Science Applications International Corp 10-Q

Item 1. Financial Statements SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions, except per share amounts) Revenues $ 1,866 $ 1,976 $ 5,512 $ 5,641 Cost of revenues 1,639 1,739 4,861 4,981 Selling, general and administrative expenses 101 83 265 245 Other operating (income) expense ( 2 ) ( 6 ) ( 2 ) ( 10 ) Operating income 128 160 388 425 Interest expense, net 33 32 94 97 Other (income) expense, net 1 2 6 7 Income before income taxes 94 126 288 321 Income tax (expense) benefit ( 16 ) ( 20 ) ( 15 ) ( 57 ) Net income $ 78 $ 106 $ 273 $ 264 Earnings per share: Basic $ 1.70 $ 2.15 $ 5.85 $ 5.22 Diluted $ 1.69 $ 2.13 $ 5.82 $ 5.17 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 Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions) Net income $ 78 $ 106 $ 273 $ 264 Other comprehensive (loss) income, net of tax: Net unrealized (loss) gain on derivative instruments ( 1 ) ( 1 ) ( 4 ) ( 6 ) Total other comprehensive (loss) income, net of tax ( 1 ) ( 1 ) ( 4 ) ( 6 ) Comprehensive income $ 77 $ 105 $ 269 $ 258 See accompanying notes to condensed consolidated financial statements. -2- Table of Conten ts SCIENCE APPLICATIONS INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) October 31, 2025 January 31, 2025 (in millions) ASSETS Current assets: Cash and cash equivalents $ 45 $ 56 Receivables, net 1,045 1,000 Prepaid expenses 145 78 Other current assets 22 20 Total current assets 1,257 1,154 Goodwill 2,960 2,851 Intangible assets, net 779 779 Property, plant, and equipment (net of accumulated depreciation of $ 212 million and $ 200 million at October 31, 2025 and January 31, 2025, respectively) 108 104 Operating lease right of use assets 162 164 Other assets 157 194 Total assets $ 5,423 $ 5,246 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 627 $ 631 Accrued payroll and employee benefits 308 339 Other accrued liabilities 103 113 Debt, current portion 12 313 Total current liabilities 1,050 1,396 Debt, net of current portion 2,475 1,907 Operating lease liabilities 159 173 Deferred income taxes 124 24 Other long-term liabilities 103 169 Commitments and contingencies (Note 12) Equity: Common stock, $ 0.0001 par value, 1 billion shares authorized, 45 million and 48 million shares issued and outstanding as of October 31, 2025 and January 31, 2025, respectively — — Additional paid-in capital — — Retained earnings 1,504 1,565 Accumulated other comprehensive income 8 12 Total stockholders' equity 1,512 1,577 Total liabilities and stockholders' equity $ 5,423 $ 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 August 1, 2025 46 $ — $ 1,508 $ 9 $ 1,517 Net income — — 78 — 78 Issuances of stock — 4 — — 4 Other comprehensive loss, net of tax — — — ( 1 ) ( 1 ) Cash dividends of $ 0.37 per share — — ( 17 ) — ( 17 ) Stock-based compensation, net of shares withheld for taxes (1) — 26 — — 26 Repurchases of stock ( 1 ) ( 30 ) ( 65 ) — ( 95 ) Balance at October 31, 2025 45 $ — $ 1,504 $ 8 $ 1,512 Balance at January 31, 2025 48 $ — $ 1,565 $ 12 $ 1,577 Net income — — 273 — 273 Issuances of stock — 16 — — 16 Other comprehensive loss, net of tax — — — ( 4 ) ( 4 ) Cash dividends of $ 1.11 per share — — ( 53 ) — ( 53 ) Stock-based compensation, net of shares withheld for taxes (1) — 32 — — 32 Repurchases of stock ( 3 ) ( 48 ) ( 281 ) — ( 329 ) Balance at October 31, 2025 45 $ — $ 1,504 $ 8 $ 1,512 Balance at August 2, 2024 50 $ 63 $ 1,551 $ 11 $ 1,625 Net income — — 106 — 106 Issuances of stock — 5 — — 5 Other comprehensive loss, net of tax — — — ( 1 ) ( 1 ) Cash dividends of $ 0.37 per share — — ( 18 ) — ( 18 ) Stock-based compensation, net of shares withheld for taxes (1) — 11 — — 11 Repurchases of stock ( 1 ) ( 79 ) ( 37 ) — ( 116 ) Balance at November 1, 2024 49 $ — $ 1,602 $ 10 $ 1,612 Balance at February 2, 2024 52 $ 337 $ 1,432 $ 16 $ 1,785 Net income — — 264 — 264 Issuances of stock — 14 — — 14 Other comprehensive loss, net of tax — — — ( 6 ) ( 6 ) Cash dividends of $ 1.11 per share — — ( 57 ) — ( 57 ) Stock-based compensation, net of shares withheld for taxes (1) — 13 — — 13 Repurchases of stock ( 3 ) ( 364 ) ( 37 ) — ( 401 ) Balance at November 1, 2024 49 $ — $ 1,602 $ 10 $ 1,612 (1) During the three months ended October 31, 2025, there were no shares withheld for taxes related to stock-based compensation arrangements. During the three months ended November 1, 2024, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 2 million. During the nine months ended October 31, 2025 and November 1, 