Waldorf Astoria Hotel – New York, NY Leidos Investor Day September 11, 2013 |
Forward-Looking Statements Certain statements in this presentation contain or are based on "forward-looking" information within the meaning of the Private Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates” and similar words or phrases. Forward-looking statements in this presentation include, among others: our intent to separate into two independent publicly traded companies as a result of the proposed spin-off and the timing of the proposed transaction; revenue, growth, profitability and cost- efficiency expectations for the company following the spin-off; the expectation that the spin-off will be tax-free; statements regarding the resources, potential, priorities, competitive positioning, opportunities and addressable markets for the company following the spin-off; expectations about future regular or special dividends, stock repurchases and other anticipated uses of capital. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Actual performance and results may differ materially from the forward-looking statements made in these slides depending on a variety of factors, including: developments in the U.S. Government defense budget, including budget reductions, implementation of spending cuts (sequestration) or changes in budgetary priorities; delays in the U.S. Government budget process or approval to raise the U.S. debt ceiling; delays in the U.S. Government contract procurement process or the award of contracts; delays or loss of contracts as result of competitor protests; changes in U.S. Government procurement rules, regulations and practices; our compliance with various U.S. Government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. Government and other customers; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; our ability to comply with certain agreements entered into in connection with the CityTime matter; cybersecurity, data security or other security threats, systems failures or other disruptions of our business; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; our ability to effectively acquire businesses and make investments; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts, including complex engineering or design build projects; the failure of our inspection or detection systems to detect threats; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to manage risks associated with our international business; our ability to declare future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable laws and contractual agreements; risks associated with the proposed spin- off of our technical, engineering and enterprise information technology services business, such as disruption to business operations, unanticipated expenses, significant transaction costs and/or liabilities, the timing of the spin-off or a failure to complete the proposed spin-off or realize the expected benefits of the proposed spin-off; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in these slides. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission. All information in this presentation is as of September 11, 2013. The Company expressly disclaims any duty to update the forward-looking statement provided in this presentation to reflect subsequent events, actual results or changes in the Company's expectations. The Company also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others. |
START STOP DURATION (mins) TOPIC 7:30 8:25 55 Registration and Continental Breakfast 8:25 8:30 5 Opening Remarks and Introductions: John Sweeney, Investor Relations 8:30 8:50 20 Introduction and Company Overview: John Jumper, CEO 8:50 9:20 30 Strategy and Operations: Stu Shea, President & Chief Operating Officer 9:20 9:40 20 CEO and COO Q&A 9:40 10:10 30 National Security: Lou Von Thaer, Sector President 10:10 10:30 20 National Security: Q&A 10:30 10:45 15 Break 10:45 11:15 30 Health and Engineering: Joe Craver, Sector President 11:15 11:35 20 Health and Engineering: Q&A 11:35 11:40 15 Financial: Mark Sopp, Chief Financial Officer 11:40 12:00 20 Financial: Q&A 12:00 12:15 15 Closing Remarks: John Jumper, CEO 4 Investor Day—Wednesday, September 11 ©2013 LEIDOS. ALL RIGHTS RESERVED. th |
Introduction and Company Overview— John Jumper CEO |
7 $200M+ cost savings with more to come in FY15 Emphasize profit growth over top line revenue – Target 10.0% EPS annual growth – Continuous improvement driving lower rates & higher margin Strong cash generation: priority return to shareholders – $400M annual operating cash flow Stable business base: doing the important things – Intelligence, Health, Energy, Environment Technology leverage: deep analytics, cybersecurity Remove Organizational Conflict of Interest ©2013 LEIDOS. ALL RIGHTS RESERVED. Unlocking The Value of Leidos |
8 ©2013 LEIDOS. ALL RIGHTS RESERVED. What Has Changed… Old SAIC Leidos 1,000 flowers blooming and internal competition Organizational Conflicts of Interest Higher cost structure M&A-focused capital deployment Cash on the balance sheet Optimized portfolios, shared resources and leveraged technology Free to pursue more business Designed to cost Return-focused capital deployment Cash returned to shareholders Our Transformation |
9 ©2013 LEIDOS. ALL RIGHTS RESERVED. Our Key Leaders With You Today JOHN JUMPER Chairman and Chief Executive Officer STU SHEA President and Chief Operating Officer MARK SOPP Chief Financial Officer JOE CRAVER President, Health and Engineering Sector LOU VON THAER President, National Security Sector Aligned in Their Vision for the Company |
10 ©2013 LEIDOS. ALL RIGHTS RESERVED. Our Board of Directors JOHN P. JUMPER Chairman & Chief Executive Officer DAVID G. FUBINI Director JOHN J. HAMRE Director MIRIAM E. JOHN Director ANITA K. JONES Director HARRY M. J. KRAEMER, JR. Director LAWRENCE C. NUSSDORF Director ROBERT S. SHAPARD Director NOEL B. WILLIAMS Director |
11 Stable National Security Sector revenues combined with growth opportunities in Health and Engineering Removal of organizational conflicts of interest Continuous improvement to drive down costs Target operating margin of 8.0%+ Low Cap Ex requirements Strong operating cash generation: Target $400M operating cash flow in FY15 Return Value to Shareholder – Attractive dividend yield – Priority on returning cash to shareholders – Higher threshold for acquisitions ©2013 LEIDOS. ALL RIGHTS RESERVED. Investment Rational + |
Strategy and Operations— Stu Shea PRESIDENT AND CHIEF OPERATING OFFICER |
