Science Applications International Corp 10-Q

Item 1. Financial Statements SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions, except per share amounts) Revenues $ 1,769 $ 1,818 $ 3,646 $ 3,665 Cost of revenues 1,554 1,608 3,222 3,242 Selling, general and administrative expenses 75 77 164 162 Other operating (income) expense 1 ( 1 ) — ( 4 ) Operating income 139 134 260 265 Interest expense, net 31 31 61 65 Other (income) expense, net — 3 5 5 Income before income taxes 108 100 194 195 Income tax (expense) benefit 19 ( 19 ) 1 ( 37 ) Net income $ 127 $ 81 $ 195 $ 158 Earnings per share: Basic $ 2.72 $ 1.59 $ 4.14 $ 3.08 Diluted $ 2.71 $ 1.58 $ 4.12 $ 3.06 See accompanying notes to condensed consolidated financial statements. -1- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED) Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions) Net income $ 127 $ 81 $ 195 $ 158 Other comprehensive (loss) income, net of tax: Net unrealized (loss) gain on derivative instruments ( 2 ) ( 8 ) ( 3 ) ( 5 ) Total other comprehensive (loss) income, net of tax ( 2 ) ( 8 ) ( 3 ) ( 5 ) Comprehensive income $ 125 $ 73 $ 192 $ 153 See accompanying notes to condensed consolidated financial statements. -2- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) August 1, 2025 January 31, 2025 (in millions) ASSETS Current assets: Cash and cash equivalents $ 48 $ 56 Receivables, net 951 1,000 Prepaid expenses 175 78 Other current assets 30 20 Total current assets 1,204 1,154 Goodwill 2,851 2,851 Intangible assets, net 721 779 Property, plant, and equipment (net of accumulated depreciation of $ 210 million and $ 200 million at August 1, 2025 and January 31, 2025, respectively) 104 104 Operating lease right of use assets 156 164 Other assets 165 194 Total assets $ 5,201 $ 5,246 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 557 $ 631 Accrued payroll and employee benefits 336 339 Other accrued liabilities 106 113 Debt, current portion 448 313 Total current liabilities 1,447 1,396 Debt, net of current portion 1,844 1,907 Operating lease liabilities 153 173 Deferred income taxes 132 24 Other long-term liabilities 108 169 Commitments and contingencies (Note 11) Equity: Common stock, $ 0.0001 par value, 1 billion shares authorized, 46 million and 48 million shares issued and outstanding as of August 1, 2025 and January 31, 2025, respectively — — Additional paid-in capital — — Retained earnings 1,508 1,565 Accumulated other comprehensive income 9 12 Total stockholders' equity 1,517 1,577 Total liabilities and stockholders' equity $ 5,201 $ 5,246 See accompanying notes to condensed consolidated financial statements. -3- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (UNAUDITED) Shares of common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total (in millions) Balance at May 2, 2025 47 $ — $ 1,494 $ 11 $ 1,505 Net income — — 127 — 127 Issuances of stock — 6 — — 6 Other comprehensive loss, net of tax — — — ( 2 ) ( 2 ) Cash dividends of $ 0.37 per share — — ( 18 ) — ( 18 ) Stock-based compensation, net of shares withheld for taxes (1) — 8 — — 8 Repurchases of stock ( 1 ) ( 14 ) ( 95 ) — ( 109 ) Balance at August 1, 2025 46 $ — $ 1,508 $ 9 $ 1,517 Balance at January 31, 2025 48 $ — $ 1,565 $ 12 $ 1,577 Net income — — 195 — 195 Issuances of stock — 12 — — 12 Other comprehensive loss, net of tax — — — ( 3 ) ( 3 ) Cash dividends of $ 0.74 per share — — ( 36 ) — ( 36 ) Stock-based compensation, net of shares withheld for taxes (1) — 6 — — 6 Repurchases of stock ( 2 ) ( 18 ) ( 216 ) — ( 234 ) Balance at August 1, 2025 46 $ — $ 1,508 $ 9 $ 1,517 Balance at May 3, 2024 51 $ 251 $ 1,489 $ 19 $ 1,759 Net income — — 81 — 81 Issuances of stock — 5 — — 5 Other comprehensive loss, net of tax — — — ( 8 ) ( 8 ) Cash dividends of $ 0.37 per share — — ( 19 ) — ( 19 ) Stock-based compensation, net of shares withheld for taxes (1) — 11 — — 11 Repurchases of stock ( 1 ) ( 204 ) — — ( 204 ) Balance at August 2, 2024 50 $ 63 $ 1,551 $ 11 $ 1,625 Balance at February 2, 2024 52 $ 337 $ 1,432 $ 16 $ 1,785 Net income — — 158 — 158 Issuances of stock — 9 — — 9 Other comprehensive loss, net of tax — — — ( 5 ) ( 5 ) Cash dividends of $ 0.74 per share — — ( 39 ) — ( 39 ) Stock-based compensation, net of shares withheld for taxes (1) — 2 — — 2 Repurchases of stock ( 2 ) ( 285 ) — — ( 285 ) Balance at August 2, 2024 50 $ 63 $ 1,551 $ 11 $ 1,625 (1) During the three months ended August 1, 2025 and August 2, 2024, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 2 million and $ 1 million, respectively. During the six months ended August 1, 2025 and August 2, 2024, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 19 million and $ 23 million, respectively. See accompanying notes to condensed consolidated financial statements. -4- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended August 1, 2025 August 2, 2024 (in millions) Cash flows from operating activities: Net income $ 195 $ 158 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 71 69 Stock-based compensation expense 25 25 Deferred income taxes 109 ( 8 ) Other — ( 3 ) Increase (decrease) resulting from changes in operating assets and liabilities: Receivables 49 ( 32 ) Prepaid expenses and other current assets ( 107 ) 14 Accounts payable and other accrued liabilities ( 84 ) 39 Accrued payroll and employee benefits ( 3 ) ( 32 ) Operating lease assets and liabilities, net ( 4 ) ( 5 ) Other assets and other long-term liabilities, net ( 29 ) 11 Net cash provided by operating activities 