Science Applications (SAIC) Risk Analysis

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Public companies are required to disclose risks that can affect the business and impact the stock. These disclosures are known as “Risk Factors”. Companies disclose these risks in their yearly (Form 10-K), quarterly earnings (Form 10-Q), or “foreign private issuer” reports (Form 20-F). Risk factors show the challenges a company faces. Investors can consider the worst-case scenarios before making an investment. TipRanks’ Risk Analysis categorizes risks based on proprietary classification algorithms and machine learning.

Science Applications disclosed 29 risk factors in its most recent earnings report. Science Applications reported the most risks in the “Legal & Regulatory” category.

Risk Overview Q4, 2024

Risk Distribution

24% Legal & Regulatory

21% Finance & Corporate

17% Tech & Innovation

14% Ability to Sell

14% Macro & Political

10% Production

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

This chart displays the stock's most recent risk distribution according to category. TipRanks has identified 6 major categories: Finance & corporate, legal & regulatory, macro & political, production, tech & innovation, and ability to sell.

Risk Change Over Time

S&P500 Average

Sector Average

Risks removed

Risks added

Risks changed

Science Applications Risk Factors

New Risk (0)

Risk Changed (0)

Risk Removed (0)

No changes from previous report

The chart shows the number of risks a company has disclosed. You can compare this to the sector average or S&P 500 average.

The quarters shown in the chart are according to the calendar year (January to December). Businesses set their own financial calendar, known as a fiscal year. For example, Walmart ends their financial year at the end of January to accommodate the holiday season.

Risk Highlights Q4, 2024

Main Risk Category

Legal & Regulatory

With 7 Risks

Legal & Regulatory

With 7 Risks

Number of Disclosed Risks

-1

From last report

S&P 500 Average: 32

-1

From last report

S&P 500 Average: 32

Recent Changes

1Risks added

2Risks removed

12Risks changed

Since Jan 2025

1Risks added

2Risks removed

12Risks changed

Since Jan 2025

Number of Risk Changed

+12

From last report

S&P 500 Average: 4

+12

From last report

S&P 500 Average: 4

See the risk highlights of Science Applications in the last period.

Risk Word Cloud

The most common phrases about risk factors from the most recent report. Larger texts indicate more widely used phrases.

Risk Factors Full Breakdown - Total Risks 29

Legal & Regulatory

Total Risks: 7/29 (24%)Above Sector Average

Regulation2 | 6.9%

Regulation - Risk 1

Added

The U.S. government may issue or revise existing rules, regulations, and directives at any time, creating uncertainty and requiring unanticipated investments in related compliance efforts.

In recent quarters, the U.S. government customer has increasingly focused on affordability, efficiencies, and cost recovery when contracting with private companies. The new Department 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's 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 elimination of diversity, equity, and inclusion ("DEI"), and changes in corporate environmental obligations, could affect our business. 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 and 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. The ongoing reforms to the U.S. government acquisition process, including changes to procurement rules and regulations, could transform how contracts are awarded, negotiated, and managed, which could lead to delays in contract awards and/or modifications to the scope or terms of contracts we hold. We could face increased competition, greater scrutiny, a more complex regulatory environment, heightened compliance requirements, and additional administrative burdens, all of which have the potential to affect our profitability. 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. Similarly, recent executive orders related to energy and the environment suggest a shift towards deregulation at the federal level. Although deregulation initiatives could provide short-term relief from regulatory obligations, the executive orders introduce uncertainty and risk, including the potential for legal challenges and the possibility of new environmental policies at the state or local levels that may impose stricter regulations. We are actively monitoring and adapting to changes in environmental laws, assessing the physical risks posed by climate change, and implementing sustainability initiatives aimed at reducing the environmental impact of our operations. However, the full extent of these risks and their potential impact on our business remains uncertain and could materially affect its financial performance.

Regulation - Risk 2

Our business is subject to numerous legal and regulatory requirements, and any violation of these requirements, or any misconduct by our employees, subcontractors, agents, or business partners, could harm our business and reputation.

In addition to government contract procurement laws and regulations, we are subject to numerous other federal, state, and foreign legal requirements related to, among other things, fraud (including but not limited to falsifying time and other records), data privacy and protection, employment and labor relations, immigration, taxation, anticorruption, import/export controls, trade restrictions, internal and disclosure control obligations, securities regulations, and antitrust. Compliance with diverse and changing legal requirements is costly, time-consuming, and requires significant resources. Violations can result in fines, penalties, restitution, or other damages (which can be significant), criminal sanctions against our Company and/or our officers, the loss of security clearances, the cancellation of current contracts and the ineligibility for future contracts, and suspension or debarment from federal, state, or local contracting – any of which could adversely affect our business and financial results. Additionally, depending on the circumstances, our Company can be held liable for the misconduct of its employees, subcontractors, agents, or business partners.

