What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-31 compared with 2026-06-01 · 113 added, 57 removed, 245 unchanged (41% of the section changed)

26 unchanged sentences

The reorganization was designed to simplify our organization structure and optimize operations and customer focus for growth.

The consolidated business groups will be led by three Executive Vice Presidents.

The three business groups will continue to report directly to our Chief Executive Officer (“CEO”), the chief operating decision maker (“CODM”).

The consolidated business groups are led by three Executive Vice Presidents.

The three business groups report directly to our Chief Executive Officer (“CEO”), the chief operating decision maker (“CODM”).

The reorganization did not have an impact on our reportable segments.

We now have three customer facing business groups which are also our operating segments.

We have three customer facing business groups which are also our operating segments.

They 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.

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Economic Opportunities, Challenges, and Risks

During the three months ended May 1, 2026, we generated 97% of our revenues from contracts with the U.S.

During the three and six months ended July 31, 2026, we generated 97% of our revenues from contracts with the U.S.

government, including subcontracts on which we perform.

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The following table summarizes our condensed consolidated results of operations:

Three Months Ended

change May 2,

Three Months Ended Six Months Ended

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2025 July 31,

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(dollars in millions)

3 unchanged sentences

Selling, general and administrative expenses

87 16 % 75 170 4 % 164

Other operating (income) expense

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$ 102 (20 %) $ 127 $ 217 11 % $ 195

Revenues increased $29 million for the three months ended May 1, 2026 as compared to the same period in the prior year primarily due to revenues from the acquisition of SilverEdge Government Solutions ("SilverEdge") of $19 million and ramp up in volume on existing and new contracts, partially offset by contract completions.

Adjusting for the acquisition of SilverEdge, revenues grew by approximately 0.5%.

Revenues increased $111 million for the three months ended July 31, 2026 as compared to the same period in the prior year primarily due to ramp up in volume on existing and new contracts and from the acquisition of SilverEdge Government Solutions ("SilverEdge") of $20 million, partially offset by contract completions.

Adjusting for the impact of acquisitions, revenues grew by approximately 5.3%.

Revenues increased $140 million for the six months ended July 31, 2026 as compared to the same period in the prior year primarily due to ramp up in volume on existing and new contracts and from the acquisition of SilverEdge of $39 million, partially offset by contract completions.

Adjusting for the impact of acquisitions, revenues grew by approximately 2.9%.

Operating Income.

Operating income as a percentage of revenues for the three months ended May 1, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio and a $12 million gain from the sale of an investment in the current year.

Operating income as a percentage of revenues for the three months ended July 31, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio and costs related to the settlement of federal tax audits in the prior year, partially offset by higher selling, general and administrative expenses, including recovery of costs from the settlement of a patent infringement matter in the prior year.

Operating income as a percentage of revenues for the six months ended July 31, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio and a $12 million gain from the sale of an investment in the current year, partially offset by recovery of costs from the settlement of a patent infringement matter in the prior year.

Income Taxes.

Our effective income tax rate was 20.9% and 20.6% for the three months ended May 1, 2026 and May 2, 2025, respectively.

The rate for both periods was below our combined federal and state statutory tax rate, primarily due to research and development tax credits and the tax deduction for foreign-derived deduction eligible income.

Our effective income tax rate was 14.2% and 17.9% for the three and six months ended July 31, 2026, respectively, and was (17.2)% and (0.4)% for the three and six months ended August 1, 2025, respectively.

The effective tax rates for the prior year periods reflected a $47 million tax benefit related to the settlement of an IRS audit covering fiscal years 2016 through 2019.

For the three and six months ended July 31, 2026, our effective tax rates were lower than the combined federal and state statutory tax rates, primarily due to research and development tax credits and the tax deduction for foreign-derived deduction eligible income.

On July 4, 2025, the One Big Beautiful Bill Act (“the Act”) was enacted, introducing several significant changes to U.S.

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Accordingly, the estimated impacts of the Act are subject to change as we complete our analysis.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Segment and Corporate Results

The primary financial performance measures we use to manage our reportable segments and monitor results of operations are revenues and adjusted operating income.

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.

Adjusted operating income is calculated by taking operating income and excluding amortization of intangible assets, depreciation of property, plant, and equipment, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs.

