cowen 35th annual aerospace / defense & transportation

Cowen 35th Annual Aerospace /

Defense & Transportation Conference

February 6, 2014

2 ©2014 LEIDOS. ALL RIGHTS RESERVED.

Forward-Looking Statements Certain statements in this presentation contain or are based on "forward-looking" information within the meaning of the Private Litigation Reform Act of

1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates”

and similar words or phrases. Forward-looking statements in this presentation include, among others: estimates of future revenues, operating income,

cash flow, growth and profitability as wells as statements about future regular or special dividends, stock repurchases and other anticipated uses of

capital. 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 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; our ability to comply with certain agreements

entered into in connection with the CityTime matter; 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 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, including complex engineering or design build projects; our ability to profitably

operate and recover our investment in the Plainfield Renewable Energy Project, the failure of our inspection or detection systems to detect threats; the

adequacy of our insurance programs designed to protect us from significant product or other liability claims; our ability to manage risks associated with

our international business; 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; risks associated with the recently completed spin-off of our technical, engineering

and enterprise information technology services business, such as disruption to business operations, or a failure to realize the expected benefits of the

spin-off; 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.

All information in this presentation is as of February 6, 2014. The Company expressly disclaims any duty to update the forward-looking statement

provided in this presentation to reflect subsequent events, actual results or changes in the Company's expectations. The Company also disclaims any

duty to comment upon or correct information that may be contained in reports published by investment analysts or others.

3

Numerous exciting opportunities to drive shareholder value:

Separation of a $1.7B equity market cap business. Removed organizational conflicts of interest

& increased our addressable market by $37B

Leidos operates in three multi-billion dollar markets that are critical to maintaining our way of

life – National Security, Engineering and Healthcare

• Distinct competitive advantages and our low capital intensive business model drive our success

Driving strong cash flows providing returns to shareholders & retaining a strong balance sheet

Capital deployment execution: ~20% of market cap returned to shareholders in FY14

• Recurring dividend of $0.32 per quarter, 2.9% annualized yield

• Special dividend of $4 per share, paid in March 2013, 9% yield at current valuation

• Authorized a $300 Million Accelerated Stock Repurchase (8% of float) December 13, 2013 as part of an

$820M share repurchase plan (23% of float) announced December 3, 2013

“Breaking the rubber band” Continuous improvement to reduce costs & improve profitability

• $200M cost reduction plan completed in FY14

• Additional $50 to $100M in cost cuts for FY15

• Portfolio shaping initiatives

©2013 LEIDOS. ALL RIGHTS RESERVED.

Investment Rationale

4

National Security Sector

$4.2B TTM revenue

13,500 employees with >10,500 possessing DoD,

TS/SCI, SAP/SAR and DoE security clearances

99% government, <1% commercial

Health & Engineering Sector

$1.9B TTM revenue

9,500 employees

62% commercial, 38% government


Who we are:

Solutions that secure our future and our way of life

National Security

68%

Health 14%

Engineering 18%


National Security at a Glance

14,000 PROFESSIONALS

10,000 WITH SECURITY CLEARANCES

Broad technology,

development and

integration

capabilities

CONTRIBUTE TO OUR CUSTOMER

MISSIONS…

OUR CORE RESOURCES… AND GENERATE

RESULTS

5% DHS & COMMERCIAL

15% DEFENSE

80% INTELLIGENCE

**Total Backlog

$7.5B BACKLOG**

$4.2B TTM REVENUE

National Security

Critical Mission Support In All Operational Regimes:

Air, Land, Sea, Space, and Cyberspace

Maritime Systems

Space Systems

Airborne Systems

Ground Systems

Readiness & Sustainment

Cybersecurity

Intelligence Analysis & Production

Intelligence Systems

©2013 LEIDOS. ALL RIGHTS RESERVED. 6

National Security Addressable Market

BUSINESS SEGMENT

REVENUE

PERCENTAGE

ADDRESSABLE

MARKET

Technology 25% $47B

Intelligence 60% $23B

Cybersecurity 15% $24B

$94B

Increase of $37 Billion in addressable market


8

R&D in air, sea, ground & space

Autonomous and Distributed Solutions

Modeling, Simulation & Training

Wide range of technical solutions

First full spectrum ISR in theater

Leading Navy’s diesel submarine tracking

prototype

Developing one of two high speed

prototype crafts for USSOCOM

Transitioning to new markets

Unmanned, autonomous naval systems

Advanced electronic warfare

Border Security missions

Classified next generation sensors


Saturn Arch

Buckeye

Desert Owl

Blue Devil ISR

Target Recognition

Tactical Sonar

Naval Warfare Engineering

MOJAVE

ACTUV

Integrated WMD

Targeting & Intel Support

Technology Business Technology-driven end-to-end integrated solutions operating in the air, land, sea & space

CAPABILITIES CUSTOMERS PROGRAMS

Advanced technology solutions to differentiate Leidos offerings

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System Engineering & Integration

Advanced analytics

Software development

Intelligence analysis & operations

Integrated logistics solutions

Delivering across Intel and Defense

Top geospatial products producer for IC

Leading NSA & Army data analytics

First Intel & Defense Cloud architectures

Pursuing adjacent markets in Defense

Bid Data & Cloud solutions

Integrated intelligence systems

Infrastructure protection

Modernization, readiness & sustainment


Classified

Intel Communications

Army Military Intel Enterprise

Joint Intel Ops Center

Geospatial Production

iSTORE Content Management

MRAP

Distributed Common Ground

System

GPS System Engineering

TACAN Replacement

Intelligence Business Building wide range of information processing systems solving toughest challenges today

Delivering “Glue-ware” to create integrated systems for decision makers

CAPABILITIES PRIMARY CUSTOMERS

10

Leading Cyber provider in Intel Community

Computer Defense, Exploitation, & Ops

Predictive Cyber analytics

Largest forensics malware in IC

Large scale systems design & integration

Delivering broad cyber solutions

Cryptographic algorithms, key management

Cyber software development

Navy 2013 Tech Award: Cyber Domain

Services

Expanding Cyber beyond Intel Community


Federal Government

Classified (Multiple)

Key Management

US National Data Center

Key Management

Commercial & Critical Infrastructure

Health

Critical Infrastructure

Commercials Providers

Cybersecurity Business Delivering over $700M of Cybersecurity to the Intelligence Community to constantly defend critical

infrastructure against the most sophisticated adversaries

Leveraging Cyber leadership in Intel to address

increasing commercial demands

CAPABILITIES PRIMARY CUSTOMERS

http://www.saic.com/media/videos/protecting-cyber-infrastructure

http://www.saic.com/media/videos/cyber-defense

Health & Engineering Sector

33%

66% 56%

44%

Commercial

Federal

Healthcare

Engineering

$1.9B Revenues (TTM)


12


Healthcare Market

Source: Gartner Enterprise IT spending by verticals forecast, 2013Q1

International Health IT market is > $90B

Total addressable market is much bigger than just Health IT

The U.S. Healthcare IT Market is >$35B and Growing

Health Solutions

From the Research Bench to the Patient Bedside

Electronic Health Record System Implementation

& Optimization

Health Information

Security

Behavioral Health Research & Outreach

Biomedical Data Integration & Warehousing

Health IT Framework & Information Exchange

Advanced Data

Analytics & Visualization

Biomedical Research &

Development Public Health

Surveillance & Outreach



Leidos Health: What We Do

45%

15%

10%

% of Business

30%

EHR Consulting (Digitization)

Systems Integration (Integration and Interoperability)

Strategic Services & Solutions (Data Leverage)

Health Research & Life Sciences (Precision Medicine & Personalization)

EHR Implementation

Optimization

Information integration

IT Services

Application Development & Maint

Ongoing System Support

Legacy System Support

Strategic IT Planning

Meaningful Use

Clinical Transformation

ICD-10

Revenue Cycle Management

Data analytics; cyber security

Behavioral Health

Public health

Life Sciences

Health Research

Capabilities


Leidos Engineering: Five Core Businesses

Process-intensive

Industries

Engineering

Architecture and design

Detailed engineering design

Controls and information technologies

Construction program management

DesignBuild

Mid Tier Refiners HollyFrontier

Magellen

Process industries/manufacturing LSB

3M

InBev

Security Products Systems Integration

Manufacturing

System Support

Federal Customs and Border Patrol

TSA

DoD

International

Power/Grid

Engineering

Engineering design

Consulting: planning, regulatory etc.