©2013 LEIDOS. ALL RIGHTS RESERVED. Executing on Our Vision Why Leidos Matters Who We Are What Makes Us Distinctive What is Our Value Proposition What You Should Expect From Us We Have a Roadmap for Delivering Value to our Shareholders 14 |
Why Leidos Matters: Convergence of Megatrends Giving Rise to Opportunities in Enduring Markets That Matter 15 Increasingly Impactful Cybersecurity Threats National Security Threats Protected Environment Clean Water Aging Critical Infrastructure Border Protection Cyber Threats Global Pandemics Clean Energy Preserve Natural Resources Affordable Healthcare Increasingly Challenging Economics, Geopolitics, and Urbanization Increasingly Global, Interconnected Markets Increasingly Complex, Data Rich Environments ©2013 LEIDOS. ALL RIGHTS RESERVED. |
16 ©2013 LEIDOS. ALL RIGHTS RESERVED. |
©2013 LEIDOS. ALL RIGHTS RESERVED. Who We Are Solutions That Secure Our Future and Our Way of Life 17 FY2014 revenues: ~$6B National Security 68% Health 14% Engineering 17% National Security Sector ~$4B revenue 13,500 employees with >10,500 possessing DoD, TS/SCI, SAP/SAR, and DoE security clearances 99% government, <1% commercial Critical mission support for intelligence community C4ISR R&D and solutions for DoD Industry-leading cybersecurity capabilities Health & Engineering Sector ~$2B revenue 9,500 employees 63% commercial, 37% government Healthcare information technology, electronic health records, and advanced data analytics Health and life science / clinical research Energy grid and critical infrastructure design and integration |
Revenue Composition Diversified and Stable Revenue Base, Low Concentration Risk 18 Contract Type Prime vs. Subcontract Contract Concentration IDIQ v. Non-IDIQ Employee Location Customers OCO Exposure Intelligence / Cyber Other Commercial Federal Gov Defense Top 5 Top 6-10 Subcontract T&M Fixed Price Cost Plus Customer Site Non IDIQ Prime OCO Non OCO Leidos Site IDIQ ©2013 LEIDOS. ALL RIGHTS RESERVED. |
©2013 LEIDOS. ALL RIGHTS RESERVED. We Have the Right Team A Balanced, Well-Educated Workforce Capable of Creating the Right Solutions 19 United States Top Operating Locations International Years of Service Degrees Veterans Concentration Washington, DC (26%) Baltimore, MD (16%) San Diego, CA (6%) Boston, MA (3%) Orlando, FL (3%) Dayton, OH (2%) St. Louis, MO (2%) Pensacola, FL (2%) Knoxville, TN (1%) Oklahoma City, OK (1%) Afghanistan Kuwait Germany Canada Japan Korea Australia United Kingdom Italy Iraq Social Sciences Sciences Engineering Veterans Non Veterans Masters Bachelors Others Doctorate <2 years 2-5 years 5-10 years >10 years Business, Law, Economics |
©2013 LEIDOS. ALL RIGHTS RESERVED. Health ($43B) • National Security ($94B) • • Evolve value-based healthcare through data analytics • Embed cybersecurity for privacy protection • Focus on agile, mission- critical integration • Exploit & leverage technology for mission advantage • Build on IT, analytics and engineering capabilities • Bring science & technology solutions Engineering ($80B) • What Makes Us Distinctive: Rich Markets Leveraging Technical Capabilities and Innovate Across Markets 20 One company in three opportunity rich markets of global importance Drive leading C4ISR solutions in challenging mission environments across all operational regimes Improve access and quality of healthcare by driving digitization, interoperability and personalized medicine Expand commercially and internationally to meet global infrastructure and natural resource needs |
©2013 LEIDOS. ALL RIGHTS RESERVED. What Makes Us Distinctive: Competitive Levers Leidos’ 3 Competitive Levers are Unique, Complete, and Proven 21 Deep Customer Domain Knowledge Deep scientific, technology, and subject matter expertise Complex data and analytic insight Relevant customer operational expertise Community thought leadership 1 People, Process, and Tools Highly educated workforce ISO, CMMI certifications Physics-based modeling and simulation 2 Scalable Capabilities Applied research and development Pilot engagements and system prototypes Component, systems, and subsystems Agile, quick reaction/ delivery solutions 3 3 Key Levers The Leidos Performance Value Chain |
©2013 LEIDOS. ALL RIGHTS RESERVED. What Makes Us Distinctive: Solutions That Work Our Strategy Gives Us a Roadmap for Meeting Our Objectives 22 People, Processes, and Tools Deep Customer Domain Knowledge Agile development processes Repeatable processes Reliable integrators Physics-based modeling and simulation Science and technology heritage Practical operational knowledge Embedded with our customer community Critical to mission success Respected community thought leadership Concept to creation Information-enabled engineering Advanced data analytics Full range of CyberSecurity Appropriate solutions Scalable Capabilities 1 2 3 One company with Three Unique Levers |
©2013 LEIDOS. ALL RIGHTS RESERVED. What Makes Us Distinctive: Information-Driven Capabilities Achieving technology leverage – Market pull is enabled by technology Provides channel access to customers – Technology push is informed by the market Retains the imperative of innovation Opportunity to scale – Diverse markets share common technical challenges Health market drowning in data and need to offset demanding regulatory challenges Future of a highly-interconnected infrastructure (energy sensors) – Additional investments key capabilities Enterprise Strategy, Focused Leadership, and Repeatable Solutions 23 |
©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Investment Thesis Compelling vision and performance objectives Balanced financial strategy Repeatable operating model Aggressive portfolio management Common core of information-driven capabilities Proximity and criticality to operators & customers Continually optimized cost structure 24 |
©2013 LEIDOS. ALL RIGHTS RESERVED. What You Should Expect From Us: Performance Maintain discipline – Laser-focused on core markets – Controlled adjacencies Expanding commercial portfolio Technology sharing – Increased, shared investment Economic profit improvement – Quality revenues – Educated workforce – Higher margin expectations We Will Drive Profit Growth While Earning a Competitive Return on Capital 25 Perform on current contracts – Early contract reviews – Integrated early warning system Divestitures and monetization – Portfolio shaping Better return of capital to shareholders Continuous attention to cost efficiencies – Improved business ecosystems |
