Science Applications International Corporation (SAIC)...Reports on Form 10-Q and other filings with...

Science ApplicationsInternational Corporation(SAIC)

Investor PresentationSeptember 2020

© SAIC. All rights reserved.S A I C P R O P R I E T A R Y

Forward-Looking Statements

Certain statements in this presentation are “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. Words such as “may,” “will,” “should,” “expects,”“intends,” “projects,” “plans,” “believes,” “estimates,” “targets,” “anticipates,” and similarexpressions identify forward-looking statements in this presentation. Such statements include, butare not limited to, statements about future financial and operating results, plans, objectives,expectations and intentions, and other statements that are not historical facts. These statementsare subject to numerous assumptions, risks, and uncertainties, and other factors, many of which areoutside the control of SAIC. These factors could cause actual results to differ materially from suchforward-looking statements. Risks, uncertainties and assumptions that could cause SAIC’s actualresults to differ materially from those discussed in the forward-looking statements include, but arenot limited to, those described in the “Risk Factors” section of SAIC’s most recent Form 10-K filedwith the Securities and Exchange Commission (“SEC”) and updated in any subsequent QuarterlyReports on Form 10-Q and other filings with the SEC. The reports referenced above are available onSAIC’s website at www.saic.com or on the SEC’s website at www.sec.gov. No assurance can be giventhat the results of events described in forward-looking statements will be achieved and actualresults may differ materially from these statements. SAIC disclaims any obligation to update anyforward-looking statements provided in this presentation to reflect subsequent events, actualresults, or changes in SAIC expectations.

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SAIC’s Value Proposition to Investors

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MARKET Stable Government Services Market Environment; Continued Investment in Focus Areas of ITModernization, Cyber, Space, Intelligence, Training & Simulation

FINANCIAL PROFILELarge Pure Play Service Provider to the U.S. Government with approximately $7.1B inAnnual Revenues; Recurring Revenue Base with Significant Margin Expansion and StrongCash Flow Generation

CAPITAL DEPLOYMENTHistory of Disciplined Capital Deployment for Shareholder Value Creation Through aBalanced Mix of Dividends, Share Repurchases, and M&A

OPERATIONAL MODEL Differentiated Matrix Operating Model Enabling Customer Account Management andLeveraging Capabilities Across Our Broad Portfolio to Compete More Effectively

CUSTOMERS & OFFERINGSEnduring Customer Relationships Providing End-to-End Services and Innovative TechnologySolutions Supporting Critical Missions of National Importance


Our Heritage

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SAIC: Overview

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SAIC® is a premier Fortune

500® technology

integrator driving our

nation’s digital transformation. Our

robust portfolio of offerings across

the defense, space, civilian, and

intelligence markets

includes secure high-end solutions

in engineering, IT modernization,

and mission solutions. Using our

expertise and understanding of

existing and emerging technologies,

we integrate the best components

from our own portfolio and our

partner ecosystem to deliver

innovative, effective, and efficient

solutions that are critical to

achieving our customers' missions.

SAIC At A Glance(1)

~ 2 5 , 5 0 0E M P L O Y E E S

~ 9 0 %PRIME CONTRACTS

50%+ H O L D AS E C U R I T YC L E A R A N C E

$ 7. 1BR E V E N U E S ( 2 )

(1) Shown as of the end of FY2020 (January 31, 2020) for SAIC and including the impact from the acquisition of Unisys Federal.(2) Last twelve months (LTM) as of the end of the fourth quarter of fiscal year 2020 for SAIC (January 31, 2020), including the trailing twelve months of revenue

from the acquisition of Unisys Federal for the year ended December 31, 2019.

Our Customer Mix(2)


V I S I O NBe the premier technology integrator in our market by making a profound difference supporting

our customers’ missions, engaging the best talent in industry and providing strong shareholder returns.

SAIC: Redefining Ingenuity

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We Are Redefining Ingenuity Through:

Leading technologyintegrator specializing intechnical, engineering,intelligence, and enterpriseIT services to the U.S.government.

50-year history ofmission service deliveryand customerrelationships.

Annual revenues ofabout $7.1 billion withscale in each of our 3customer facingorganizations; strong andpredictable cash flow.

Highly skilled workforceof about 25,500employees with about70% holding a securityclearance.

