In This Issue

1 Strong Appetite

for Acquisitions

2 Public Company

Valuation Multiples

& Select Financial

Metrics

3 M&A Transactions

4 Select Market

Activity

5 Industry and

Agency News

6 Representative

Transactions

7 Contact Information

GOVERNMENT CONTRACTOR QUARTERLY MARKET UPDATE Q1 | 2016

SC&H CAPITAL is an

investment banking firm

dedicated to advising the

owners of middle market

companies on merger and

acquisition transactions,

capital raises, and

corporate finance

projects. SC&H Capital

has successfully closed

100+ transactions with

industry-leading growth companies.

On the whole, 2015 was a year of platform consolidation and portfolio shaping in the defense sector, as government contractors attempted to narrow focus on critical platforms and boost competitiveness and profitability by divesting non-core business units. A high level of total deal volume was supported by perceived stabilization of the federal defense budget, seemingly concluding a period of uncertainty in defense spending. Prime contractors’ profit margins generally continued to shrink due to strong price competition and flat agency spending.

Government contractors have responded to decreasing margins by continuing to restructure their portfolios to focus on higher-margin opportunities, while divesting underperforming business units. The year ended with an

exceptionally active M&A environment, with several headline acquisitions driving up the total combined deal volume for 2015. Notable transactions announced in Q4 include CACI’s acquisition of L-3’s National Security Solutions, Inc. for $550 million, and the $431 million Comtech / TCS merger announced in late November. Meanwhile, Lockheed Martin closed its acquisition of Sikorsky Aircraft, and is actively evaluating the divestiture of its IT services business.

Q4 also saw a number of transactions involving private equity firms, continuing the trend from prior quarters. SC&H Capital expects the M&A marketplace to remain active in 2016, with continued consolidation and divestitures across the industry as contractors maintain a strong appetite for acquisitions.

Contractors Maintain Strong Appetite for Acquisitions

1

One – Year Relative Performance:Over the 52-week period ending December 31, 2015, the Prime Defense Contractor index was up 12.8% while the Other Defense Contractor index fell 2.9%. Over the same period, the benchmark S&P 500 was down 0.7% and the benchmark Rus-sell 2000 index fell by 5.7%.

Three – Year Relative Performance:Over the 36-month period ending December 31, 2015, the Prime Defense Contractor index gained 108.8% and the Other Defense Contractor index increased by 46.2% compared to the benchmark S&P 500 and Russell 2000 indexes which had gained 44.2% and 35.2%, respectively.

Source: Capital IQ

90.0 95.0

100.0 105.0 110.0 115.0 120.0 125.0

Inde

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at 1

2/31

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4 Cl

ose

1 - Year Relative Performance

S&P 500 Russell 2000 Primes Other Defense

90.0

110.0

130.0

150.0

170.0

190.0

210.0

Inde

xed

at 1

2/31

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2 Cl

ose

3 - Year Relative Performance

S&P 500 Russell 2000 Primes Other Defense

Large Prime Contractors

Other Defense Contractors

Government Services Average EBITDA Multiple Samples Government Services Average Revenue Multiple Samples

Source: Capital IQ

PUBLIC COMPANY VALUATIONS MULTIPLES AND SELECT FINANCIAL METRICS

Note: Data as of 12/31/14 and 12/31/15Aerospace & Defense: NOC, LMT, GD, BA, RTN, HON, LLL

IT Services: LDOS, CACI, MANT, EGL, NCIT | Diversified: CSC, HRS, ICFI, ACN

2 | Government Contractor | Quarterly Market Update | Q1 2016

($ in Millions of USD, except for per share info) Recent % off Trailing Twelve Months ForwardStock Price 52 - Week Market Enterprise EV / EV / EV / EV / Revenue Growth

Company Ticker 12/31/2015 High Cap Value Revenue EBITDA Revenue EBITDA

The Boeing Company BA $144.59 (9.0%) 96,872.9$ 96,115.9$ 1.0x 9.7x 1.0x 0.0xHoneywell International Inc. HON $103.57 (3.6%) 79,820.5$ 80,462.5$ 2.1x 11.1x 2.0x 9.8xLockheed Martin Corporation LMT $217.15 (4.7%) 66,729.2$ 71,841.2$ 1.6x 11.5x 1.5x 10.7xAccenture plc ACN $104.50 (4.9%) 65,617.0$ 63,073.8$ 2.0x 12.1x 1.9x 11.6xGeneral Dynamics Corporation GD $137.36 (10.7%) 43,423.4$ 43,464.4$ 1.4x 9.3x 1.3x 9.3xRaytheon Company RTN $124.53 (4.2%) 37,495.7$ 40,312.7$ 1.7x 12.3x 1.7x 10.9xNorthrop Grumman Corporation NOC $188.81 (2.7%) 34,435.7$ 39,670.7$ 1.7x 11.0x 1.7x -