©2013 LEIDOS. ALL RIGHTS RESERVED. 26 National Security Engineering Health Cybersecurity |
National Security— Lou Von Thaer SECTOR PRESIDENT |
28 ~$4B in revenues NSS capabilities aligned to address our Nation’s vast Intelligence & Defense requirements Intelligence collection, analysis and exploitation of data expertise are indispensable in today’s world – Comprises 80% of NSS revenues New multibillion dollar OCI-deconflicted markets available to pursue Forty-four year track record of winning competitively and executing Highly regarded industry reputation – Adept at rapidly developing and producing cost-effective solutions ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security Sector - Positioned for Success |
Leidos Information Enabled Solutions 29 ©2013 LEIDOS. ALL RIGHTS RESERVED. Market Shift Plays to Leidos’ Advantage CONVERGENCE In the future, those that control the information will control greater portions of the budget PHYSICAL REALM DIGITAL REALM OPERATIONAL REALM |
30 ©2013 LEIDOS. ALL RIGHTS RESERVED. Disclosed US Government Intelligence Budget Intelligence Spending CURRENT DOLLARS $B Key contributors to U.S. intelligence for four decades Sources: DNI disclosure of National Intelligence Budget & DoD Green Book; USD not adjusted for inflation. 80% of our current revenue National Security Sector Revenue 2006 2007 2008 2009 2010 2011 2012 2013 MIP Budget NIP Budget $10 $20 $30 $40 $50 $60 $70 $80 $90 80% INTELLIGENCE 15% DEFENSE 5% DHS & COMMERCIAL $0 |
31 ©2013 LEIDOS. ALL RIGHTS RESERVED. Expanding Growth Into Defense Market Reagan Era Vietnam Era Iraq/Afghanistan Source: DoD Green Book, USD not adjusted for inflation Long-term growing market DoD Spending CURRENT DOLLARS $B War Funding Current Year $0 $100 $200 $300 $400 $500 $600 $700 $800 |
32 Addressable market increases dramatically upon separation Significant opportunity space in long term Defense budgets ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security Sector Unconstrained Markets $37B AIR FORCE NAVY ARMY SOCOM & UNIFIED COMMANDS $0 $10 $20 $30 $40 |
33 ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security Maritime Systems Space Systems Airborne Systems Ground Systems Readiness & Sustainment Cybersecurity Intelligence Analysis & Production Intelligence Systems Critical Mission Support in all Operational Domains: Air, Land, Sea, Space and Cyberspace |
34 ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security at a Glance 13,500 PROFESSIONALS 10,500 WITH SECURITY CLEARANCES Broad technology, development and integration capabilities CONTRIBUTE TO OUR CUSTOMER MISSIONS… OUR CORE RESOURCES… 5% DHS AND COMMERCIAL 15% DEFENSE 80% INTELLIGENCE |
35 ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security at a Glance Increase of $37 Billion in Addressable Market BUSINESS SEGMENT REVENUE PERCENTAGE ADDRESSABLE MARKET Technology 25% $47B Intelligence 60% $23B Cybersecurity 15% $24B $94B |
36 Diversified contract base Top 10 contracts < 25% of total revenues 9 of Top 10 contracts in stable intelligence market ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security at a Glance FY14 Top Contracts PROGRAM REVENUE BUSINESS SEGMENT Classified $154M Intelligence Saturn Arch $140M Technology GGI $102M Intelligence MRAP JLI $ 99M Intelligence Classified $ 97M Cyber Classified $ 86M Cyber Classified $ 85M Cyber Buckeye $ 79M Technology Blue Devil $ 72M Technology Joint Intel Ops Center $ 70M Intelligence |
27% Fixed Price 37 Proximity to operators & deep domain expertise Capabilities address emerging market needs Rapidly deploy cost-effective technical solutions Advanced analytics to solve complex information problems Cybersecurity to defend critical missions and systems Well positioned in market for revenue & profit growth Market leader with prime contracts Broad and established base Positioned for OCI deconflicted defense market Streamlined infrastructure with costs reduced 15% Prolific business development engine 60% increase in proposal submissions $7B of bids pending award • Additional $7B of IDIQ bids submitted Competitive win rate (50 – 65%) ©2013 LEIDOS. ALL RIGHTS RESERVED. History as a Fierce Competitor 88% PRIME 82% Base Funding 61% Cost Plus 12% T&M 27% Fixed Price 88% PRIME 12% SUB 82% Base Funding 18% OCO |
38 Horizontally Integrated Solutions into New Markets ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos National Security Strategy Consistent, Reliable, Secure Technology and Information Globally for all Customers Technology Intelligence Cybersecurity Intelligence Defense Homeland Security Healthcare Engineering Utilities BUSINESS SEGMENTS DELIVERY FOCUS MARKETS Quick to Market Tailored to Need Predictive Analytics Full Life Cycle Support Affordable Global Operations |
39 ©2013 LEIDOS. ALL RIGHTS RESERVED. Technology Business Segment Technology-driven end-to-end integrated solutions operating in the air, land, sea & space Advanced Technology Solutions to Differentiate Leidos Offerings R&D in air, sea, ground & space Autonomous and distributed solutions Modeling, simulation and training Wide range of technical solutions First full-spectrum ISR in theater Leading Navy’s diesel submarine tracking prototype Developing one of two high-speed prototype crafts for USSOCOM Transitioning to new markets Unmanned, autonomous naval systems Advanced electronic warfare Border Security missions Classified next generation sensors Saturn Arch Buckeye Desert Owl Blue Devil ISR Target Recognition Tactical Sonar Naval Warfare Engineering MOJAVE ACTUV Integrated WMD Targeting & Intelligence Support CAPABILITIES PRIMARY CUSTOMERS Research organizations across DoD |
40 ©2013 LEIDOS. ALL RIGHTS RESERVED. Success Story: Distributed Airborne Information Solutions Deployed technologies on Blue Devil, Buckeye, Desert Owl, Radiant Falcon, Saturn Arch Catching Bad Guys and Protecting our Troops Mission Needs Customer needed to integrate sensor operations to identify and address threats Leidos Response Leidos combined our expertise, experience, and technologies to develop solutions quickly to match the need Idea to deployment in less than10 months Result Delivered rapid persistent, multisource, integrated intelligence capability Identified multiple high-value targets Protected U.S. and coalition troops operating in high-threat areas Day & Night 3-D Geospatial Multiple Sources Full Motion Video Wide Area Imagery Technology Business Segment |