Strategic partnerships withpremier technology providersto enable infusion ofcommercially availabletechnologies to improveefficiency and reduce costs

Differentiated, repeatablesolutions that enable ourcustomer’s missionobjectives; technologyindependent solutionsaddressing their mostcomplex challenges

MARKET HERITAGE PEOPLEFINANCIAL ALLIANCE PARTNERS CAPABILITIES


SAIC: What We Do

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Operating Model

• Infrastructure engineering andmodernization

• Cloud integration• Digital platform services• User experience and support• Personal compute services• IT operations and business

integration• Transformation services

• App modernization andmigration

• Mission and enterprise softwaredevelopment

• Artificial intelligence/machinelearning enabled softwaredevelopment

• Cloud-native softwaredevelopment

• Governance, risk andcompliance

• Cyberspace operations• Security operation and incident

management• Infrastructure security• Cyber training

• Digital engineering services• Technical and knowledge

management services• Mission engineering and concept

development• System definition services• System build and test services• System operation and

sustainment services• Logistics and supply chain

services

• Data frameworks andenvironments

• Data management processesand toolkits

• Modeling and simulation• Analysis services• Mission applications and tools

• Training delivery• Training asset development• Training infrastructure and

support• Program management,

business, and office support• Strategic comms and

multimedia production• Acquisition management

Enterprise IT Software Cyber Advanced Analytics& Simulation

Engineering,Integration, & Logistics

Training & MissionSolutions

SAIC Operating Model is designed to:

CivilianMarketsGroup

DefenseSystems

Group

NationalSecurityGroup

Solutions & Technology Group

• Drive growth through customer aligned accounts

• Enhance engagement and leverage our people

• Enable repeatable solutions facilitating profitable growth

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2

3 SAIC also has employees deployed in 40+ internationallocations in support of our customers’ missions

Locations

D.C. Metro7,000+ employees

Virginia Beach

Charleston

Huntsville

OklahomaCity

San DiegoMetro

SouthwesternIndiana

500+ employees


At-Scale Operating Groups Aligned to Areas of Strategic Importance

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SAIC’s Portfolio Benefits from Customer Diversification, Scale and Alignment to Mission

Notable Recent Win: USAF Cloud One

Migrate approximately 800 Air Force and

U.S. Army mission applications into the

cloud. Contract has firm fixed-price, labor

hour and cost reimbursement elements

Notable Recent Win: AMCOM SLCD

Recompete and new business contract

to provide mission engineering,

integration, software development, and

other life cycle support

Notable Recent Win: USAF TADS

New business IT modernization contract to

support an integrated system of weather

enterprise hardware and software to provide

accurate, consistent, relevant, and timely

environmental intelligence

Civilian Markets GroupCivilian Markets Group Defense Systems GroupDefense Systems Group National Security GroupNational Security Group• Management of complex IT systems

supporting critical civilian services

• Support for space missions and operations

• Air Traffic Controller training

• Modernization of Legacy including, Cloud

Migration, Enterprise App Development,

Cybersecurity, Infrastructure Optimization,

Advanced Analytics, End User Services,

Organizational Change Management

• Systems Engineering and Integration

• Enterprise IT Modernization

• Platform, Vehicle, C4ISR, and Weapons

Systems integration

• Cyber

• Training: Live, Virtual, Constructive, and

Serious Gaming

• Logistics and Supply Chain Management

• Systems Engineering and Integration

• SETA

• Space missions

• Mission IT services focusing on IT

modernization, software development,

application migration to cloud, and

analytics

• Policy thought leadership and broad

mission IT services

• Intelligence community mission operations

$2.9B / 5 yrs$630M / 6 yrs $727M / 57 mo


IT MODERNIZATION

CYBER

SPACE

DATA PROLIFERATION

TRAINING

SAIC is Aligned to Customers’ Critical Priorities

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• Aging IT infrastructure across the U.S. Government is driving investments intransforming legacy systems through advanced services across cloud, software,cyber, and analytics

• Increasing threat environment from numerous classes of actors• Market demand for solutions ranging from space resilience to network security to

insider threat analysis; cyber is no longer just an IT priority, cyber is in everything

• U.S. desire to reestablish a dominant position in space mission capabilitiesand enhance system resiliency

• New threats from near-peer adversaries with significant capability drivingenhanced focus and funding (creation of a new U.S. space organization)

• Timely and secure access to high-volume, distributed data and information is ofgreat importance

• Need to advance intelligence integration by leveraging new capabilities in machinelearning and artificial intelligence in a secure information technology enterprise

• Training and readiness remains a priority; force of the future will requiregreater access to technology and training

• Military services are driving towards rapid fielding and requiring provensystems & solutions

• Focus on providing global, secure supply chain solutions, with increasedemphasis on outsourcing more commodities


Top Revenue Generators

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AMCOM

Providing systemsengineering and

software developmentservices to the US Army

Aviation and MissileCommand (AMCOM)