2024, shares withheld for taxes related to stock-based compensation arrangements amounted to $ 19 million and $ 25 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) Nine Months Ended October 31, 2025 November 1, 2024 (in millions) Cash flows from operating activities: Net income $ 273 $ 264 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 109 104 Stock-based compensation expense 51 38 Deferred income taxes 101 ( 15 ) Gain on sale of equity method investments — ( 5 ) Other ( 4 ) ( 4 ) Increase (decrease) resulting from changes in operating assets and liabilities, net of the effect of acquisitions: Receivables ( 31 ) ( 108 ) Prepaid expenses and other current assets ( 68 ) 31 Accounts payable and other accrued liabilities ( 22 ) 119 Accrued payroll and employee benefits ( 36 ) ( 59 ) Operating lease assets and liabilities, net ( 5 ) ( 7 ) Other assets and other long-term liabilities, net ( 17 ) 21 Net cash provided by operating activities 351 379 Cash flows from investing activities: Cash paid for acquisitions, net of cash acquired ( 203 ) — Expenditures for property, plant, and equipment ( 24 ) ( 21 ) Purchases of marketable securities ( 5 ) ( 11 ) Sales of marketable securities 5 10 Proceeds from sale of equity method investments — 10 Contributions to investments ( 10 ) ( 3 ) Net cash used in investing activities ( 237 ) ( 15 ) Cash flows from financing activities: Proceeds from borrowings 2,745 1,114 Principal payments on borrowings ( 2,473 ) ( 1,056 ) Stock repurchased and retired or withheld for taxes on equity awards ( 347 ) ( 425 ) Dividend payments to stockholders ( 53 ) ( 57 ) Issuances of stock 16 14 Debt issuance costs ( 9 ) — Other ( 4 ) ( 3 ) Net cash used in financing activities ( 125 ) ( 413 ) Net decrease in cash, cash equivalents and restricted cash ( 11 ) ( 49 ) Cash, cash equivalents and restricted cash at beginning of period 64 103 Cash, cash equivalents and restricted cash at end of period $ 53 $ 54 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 War ("DoW", formerly referred to as the Department of Defense) 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 11—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 8—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 October 31, 2025 and January 31, 2025, the fair value of the Company's investments totaled $ 39 million and $ 36 million, respectively, 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: October 31, 2025 January 31, 2025 (in millions) Cash and cash equivalents $ 45 $ 56 Restricted cash included in other current assets 3 3 Restricted cash included in other assets 5 5 Cash, cash equivalents and restricted cash $ 53 $ 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 11—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. In September 2025, the FASB issued ASU No. 2025-06, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The standard modernizes the accounting for internal-use software costs by removing all references to project stages and defining a probable-to-complete threshold to begin capitalizing costs. The standard also clarifies the disclosure requirements for capitalized internal-use software costs. The standard is effective for annual reporting periods, including interim reporting periods within those annual reporting periods, beginning after December 15, 2027. The amendment can -8- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) be applied prospectively, retrospectively, or on a modified transition approach. Early adoption is permitted. The Company is currently evaluating the impact of adoption of this standard on its consolidated financial statements and related 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 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 Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions) Basic weighted-average number of shares outstanding 45.9 49.4 46.7 50.6 Dilutive common share equivalents - stock options and other stock-based awards 0.2 0.4 0.2 0.5 Diluted weighted-average number of shares outstanding 46.1 49.8 46.9 51.1 Antidilutive stock awards excluded from the weighted-average number of shares outstanding used to compute diluted EPS for the three and nine months ended October 31, 2025 and November 1, 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 nine months ended October 31, 2025, the Company repurchased approximately 3.0 million shares of its common stock from the open market under its existing share repurchase plan for approximately $ 325 million. As of October 31, 2025, the Company has repurchased approximately 27.5 million shares of its common stock under the plan for approximately $ 2.4 billion. Dividends The Company declared and paid a quarterly dividend of $ 0.37 per share of its common stock during the three months ended October 31, 2025. 