Science Applications International Corp

Previous wording

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, 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.

Current wording

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.

Previous wording

Our Innovation Factory supports the operating segments by developing superior enterprise-class solutions which are delivered to the our customers as stand-alone solutions or integrated with and aligned to 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, and cyber. It uses a highly automated, cloud-hosted tool set to rapidly build, test and deploy solutions quickly and works with customers to enhance solutions going forward.

Current wording

Our Innovation Factory supports the operating segments by developing superior enterprise-class solutions which are delivered to the our customers as stand-alone solutions or integrated with and aligned to 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, 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.

Previous wording

During the three months ended May 3, 2024, we generated 98% of our revenues from contracts with the U.S. government, including subcontracts on which we perform. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government. Appropriations measures passed in December 2022 provided full funding for the federal government through the end of government fiscal year ("GFY") 2023. In March 2024, the President signed appropriation measures that provide funding for GFY 2024 for all of the U.S. government and submitted the GFY 2025 budget request which adheres to the Fiscal Responsibility Act of 2023. The GFY 2025 budget includes 1% growth for defense budgets and an overall 1% growth for non-defense budgets. If Congress is not able to pass the GFY 2025 funding measures by the end of September 2024, it could result in the U.S. government operating on a continuing resolution or could potentially lead to a partial or full government shutdown.

Current wording

During the three and six months ended August 2, 2024, we generated 98% of our revenues from contracts with the U.S. government, including subcontracts on which we perform. Our business performance is affected by the overall level of U.S. government spending and the alignment of our offerings and capabilities with the budget priorities of the U.S. government. In March 2024, the President signed appropriation measures that provide funding for GFY 2024 for all of the U.S. government and submitted the GFY 2025 budget request which adheres to the Fiscal Responsibility Act of 2023. The GFY 2025 budget includes 1% growth for defense budgets and an overall 1% growth for non-defense budgets. If Congress is not able to pass the GFY 2025 funding measures by the end of September 2024, it could result in the U.S. government operating on a continuing resolution or could potentially lead to a partial or full government shutdown.

Previous wording

We succeed as a business based on the solutions we deliver, our past performance, and our ability to compete on price. Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best capabilities available. Our Innovation Factory develops superior enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings to meet complex customer needs and accelerate the digital transformation. Our past performance was achieved by employees dedicated to supporting our customers' most challenging missions. Our current cost structure and

Current wording

We succeed as a business based on the solutions we deliver, our past performance, and our ability to compete on price. Our solutions are inspired through innovation based on adoption of best practices and technology integration of the best capabilities available. Our Innovation Factory develops superior enterprise-class solutions which are delivered to our customers as stand-alone solutions or integrated with and aligned to our product offerings to meet complex customer needs and accelerate the digital transformation. Our past performance was achieved by employees dedicated to supporting our customers' most challenging missions. Our current cost structure and ongoing efforts to reduce costs by strategic sourcing and developing repeatable offerings sold "as a service" and as

Previous wording

ongoing efforts to reduce costs by strategic sourcing and developing repeatable offerings sold "as a service" and as managed services in a more commercial business model are expected to allow us to compete effectively on price in an evolving environment. Our ability to be competitive in the future will continue to be driven by our reputation for successful program execution, competitive cost structure, development of new pricing and business models, and efficiencies in assigning the right people, at the right time, in support of our contracts.

Current wording

managed services in a more commercial business model are expected to allow us to compete effectively on price in an evolving environment. Our ability to be competitive in the future will continue to be driven by our reputation for successful program execution, competitive cost structure, development of new pricing and business models, and efficiencies in assigning the right people, at the right time, in support of our contracts.

Previous wording

Revenues. Revenues decreased $181 million for the three months ended May 3, 2024 as compared to the same period in the prior year primarily due to the sale of the Supply Chain Business ($188 million) in the prior year (see Note 4—Divestitures to the condensed consolidated financial statements), and contract completions. This was partially offset byramp up in volume on existing and new contracts. Adjusting for the impact of the divestiture, revenues grew 0.4%.

