25 unchanged sentences
Economic Opportunities, Challenges, and Risks
−Removed: During the three and six months ended July 29, 2022, we generated approximately 98% of our revenues from contracts with the U.S.
+Added: During the three and nine months ended October 28, 2022, we generated approximately 98% of our revenues from contracts with the U.S.
government, including subcontracts on which we perform.
1 unchanged sentence
government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S.
−Removed: Appropriations measures passed in March 2022 provided full funding for the federal government through the end of government fiscal year 2022.
+Added: Appropriations measures passed in March 2022 provided full funding for the federal government through the end of government fiscal year (GFY) 2022.
+Added: government is currently operating under a Continuing Resolution for GFY 2023.
In October 2021, the Federal debt ceiling was increased by $480 billion and in December 2021 was further increased by $2.5 trillion which is expected to allow the U.S.
3 unchanged sentences
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.
−Removed: 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.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
+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.
government has increasingly relied on contracts that are subject to a competitive bidding process (including indefinite delivery, indefinite quantity (IDIQ), U.S.
General Services Administration (GSA) schedules, and other multi-award contracts), which has resulted in greater competition and increased pricing pressure.
+Added: Additionally, the U.S.
+Added: government has put renewed emphasis on increasing the number of small business prime set-aside contracts that further reduce the addressable market in some areas.
Despite the budget and competitive pressures affecting the industry, we believe we are well-positioned to protect and expand existing customer relationships and benefit from opportunities that we have not previously pursued.
14 unchanged sentences
The first installment of these deferred payroll taxes was paid during the third quarter of fiscal 2022 (approximately $51 million) with the remaining amounts due in the fourth quarter of fiscal 2023.
−Removed: In September 2021, the President issued an executive order which requires all federal employees and contractors to be fully vaccinated by January 18, 2022, unless an employee is legally entitled to an accommodation.
−Removed: In December 2021, a federal district judge issued an order, which temporarily enjoined the federal contractor vaccine mandate.
−Removed: We had taken steps to comply with the vaccine mandate across our workforce until it was enjoined.
−Removed: We are continuing to monitor the impact that the enforcement of this executive order will have on our workforce and operations, but at this point the impact has not been material.
We have not experienced a significant impact to our liquidity or access to capital as a result of the COVID-19 pandemic.
−Removed: While we continue to navigate the impacts of the COVID-19 pandemic, COVID-19 did not have a material impact to revenues and operating income for the three and six months ended July 29, 2022.
+Added: While we continue to navigate the impacts of the COVID-19 pandemic, COVID-19 did not have a material impact to revenues and operating income for the three and nine months ended October 28, 2022.
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.
9 unchanged sentences
We also analyze our cost mix (labor, subcontractor or materials) in order to understand operating margin because programs with a higher proportion of SAIC labor are generally more profitable.
−Removed: Changes in costs of revenues as a percentage of revenue other than from revenue volume or cost mix are normally driven by fluctuations in shared or corporate costs, or cumulative revenue adjustments due to changes in estimates.
+Added: Changes in cost of revenues as a percentage of revenues other than from revenue volume or cost mix are normally driven by fluctuations in shared or corporate costs, or cumulative revenue adjustments due to changes in estimates.
Changes in operating cash flows are described with regard to changes in cash generated through the delivery of services, significant drivers of fluctuations in assets or liabilities and the impacts of changes in timing of cash receipts or disbursements.
2 unchanged sentences
The following table summarizes our results of operations:
−Removed: Three Months Ended Six Months Ended
−Removed: change July 30,
−Removed: 2021 July 29,
−Removed: change July 30,
+Added: Three Months Ended Nine Months Ended
+Added: change October 29,
+Added: 2021 October 28,
+Added: change October 29,
(dollars in millions)
10 unchanged sentences
Net cash provided by operating activities $ 128 (4 %) $ 134 $ 387 (7 %) $ 415
−Removed: Revenues decreased $5 million for the three months ended July 29, 2022 as compared to the same period in the prior year primarily due to contract completions, one fewer working day compared to the prior year period, lower net favorable changes in contract estimates, and higher accelerated amortization on certain off-market liability contracts during the prior year period, partially offset by ramp up on new and existing contracts and the acquisition of Halfaker (approximately $30 million).
−Removed: Adjusting for the impact of acquired and divested revenues, revenues contracted 1.8%.
−Removed: Revenues increased $113 million for the six months ended July 29, 2022 as compared to the same period in the prior year due to ramp up on new and existing contracts and the acquisition of Halfaker (approximately $72 million), partially offset by contract completions, lower net favorable changes in contract estimates, and higher accelerated amortization on certain off-market liability contracts during the prior year period.
−Removed: Adjusting for the impact of acquired and divested revenues, revenues grew 1.1%.
+Added: Revenues increased $11 million for the three months ended October 28, 2022 as compared to the same period in the prior year primarily due to ramp up on new and existing contracts, partially offset by contract completions and lower accelerated amortization on certain off-market liability contracts.
+Added: Revenues increased $124 million for the nine months ended October 28, 2022 as compared to the same period in the prior year due to ramp up on new and existing contracts and the acquisition of Halfaker (approximately $72 million), partially offset by contract completions, one fewer working day compared to the prior year period, lower net favorable changes in contract estimates, and lower accelerated amortization on certain off-market liability contracts.
+Added: Adjusting for the impact of acquired and divested revenues, revenues grew approximately 1%.
Cost of Revenues.
−Removed: Cost of revenues increased $8 million for the three months ended July 29, 2022 as compared to the same period in the prior year primarily due to ramp up on new and existing contracts, the acquisition of Halfaker, and higher indirect costs.
−Removed: Cost of revenues increased $117 million for the six months ended July 29, 2022 as compared to the same period in the prior year primarily due to ramp up on new and existing contracts and the acquisition of Halfaker.
−Removed: SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
+Added: Cost of revenues increased $3 million for the three months ended October 28, 2022 as compared to the same period in the prior year primarily due to ramp up on new and existing contracts.
+Added: Cost of revenues increased $120 million for the nine months ended October 28, 2022 as compared to the same period in the prior year primarily due to ramp up on new and existing contracts and the acquisition of Halfaker.
Selling, General and Administrative Expenses.
−Removed: SG&A increased $8 million for the three months ended July 29, 2022 as compared to the same period in the prior year primarily due to higher indirect expenses and intangible asset amortization related to the acquisition of Halfaker.
−Removed: SG&A increased $20 million for the six months ended July 29, 2022 as compared to the same period in the prior year primarily due to higher indirect expenses and the acquisition of Halfaker including the related intangible asset amortization.
+Added: SG&A remained consistent for the three months ended October 28, 2022 as compared with the same period in the prior year.
+Added: SG&A increased $20 million for the nine months ended October 28, 2022 as compared to the same period in the prior year primarily due to higher indirect expenses and the acquisition of Halfaker.
+Added: SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
Operating Income.
−Removed: Operating income as a percentage of revenues for the three months ended July 29, 2022 decreased from the comparable prior year period primarily due to lower net favorable changes in contract estimates, higher accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period, partially offset by lower acquisition and integration costs and higher benefit from net favorable settlement of prior indirect rate years in the current year period.
−Removed: Operating income as a percentage of revenues decreased for the six months ended July 29, 2022 from the comparable prior year period primarily due to lower net favorable changes in contract estimates, higher accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period, partially offset by lower acquisition and integration costs.
+Added: Operating income as a percentage of revenues for the three months ended October 28, 2022 increased from the comparable prior year period primarily due to lower acquisition and integration costs and indirect costs, partially offset by lower accelerated amortization on certain off-market liability contracts.
+Added: Operating income as a percentage of revenues remained consistent for the nine months ended October 28, 2022 as compared with the same period in the prior year.
+Added: Lower net favorable changes in contract estimates and accelerated amortization on certain off-market liability contracts were offset by lower acquisition and integration costs.
Net Cash Provided by Operating Activities.