Litigation & Legal Liabilities3 | 10.3%

Litigation & Legal Liabilities - Risk 1

Changed

We are subject to government audits, cost adjustments, reviews, and investigations that could adversely affect our profitability, cash flows, or growth prospects.

The DCAA, the DCMA, and others routinely audit a contractor's performance on government contracts, indirect cost rates and pricing practices, and compliance with applicable government contracting and procurement laws, regulations, and standards. They also review the adequacy of the contractor's compliance with government standards for its business systems, including its accounting, earned value management, estimating, materials management, property management, and purchasing systems. A finding of significant control deficiencies in a contractor's business systems or a finding of noncompliance with the CAS can result in decremented billing rates until the control deficiencies are corrected and DCMA approves their remediation. Government audits and reviews have become more rigorous as the agencies that conduct them have come under increased scrutiny, leading to stricter interpretations of the standards to which government contractors are held and the increased likelihood of adverse outcomes. Government audits may conclude that our practices are not consistent with applicable laws and regulations, leading to adjustments to contract costs and mandatory customer refunds. Such adjustments can be applied retroactively. Adverse audit findings or the failure to obtain an "approved" determination on our systems could adversely affect our business by, among other things, restricting our ability to bid on new contracts and diminishing our competitive position for proposals under evaluation. A determination of noncompliance could also result in the U.S. government imposing penalties and sanctions against us, including withholding of payments, suspension of payments, and increased government scrutiny. Increased scrutiny could adversely impact contract performance, impede our invoicing for work performed, delay our receipt of timely payment, and weaken our ability to compete for new contracts. As is typical in our industry, DCAA's indirect cost audits of our business remain open for certain prior years and the current year. We have recorded contract revenues based on an estimate of costs that we believe will be approved. However, we cannot guarantee the outcome of any ongoing or future audits or that any required adjustments will not exceed our reserves. We are also subject to government reviews and investigations relating to all aspects of our business, including our contracts and operations. If a review or investigation identifies improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, which could include the termination of contracts, forfeiture of profits, triggering of price reduction clauses, suspension of payments, imposition of fines, and/or suspension or debarment from doing business with the U.S. government. Allegations of impropriety, even if untrue, may cause us reputational harm and impede our ability to win new contract awards or receive contract renewals. Fines, penalties, and other sanctions are not uncommon in our industry and could negatively impact our profitability, cash position, and future opportunities.

Litigation & Legal Liabilities - Risk 2

Changed

Legal disputes could require us to pay potentially large damage awards and could be costly to defend, which could adversely affect our cash balances and profitability, and could damage our reputation.

We are subject to several lawsuits and claims described under "Legal Proceedings" in Part I, Item 3 of this report. We are also subject to, and may become a party to, a variety of other immaterial litigation or claims arising from time to time in the ordinary course of our business. The Department of Justice and other U.S. or foreign enforcement agencies may bring claims or lawsuits in connection with our performance of government contracts or our billing or record-keeping relating to those contracts. Although rare, government agencies can seek to suspend or debar government contractors they believe have engaged in misconduct. The government has considerably more resources at its disposal to pursue these matters than we do to defend ourselves against them, and certain statutes under which the Department of Justice may bring claims (like the False Claims Act) provide for treble damages and penalties on a per invoice basis. Consequently, the government generally has more leverage against us than a commercial plaintiff or other private party would have. Settlements or adverse judgments may result in significant monetary damages or injunctions, and litigation and claims could be costly to defend. Even if we are successful, fully indemnified, or insured, we could suffer damage to our reputation that impedes our ability to compete for work or obtain adequate insurance in the future. The outcome of litigation and other claims, including those described under "Legal Proceedings" in Part I, Item 3 of this report, is inherently uncertain, and management's view of these matters may change in the future.

Litigation & Legal Liabilities - Risk 3

Our business is subject to governmental review and investigation, which could adversely affect our profitability, cash position and growth prospects.

We are routinely subject to governmental investigations relating to all aspects of our business including our contracts and operations. If a review or investigation identifies improper or illegal activities, we may be subject to civil or criminal penalties or administrative sanctions, which could include the termination of contracts, forfeiture of profits, the triggering of price reduction clauses, suspension of payments, fines, and suspension or debarment from doing business with governmental agencies. We may suffer harm to our reputation if allegations of impropriety are made against us, which would impair our ability to win new contract awards or receive contract renewals. Penalties and sanctions are not uncommon in our industry. If we incur a material penalty or administrative sanction or otherwise suffer harm to our reputation, our profitability, cash position and future prospects could be adversely affected.

Taxation & Government Incentives1 | 3.4%

Taxation & Government Incentives - Risk 1

Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.