222 236 Cash flows from investing activities: Expenditures for property, plant, and equipment ( 15 ) ( 12 ) Purchases of marketable securities ( 4 ) ( 8 ) Sales of marketable securities 4 6 Contributions to investments ( 7 ) ( 2 ) Net cash used in investing activities ( 22 ) ( 16 ) Cash flows from financing activities: Proceeds from borrowings 1,307 673 Principal payments on borrowings ( 1,235 ) ( 606 ) Stock repurchased and retired or withheld for taxes on equity awards ( 252 ) ( 304 ) Dividend payments to stockholders ( 36 ) ( 39 ) Issuances of stock 12 9 Other ( 4 ) — Net cash used in financing activities ( 208 ) ( 267 ) Net decrease in cash, cash equivalents and restricted cash ( 8 ) ( 47 ) Cash, cash equivalents and restricted cash at beginning of period 64 103 Cash, cash equivalents and restricted cash at end of period $ 56 $ 56 See accompanying notes to condensed consolidated financial statements. -5- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1—Business Overview and Summary of Significant Accounting Policies: Overview Science Applications International Corporation (collectively, with its consolidated subsidiaries, the “Company") is a leading provider of technical, engineering and enterprise information technology ("IT") services primarily to the U.S. government. The Company integrates emerging technology securely and in real-time into mission critical operations that modernize and enable national imperatives. 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. The Company has five customer facing business groups supported by the enterprise organizations, including the Innovation Factory. The Company's five business groups, which are also its operating segments, are aggregated into two reportable segments for financial reporting purposes given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve. The Company’s two reportable segments are the Defense and Intelligence segment and the Civilian segment. The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the Department of Defense ("DoD") and Intelligence Community of the United States Government. The Civilian segment provides solutions to the civilian markets, encompassing federal, state, and local governments, in order to deliver services for citizen well-being, border security, and protecting lives. This includes integrating solutions into a spectrum of public service missions that impact travel, trade, health and the economy. The offerings of both reportable segments entail the integration of emerging technologies into mission critical operations that modernize and enable national imperatives, including IT modernization, digital engineering, artificial intelligence ("AI"), mission systems support and advisory, training and simulation, and ground vehicles support. These services include end-to-end solutions spanning the design, development, integration, deployment, management and operations, sustainment and security of the customers’ entire IT infrastructure. The Company's Innovation Factory supports the operating segments by developing enterprise-class solutions which are delivered to the Company's customers as stand-alone solutions or integrated with and aligned to the Company's product offerings through the operations of the business to meet complex customer needs and accelerate digital transformation. The Innovation Factory includes designated teams focused on AI, application development, network services, platforms and cloud, engineering, and cybersecurity. It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions and works with customers to enhance solutions going forward. Costs associated with corporate functions that are not allocable to the reportable segments are presented as Corporate activities. See Note 10—Business Segments Information for additional information. Principles of Consolidation and Basis of Presentation References to “financial statements” refer to the condensed consolidated financial statements of the Company, which include the statements of income and comprehensive income, balance sheets, statements of equity and statements of cash flows. These financial statements were prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). All intercompany transactions and account balances within the Company have been eliminated. The results reported in these financial statements are not necessarily indicative of results that may be expected for the entire year and should be read in conjunction with the information contained in the Company’s Annual Report on Form 10-K for the year ended January 31, 2025. -6- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Use of Estimates The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. Significant estimates inherent in the preparation of the financial statements may include, but are not limited to, estimated profitability of long-term contracts, income taxes, fair value measurements, fair value of goodwill and other intangible assets, pension and defined benefit plan obligations, and contingencies. Estimates have been prepared by management on the basis of the most current and best available information at the time of estimation and actual results could differ from those estimates. Reporting Periods The Company utilizes a 52/53 week fiscal year ending on the Friday closest to January 31, with fiscal quarters typically consisting of 13 weeks. Fiscal 2026 began on February 1, 2025 and ends on January 30, 2026, while fiscal 2025 began on February 3, 2024 and ended on January 31, 2025. Operating Cycle The Company’s operating cycle may be greater than one year and is measured by the average time intervening between the inception and the completion of contracts. Derivative Instruments Designated as Cash Flow Hedges Derivative instruments are recorded on the condensed consolidated balance sheets at fair value. Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income (loss) and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions. Settlement amounts related to derivatives designated as cash flow hedges are presented within operating activities on the condensed consolidated statement of cash flows. The Company’s fixed interest rate swaps are considered over-the-counter derivatives, and their fair value is calculated using a standard pricing model for interest rate swaps with contractual terms for maturities, amortization and interest rates. Level 2, or market observable inputs (such as yield and credit curves), are used within the standard pricing models in order to determine fair value. The fair value is an estimate of the amount that the Company would pay or receive as of a measurement date if the agreements were transferred to a third party. See Note 7—Derivative Instruments Designated as Cash Flow Hedges for further discussion on the Company’s derivative instruments designated as cash flow hedges. Marketable Securities Investments in marketable securities consist of equity securities, which are recorded at fair value using observable inputs such as quoted prices in active markets (Level 1). As of August 1, 2025 and January 31, 2025, the fair value of the Company's investments totaled $ 36 million and are included in "Other assets" on the condensed consolidated balance sheets. The Company's investments are primarily held in a custodial account, which includes investments to fund its deferred compensation plan liabilities. -7- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Cash, Cash Equivalents and Restricted Cash The following table provides a reconciliation of cash, cash equivalents and restricted cash to amounts reported on the condensed consolidated balance sheets for the periods presented: August 1, 2025 January 31, 2025 (in millions) Cash and cash equivalents $ 48 $ 56 Restricted cash included in prepaid expenses and other current assets 3 3 Restricted cash included in other assets 5 5 Cash, cash equivalents and restricted cash $ 56 $ 64 Accounting Standards Updates Accounting Standards Updates Recently Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. Amongst other amendments, the standard requires annual and interim disclosures of significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"), and interim disclosures about a reportable segment’s profit or loss and assets that are currently required annually. This standard does not change how an entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments. The standard was effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company adopted the annual disclosure requirements in fiscal 2025 and adopted the interim disclosure requirements in fiscal 2026. See Note 10—Business Segments Information for additional information. Accounting Standards Updates Recently Issued But Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The standard includes amendments that enhance annual income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The standard is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments can be applied on a prospective or retrospective basis. The Company plans to adopt this standard prospectively in fiscal 2026 and does not expect it to have a material impact on its consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The standard includes new disclosure requirements relating to specified categories of expenses (purchases of inventory, employee compensation, depreciation, and amortization) that are included in certain expense captions presented on the face of the income statement. Early adoption is permitted. The amendments can be applied on a prospective or retrospective basis. In January 2025, the FASB clarified the effective date of the standard by issuing ASU No. 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date. The standard is effective for fiscal years beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adoption of this standard on its financial statement disclosures. Note 2—Earnings Per Share, Share Repurchases and Dividends: Earnings Per Share ("EPS") Basic EPS is computed by dividing net income by the basic weighted-average number of shares outstanding. Diluted EPS is computed similarly to basic EPS, except the weighted-average number of shares outstanding is -8- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) increased to include the dilutive effect of outstanding stock-based awards. The dilutive effect of outstanding stock-based awards is computed using the treasury stock method. The following table provides a reconciliation of the weighted-average number of shares outstanding used to compute basic and diluted EPS for the periods presented: Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions) Basic weighted-average number of shares outstanding 46.7 50.9 47.1 51.3 Dilutive common share equivalents - stock options and other stock-based awards 0.1 0.3 0.2 0.4 Diluted weighted-average number of shares outstanding 46.8 51.2 47.3 51.7 Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for the three and six months ended August 1, 2025 