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. -9- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions, except per share amounts) Net favorable (unfavorable) adjustments $ 4 $ 15 $ 7 $ 15 Net favorable (unfavorable) adjustments, after tax 4 13 7 12 Diluted EPS impact $ 0.09 $ 0.26 $ 0.15 $ 0.23 Revenues were $ 8 million and $ 15 million higher for the three and nine months ended October 31, 2025, respectively, and $ 13 million and $ 14 million higher for the three and nine months ended November 1, 2024, respectively, due to net revenue recognized 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 October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Department of War $ 970 $ 2 $ 972 $ 992 $ 13 $ 1,005 Intelligence and other federal government agencies 462 387 849 517 413 930 Commercial, state and local governments and international 7 38 45 6 35 41 Total $ 1,439 $ 427 $ 1,866 $ 1,515 $ 461 $ 1,976 Nine Months Ended October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Department of War $ 2,872 $ 7 $ 2,879 $ 2,916 $ 15 $ 2,931 Intelligence and other federal government agencies 1,351 1,155 2,506 1,430 1,158 2,588 Commercial, state and local governments and international 23 104 127 20 102 122 Total $ 4,246 $ 1,266 $ 5,512 $ 4,366 $ 1,275 $ 5,641 -10- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Disaggregated revenues by contract type were as follows: Three Months Ended October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Cost reimbursement $ 1,148 $ 15 $ 1,163 $ 1,245 $ 28 $ 1,273 Time and materials ("T&M") 129 288 417 119 287 406 Firm-fixed price ("FFP") 162 124 286 151 146 297 Total $ 1,439 $ 427 $ 1,866 $ 1,515 $ 461 $ 1,976 Nine Months Ended October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Cost reimbursement $ 3,375 $ 48 $ 3,423 $ 3,464 $ 69 $ 3,533 Time and materials ("T&M") 387 856 1,243 430 819 1,249 Firm-fixed price ("FFP") 484 362 846 472 387 859 Total $ 4,246 $ 1,266 $ 5,512 $ 4,366 $ 1,275 $ 5,641 Disaggregated revenues by prime versus subcontractor were as follows: Three Months Ended October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Prime contractor to federal government $ 1,316 $ 352 $ 1,668 $ 1,384 $ 385 $ 1,769 Subcontractor to federal government 116 37 153 125 41 166 Other 7 38 45 6 35 41 Total $ 1,439 $ 427 $ 1,866 $ 1,515 $ 461 $ 1,976 Nine Months Ended October 31, 2025 November 1, 2024 Defense and Intelligence Civilian Total SAIC Defense and Intelligence Civilian Total SAIC (in millions) Prime contractor to federal government $ 3,854 $ 1,053 $ 4,907 $ 3,976 $ 1,062 $ 5,038 Subcontractor to federal government 369 109 478 370 111 481 Other 23 104 127 20 102 122 Total $ 4,246 $ 1,266 $ 5,512 $ 4,366 $ 1,275 $ 5,641 -11- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Contract Balances Contract balances for the periods presented were as follows: Balance Sheet line item October 31, 2025 January 31, 2025 (in millions) Billed and billable receivables, net (1) Receivables, net $ 554 $ 526 Contract assets - unbillable receivables Receivables, net 491 474 Contract assets - unbillable receivables Other assets 16 29 Contract assets - contract retentions Other assets 16 15 Contract liabilities - current Other accrued liabilities 24 38 Contract liabilities - non-current Other long-term liabilities 1 — (1) Net of allowance of $ 3 million as of October 31, 2025 and January 31, 2025. During the three and nine months ended October 31, 2025, the Company recognized revenues of $ 2 million and $ 27 million, respectively, relating to amounts that were included in the opening balance of contract liabilities as of January 31, 2025. During the three and nine months ended November 1, 2024, the Company recognized revenues of $ 3 million and $ 33 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 October 31, 2025, the Company had approximately $ 6.5 billion of RPO. The Company expects to recognize revenue on approximately 80 % of the RPO over the next 12 months and approximately 89 % over the next 24 months, with the remaining recognized thereafter. Note 4—Acquisitions: Acquisition of SilverEdge Government Solutions (“SilverEdge”) On October 15, 2025, the Company acquired SilverEdge, an innovative provider of