iteration of the Software Lifecycle Development Program, one of SAIC's largest programs by revenue. I am proud of our team in Huntsville for their efforts in securing this important program and for the continuation of our long term partnership with the Army.

As we show on Slide five, we submitted bids totaling $28,000,000,000 in fiscal year twenty twenty five, well ahead of our initial plan of $22,000,000,000 Our backlog of submitted bids increased to just over $20,000,000,000 at year end on a trailing twelve month basis, over half of which is currently expected to award over the next two to three quarters. Our win on SSLE and our strong backlog of submitted bids provide visibility into driving our book to bill to our target of 1.2 by the first half of FY twenty twenty six. Of course, subject to the caveat that timing may be impacted by the ongoing uncertainty facing our customers. While there have been some recent examples of procurement timelines being extended, it has not been broad based. In addition, it is important to remember that procurement delays, while generally a headwind to bookings, also prolong recompete schedules such that the net effect to revenue and earnings will be far less material.

I will now provide a review of our fourth quarter and full year financial results. We reported fourth quarter revenue of $1,840,000,000 an increase of 6% year over year, driven mainly by new program wins and on contract growth, which offset program completions. Full year fiscal year 2025 revenue of $7,480,000,000 represented 3.1% organic growth, which is at the high end of the guidance we provided at the start of the year. Fourth quarter adjusted EBITDA of 177,000,000 resulted in a margin of 9.6%. For the full year, adjusted EBITDA of $710,000,000 produced a margin of 9.5%, which was 20 basis points ahead of guidance due primarily to strong program performance and lower incentive compensation expense compared to the prior year.

Adjusted diluted earnings per share was $2.57 for the fourth quarter and $9.13 for the full year, benefiting from the strong operating performance and a lower effective tax rate. We delivered free cash flow of $236,000,000 in the fourth quarter and $5.00 $7,000,000 for the year, resulting in free cash flow per share of just over $10 As Prabhu will discuss, we expect to achieve our target for free cash flow per share of $11 in fiscal year 'twenty six and $12 in fiscal year 'twenty seven and believe we can accomplish this in various revenue scenarios. Again, I want to thank everyone at SAIC for the dedication they've shown to the company, one another and our customers. With that, I will turn the call over to Prabhu.

Thank you, Tony, and good morning to everyone joining our call. I will focus my remarks today on our financial guidance for FY '20 '20 '6 and an update on our capital deployment plans. We are guiding revenues to a range of 7,600,000,000 to $7,750,000,000 representing approximately 3% organic growth at the midpoint. As we detail on Slide eight, we expect growth to accelerate from 1% to 3% in the first half to 2% to 4% in the second half. This cadence is driven primarily by the timing of recompete headwinds, which are more pronounced in the first quarter and ease through the year.

Our guidance assumes a roughly two point headwind from recompete losses, primarily related to a NASA program that exited our business in October. In addition, we expect a roughly $200,000,000 headwind related to low margin Air Force CloudOne compute and store revenue, which we chose to no bid that will be spread evenly through the year. We expect these headwinds to be offset by a fairly even contribution from the continued ramp up on previously won new business, including T cloud, DTAM, CBC2 and on contract growth across a number of programs. While our guidance assumes no material disruptions resulting from the government's ongoing efficiency initiatives, we are preparing to respond with actions aimed at producing similar EBITDA and free cash flow if we see incremental revenue pressures. For EBITDA margin, we are guiding to a range of 9.4% to 9.6%, an increase of 10 basis points, driven by strong program performance, efficiencies from internal process improvements and incremental scrutiny on investments given the uncertain revenue environment.

As shown on Slide 10, we expect this trend to continue into FY 2027 with margins improving an additional 10 basis points to a range of 9.5% to 9.7%. We are guiding adjusted diluted earnings per share to a range of 9.1 to $9.3 largely due to increased earnings and a lower share count offset by a higher effective tax rate of 23%. Free cash flow of $510,000,000 to $530,000,000 should translate into approximately $11 per share and continue to have good visibility to $12 per share in FY 2027. We expect to repurchase between $350,000,000 to $400,000,000 in FY 2026 and 2027, while maintaining sufficient capacity for capability focused M and A or additional share repurchases. This is unchanged from our prior framework.