Annual revenues ofapproximately $650M

Supply Chain(CHEMPOL II, Tires, PVMRO)

Multiple contracts andtask orders providingintegrated logistics

services to insure timelyand cost efficient

supplies to U.S. militaryforces


Vanguard

Maintain and enhanceenterprise-wide IT

network and servicesinfrastructure for UnitedStates diplomats in the

U.S. and around the globe


NICS

Maintain and enhanceglobal

telecommunicationservices network

supporting 80,000+NASA users and partners



Revenue Profile

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CustomerMix*

ContractType*

Cost ofRevenues Mix*

IntelCommunity16%

Army20%

FederalCivilian33%Other

DoD14%

Navy/Marine Corps12%

CostReimbursable53%

Fixed PriceSupply ChainMaterials9%

SAIC Labor52%

Subcontractor30%

Supply ChainMaterials10%

OtherMaterials8%

~85% IDIQ Revenue; ~90% Prime Revenue

Fixed PriceServices17%

Time &Materials21%

Other 2%

Air Force 3%

* Last twelve months (LTM) as of the end of the fourth quarter of fiscal year 2020 for SAIC (January 31, 2020), including the trailingtwelve months of revenue from the acquisition of Unisys Federal for the year ended December 31, 2019.


Overview of Unisys Federal

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Homeland /CriticalInfrastructure

Defense /Intelligence

Civilian

Aligned to priorities of NationalDefense Strategy (IT integration withweapons systems, Cyber, Cloud & ITconsolidation)

Differentiated GTM solution approachwith focus on CloudForte™,InteliServe™ and Security+

Differentiated solutions in Inteliserve,cloud native solutions, and personcentric data lifecycle

Leverages capabilities in CloudForteTMand relationships with AWS andMicrosoft to accelerate migrations andtransform mission readiness

Key Statistics

10+%2-year Historical Organic

Growth CAGR

1,500+Cloud Certifications/

Accreditations

~2,000Employees

95%(1)Fixed Price / T&M

Contracts

10+%Adj. EBITDA Margins

75%(2)Federal Civilian Customers

~80%Funded backlog in FY2021

$1.6MCapEx in FY2020

SAIC FY2020 = Unisys Federal FY2019.(1) LTM for the period ending 12/31/2019. Remaining 5% of contracts are Cost Plus.(2) LTM for the period ending 12/31/2019. Remaining 25% of customers are Defense and Intel.


Overview of Unisys Federal (cont’d)

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• Adding deep expertise in infrastructure modernization, cloud migration, managed services and enterpriseIT-as-a-service (eITaas)

• Expanding portfolio of IP based, technology-enabled, productized solutions that are scalable and repeatable

• Commercial-like service delivery model that adds differentiation from other federal integrators

• Aligned to long-term strategy and recently communicated areas of increased focus

• Adds technology-enabled solutions and expansion of portfolio to high priority customers

• Immediately accretive to organic growth profile, adjusted EBITDA margin and non-GAAP EPS

Capabilities

Strategic & Financial Attributes

Long Standing Relationships With Key Customers

30+Years

10+Years

30+Years

10+Years

30+Years

30+Years


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F I N A N C I A L I M P A C T• Growth: Immediately accretive to organic growth profile• Margins: Increases Year 1 adjusted EBITDA margins by ~30 bps• Adjusted EPS: Immediately accretive to Year 1 by 6% to 8%(1);

10% to 12% accretive in Year 2

• Free Cash Flow: Greater than 10% accretion to adjusted free cash flow(1)

F I N A N C I N G & C L O S I N G• Transaction funded through cash on hand and incremental debt• Net leverage ratio of ~4.5x at close, rapid de-levering to target of 3.0x• Return to capital deployment flexibility by end of year 2• Closed on March 13, 2020

P U R C H A S E P R I C E• $1.2 billion (100% cash consideration); no assumption of pension liability

• Represents ~10.5x CY2020 adjusted EBITDA, adjusted for the netpresent value of tax assets (approximately $175 million)

Note: Adjusted EBITDA excludes one-time transaction-related expenses. Adjusted EBITDA multipleexcludes the expected net present value of the tax asset

(1) Adjusting for one-time costs and cash outflows related to acquisition and integration expenses

TransactionOverview


Transaction Rationale

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Enhances Capabilities

• Aligned to long-term strategy and recently communicated area of focus; IT Modernization• Addition of high value-chain offerings in infrastructure modernization, cloud migration, cloud brokerage, managed

services, and as-a-service models• Incremental capabilities in application development, digital enablement, and data analytics