Energy efficiency consulting and program

management

Smart Grid as a Service

Large Utilities National Grid

Hawaii Electric & Energy

Northeast Utilities

Munis & Coops

Federal

Environmental &

Engineering

Environmental sciences & technology

Permitting, NEPA

Remediation

Engineering design and DesignBuild

DoD Army Corps of Engineers

Air Force

Navy

Fed Civ NASA & DOE

Lender/ Developer

Fin Advisory

Transaction valuation services Major lending institutions:

1

2

3

5

BUSINESS CAPABILITIES CUSTOMERS

4

Leidos Engineering - $1.1B TTM Revenues

Process Industries

Engineering

Power/Grid Engineering

Asset Transactions

Federal Environmental & Engineering

Security Products

Other

16

Process Industries Engineering (30% of Engineering Revenues)

National

Rankings #3

BIM Engineering Firms Building Design+ Constr., July 2013

Capabilities:

• Architecture/ Design/ Build & Construction Program

Management

• Specialized Engineering Design & Controls

Markets Served:

• Mid Tier Refiners

• Process Industries/ Manufacturing (3M, InBev, LSB)

Key Competencies:

• Deep Client Relationships

• Building Information Management Tech.

• Technology Insertion

Market Stats

U.S. Market $8B/yr

Market Growth 6-8%

Industry Margins MSD

Share of Top 5 25%

17


Process Industries Engineering - Projects ›Active contracts with 4 of the top 6 super majors in oil

›Service delivery at more than 500 shale energy sites

›$125 million in process industry EPC projects in 2012

›Winner of 3 Design-Build Institute of America (DBIA) awards

›Named 2013 System Integrator of the Year by Control Engineering

HollyFrontier Corporation

› Specification and integration of 35+ new

pieces of equipment

› Output of 15,000 barrels per stream day

EPC FOR MILD GAS OIL HYDROCRACKER

Solutia

› Feasibility and front-end engineering for

new Saflex polyvinyl butyral interlayer plant

› Provides access to Shanghai automotive

industry

INTERLAYER PLANT FEASIBILITY AND ENGINEERING

Anheuser-Busch

› Engineered, constructed, and installed

state-of-the-art bottle lines and controls

› America’s leading brewer

BOTTLING LINE PROCESS ENGINEERING AND

INSTALLATION

Security Products (23% of Engineering Revenues)

Capabilities:

• Non-intrusive Inspection (Vehicles and Cargo)

• Explosives Detection (Checked Airline Baggage)

• Radiation Detection (Vehicles and Cargo)

Markets Served:

• Customs and Border Protection

• Department of Defense

• Transportation Security Administration

• International Customs, Military, and

Security Agencies

Key Competencies:

• Technology Leader

• Strong International Business

• Broad Installed Base With Strong Recurring Service

Revenue Stream

Market Stats

Global Market $1B/yr

Market Growth 5-6%

Industry Margins DD

Share of Top 5 >90%

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Security Products – Latest Solutions ›Market Diversification: more than 75% of FY14 VACIS sales made to

international customers

›Product Diversification: more than 90% of FY14 VACIS sales were of models

created within past year

›Revenue Diversification: more than 2,000 security systems currently installed

and covered under paid annual service agreements

VACIS® XPL Mobile

› Dual-energy scanning of cars and light trucks

› Sets up or stows in minutes

MOBILE LIGHT VEHICLE INSPECTION

Reveal CT-120

› Designed to the world’s most demanding

security standards

› 1,000 bags per hour – 1 meter tunnel

HIGH-SPEED OVERSIZED BAGGAGE SCANNING

EXPLORANIUM® SRPM-210

› Significantly reduces costly manual inspections

› Field upgrades available: over 1,000 existing

EXPLORANIUM systems eligible

DRIVE-THROUGH ISOTOPE CATEGORIZATION

Power/Grid Engineering (18% of Engineering Revenues)

Capabilities:

• Engineering Design & Consulting

• Energy Efficiency Consulting & Program Management

• Smart Grid as a Service

Markets Served:

• Large Utilities, including National Grid, Hawaii Electric &

Energy & Northeast Utilities

• Muni & Coop Clients

Key Competencies:

• Longstanding Client Affinity, Legacy Brands

• Responsiveness & Quality

• Big Data Capability – Smart Grid as a Service

Market Stats

U.S. Market $4B/yr

Market Growth 5-8%

Industry Margins HSD

Share of Top 5 30%

21


United Power

› 10,000-meter pilot followed by additional

20,000-meter implementation

› Smarter grid for 70,000 customers

SMART GRID AS A SERVICE FOR UTILITY

Ameren

› Design and deployment of ActOnEnergy®

energy efficiency program

› More than 238 million kilowatt hours

reduced, $20 million in incentives earned,

and $41 million in energy costs saved to date

ENERGY EFFICIENCY PROGRAM MANAGEMENT

National Grid

› More than 150 transmission line,

substation, and distribution projects

› Management for 15 capital programs

TRANSMISSION AND DISTRIBUTION SYSTEM

CAPITAL MANAGEMENT PROGRAM

›Almost 600 utility clients

›More than 30 smart grid projects underway

›Helped save more than 700,000 net megawatt hours annually through energy

efficiency services

Power/Grid Engineering - Projects

Federal Environmental / Engineering (18% of Engineering Revenues)

Capabilities:

• Environmental Sciences & Technology

• Permitting, NEPA

• Remediation

• Engineering Design & Design/Build

Markets Served:

• DoD - Army Corps of Engineers, Air Force & Navy

• Fed Civ – NASA & DOE

Key Competencies:

• Longstanding Client Affinity

• Leadership in NEPA

• Strong Sciences Foundation & Specialties

Market Stats

U.S. Market $8B/yr

Market Growth 0-2%

Industry Margins MSD

Share of Top 5 25%

23


›2,150 prime environmental and engineering projects in the last five years

valued at $2.4 billion

›125 active engineering contracts with civilian and defense agencies

›Winner of 4 DBIA awards

Federal Environmental and Engineering - Projects

NASA Glenn Research Center

› Largest ship-in-a-bottle construction project

of its kind

› Awarded 2012 National Design-Build Award

by Design-Build Institute of America

ONE-OF-A-KIND VIBRO-ACOUSTIC TEST CAPABILITY

FACILITY

Client Confidential

› Multi-disciplinary EIS outlining impacts on

water, human health, and ecological risks

› Prepared for closure of 54.5 million gallons

of mixed waste stored in 177 large tanks and

61 underground tanks

NUCLEAR TANK CLOSURE ENVIRONMENTAL IMPACT

STUDY (EIS)

46th Test Wing – Eglin Air Force Base

› First-of-its-kind initiative to optimize

airspace in light of base realignment and

closure act (BRAC)

› Modeled air traffic within region to identify

chokepoints, generate alternatives, and test

solutions

GULF REGIONAL AIRSPACE STRATEGIC PLANNING

(GRASI)

Transaction & Valuation Consulting (5% of Engineering Revenues)

Capabilities:

• Gold Standard Process

• Deep Technology Understanding

Markets Served:

Major Lending Institutions to the Power Market

• Citibank

• Credit Suisse

• Prudential

Key Competencies:

• Evaluation of Deals for Financing

• Owners/Lender Engineer Project Oversight

Market Stats

U.S. Market $150M/yr

Market Growth 3-5%

Industry Margins DD

Share of Top 5 70%

25


Leidos Value Creation Roadmap

Proven Business Model –

On a new path to drive Shareholder Value

Profit-Focused Revenues

Year-over-year Operating Income Growth

Strong Cash Generation

Capital Allocation Effectiveness

Profit growth-focused revenues

Capitalize on OCI and commercial opportunities

Increase Leidos content in programs

Complete transition year costs/charges

Ongoing cost reductions; full-year benefit FY15

Underperforming business areas removed


Profitability Actions

Focus on

Profitable

Growth

Deliver

Expanded

Margins


Strong Cash Flow

Low Capital-Intensity Business Model

Strong Cash Flow

No Factories

Insignificant Pensions

Variable Cost

Structure

Human Capital Based

29

Exciting opportunity to drive shareholder value

Our goal is to drive strong cash flows to invest in the business and

drive strong returns for shareholders

Post spin off from old SAIC our addressable market is significantly

larger

Focused on continuous improvement to drive down costs and

increase profitability

Defined capital deployment – in FY14 ~20% of equity market value

returned to our shareholders


Summary

cowen 35th annual aerospace / defense & transportation

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