and August 2, 2024 were immaterial . Share Repurchases The Company may repurchase shares in accordance with established repurchase plans. The Company retires its common stock upon repurchase with the excess over par value allocated to additional paid-in capital. When repurchases for the period exceed total additional-paid-in-capital, the excess repurchases are recorded as a reduction to retained earnings. The Company has not made any material purchases of common stock other than in connection with established share repurchase plans. During the six months ended August 1, 2025, the Company repurchased approximately 2.1 million shares of its common stock from the open market under its existing share repurchase plan for approximately $ 231 million. As of August 1, 2025, the Company has repurchased approximately 26.6 million shares of its common stock under the plan for approximately $ 2.3 billion. Dividends The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended August 1, 2025. Subsequent to the end of the quarter, on August 28, 2025, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on October 24, 2025 to stockholders of record on October 10, 2025. -9- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 3—Revenues: Changes in Estimates on Contracts Changes in estimates of revenues, cost of revenues or profits related to performance obligations satisfied over time are recognized in operating income in the period in which such changes are made for the inception-to-date effect of the changes. Changes in these estimates can occur routinely over the performance period for a variety of reasons, which include: changes in scope; changes in cost estimates due to unanticipated cost growth or reassessments of risks impacting costs; changes in the estimated transaction price, such as variable amounts for incentive or award fees; and performance being better or worse than previously estimated. A significant portion of the Company's contracts recognize revenue on performance obligations using a cost input measure (cost-to-cost), which requires estimates of total costs at completion. In cases when total expected costs exceed total estimated revenues for a performance obligation, 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. Aggregate net changes in estimates on contracts accounted for using the cost-to-cost method of accounting were recognized in operating income as follows: Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions, except per share amounts) Net favorable (unfavorable) adjustments $ 5 $ ( 1 ) $ 3 $ — Net favorable (unfavorable) adjustments, after tax 6 ( 1 ) 3 — Diluted EPS impact $ 0.13 $ ( 0.02 ) $ 0.06 $ — Revenues were $ 7 million higher for the three and six months ended August 1, 2025, and $ 1 million higher for the six months ended August 2, 2024, due to net revenue recognized from performance obligations satisfied in prior periods. There was no revenue recognized during the three months ended August 2, 2024 from performance obligations satisfied in prior periods. Disaggregation of Revenues The Company's revenues are generated primarily from long-term contracts with the U.S. government including subcontracts with other contractors engaged in work for the U.S. government. The Company disaggregates revenues by customer, contract type and prime versus subcontractor to the federal government for each of its reportable segments. Disaggregated revenues by customer were as follows: Three Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Department of Defense $ 920 $ 2 $ 922 $ 950 $ — $ 950 Intelligence and other federal government agencies 444 360 804 455 369 824 Commercial, state and local governments and international 10 33 43 10 34 44 Total $ 1,374 $ 395 $ 1,769 $ 1,415 $ 403 $ 1,818 -10- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Six Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Department of Defense $ 1,902 $ 5 $ 1,907 $ 1,924 $ 2 $ 1,926 Intelligence and other federal government agencies 889 768 1,657 913 745 1,658 Commercial, state and local governments and international 16 66 82 14 67 81 Total $ 2,807 $ 839 $ 3,646 $ 2,851 $ 814 $ 3,665 Disaggregated revenues by contract type were as follows: Three Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Cost reimbursement $ 1,093 $ 13 $ 1,106 $ 1,085 $ 20 $ 1,105 Time and materials ("T&M") 117 276 393 162 264 426 Firm-fixed price ("FFP") 164 106 270 168 119 287 Total $ 1,374 $ 395 $ 1,769 $ 1,415 $ 403 $ 1,818 Six Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Cost reimbursement $ 2,227 $ 33 $ 2,260 $ 2,219 $ 41 $ 2,260 Time and materials ("T&M") 258 568 826 311 532 843 Firm-fixed price ("FFP") 322 238 560 321 241 562 Total $ 2,807 $ 839 $ 3,646 $ 2,851 $ 814 $ 3,665 Disaggregated revenues by prime versus subcontractor were as follows: Three Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Prime contractor to federal government $ 1,239 $ 329 $ 1,568 $ 1,283 $ 335 $ 1,618 Subcontractor to federal government 125 33 158 122 34 156 Other 10 33 43 10 34 44 Total $ 1,374 $ 395 $ 1,769 $ 1,415 $ 403 $ 1,818 -11- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Six Months Ended August 1, 2025 August 2, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Prime contractor to federal government $ 2,538 $ 701 $ 3,239 $ 2,592 $ 677 $ 3,269 Subcontractor to federal government 253 72 325 245 70 315 Other 16 66 82 14 67 81 Total $ 2,807 $ 839 $ 3,646 $ 2,851 $ 814 $ 3,665 Contract Balances Contract balances for the periods