mission-driven technology solutions and products, for a preliminary purchase price of $ 203 million, net of $ 6 million cash acquired, subject to post-closing adjustments. The acquisition advances the Company's strategy to provide mission focused, IP-based solutions and commercial products to its customers. The Company funded the transaction from increased borrowings (see Note 7—Debt Obligations for additional information) and cash on hand. As of October 31, 2025, the Company is in the process of obtaining the information required to complete the valuation and purchase price allocation related to this acquisition. The Company has preliminarily recorded goodwill and amortizable intangible assets of $ 109 million and $ 87 million, respectively. The goodwill is primarily associated with intellectual capital and an acquired assembled workforce. The intangible assets consist of customer relationships of $ 44 million, developed technology of $ 36 million, and backlog of $ 7 million that will be amortized over a period of thirteen years, eight years, and one year, respectively. -12- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 5—Goodwill and Intangible Assets: Goodwill The following table presents the carrying value of goodwill by reportable segment: October 31, 2025 January 31, 2025 (in millions) Defense and Intelligence $ 2,110 $ 2,001 Civilian 850 850 Total $ 2,960 $ 2,851 During the three months ended October 31, 2025, goodwill increased by $ 109 million in the Defense and Intelligence reportable segment due to the acquisition of SilverEdge (see Note 4—Acquisitions for additional information). 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: October 31, 2025 January 31, 2025 Gross carrying value Accumulated amortization Net carrying value Gross carrying value Accumulated amortization Net carrying value (in millions) Customer relationships $ 1,505 $ ( 773 ) $ 732 $ 1,462 $ ( 688 ) $ 774 Developed technology 46 ( 6 ) 40 10 ( 5 ) 5 Backlog 7 — 7 — — — Trade name — — — 1 ( 1 ) — Total intangible assets $ 1,558 $ ( 779 ) $ 779 $ 1,473 $ ( 694 ) $ 779 During the three months ended October 31, 2025, the gross carrying value of intangible assets increased by $ 87 million due to the acquisition of SilverEdge (see Note 4—Acquisitions for additional information). Amortization expense related to intangible assets was $ 29 million and $ 87 million for the three and nine months ended October 31, 2025 and November 1, 2024, respectively. There were no intangible asset impairment losses during the periods presented. As of October 31, 2025, the estimated future annual amortization expense related to intangible assets is as follows: Fiscal Year (in millions) Remainder of 2026 $ 32 2027 127 2028 106 2029 106 2030 103 Thereafter 305 Total $ 779 -13- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Actual amortization expense in future periods could differ from these estimates as a result of future acquisitions, divestitures, impairments, and other factors. Note 6—Income Taxes: The Company's effective income tax rate was 16.7 % and 5.2 % for the three and nine months ended October 31, 2025, respectively, and 15.6 % and 17.8 % for the three and nine months ended November 1, 2024, respectively. The effective tax rate for the three months ended October 31, 2025 increased compared to the same period last year primarily due to the impacts of the One Big Beautiful Bill Act (“the Act”). The effective tax rate for the nine months ended October 31, 2025 decreased compared to the same period last year primarily due to a $ 47 million benefit from an IRS audit settlement, pending final administrative approvals, covering fiscal years 2016 through 2019, and reductions in liabilities for uncertain tax positions for the remaining open tax years. Additionally, the Company’s effective tax rate further differs from the statutory tax rate due to research and development tax credits and tax benefits from employee share-based compensation. On July 4, 2025, 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. Note 7—Debt Obligations: The Company’s debt as of the dates presented was as follows: October 31, 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 — % — % $ — $ — $ — $ 1,122 $ ( 2 ) $ 1,120 Term Loan A Facility due September 2030 5.21 % 5.29 % 1,100 ( 4 ) 1,096 — — — Term Loan B3 Facility due February 2031 5.71 % 5.86 % 503 ( 3 ) 500 506 ( 3 ) 503 Senior Notes due April 2028 4.88 % 5.11 % 400 ( 2 ) 398 400 ( 3 ) 397 Senior Notes due November 2033 5.88 % 6.09 % 