The following tables summarize our results of operations by reportable segment:

Defense and Intelligence Three Months Ended

change May 2,

Defense and Intelligence Three Months Ended Six Months Ended

change August 1,

2025 July 31,

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(dollars in millions)

3 unchanged sentences

As a percentage of revenues 9.5 % 9.0 % 9.7 % 8.5 %

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Revenues increased $33 million for the three months ended May 1, 2026 as compared to the same period in the prior year primarily due to revenues from the acquisition of SilverEdge of $19 million and ramp up in volume on existing and new contracts, partially offset by contract completions.

Revenues increased $75 million for the three months ended July 31, 2026 as compared to the same period in the prior year primarily due to ramp up in volume on existing and new contracts and from the acquisition of SilverEdge of $20 million, partially offset by contract completions.

Revenues increased $108 million for the six months ended July 31, 2026 as compared to the same period in the prior year primarily due to ramp up in volume on existing and new contracts and from the acquisition of SilverEdge of $39 million, partially offset by contract completions.

Adjusted operating income.

Adjusted operating income as a percentage of revenues for the three months ended May 1, 2026 increased compared to the comparable prior year period primarily due to improved profitability and timing and volume mix in our contract portfolio, partially offset by contract completions.

Three Months Ended

change May 2,

Adjusted operating income as a percentage of revenues for the three and six months ended July 31, 2026 increased compared to the same periods in the prior year primarily due to improved profitability across our contract portfolio.

Three Months Ended Six Months Ended

change August 1,

2025 July 31,

change August 1,

(dollars in millions)

3 unchanged sentences

As a percentage of revenues 13.0 % 13.7 % 14.2 % 12.6 %

Revenues decreased $4 million for the three months ended May 1, 2026 as compared to the same period in the prior year primarily due to contract completions, partially offset by new contracts.

Revenues increased $36 million and $32 million for the three and six months ended July 31, 2026, respectively, as compared to the same periods in the prior year primarily due to ramp up in volume on existing and new contracts, partially offset by contract completions.

Adjusted operating income.

Adjusted operating income as a percentage of revenues for the three months ended May 1, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio.

Three Months Ended

change May 2,

Adjusted operating income as a percentage of revenues for the three months ended July 31, 2026 decreased from the same period in the prior year primarily due to timing and volume mix in our contract portfolio.

Adjusted operating income as a percentage of revenues for the six months ended July 31, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio.

Three Months Ended Six Months Ended

change August 1,

2025 July 31,

change August 1,

(dollars in millions)

Adjusted operating income (loss) $ (3) (175 %) $ 4 $ 4 180 % $ (5)

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Adjusted operating income (loss).

Adjusted operating income was $7 million for the three months ended May 1, 2026, compared to an adjusted operating loss of $9 million during the same period in the prior year primarily due to a gain on an investment sale of $12 million in the current year and lower selling, general and administrative expenses.

Adjusted operating loss was $3 million for the three months ended July 31, 2026, compared to an adjusted operating income of $4 million during the same period in the prior year primarily due to higher selling, general and administrative expenses, including recovery of costs from the settlement of a patent infringement matter in the prior year.

Adjusted operating income was $4 million for the six months ended July 31, 2026, compared to an adjusted operating loss of $5 million during the same period in the prior year primarily due to a $12 million gain from the sale of an investment in the current year, partially offset by higher selling, general and administrative expenses, including recovery of costs from the settlement of a patent infringement matter in the prior year.

Non-GAAP Measures

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Adjusted operating income is a performance measure that primarily excludes the impact of non-recurring transactions and activities that we do not consider to be indicative of our ongoing operating performance.

Depreciation of property, plant, and equipment relates to property, plant, and equipment specifically identifiable for each segment.

Adjusted operating income excludes amortization of intangible assets because we do not have a history of significant acquisition activity, we do not acquire businesses on a predictable cycle, and the amount of an acquisition's purchase price allocated to intangible assets and the related amortization term are unique to each acquisition.

Acquisition, integration, restructuring and impairment costs represent costs incurred related to acquisitions, the reorganization, facilities optimization efforts, and impairments of long-lived assets, along with associated depreciation.

EBITDA and Adjusted EBITDA.

EBITDA is a performance measure that is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA is a performance measure that excludes the impact of non-recurring transactions and activities that we do not consider to be indicative of our ongoing operating performance.

Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition, integration, restructuring and impairment costs, and any other material non-recurring costs.

Acquisition, integration, restructuring and impairment costs.