41 Expanding market for Navy autonomous solutions to address expanding threats Navy developing solution to counter diesel submarines Leidos ability to meet Navy’s need Leading prototype design to track diesel electric submarines for months at a fraction of their size and cost Leveraging integration capabilities in ocean modeling, systems engineering and integration, and software development Enabled by experience in design and build of maritime sensors, communications systems, autonomous controls, and propulsion systems Positions Leidos for expanded Navy business over the coming decade ©2013 LEIDOS. ALL RIGHTS RESERVED. Growth Opportunity: Naval Autonomous Technology Design and integrate unmanned, autonomous solutions for intelligence and defense needs Advanced Platform Development to Meet Demanding New Mission Needs ACTUV: Anti-Submarine Warfare (ASW) Continuous Trail Unmanned Vessel 130 40 80 FEET LONG FEET WIDE TONS Technology Business Segment |
42 Growing market for multiple mission autonomous systems Navy developing affordable, versatile systems for deploying and retrieving equipment Leidos ability to meet Navy’s need Leveraging ACTUV prototype design experience Knowledge in underwater operations, propulsion, and controls Broad experience in intelligence, surveillance, and reconnaissance Expanding Leidos offering for next-generation Navy systems ©2013 LEIDOS. ALL RIGHTS RESERVED. Growth Opportunity: Naval Autonomous Technology Design and integrate unmanned, autonomous solutions for intelligence and defense needs Leveraging Technology and Experience into Affordable Future Navy Workhorse 25 5 5 FEET LONG FOOT DIAMETER TONS UUV: Unmanned Underwater Vehicle Technology Business Segment |
43 ©2013 LEIDOS. ALL RIGHTS RESERVED. Intelligence Business Segment Building wide range of information processing systems solving toughest challenges today Delivering “Glue-ware” to Create Integrated Systems for Decision Makers PRIMARY CUSTOMERS System Engineering & Integration Delivering across Intelligence & Defense Pursuing adjacent markets in Defense Classified Intelligence Communications Army Military Intel Enterprise Joint Intelligence Ops Center Geospatial Production iSTORE Content Management MRAP JLI Distributed Common Ground System GPS System Engineering TACAN Replacement CAPABILITIES Advanced analytics Software development Intelligence analysis & operations Integrated logistics solutions Top geospatial products producer for IC Leading NSA & Army data analytics First Intel & Defense Cloud architectures Bid Data & Cloud solutions Integrated intelligence systems Infrastructure protection Modernization, readiness & sustainment |
44 Mission Need Intelligence community must review massive amounts of data to make accurate decisions Leidos Response Leidos leveraged our domain knowledge, data analytics and software development capabilities to deliver the leading data analytics platform Result Leidos solution “transformed tactical intelligence” Leidos implemented a 40x improvement in throughput following year “The most significant SIGINT system in aiding the Warfighter in the past 10 years” In 2013, Leidos developed a commercial platform operating at a 200x improvement ©2013 LEIDOS. ALL RIGHTS RESERVED. Success Story: Big Data Analytic Solution Leverage leading data analytics successes in Intelligence into broader markets ENERGY HEALTH DEFENSE DHS CRITICAL INSIGHT Intelligence Data Analytics Tools Commercial Data Analytics Tool Intelligence Business Segment |
45 DHS seeking low-risk near-term solution for U.S. border security – Failed Secure Border Initiative program delayed border security implementation – Seeking proven system to detect and track items of interest along nation's borders Leidos ability to meet DHS’ need – Leverage security and force protection – Integrated solution with proven systems and operations experience – Automated solution flexible and easy to operate – Positioned for growth in U.S. and global markets ©2013 LEIDOS. ALL RIGHTS RESERVED. Growth Opportunity: Border Security Surveillance Rapid solution deployment for high confidence border security Proven, affordable and flexible solutions for border security Intelligence Business Segment |
46 ©2013 LEIDOS. ALL RIGHTS RESERVED. Cybersecurity Business Segment Delivering over $700M of Cybersecurity to the Intelligence Community to constantly defend critical infrastructure against the most sophisticated adversaries Leveraging Cyber leadership in Intelligence to address increasing commercial demands Leading Cyber Provider in Intelligence Community Computer Defense, Exploitation, & Ops Predictive Cyber analytics Largest forensics malware in IC Large-scale systems design and integration Delivering Broad Cyber Solutions Cryptographic algorithms, key management Cyber software development Navy 2013 Tech Award: Cyber Domain Services Expanding Cyber beyond Intelligence Community Federal Government Classified (Multiple) Key Management U.S. National Data Center Key Management Commercial & Critical Infrastructure Health Critical Infrastructure Commercial Providers CAPABILITIES PRIMARY CUSTOMERS |
47 Mission Needs Intelligence community faced with constant, sophisticated cyber attacks Leidos Response Developed solution to identify and defend against new cyber threats Delivers software to defend against new attacks, and protect networks across IC Result Enterprisewide protection from new and emerging cyber threats Well positioned to leverage capabilities across defense and commercial markets ©2013 LEIDOS. ALL RIGHTS RESERVED. Success Story: Cyber Signature Management Delivering cyber signatures to protect critical Intelligence Community infrastructure Cybersecurity Business Segment |
48 DHS and commercial companies seeking secure network solutions Cyber threats continue to expand in numbers and sophistication Need for reliable cyber protection expanding Leidos has the ability to meet emerging needs Deliver differentiated solutions to protect networks and information Provide cybersecurity defense and incident response Highest margins, fastest growing market Solutions in development ©2013 LEIDOS. ALL RIGHTS RESERVED. Growth Opportunity: Cyber Threat Operations Using intelligence-based capabilities, deliver cybersecurity to protect federal and commercial entities Cybersecurity Business Segment |
49 ©2013 LEIDOS. ALL RIGHTS RESERVED. Competition Intelligence & Security Information Systems & Technology Information Systems & Global Solutions National Security Solutions Intelligence, Information & Services Information Systems Defense, Space & Security SERVICES Mission, Cyber & Intelligence Solutions SYSTEM INTEGRATORS & SOLUTIONS |
50 NSS brings a 44 year history of performance in good markets and bad – Leidos design drives horizontal technology collaboration in expanded markets – Continual focus on streamlined operations at reduced cost – Expanded focus on increasing earnings to drive shareholder value Continued need for intelligence and market shift plays to Leidos’ advantage Nimble and affordable Uniquely positioned to compete ©2013 LEIDOS. ALL RIGHTS RESERVED. Summary Leidos – Missions that Matter |
Health & Engineering— Joe Craver SECTOR PRESIDENT |
53 Long-term market presence with solution and service delivery at scale Applied solutions focused on large, receptive commercial markets Core capability leverage with broad impact across multiple market segments ©2013 LEIDOS. ALL RIGHTS RESERVED. Health & Engineering Sector Healthcare Engineering ~$2B Revenues Commercial Federal 63% 37% 43% 57% |
Leidos Health |
55 Material presence and scale in more than $35B healthcare IT market Market drivers and business imperatives creating need for health organizations to seek applied solutions Extensive client list, reputation for quality and partnered with all the industry leading software vendors Uniquely positioned with expertise in IT, clinical transformation, behavioral health, life sciences and data analytics Positioned to grow in both Commercial and Federal markets ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Health – Positioned for Long-Term Success |
34 35 36 39 41 43 45 Hardware Telecom Software Internal Services IT Services 56 International Health IT market is more than $90B Total addressable market is much bigger than just Health IT ©2013 LEIDOS. ALL RIGHTS RESERVED. U.S. Healthcare Provider IT Market Source: Gartner Enterprise IT spending by verticals forecast, 2013Q1 CAGR ’11–’13F 4% 4% 2% 6% 7% 0% CAGR ’13F–’17F 5% 3% 3% 7% 7% 4% 0 10 20 30 40 50 2011 2012 2013 2014F 2015F 2016F 2017F |
57 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Health in the Marketplace #9 Modern Healthcare's 2013 Management Consulting Firms Engaged by 18 of 25 largest Academic Medical Centers as listed by Modern Healthcare 2012 Worked with 15 of 18 U.S. News and World Report’s 2012-13 Best Hospitals Honor Roll #4 KLAS Ranking of Overall Health Services Firms #18 Healthcare Informatics Top 100 |
58 Major Shift as Healthcare Becomes More Data-Enabled… ©2013 LEIDOS. ALL RIGHTS RESERVED. A New Era in Healthcare Is Emerging… Leidos’ Analytical Capabilities and Domain Knowledge Allow Us To Excel In Data-Enabled Environments Tomorrow Today Digitization Integration and Interoperability Data Leverage Precision Medicine & Personalization |
Health Solutions Electronic Health Record System Implementation & Optimization Health Information Security Behavioral Health Research & Outreach Biomedical Data Integration & Warehousing Health IT Framework & Information Exchange Advanced Data Analytics & Visualization Biomedical Research & Development Public Health Surveillance & Outreach 59 From the Research Bench to the Patient Bedside ©2013 LEIDOS. ALL RIGHTS RESERVED. |
EHR implementation Optimization Information integration IT services Application development and maintenance Ongoing system support Legacy system support Strategic IT planning Meaningful use Clinical transformation ICD-10 Revenue cycle management Data analytics; cybersecurity Behavioral health Public health Life sciences Health research What We Do 45% 15% 10% Leidos Health 5-Year Growth Trajectory 5–10% 3–6% 10%+ Percent of Leidos Health Business 30% 3–6% EHR Consulting (Digitization) Systems Integration (Integration and Interoperability) Strategic Services and Solutions (Data Leverage) Health Research and Life Sciences (Precision Medicine and Personalization) Capabilities ©2013 LEIDOS. ALL RIGHTS RESERVED. 60 |
61 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Health Clients Helping Drive the Transformation Towards Value-Based Healthcare Federal Health Clients Commercial Clients |
62 ©2013 LEIDOS. ALL RIGHTS RESERVED. EHR Consulting Digitization |
63 ©2013 LEIDOS. ALL RIGHTS RESERVED. EHR Consulting Majority of Institutions Have Underdeveloped EHR Capabilities Data from HIMSS Analytics Database Q1 2013 7 Digitization Only 27% of hospitals have reached Healthcare Information and Management Systems Stage 5 or higher |
64 Developed & support the U.S. military AHLTA/CHCS system, the largest EHR system ever implemented ©2013 LEIDOS. ALL RIGHTS RESERVED. Systems Integration Integration and Interoperability Provided health IT & systems integration support in connecting Inland Northwest Health Services (INHS), one of the nation’s first health information exchanges, to public health entities and applications Supported a major Canadian provincial health system in the creation and development of a health information network to link healthcare providers province wide Links nearly 300 healthcare facilities in 126 communities & 380 pharmacies connecting approximately 19,000 healthcare professionals Nearly 10 million beneficiaries 50 treatment facilities & 360 clinics |
65 VA/DoD EHR Integration Opportunity Servicing over 18 million patients in both VA / MHS Total program cost: ~ $5 - $20 billion High Congressional visibility creating pressure for action Possible Scenarios: Expansion of existing sharing platforms Adoption of existing systems by differing agency Integration and deployment of new EHR systems (COTS) ©2013 LEIDOS. ALL RIGHTS RESERVED. Systems Integration Integration and Interoperability |
66 Strategic Services and Solutions True Value of Digitization is Unlocked Through Data Leverage STRATEGIC ADVISORY SERVICES VALUE-BASED OUTCOMES IT Strategy & IT Strategy & Program Program Management Management Cyber Cyber Security Security ICD-10 Transformation Advanced Data Advanced Data Analytics Analytics Clinical Clinical Transformation Transformation Revenue Cycle Revenue Cycle Optimization Optimization Meaningful Use (MU) Data Leverage ©2013 LEIDOS. ALL RIGHTS RESERVED. |
… directed the full implementation of clinical and revenue cycle applications at 27 hospitals and clinics for one of the top academic medical centers in the country … Revenue cycle transformation… … for one of the largest public hospitals (Grady Health System) in the United States … Advanced Analytics… social network analytics solutions to support product introduction decisions internationally for one of the largest pharmaceutical companies in the country … 67 ©2013 LEIDOS. ALL RIGHTS RESERVED. Strategic Services and Solutions Data Leverage deployed |