500 ( 7 ) 493 — — — Revolving Credit Facility due June 2027 — % — % — — — 200 — 200 Total debt $ 2,503 $ ( 16 ) $ 2,487 $ 2,228 $ ( 8 ) $ 2,220 Less current portion 12 — 12 313 — 313 Total debt, net of current portion $ 2,491 $ ( 16 ) $ 2,475 $ 1,915 $ ( 8 ) $ 1,907 Credit Facility As of October 31, 2025, the Company had a $ 2.6 billion secured credit facility (the "Credit Facility") consisting of a Term Loan A Facility due September 2030, a Term Loan B3 Facility due February 2031 (together, the "Term Loan Facilities"), and a $ 1.0 billion Revolving Credit Facility due September 2030 (the "Revolving Credit Facility"). On September 30, 2025, the Company executed the Eighth Amendment to the Third Amended and Restated Credit Agreement ("Eighth Amendment"), which established a new $ 1.1 billion senior secured term loan credit facility due on September 30, 2030 ("Term Loan A Facility due September 2030"). The entire Term Loan A Facility due September 2030 was immediately borrowed by the Company and the proceeds were used to pay in full the -14- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) outstanding principal balance and accrued interest under the Term Loan A Facility due June 2027, transaction related fees and expenses, and for general corporate purposes. The Term Loan A Facility due September 2030 is secured by substantially all of the assets of the Company and the Company’s wholly owned domestic subsidiaries, and is guaranteed by each of the Company’s wholly owned domestic subsidiaries. The Term Loan A Facility due September 2030 is subject to the same covenants and events of default as the Company’s existing term loans under the Credit Facility. Borrowings under the Term Loan A Facility due September 2030 amortize quarterly beginning on October 31, 2026 at 0.625 % of the original borrowed amount, with such quarterly amortization increasing to 1.25 % on October 31, 2027, and to 1.875 % on October 31, 2028, with the remaining unamortized balance due in full upon maturity. The Term Loan A Facility due September 2030 may be prepaid at any time without penalty and is subject to the same mandatory prepayments, including from excess cash flow, as the Company’s existing term loans under the Credit Facility. The Eighth Amendment also established a new $ 1.0 billion revolving credit facility with a termination date of September 30, 2030 ("Revolving Credit Facility due September 2030") that replaced the Revolving Credit Facility due June 2027. The Term Loan A Facility due September 2030 and the Revolving Credit Facility due September 2030 bear interest at a variable rate of interest equal to a base rate or a Secured Overnight Financing Rate (SOFR) rate, plus the applicable interest rate margin of 0 % to 0.75 % for base rate loans and 0.75 % to 1.75 % for SOFR rate loans, dependent on the Company’s leverage ratio. The Eighth Amendment eliminated the 0.10 % credit spread adjustment used in the calculation of SOFR rate loans on the Term Loan A Facility due 2027 and the Revolving Credit Facility due June 2027. During the nine months ended October 31, 2025, the Company made scheduled principal payments of $ 46 million on the Term Loan A Facility due June 2027. During the three months ended October 31, 2025, the Company made no scheduled principal payments on the Term Loan A Facility due June 2027 or the Term Loan A Facility due September 2030. During the three and nine months ended October 31, 2025, the Company made scheduled principal payments of $ 2 million and $ 4 million on the Term Loan B3 Facility due February 2031, respectively. During the three and nine months ended October 31, 2025, the Company borrowed $ 275 million and $ 1.6 billion, respectively, and repaid $ 595 million and $ 1.8 billion, respectively, under the Revolving Credit Facility due June 2027. During the three months ended October 31, 2025, the Company borrowed $ 320 million and repaid $ 320 million under the Revolving Credit Facility due September 2030. There was no balance outstanding on the Revolving Credit Facility as of October 31, 2025. 