Acquisition and integration costs represent costs incurred related to our acquisitions and subsequent integration with acquired businesses.

Restructuring and impairment costs represent costs incurred related to internal reorganizations and initiatives (e.g., Project Orbit), facilities optimization efforts, and impairments of long-lived assets, along with associated depreciation.

Recovery of acquisition, integration, restructuring and impairment costs.

Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards.

Costs related to the settlement of federal tax audits.

Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019 .

Gain on divestitures, net of transaction costs.

The gain on divestitures includes gains recognized related to divestitures, net of transaction costs.

We believe that these performance measures provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

We believe that this performance measure provides management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.

Adjusted operating income for the periods presented were calculated as follows:

Three Months Ended

Three Months Ended Six Months Ended

2026 August 1,

2025 July 31,

2026 August 1,

(dollars in millions)

1 unchanged sentence

Operating income

$ 152 $ 139 $ 331 $ 260

Operating income as a percentage of revenues

8.1 % 7.9 % 8.7 % 7.1 %

Depreciation of property, plant and equipment

2 unchanged sentences

Recovery of acquisition, integration, restructuring and impairment costs

(1) — (2) (2)

Costs related to the settlement of federal tax audits

Gain on divestitures, net of transaction costs

Adjusted operating income

$ 191 $ 182 $ 412 $ 340

Adjusted operating income as a percentage of revenues

(1) Adjustment reflects the portion of acquisition, integration, restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

EBITDA and Adjusted EBITDA.

EBITDA is a performance measure that is calculated by taking net income and excluding interest and loss on sale of receivables, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA is a performance measure that excludes the impact of non-recurring transactions and activities that we do not consider to be indicative of our ongoing operating performance.

Adjusted EBITDA is calculated by taking EBITDA and excluding acquisition, integration, restructuring and impairment costs, and any other material non-recurring costs.

Recovery of acquisition, integration, restructuring and impairment costs represents costs recovered through our indirect rates in accordance with Cost Accounting Standards.

Costs related to the settlement of federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019 .

We believe that EBITDA and adjusted EBITDA provide management and investors with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding our long-term financial performance.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

10.2 % 10.3 % 10.9 % 9.3 %

EBITDA and adjusted EBITDA for the periods presented were calculated as follows:

Three Months Ended

Three Months Ended Six Months Ended

2026 August 1,

2025 July 31,

2026 August 1,

(dollars in millions)

3 unchanged sentences

Income tax expense (benefit)

17 (19) 47 (1)

Depreciation and amortization 39 35 79 71

3 unchanged sentences

Recovery of acquisition, integration, restructuring and impairment costs

(1) — (2) (2)

Costs related to the settlement of federal tax audits

Gain on divestitures, net of transaction costs

Adjusted EBITDA $ 193 $ 185 $ 415 $ 342

Adjusted EBITDA as a percentage of revenues 10.3 % 10.5 % 11.0 % 9.4 %

(1) Adjustment reflects the portion of acquisition, integration, restructuring and impairment costs recovered through our indirect rates in accordance with U.S.

government Cost Accounting Standards.

Adjusted operating income and adjusted EBITDA as a percentage of revenues for the three months ended May 1, 2026 increased compared to the same period in the prior year due to improved profitability across our contract portfolio, a $12 million gain from the sale of an investment in the current year, and lower selling, general and administrative expenses.

Adjusted operating income and adjusted EBITDA as a percentage of revenues for the three months ended July 31, 2026 decreased compared to the same period in the prior year primarily due to higher selling, general and administrative expenses, including recovery of costs from the settlement of a patent infringement matter in the prior year, partially offset by improved profitability across our contract portfolio.

Adjusted operating income and adjusted EBITDA as a percentage of revenues for the six months ended July 31, 2026 increased compared to the same period in the prior year due to improved profitability across our contract portfolio and a $12 million gain from the sale of an investment in the current year, partially offset by higher selling, general and administrative expenses, including recovery of costs from the settlement of a patent infringement matter in the prior year.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Other Key Performance Measures

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Funded backlog for contracts with non-government customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on these contracts.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

• Negotiated Unfunded Backlog.

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The estimated value of our total backlog as of the dates presented was:

May 1, 2026 January 30, 2026

July 31, 2026 January 30, 2026

Defense and Intelligence

4 unchanged sentences

Total backlog $ 18,133 $ 4,003 $ 22,136 $ 18,380 $ 4,242 $ 22,622

We had net bookings worth an estimated $2.1 billion during the three months ended May 1, 2026.