Changes in federal or state tax regulations or in their interpretation and application, including those with retroactive effect, could cause increases in our tax expense and affect profitability and cash flows. For example, beginning in fiscal 2023, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures in the year incurred, instead requiring taxpayers to amortize such expenditures over five years for tax purposes. The impact of this change is dependent on the amount of research and development expenses we incur, as well as the potential for Congress to modify or repeal the provision or for the U.S. Treasury Department to release new guidance or interpretive rules. The impact to our income taxes payable was most significant in fiscal 2023 decreasing over the five-year amortization period. By year six, we anticipate any impact to be immaterial.

Environmental / Social1 | 3.4%

Environmental / Social - Risk 1

Our services and operations sometimes involve using, handling, or disposing of hazardous substances or dangerous materials, which could expose us to potentially significant liabilities.

Some of our services and operations involve the use, handling, or disposal of hazardous substances or dangerous materials, including explosive, chemical, biological, radiological, or nuclear materials. These activities generally subject us to extensive foreign, federal, state, and local environmental protection and health and safety laws and regulations, which, among other things, require us to incur compliance costs and the risk of liability. Failure to comply with these environmental protection and health and safety laws and regulations could result in civil, criminal, regulatory, administrative, or contractual sanctions, including but not limited to fines, penalties, and/or suspension or debarment actions. We could be required to incur costs to change, upgrade, remediate, and/or close some of our operations or properties. Although we do not have extensive real estate holdings, our ownership and operation of real property also subjects us to environmental protection laws, some of which create liability for current or previous owners or operators of businesses and real property liable for hazardous substance releases, even if they did not know of and were not responsible for the releases. If we have any violations of, or incur liabilities pursuant to, these laws or regulations, our financial condition and operating results could be adversely affected.

Finance & Corporate

Total Risks: 6/29 (21%)Below Sector Average

Share Price & Shareholder Rights1 | 3.4%

Share Price & Shareholder Rights - Risk 1

Changed

Our failure to comply with the laws and regulations governing organizational conflicts of interest ("OCIs") could lead to penalties including, potentially, termination of one or more of our U.S. government contracts.

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.

Accounting & Financial Operations3 | 10.3%

Accounting & Financial Operations - Risk 1

Changed

We use estimates in recognizing revenues, and our profitability may be adversely affected if we make changes to those estimates.

A significant portion of our revenues are recognized on contracts using a cost input measure, which requires estimates of total costs at completion, fees earned, or both. Due to the technical nature of our services and the length of certain contracts, this estimation process is complex and involves significant judgment. Adjustments to original estimates are often required as work progresses, experience is gained, and additional information becomes known, even though the scope of the work required under the performance obligation may not have changed. Changes in the underlying assumptions, circumstances, or estimates could necessitate adjustments that may adversely affect future financial results.

Accounting & Financial Operations - Risk 2

Changed

Goodwill and intangible assets represent a significant amount of our total assets and any impairment of these assets would negatively affect our results of operations.

Goodwill is tested for impairment annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. This includes, for example, significant adverse changes in the legal or regulatory landscape or in the business climate, adverse actions or assessments by regulators, unanticipated competition, the loss of key contracts, significant decreases in our stock price, or disruptions in customer relationships that affect current and future operating cash flows of the reporting unit. We assess intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable at the asset group level. Any future impairment of goodwill or other intangible assets would have a negative impact on our profitability and financial results.

Accounting & Financial Operations - Risk 3

Changed

Our use of net operating loss carryforwards and other tax attributes to offset future taxable income may become limited if we or the IRS determine that we have experienced an ownership change.

As of January 31, 2025, we have estimated $223 million of gross net operating loss carryforwards and gross tax basis in our acquired amortizable goodwill, as well as other intangible assets of approximately $1.0 billion. Net operating loss carryforwards and other tax attributes are subject to various annual limitations under Sections 382 and 383 of the Internal Revenue Code, which restricts a corporation's ability to use such carryforwards and attributes following an ownership change.

Debt & Financing1 | 3.4%

Debt & Financing - Risk 1

We maintain our cash at financial institutions, often in balances that exceed federally insured limits.

Most of our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in depository accounts may exceed the $250,000 Federal Deposit Insurance Corporation ("FDIC") insurance limits. If these banking institutions were to fail, we could lose part or all of the amounts in excess of the insurance limits. A material loss related to a bank failure could have a material adverse effect on our financial position and could impact our ability to pay operational expenses or make other payments. Additionally, if our customers, suppliers, insurers, joint venture partners, sureties, or other parties with which we partner are materially impacted by a bank failure or other issues in the banking industry, including changes in legislation and regulation, it may have an adverse impact on our operational and financial performance.