68 Leidos has over 25 years of combined programmatic experience providing solutions that enhance health, resilience, readiness, and performance through research, education, training and counseling in areas such as: Performance Enhancement: Prediction of Unplanned Loss Team Resilience Traumatic Brain Injury Rehabilitation Career-Span Health & Wellness Operational Stress: Post Traumatic Stress Disorder (PTSD) Insomnia Suicide Prevention Depression Re-Integration Behavioral Sciences: Adolescent Substance Abuse Counseling & Prevention Substance Use & Abuse Sexual Assault & Harassment Family & Workplace Violence Prevention of Sexually Transmitted Disease (STDs) Leidos researchers conduct over 70 individual research studies annually and have supported over 500 research projects in the last 5 years in the areas of health, resilience, and readiness Human subject studies range from 100-2,000 and large database driven research studies are in excess of 5 million records ©2013 LEIDOS. ALL RIGHTS RESERVED. Health Research & Life Sciences Precision Medicine and Personalization |
69 ©2013 LEIDOS. ALL RIGHTS RESERVED. Research and Life Sciences: Leidos Biomedical Research Frederick National Laboratory for Cancer Research Advanced Technology Research Facility Opened June 2012 Genetics and genomics Proteins and proteomics Imaging and nanotechnology Advanced biomedical computing Translational Research Precision Medicine and Personalization |
70 Competitive Landscape ©2013 LEIDOS. ALL RIGHTS RESERVED. Commercial Health Federal Health |
71 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Health Competitive Advantage Life Sciences Clinical SME Health IT Advanced Data Analytics Behavioral Health & Wellness Health IT Clinical SME Life Sciences ADVANCED DATA ANALYTICS BEHAVIORAL HEALTH & WELLNESS |
Leidos Engineering |
73 Consistently meets deadlines, budget and delivers on commitments Uses systems approach to integrate engineering, technology, IT and consulting to address emerging challenges Has capabilities to bring clarity and insight to large data ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Engineering … a Customer Survey of over 800 Industry Decision Makers Revealed the Following Top 3 Priorities… |
74 Market Drivers ©2013 LEIDOS. ALL RIGHTS RESERVED. |
75 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Engineering Approach is Our Advantage Combining Horizontal Capability & Applying to Industry Sectors Addressing Market Interdependence Through Horizontal Leverage Tomorrow Today Foundational Differentiating Disruptive Architecture Engineering Environmental DesignBuild Systems Engineering Systems Integration Program Management Financial Advisory Technology Assessment Energy Modeling Energy Management Information Technologies Sensor Integration Physical Controls System Automation Business Modeling Data Analytics |
Engineering Solutions Secure Commerce Business and Financial Advisory Water and Waste Energy Management & Efficiency Environmental Services Oil, Gas and Chemicals Renewable Energy Power Delivery and Smart Grid 76 Bringing Engineering and Technology Together in Critical Markets ©2013 LEIDOS. ALL RIGHTS RESERVED. |
Industry Rankings and Awards TOP NATIONAL RANKINGS Business Information Modeling (BIM) Engineering Firms Building Design+ Constr., July 2013 # 6 Transmission & Distribution ENR, July 2013 #7 Environmental Management ENR, 2013 # 8 Top 50 in Program Management ENR, June 2013 # 8 Top Engineering/Architecture Firms BD+C, July 2013 # 23 Top 25 in Power ENR, July 2013 # 34 Top 500 in Design ENR, April 2013 OTHER SELECT RANKINGS # 4 Wind Power ENR, July 2013 # 6 Auto Plants Engineering Firms ENR, July 2013 # 9 Top Data Center Engineering Firms ENR, July 2013 # 46 Top 100 in Design-Build ENR, June 2013 ©2013 LEIDOS. ALL RIGHTS RESERVED. 77 |
What We Do Percentage of Leidos Engineering Business Leidos Engineering 5 Year Growth Trajectory Capabilities Power Oil and Gas Commercial and Industrial Infrastructure 25% 10% 25% 40% Consulting Enterprise IT Energy efficiency T&D and smart grid Renewable integration Shale gas Asset management Remediation Design and engineering DesignBuild Architect and engineering Energy efficiency Advanced communications systems Environmental support Water resource management Civil engineering Financial transactions Secure commerce products 5-8% 8-10% 3-6% 3-6% ©2013 LEIDOS. ALL RIGHTS RESERVED. 78 |
79 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Engineering Capabilities Delivered to Markets Scale and Experience in Markets that Matter |
80 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Engineering Clients … and Other Fortune 100 Companies |
81 ©2013 LEIDOS. ALL RIGHTS RESERVED. Secure Commerce Clients Include: CBP, TSA, DoD, DOS, Mexico, Middle East |
82 Prepared reports on nearly 1,000 power, infrastructure and industrial projects in 75 countries and territories Independent engineering on more than 1,000 energy projects, nearing $200 billion in completed transactions Active in independent engineering and owner’s advisory since 1978 Reviewed nearly 500 renewable energy and 150 biofuel projects across 6 continents, with energy capacity in excess of 33,000 megawatts over the last 2 years alone Evaluated over 300 major technologies ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Engineering Lenders & Developers – Consulting Engineering 7 RECENT DEAL OF THE YEAR AWARDS Project Finance Magazine |
83 ©2013 LEIDOS. ALL RIGHTS RESERVED. Competitive Landscape Large Engineering Specialized Engineering |
84 ©2013 LEIDOS. ALL RIGHTS RESERVED. Impact of Leidos Health & Engineering NASA One-of-a-Kind Vibro- Acoustic Research Facility DesignBuild Responsible Shale Exploration Support San Diego County Airport Design, Engineering, Installation, Testing, and Commissioning Data Analytics Oklahoma Cancer Research Center |
Financial Overview— Mark Sopp CHIEF FINANCIAL OFFICER |
86 ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Value Creation Roadmap Proven Business Model – On a New Path to Drive Shareholder Value Profit-Focused Revenues Year-over-year Operating Income Growth Strong Cash Generation Capital Allocation Effectiveness |
