Science Applications International Corporation (SAIC ... · PDF fileScience Applications...

© SAIC. All rights reserved.

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

Jefferies 2014 Global Industrials Conference

August 13, 2014

Anthony J. Moraco, Chief Executive Officer

John R. Hartley, Chief Financial Officer

S A IC .c om


Forward-Looking Statements

2

Certain statements in these slides contain or are based on “forward-looking” information within the meaning of the Private Securities Litigation

Reform Act of 1995. 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 guidance and other 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; 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 in

determining to pay dividends, implement share repurchases or 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; the adequacy of our insurance programs designed to protect us from significant product, design 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; 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.

In addition, these slides should be read in conjunction with our earnings press release dated June 10, 2014 along with listening to or reading a

transcript of the comments of our management delivered in an earnings conference call held on June 10, 2014.

All information in these slides is as of June 10, 2014. We expressly disclaim any duty to update any forward-looking statement provided in these

slides to reflect subsequent events, actual results or changes in expectations.

S A IC .c om


Today’s Speakers

3

Anthony J. Moraco

Chief Executive Officer

John R. Hartley

Chief Financial Officer

S A IC .c om


4

S A IC .c om


SAIC Overview

5

• Leading technology integrator specializing in technical, engineering and

enterprise IT services to the U.S. government

• 45-year history of mission service delivery and customer relationships

• Significant scale of about $4 billion with diversified contract base

• Highly skilled workforce of about 13,000 employees

• Strong and predictable cash flow

S A IC .c om


Investment Highlights

6

Focused on serving our customers leveraging both deep mission domain knowledge and the breadth of enabling IT solutions

Enduring Customer Relationships

and Mission-Orientation

Technical Experts Led by

Experienced Management

Tailored Operational Model and

Competitive Structure

Over 65% of workforce hold a security clearance and work at customer locations

Efficient corporate structure and effective account management and service lines for critical mission delivery

Solid Financial Position Strong cash flow generation from recurring revenue base with margin expansion potential

Full Lifecycle Offerings End-to-end services and solutions support entire mission and enterprise lifecycles

Significant Scale and Diversified

Contract Base

One of the largest pure play technical services providers to the U.S. Government; about $4B in annual revenues, with 90% prime contracts

Offering an outstanding value proposition to all stakeholders

S A IC .c om


FY14 Year in Review (Ended January 31, 2014)

Operating as an independent company since September 2013

Solid financial performance

$4.1B of revenue with a diverse contract base and customer portfolio

Adjusted operating margin of 6.0% (1)

$183 million of operating cash flow; $167 million of free cash flow (1)

Diluted EPS of $2.27 (includes impact of non-recurring separation transaction expenses)

Implemented new operating model; matrix organization

Transformational year leading to optimization year in FY15

7

(1) Adjusted operating margin and free cash flow are non-GAAP financial measure as defined and reconciled in the appendix of this presentation.

S A IC .c om


Full Lifecycle Services & Solutions

8

Mission & SETA

HardwareIntegration

Training & Simulation

Logistics & Supply Chain

Network Integration

Software Integration

Cyber, Cloud and Data Sciences

IT ManagedServices

SAIC

Services &

Solutions

DESIGN

Engineering

& Analysis

BUILD

Develop &

Integrate

SUPPORT

Operations &

Maintenance

S A IC .c om


Fiscal Year 2014 Revenue

Customer

Mix

Contract

Type

Revenue

Mix

Navy /

Marine Corps

24%

Federal

Civilian

25%

Army /

Air Force

30%

DoD Agencies

& Commands

18%

State/Local/

Commercial

3%Cost

Reimbursable

37%

Time &

Materials

31%

Fixed Price

32%

SAIC Labor

43%

Subcontractor

37%

Supply Chain

Materials

14%

Other Materials

6%

9

~ 90% Prime Contractor; ~ 85% IDIQ Revenue

S A IC .c om


Army /

Air ForceState, Local

and

Commercial

Navy /

Marine

Corps

DoD

Agencies &

Commands

Federal

Civilian

SAIC Market Position

Offerings

Network Integration

Software Integration

IT Managed Services

Cyber, Cloud & Data Sciences

Mission & SETA

Hardware Integration

Training & Simulation

Logistics & Supply Chain

Grow Protect/Expand

Operating Model to Drive Growth

10

S A IC .c om


FY14 - YEAR OF

“Transformation”