presented were as follows: Balance Sheet line item August 1, 2025 January 31, 2025 (in millions) Billed and billable receivables, net (1) Receivables, net $ 500 $ 526 Contract assets - unbillable receivables Receivables, net 451 474 Contract assets - unbillable receivables Other assets 29 29 Contract assets - contract retentions Other assets 16 15 Contract liabilities - current Other accrued liabilities 27 38 Contract liabilities - non-current Other long-term liabilities 1 — (1) Net of allowance of $ 2 million and 3 million, respectively, as of August 1, 2025 and January 31, 2025. During the three and six months ended August 1, 2025, the Company recognized revenues of $ 8 million and $ 25 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 31, 2025. During the three and six months ended August 2, 2024, the Company recognized revenues of $ 10 million and $ 30 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of February 2, 2024. Remaining Performance Obligations Remaining performance obligations ("RPO") represent the transaction price of exercised contracts (both funded and unfunded) less inception to date revenue recognized. RPO does not include unexercised option periods and future task orders expected to be awarded under IDIQ contracts. As of August 1, 2025, the Company had approximately $ 6.1 billion of RPO. The Company expects to recognize revenue on approximately 79 % of the RPO over the next 12 months and approximately 89 % over the next 24 months, with the remaining recognized thereafter. Note 4—Goodwill and Intangible Assets: Goodwill The following table presents the carrying value of goodwill by reportable segment: August 1, 2025 January 31, 2025 (in millions) Defense and Intelligence $ 2,001 $ 2,001 Civilian 850 850 Total $ 2,851 $ 2,851 -12- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Goodwill is not amortized, but rather tested for potential impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The goodwill impairment test is performed at the reporting unit level. There were no impairments of goodwill during the periods presented. Intangible Assets Intangible assets, all of which were finite-lived, consisted of the following: August 1, 2025 January 31, 2025 Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value (in millions) Customer relationships $ 1,461 $ ( 745 ) $ 716 $ 1,462 $ ( 688 ) $ 774 Developed technology 10 ( 5 ) 5 10 ( 5 ) 5 Trade name — — — 1 ( 1 ) — Total intangible assets $ 1,471 $ ( 750 ) $ 721 $ 1,473 $ ( 694 ) $ 779 Amortization expense related to intangible assets was $ 29 million and $ 58 million for the three and six months ended August 1, 2025 and August 2, 2024, respectively. There were no intangible asset impairment losses during the periods presented. As of August 1, 2025, the estimated future annual amortization expense related to intangible assets is as follows: Fiscal Year (in millions) Remainder of 2026 $ 57 2027 115 2028 98 2029 97 2030 95 Thereafter 259 Total $ 721 Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, and other factors. Note 5—Income Taxes: The Company's effective income tax rate was ( 17.2 )% and ( 0.4 )% for the three and six months ended August 1, 2025, respectively, and 19.6 % and 19.3 % for the three and six months ended August 2, 2024, respectively. The effective tax rate significantly decreased compared to the same period last year primarily due to a $ 47 million benefit from an IRS audit settlement subject to final administrative approvals covering fiscal years 2016 through 2019 and decreases in liabilities for uncertain tax positions for the remaining open tax years. Additionally, the Company’s effective tax rate differs from the statutory tax rate primarily due to research and development tax credits and tax benefits from employee share-based compensation. On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was enacted, introducing several significant changes to U.S. corporate income tax law. One key provision of the Act is the permanent reinstatement of the immediate expensing of U.S. research and development expenditures which the Company expects will result in a cash tax benefit in the current year. Based on the Company's interpretation of the Act, there will be an immaterial increase to the Company's effective tax rate for the year. The Company is awaiting interpretive guidance from the IRS, and therefore the current estimated impacts of the Act are subject to change. -13- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 6—Debt Obligations: The Company’s debt as of the dates presented was as follows: August 1, 2025 January 31, 2025 Stated interest rate Effective interest rate Principal Unamortized debt issuance costs Net Principal Unamortized debt issuance costs Net (dollars in millions) Term Loan A Facility due June 2027 5.71 % 5.82 % $ 1,076 $ ( 2 ) $ 1,074 $ 1,122 $ ( 2 ) $ 1,120 Term Loan B3 Facility due February 2031 6.11 % 6.25 % 504 ( 3 ) 501 506 ( 3 ) 503 Senior Notes due April 2028 4.88 % 5.11 % 400 ( 3 ) 397 400 ( 3 ) 397 Revolving Credit Facility due June 2027 (1) 6.31 % — % 320 — 320 200 — 200 Total debt $ 2,300 $ ( 8 ) $ 2,292 $ 2,228 $ ( 8 ) $ 2,220 Less current portion 448 — 448 313 — 313 Total debt, net of current portion $ 1,852 $ ( 8 ) $ 1,844 $ 1,915 $ ( 8 ) $ 1,907 (1) The stated interest rate for the Revolving Credit Facility due June 2027 reflects the weighted average interest rate for outstanding borrowings as of August 1, 2025. As of August 1, 2025, the Company had a $ 2.6 