Corporate Activity and Growth1 | 3.4%

Corporate Activity and Growth - Risk 1

Changed

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

Subject to the limitations of our credit facility (as further described in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of this report), we may make strategic acquisitions or investments, engage in joint ventures, or divest existing businesses, which could cause unforeseen expenses, disrupt our business, fail to yield the anticipated benefits, or pose other risks that could adversely affect our reputation, operations, or financial results, including: - we may not retain key employees (including those with needed security clearances), customers, and business partners of an acquired business in the future;- we may fail to successfully integrate acquired businesses, such as failing to successfully implement IT and other control systems relating to the operations of any acquired business;- we may not generate sufficient earnings to meet the required Leverage Ratio under the Credit Facility, which would give lenders the right to, among other things, foreclose on our assets;- acquisitions normally require a significant investment of time and resources, which may disrupt our business and distract our management from other important responsibilities;- we may not be able to accurately estimate the financial effect of any acquisitions and investments on our business and we may not realize anticipated revenue opportunities, cost savings, or other synergies or benefits, or acquisitions may not result in improved operating performance; and - we may assume known and unknown material liabilities, including legal or regulatory risks that were not identified as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification. If any acquisitions, investments, or joint ventures fail, perform poorly, or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected. In addition, we may periodically divest businesses, including businesses that are no longer a part of our ongoing strategic plan. These divestitures similarly require significant investment of time and resources. They may disrupt our business, distract management from other responsibilities, and create losses on disposal or continued financial involvement in the divested business, including through indemnification, guarantee, or other financial arrangements, for a period of time following the transaction, which could adversely affect our financial results.

Tech & Innovation

Total Risks: 5/29 (17%)Below Sector Average

Trade Secrets1 | 3.4%

Trade Secrets - Risk 1

We have only a limited ability to protect our intellectual property rights, which are important to our success. Our failure to adequately protect our proprietary information and intellectual property rights could adversely affect our competitive position.

We rely principally on trade secrets to protect much of our intellectual property in cases where we do not believe that patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information. We may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights. Failure to obtain or maintain trade secret protection could adversely affect our competitive business position. If we are unable to prevent third parties from infringing or misappropriating our copyrights, trademarks, or other proprietary information, our competitive position could be adversely affected. In addition, in connection with the performance of services, the U.S. government has certain rights to inventions, data, software codes, and related material that we develop under government-funded contracts and subcontracts, which may permit the U.S. government to disclose or license this information to third parties, including, in some instances, our competitors. In the course of conducting our business, we may inadvertently infringe the intellectual property rights of others, resulting in claims against us or our customers. Our contracts generally indemnify our customers for third-party claims for intellectual property infringement by the services and solutions we provide. The expense of defending these claims may adversely affect our financial results.

Cyber Security1 | 3.4%

Cyber Security - Risk 1

Our business and financial results could be negatively affected by cyber or other security threats.

We encounter cybersecurity and physical security threats as part of the work we do for our customers and our internal business. Our IT systems contain a variety of sensitive and classified information which attract adversaries including nation-state threat actors. We face cybersecurity threats including attempts to disrupt our critical systems, gain unauthorized access to data, release or corrupt sensitive information, and interfere with operations. Adversaries that acquire unauthorized access to customer accounts can use that information to compromise data. Inadequate account security practices could result in malicious activity affecting customer use of our solutions. We work cooperatively with our customers to address cybersecurity threats and we are subject to extensive regulations related to cybersecurity. Actual or perceived cybersecurity vulnerabilities may lead to claims against us. Our customers, their employees, or third parties may seek to hold us liable for any costs or other damages associated with unauthorized access to sensitive information for which we are responsible under customer contracts. We develop custom software code and our products may utilize or include open source or AI-generated code, which may make our products susceptible to cyberattacks. We also rely on our supply chain to deliver products and services to our customers. Threat actors have and may continue to seek and gain access to our systems through our business partners and suppliers. A cybersecurity incident affecting our business partners and suppliers could materially adverse impact on our business. Our information security staff manage cybersecurity risks by implementing security controls in accordance with industry standards and conducting regular employee cybersecurity training. Our cybersecurity policies, procedures and maturity are subject to review and audit by third parties. Although we have implemented and regularly update cybersecurity controls, there can be no assurance that these measures will successfully prevent or mitigate cybersecurity incidents. We have been subject to cybersecurity incidents, disruptions and data loss targeting our data and systems of the data and systems of our customers. None of these incidents has had a material impact on us or, to our knowledge, our customers. We report cybersecurity incidents, as appropriate, to affected customers and the cognizant regulatory, law enforcement, and national security authorities. Future cybersecurity incidents could damage our reputation, expose us to liability, or prevent us from winning future work, and could have a material adverse impact on our business. Because of the rapidly evolving nature of these threats, there can be no assurance that our policies, procedures and security controls will detect or prevent them, mitigate their affects and we cannot predict their full impact. In addition, government agencies investigate and may bring actions against us for noncompliance with legal, contractual, or regulatory requirements regarding cybersecurity controls and disclosure of cybersecurity incidents to customers, regulators, law enforcement, or the public. Any remediation costs, damages or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means.

Technology3 | 10.3%

Technology - Risk 1

Customer systems failures could damage our reputation and adversely affect our revenues and profitability.

Many of the systems and networks that we develop, install, and maintain for our customers involve managing and protecting personal information and information relating to national security and other sensitive government functions. While we have programs designed to comply with relevant privacy and security laws and restrictions, if a system or network that we develop, install, or maintain were to fail or experience a security breach or service interruption (whether caused by us, third-party service providers, cybersecurity threats, or other events), we may experience loss of revenue, remediation costs, claims for damages, or contract termination. This could cause serious harm to our reputation and prevent us from having access to, or being eligible for, further work involving these systems and networks. Our errors and omissions liability insurance may not adequately compensate us for the damages that we incur, and our results could be adversely affected.

Technology - Risk 2

We could incur significant liabilities and suffer negative publicity if our detection systems fail to operate as intended or our assessment reports prove to be inaccurate.

We have developed and sold tsunami buoys and related services that are designed to assist in the detection of tsunamis or large waves that may have catastrophic consequences to coastal communities. Our buoys have been deployed by the U.S. National Oceanic and Atmospheric Administration and non-U.S. governments in other areas around the world. There are many factors, some of which are beyond our control, that could result in the failure of these buoys. We may develop other products or provide services for the detection of catastrophic natural or man-made threats. Some of our contracts involve evaluating and/or assessing the likelihood or potential consequences of natural disasters and other threats. The failure of our products and services to help detect the threats for which they were designed, or the failure of our reports to accurately assess the consequences of certain threats could contribute to injury, death, or extensive property damage, potentially leading to product liability, professional liability, or other claims against us. Further, if our products, services, or reports fail to (or are perceived to have failed to) help detect or adequately assess a threat, the negative publicity could have a material adverse effect on our business.

Technology - Risk 3

Changed

We use and deploy AI solutions for our customers that could harm our reputation or create liability if they do not function as predicted.

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 some 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. 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. Our use of AI solutions could be limited by, or subject to regulatory action or legal liability under, proposed rules or legislation regarding privacy, intellectual property, and other laws.

Ability to Sell

Total Risks: 4/29 (14%)Below Sector Average

Competition1 | 3.4%

Competition - Risk 1

We face aggressive competition that can impact our ability to obtain contracts and may affect our future revenues, profitability, and growth prospects.

We expect that most of the contracts we pursue in the foreseeable future will be awarded through a competitive bidding process as the U.S. government increasingly relies on IDIQ, GSA Schedule, and other multi-award contracts, which has led to greater competition and increased pricing pressure. The competitive bidding process involves substantial resources and a number of risks, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded but for which we do not receive meaningful task orders. Following contract award, we may encounter significant expense, delay, contract modifications, or even contract loss in the event our competitors protest the award of contracts to us in competitive bidding. Any resulting loss or delay of startup and funding of work under protested contract awards may adversely affect our revenues and/or profitability. In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract, failure of which may result in us not recognizing revenues under these multi-award contracts. Our failure to compete effectively in this procurement environment could adversely affect our revenues and profitability. We compete with larger companies that have more name recognition, greater financial resources, and larger technical staffs, and we also compete with smaller, more specialized companies that concentrate their resources on particular areas. Additionally, we may compete with the U.S. government's own capabilities. To remain competitive, we must consistently provide superior service, technology, and performance on a cost-effective basis to our customers.

Demand1 | 3.4%

Demand - Risk 1

Changed

We depend on U.S. government agencies as our primary customers and, if our reputation or relationships with these agencies were to be harmed, it could adversely impact our financial performance.

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 DoD 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.

Sales & Marketing2 | 6.9%

Sales & Marketing - Risk 1

Changed

Our earnings and profitability may vary based on the mix of our contracts and may be adversely impacted if we fail to estimate and manage costs, time, and resources accurately.

Our profitability and cash flow may vary materially depending on the types of government contracts we are awarded, the nature of services performed under those contracts, the costs incurred in performing the work, the achievement of performance objectives, and the stage of performance at which the right to receive fees is determined, particularly under incentive and award fee contracts. Failure to perform to customer expectations and contract requirements may result in reduced fees or losses and may adversely affect our financial performance. 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, approximately 16%, 22% and 62% of our total revenues came from FFP contracts, T&M and cost-reimbursable contracts, respectively. To varying degrees, there is financial risk with each of these contract types if we underestimate the costs of performance or fail to manage the program efficiently and cost-effectively. Unexpected expenses and/or unanticipated delays (including those caused by contract disputes or other factors outside our control, such as poor performance by our subcontractors, rising inflation, natural disasters, or other force majeure events) could result in reduced profits or losses.