• Implemented agile operational model

• Restructured leadership roles

• Portfolio aligned to leverage scale

• Established capital structure and deployment strategy

3-Year Strategic Road Map

FY15 - YEAR OF

“Optimization”

• Sustain our revenues

• Improve our operating margins

• Invest in repeatable technologies & capabilities

• Total ‘solutioning’ with partners

• Executing capital deployment strategy

FY16 & BEYOND

“Maturation”

• Technology integrator of choice across full lifecycle

• Employer of choice for subject matter experts

• Market leadership in existing and new markets

• World-class solutions

• Investment of choice; disciplined capital deployment

S A IC .c om


SAIC Approach To Shareholder Value

12

Leverage scale

Protect the base

Expand current

customers

Grow new

customers

Strong program

performance

Reduce indirect

costs

Revenue Growth

Annual margin

expansion Earnings growth

Dividend

~ 30% of free cash

flow

Increased

operating cash

flow

Free cash flow

~$200M/yr

Maximize Total

Shareholder

ReturnIncrease SAIC

labor content

Reliable operating model allows for disciplined capital deployment

Re

ven

ue

le

vers

Op

in

co

me

le

vers

Additional

leverage above

current level

Share repurchases

currently >50% of

excess cash

Opportunistic M&A

S A IC .c om


Annual Organic Revenue Growth Low single-digit growth

Target Operating Margin10 to 20 bps annual improvement,

on average, starting in the low 6% range

Maximize cash flow generation,

free cash flow to exceed net income

Return of capital in excess of operating needs,

absent higher return capital

deployment opportunities

Leverage (debt to EBITDA)

Financial leverage appropriate for SAIC’s

investment requirements and cash

generating characteristics

Long Term Financial Targets (on average and over time)

13

S A IC .c om


SAIC – Creating Shareholder Value

Organizational alignment

Value Proposition Principles:

• Understood and executed at every level

of the enterprise

• Explicit and disciplined in how we

deliver value

• Tangible metrics that measure our

progress

• Well aligned incentives that drive

behavior throughout the enterprise

• Transparency with investors to provide

visibility into business

Say what we do

Do what we say

Transparency of mission

Make our value proposition clear

14

Execution of our strategy to deliver value


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

APPENDIX

S A IC .c om


First Quarter Fiscal Year 2015 Results (1)

(1) Results of Science Applications International Corporation and its consolidated subsidiaries for the first quarter ended May 2, 2014 and excludes revenues performed by former

parent company.

16

(1) Results of Science Applications International Corporation and its consolidated subsidiaries for the first quarter ended May 2, 2014 and excludes revenues performed by former

parent company.

(2) Free cash flow is a non-GAAP financial measure as defined and reconciled in the appendix of this presentation.

S A IC .c om


Non-GAAP Reconciliation – FY15 Q1 Adjusted Operating Margin

17

($ in millions)

These slides refer to adjusted operating income margin,

which is a non-GAAP financial measure that is reconciled

to the most directly comparable GAAP financial measure,

operating income margin. The company believes that

reporting adjusted operating margin provides investors

with greater visibility into the profitability of the company.

The company calculates adjusted operating income

margin by adding expenditures for the separation of the

company to GAAP operating income and subsequently

dividing by revenue.

This financial measure is not meant to be considered in

isolation or as a substitute for comparable GAAP

measures and should be read only in conjunction with

SAIC's consolidated financial statements prepared in

accordance with GAAP. The method that the company

uses to calculate adjusted operating income is not

necessarily comparable to similarly titled financial

measures presented by other companies.

Three Months Ended Three Months Ended

($ in mi l l ions) May 2, 2014 May 3, 2013

Operating Income 59$ 52$

Separation Transaction Expenses - 16

Adjusted Operating Income 59$ 68$

Operating Margin 6.1% 4.7%

Adjusted Operating Margin 6.1% 6.1%

S A IC .c om


Non-GAAP Reconciliation – FY15 Q1 Free Cash Flow

($ in millions)

These slides refer to free cash flow, which 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.

The limitation of this non-GAAP financial measure as

compared to the most directly comparable GAAP

financial measure is that free cash flow does not

represent total cash flows. The company addresses this

limitation by presenting free cash flow near disclosures of

cash flows used in operating activities. This financial

measure is not meant to be considered in isolation or as

a substitute for comparable GAAP measures and should

be read only in conjunction with SAIC's consolidated

financial statements prepared in accordance with GAAP.