Current wording

Revenues decreased $147 million for the six months ended August 2, 2024 as compared to the same period in the prior year primarily due to the sale of the Supply Chain Business ($188 million) in the prior year (see Note 4—Divestitures to the condensed consolidated financial statements), and contract completions. This was partially offset by ramp up in volume on existing and new contracts. Adjusting for the impact of the divestiture, revenues grew 1.1%.

Previous wording

Operating Income. Operating income as a percentage of revenues for the three months ended May 3, 2024 decreased from the comparable prior year period primarily due to the sale of the Supply Chain Business in the prior year.

Current wording

Operating Income. Operating income as a percentage of revenues for the three months ended August 2, 2024 decreased from the comparable prior year period prim arily due to the gain on the sale of the Supply Chain Business ($234 million) in the prior year period, and contract completions, partially offset by ramp up in volume on existing and new contracts.

Previous wording

Operating Income. Operating income as a percentage of revenues for the three months ended May 3, 2024 decreased from the comparable prior year period primarily due to sale of the Supply Chain Business in the prior year, a gain recognized from the deconsolidation of FSA in the prior year period, and contract completions, partially offset byramp up in volume on existing and new contracts.

Current wording

Operating income as a percentage of revenues for the six months ended August 2, 2024 decreased from the comparable prior year period primarily due to the gain on the sale of the Supply Chain Business ($233 million) in the prior year, a gain recognized from the deconsolidation of FSA ($7 million), and contract completions, partially offset by ramp up in volume on existing and new contracts.

Previous wording

Income Taxes. Our effective income tax rate was 19.0% and 20.0% for the three months ended May 3, 2024 and May 5, 2023, respectively. Our effective tax rate for the three months ended May 3, 2024, is lower compared to the effective tax rate from the same period in the prior year primarily due to higher tax benefits from the deduction for foreign-derived intangible income.

Current wording

Income Taxes. Our effective income tax rate was 19.6% and 19.3% for the three and six months ended August 2, 2024, respectively, and 26.4% and 24.7% for the three and six months ended August 4, 2023, respectively. Our effective tax rate differs from the statutory tax rate primarily due to the deduction for foreign derived intangible income, research and development tax credits, and stock-based compensation windfalls.

Previous wording

Revenues: Revenues decreased $161 million for the three months ended May 3, 2024 as compared to the same period in the prior year primarily due to the sale of the Supply Chain Business ($188 million) in the prior year, and contract completions. This was partially offset by ramp up in volume on existing and new contracts. Adjusting for the impact of the divestiture, revenues grew 1.9%.

Current wording

Revenues decreased $135 million for the six months ended August 2, 2024 as compared to the same period in the prior year primarily due to the sale of the Supply Chain Business ($188 million) in the prior year, and contract completions. This was partially offset by ramp up in volume on existing and new contracts. Adjusting for the impact of the divestiture, revenues grew 1.9%.

Previous wording

Revenues: Revenues decreased $20 million for the three months ended May 3, 2024 as compared to the same period in the prior year primarily due to reduced volume partially offset by new contracts.

Current wording

Revenues decreased $12 million for the six months ended August 2, 2024 as compared to the same period in the prior year primarily due to reduced volume on existing contracts, partially offset by new contracts.

Previous wording

Operating Income. Operating income as a percentage of revenues for the three months ended May 3, 2024 decreased from the comparable prior year period primarily due to reduced volume.

Current wording

Operating income as a percentage of revenues for the six months ended August 2, 2024 decreased from the comparable prior year primarily due to reduced volume on existing contracts.

Previous wording

Operating Loss. Operating loss increased $1 million for the three months ended May 3, 2024 as compared to the same period in the prior year primarily due to the gain recognized from the deconsolidation of FSA in the prior year period, partially offset by lower selling, general and administrative expenses.

Current wording

Operating (Loss) Income: Operating loss increased $220 million for the three months ended August 2, 2024 as compared to the same period in the prior year primarily due to the gain recognized from the divestiture of the Supply Chain Business in the prior year period ($234 million), partially offset by lower selling, general and administrative expenses.