We are further refining our incentive compensation plans to ensure alignment with our investors. For FY 2026, plans for all eligible employees will be based on enterprise wide performance versus the prior plan, which blended enterprise and business group performance. As we focus on our strategy to more efficiently allocate capital across the company and operate as one SAIC, we believe aligning behind a single scorecard will enhance that push. Finally, as you will see in their upcoming SEC filings, several members of the executive leadership team have indicated an intent to make a discretionary purchase of SAIC shares in the near future to further align our team's interests with those of our shareholders. I'll now turn the call over to begin Q and A.

Thank Our first question is going to come from the line of Colin Canfield with Cantor Fitzgerald. Your line is open. Please go ahead.

Just making sure we understand the $1,800,000,000 recompete. Can you talk us through how that impacts book to bill for the future quarter?

Thanks. Good morning, Hal, and thank you for the question. And again, let me just reiterate how pleased I am with the Q4 results and having this award as well as a pending award backlog that we have shared through our results. On SSLE, on this particular win, from a trailing twelve month perspective, it would this win would get us close to the one point zero trailing twelve month. You heard us report at 0.9 prior at the quarter or year end close.

So that would be the impact on the trailing twelve month. Obviously, we see this as an important continuation of our relationship with the Army Aviation and Missile Command and quite frankly, not only the wind, but also the ongoing work that we expect on this contract, we think sets us up fairly well for this part of the business.

Got it. And then maybe talking about the incremental submit increase, so going from '22 to '26 or '28, excuse me, can you just talk a little bit about what was in that incremental $6,000,000,000 of submits? And where do you feel that FDIC has a right to win on those incremental wins or incremental submits? Excuse me.

If we're talking about the increase from 22% to 28%, look, we think there's a combination of reasons for that to include the efficiency of having standardized our business development function using an enterprise operating model to drive that. And we talk about in terms of not only bid more the quantity, but also bid better, the nature of those bids being on strategy and quite frankly, marginally accretive to prior bids. When we look at that pending plan right now, about two thirds of that pipeline that we are waiting to have awarded and adjudicated is in the Mission and Enterprise IT arena. About two thirds of that is new business, a third is recompete. So we feel balanced in both the new business recompete component as well as that this is the strategic area that we put in place in our 2024 growth strategy and that majority, again over two thirds of our pipeline are in these strategic areas of our portfolio.

And then maybe Hey, Colin, the only thing I would add to that would be that the margins that are implied in the submissions are also higher than current company wide margins. So therefore, that's the other side of this that we're pleased to see that we're continuing to move core margins up in the business.

Got it. Got it. Yes, definitely understood that algorithm. Maybe just last one for me before I get back in the queue. Focusing on so if I think about this, the spin pipe, can you just maybe talk a little bit about the nature of the budget dollars in this spin pipe and whether it's tied more to FY 2025 or FY 2026 budget?

The nature of the budget dollars in the submit pipeline, meaning for the submissions for this year. Look, we're

We've got as we look at this year, the way we understand the CR that's in place for the year, we believe that there's some flexibility in that CR that we have not seen in previous continuing resolutions. So when we think about the ability to have new starts, the ability to have flex across the particularly Department of Defense and intel sectors, we feel strongly that our current pipeline as submitted is competitive, it can be funded in this environment and is sufficient quite frankly to drive to the 1.2 book to bill that we have been putting forward as our first half exit in book to bill. So right now, we feel pretty strong about that. Obviously, we're monitoring on a daily basis. The CR information came in last week.

We're staying on this on a every twenty four hour run here, but and we'll update if any conditions fundamentally change, but right now we feel fairly solid.

Thank you. And one moment for our next question. Our next question is going to come from the line of Jason Gursky with Citi. Your line is open. Please go ahead.

Hey, good morning, Tony and everybody else. Tony, quick question for you. You emphasized a bit the potential for some mix shift ahead of you from cost plus to firm fixed price.

curious how that will work mechanically for you all as you've done that analysis. Is there the potential that we see higher margins, but lower revenue? Is that one of the things that you've kind of discovered as you've gone through that analysis?

Look, we're thanks, first of all, for the question, Jason. We've been doing that analysis for a number of quarters, quite frankly. We have looked at opportunities to move our cost plus contracts into more of a fixed price environment. We see the upside as well as we understand the additional risk. What it requires for us, we probably spend more time making sure that we have the frame for what we call service level agreements, very clear agreements with the government of what success looks like measurable.

We've seen in our civilian business, which you see a good portion of fixed price work in our civilian business that we've been able to not only compete and win that business, but also deliver it at higher margins and continue to be competitive in that space. So we feel like we have a lot that we can, if you will, transfer from that civilian business into other parts of our organization and other business groups for fixed price. And right now, I don't know if we have the assumption that revenue would necessarily decline. I think more we probably see it more as a margin improvement opportunity with the appropriate execution, with the appropriate guardrails as it relates to service level agreements with the customer. Not yet a revenue impact that we see to date, probably any thoughts you might have there?

Hey, Jason, the only thing I would add to that would be the transition from cost to fixed price will depend on the customer and the current contract vehicles. If we assume that invasive changes occur in the procurement environment, you're going to likely see that transition happen sooner than one might reasonably expect. On the other hand, by and large, we expect that transition to happen as things come up for renewal, as we introduce more fixed price work inside of existing cost plus work. So I think I suspect it's going to be more gradual. And to the extent that it happens a little bit sooner, in theory, what that would imply is that you will have less cost as a contractor and higher margin percentages and therefore arguably perhaps an impact, but the reality is I think we expect the transition itself to be gradual and we'll be working with our customers to to facilitate that transition whenever we think that is in our best interest and the customer's best interest.

So it's an ongoing process, so stay tuned.

Right. Okay. That's helpful. I appreciate that. And then my follow-up question just has to do with risks and opportunities around what we've all been reading in the headlines at DoD, where they've got, I think the list is something like 17 protected capability sets and then they're asking the rest of the building to go find some percentage.

I think the headline number has been 8% in cuts so that they can reallocate freed up money through those efficiencies to support those core 17 or so capabilities. So just kind of curious as you assess the portfolio and the things that you have in your pipeline in your bid submits, where the risks and opportunities are there for you? Those protected areas, where do you have exposure and where do you think you might have some risks on the areas that are asked being asked to incur

Thanks. Hey, Jason, thank you for the question and obviously a great one. I'll take the first crack at it. Let me just chime in here.

In terms of the protected capability sets, I think part of the message that we're communicating is that if the program is considered mission critical, then you're likely to see programs like that continue in an environment like this. And I think that's why instead of trying to figure out is there sort of a capability set match to the existing portfolio, just selecting the right targets, continuing to invest in capabilities that we believe are broadly needed across the customer landscape is the right way to do it. So we are focused on making sure that the programs we're bidding on and executing on are mission critical that we could do them effectively and execute well because we all know that in a constrained budget environment or where reallocation decisions get made that underperforming programs are likely to see the brunt of that. That is just history in this business, as you know, from decades here in the industry as well. So the reality is that's the focus right now.

And while we are investing in critical areas that are relevant to the 17 or so critical mission sets, I think our fundamental focus is, are we executing and delivering mission critical capabilities to the customer. Tony?

And I guess I'd just summarize that back to the data point that I gave initially. Over two thirds of our submit portfolio or pipeline for this year is in mission critical, mission IT and enterprise IT capabilities that are driving directly towards mission programs and or the IT infrastructure that is supporting the mission in substantively technical ways. And so this is where we tend to look at it in terms of the portion of our portfolio that we are bidding that is driving mission critical outcomes and that we believe will be durable. That funding will continue to be durable and that we're well positioned in that space.

Thank you. And one moment for our next question. Our next question is going to come from the line of Matt Akers with Wells Fargo. Your line is open. Please go ahead.

Hey, guys. Good morning. Thanks for the question. I wanted to ask about hey, good morning. One of the pushes from the government efficiency initiative is we've seen a lot of layoffs of sort of the federal workforce.

So just curious how you think about that. Is there a portion of your business that's maybe

the near term that maybe there are fewer people to support even if longer term potentially maybe there's an opportunity for you to pick up some of that work? Just kind of how you think about that dynamic for SAIC?

Yes. Hey, Matt, I think it's a fair question. Obviously, we're tracking all of the various initiatives coming out of DOSH and other parts of the administration that affect program by program, agency by agency. To date, we've not seen a it's been fairly nominal. We have not seen a significant impact.

I think we are also prepared and working with our customers directly as their personnel changes or the, let's say, potential cuts in their workforce. How do we support them on the ground with ongoing continuity of, if you will, business operation? I think many of us see that as both risk and opportunity, as you mentioned, where we may be the contractor staff that may be part of the ongoing continuity of those government operations, both mid term and long term. So we are very close to our customers right now and providing them all the support that they need and understanding what personnel cuts mean for them and for their particular missions. I would say there's no one unique area that we that has stood out as a specific.

You know what our footprint is in civilian and in our civilian agencies, particularly we are in mission critical cabinet agencies that have not had major cuts to date, but we are obviously tracking against that.

Matt, the only thing I'd add to that is, we continue to have productive discussions with our counterparts and focused on mission criticality and what agencies we're serving and to suggest that there is going to be no impact from any of this would likely be viewed as naive. And the reality is there are so many mixed signals we get every day from a variety of different sources that it's hard to react to every one of them. So just being able to zoom out a little and think about big picture underlying trends, I think it's probably the right posture for us. So I think that's why we're back to very much focused on what we do has to be mission critical to justify the investments we're making in the organization, as well as generating good ROI. Replicability of solutions across the landscape, that is a really important part of the investment thesis we have inside the company.

And our view is, if we do those two things effectively and make smart capital allocation decisions, we're going to ride this out as uncertain as these times are. So that's sort of how we think about it.

Yes, got it. Thanks. And I guess as a follow-up, for the 2% to 4% organic growth this year,

your backlog, I guess, is down year over year, we're operating under a CR. I guess, how much of that is already in backlog or how much maybe do we need maybe new work to come through to get to that 2% to 4% level?

Great question, Matt. I would say a very high percentage of that 2% to 4%, I would say probably north of 75% right now. I sort of round it up a little bit and say about three fourths in backlog. We are not relying on a ton of new business revenue in the year. I think our submit plan and our book to bill for the year suggests that we expect to have a good year on book to bill, but overall we're not expecting a ton of incremental revenue.

I think you're exactly right to be tempered in the question, which is in a CR environment, how much of a go get is there. And I think our operating plan for the year is very much an on contract growth operating plan with some higher targets this year relative to even our performance last year, which I thought was a pretty good on contract growth year. So I think that's the name of the game for the near term. And hopefully, we'll start to see some awards come here over the next couple of quarters and hopefully sets us up for the second half and into FY 2027, Tony.

No, I think that was I think probably that was it. That was spot on. And again, staying close to the customers, a very solid Q4 close on program execution in every dimension, continuing that into the year. And this on contract growth expectation has increased year over year in this environment. We obviously want to be in the right places that are being funded, that are deemed mission critical and quite frankly, bringing commercial solutions and using our commercial operating segment even more is our expectation this year to introduce more, if you will, technically

the art capability into these mission areas. And that's probably an area that's another lever that we've been able to exercise over the last couple of years. You'll see even more of that this year.

more, I guess seasonality, you talked about first half being a little bit slower. Is there seasonality like within Q1 versus Q2? Do we start out slower? And do you think kind of both quarters will still be positive growth? Or could we get to negative and then accelerate from there?

Yes. Fair question, Matt. I think with all of the health warnings that come with quarterly level guidance and I think we do our best try to estimate what these trends look like. And I think we're seeing a little more in the way of recompete headwinds in Q1 relative to Q2. And for example, C4ES, which is recompete that we lost in Q1 of last year will actually lap out at the end of Q1 of this year.

So in theory, that would suggest that Q2 ought to be better than Q1, but candidly with $18,000,000 being 1% to revenue in a quarter, the reality is that's easy to move the dial inside of a quarter and between quarters. So with the caveat that things are going to move around a little bit, I think it's fair to say fewer headwinds in Q2 than even Q1.

Yes, right. But growth in both I mean the idea of H1 over H2 or H2, if you will, over H1 in terms of higher growth, we do anticipate growing throughout the year and combination of how we grow as Prabhu has mentioned, as well as we do see some movement to the right on recompete across the government. And so we're looking at and understanding what that may mean for our year as well as we push out some recompete risk towards the end

Thank you. One moment as we move on to the next question. Our next question is going to come from the line of Gavin Parsons with UBS. Your line is open. Please go ahead.

It sounds like there is still a lot of uncertainty and probably you mentioned the mix signals and appreciate you guys are being very proactive. Anything specific that gave you confidence to raise the low end of the '26 guidance in light of that?

I would say here's maybe how we think about this, Gavin. I think the signals are very mixed. And then we look at what do we actually know as we go into the Sprint. And as Tony, I think absolutely correctly summarized it, the impacts have been nominal. And then you look back to say, how do we end the year?

And I think we forget that we grew about a little over 4% in Q3, close to 6% in Q4. And candidly, we've grown above 5%, probably 50% of the last eight quarters. And so I think the actual organic growth thesis is intact and our teams are doing a good job, scouring and figuring out how to grow this business organically, absent new large recompete wins. And that OCG machine is working effectively. And that doesn't mean any of this guidance is a gimme.

It just means that we are betting on ourselves a little bit to say, can we keep the momentum up? And I think we're keen on delivering solid OCG. And if something changes, you know our reputation, we'll be the first to come out and say we're seeing some headwinds, but we're not seeing those just yet.

transparency. Does it feel like visibility is improving or day by day that things are getting increasingly less certain?

Gavin, that's a great question right there. And look, I think we obviously we are tracking this on a daily basis, but we are I think whenever messages get compounded or reinforced, you start to feel a little bit better directionally. Obviously having the CR in place for the year set some expectation. It does actually offset some of the volatility by acknowledging that we have a CR in place and a CR that has flexibility more than what we've seen in prior years. So that I would say is a net positive in terms of just stabilizing our environment and helping us make good decisions going forward.

I think the other there's education going on. And I think as we engage both with GSA and other parts of the government, we've been able to clarify the work that we do, explain where SAIC fits in this ecosystem, explain the mission criticality of our work, as well as some of the technical work that we do to support at an enterprise IT level. And I think with greater explanation, it'll start to, if you will, bring down some of the more knee jerk reactions that all of us have had over the last few weeks. And so I actually feel like it's moving towards a little more stability, not to say there won't be new initiatives that are introduced, but we are seeing at least some coalescing around clarity on the CR, clarity on flexibility within the CR, clarity on who SAIC is, engaging with the new administration. And as they learn more about who we are, I think it's going to become very, very clear on the mission role we play.

Thank you. One moment for the next question. Our next question comes from the line of Seth Seifman with JPMorgan. Your line is open. Please go ahead.

Hi, good morning. This is Raul on for Seth.

The prior goal was to increase the share of civil work. However, with the spraying priorities of this administration, does the strategy still make sense or will SAIC shift the focus more towards defense and intelligence work?

When you I'm sorry, could you repeat the first part of your question? I heard the last part, excuse me, Rob.

Yes, sorry. With the prior kind of focus being on increasing the share of civil work, but with this administration kind of focus on cutting the civil budget and moving more towards defense, is SAIC strategy kind of shifting with that administration?

We haven't made a shift in strategy to date. I mean, our civilian work is just around 20% of our overall portfolio. We have done well at Civilian, as you can see, is a reportable segment, had a very, very solid year this last year. If you look at the footprint of where we are within Civilian, we're in mission critical spaces around five to six key cabinet agencies that are continually going to be funded, we believe, and particularly in the mission areas where we find ourselves. So it isn't I'm not going to say that we are bullish.

I would say, of course, we're watching the market to see if there are any fundamental changes. But right now, our strategy was a strategy that focused on a portfolio shift to enterprise and mission IT across our portfolio, which we are accomplishing as we look at our pipeline moving to two thirds more than two thirds in those areas. And as civilian was a growth sector, where we are in civilian, we have been growing and we expect to continue to grow. If we see a fundamental shift, obviously, we will pause and reevaluate. But right now, we feel like given where we're positioned, we'll hold with the strategy that we put in place.

Right. Then building on it, how should we think about the segment growth between Civil and Defense this year moving forward?

Relative, you mean Civil versus our other business groups? Look, I mean, Civil had a phenomenal year this year, I think I'm sorry?

We're in agreement, great. Civil had a great year and they are part of our overall expectation to continue to grow, particularly in the on contract growth arena. They also have a pretty significant part of our pending award pipeline as well or backlog as well. I think that when we look at it, we do expect that the growth rates relative to the market will be higher in defense and intel than civilian on the growth side in terms not our growth rates, but the market and how spending will occur. But for Civil, there's always the conversation about how we grow on contract, how we have a significant pipeline there and how we are positioned in mission critical areas.

So my expectation is not a fundamental mix shift between civilian and defense in terms of our expectations of growth. Prabhu, any thoughts you have?

Yes, the only thing I would add is, as you know, we do not provide guidance at the segment level. And I think it's fair to say that we see good prospects for growth in both of our reportable segments. Three, the recompete headwinds and the decision to walk away from the low margin computing store is actually in our defense business, specifically Air Force and Space and Air Force respectively. So I think if you sort of nominally adjusted for those headwinds, I would say both segments are going to grow. The reality is, I think we do have some known headwinds in Defense and Intel and that's likely going to impact the relative growth rates, which obviously we'll report as we cycle through the year.

But as you know, we do not provide specific guidance on the segments themselves.

Science Applications International (SAIC) Q4 2025 Earnings Call Transcript

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