The method that the company uses to calculate free cash

flow is not necessarily comparable to similarly titled

financial measures presented by other companies.


($ in mi l l ions) May 2, 2014 May 3, 2013

Total cash flows used in operating activities, as reported 34$ (15)$

Expenditures for property, plant and equipment (7) (1)

Free cash flow 27$ (16)$

18

S A IC .c om


Non-GAAP Reconciliation – FY14 Adjusted Operating Margin

19

($ in millions)

These slides refer to adjusted operating income margin,

which is a non-GAAP financial measure that is reconciled

to the most directly comparable GAAP financial measure,

operating income margin. The company believes that

reporting adjusted operating margin provides investors

with greater visibility into the profitability of the company.

The company calculates adjusted operating income

margin by adding expenditures for the separation of the

company to GAAP operating income and subsequently

dividing by revenue.

This financial measure is not meant to be considered in

isolation or as a substitute for comparable GAAP

measures and should be read only in conjunction with

SAIC's consolidated financial statements prepared in

accordance with GAAP. The method that the company

uses to calculate adjusted operating income is not

necessarily comparable to similarly titled financial

measures presented by other companies.


($ in mi l l ions) January 31, 2014 January 31, 2013


Separation Transaction Expenses 1 13




Twelve Months Ended Twelve Months Ended



Separation Transaction Expenses 58 28




S A IC .c om


Non-GAAP Reconciliation – FY14 Free Cash Flow

20

($ in millions)

These slides refer to free cash flow, which 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.

The limitation of this non-GAAP financial measure as

compared to the most directly comparable GAAP

financial measure is that free cash flow does not

represent total cash flows. The company addresses this

limitation by presenting free cash flow near disclosures of

cash flows used in operating activities. This financial

measure is not meant to be considered in isolation or as

a substitute for comparable GAAP measures and should

be read only in conjunction with SAIC's consolidated

financial statements prepared in accordance with GAAP.

The method that the company uses to calculate free cash

flow is not necessarily comparable to similarly titled

financial measures presented by other companies.



Total cash flows used in operating activities, as reported 125$ 33$

Expenditures for proprty, plant and equipment (6) (1)

Free cash flow 119$ 32$

Twelve Months Ended Twelve Months Ended


Total cash flows used in operating activities, as reported 183$ 280$

Expenditures for proprty, plant and equipment (16) (7)

Free cash flow 167$ 273$

S A IC .c om


Shareholder and Stock Information

► Initial Public Offering: Science Applications International Corporation (SAIC) common stock began trading

on the New York Stock Exchange (NYSE) on September 30, 2013.

► Fiscal Year 2015: SAIC’s fiscal year starts on February 1, 2014 and ends on January 30, 2015.

► Share Price Information: SAIC’s common stock is listed on the NYSE under ticker symbol SAIC. Share price

information can be found at http://investors.saic.com/stock-information

► State of Incorporation: SAIC is incorporated in the state of Delaware

► Dividends: SAIC expects to declare and pay regular quarterly cash dividends in the future; however, the

actual declaration of any such future dividends and the establishment of the per share amount, record

dates and payment dates for any such future dividends are subject to the discretion of the Board. The table

below lists SAIC’s dividends for the past 12 months:

Declaration Date Record Date Payable Date Amount Type

06/04/14 07/15/14 04/30/14 $0.28 Cash, Quarterly

03/20/14 04/15/14 04/30/14 $0.28 Cash, Quarterly

12/12/13 01/15/14 01/30/14 $0.28 Cash, Quarterly

10/03/13 10/15/13 10/30/13 $0.28 Cash. Quarterly

21

http://investors.saic.com/stock-information

S A IC .c om


Shareholder and Stock Information (continued)

► Website: www.saic.com

► Inquiries from securities analysts, portfolio managers, institutional investors and other interested investors

in SAIC should be directed to:

Paul E. Levi

Director of Investor Relations

(703) 676-2283

[email protected]

► Inquiries from media should de directed to:

Lauren A. Darson

(703) 676-8982

[email protected]

► Inquiries regarding corporate governance should de directed to:

Paul H. Greiner

(858) 826-7360

[email protected]

22

http://www.saic.com/

Science Applications International Corporation (SAIC ... · PDF fileScience Applications...

Documents

Transcript of Science Applications International Corporation (SAIC ... · PDF fileScience Applications...