Leidos Holdings, Inc. · NYSE:LDOS
Leidos — Drexel Hamilton Aerospace & Defense Conference 2016
32 slides from Leidos's conference presentation, Jun 9, 2016
Slide 1: Drexel Hamilton Aerospace & Defense Conference
Drexel Hamilton Aerospace & Defense Conference June 9, 2016 Kelly P. Hernandez, Vice President of Investor Relations leidos
Slide 2: Forward-Looking Statements
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 1995. In some cases, you can identify forward-looking statements by words such as “expects,” “intends,” “plans,” “
Slide 3: Who We Are
Who We Are NSS 68% C2015 Revenues $5.1B HIS 32% NATIONAL SECURITY SECTOR $3.5B revenue Critical mission support for intelligence community ~10,000* employees with C4ISR, Cyber, Data Analytics ~7,800 possessing solutions security clearances 96% government Serves Intel community, DoD, 4% commercial UK
Slide 4: National Security Sector Snapshot
National Security Sector SNAPSHOT PRIMARY CUSTOMERS MARQUEE PROGRAMS $3.5B CY15 Revenue Intel Community LCST Data analysis & exploitation Army Saturn Arch Agile software development Air Force Desert Owl C4ISR Navy Buckeye Cyber Department of Homeland ACTUV R&D in air, sea, ground & space Security (D
Slide 5: Health & Infrastructure Sector Snapshot
Health & Infrastructure Sector SNAPSHOT $1.6B CY15 Revenue EHR consulting Systems design & integration Health research & life sciences Power delivery & Smart grid Border, port, & infrastructure security PRIMARY CUSTOMERS Defense Health Agency (DHA) Utilities US Army Corp of Engineers Veterans Admini
Slide 6: Historical Financials — Select Items
Historical Financials — Select Items 1Q’C15 2Q’C15 3Q’C15 4Q’C15 C2015 1Q’F16 Revenue ($M) 1,246 1,257 1,302 1,281 5,086 1,312 Operating income from continuing 38 64 94 102 298 89 operations ($M) Non-GAAP operating income from 82 96 101 107 386 99 continuing operations ($M) Diluted earnings per shar
Slide 7: Basis for Competition in the Industry
Basis for Competition in the Industry Experience – both technical and domain knowledge People Customer relationships – understanding the mission requirements Advanced technology-based solutions Capabilities Large scale network design & operation Data driven intelligence Competitive cost structure ac
Slide 8: LDOS: A trusted long-term partner
LDOS: A trusted long-term partner 40+ year RELATIONSHIPS 30+ year CLASSIFIED RELATIONSHIPS 20+ year NATIONAL ® CANCER INSTITUTE RELATIONSHIPS CLASSIFIED 10+ year HOME OFFICE RELATIONSHIPS CLASSIFIED ENTERGY 1969 – SAIC/LDOS Founded 8 ©2016 LEIDOS. ALL RIGHTS RESERVED leidos
Slide 9: Leidos Core Competencies
Leidos Core Competencies C4ISR 1 Disruptive C4ISR solutions that proactively address our most critical national security needs. Cyber 2 Strong national security credentials provide foundation for protecting customers in all markets we serve. System Engineering 3 Optimally tailored to customer needs;
Slide 10: DHA Genesis | Systems Engineering
DHA GENESIS | SYSTEMS ENGINEERING Defense Health Agency Genesis (formerly Defense Health Management System Modernization) Bringing evidence based medicine to the point of care through open systems architecture $4.3B IDIQ Ceiling Value 9.6M Beneficiaries Mission Need: - Improve the health and medical
Slide 11: UK LCST | Systems Engineering
UK LCST | SYSTEMS ENGINEERING United Kingdom Logistics and Commodities Systems Transformation Modernizing procurement, storage and distribution services for the UK’s armed forces at home and abroad Ministry of Defence ~$2.8B Booked Contract Value 13 Year contract Mission Need: - Improve the efficien
Slide 12: Distributed Airborne Information Solutions | C4ISR
Distributed Airborne Information Solutions | C4ISR Deployed Technologies on Blue Devil, Buckeye, Desert Owl, Radiant Falcon, Saturn Arch, ARL-E 150k+ FLIGHT HOURS 30+ AIRCRAFT Mission Need: - Integrate sensor operations to identify and address threats Leidos Response: - Transition emerging technolog
Slide 13: Seahunter | Systems Engineering
SEAHUNTER | SYSTEMS ENGINEERING NAVAL AUTONOMOUS TECHNOLOGY Design and Integrate Unmanned, Autonomous Solutions for Intelligence and Defense Needs 132 FEET LONG 47 FEET WIDE ACTUV: Anti-Submarine Warfare (ASW) Continuous 140 TONS Trail Unmanned Vessel Mission Need: Expanding market for Navy autonomo
Slide 14: Basis for Competition in the Industry
Basis for Competition in the Industry Experience - both technical and domain knowledge People Customer relationships - understanding the mission requirements Advanced technology-based solutions Capabilities Large scale network design & operation Data driven intelligence Competitive cost structure ac
Slide 15: Proposed Transaction: Leidos + Lockheed Martin IS&GS business
Proposed Transaction: Leidos + Lockheed Martin IS&GS business
Slide 16: Transaction Summary
Transaction Summary Leidos to combine with Lockheed Martin’s Information Systems & Global Solutions (“IS&GS”) business via a Reverse Morris Trust structure Structure and Total transaction value of $5 billion for IS&GS, including $3.2 billion(1) in Leidos stock Consideration (~77 million shares) and
Slide 17: Combined Company Market Alignment
Combined Company Market Alignment Leidos IS&GS C4ISR ~$1.7B Mission IT ~$1.6B Intelligence Services ~$1.8B Design, Develop, Maintain NextGen C4ISR Component Systems Manage and Modernize Large-Scale Critical IT Systems Provide World-Class Analytic Services Leanly and Efficiently Healthcare Informatio
Slide 18: Strategic Rationale – Complementary Capabilities
Strategic Rationale – Complementary Capabilities Leidos IS&GS Pro forma Leidos Logistics Facilities Management Data Center Consolidation Financial and HR ERP Outsourcing IT Operations C4ISR Application Development Cybersecurity Systems Engineering Pro forma Leidos will have broader capability set an
Slide 19: Pro forma Leidos Positioned For Growth
Pro forma Leidos Positioned For Growth Leidos Pro forma Leidos Increased Scale ~$5 billion ~$10 billion With More Balanced Portfolio Civil & Commercial: 28% Civil & Commercial: 45% Defense & Intel: 72% Defense & Intel: 55% Competitive Cost Structure and ~8.0% ~9.5 – 10% Structurally Higher EBITDA Ma
Slide 20: Identifiable Run-Rate Net Cost Synergies of $120mm
Identifiable Run-Rate Net Cost Synergies of $120mm; Significant Portion Captured in Year-One Annual Net Cost Synergies(1) ($M) $10 $70 $110 $120 2016 2017 2018 2019 Confidence in delivering identified synergies expected annual run-rate net cost synergies of $120 million, fully achieved by late 2018
Slide 21: Strategic Transaction + Significant Value to Stockholders
Strategic Transaction + Significant Value to Stockholders Creates a leading Government & IT Services player with mission-critical Strategic Rationale domain expertise and high-technical competencies Highly complementary market offerings, capability, and customer reach Identifiable run-rate synergies
Slide 22: Looking Ahead
Looking Ahead People Broaden and deepen customer relationships Capabilities Further strengthen technical capabilities and differentiators Cost Improve cost structure & EBITDA margins, and enhance competitiveness 22 ©2016 LEIDOS. ALL RIGHTS RESERVED leidos
Slide 23: leidos
leidos
Slide 24: Appendix
Appendix
Slide 25: Non-GAAP Reconciliations
Non-GAAP Reconciliations This presentation includes certain non-GAAP financial measures, such as non-GAAP operating income, non-GAAP operating income margin, non-GAAP income from continuing operations, non-GAAP diluted earnings per share (EPS) and adjusted earnings before interest, taxes, depreciati
Slide 26: Definitions of Non-GAAP Financial Measures
Definitions of Non-GAAP Financial Measures Non-GAAP operating income is computed by excluding the following items from income (loss) from continuing operations: (i) other income (expense), net; (ii) interest expense; (iii) interest income; (iv) income tax (expense) benefit adjusted to reflect non-GA
Slide 27: Non-GAAP Operating Income Reconciliation
Non-GAAP Operating Income Reconciliation 1QCY151 2QCY151 3QCY151 4QCY151 CY151 1QFY16 (in millions) GAAP operating income from continuing operations $ 38 $ 64 $ 94 $ 102 $ 298 $ 89 Acquisition and integration costs - - - - - 9 Amortization of acquired intangible assets 2 3 2 2 9 1 Asset impairment c
Slide 28: Non-GAAP Financial Measures Reconciliation
Non-GAAP Financial Measures Reconciliation 1QCY151 2QCY151 3QCY151 4QCY151 CY151 1QFY16 (in millions, except for per share amounts) Non-GAAP operating income from continuing operations $ 82 $ 96 $ 101 $ 107 $ 386 $ 99 Depreciation expense 10 9 9 7 35 7 Other (income) expense, net (1) 2 - 1 2 (2) Adj
Slide 29: How Does The RMT Transaction Work?
How Does The RMT Transaction Work? IS&GS merges with Leidos in tax-free Reverse Morris Trust transaction Transaction LMT Stockholders Participating LMT Stockholders Existing Leidos Stockholders 2 Split-off Shares 50.5% 49.5% LMT Leidos 1 Cash $1.0B 1 Cash $1.8B Retained Businesses IS&GS 3 Merge (via
Slide 30: RMT Transaction Relative Ownership
RMT Transaction Relative Ownership Tax-free Reverse Morris Trust structure Ownership split - 49.5% existing Leidos stockholders - 50.5% Lockheed Martin stockholders One-time special dividend of ~$1.03 billion to Leidos stockholders at close IS&GS Leidos Enterprise Value(1) $5.0 billion $4.6 billion
Slide 31: How Does The Split-Off Work?
How Does The Split-Off Work? Split-off allows LMT stockholders to elect to exchange LMT stock for Leidos stock and doesn’t create any transaction risk Existing LMT stockholders can elect to exchange LMT shares for Leidos shares ~15M LMT shares (less than 5% of LMT shares) exchanged for ~77M Leidos s
Slide 32: Prudent Leverage, in Line With Peers
Prudent Leverage, in Line With Peers Strong free cash flow profile will support continuous capital return to stockholders and rapid delevering - Maintain quarterly $0.32 / share dividends to all stockholders Pro Forma Capitalization ($B) Cash $0.2 Existing Leidos Debt $1.1 Incremental Debt $2.5 Tota
Leidos Holdings — Drexel Hamilton Aerospace & Defense Conference 2016 on 6ix