SAIC 10-K & 10-Q changes, risk factors and insider trading

We generated 98% of our total revenues during each of the last three fiscal years from contracts with the U.S. government, either as a prime contractor or as a subcontractor to other companies performing prime contracts for the U.S. government. We expect to continue to derive substantially all of our revenues from work performed under U.S. government contracts. Our relationship with the U.S. government – particularly with DoDDoW agencies – is key to maintaining these contracts, winning new work, and growing our revenues. Negative press reports or publicity, regardless of accuracy, could harm our reputation and jeopardize our business with our customers, potentially adversely affecting our revenues, cash flows, and financial results.

In addition, it is possible that an impasse on policy issues could threatenimpact continuous government funding for the Department of Homeland Security through September 30, 2025, or result in another federal government shutdown,2026, which could cause us to incur labor or other costs without reimbursement under customer contracts or the delay or cancellation of key programs, and could adversely affect our operations, cash flows, and financial results.

The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoDDoW budgetary priorities, reduce overall spending or delay contract or task order awards for defense-related programs from which we would otherwise expect to derive a significant portion of our future revenues. A significant decline in overall U.S. government spending, a significant shift in spending priorities, the substantial reduction or elimination of defense-related programs or significant budget-related delays in contract or task order awards for large programs could adversely affect our future revenues and limit our growth prospects.

We generate revenues under several contract types, including cost-reimbursable, T&M, and FFP contracts. Under cost-reimbursable contracts, the government pays allowable costs incurred during performance of the contract plus a fee up to a ceiling based on the amount that has been funded. Cost, schedule, or technical performance issues on cost-reimbursable contracts could result in reduced fees, decreased profit, or program cancellation. Under T&M contracts, the government pays for the exact cost of all materials, plus a predetermined hourly rate for the labor involved. Under FFP contracts, the government pays a fixed price regardless of the actual costs of performance, meaning that we bear the risk of cost overruns, but we also have the opportunity for profit if we manage the program efficiently. Cost-reimbursable and T&M contracts are generally less profitable than FFP contracts. In fiscal 2025,2026, approximately 16%,62%, 22% and 62%16% of our total revenues came from FFPcost-reimbursable contracts, T&M contracts and cost-reimbursableFFP contracts, respectively.

Many of our U.S. government contracts contain organizational conflict of interest ("OCI") clauses that may limit our ability to compete for or perform certain other contracts or other types of services for particular customers. OCI arises when we engage in activities that may make us unable to render impartial assistance or advice to the U.S. government, impair our objectivity in performing contract work, or provide us with an unfair competitive advantage. Existing OCI, and any OCI that may develop, could preclude our competition for or performance on a significant project or contract, which could limit our opportunities.

In recent quarters, the U.S. government customer has increasingly focused on affordability, efficiencies, and cost recovery when contracting with private companies. The newU.S. Departmentgovernment performs ongoing evaluations of Government Efficiency (“DOGE”) is currently evaluating federal agencies and existing government contracts, grants, and programs for affordability, efficiency, and alignment with U.S. government objectives. DOGE’sThese efforts to reduce federal spending create uncertainty and risk for government contractors, including potentially resulting in change in budgetary priorities and timing on issuing awards. Decreases in, or delays in contract awards and in government spending on the types of programs that we support, and terminations or stop-work-orders on government contracts on which we are currently performing could adversely affect our future revenues and profitability. At the same time, given the nature of our business, the administration’s focus on efficiency, along with the potential for certain traditionally government functions to be transferred to private entities, may present business opportunities for us.

Federal legislation, regulations, executive orders, and other initiatives dealing with, among other things, procurement reform, the mitigation of potential OCIs, the deterrence of fraud, the U.S. government taking ownership stakes in certain competitors, the threat of contract cancellation if timely performance is not met, the elimination of diversity, equity, and inclusion (“DEI”), and changes in corporate environmental obligations, could affect our business. A recent executive order was issued to limit stock buy-backs, dividends or other forms of corporate distribution if certain contractors underperform on critical defense supply contracts. We will continue to monitor to determine if this ultimately affects our future revenues, cash flows and profitability. Additionally, we are subject to the laws and regulations of the states in which we operate, which, at times, may conflict with federal laws and regulations, introducing ambiguity.