billion secured credit facility (the Credit Facility) consisting of a Term Loan A Facility due June 2027, a Term Loan B3 Facility due February 2031 (together, the "Term Loan Facilities"), and a $ 1.0 billion Revolving Credit Facility due June 2027 (the "Revolving Credit Facility"). During the three and six months ended August 1, 2025, the Company made scheduled principal payments of $ 23 million and $ 46 million on the Term Loan A Facility due June 2027 and made scheduled principal payments of $ 1 million and $ 2 million on the Term Loan B3 Facility due February 2031, respectively. During the three and six months ended August 1, 2025, the Company borrowed $ 557 million and $ 1.3 billion, respectively, and repaid $ 522 million and $ 1.2 billion, respectively, under the Revolving Credit Facility. As of August 1, 2025, the outstanding principal under the Revolving Credit Facility was classified as "Debt, current portion" on the condensed consolidated balance sheets. Subsequent to quarter end, the Company repaid $ 95 million of the outstanding principal under the Revolving Credit Facility. Commitment fees for undrawn amounts under the Revolving Credit Facility range from 0.125 % to 0.25 % per annum based on the Company’s leverage ratio. As of August 1, 2025, the Company was in compliance with the covenants under its Credit Facility. As of August 1, 2025 and January 31, 2025, the carrying value of the Company’s outstanding debt obligations approximated its fair value. The fair value of debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s Term Loan Facilities and Senior Notes. Maturities of debt as of August 1, 2025 are: Fiscal Year Total (in millions) Remainder of 2026 $ 385 2027 128 2028 896 2029 406 2030 5 Thereafter 480 Total principal payments $ 2,300 -14- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 7—Derivative Instruments Designated as Cash Flow Hedges: The Company’s derivative instruments designated as cash flow hedges consist of: Fair Value of Asset (1) at Notional Amount at August 1, 2025 Pay Fixed Rate Receive Variable Rate Settlement and Termination August 1, 2025 January 31, 2025 (in millions) (in millions) Interest rate swaps $ 685 2.96 % 1-month Term SOFR Monthly through October 31, 2025 $ 2 $ 6 (1) The fair value of the fixed interest rate swap asset is included in "Other assets" on the condensed consolidated balance sheets. The Company is party to fixed interest rate swap instruments that are designated and accounted for as cash flow hedges to manage risks associated with interest rate fluctuations on a portion of the Company’s floating rate Credit Facility borrowings. The counterparties to all swap agreements are financial institutions. See Note 8—Changes in Accumulated Other Comprehensive Income (Loss) by Component for the unrealized change in fair values on cash flow hedges recognized in other comprehensive income (loss) and the amounts reclassified from accumulated other comprehensive income (loss) into earnings for the current and comparative periods presented. The Company estimates that it will reclassify $ 2 million of unrealized gains from accumulated other comprehensive income into earnings from August 2, 2025 until the interest rate swaps mature on October 31, 2025. -15- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 8—Changes in Accumulated Other Comprehensive Income (Loss) by Component: The following table presents the changes in accumulated other comprehensive income (loss) attributable to the Company’s fixed interest rate swap cash flow hedges that are discussed in Note 7—Derivative Instruments Designated as Cash Flow Hedges and the Company's defined benefit plans. Unrealized Gains (Losses) on Fixed Interest Rate Swap Cash Flow Hedges (1) Defined Benefit Obligation Adjustment Total (in millions) Three months ended August 1, 2025 Balance at May 2, 2025 $ 3 $ 8 $ 11 Other comprehensive income before reclassifications 1 — 1 Amounts reclassified from accumulated other comprehensive income ( 3 ) — ( 3 ) Income tax impact — — — Net other comprehensive loss ( 2 ) — ( 2 ) Balance at August 1, 2025 $ 1 $ 8 $ 9 Three months ended August 2, 2024 Balance at May 3, 2024 $ 14 $ 5 $ 19 Other comprehensive loss before reclassifications ( 6 ) — ( 6 ) Amounts reclassified from accumulated other comprehensive income ( 4 ) — ( 4 ) Income tax impact 2 — 2 Net other comprehensive loss ( 8 ) — ( 8 ) Balance at August 2, 2024 $ 6 $ 5 $ 11 Six months ended August 1, 2025 Balance at January 31, 2025 $ 4 $ 8 $ 12 Other comprehensive income before reclassifications 1 — 1 Amounts reclassified from accumulated other comprehensive income ( 5 ) — ( 5 ) Income tax impact 1 — 1 Net other comprehensive loss ( 3 ) — ( 3 ) Balance at August 1, 2025 $ 1 $ 8 $ 9 Six months ended August 2, 2024 Balance at February 2, 2024 $ 11 $ 5 $ 16 Other comprehensive income before reclassifications 2 — 2 Amounts reclassified from accumulated other comprehensive income ( 8 ) — ( 8 ) Income tax impact 1 — 1 Net other comprehensive loss ( 5 ) — ( 5 ) Balance at August 2, 2024 $ 6 $ 5 $ 11 (1) The amount reclassified from accumulated other comprehensive income (loss) is included in "Interest expense, net. " -16- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 9—Sales of Receivables: The Company has a Master Accounts Receivable Purchase Agreement ("MARPA Facility") with MUFG Bank, Ltd. (the "Purchaser") for the sale of up to a maximum amount of $ 300 million of certain designated eligible receivables with