Sales & Marketing - Risk 2

The U.S. government may terminate, cancel, modify, or curtail our contracts at any time and, if we do not replace them, we may be unable to achieve or sustain revenue growth and may suffer a decline in revenues and profitability.

Many of the U.S. government programs for which we are a prime contractor or subcontractor may extend for several years, and may include one or more base years and one or more option years. The U.S. government generally has the right not to exercise options to extend or expand our contracts, and may otherwise terminate, cancel, modify, or curtail our contracts at its convenience. Any decision by the U.S. government not to exercise contract options or to terminate, cancel, modify, or curtail our major programs or contracts would adversely affect our revenues, revenue growth, and profitability. We have experienced, and will continue to experience in the normal course of business, periodic performance issues under certain of our contracts. If a government customer terminates a contract for default, we may be exposed to liability, including for excess costs incurred by the customer in procuring undelivered services and solutions from another source. Depending on the nature and value of the contract, a performance issue or termination for default could cause our actual results to differ from those anticipated and could harm our reputation.

Macro & Political

Total Risks: 4/29 (14%)Above Sector Average

Economy & Political Environment1 | 3.4%

Economy & Political Environment - Risk 1

Changed

Reduced U.S. government defense spending, changes in acquisition priorities, significant delays in U.S. government appropriations, and delays in contract awards, program starts, and other procurement activity, could adversely affect our future revenues, cash flow, and financial results.

Because we generate substantially all of our revenues from contracts with U.S. government agencies, our operating results could be adversely affected by spending caps, changes in budgetary priorities, or delays in the government budget process, program starts, or the award of contracts or task orders under contracts. Current U.S. government spending levels for defense-related and other programs may not be sustained through government fiscal year ("GFY") 2025. Future spending and program authorizations may be stagnant or decrease, or spending priorities may shift to programs in areas in which we do not provide services or are less likely to be awarded contracts. A change in administration or changing national priorities may reduce defense-related and other programs due to competing demands for federal funds and the number and intensity of military conflicts or other factors. When Congress fails to pass a budget before the end of the fiscal year, government operations typically are funded through one or more continuing resolutions ("CRs"), which enable government agencies to continue operating but do not allow new spending initiatives. CRs can lead to contract awards being delayed, canceled, or funded at lower levels, which could adversely impact our operations, cash flows, and financial results. In addition, it is possible that an impasse on policy issues could threaten continuous government funding through September 30, 2025, or result in another federal government shutdown, 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 DoD 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.

International Operations1 | 3.4%

International Operations - Risk 1

We face risks associated with our international business.

Our international operations, which have historically generated a small portion of our revenues, may be subject to additional and different risks than our domestic operations. Failure to comply with U.S. government laws and regulations applicable to international business, such as the Foreign Corrupt Practices Act and U.S. export control regulations, could have an adverse impact on our business with the U.S. government and could expose us to administrative, civil, or criminal penalties, and potentially significant contract losses. We provide services and solutions in support of U.S. government customers in countries that are politically unstable, active conflict zones, or subject to high-risk intelligence operations. Operating in these environments may increase the risk of an incident resulting in injury or loss of life, property damage or destruction, or the inability to meet our contractual obligations. It is impossible to predict the impact that these regulatory, geopolitical, and other factors may have on our business in the future.

Natural and Human Disruptions2 | 6.9%

Natural and Human Disruptions - Risk 1

We face various risks related to health epidemics, pandemics, and similar outbreaks, which may have material adverse effects on our business, financial position, results of operations, and/or cash flows.

We face various risks related to health epidemics, pandemics, and similar outbreaks such as the global outbreak of COVID-19. If significant portions of our workforce cannot work effectively due to illness, quarantines, government actions, facility closures, or for other reasons in connection with an epidemic, our operations will be impacted. We may be unable to perform fully on our contracts and some of our costs may not be fully recoverable or adequately covered by insurance. Another epidemic could cause disruption in our supply chain, could delay or limit the operations of the U.S. government and other customers to perform (including making timely payments to us), could impact investment performance, and could cause other negative events. In addition, the resulting volatility in the global capital markets could restrict our access to capital and/or increase our cost of capital.

Natural and Human Disruptions - Risk 2

Changed

We face risks related to climate change if extreme weather events adversely affect our ability to work or our customers' requirements or priorities.

Severe storms, increased precipitation and flooding, heat waves, forest fires, and other natural disasters tied to climate change could adversely affect our ability to execute our strategy and may disrupt our operations. Any climate event limiting our employees' ability to work could potentially impair our capability to perform and meet our contractual obligations, address our customers' needs, and ultimately win new business, all of which could adversely affect our business, financial position, results of operations, and/or cash flows. While we have a distributed workforce with employees working remotely across the U.S., we do have employees who, because of client requirements or contractual obligations, must work at specified locations. In these instances, if there were a severe weather event that impacted such a location, we might not be able to meet the client's requirements or our contractual obligations. In the shorter term, a climate-related event could temporarily impede our ability to do the required work in person, produce operational or other unforeseen challenges, and in the longer term, threaten our performance of contracts, any of which could harm our business and its results. Although we have business continuity plans and other safeguards in place, there is no assurance that such plans and safeguards will be effective in preventing adverse impacts on our operations or long-term plans. Local conditions and regulations may delay the return of employees to business sites, which could undermine our efforts to meet our contractual obligations. Climate-related limitations on individual employees may also create obstacles to meeting customer requirements or our contractual obligations. Additionally, our customers could change priorities or direction due to a direct climate-change impact, concerns about long-term sustainability, legislative or regulatory pressure, or market factors such as investor, consumer, or societal requests or demands. Such changes and responses by our customers have the potential to adversely impact our future revenues, profitability, and prospects.

Production

Total Risks: 3/29 (10%)Below Sector Average

Employment / Personnel2 | 6.9%

Employment / Personnel - Risk 1

A failure to attract, train, retain, and utilize skilled employees and our senior management team would adversely affect our ability to execute our strategy and may disrupt our operations.

Our business relies heavily on the expertise and skills of our employees. Many government programs require our personnel to have security clearances. Our continued success depends on the ability to recruit and retain highly trained, skilled and, at times, cleared engineering, technical, and professional personnel. Competition for talent is intense, and competitors aggressively recruit key employees. Security clearances can be difficult and time-consuming to obtain, and cleared talent is in demand. Particularly in highly specialized areas, it has become more difficult to recruit and retain qualified employees, which could affect our growth in the current and future fiscal years. We will continue to devote significant resources to recruiting, training, and retaining top talent, but we cannot guarantee the outcome of these efforts. The failure to timely secure qualified employees could impair our ability to win new business or meet existing contractual obligations, which could adversely affect our future financial performance. In addition, salaries and related expenses are a significant portion of the cost of our services and, accordingly, our ability to utilize our workforce efficiently can impact our profitability. If our employees are under-utilized, our profitability could suffer. Our success also depends on the continued employment of a highly qualified and experienced senior management team that focuses on retaining existing business and generating new business. Although we have succession plans in place, the loss of key personnel in critical functions could temporarily impair our ability to win new contracts or perform existing work.

Employment / Personnel - Risk 2

Pension funding and costs are dependent upon several economic assumptions, which, if changed, may cause our future earnings and cash flow to fluctuate significantly.

Through our acquisition of Engility Holdings, Inc. ("Engility") in fiscal 2019, we assumed obligations under Engility's defined benefit pension plan (the "Pension Plan"). The impact of the Pension Plan on our generally accepted accounting principles ("GAAP") earnings may be volatile. Because our calculations are sensitive to funding levels and rely on several key economic assumptions, including interest rates, rates of return on plan assets, and participant mortality estimates, the expenses we record for the Pension Plan may materially change from year to year. Changes in these factors also affect our plan funding, cash flow, and stockholders' equity. In addition, the Pension Plan funding may be subject to changes caused by legislative or regulatory actions. We will make contributions to fund the Pension Plan when considered necessary or advantageous to do so. The macro-economic factors discussed above, including the return on assets and the minimum funding requirements established by government funding or taxing authorities, or established by other agreement, may influence future funding requirements. A significant decline in the fair value of the assets in the Pension Plan, or other adverse changes to the Pension Plan, could require us to make significant funding contributions and affect cash flows in future periods. We also, in the acquisition of Engility, assumed obligations under a Retiree Health Reimbursement Account plan ("RHRA"). The impact of Engility's RHRA on our GAAP earnings may be volatile in that the amount of expense we record for the plan may materially change from year to year because those calculations are sensitive to several key economic assumptions, including interest rates and actuarial assumptions related to participant mortality, retirement, and termination. CAS govern the extent to which postretirement costs and plan contributions are allocable to and recoverable under contracts with the U.S. government. On December 27, 2011, the CAS Board published a final rule that harmonizes CAS pension cost reimbursement rules with the Pension Protection Act of 2006 ("PPA") funding requirements. The rule is expected to mitigate the mismatch between CAS costs and minimum funding requirements under PPA-amended Employee Retirement Income Security Act of 1974 ("ERISA"), which should accelerate allowable CAS pension costs as compared to prior rules. We anticipate that government contractors will be entitled to an equitable adjustment for any additional CAS contract costs resulting from the final rule. We have sought, and expect to continue seeking, reimbursement from the U.S. government for a portion of our postretirement costs and plan contributions. For additional information related to our pension funding and costs, see Note 9-Retirement Plans to the consolidated financial statements contained within this report.

Supply Chain1 | 3.4%

Supply Chain - Risk 1

We depend on our teaming arrangements and relationships with other contractors and subcontractors. If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability, and growth prospects could be adversely affected.

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 contracts and potential 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.

See a full breakdown of risk according to category and subcategory. The list starts with the category with the most risk. Click on subcategories to read relevant extracts from the most recent report.

FAQ

What are “Risk Factors”?

Risk factors are any situations or occurrences that could make investing in a company risky.

The Securities and Exchange Commission (SEC) requires that publicly traded companies disclose their most significant risk factors. This is so that potential investors can consider any risks before they make an investment.

They also offer companies protection, as a company can use risk factors as liability protection. This could happen if a company underperforms and investors take legal action as a result.

It is worth noting that smaller companies, that is those with a public float of under $75 million on the last business day, do not have to include risk factors in their 10-K and 10-Q forms, although some may choose to do so.

How do companies disclose their risk factors?

Publicly traded companies initially disclose their risk factors to the SEC through their S-1 filings as part of the IPO process.

Additionally, companies must provide a complete list of risk factors in their Annual Reports (Form 10-K) or (Form 20-F) for “foreign private issuers”.

Quarterly Reports also include a section on risk factors (Form 10-Q) where companies are only required to update any changes since the previous report.

According to the SEC, risk factors should be reported concisely, logically and in “plain English” so investors can understand them.

How can I use TipRanks risk factors in my stock research?

Use the Risk Factors tab to get data about the risk factors of any company in which you are considering investing.

You can easily see the most significant risks a company is facing. Additionally, you can find out which risk factors a company has added, removed or adjusted since its previous disclosure. You can also see how a company’s risk factors compare to others in its sector.

Without reading company reports or participating in conference calls, you would most likely not have access to this sort of information, which is usually not included in press releases or other public announcements.

A simplified analysis of risk factors is unique to TipRanks.

What are all the risk factor categories?

TipRanks has identified 6 major categories of risk factors and a number of subcategories for each. You can see how these categories are broken down in the list below.

1. Financial & Corporate

Accounting & Financial Operations - risks related to accounting loss, value of intangible assets, financial statements, value of intangible assets, financial reporting, estimates, guidance, company profitability, dividends, fluctuating results.
Share Price & Shareholder Rights – risks related to things that impact share prices and the rights of shareholders, including analyst ratings, major shareholder activity, trade volatility, liquidity of shares, anti-takeover provisions, international listing, dual listing.
Debt & Financing – risks related to debt, funding, financing and interest rates, financial investments.
Corporate Activity and Growth – risks related to restructuring, M&As, joint ventures, execution of corporate strategy, strategic alliances.

2. Legal & Regulatory

Litigation and Legal Liabilities – risks related to litigation/ lawsuits against the company.
Regulation – risks related to compliance, GDPR, and new legislation.
Environmental / Social – risks related to environmental regulation and to data privacy.
Taxation & Government Incentives – risks related to taxation and changes in government incentives.

3. Production

Costs – risks related to costs of production including commodity prices, future contracts, inventory.
Supply Chain – risks related to the company’s suppliers.
Manufacturing – risks related to the company’s manufacturing process including product quality and product recalls.
Human Capital – risks related to recruitment, training and retention of key employees, employee relationships & unions labor disputes, pension, and post retirement benefits, medical, health and welfare benefits, employee misconduct, employee litigation.

4. Technology & Innovation

Innovation / R&D – risks related to innovation and new product development.
Technology – risks related to the company’s reliance on technology.
Cyber Security – risks related to securing the company’s digital assets and from cyber attacks.
Trade Secrets & Patents – risks related to the company’s ability to protect its intellectual property and to infringement claims against the company as well as piracy and unlicensed copying.

5. Ability to Sell

Demand – risks related to the demand of the company’s goods and services including seasonality, reliance on key customers.
Competition – risks related to the company’s competition including substitutes.
Sales & Marketing – risks related to sales, marketing, and distribution channels, pricing, and market penetration.
Brand & Reputation – risks related to the company’s brand and reputation.

6. Macro & Political

Economy & Political Environment – risks related to changes in economic and political conditions.
Natural and Human Disruptions – risks related to catastrophes, floods, storms, terror, earthquakes, coronavirus pandemic/COVID-19.
International Operations – risks related to the global nature of the company.
Capital Markets – risks related to exchange rates and trade, cryptocurrency.

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