Science Applications International Corporation (SAIC) [NYSE: SAIC]

Transcription

1 Science Applications International Corporation (SAIC) [NYSE: SAIC] Tony Moraco, Chief Executive Officer John Hartley, Chief Financial Officer SAIC. All rights reserved.

2 Forward-Looking Statements Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 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 release include, among others, statements regarding benefits of the proposed acquisition (including anticipated future financial operating performance and results), estimates of future revenues, operating income, earnings, earnings per share, charges, backlog, outstanding shares and cash flows, as well as statements about future dividends, share repurchases and other capital deployment plans. 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 this release depending on a variety of factors, including: the risk that Scitor will not be integrated successfully into SAIC following the consummation of the acquisition and the risk that revenue opportunities, cost savings, synergies and other anticipated benefits from the merger may not be fully realized or may take longer to realize than expected, diversion of management s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from the acquisition, difficulties in entering markets in which we have previously had limited direct prior experience, the potential loss of key employees, customers, and other business partners following announcement of the acquisition, use of a substantial portion of our existing cash resources, incurrence of a substantial amount of debt with increased interest expense and amortization demands, compliance with new bank financial and other covenants, assumption of the known and unknown liabilities of the acquired company, recordation of goodwill and nonamortizable intangible assets subject to regular impairment testing and potential impairment charges, incurrence of amortization expenses related to certain intangible assets, assumption that we will enjoy material future tax benefits acquired in connection with the acquisition, developments in the U.S. government defense and intelligence community budgets, 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 retain and obtain security clearances for our employees; our ability to accurately estimate costs associated with our firm-fixed-price and other contracts; 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 deploy capital and make investments in our business; 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; the adequacy of our insurance programs designed to protect us from significant product or other liability claims; 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 our completed spin-off transaction from our former parent, such as disruption to business operations, unanticipated expenses or a failure to realize the expected benefits of the 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 this release. 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, including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our Annual Report on Form 10-K which may be viewed or obtained through the Investor Relations section of our web site at All information in this presentation is as of December 2, SAIC expressly disclaims any duty to update any forward-looking statement provided in this release to reflect subsequent events, actual results or changes in SAIC's expectations. SAIC also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others. In addition, these slides should be read in conjunction with our press release dated December 2, 2015 along with listening to or reading a transcript of the comments of our management delivered in a conference call held on December 2,

3 SAIC Overview Leading technology integrator specializing in technical, engineering, intelligence, and enterprise IT services to the U.S. government 46-year history of mission service delivery and customer relationships Annual revenues of about $4.4 billion with scale in each of our 5 customer facing organizations Highly skilled workforce of over 15,000 employees Strong and predictable cash flow 3

4 We Are Providing Full Lifecycle Services & Solutions Mission, SETA, and Program Support Hardware Integration & Logistics Cyber, Cloud & Data Science Intelligence, Surveillance, and Reconnaissance Software Integration Training & Simulation IT Managed Services Integrator of complex systems supporting all lifecycle phases 4

5 SAIC s Compelling Value Proposition REVENUE & EARNINGS Large, recurring revenue base; diversified portfolio with significant scale and positioned for growth Customers of national importance and vital missions Margin opportunity levers available to accelerate earnings growth Strong Revenue Base With Margin Expansion CASH FLOW Predictable free cash flow to support capital deployment Balance sheet strength to support future growth Predictable Cash Generator CAPITAL DEPLOYMENT Disciplined approach to capital deployment for shareholder value Direct return to shareholders of excess cash Capital Deployment Consistency 5

6 Gaining Momentum in the Market Grow into Market Adjacencies Expand with Current Customers Protect Our Base Protect our revenue base - Excellent contract execution - Retain incumbent positions Expand current offerings to current customers - Leverage existing service line portfolio to existing customers Grow into white space - Strategic targeting of new customers for our mature capabilities - Utilize differentiated offerings Matrix operating model enables the Protect, Expand, Grow strategy 6

7 Notable Protect Contract Award AMCOM SCRS/TO 37 Awarded a $757 million task order under the AMCOM Express BPA to continue providing systems engineering and software development services to the US Army Aviation and Missile Command (AMCOM). This single award, fixed price level of effort task order has a one year ordering period and a two year period of performance. 7

8 Notable Expand Contract Awards FAA Controller Training Awarded a $425 million contract to provide all training and training program support services to the Federal Aviation Administration. This single award, IDIQ contract has a three-year base period and two one-year options with a maximum contract ceiling of $727 million. Marine Corp Assault Amphibious Vehicle (AAV) This single award, firm fixed price contract has a total value of ~$194 million over five years. Awarded a $53 million contract increase to perform upgrades to 10 AAV prototypes leading to, if exercised, developmental testing and low rate initial production of 52 vehicles for operational test and evaluation. 8

9 Notable Grow Contract Award GSA Enterprise Operations (GEO) Awarded a $549 million task order to manage the IT infrastructure for the General Services Administration. This single award, cost plus award fee task order has a one-year base period of performance and four one year options. 9

10 FY16 Revenue Profile Time & Materials 29% Cost Reimbursable 37% Intel / Air Force 14% Navy / Marine Corps 21% Customer Mix ** Federal Civilian 23% Army 21% SAIC Labor 46% Contract Type * Revenue Mix * Fixed Price Supply Chain Materials 14% Fixed Price Services 20% DoD Agencies & Commands 21% Other Materials 5% Supply Chain Materials 15% Subcontractor 34% *YTD as of SAIC FY2016 Q3 ended October 30, 2015 **Pro-Forma trailing twelve months ending October 30, ~85% IDIQ Revenue; 90%+ recompete win rate

11 Long-Term Financial Targets Annual Revenue About $4.4B * ; at scale, diversified portfolio with a target of low single digit annual growth Adjusted EBITDA Low 7% range**; target of 10 to 20 bps annual increase Free Cash Flow About $240M; low capital requirement business (less than 1% of revenues) Capital Deployment Return of capital to shareholders above operating needs (currently $150M) 11 Stable business with recurring revenue base and strong cash flow characteristics *Pro-forma trailing twelve months; includes Scitor pre-acquisition revenues for FY15 Q4 and FY16 Q1 **excludes Scitor acquisition and integration costs; as reconciled in appendix of FY16 Q3 earnings press release

12 Areas of Investment to Drive Growth Biometrics ISR 3-D Printing/Additive Manufacturing Training & Simulation Platform Integration 12

13 Science Applications International Corporation (SAIC) [NYSE: SAIC] Tony Moraco, Chief Executive Officer John Hartley, Chief Financial Officer SAIC. All rights reserved.

14 SAIC Operating Model SERVICES LINES Army Navy / Marine Corps DoD Agencies and Commands Federal Civilian Intelligence Community and Air Force Mission, SETA, and Program Support Hardware Integration and Logistics Training and Simulation Software Integration IT Managed Services Cyber, Cloud, and Data Science Intelligence, Surveillance, and Reconnaissance SAIC Market Position PROTECT/EXPAND GROW Increasing opportunity for expansion and growth in current market 14

15 FY16 Key Wins PROTECT Army AMCOM EXPRESS TO-37 ($757M) NASA EAST 2 ($485M) Defense Logistics Agency Supply Chain Management ($480M) Department of Agriculture Risk Management Agency ($156M) Navy Fleet Forces Command Synthetic Training ($119M) EXPAND Federal Aviation Association Controller Training ($425M) Air Force NETCENTS 2 NETOPS ($396M) Marine Corps AAV SU ($194M) ACV ($122M) NASA LITES ($144M) GROW General Services Administration GEO ($549M) Army TACOM Strategic Services Solutions ($84M) 15