Provides Intellectual Property & Delivery Model Differentiators

• Utilization of proprietary technology to successfully shape, bid, and win new business with strong margins• Scalable and repeatable solutions delivered in a commercial-like model; further differentiates SAIC in the federal

services marketplace

Increases Presence In High-growth Market Sub-sectors

• Favorably positioned in growing sub-sectors of federal budgets• Positioned for large scale contract opportunities currently being piloted across several strategic customers

Increased Customer Access & Strong Pipeline Of New Business Opportunities

• Incremental access and further diversification of customer portfolio; addition of several targeted federal civilianaccounts such as DHS, CBP, and IRS

• Unisys Federal has robust pipeline of new business opportunities


Financial Policy Post-Closing

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Accretive Financial Profileand Strong ExecutionAllows for Higher Leverage

Capital Deployment Plan

De-Leveraging Strategy

Strong pro forma free cash flow gives SAIC comfort that de-leveragingwill happen quickly

Enhanced financial position, strategic fit and absence of “go-get” costsynergies ensure high probability of strong execution

Commitment to de-lever rapidly through use of free cash flow, post-dividend, for debt repayment

Enhanced free cash flow generation improves de-levering capability

Return to capital deployment after de-levering

SAIC intends to halt share buybacks in the near term (at minimum one year)

Expect no change in dividend policy


• Commitment to de-lever rapidly through use of excess freecash flow for debt repayment

• Expected net debt at close of $2.8B

• Rapid de-levering will enable return to capital deploymentflexibility within year 2

• Dividend policy unchanged

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Rapid De-levering andNear-Term Return toCapital DeploymentFlexibility

4.5x*

3.0x*

CLOSE YEAR 2

DE-LEVER ING PROFILE

*Net leverage ratio

ContinuedStrong FreeCash Flow forValueCreation


SAIC Competitive Landscape

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SAIC competes effectively across this landscape

Aerospace & Defense(A&D) Contractors

Pure Play Government Services Diversified IT Services


SAIC Strategic and Alliance Partners

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Leveraging strategic alliances to bring commercial technology andrepeatable solutions to our customers


Q2 Total Revenue Growth of 11%(1% Internal Contraction, 3% Internal Growth After Adjusting for COVID-19 Impact)Q2 Adjusted EBITDA Margin* of 9.5%, 10 bps Negative Impact from COVID

Strong Q2 Free Cash Flow* Generation of $90MDebt Repayment of $142M in Q2, $258M YTD Including $100M of

Voluntary Debt Repayment After Quarter-End

Q2 Book to Bill of 2.6xYear-to-Date Book-to-Bill of 1.8x

Modest Impact from COVID-19, Resilient Business and MarketContinued Strategy Execution, Minor Portfolio Shaping

Strong Performance with Building Business Momentum

*Adjusted EBITDA, adjusted diluted earnings per share and free cash flow are non-GAAP financial measures as defined and reconciled in the appendix of this presentation.

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FY2021 Q2 Highlights


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Fiscal Year 2021 Guidance

Current Prior

Revenue

Adjusted Diluted EPS*

Free Cash Flow*

$7.1B - $7.2B

$5.80 - $6.10

meet orexceed $500M

10.5 months of Unisys Federal ~$250M of unfavorable impact due to COVID-19 Guided range reflects 1% - 3% organic growth

~$35M unfavorable pre-tax impact due to COVID-19 Effective tax rate of 23% - 25%

~$80M of positive impact from deferred payroll taxesas afforded by the CARES Act

~$30M of negative impact due to COVID-19 reducedprofitability

Excludes $200M impact from Q1 sale of receivables**

*Adjusted EBITDA, adjusted diluted earnings per share and free cash flow are non-GAAP financial measures as defined and reconciled in the appendix of this presentation.**Master Accounts Receivable Purchase Agreement entered into in the first quarter of fiscal year 2021 as part of the acquisition of Unisys Federal.

$7.1B - $7.3B

$5.80 - $6.10

meet orexceed $500M


Shareholder and Stock Information

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• Initial Public Offering: Science Applications International Corporation (SAIC) common stock began trading onthe New York Stock Exchange (NYSE) on September 30, 2013.