We had net bookings worth an estimated $1.2 billion and $3.3 billion during the three and six months ended July 31, 2026, respectively.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Contract Types.

3 unchanged sentences

Three Months Ended

July 31, 2026

August 1, 2025

Defense and Intelligence

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Total 100 % 100 % 100 % 100 % 100 % 100 %

Six Months Ended

July 31, 2026

August 1, 2025

Defense and Intelligence

Cost reimbursement 78 % 2 % 61 % 79 % 4 % 62 %

Time and materials ("T&M")

10 % 68 % 23 % 9 % 68 % 23 %

Firm-fixed price ("FFP")

12 % 30 % 16 % 12 % 28 % 15 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

Cost of Revenues Mix.

2 unchanged sentences

Contracts performed with a higher proportion of SAIC labor are generally more profitable.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

The following table presents cost mix as a percentage of each reportable segment and total SAIC revenues for the periods presented:

Three Months Ended

July 31, 2026

August 1, 2025

Defense and Intelligence

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Total 100 % 100 % 100 % 100 % 100 % 100 %

Six Months Ended

July 31, 2026

August 1, 2025

Defense and Intelligence

Labor-related cost of revenues 57 % 58 % 57 % 59 % 59 % 59 %

Subcontractor-related cost of revenues 28 % 29 % 28 % 29 % 32 % 30 %

Other materials-related cost of revenues 15 % 13 % 15 % 12 % 9 % 11 %

Total 100 % 100 % 100 % 100 % 100 % 100 %

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Liquidity and Capital Resources

As a services provider, our business generally requires minimal infrastructure investment.

We expect to fund our ongoing working capital, commitments and any other discretionary investments with cash on hand, future operating cash flows and, if needed, borrowings under our $1.0 billion Revolving Credit Facility and $300 million Master Accounts Receivable Purchase Agreement ("MARPA Facility") Facility.

Subsequent to quarter end, on August 14, 2026, we amended the MARPA to increase the aggregate facility limit from $300 million to $400 million.

We anticipate that our future cash needs will be for working capital, capital expenditures, and contractual and other commitments.

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The following table summarizes our cash flows:

Three Months Ended

Six Months Ended

2026 August 1,

(in millions)

Net cash provided by operating activities $ 273 $ 222

Net cash provided by (used in) investing activities

Net cash used in investing activities

Net cash used in financing activities (315) (208)

1 unchanged sentence

Net Cash Provided by Operating Activities.

Cash flows provided by operating activities for the three months ended May 1, 2026 increased $27 million compared to the prior year primarily due to timing of vendor payments, lower cash incentive-based compensation payments, and other changes in working capital, partially offset by lower cash inflows from the usage of the MARPA Facility and higher interest paid in the current year.

Net Cash Provided by (Used in) Investing Activities.

Cash provided by investing activities for the three months ended May 1, 2026 was $1 million compared to cash used in investing activities of $15 million in the prior year period, primarily due to proceeds from the sale of investments in the current year.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Cash flows provided by operating activities for the six months ended July 31, 2026 increased $51 million compared to the prior year period primarily due to timing of vendor payments, lower cash incentive-based compensation payments, and other changes in working capital, partially offset by lower cash inflows from the usage of the MARPA Facility, timing of customer collections, and higher interest paid on our debt.

Net Cash Used in Investing Activities.

Cash used in investing activities for the six months ended July 31, 2026 decreased $8 million compared to the prior year period primarily due to proceeds from the sale of investments in the current year, partially offset by higher cash paid for capital expenditures.

Net Cash Used in Financing Activities.

Cash used in financing activities for the three months ended May 1, 2026 increased $107 million compared to the prior year period primarily due to lower proceeds from borrowings, net of lower principal payments, and higher plan share repurchases in the current year.

Cash used in financing activities for the six months ended July 31, 2026 increased $107 million compared to the prior year period primarily due to lower proceeds from borrowings, net of lower principal payments, and higher plan share repurchases in the current year.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates during the three months ended May 1, 2026 from those disclosed in our most recently filed Annual Report on Form 10-K.

There have been no changes to our critical accounting policies and estimates during the six months ended July 31, 2026 from those disclosed in our most recently filed Annual Report on Form 10-K.

SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

Recently Issued But Not Yet Adopted Accounting Pronouncements

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis