Leidos Holdings, Inc. · NYSE:LDOS
Leidos — Investor Day (October 2021)
67 slides from Leidos's investor day presentation, Oct 7, 2021
Slide 1: 2021 Investor Day
CONRAD MIDTOWN October 7, 2021 2021 Investor Day
Slide 2: Forward-looking statements
Certain statements in this presentation 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," "anticipates," "believe
Slide 3: Agenda
Agenda 3 8:00 – 8:30 Registration and Breakfast 8:30 – 8:35 Stuart Davis, Investor Relations Opening Remarks 8:35 – 9:05 Roger Krone, Chairman & CEO Strategy & Investment Thesis 9:05 – 9:20 Jim Carlini, Chief Technology Officer Technology Differentiation 9:20 – 9:55 Dave King, Dynetics Group Preside
Slide 4: Strategy and Investment Thesis
Strategy and Investment Thesis ROGER KRONE, CHAIRMAN AND CEO 4
Slide 5: Building the Leader in the Government Technology Services Market
Building the Leader in the Government Technology Services Market 5 Q&AFinancial OverviewCivilHealthIntelligenceDefenseDynetics Technology Differentiation Strategy & Investment Thesis Introduction
Slide 6: Motivated by Our Mission, Vision & Values
Motivated by Our Mission, Vision & Values 6 Vision Become the global leader in the development and application of technology to solve our customers’ most demanding challenges. Engage, develop and empower our diverse and valued people to foster a culture of creativity and growth. Strengthen our commu
Slide 7: Living Our Values Through Commitment to ESG
Living Our Values Through Commitment to ESG 7 2030 Sustainability Goals ADVANCE ENVIRONMENTAL SUSTAINABILITY • Reduce GHG emissions 25% • Reduce waste by 50% in Leidos facilities • Increase renewable energy to 25% of total electricity use PROMOTE HEALTHIER LIVES • Source 20 of Leidos’ biggest commod
Slide 8: On Track to Exceed 2019 – 2021 Financial Targets
On Track to Exceed 2019 – 2021 Financial Targets 8 * Reconciliations of non-GAAP measures to the most comparable GAAP measures are included in the Appendix Metric 2019 – 2021 Targets 2019 – Q2 2021 Results Organic Revenue Growth CAGR:* 5% 6.6% (12.1% Total) Adjusted EBITDA Margin:* 10.0%+ 10.7% Cash
Slide 9: Winning in the Market
$7.7B 12/20 $6.5B 04/20 $4.0B 04/20 $2.9B 08/20 $2.9B 06/19 Next Generation Enterprise Network Service Management, Integration, & Transport Global Solutions Management Operations II Hanford Mission Integration Solution Singlelock NASA End-user Services and Technologies Winning in the Market 9 $2.0B
Slide 10: Building the Foundation for a Stronger Future
Building the Foundation for a Stronger Future 10 $21.5 $21.7 $23.9 $24.1 $28.2 $30.7 $31.7 $31.9 $32.6 $33.5 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 +56% Ba ck lo g (B ) Q&AFinancial OverviewCivilHealthIntelligenceDefenseDynetics Technology Differentiation Str
Slide 11: Strategic Focus
Our business model will continue to differentiate us in the marketplace and lead to above market revenue, adjusted EBITDA, and cash generation growth based on our: Scale • Largest government technology services provider • Drives differentiation from peers Positioning • Three complementary segments o
Slide 12: Increasing Our Leadership Position
Increasing Our Leadership Position 12 $10.2 $8.3 $6.6 $6.5 $6.9 $4.6 $4.4 $3.5 $2.0 $1.5 $13.3 $8.2 $7.9 $7.2 $7.0 $6.0 $5.2 $4.4 $2.6 $1.8 LDOS GDIT BAH SAIC Perspecta, NGIT, Peraton CACI Jacobs ATN KBR Government Solutions MANT Parsons Federal Solutions Q4 2018 Q2 2021 Note: Revenues shown for tra
Slide 13: Reaping the Benefits of Scale
Reaping the Benefits of Scale Technical Differentiation Greater investment in differentiation & repeatable solutions Leidos Innovation Center (LInC) incubates advanced technologies Strategic supplier alliances and university partnerships augment internal capabilities Customer Relationship Broadest s
Slide 14: Diversified Revenues — Three Segments at Scale
Diversified Revenues — Three Segments at Scale 14 26% 20% 13% 24% 17% $13.3B Q2 2021 TTM Revenues $2.3B HEALTH $3.1B CIVIL Defense Group Dynetics Group Intelligence Group $7.8B DEFENSE SOLUTIONS Note: Segment revenues do not sum to total revenues due to rounding.Note: Segment revenues do not sum to
Slide 15: Focusing on Attractive Markets We Can Lead
Focusing on Attractive Markets We Can Lead 15 2020 2021 2022 2023 2024 Civil Defense Dynetics Health Intelligence $333B $351B $365B $384B $398B CAGR ‘20 – ’24 3.3% 6.2% 4.1% 3.4% 4.9% ~4.6% ’20-’24 CAGR Attractive end markets • Civil & Health market leadership • Non-defense supplemental would provid
Slide 16: Respected Leadership Team
Respected Leadership Team 16 Roger Krone Chairman & Chief Executive Officer Paul Engola EVP, National Security Space Kamal Dua Chief Audit Executive Jim Carlini Chief Technology Officer Chris Cage Chief Financial Officer Vicki Schmanske EVP, Corporate Operations Gerry Fasano President, Defense Group
Slide 17: Investing in Our People
• Increased headcount by 35% since Q1 2019 • Leadership development & rotational opportunities • Building out software development centers near universities to attract technical talent • Upskilling initiatives in AI/ML, Data Science and Digital Engineering • Diversity and inclusion training and poli
Slide 18: Compelling Investment Thesis
Compelling Investment Thesis 18 Cultivate a portfolio which offers resiliency across the cycles through presence in diverse, yet complementary end-markets. Operate an asset-light business with a high Return on Invested Capital while investing to improve competitive position. Drive market share gains
Slide 19: Technology Differentiation
Technology Differentiation JIM CARLINI, CHIEF TECHNOLOGY OFFICER 19
Slide 20: Strategic Anticipation, Differentiation, and Scale
Strategic Anticipation, Differentiation, and Scale 20 Speed, Security, and Scale Core capabilities and technologies Demos at scale Leverage external tech Culture of innovation New Administration Priorities and Spending New Technologies New Threats and Mission Needs Commercial Innovation Increasing D
Slide 21: Core Capabilities and Technologies
Core Capabilities and Technologies — Making the World Safer, Healthier, and More Efficient 21 Through our customer facing organizations • Dynetics • Defense • Intelligence • Health • Civil By Delivering Our Differentiated Capabilities (Speed, Security, and Scale) • Digital Modernization • Cyber Oper
Slide 22: Differentiating at Scale
Accelerators AI/ML Cyber Software Digital Modernization Demos at Scale Air Defense Launcher Zero Trust AIOps Modeling and Simulation Our Partners Commercial Industry Labs and FFRDCs Universities Technical Talent & Culture Upskilling Innovation Council Differentiating at Scale 22 Q&AFinancial Overvie
Slide 23: Trusted AI/ML
Trusted AI/ML 23 Driving Trusted AI/ML into all core capabilities using unique algorithms and deployment methodologies Digital Modernization Cyber Operations Mission Software Systems Integrated Systems Mission Operations Increased IT operations efficiency and security for large networks via Smarter
Slide 24: Full-Spectrum Cyber — Beyond Compliance
Digital Modernization Cyber Operations Mission Software Systems Integrated Systems Mission Operations Secure current IT and cloud environments; migrate to future resilient architectures Counter advanced cyber threats through prevention, detection, and response Defend software integrity through secur
Slide 25: Driving the Business in 2021 and Beyond
Driving the Business in 2021 and Beyond 25 Technical differentiation to help our customers achieve speed, security, and scale Rapidly Fielded Capabilities for Great Power Competition Secure, Modernized, Large-scale Enterprise Infrastructure Transformed Mission Operations Better Health Outcomes Secur
Slide 26: Dynetics Group
Dynetics Group DAVE KING, GROUP PRESIDENT Dynetics is the applied research and technology accelerator for the corporation, focused on transitioning innovative prototypes to fielded solutions. We solve the toughest scientific and engineering problems for our customers and deliver high-technology, mis
Slide 27: Strategic Focus
Strategic Focus 27 2020 2021 2022 2023 2024 Tactical Weapons Hypersonic Systems Integrated Force Protection Sensors Cyber - Physical Systems Airborne Autonomy Human Space Exploration E&T Services and Prototyping Maritime Systems CAGR ’20-’24$51B$50B $46B $44B $45B 6.1% 0.8% 4.8% 4.2% 3.9% 3.5% 13.3%
Slide 28: What We Do
What We Do 28 Aerospace, Defense, & Civil Maritime Systems Advanced Science & Technology Center Weapons Technology & Manufacturing Description Advanced engineering, disruptive integration, agile development, technology and advanced materials solutions Deep engineering talent across naval architectur
Slide 29: Key Programs
Key Programs 29 $750M POR potential 35 Employees 4 U.S. Sites Positioned for: Tranche 1 & beyond refresh growing to 100’s of SV’s Positioned for: Low rate initial production leading to Program of Record Common Hypersonic Glide Body Tranche 0 Tracking Layer Wide Field of View (WFOV) Mission Need: Ena
Slide 30: Key Takeaways
Key Takeaways 30 As an innovation engine for Leidos, we deliver technology-enabled solutions to address the highest priorities of our national security strategy Will benefit from increasing requirement to field platform agnostic, open solutions that integrate the best capabilities from any supplier
Slide 31: Defense Group
Defense Group GERRY FASANO, GROUP PRESIDENT The Defense Group is the proven trusted partner who delivers digital modernization, integrated decision support solutions and mission-critical operational services across land, sea, air, space and cyber domains for DoD, UK and select strategic internationa
Slide 32: Strategic Focus
Strategic Focus 32 CAGR ’20-’24 2020 2021 2022 2023 2024 UK C4ISR Logistics Digital Modernization Airborne Simulation and Training Force Protection $95B$94B$92B$90B $84B 5.6% 5.1% 3.9% 1.8% 4.8% 2.1% 2.3% Market Drivers: • Pivot to Great Power Competition as Counter-Insurgency operations wane • DoD
Slide 33: What We Do
Airborne Solutions C4ISR Digital Modernization Logistics & Mission Support UK & Europe Description Design, integrate, operate, and sustain technically advanced manned and unmanned aerial ISR platforms Secure all domain C2 mission software systems, simulation and training, Intel analysis and data ana
Slide 34: Key Programs
Key Programs 34 $604M Contract Value 2.4M km2 of High-Resolution Data Collected 31 Countries in Which Data Has Been Collected $7.7B IDIQ Ceiling Value 670K Navy and Marine Corps Users 2.5K Worldwide Sites Positioned for: FEDSIM SENTINEL (sensor integration and operations)Positioned for: DISA Defense
Slide 35: Key Takeaways
Key Takeaways 35 Market leadership at scale with repeatable solutions—we execute industry’s franchise programs, including NGEN, GSMO, ACC-ISR and UK Logistics (LCST) Well positioned in Multi-Domain Operations / JADC2 with focus on resilient infrastructure, trusted AI/ML, and easily-deployed C2 softw
Slide 36: Intelligence Group
Intelligence Group ROY STEVENS, GROUP PRESIDENT The Intelligence Group provides a full range of intelligence capabilities, digital modernization and mission critical software for the 17 members of the US Intelligence Agencies and the Commonwealth of Australia. 36 Key Customers
Slide 37: Strategic Focus
~3.3% ’20-’24 CAGR Strategic Focus 2020 2021 2022 2023 2024 Intel Tradecraft Digital Modernization Logistics Cyber Mission Software Systems Intel ISR $48B CAGR ’20-’24 $42B $43B $45B $46B 4.3% 3.8% 5.6% 2.4% 2.6% 1.0% Market Drivers: • Increasing prevalence of cyber and space as contested domains by
Slide 38: What We Do
What We Do 38 Intel Tradecraft Digital Modernization Cyber Mission Software Systems Logistics Description Provision of analytic expertise in the geospatial, human and electronic domains leveraging data science and intelligent automation Design, operate and optimize all aspects of IT networks, from e
Slide 39: Key Programs
Key Programs 39 $1.3B Contract Value 110K+ Defense and Government Users 15 Locations (Australia + International) Positioned for: JP2060 (Defense Health Transformation)Positioned for: CBP Integrated Traveler Initiatives CBP — Traveler Processing and Vetting Software Application Services (TPVS) Austra
Slide 40: Key Takeaways
Key Takeaways 40 We are a leader in providing services to the US intelligence community and the Commonwealth of Australia While continuing to deliver mission operations, we will expand our market positions in mission software, full-spectrum cyber, digital modernization We will improve margins by cha
Slide 41: Health Group
Health Group LIZ PORTER, GROUP PRESIDENT Leidos Health Group is a leading provider of healthcare solutions for federal agencies. We deliver secure, whole health solutions, across ever-changing sites of care, to improve patient outcomes and system efficiencies. 41 Key Customers
Slide 42: Strategic Focus
Strategic Focus 42 2020 2021 2022 2023 2024 Digital Modernization (Federal) Digital Modernization (Commercial) Managed Health Services Life Sciences Mission Software Systems $87B $97B $111B $104B $93B 8.9% -6.4% 6.1% 7.5% 3.0% CAGR ’20-’24 Market Drivers: • Shifting care to alternative sites driving
Slide 43: What We Do
What We Do 43 Digital Modernization Mission Software Systems Managed Health Services Life Sciences Description Delivering mission-focused, enterprise-scale digital modernization combined with our distinctive health IT capabilities, enhanced cybersecurity and cloud solutions Using mission expertise t
Slide 44: Key Programs
Key Programs 44 $2B+ Total Contract value 7 Year Period of performance 880+ Counselors 140 U.S. military installations 15 States and eastern Asia, the Pacific Islands & the Middle East Positioned for: Managed health services and care coordination Positioned for: Electronic health record modernizatio
Slide 45: Key Takeaways
Key Takeaways 45 Leading provider of data-driven, whole health solutions for federal healthcare agencies across the healthcare ecosystem Pursuing opportunities that leverage corporate capabilities in cyber, data analytics and digital modernization to deliver mission focused transformation Potential
Slide 46: Civil Group
Civil Group JIM MOOS, GROUP PRESIDENT The Civil Group is modernizing global infrastructure, systems, and security for government agencies and commercial markets. 46 Key Customers
Slide 47: Strategic Focus
Strategic Focus 47 2020 2021 2022 2023 2024 Digital Modernization Mission Application Modernization Security Products & Services Logistics Mission Operations Energy Infrastructure CAGR ’20-’24 $85B $89B $93B $80B $77B 7.0% 5.6% 1.2% 5.4% 4.8% 3.3% Market Drivers: • Demand for U.S. civil agency IT co
Slide 48: What We Do
What We Do 48 Digital Modernization Energy Infrastructure Integrated Missions Transportation Applications Security Detection Description Modernizing and managing U.S. civilian agencies’ digital environments, from endpoints to networks to Cloud, leveraging automation, AI/ML, and continuous cybersecur
Slide 49: Key Programs
Key Programs 49 $480M IDIQ Ceiling Value +$1B Appropriated to CBP for NII Since 2016 15 Year Contract Positioned for: International Customs GrowthPositioned for: NASA Advanced Enterprise Global IT Solutions (AEGIS) NASA End-user Services & Technologies (NEST) Customs and Border Protection (CBP) Mult
Slide 50: Key Takeaways
Key Takeaways 50 Sustained market leadership in fed-civ IT with franchise positions at NASA, FAA, DOJ Expanded pursuits in cyber, grid security/resiliency, and climate science Continued diversification into commercial and global markets Integrated suite of products and solutions across the security
Slide 51: Financial Overview and Outlook
Financial Overview and Outlook CHRIS CAGE, CFO 51
Slide 52: Key Messages
Consistent performance above our previous financial targets Strong track record of deploying capital for shareholder value Continued growth momentum expected over the three-year horizon Long-term margin uplift and ability to generate substantial cash for value creation Key Messages 52 Q&AFinancial O
Slide 53: Strong Organic Growth
• 6.6% organic growth CAGR since 2019 • Business development momentum driving strong revenue growth • Diversified portfolio offers resiliency and growth potential across administrations Strong Organic Growth 53* Excludes divested revenues as well as acquired revenues for twelve months; reconciliatio
Slide 54: Track Record of Margin Delivery
Track Record of Margin Delivery 54 10.1% 10.0% 8.8% 11.0% 9.7% 11.1% 10.6% 11.5% 11.0% 10.4% Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 10% Target (5/19) * Excludes certain impacts (VirnetX, MSA, and Greek settlement gains) as well as the impact of COVID-19; reco
Slide 55: Significant and Predictable Cash Flow
Significant and Predictable Cash Flow 55 $288 $186 $290 $169 $175 $251 $541 $147 $145 $85 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 * Excludes certain impacts (VirnetX, MSA, and Greek settlement gains and CARES Act tax deferrals and employee retention credit) as
Slide 56: Capital Structure Provides Financial Flexibility
Capital Structure Provides Financial Flexibility 56 $48 $476 $668 $193 $1,349 $750 $1,000 $250 $161 $219 H2 '21 '22 '23 '24 '25 '26-'29 '30 '31 '32 '33 '34-'39 '40 • Maintain investment grade rating − Minimize WACC − 3x leverage ratio target • Balanced debt ladder—modest near-term maturities − 2022
Slide 57: Disciplined and Balanced Past Capital Deployment
Disciplined and Balanced Past Capital Deployment 57 CapEx 7% M&A 69% Share Repurchase 14% Dividends 10% • 76% growth investments − M&A to strengthen foundation in integration, enter new markets, and expand long-term margins − Cap Ex to establish anchor facilities and drive profitable growth • 24% re
Slide 58: Providing Value through M&A
Providing Value through M&A 58 Strategic Fit Cultural Fit Deal Economics Capital Light Business Model Drive EBITDA • M&A has accelerated the differentiation from our near peers − Scale: IS&GS (2016) − Tailored, integrated solutions: Dynetics (2020), Gibbs & Cox (2021), and Security Detection & Autom
Slide 59: Improved Three-Year Financial Outlook
• Above-market growth driven by differentiated position and business development success • Sustaining/growing margins through attractive business mix • Substantial cash generation capacity— $3.5B in operating cash flow • Assumptions − No change to federal tax policy − R&D capitalization provision of
Slide 60: Strong Foundation Underlying Three-Year Outlook
Strong Foundation Underlying Three-Year Outlook 60 Revenue Drivers + Build-out of recent wins + $49B submitted pipeline + $4B+ protested awards + Positioning in fast growing markets + Non-defense supplemental spending bill - Ramp downs: VA exam business (’22), DHMSM (’23) - Program ends: NASA HLS, A
Slide 61: Deploying Cash to Drive Shareholder Value
Deploying Cash to Drive Shareholder Value 61 CapEx 13% M&A / Share Repurchase 64% Dividends 18% Debt Pay- down 5% • Substantial cash generation 2022-2024 provides opportunity for value creation • Committed to balanced capital deployment strategy − Maintain appropriate leverage—investment-grade ratin
Slide 62: Compelling Investment Thesis
Compelling Investment Thesis 62 Cultivate a portfolio which offers resiliency across the cycles through presence in diverse, yet complementary end-markets. Operate an asset-light business with a high Return on Invested Capital while investing to improve competitive position. Drive market share gains
Slide 63: Appendix
Appendix NON-GAAP RECONCILIATIONS LIST OF ACRONYMS 63
Slide 64: Non-GAAP financial measures
This presentation includes certain non-GAAP financial measures, such as organic growth; non-GAAP net income; adjusted earnings before interest, taxes, depreciation and amortization (EBITDA); adjusted EBITDA margin; normalized adjusted EBITDA margin, normalized operating cash flow, free cash flow, an
Slide 65: Non-GAAP definitions and computations
Organic growth is computed as pro-forma revenues, post divestitures excluding acquired revenues 12 months since closing date divided by prior year pro-forma revenues, post divestitures. The organic revenue CAGR for the 10 quarters beginning FY19 Q1 is computed as: !"#$ %# &&' ()*+,*)-. )/0/12/3, (*3
Slide 66: Non-GAAP Financial Measures Reconciliation
Non-GAAP Financial Measures Reconciliation 66 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 (in millions) Revenues, as reported $2,443 $2,529 $2,575 $ 2,647 $2,577 $2,728 $2,835 $2,954 $2,889 $2,914 $3,242 $3,252 $3,315 $3,448 YoY revenue growth on
Slide 67: Acronym List
Acronym List 67 ACC-ISR Air Combat Command Intelligence Surveillance Reconnaissance AFATDS Advanced Field Artillery Tactical Data System AI/ML Artificial Intelligence/Machine Learning AIE-3 Automated Installation Entry - 3 AIOps Artificial Intelligence for IT Operations C2 Command and Control C4ISR