the U.S. government. During the three and six months ended August 1, 2025, the Company incurred purchase discount fees of approximately $ 3 million and $ 7 million, respectively. During the three and six months ended August 2, 2024, the Company incurred purchase discount fees of $ 4 million and $ 7 million, respectively. The purchase discount fees are presented in "Other (income) expense, net" on the condensed consolidated statements of income and are reflected as cash flows from operating activities on the condensed consolidated statements of cash flows. MARPA Facility activity consisted of the following: Six Months Ended August 1, 2025 August 2, 2024 (in millions) Beginning balance $ 164 $ 205 Sale of receivables 2,443 2,065 Cash collections ( 2,342 ) ( 2,095 ) Outstanding balance sold to Purchaser (1) 265 175 Cash collected, not remitted to Purchaser (2) ( 25 ) ( 31 ) Remaining sold receivables $ 240 $ 144 (1) For the six months ended August 1, 2025, the Company recorded a net increase of $ 101 million to cash flows from operating activities from sold receivables. For the six months ended August 2, 2024, the Company recorded a net decrease of $ 30 million to cash flows from operating activities from sold receivables. (2) Primarily represents the cash collected on behalf of but not yet remitted to the Purchaser as of August 1, 2025 and August 2, 2024. This balance is included in "Accounts payable" on the condensed consolidated balance sheets. Note 10—Business Segments Information: The Company has five customer facing business groups supported by the enterprise organizations, including the Innovation Factory. The five business groups, which are also its operating segments, are aggregated into two reportable segments for financial reporting purposes given the similarity in economic and qualitative characteristics, and based on the nature of the customers they serve. The Company’s two reportable segments are the Defense and Intelligence segment and the Civilian segment. The Company defines its operating segments based on the way the CODM, currently the Company's CEO, manages the operations for the purpose of allocating resources and assessing performance. The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the DoD and Intelligence Community of the United States Government. The Civilian segment provides solutions to the civilian markets, encompassing federal, state, and local governments, in order to deliver services for citizen well-being, border security, and protecting lives. This includes integrating solutions into a spectrum of public service missions that impact travel, trade, health and the economy. The offerings of both reportable segments entail the integration of emerging technologies into mission critical operations that modernize and enable national imperatives, including IT modernization, digital engineering, AI, mission systems support, training and simulation, and ground vehicles support. These services include end-to-end solutions spanning the design, development, integration, deployment, management and operations, sustainment and security of the customers’ entire IT infrastructure. Costs associated with corporate functions that are not allocable to the reportable segments are presented as Corporate. -17- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The CODM reviews and evaluates segment operating performance using segment "Revenues" and "Adjusted operating income (loss)". Adjusted operating income is a performance measure that primarily excludes the impact of non-recurring transactions and activities that the Company does not consider to be indicative of its ongoing operating performance. Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs. The CODM uses revenues and adjusted operating income to assess the financial performance of each operating segment against pre-established performance targets and to allocate resources for strategic business decisions, including investments in certain products or services, potential acquisitions or divestitures, and capital deployment. Labor base is the significant expense that is regularly provided to the CODM, and primarily includes direct labor on customer contracts. The segment information for the periods presented was as follows: Three Months Ended August 1, 2025 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 1,374 $ 395 $ — $ 1,769 Labor base 410 124 — 534 Other operating expenses (income) (1) 840 217 ( 4 ) 1,053 Adjusted operating income (loss) $ 124 $ 54 $ 4 $ 182 Three Months Ended August 2, 2024 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 1,415 $ 403 $ — $ 1,818 Labor base 403 125 — 528 Other operating expenses (income) (1) 888 232 1 1,121 Adjusted operating income (loss) $ 124 $ 46 $ ( 1 ) $ 169 Six Months Ended August 1, 2025 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 2,807 $ 839 $ — $ 3,646 Labor base 841 257 — 1,098 Other operating expenses (income) (1) 1,727 476 5 2,208 Adjusted operating income (loss) $ 239 $ 106 $ ( 5 ) $ 340 Six Months Ended August 2, 2024 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 2,851 $ 814 $ — $ 3,665 Labor base 832 254 — 1,086 Other operating expenses (income) (1) 1,771 468 6 2,245 Adjusted operating income (loss) $ 248 $ 92 $ ( 6 ) $ 334 (1) "Other operating expenses (income)" includes cost of revenues, selling, general and administrative expenses, and other operating income or expenses which are not regularly provided to the CODM. This excludes labor base which is presented separately. -18- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The table below includes a reconciliation of total "Adjusted operating income" to "Income before income taxes" for the three and six months ended August 1, 2025 and August 2, 2024. Three Months Ended Six Months Ended August 1, 2025 August 2, 2024 August 1, 2025 August 2, 2024 (in millions) Adjusted operating income $ 182 $ 169 $ 340 $ 334 Depreciation of property, plant, and equipment 6 5 13 11 Amortization of intangible assets 29 29 58 58 Acquisition, integration, restructuring and impairment costs 1 2 4 2 Recovery of acquisition, integration, restructuring and impairment costs (1) — ( 1 ) ( 2 ) ( 2 ) Costs related to the settlement of federal tax audits 7 — 7 — Interest expense, net 31 31 61 65 Other (income) expense, net — 3 5 5 Income before income taxes $ 108 $ 100 $ 194 $ 195 (1) Adjustment reflects the portion of acquisition, integration, restructuring and impairment costs recovered through the Company's indirect rates in accordance with U.S. government Cost Accounting Standards. Asset information by segment is not a key measure of performance used by the CODM. Note 11—Legal Proceedings and Other Commitments and Contingencies: Legal Proceedings The Company is involved in various claims and lawsuits arising in the normal conduct of its business, none of which the Company’s management believes, based on current information, is expected to have a material adverse effect on the Company’s financial position, results of operations or cash flows. In April 2022 and October 2023, the Company received Federal Grand Jury Subpoenas in connection with a criminal investigation being conducted by the U.S. Department of Justice, Antitrust Division ("DOJ"). As required by the subpoenas, the Company has provided the DOJ with a broad range of documents related to the investigation, and the Company’s collection and production process remains ongoing. The Company is fully cooperating with the investigation. At this time, it is not possible to determine whether the Company will incur, or to reasonably estimate the amount of, any fines, penalties or further liabilities in connection with the investigation pursuant to which the subpoenas were issued. In June 2017, the Company filed a patent infringement complaint in the United States Court of Federal Claims against the United States and three other parties, alleging infringement of the Company’s Enhanced Rapid Engagement and Vision in Ambient Lighting patents. In July 2025, the Company executed a favorable settlement agreement with all parties. As part of the settlement, the Company recovered $ 15 million and recognized $ 9 million as a recovery for costs previously incurred within "Selling, general and administrative expenses" within the Company’s condensed consolidated statements of income during the second quarter of fiscal 2026. In addition, the Company recognized $ 6 million of costs that was contingent on the settlement of the patent infringement matter. Government Investigations, Audits and Reviews The Company is routinely subject to investigations and reviews relating to compliance with various laws and regulations with respect, in particular, to its role as a contractor to federal, state and local government customers and in connection with performing services in countries outside of the United States. U.S. government agencies, including the Defense Contract Audit Agency ("DCAA"), the Defense Contract Management Agency and others, routinely audit and review a contractor’s performance on government contracts, indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards. They also review the adequacy of the contractor’s compliance with government standards for its business systems. Adverse findings in -19- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) these investigations, audits, or reviews can lead to criminal, civil or administrative proceedings, and the Company could face disallowance of previously billed costs, penalties, fines, compensatory damages and suspension or debarment from doing business with governmental agencies. Due to the Company’s reliance on government contracts, adverse findings could also have a material impact on the Company’s business, including its financial position, results of operations and cash flows. The indirect cost audits by the DCAA of the Company’s business remain open for certain prior years and the current year. Although the Company has recorded contract revenues based on an estimate of costs that the Company believes will be approved on final audit, the Company does not know the outcome of any ongoing or future audits. If future completed audit adjustments exceed the Company’s reserves for potential adjustments, the Company’s profitability could be materially adversely affected. As of August 1, 2025, the Company believes it has adequately reserved for estimated net amounts to be refunded to customers for potential adjustments for indirect cost audits and compliance with U.S. government Cost Accounting Standards. Letters of Credit and Surety Bonds The Company has outstanding obligations relating to letters of credit of $ 8 million as of August 1, 2025, principally related to guarantees on insurance policies. The Company also has outstanding obligations relating to surety bonds of $ 19 million, principally related to performance and payment bonds on the Company’s contracts. -20- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION