Science Applications International Corporation · NASDAQ:SAIC
Science Applications International — Investor Day (January 2019)
54 slides from Science Applications International's investor day presentation, Jan 7, 2019
Slide 1: Science Applications International Corporation Investor Day
Science Applications International Corporation Investor Day InterContinental New York BarclayJanuary 7, 2019
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements in this written communication contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation Reform Act of 1995 that involves risks and uncertainties concerning the proposed transaction between SAIC and Engi
Slide 3: Additional Information and Where to Find It
Forward-Looking Statements Additional Information and Where to Find ItIn connection with the proposed acquisition of Engility, SAIC filed with the Securities and Exchange Commission (“SEC”), on December 3, 2018, an amendment to the registration statement on Form S-4 that was originally filed on Octo
Slide 4: SAIC Investor Day 2019 – Agenda
SAIC Investor Day 2019 – Agenda 4 Lunch and Registration 12:00 p.m. – 1:00 p.m. Welcome and IntroductionsShane Canestra 1:00 p.m. – 1:05 p.m. SAIC Long Term Strategy and Business HighlightsTony Moraco 1:05 p.m. – 1:45 p.m. Business Overview, Operating Model & IntegrationNazzic Keene 1:45 p.m. – 2:15
Slide 5: SAIC Long Term Strategy and Business Highlights
SAIC Long Term Strategy and Business Highlights Tony Moraco, SAIC CEO
Slide 6: Engility acquisition accelerates execution of long term strategy
SAIC’s pending acquisition of Engility accelerates the execution of our long term strategy to be the premier technology integrator in the government services market and deliver sustained profitable growth SAIC Investor Day LONG TERM STRATEGY AND BUSINESS HIGHLIGHTS ENGILITY PERSPECTIVE BUSINESS OVER
Slide 7: Key Messages for our Stakeholders
Key Messages for our Stakeholders 7 You should leave here today with the understanding that…. 1 2 3 4 We are confident in our strategy to drive growth based on current contracts and growth opportunities that are aligned with areas of strategic national importance With additional market access and te
Slide 8: SAIC's Value Proposition to Investors
SAIC’s Value Proposition to Investors 8 MARKET Favorable Government Services Market Environment; Continued Investment in Focus Areas of Defense Readiness, IT Modernization, Cyber, Space, Intelligence, Training & Simulation FINANCIAL PROFILE Large Pure Play Service Provider to the U.S. Government wit
Slide 9: Government Services Market Dynamics
Government Services Market Dynamics Customer funding priorities are shifting toward responses to near-peer threats in Space, Cyber, Unmanned Aerial Systems, Platform Lethality, and IT ModernizationSAIC advantage: Space, Cyber and IT modernization capabilities and qualifications directly aligned to t
Slide 10: SAIC's Value Proposition to Customers
SAIC’s Value Proposition to Customers 10 A technical approach to integration tailored to a customer’s mission requirements Ability to meet aggressive schedules and overcome technical challenges on end to end services Innovative approaches to the customers’ needs though our unique solutions and adopt
Slide 11: Ingenuity 2025 – Vision Statement
Ingenuity 2025 – Vision Statement Be the premier technology integrator in our market by making a profound difference supporting our customers’ missions, engaging the best talent in the industry while providing strong shareholder returns OUR VISION 11 © SAIC. All rights reserved. SAIC PROPRIETARY SAI
Slide 12: SAIC Continues to Execute Ingenuity 2025 to Create Value
SAIC Continues to Execute Ingenuity 2025 to Create Value 12 Provide market leading total shareholder returns (TSR) Achieve sustained profitable growth by delivering excellence to our customers’ missions Create and sustain a culture of exceptional talent, engaged employees and transparency while serv
Slide 13: Engility Acquisition Strengthens Ingenuity 2025 Strategy Execution
Engility Acquisition Strengthens Ingenuity 2025 Strategy Execution 13 Combination of two leading government service providers, with highly complementary capabilities, customers, and cultures Enhance shareholder value through improved cash flow and margin profile driven by cost synergies and increase
Slide 14: SAIC is Repositioned as a Stronger Market Leader
SAIC is Repositioned as a Stronger Market LeaderLTM Revenue ($B) Last Twelve Months (LTM) as of the end of the third quarter of fiscal year 2019 for SAIC (November 2, 2018) and fiscal year 2018 for Engility (September 28, 2018), or the last reported quarter of peer companiesSource: Company filings $
Slide 15: Engility's Portfolio Accelerates Targeted Market Penetration
Engility’s Portfolio Accelerates Targeted Market Penetration 15 Total Intel portfolio (including NRO) increases from ~$375M to $1B+Non-NRO Intel increases from less than $100M to ~$500MAdds ~$300M of revenue at strategic intelligence agencies Solidifies a leading position at NRO with combined revenu
Slide 16: Shareholder Value Creation Opportunities Enhanced by the Acquisition
Shareholder Value Creation Opportunities Enhanced by the Acquisition 16 Increased Investment Capacity Ability to pursue additional strategic contract opportunities and expand capabilities portfolio Addition of 6,000 Cleared PersonnelIncreases cleared workforce by 60%+ amidst tightening labor market
Slide 17: Engility Acquisition Addresses Ingenuity 2025 Performance Drivers
Engility Acquisition Addresses Ingenuity 2025 Performance Drivers for Sustained Profitable Growth Develop and sustain leadership positions in key market sub-segments SUB-SEGMENTLEADERSHIP Increase deployment of solutions and offerings that leverage shared assets and learning REPEATABILITYOF OFFERING
Slide 18: Business Overview, Operating Model, and Integration
Business Overview, Operating Model, and Integration Nazzic Keene, SAIC COO
Slide 19: Our Motivation is to Deliver Value to All Three Stakeholders
Our Motivation is to Deliver Value to All Three Stakeholders 19 Driven by mission, united by purpose, inspired by opportunity We are mission critical because the mission is critical to our country Excited by a bright future forged by strong legacies of integrity, knowledge, ingenuity and success Lea
Slide 20: SAIC Operating Model Supports Effective Integration and Drives Growth
SAIC Operating Model Supports Effective Integration and Drives Growth 20 z Defense Systems Group Civilian Markets Group National Security Group Solutions & Technology GroupMarket SegmentsEngineering, Integration, & Mission Solutions (EIMS)Information Technology Solutions (ITS)Platform Integration, L
Slide 21: Engility Acquisition — Integration Planning is Complete
Engility Acquisition — Integration Planning is Complete and SAIC is Ready to Execute on Day 1 21 ACCOMPLISHMENTS IN PROGRESS ACTIVITIES Senior leadership engaged in joint decisional steering committee – operating from announcement through full integrationAll leadership and portfolio decisions made e
Slide 22: Engility Acquisition — Cost Synergy Status
Engility Acquisition — Cost Synergy Status 22 Synergy planning preserves and enhances operations~60% of identified synergies come from corporate and back-office functionsProtects and enhances investment accounts of IRAD and B&P; ~40% increase in business development dollars to support prioritized in
Slide 23: Customer Access is Strengthened by Addition of Engility portfolio
Customer Access is Strengthened by Addition of Engility portfolio 23 DEFENSE SYSTEMS GROUPPro Forma Annual Revenue: ~$3.0BStrategic Sub-Segments: Engineering and Integration; Analytics; Training and Mission Solutions; Enterprise IT, Cyber, and Software; Supply Chain ManagementNotable Contracts: Army
Slide 24: SAIC with Engility — Better Aligned to Customers' Critical Missions
IT MODERNIZATION CYBER SECURITY SPACE DATA PROLIFERATION TRAINING & READINESS SAIC — with Engility — ‘Better Aligned to Customers’ Critical Missions 24 Aging IT infrastructure across the U.S. Government is driving investments in transforming legacy systems in application development, cloud, analytic
Slide 25: Defense Systems Customer Group — Overview
Defense Systems Customer Group — Overview 25 Army: Expand beyond Huntsville into new Army R&D centersNavy: Transform portfolio with more software and hardware integration serviceMission/Enterprise IT: Expand portfolio of apps modernization and sustainment; provide integrated mission command and cont
Slide 26: Defense Systems Customer Group – Army Virtual Systems Contract
Defense Systems Customer Group 26 Contract Objective: Acquire systems engineering and computer resource engineering support within the domain of Virtual, Interactive, and Multimedia SystemsScope: Provide system lifecycle support to define concepts, define requirements plan, manage, develop, sustain,
Slide 27: Civilian Markets Customer Group — Overview
Civilian Markets Customer Group — Overview 27 #1 IT provider at State Department, NASA, Department of Agriculture (USDA)#3 services provider at NASA#1 Software Provider at US Patent Trade OfficeOne of the leading providers of End User Services to Civilian MarketContinue to drive Government-wide IT M
Slide 28: Civilian Markets Customer Group – NASA OMES
Civilian Markets Customer Group 28 Development of instruments and flight subsystems (hardware and software) for robotic satellite servicing missionsDevelopment of a variety of tools for in flight operations including space walks (extra-vehicular activities)Systems engineering and programmatic suppor
Slide 29: Civilian Markets Customer Group – Department of State Vanguard
Civilian Markets Customer Group 29 Network design, maintenance, and operationsSecurity operations, assessment and authorizationTier I, II, and III support to Department of State worldwide messaging systemsData Center Operations, Tier III, engineering support Execution of large, multi-billion dollar
Slide 30: National Security Customer Group — Overview
National Security Customer Group — Overview 30 Maintain and leverage our strong National Reconnaissance Office (NRO) SETA and SE&I position serving space missionsSignificantly expand our services in other key intelligence agenciesBecome the top Systems Engineering Integrator in the Space CommunityEx
Slide 31: National Security Customer Group
National Security Customer Group 31 SAIC provides:Deep and broad space system domain expertise, systems engineering, integration, and operations support services For:DoD and Intelligence Community payload launch, command and control, missile defense, and on-orbit systems that are critical to our nat
Slide 32: Solutions & Technology Group – Solutions for Profitable Growth
Solutions & Technology Group –Solutions for Profitable Growth 32 Business Model Enablers Portfolio and Knowledge Management Technology and Innovation SOLUTIONS AND TECHNOLOGY GROUP Solution Development Solution Delivery Solution Architecting STG is the Engine that Enables SAIC as a “Premier Technolo
Slide 33: Solutions & Technology Group — Overview
Solutions & Technology Group — Overview 33 To serve as SAIC’s hub of innovation, enabling the company to achieve its objective to be the premier technology integrator serving the federal government Develop and sell innovative differentiated solutions across the portfolio of programs to drive increas
Slide 34: Solutions & Technology Group – Talent and Technology
Solutions & Technology Group – Talent and Technology Engineering, Integration And Mission Solutions (EIMS) Information Technology Solutions (ITS) Platform Integration, Logistics, Readiness and Sustain (PILRS) Talent: ~10,000 professionals with concentrations in Systems Engineering, Training, Modelin
Slide 35: Accelerating Profitable Growth and Driving Revenue Synergies
Accelerating Profitable Growth and Driving Revenue Synergies Position of Strength on Day 1Pro-forma backlog of $14.5BCombined value of submitted proposals of $20BLow recompete volume in FY2020 (~13% of revenues); drives greater investments in new business pursuits Increased investments of ~40% in bu
Slide 36: Performance Drivers are all enhanced by Engility Acquisition
Ingenuity 2025 – Performance Drivers for Sustained Profitable Growth are all enhanced by Engility Acquisition SAIC will now be a market leader in all three Customer Portfolios (Defense, Civilian and National Security) and in all three Market Segments (EIMS, ITS and PILRS) SAIC’s expanded portfolio o
Slide 37: Engility Perspective
Engility Perspective Lynn Dugle, Engility CEO
Slide 38: Engility in CY2018 — Strong Momentum
Backlog up 20% year-over-yearTTM book-to-bill of 1.4xIntelligence – 15 consecutive quarters of growthSpace – strong customer confidence, reliable growth marketDefense – doubled recompete win rate Engility in CY2018 — Strong Momentum 38 Only 1−2% of bids in the last 3 years PHASED OUT LPTA TASC busin
Slide 39: Stronger Together
Increased investments Accelerate development and marketing Artificial Intelligence and Machine LearningData AnalyticsResilient SpaceEnhanced competitive position StrategyAcceleration STRONGER Differentiated Solutions Strategy Federal IT entry, Space and Intel market leadershipImpressive past perform
Slide 40: Financial Outlook
Financial Outlook Charlie Mathis, SAIC CFO
Slide 41: SAIC's Value Proposition
SAIC’s Value Proposition 41 SAIC Investor Day LONG TERM STRATEGY AND BUSINESS HIGHLIGHTS ENGILITY PERSPECTIVE BUSINESS OVERVIEW, OPERATING MODEL, AND INTEGRATION FINANCIAL OUTLOOK MARKET Favorable Government Services Market Environment; Continued Investment in Focus Areas of Defense Readiness, IT Mo
Slide 42: Three-Year Pro Forma Outlook
Three-Year Pro Forma Outlook 42 LONG-TERM FINANCIAL OBJECTIVES(on average and over time) THREE-YEAR PRO FORMA PERFORMANCE (FY2020 – FY2022) Annual Internal Revenue Growth(Low single digit annual growth) Three-year CAGR of ~3% Adjusted EBITDA Margin(Annual organic margin expansion of 10 to 20 bps) Ad
Slide 43: Engility Contributes Significantly to Stronger Financial Profile
Engility Contributes Significantly to Stronger Financial Profile 43 $4.6B $7.0B FY2019E SAIC Stand Alone FY2022E Pro Forma 7.3%** 9.0% FY2019E SAIC Stand Alone FY2022E Pro Forma $250M $500M FY2019E SAIC Stand Alone FY2022E Pro Forma REVENUE +3% CAGR (FY20 – FY22) ADJUSTED EBITDA MARGIN +170 bps FREE
Slide 44: Cost Synergies Enhance Profitability and Cash Flow
Cost Synergies Enhance Profitability and Cash Flow 44 FY2020 FY2021 FY2022 Cumulative Gross Cost Synergies $75M $150M $150M Cumulative Net Cost Synergies and Adjusted EBITDA* Impact(after effect of cost reimbursable contracts at ~50%) $38M $75M $75M * Excluding integration costs 85% of Total Net Cos
Slide 45: Initial FY2020 Pro Forma Financial Outlook
Initial FY2020 Pro Forma Financial Outlook 45 LONG-TERM FINANCIAL OBJECTIVES(On average and over time) FISCAL YEAR 2020 PRO FORMA OUTLOOK Annual Internal Revenue Growth(Low single digit annual growth) Revenue range of $6.45B to $6.65B Adjusted EBITDA Margin Adjusted EBITDA Margin of 8.1% to 8.4% (ex
Slide 46: Initial FY2020 Pro Forma Financial Outlook – Other Items
Initial FY2020 Pro Forma Financial Outlook – Other Items 46 FISCAL YEAR 2020 PRO FORMA OUTLOOK Annual Effective Tax Rate 20% to 25% Shares Outstanding (at close) ~60M Debt /Annual Interest Rate $1.9B of debt with a blended rate of 4.50% (70% of debt hedged to fixed rate) Capital Expenditures ~$35M N
Slide 47: Capital Structure Enhanced by Equity Based Transaction and Favorable Financing
Capital Structure Enhanced by Equity Based Transaction and Favorable Financing 47 Significant pro-forma free cash flow generation Maintain average cash balance of $200MRevolving credit facility of $400MLeverage ratio of 3.0x by end of Fiscal Year 2021 Extends our debt maturity7 years on the Term Loa
Slide 48: Fiscal Year 2020 — Bridge to Free Cash Flow
Fiscal Year 2020 — Bridge to Free Cash Flow($M) 48 SAICStandalone FCF EngilityStandaloneFCF IntegrationCost (After Tax) Synergies (After Tax) Net of Interest Savings and Lower Cash Taxes(After Tax) Pro-Forma FCF Estimating $400M of Free Cash Flow in FY2020 / $150M Increase from FY19 SAIC Investor Da
Slide 49: Substantial Deployable Cash Available for Disciplined Capital Allocation
Substantial Deployable Cash Available for Disciplined Capital Allocation 49 70% of free cash flow available after regular dividend and mandatory debt repayments over the next 3 years Assuming mandatory debt repayment only Mandatory Debt Repayment Reduces Leverage to 2.7x by FY2022 Year-EndDeployable
Slide 50: Financial Policy To Remain Consistent Post-Closing
Financial Policy To Remain Consistent Post-Closing with Enhanced Deployable Cash Return capital in excess of operating needs to shareholders in absence of higher return capital deployment opportunitiesReasonable pro forma leverage, greater pro forma free cash flow generation, and credit facility enh
Slide 51: Well Positioned for Sustained Profitable Growth and Value Creation
Well Positioned for Sustained Profitable Growth and Value Creation 51 SAIC and Engility: Financially Stronger Together Enhanced Margin Profile of 100 bps in Year 1; 170 bps by Year 3 Free Cash Flow Generation Expected to Double by Year 3 Double Digit Non-GAAP EPS and Free Cash Flow Accretion Discipl
Slide 52: Concluding Remarks
Concluding Remarks Tony Moraco, SAIC CEO
Slide 53: Key Messages for our Stakeholders
Key Messages for our Stakeholders 53 You should leave here today with the understanding that…. 1 2 3 4 We are confident in our strategy to drive growth based on current contracts and growth opportunities that are aligned with areas of strategic national importance With additional market access and t
Slide 54: Science Applications International Corporation Investor Day
Science Applications International Corporation Investor Day InterContinental New York BarclayJanuary 7, 2019
Science Applications International — Investor Day (January 2019) on 6ix