Recent executive orders relating to DEI andDEI, other social issues and “return-to-office” requirements, along with pending legal challenges, create uncertainty and may be temporarily unsettling for portions of our workforce. As always, we are committed to complying with all applicable laws and regulations, and we do not anticipate an adverse impact on our future operations and revenues related to these executive orders.

TheAn executive order was issued to overhaul the FAR, including simplifying the procurement process and potentially changing the criteria for cost allowability and compliance, which could negatively impact our profitability. In addition, the FAR Council recently proposed significant revisions to the FAR related to OCIs, which, if adopted, could limit our ability to bid on certain contracts and/or require us to modify or restructure some business relationships. They could also impose additional compliance burdens and constraints on our business operations. Increased costs related to identifying, assessing, and mitigating OCI's could negatively impact our profitability.

We may make acquisitions, divestitures, investments, or enter into joint ventures, and divestituresventures in the future that involve numerous risks, which, if realized, may adversely affect our business and financial performance.

We use and deploy AI solutions for our customers that could harm our reputation orreputation, create liability if they do not function as predicted.predicted, or we are required to discontinue their use.

We deploy and integrate AI solutions for our business operations and for customers, including AI solutions that assist with the design, deployment, and management of AI applications that allow customers to work with their complex and sensitive data to power the most demanding analytics, data science, and AI use cases. These AI solutions may be vulnerable to misuse or cyberattack. Additionally, because this technology is developing so rapidly, we may be unable to keep up with new AI developments. We use some AI solutions that we develop and someother AI solutions that we obtain others from third parties. The development methods and algorithms of these solutions could be flawed, and the datasets could contain incorrect or biased information.information, which may require us to discontinue use of certain AI technology immediately or within short timelines. Content or code generated by AI systems may be vulnerable to cyberattack, require human review, be unreliable, illegal, or offensive, and could result in the AI solution not working as intended. If we deploy AI solutions that have unintended consequences or are more controversial than we anticipate, our customers may seek redress, and we may experience reputational harm that could affect our business or financial results.results, including increased costs, schedule delays, or operational disruptions. Our use and deployment of AI solutions and capabilities could be limited by, or subject to regulatory actionaction, supply chain risk, or legal liability under, proposed rules or legislation regarding privacy, intellectual property, and other laws.laws, which could ultimately affect our competitiveness in bids or impair our performance on existing contracts.

We rely on teaming relationships with other prime contractors and subcontractors to bids on large procurements and other opportunities when we believe the combination of services, products, and solutions we can offer with teammates will help us win and perform the contract. Our future revenues and growth could be adversely affected if our partners reduce or end their contract relationships with us, or if the U.S. government terminates or reduces programs of prime contractors to which we subcontract, does not award them new contracts, or refuses to pay under a contract. We may contract with subcontractors that do not have experience on U.S. government contracts or with our customers, providing them with the experience, relationships, and past performance to compete with us on future contractscontracts, andwhich potentialcould potentially result in contract losses. If subcontractors fail to timely meet their contractual obligations or have regulatory compliance or other problems, our ability to fulfill our obligations as a prime contractor or higher tier subcontractor may be jeopardized.

The following discussion and analysis of our financial condition and results of operations, and quantitative and qualitative disclosures about market risk should be read in conjunction with our consolidated financial statements and the related notes included in this Form 10-K.10-K, as well as Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 10-K for the year ended January 31, 2025, which provides additional information on comparisons of fiscal 2025 and 2024. It contains forward-looking statements (which may be identified by words such as those described in “Risk Factors—Forward-Looking Statement Risks” in Part I, Item 1A of this report), including statements regarding our intent, belief, or current expectations with respect to, among other things, trends affecting our financial condition or results of operations; backlog; our industry; government budgets and spending; market opportunities; the impact of competition; and the impact of acquisitions and divestitures. Such statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those in the forward-looking statements as a result of various factors. Risks, uncertainties and assumptions that could cause or contribute to these differences include those discussed below and elsewhere in this report, particularly in “Risk Factors” in Part I, Item 1A of this report. Due to such risks, uncertainties and assumptions, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update these factors or to publicly announce the results of any changes to our forward-looking statements due to future results or developments.

We utilize 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 ended on January 30, 2026, fiscal 2025 began on February 3, 2024 and ended on January 31, 2025, and fiscal 2024 began on February 4, 2023 and ended on February 2, 2024, and fiscal 2023 began on January 29, 2022 and ended on February 3, 2023. Fiscal 2025 and fiscal 2024 each consisted of 52 weeks, and fiscal 2023 consisted of 53 weeks.2024.

We are a leading technology integrator providing full life cycle services and solutions in the technical, engineering and mission and enterprise information technology ("IT") markets. We developed our brand by addressing our customers’ mission critical needs and solving their most complex problems for over 50 years. As one of the largest pure-play technology service providers to the U.S. government, we serve markets of significant scale and opportunity. Our primary customers are the departments and agencies of the U.S. government. We serve our customers through approximately 1,700 active contracts and task orders and employ approximately 24,00023,000 individuals who are led by an experienced executive team of proven industry leaders. Our long history of serving the U.S. government has afforded us the ability to develop strong and longstanding relationships with some of the largest customers in the markets we serve. Substantially all of our revenues and tangible long-lived assets are generated and located in the United States.

The Defense and Intelligence segment provides a diverse portfolio of national security solutions to the DoDDoW and the Intelligence Community of the United States Government.

In fiscal 2025,2026, 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 2025, the President signed a continuing resolution ("CR") that extends government funding through the close of government fiscal year ("GFY") 2025. The measure provides budget certainty for agencies through September 30, 2025. The CR also provides flexibility for new starts on programs at the DoD,DoW, which are typically not allowed under CRs.

WeThe primary financial measures used to evaluate our consolidated results of operations by considering the drivers causing changes ininclude revenues, operating income, adjusted operating income(1), adjusted EBITDA(1), and operating cash flows. Given that revenues fluctuate on our contract portfolio over time due to contract awards and completions, changes in customer requirements, and increases or decreases in ordering volume of materials, we evaluate significant trends and fluctuations resulting from these factors. Whether performed by our employees or by our subcontractors, we primarily provide services and, as a result, our cost of revenues are predominantly variable. We also analyze our cost mix (labor, subcontractor and materials) in order to understand operating margin because programs with a higher proportion of SAIC labor are generally more profitable. Changes in cost of revenues as a percentage of revenues other than from revenue volume or cost mix are normally driven by fluctuations in shared or corporate costs, or cumulative revenue adjustments due to changes in estimates.

(1) Non-GAAP measure, see "Non-GAAP Measures" section below for additional information about this measure.

Cost of Revenues. CostRevenues ofdecreased revenues increased $15$217 million from fiscal 20242025 to fiscal 20252026 primarily due to contract completions and ramp updown in volume on existing andcontracts, newincluding contracts.approximately This$26 wasmillion attributable to the government shutdown, partially offset by thenew salecontracts. ofRevenues attributed to SilverEdge for the Supplyyear Chainended BusinessJanuary ($17230, million)2026 inwere the$27 prior year, and contract completions.million. Adjusting for the impactacquisition of the divestiture, cost ofSilverEdge, revenues grewcontracted by approximately 2.9%.3.3%.

Operating Income. Operating income as a percentage of revenues decreased from fiscal 20242025 to fiscal 20252026 primarily due to aexecutive $233transition millioncosts, gainnet recognizedof fromrecoveries, the sale of the Supply Chain Business and a $7 million gain recognized from the deconsolidation of FSA in the prior year. This was partially offset by improved profitability across our contract portfolio, thefavorable resolution of the Assault Amphibious Vehicle ("AAV") contract termination,termination lowerin incentive-basedthe compensationprior expense,year and($13 lowermillion), stock-based compensationcosts related to the restructuringsettlement of federal tax audits, and executivetiming transition.and volume mix in our contract portfolio, partially offset by a recovery of costs from the settlement of a patent infringement matter.

In December 2021, the Organisation for Economic Co-operation and Development (OECD) enacted model rules for a new 15% global minimum tax framework (“Pillar Two”) which became effective in certain jurisdictions beginning in fiscal 2024. While U.S. adoption is uncertain, several countries where we operate have implemented it, and others are in the process of adopting. We do not anticipate Pillar Two to have a significant impact on our effective tax rate or our consolidated results of operations, financial position, and cash flows.

The primary financial performance measures we use to manage our reportable segments and monitor results of operations are revenues and adjusted operating income. TheAdjusted followingoperating tablesincome summarizeis our results of operationscalculated by reportabletaking segment:operating income and excluding depreciation and amortization, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs.

Revenues. Revenues increaseddecreased $126$145 million from fiscal 20242025 to fiscal 20252026 primarily due to contract completions and ramp updown in volume on existing and new contracts, partially offset by contractnew completions.contracts. Revenues attributed to SilverEdge for the year ended January 30, 2026 were $27 million.

Operating and adjustedAdjusted operating income. Operating and adjustedAdjusted operating income as a percentage of revenues decreased from fiscal 20242025 to fiscal 20252026 primarily due to timingcontract completions and ramp down in volume mix.on existing contracts and the favorable resolution of the AAV contract termination in the prior year ($13 million), partially offset by new contracts.

OperatingAdjusted andoperating adjustedincome. Adjusted operating income as a percentage of revenues increased from fiscal 20232025 to fiscal 20242026 primarily due to improved profitability across ourthe contract portfolio.

Adjusted operating loss. Adjusted operating loss decreased from fiscal 20242025 to fiscal 20252026 primarily due to lowerrecovery incentive-basedof compensationcosts expense,from the settlement of a patent infringement matter and lower stock-basedother compensationselling, related to the restructuringgeneral and executiveadministrative transition.expenses.

AdjustedConsolidated adjusted operating income, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and adjusted EBITDA are non-GAAP financial measures. While we believe that these non-GAAP financial measures are also useful for management and investors in evaluating our financial information, they should be considered as supplemental in nature and not as a substitute for financial information prepared in accordance with GAAP. Reconciliations, definitions, and how we believe these measures are useful to management and investors are provided below. Other companies may define similar measures differently.

Adjusted operating income. 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. Adjusted operating income is calculated by taking operating income and excluding depreciation and amortization, acquisitionacquisition, integration, restructuring, and integration costs, impairments, restructuringimpairment costs, and any other material non-recurring costs. TheAcquisition, acquisition and integration costs relate to our acquisitions. Theintegration, restructuring and impairment costs represent thecosts reorganizationincurred andrelated to acquisitions, reorganizations, facilities optimization costsefforts, orand impairments of long-lived assets, along with associated depreciationdepreciation. included in those restructuring and impairment costs. The recoveryRecovery of acquisitionacquisition, and integration costs andintegration, restructuring and impairment costs relate torepresents costs recovered through our indirect rates in accordance with Cost Accounting Standards. Depreciation of property, plant, and equipment relates to property, plant, and equipment specifically identifiable for each segment.segment and Corporate. Adjusted operating income also excludes amortization of intangible assets because we do not have a history of significant acquisition activity, weand dotherefore notconsider acquireacquisitions businessesto onbe a predictablenon-recurring cycle,activity, and the amount of an acquisition's purchase price allocated to intangible assets and the related amortization term are unique to each acquisition. WeExecutive believetransition thatcosts, thesenet performanceof measuresrecoveries, providerepresent managementcosts and investorsassociated with useful information in assessing trends in our ongoing operating performance and may provide greater visibility in understanding the long-term financial performancedeparture of our Company. Refer to "SegmentCEO and Corporateother Results"executives section above forin the reconciliationthird quarter of the GAAPfiscal financialyear measure2026, net of the portion recovered through our indirect rates in accordance with Cost Accounting Standards. Costs related to the non-GAAPsettlement financialof measure.federal tax audits represent costs related to the IRS audit settlement for fiscal years 2016 through 2019. The (Gain) loss on divestitures, net of transaction costs includes gains associated with the deconsolidation of FSA and the sale of the Supply Chain Business.

Effective January 31, 2026, the first day of fiscal 2027, we completed a business reorganization that consolidated our five previous business groups into three. The reorganization was designed to simplify our organization structure and optimize operations and customer focus for growth. The consolidated business groups will beare 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 reorganization did not have an impact on our reportable segments.

We now 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. Our two reportable segments are the Defense and Intelligence segment and the Civilian segment.

During the three and six months ended MayJuly 1,31, 2026, we generated 97% 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.

Revenues. Revenues increased $29$111 million for the three months ended MayJuly 1,31, 2026 as compared to the same period in the prior year primarily due to revenuesramp up in volume on existing and new contracts and from the acquisition of SilverEdge Government Solutions ("SilverEdge") of $19$20 million and ramp up in volume on existing and new contracts,million, partially offset by contract completions. Adjusting for the acquisitionimpact of SilverEdge,acquisitions, revenues grew by approximately 0.5%.5.3%.

Operating Income. Operating income as a percentage of revenues for the three months ended MayJuly 1,31, 2026 increased from the comparable prior year period primarily due to improved profitability across our contract portfolio and acosts $12related millionto gainthe settlement of federal tax audits in the prior year, partially offset by higher selling, general and administrative expenses, including recovery of costs from the salesettlement of ana investmentpatent infringement matter in the currentprior year.

Income Taxes. Our effective income tax rate was 20.9%14.2% and 20.6%17.9% for the three and six months ended MayJuly 1,31, 20262026, respectively, and Maywas 2,(17.2)% and (0.4)% for the three and six months ended August 1, 2025, respectively. The rateeffective tax rates for boththe prior year periods wasreflected belowa our$47 combined federal and state statutorymillion tax rate,benefit primarily duerelated to research and development tax credits and the taxsettlement deductionof foran foreign-derivedIRS deductionaudit eligiblecovering income.fiscal years 2016 through 2019.

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 amortization of intangible assets, depreciation of property, plant, and amortization,equipment, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs.

Revenues. Revenues increased $33$75 million for the three months ended MayJuly 1,31, 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,contracts and from the acquisition of SilverEdge of $20 million, partially offset by contract completions.

Revenues. Revenues decreasedincreased $4$108 million for the threesix months ended MayJuly 1,31, 2026 as compared to the same period in the prior year primarily due to contractramp completions,up in volume on existing and new contracts and from the acquisition of SilverEdge of $39 million, partially offset by newcontract contracts.completions.

Adjusted operating income. Adjusted operating income as a percentage of revenues for the three and six months ended MayJuly 1,31, 2026 increased fromcompared to the comparablesame periods in the prior year period primarily due to improved profitability across our contract portfolio.

AdjustedRevenues. operatingRevenues incomeincreased (loss).$36 Adjustedmillion operatingand income was $7$32 million for the three and six months ended MayJuly 1,31, 2026, respectively, as compared to an adjusted operating loss of $9 million during the same periodperiods in the prior year primarily due to aramp gainup in volume on an investment sale of $12 million in the current yearexisting and lowernew selling,contracts, generalpartially andoffset administrativeby expenses.contract completions.

Adjusted operating income. 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. Adjusted operating income is calculated by taking operating income and excluding amortization of intangible assets, depreciation of property, plant, and amortization,equipment, acquisition, integration, restructuring, and impairment costs, and any other material non-recurring costs. 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. 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 thisthese performance measuremeasures providesprovide 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 and adjusted EBITDA as a percentage of revenues for the three months ended MayJuly 1,31, 2026 increaseddecreased 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, a $12 million gain from the sale of an investment in the current year, and lower selling, general and administrative expenses.portfolio.

We had net bookings worth an estimated $2.1$1.2 billion and $3.3 billion during the three and six months ended MayJuly 1,31, 2026.2026, respectively.

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.

Net Cash Provided by Operating Activities. Cash flows provided by operating activities for the threesix months ended MayJuly 1,31, 2026 increased $27$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 FacilityFacility, timing of customer collections, and higher interest paid inon theour current year.debt.

Net Cash Used in FinancingInvesting Activities. Cash used in financinginvesting activities for the threesix months ended MayJuly 1,31, 2026 increaseddecreased $107$8 million compared to the prior year period primarily due to lower proceeds from borrowings,the netsale of lower principal payments, and higher plan share repurchasesinvestments in the current year.year, partially offset by higher cash paid for capital expenditures.

There have been no changes to our critical accounting policies and estimates during the threesix months ended MayJuly 1,31, 2026 from those disclosed in our most recently filed Annual Report on Form 10-K.