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 October 31, 2025, the Company was in compliance with the covenants under its Credit Facility. Senior Notes On September 25, 2025, the Company issued $ 500 million of unsecured 5.875 % Senior Notes due 2033 ("Senior Notes due November 2033") through a private offering. Proceeds received from the offering were used to repay all indebtedness outstanding under the Revolving Credit Facility due June 2027 and fees and expenses from the offering, with remaining proceeds to be used for general corporate purposes, including working capital to fund growth and strategic projects and transactions. The Senior Notes due November 2033 were issued pursuant to an indenture, dated September 25, 2025, and are the senior unsecured obligations of the Company and are fully and unconditionally guaranteed by each of the Company’s existing and future domestic subsidiaries that guarantee the Company’s obligations under its credit facilities and certain other indebtedness. Interest is payable semi annually on May 1 and November 1 of each year, commencing on May 1, 2026. The principal is due on November 1, 2033. At any time prior to November 1, 2028, the Company may redeem some or all of the Senior Notes due November 2033 at a price equal to 100 % of the principal amount, plus accrued and unpaid interest, plus an applicable “make-whole premium.” On or after November 1, 2028, the Company may redeem in whole or in part the Senior Notes due November 2033 at set redemption prices, plus accrued and unpaid interest. At any time on or prior to November 1, 2028, the Company may redeem up to 40 % of the original aggregate principal amount of the Senior Notes due -15- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) November 2033 with the net cash proceeds from certain equity offerings at a redemption price equal to 105.875 % of the outstanding principal amount, together with accrued and unpaid interest. Upon the occurrence of certain events constituting a change of control, the Company may be required to make an offer to repurchase all of the Senior Notes due November 2033 then outstanding at a price equal to 101 % of the principal amount thereof, plus accrued and unpaid interest. The Company incurred $ 12 million of debt issuance costs associated with the Eighth Amendment and the Senior Notes due November 2033, of which $ 1 million was recognized in interest expense and the remaining $ 11 million deferred and amortized to interest expense through the maturity date of the facility utilizing the effective interest rate method. As of October 31, 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 October 31, 2025 are: Fiscal Year Total (in millions) Remainder of 2026 $ 1 2027 19 2028 31 2029 489 2030 88 Thereafter 1,875 Total principal payments $ 2,503 Note 8—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 Pay Fixed Rate Receive Variable Rate Settlement and Termination October 31, 2025 January 31, 2025 (in millions) Interest rate swaps 2.96 % 1-month Term SOFR Monthly through October 31, 2025 $ — $ 6 (1) The fair value of the fixed interest rate swap asset is included in "Other assets" on the condensed consolidated balance sheets. On October 31, 2025, the Company's interest rate swaps expired. Through October 31, 2025, the Company was party to fixed interest rate swap instruments with a notional value of $ 685 million that were 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 were financial institutions. See Note 9—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. -16- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 9—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 8—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 October 31, 2025 Balance at August 1, 2025 $ 1 $ 8 $ 9 Other comprehensive income before reclassifications — — — Amounts reclassified from accumulated other comprehensive income ( 2 ) — ( 2 ) Income tax impact 1 — 1 Net other comprehensive loss ( 1 ) — ( 1 ) Balance at October 31, 2025 $ — $ 8 $ 8 Three months ended November 1, 2024 Balance at August 2, 2024 $ 6 $ 5 $ 11 Other comprehensive income before reclassifications 3 — 3 Amounts reclassified from accumulated other comprehensive income ( 4 ) — ( 4 ) Income tax impact — — — Net other comprehensive loss ( 1 ) — ( 1 ) Balance at November 1, 2024 $ 5 $ 5 $ 10 Nine months ended October 31, 2025 Balance at January 31, 2025 $ 4 $ 8 $ 12 Other comprehensive income before reclassifications 1 — 1 Amounts reclassified from accumulated other comprehensive income ( 7 ) — ( 7 ) Income tax impact 2 — 2 Net other comprehensive loss ( 4 ) — ( 4 ) Balance at October 31, 2025 $ — $ 8 $ 8 Nine months ended November 1, 2024 Balance at February 2, 2024 $ 11 $ 5 $ 16 Other comprehensive income before reclassifications 5 — 5 Amounts reclassified from accumulated other comprehensive income ( 12 ) — ( 12 ) Income tax impact 1 — 1 Net other comprehensive loss ( 6 ) — ( 6 ) Balance at November 1, 2024 $ 5 $ 5 $ 10 (1) The amount reclassified from accumulated other comprehensive income (loss) is included in "Interest expense, net. " -17- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 10—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 nine months ended October 31, 2025, the Company incurred purchase discount fees of approximately $ 3 million and $ 10 million, respectively. During the three and nine months ended November 1, 2024, the Company incurred purchase discount fees of $ 4 million and $ 11 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: Nine Months Ended October 31, 2025 November 1, 2024 (in millions) Beginning balance $ 164 $ 205 Sale of receivables 3,342 3,216 Cash collections ( 3,256 ) ( 3,121 ) Outstanding balance sold to Purchaser (1) 250 300 Cash collected, not remitted to Purchaser (2) ( 58 ) ( 67 ) Remaining sold receivables $ 192 $ 233 (1) For the nine months ended October 31, 2025 and November 1, 2024, the Company recorded a net increase of $ 86 million and $ 95 million, respectively, 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 October 31, 2025 and November 1, 2024. This balance is included in "Accounts payable" on the condensed consolidated balance sheets. Note 11—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 Interim 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 DoW 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. -18- 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 October 31, 2025 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 1,439 $ 427 $ — $ 1,866 Labor base 423 127 — 550 Other operating expenses (income) (1) 898 238 ( 3 ) 1,133 Adjusted operating income (loss) $ 118 $ 62 $ 3 $ 183 Three Months Ended November 1, 2024 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 1,515 $ 461 $ — $ 1,976 Labor base 423 127 — 550 Other operating expenses (income) (1) 944 285 2 1,231 Adjusted operating income (loss) $ 148 $ 49 $ ( 2 ) $ 195 Nine Months Ended October 31, 2025 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 4,246 $ 1,266 $ — $ 5,512 Labor base 1,264 384 — 1,648 Other operating expenses (income) (1) 2,625 714 2 3,341 Adjusted operating income (loss) $ 357 $ 168 $ ( 2 ) $ 523 Nine Months Ended November 1, 2024 Defense and Intelligence Civilian Corporate Total SAIC (in millions) Revenues $ 4,366 $ 1,275 $ — $ 5,641 Labor base 1,255 381 — 1,636 Other operating expenses (income) (1) 2,715 753 8 3,476 Adjusted operating income (loss) $ 396 $ 141 $ ( 8 ) $ 529 (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. -19- 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 nine months ended October 31, 2025 and November 1, 2024. Three Months Ended Nine Months Ended October 31, 2025 November 1, 2024 October 31, 2025 November 1, 2024 (in millions) Adjusted operating income $ 183 $ 195 $ 523 $ 529 Depreciation of property, plant, and equipment 9 6 22 17 Amortization of intangible assets 29 29 87 87 Acquisition, integration, restructuring and impairment costs 1 — 5 2 Recovery of acquisition, integration, restructuring and impairment costs (1) — — ( 2 ) ( 2 ) Costs related to the settlement of federal tax audits — — 7 — Executive transition costs, net of recoveries 16 — 16 — Interest expense, net 33 32 94 97 Other (income) expense, net 1 2 6 7 Income before income taxes $ 94 $ 126 $ 288 $ 321 (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 12—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, -20- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 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 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 October 31, 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 October 31, 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. Note 13—Subsequent Events: Business Reorganization On November 13, 2025, the Company announced a strategic reorganization, effective January 31, 2026, the first day of fiscal 2027, that will consolidate the Company's five business groups into three . The Company is currently evaluating the impact of the reorganization on its segment reporting. The Company's Innovation Factory will be more closely aligned with the three business groups and markets it serves. Quarterly Dividend Declared On December 2, 2025, the Company's Board of Directors declared a quarterly dividend of $ 0.37 per share of the Company's common stock payable on January 28, 2026 to stockholders of record on January 14, 2026. -21- Table of Contents SCIENCE APPLICATIONS INTERNATIONAL CORPORATION