The Washington Post

SAIC sees revenue drop but profits rise

Tony Moraco, chief executive of the new Science Applications International Corp. Sales at SAIC declined in the first quarter of 2014 but profits rose, the company said. (Jeffrey MacMillan/The Washington Post)

Sales at the new Science Applications International Corp. declined in the first quarter but profits rose as a drop in defense business was offset by the absence of restructuring costs this year, the company said Tuesday.

Revenue at the McLean-based government services contractor dropped by 14 percent compared with the previous quarter, to $977 million (or $962 million excluding revenue from former parent company SAIC).

Profits were up to $34 million for the first quarter, or 71 cents a share, compared with $33 million a year ago, or 69 cents a share. The company’s operating income was also up to $59 million, compared with $52 million the previous year.

SAIC is the spin-off created by the split of the original company in 2013. The parent company, renamed Leidos, reported lower first-quarter revenue and profits last week. Since the split, SAIC has surprised industry analysts by outperforming Reston-based Leidos, which walked away with the company’s more-promising business units and an established leadership team.

“SAIC started the year well with revenue and operating income consistent with last quarter and strong operating cash flow performance,” Tony Moraco, SAIC’s chief executive, said in a statement. “We continue to pursue efforts aligned with our strategy to protect and incrementally expand our revenue base while improving our operating margins.”

The drop in revenue resulted primarily from the loss of a 2012 contract with the Defense Information Systems Agency, called the DISN Global Solutions program, the company said. Reduction in defense business and overseas military activity also led to lower revenue, SAIC said.

In a call with investors, Moraco said the company was seeing more business from federal civilian agencies compared with the Defense Department. SAIC’s biggest civilian clients include the Department of Homeland Security and NASA, he said.

The contractor has been awarded a seven-year, $22 billion contract with DHS to provide information technology support to the agency. Before the company’s split, SAIC was also selected to work on a NASA Human Health and Performance contract. That award was recently overturned after the Government Accountability Office upheld a competitor’s protest that argued SAIC wasn’t entitled to work bid by the former combined company.

The space agency has since decided to re-open the contract to new bids. In a statement, SAIC said it was “disappointed and quite frankly disagreed” with the GAO’s decision. However, the company plans to review the new contract requirements and “look for the opportunity to provide NASA with the expertise and full capabilities from SAIC and our teammates.”

SAIC shares were trading 2 percent higher when markets opened.

Amrita Jayakumar covers national startups, small business issues and entrepreneurship.



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