−Removed: Net cash provided by operating activities was $259 million for the six months ended July 29, 2022, a decrease of $22 million compared to the prior year, primarily due to timing of customer collections, cash payments during the year associated with certain change in control provisions related to the acquisition of Halfaker, and lower net earnings, partially offset by higher cash provided by the MARPA Facility.
+Added: Net cash provided by operating activities was $387 million for the nine months ended October 28, 2022, a decrease of $28 million compared to the prior year, primarily due to the timing of customer collections and other changes in working capital, cash payments during the year associated with certain change in control provisions related to the acquisition of Halfaker, and lower net earnings, partially offset by the first installment of the deferred payroll taxes allowed under the CARES Act paid in the prior year and higher cash provided by the MARPA Facility.
Non-GAAP Measures
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EBITDA and adjusted EBITDA for the periods presented were calculated as follows:
−Removed: Three Months Ended Six Months Ended
−Removed: 2022 July 30,
−Removed: 2021 July 29,
−Removed: 2022 July 30,
+Added: Three Months Ended Nine Months Ended
+Added: 2022 October 29,
+Added: 2021 October 28,
+Added: 2022 October 29,
(in millions)
1 unchanged sentence
Interest expense and loss on sale of receivables 32 27 91 81
+Added: Interest income (1) — (1) —
Provision for income taxes 20 17 62 66
3 unchanged sentences
Acquisition and integration costs 1 12 11 36
−Removed: Restructuring costs 2 — 2 —
−Removed: Depreciation included in acquisition and integration costs — — — (1)
−Removed: Recovery of acquisition and integration costs and restructuring costs (1)
+Added: Restructuring and impairment costs 5 1 7 1
+Added: Depreciation included in acquisition and integration costs and restructuring and impairment costs
+Added: (1) — (1) (1)
+Added: Recovery of acquisition and integration costs and restructuring and impairment costs (1)
+Added: (3) (1) (6) (1)
Adjusted EBITDA $ 170 $ 171 $ 509 $ 540
Adjusted EBITDA as a percentage of revenues 8.9 % 9.0 % 8.9 % 9.6 %
−Removed: (1) Adjustment reflects the portion of acquisition and integration costs and restructuring costs recovered through the Company's indirect rates in accordance with Cost Accounting Standards.
−Removed: Adjusted EBITDA as a percentage of revenues for the three months ended July 29, 2022 decreased to 9.1% from 10.1% for the same period in the prior year primarily due to lower net favorable changes in contract estimates, higher revenue resulting from accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period, partially offset by higher benefit from net favorable settlement of prior indirect rate years in the current year period.
−Removed: Adjusted EBITDA as a percentage of revenues for the six months ended July 29, 2022 decreased to 8.9% from 9.9% for the same period in the prior year primarily due to lower net favorable changes in contract estimates, higher revenue resulting from accelerated amortization on certain off-market liability contracts during the prior year period, and higher indirect costs in the current year period.
+Added: (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.
+Added: government Cost Accounting Standards.
+Added: Adjusted EBITDA as a percentage of revenues for the three months ended October 28, 2022 decreased to 8.9% from 9.0% for the same period in the prior year primarily due to lower revenue resulting from accelerated amortization on certain off-market liability contracts and net unfavorable changes in contract estimates, partially offset by lower indirect costs.
+Added: Adjusted EBITDA as a percentage of revenues for the nine months ended October 28, 2022 decreased to 8.9% from 9.6% for the same period in the prior year primarily due to lower net favorable changes in contract estimates and lower revenue resulting from accelerated amortization on certain off-market liability contracts.
Other Key Performance Measures
29 unchanged sentences
Total backlog $ 24,432 $ 24,092
−Removed: We had net bookings worth an estimated $2.1 billion and $4.1 billion during the three and six months ended July 29, 2022.
−Removed: Total backlog at the end of the second quarter is consistent with our total backlog at prior year end.
+Added: We had net bookings worth an estimated $2.0 billion and $6.1 billion during the three and nine months ended October 28, 2022.
+Added: Total backlog at the end of the third quarter is consistent with our total backlog at prior year end.
SCIENCE APPLICATIONS INTERNATIONAL CORPORATION
3 unchanged sentences
The following table summarizes revenues by contract type as a percentage of revenues for the periods presented:
−Removed: Six Months Ended
−Removed: 2022 July 30,
+Added: Nine Months Ended
+Added: 2022 October 29,
Cost reimbursement 56 % 54 %
7 unchanged sentences
The following table presents cost mix for the periods presented:
−Removed: Three Months Ended Six Months Ended
−Removed: 2022 July 30,
−Removed: 2021 July 29,
−Removed: 2022 July 30,
+Added: Three Months Ended Nine Months Ended
+Added: 2022 October 29,
+Added: 2021 October 28,
+Added: 2022 October 29,
(as a % of total cost of revenues)
4 unchanged sentences
Total 100 % 100 % 100 % 100 %
−Removed: Cost of revenues mix for the three and six months ended July 29, 2022 were consistent with the same period in the prior year.
+Added: Cost of revenues mix for the three and nine months ended October 28, 2022 were consistent with the same periods in the prior year.
Liquidity and Capital Resources
12 unchanged sentences
See Note 7 to the condensed and consolidated financial statements contained within this report for additional information.
−Removed: Beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the capitalization of research and development costs for tax purposes, which can then be amortized over five years.
−Removed: Congress may defer, modify, or repeal this provision.
−Removed: However, if the current effective date and current legislation remain in place, the Company's initial assessment is that our cash flows from operations in fiscal 2023 will decrease by a minimum of $90 million, but our net deferred tax assets will increase by a similar amount.
+Added: Beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 requires the capitalization of research and development costs for tax purposes and requires taxpayers to amortize such expenditures over five years.
+Added: Congress may defer, modify, or repeal this provision, however, if the current effective date and current legislation remain in place, the Company's initial assessment is that cash flows from operations in fiscal 2023 will decrease by a minimum of $90 million, but net deferred tax assets will increase by a similar amount.
The cash flow impact would continue over the five-year amortization period, but would decrease over the period and be immaterial in year six.
1 unchanged sentence
The following table summarizes our cash flows:
−Removed: Six Months Ended
−Removed: 2022 July 30,
+Added: Nine Months Ended
+Added: 2022 October 29,
(in millions)
4 unchanged sentences
Net Cash Provided by Operating Activities.
−Removed: Refer to “Results of Operations” above for a discussion of the changes in cash provided by operating activities between the six months ended July 29, 2022 and the comparable prior year period.
+Added: Refer to “Results of Operations” above for a discussion of the changes in cash provided by operating activities between the nine months ended October 28, 2022 and the comparable prior year period.
Net Cash Used in Investing Activities.
−Removed: Cash used in investing activities for the six months ended July 29, 2022 decreased compared to the prior year period primarily due to cash paid for the acquisitions of Halfaker and Koverse in the prior year period.
+Added: Cash used in investing activities for the nine months ended October 28, 2022 decreased compared to the prior year period primarily due to cash paid for the acquisitions of Halfaker and Koverse in the prior year period.
Net Cash Used in Financing Activities.
−Removed: Cash used in financing activities for the six months ended July 29, 2022 increased compared to the prior year period as a result of borrowings obtained to finance the Halfaker acquisition in the prior year period, higher share repurchases, and higher term loan principal payments in the current year period.
+Added: Cash used in financing activities for the nine months ended October 28, 2022 increased compared to the prior year period as a result of borrowings obtained to finance the Halfaker acquisition in the prior year period, a $90 million voluntary principal prepayment during the third quarter of fiscal 2023, and higher share repurchases of $53 million.
Critical Accounting Policies
−Removed: There have been no changes to our critical accounting policies during the six months ended July 29, 2022 from those disclosed in our most recently filed Annual Report on Form 10-K.
+Added: There have been no changes to our critical accounting policies during the nine months ended October 28, 2022 from those disclosed in our most recently filed Annual Report on Form 10-K.
Recently Issued But Not Yet Adopted Accounting Pronouncements
3 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.