• Fiscal Year 2021: SAIC’s fiscal year 2021 starts on February 1, 2020 and ends on January 29, 2021.• 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 andpayment dates for any such future dividends are subject to the discretion of the Board. The table below listsSAIC’s recent dividends:

Declaration Date Record Date Payable Date Amount Type

08/31/20 10/16/20 10/30/20 $0.37 Cash, Quarterly

06/03/20 07/17/20 07/31/20 $0.37 Cash, Quarterly

03/25/19 04/09/20 04/24/20 $0.37 Cash, Quarterly

12/10/19 01/17/20 01/31/20 $0.37 Cash, Quarterly

09/17/19 10/11/19 10/25/19 $0.37 Cash, Quarterly

06/15/19 07/12/19 07/26/19 $0.37 Cash, Quarterly

03/27/19 04/12/19 04/26/19 $0.31 Cash, Quarterly

12/11/18 01/11/19 01/25/19 $0.31 Cash, Quarterly

10/03/18 10/15/18 10/26/18 $0.31 Cash, Quarterly


Shareholder and Stock Information (continued)

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Annual Stockholder Meeting: Stockholders participated, via a virtual/online webcast, in SAIC’s annual meeting ofstockholders on June 3, 2020. At the annual meeting, stockholders approved all the matters set forth in the noticeof meeting, including the election of certain directors and the selection of the Company’s independent registeredpublic accounting firm. SAIC’s senior management presented information about performance during fiscal year2020 and were available to answer questions from stockholders.

Transfer Agent:Computershare462 S. 4th Street, Suite 1600Louisville, KY 402021-855-679-7242www.computershare.com/saic

Independent Registered Public Accounting Firm:Ernst & YoungMcLean, Virginia



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Executive Leadership:NAZZIC S. KEENE — Chief Executive Officer

CHARLES A. MATHIS — Chief Financial Officer

Board of Directors:DONNA MOREA — Chair of the Board

NAZZIC S. KEENE — Chief Executive OfficerBOB BEDINGFIELD — Independent Director

CAROL GOODE – Independent DirectorJOHN HAMRE — Independent Director

YVETTE KANOUFF – Independent DirectorDAVID KERKO – Independent Director

TIM MAYOPOULUS — Independent DirectorKATHARINA MCFARLAND — Independent Director

STEVEN SHANE — Independent Director



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Website: www.saic.com

For inquiries, contact:

For securities analysts, portfolio managers,institutional investors and other interested

investors in SAIC:

Shane P. Canestra, Director of Investor Relations(703) [email protected]

For media: Lauren A. Presti(703) [email protected]

For corporate governance: Steven G. Mahon(703) [email protected]

APPENDIX


Non-GAAP Reconciliation – EBITDA and Adjusted EBITDA

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(1) “EBITDA“ and “Adjusted EBITDA” are non-GAAP financial measures that are reconciled in this schedule to the most directly comparable GAAP financial measures. These non-GAAP financial measures helpinvestors better understand profitability trends of our business from period to period and provide useful information on how successfully we operate in our markets but are not meant to be considered inisolation or as a substitute for comparable GAAP measures and should be read only in conjunction with SAIC's condensed and consolidated financial statements prepared in accordance with GAAP. Themethods used to calculate these non-GAAP financial measures may differ from the methods used by other companies and so similarly titled non-GAAP financial measures presented by other companiesmay not be comparable to those provided in this schedule.


Non-GAAP Reconciliation – Adjusted Diluted Earnings per Share

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(1) “Adjusted diluted earnings per share” is a non-GAAP financial measure that is reconciled in this schedule to the most directly comparable GAAP financial measures. This non-GAAP financialmeasure provides investors with greater visibility into operating income but is not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only inconjunction with SAIC's condensed and consolidated financial statements prepared in accordance with GAAP. The methods used to calculate this non-GAAP financial measure may differ from themethods used by other companies and so similarly titled non-GAAP financial measures presented by other companies may not be comparable to those provided in this schedule


Non-GAAP Reconciliation – Free Cash Flow

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(1) “Free cash flow” is a non-GAAP financial measure that is reconciled in this schedule to the most directly comparable GAAP financial measures. This non-GAAP financial measure provides investors withgreater visibility into cash flows provided by operating activities, but is not meant to be considered in isolation or as a substitute for comparable GAAP measures and should be read only in conjunctionwith SAIC's condensed and consolidated financial statements prepared in accordance with GAAP. The methods used to calculate this non-GAAP financial measure may differ from the methods used byother companies and so similarly titled non-GAAP financial measures presented by other companies may not be comparable to those provided in this schedule. Additionally, the Company provides freecash flow excluding the Master Accounts Receivable Purchasing Agreement (MARPA) for the sale of certain designated eligible U.S. government receivables. Under the MARPA, the Company can selleligible receivables up to a maximum amount of $300 million. The Company provides free cash flow excluding MARPA to allow investors to more easily compare current period results to prior periodresults and to results of our peers.

Science Applications International Corporation (SAIC)...Reports on Form 10-Q and other filings with...

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Transcript of Science Applications International Corporation (SAIC)...Reports on Form 10-Q and other filings with...