87 Quality revenues; profit focus Stay within our wheelhouse; shape portfolio Capitalize on OCI and commercial opportunities Greater Leidos content, integrated technology Complete transition year costs/charges Full-year benefit of FY14 cost reductions; ongoing Underperforming business areas removed Reduce cost of delivery (procurement, subcontracting) ©2013 LEIDOS. ALL RIGHTS RESERVED. Profitability Actions Geared for More Predictable and Low Capital-Intensive Profit Streams Focus on Profitable Growth Deliver Expanded Margins |
88 ©2013 LEIDOS. ALL RIGHTS RESERVED. Strong Cash Flow Strong and Improving Capital Efficiency Strong Cash Flow No Factories Insignificant Pension Variable Cost Structure Human Capital Based |
89 ©2013 LEIDOS. ALL RIGHTS RESERVED. Cash & Credit Statistics Meaningful Near-Term Cash Deployment Opportunity No debt maturities till 12/2020 Total Debt = $1,293M Avg. Debt Rate 5.6% Anticipate maintaining investment grade rating Cash at Spin ~$450M Dividend from NSAIC $295M Est’d Beg. Cash ~$745M Est’d End FY14 ~$950M CASH DEBT |
90 ©2013 LEIDOS. ALL RIGHTS RESERVED. Capital Deployment $350M Projected FCF * /Year; >$2.5B deployable next 5 years ~1/3 - Maintain/Increase Regular Dividends >1/3 - Buybacks & Special Dividends Selective M&A 1 *FCF = Free Cash Flow; Derived from projected Operating Cash Flow minus projected Capital Expenditures $0.95B $2.6B $- $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 YE FY14 FY15 FY16 FY17 FY18 YE FY19 rd rd • Established Businesses • Strengthens our 3 Markets |
Recent Results & Outlook |
92 Pro Forma (PF) Financials Consolidated + segments; Oct ‘13 Leidos PF includes: – CityTime settlement – >100bps stranded costs – Significant special charges FY12-14 Adjusted Non-GAAP Op Income Discrete items adjusted Provides additional insight into core operating performance Reflects stranded corporate costs and does not reflect cost savings program ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos Historical Performance $'s in millions FY12 FY13 H1 FY14 Leidos Pro Forma Revenue 5,860 $ 6,471 $ 3,065 $ SAIC as Reported Operating Income 300 $ 741 $ 219 $ New SAIC (343) (288) (105) Stranded Corporate Costs (66) (70) (41) Separation Costs - 10 55 Leidos Pro Forma Operating Income (109) 393 128 Pro Forma Operating Income % -1.9% 6.1% 4.2% Non-GAAP Adjustments: CityTime 540 - - Significant EAC Adjustments - 10 37 Intangible Impairments 19 13 34 Regulatory and Legal Settlements 22 9 15 Adj. Non-GAAP Operating Income 472 $ 425 $ 214 $ Adj. Non-GAAP Operating Income %* 7.5% 6.6% 6.9% * Operating Income % appropriately adjusted for CityTime and EAC revenue impacts See Appendix for description of pro forma non-GAAP adjustments |
$368 $334 $153 $0 $100 $200 $300 $400 $500 FY12 FY13 FY14 1H Adjusted Non-GAAP Operating Income ($M) 7.2% 7.2% $4,631 $4,646 $2,116 $0 $1,000 $2,000 $3,000 $4,000 $5,000 FY12 FY13 FY14 1H Adjusted Non-GAAP Revenue ($M) 93 Revenue 1HFY14 down due to JLI and Federal spending cuts Adjusted Non-GAAP Operating Income Reflects stranded corporate costs; does not reflect cost savings program Adds back Impairments and EAC adjustments for one program ©2013 LEIDOS. ALL RIGHTS RESERVED. National Security Segment Financials 7.9% See Non-GAAP reconciliation in the Appendix |
94 Revenue Revenue; growth from acquisitions; 1HFY14 internal revenues flat Adjusted Non-GAAP Operating Income Reflects stranded corporate costs; does not reflect cost savings Adds back impairments and EAC adjustments for one program ©2013 LEIDOS. ALL RIGHTS RESERVED. Health & Engineering Segment Financials 8.6% See Non-GAAP reconciliation in the Appendix $1,622 $1,831 $972 $0 $500 $1,000 $1,500 $2,000 FY12 FY13 FY14 1H Adjusted Non-GAAP Revenue ($M) $139 $140 $79 $0 $100 FY12 FY13 FY14 1H Adjusted Non-GAAP Operating Income ($M) 7.6% 8.1% |
95 Consistent with SAIC Inc. guidance issued Sept 4, 2013, except: – Separation now assumed; triggers Stranded Corporate Costs ~$60M ($.12 EPS) – Legal expenses previously reported as part of TSIT~$10M ($.02) – EPS, provided on a pre-split and post-split basis ©2013 LEIDOS. ALL RIGHTS RESERVED. Leidos FY 14 Guidance Revenues (billions) 5.85 $ to 6.10 $ EPS Continuing Operations, pre-stock split 0.45 $ to 0.51 $ EPS Continuing Operations, split adjusted 1:4 1.80 $ to 2.04 $ Operating Cash Flows (millions) $325 + |
96 ©2013 LEIDOS. ALL RIGHTS RESERVED. FY15 Margin Improvement Outlook Major Levers: Full year benefit of $200M+ cost reductions Ongoing streamlining; lower wrap rates NSS removal of non-core under-performing business areas Restoring normative commercial health margins HES focus on higher fee consulting engineering projects Profit-focused incentives and accountability Focused on Bottom Line in Difficult Top-Line Environment FY14 1H Adjusted Non-GAAP Operating Income 6.9% FY14/15 cost savings program 1.0% - 1.5% HE Sector profit improvements 0.7% - 1.25% Anticipated portfolio changes 0.1% - 0.2% Targeted FY15 Operating Margin 8.0% + |
97 ©2013 LEIDOS. ALL RIGHTS RESERVED. Playing to our Strengths: Leidos FY15 to FY17 Targets Targeted EPS* Growth/Yr. 10.0%+ Targeted Annual Operating Margin 8.0%+ Targeted Organic Growth: FY15 +/- low single digit FY16-17 + low single digit Targeted Operating Cash Flow/Yr. $400M+ * GAAP EPS from Continuing Operations Profit-focused Lower cost structure Strong Cash Flow Attractive Regular Dividend (~1/3 FCF) Targeting > 1/3 FCF buybacks/special dividends |
98 1. Attractive, large, enduring, increasingly integrated markets 2. Streamlining, separation, and portfolio moves prep for clean FY15+ 3. Profit growth and capital effectiveness focus 4. Deployment opportunity > $2.5B over the next 5 years – >2/3 FCF targeted for dividends and buybacks – Select, established M&A to build our three markets – Systematically deploy excess cash ©2013 LEIDOS. ALL RIGHTS RESERVED. Summary Repositioned with Focus on Driving Profit Growth and Returning Cash to Shareholders |
Appendix |