Previous wording

Adjusted EBITDA as a percentage of revenues for the three months ended May 3, 2024 decreased to 9.0% from 9.3% in the prior year period, primarily due to contract completions, partially offset byramp up in volume on existing and new contracts.

Current wording

Adjusted EBITDA as a percentage of revenues for the three and six months ended August 2, 2024 decreased compared to the same periods in the prior year primarily due to contract completions, partially offset by ramp up in volume on existing and new contracts.

Previous wording

We had net bookings worth an estimated $2.6 billion during the three months ended May 3, 2024.

Current wording

We had net bookings worth an estimated $1.2 billion and $3.8 billion during the three and six months ended August 2, 2024.

Previous wording

The change in contract mix for the three months ended May 3, 2024 is primarily due to a decrease in firm-fixed price type contracts due to the divestiture of the Supply Chain Business in the prior year, which historically had a higher proportion of these contracts.

Current wording

The change in contract mix for the six months ended August 2, 2024 is primarily due to a decrease in firm-fixed price type contracts due to the divestiture of the Supply Chain Business in the prior year, which historically had a higher proportion of these contracts.

Previous wording

The change in cost of revenues mix for the three months ended May 3, 2024 is primarily due to a decrease in supply chain materials-related costs due to the divestiture of the Supply Chain Business in the prior year.

Current wording

The change in cost of revenues mix for the six months ended August 2, 2024 is primarily due to a decrease in supply chain materials-related costs due to the divestiture of the Supply Chain Business in the prior year.

Previous wording

Cash Flows Provided by Operating Activities. Cash flows provided by operating activities increased $16 million for the three months ended May 3, 2024 as compared to the prior year primarily due to the higher cash provided by the Master Accounts Receivable Purchase Agreement ("MARPA Facility") in the current year (see Note 10—Sales of Receivables to the condensed consolidated financial statements contained within this report for additional information), partially offset by higher incentive-based compensation payments in the current year and other changes in working capital.

Current wording

Net Cash Provided by Operating Activities. Cash flows provided by operating activities increased $4 million for the six months ended August 2, 2024 as compared to the prior year primarily due to timing of customer collections and vendor payments, lower tax payments in the current year, and other net favorable changes in working capital, partially offset by higher incentive-based compensation payments and higher cash used from the Master Accounts Receivable Purchase Agreement ("MARPA Facility") in the current year (see Note 10—Sales of Receivables to the condensed consolidated financial statements contained within this report for additional information).

Previous wording

Net Cash (Used in) Provided by Investing Activities. Cash used investing activities for the three months ended May 3, 2024 was $7 million compared to cash provided by investing activities of $336 million in the prior year period. This change is primarily due to the $355 million of cash proceeds for the sale of the Supply Chain Business in the prior year period (see Note 4 to the condensed consolidated financial statements).

Current wording

Net Cash (Used in) Provided by Investing Activities. Cash used in investing activities for the six months ended August 2, 2024 was $16 million compared to cash provided by investing activities of $334 million in the prior year period. This change is primarily due to the $355 million of cash proceeds for the sale of the Supply Chain Business in the prior year period (see Note 4 to the condensed consolidated financial statements).

Previous wording

Net Cash Used in Financing Activities. Cash used in financing activities for the three months ended May 3, 2024 increased compared to the prior year period primarily due to higher principal payments, net of proceeds received from borrowings and higher share repurchases in the current year.

Current wording

Net Cash Used in Financing Activities. Cash used in financing activities for the six months ended August 2, 2024 decreased compared to the prior year period primarily due to higher proceeds received from borrowings, net of principal payments, partially offset by higher share repurchases in the current year.

Previous wording

There have been no changes to our critical accounting policies and estimates during the three months ended May 3, 2024 from those disclosed in our most recently filed Annual Report on Form 10-K.

Current wording

There have been no changes to our critical accounting policies and estimates during the six months ended August 2, 2024 from those disclosed in our most recently filed Annual Report on Form 10-K.