100 The unaudited pro forma consolidated financial information included in this presentation was derived from the Company’s historical consolidated financial statements and is being presented to show the effect of the proposed spin-off of New SAIC. The unaudited pro forma consolidated financial information should be read in conjunction with the historical financial statements and accompanying notes. The unaudited pro forma consolidated financial information is presented for the six months ended August 2, 2013 and the years ended January 31, 2013 and 2012 and assumes the separation occurred on February 1, 2011. The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable, that reflect the impacts of events directly attributable to the proposed spin-off, and that are factually supportable. The pro forma adjustments may differ from those that will be calculated to report New SAIC as discontinued operations in Leidos’ future filings. The unaudited pro forma consolidated financial information is provided for illustrative and informational purposes only and is not intended to represent or be indicative of what Leidos’ results of operations or financial position would have been had the separation occurred on the dates indicated. The unaudited pro forma consolidated financial information also should not be considered representative of Leidos’ future results of operations or financial position. The pro forma adjustments represent the following: – Removal of the results of operations for the Technical Services and Information Technology segment that comprises New SAIC. – Removal of non-recurring transaction and infrastructure setup costs incurred by the Company in connection with the proposed spin-off of New SAIC. – Addition of certain general corporate overhead expenses (stranded costs) that were not specifically related to New SAIC and do not meet the requirements to be presented as a component of discontinued operations. ©2013 LEIDOS. ALL RIGHTS RESERVED. Unaudited Pro Forma Consolidated Financial Information |
101 This presentation includes the financial measures Adjusted Non-GAAP Revenue, Adjusted Non-GAAP Operating Income, and Free Cash Flow, all of which are defined as non-GAAP financial measures by the Securities and Exchange Commission (SEC). These measures may be different than similarly-titled non- GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with generally accepted accounting principles (GAAP). Explanations of our non- GAAP financial measures are as follows: Adjusted Non-GAAP Revenue is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP financial measure, Revenue. Adjusted Non-GAAP Revenue adjusts Revenue for the following discrete events: CityTime – This adjustment represents to a legal settlement related to a timekeeping contract with the City of New York. Significant EAC Adjustments – This adjustment represents write-downs for two discrete contracts during the periods presented that were unusual in nature and in amount. The Company uses non-GAAP financial measure to provide investors with visibility to how the company performed without these discrete events. ©2013 LEIDOS. ALL RIGHTS RESERVED. Non-GAAP Reconciliations |
102 Adjusted Non-GAAP Operating Income is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP financial measure, Operating Income. Adjusted Non-GAAP Operating Income adjusts Operating Income for the following discrete events: CityTime – This adjustment represents to a legal settlement related to a timekeeping contract with the City of New York. Intangible Impairments – This adjustment represents impairments of long-lived assets due to changes in actual performance against performance projected when the long lived assets were acquired. Significant EAC Adjustments – This adjustment represents write-downs for two discrete contracts during the periods presented that were unusual in nature and in amount. Regulatory and Legal Settlements – This adjustment represents settlements for discrete regulatory and legal matters. The Company uses non-GAAP financial measure to provide investors with visibility to how the company performed without these discrete events. ©2013 LEIDOS. ALL RIGHTS RESERVED. Non-GAAP Reconciliations (Continued) |
103 ©2013 LEIDOS. ALL RIGHTS RESERVED. Non-GAAP Reconciliations – Adjusted Non- GAAP Revenue and Operating Income Note: The “as reported” amounts above and throughout this presentation have been recasted to give effect to reorganizations and discontinued operations Non-GAAP Adjusted Operating Income Reconciliation by Sector FY12 FY13 FY14 HE Seg NSS Seg TSIT Corp Seg Total HE Seg NSS Seg TSIT Corp Seg Total HE Seg NSS Seg TSIT Corp Seg Total SAIC as Reported Revenue 1,622 $ 4,631 $ 4,238 $ (2) $ 10,489 $ 1,831 $ 4,646 $ 4,693 $ (5) $ 11,165 $ 972 $ 2,101 $ 2,116 $ (8) $ 5,181 $ SAIC Gemini, Inc. (4,238) - (4,238) (4,693) (4,693) (2,116) (2,116) CityTime to Leidos (391) (391) (1) (1) - Leidos Pro Forma Revenue 1,622 4,631 - (393) 5,860 1,831 4,646 - (6) 6,471 972 2,101 - (8) 3,065 Non-GAAP Adjustments: CityTime - - - 410 410 - - - - - - - - - - Significant EAC Adjustments - - - - - 10 - - - 10 16 15 - - 31 Adj Non-GAAP Revenue 1,622 $ 4,631 $ - $ 17 $ 6,270 $ 1,841 $ 4,646 $ - $ (6) $ 6,481 $ 988 $ 2,116 $ - $ (8) $ 3,096 $ Sector as Reported Operating Income 156 $ 398 $ (199) $ (55) $ 300 $ 160 $ 371 $ 314 $ (104) $ 741 $ 45 $ 157 $ 139 $ (122) $ 219 $ SAIC Gemini, Inc. - - 199 - 199 - - (314) 28 (286) - - (139) 34 $ (105) Stranded Corporate Costs (17) (49) - - (66) (20) (50) - - (70) (13) (28) - - $ (41) CityTime - - - (542) (542) - - - (2) (2) - - - - $ - Pro Forma Separation Costs - - - - - - - - 10 10 - - - 55 $ 55 Pro Forma Operating Income 139 349 - (597) (109) 140 321 - (68) 393 32 129 - (33) 128 Pro Forma Operating Income % 8.6% 7.5% 0.0% 151.9% -1.9% 7.6% 6.9% 0.0% 1133.3% 6.1% 3.3% 6.1% 0.0% 412.5% 4.2% Non-GAAP Adjustments: CityTime - - - 540 540 - - - - - - - - - - Significant EAC Adjustments - - - - - 10 - - - 10 17 20 - - 37 Intangible Impairments - 19 - 19 - 13 - 13 30 4 - 34 Regulatory and Legal Settlements - - - 22 22 - - - 9 9 - - - 15 15 Adj. Non-GAAP Operating Income 139 $ 368 $ - $ (35) $ 472 $ 150 $ 334 $ - $ (59) $ 425 $ 79 $ 153 $ - $ (18) $ 214 $ Adj. Non-GAAP Operating Income % 8.6% 7.9% N/A N/A 7.5% 8.1% 7.2% N/A N/A 6.6% 8.0% 7.2% N/A N/A 6.9% |
104 Free Cash Flow is a non-GAAP financial measure that is reconciled to the most directly comparable GAAP financial measure, cash flows used in operating activities. The company believes that reporting free cash flow provides investors with greater visibility into how effectively it generates cash. The company calculates free cash flow by subtracting expenditures for property, plant and equipment from total cash flows used in operating activities. ©2013 LEIDOS. ALL RIGHTS RESERVED. Non-GAAP Reconciliations – Free Cash Flow ($ in millions) FY15-FY19 Projected average annual operating cash flow 400 $ Projected average annual expenditures for property, plant and equipment (50) Free cash flow 350 $ |