Large Prime Contractors Median 1.7x 11.1x 1.7x 10.3xLarge Prime Contractors Mean 1.6x 11.0x 1.6x 8.7x

($ in Millions of USD, except for per share info) Recent % off Trailing Twelve Months ForwardStock Price 52 - Week Market Enterprise EV / EV / EV / EV / Revenue Growth

Company Ticker 12/31/2015 High Cap Value Revenue EBITDA Revenue EBITDA

Harris Corporation HRS $86.90 (3.2%) 10,811.5$ 15,573.5$ 2.7x 12.6x 2.0x 9.9xL-3 Communications Holdings Inc. LLL $119.51 (10.1%) 9,368.1$ 13,069.1$ 1.1x 10.7x 1.3x 11.3xComputer Sciences Corporation CSC $32.68 (55.4%) 4,535.5$ 5,356.5$ 0.5x 5.6x 0.7x 3.8xLeidos Holdings, Inc. LDOS $56.26 (5.5%) 4,056.0$ 4,566.0$ 0.9x 10.9x 0.9x 10.6xCACI International Inc. CACI $92.78 (10.9%) 2,249.3$ 3,231.0$ 1.0x 10.7x 0.9x 10.0xEngility Holdings, Inc. EGL $32.48 (33.7%) 1,193.1$ 2,282.4$ 1.2x 12.6x 1.0x 9.7xManTech International Corporation MANT $30.24 (14.2%) 1,135.7$ 1,094.5$ 0.7x 9.4x 0.7x 9.1xICF International Inc. ICFI $35.56 (18.7%) 683.6$ 1,010.0$ 0.9x 9.1x 0.8x 8.3xNCI, Inc. NCIT $13.65 (20.5%) 182.3$ 193.6$ 0.6x 7.2x 0.6x 6.7x

Other Defense Contractors Median 0.9x 10.7x 0.9x 9.7xOther Defense Contractors Mean 1.1x 9.9x 1.0x 8.8x

10.3x

8.1x8.7x

10.8x10.1x 9.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Aerospace &Defense

IT Services Diversified

TEV/

EBIT

DA

12/31/2014 12/31/2015

1.4x

0.7x

1.3x

1.5x

0.9x

1.5x

0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

1.2x

1.4x

1.6x

1.8x

Aerospace &Defense

IT Services Diversified

TEV/

Reve

nue

12/31/2014 12/31/2015

CACI TO ACQUIRE L-3’S GOVERNMENT SERVICES DIVISION FOR $550 MILLION

In December, CACI International announced that it will buy L-3’s national security services business for $550 million in what would be a major consolidation among two large defense contractors.

The division, known as National Security Solutions (NSS), provides services to the Pentagon, intelligence agencies and other federal government departments. It is projected to add $1 billion in revenue for CACI, bringing its total to about $4.4 billion a year.

NSS has 4,000 employees around the world, 90 percent of whom have security clearances.

MERGER BETWEEN CSC’S GOVERNMENT SPINOFF AND SRA INTERNATIONAL FINAL

In November, Computer Sciences Corp. (CSC) announced that its spinoff, Computer Sciences Government Services (CSCGov), officially merged with SRA International.

The new company is known as CSRA Inc., which combines the CSC name with the name of SRA International.

CSRA, with 19,000 employees and pro-forma revenues of $5.5 billion, helps U.S. government customers modernize their legacy systems, protect their networks and assets, and improve overall IT effectiveness.

RAYTHEON BROADENS CYBER CAPABILITIES WITH ACQUISITION OF FOREGROUND SECURITY

Raytheon Company announced it has acquired Herndon, Virginia-based Foreground Security, a leading provider of security operations centers (SOCs), managed security service solutions, and cybersecurity professional services.

The acquired company, which will be called Raytheon Foreground Security (RFS), accelerates Raytheon’s expansion into managed security services across federal, international, and commercial markets. RFS has

approximately 165 employees, 85 percent who are trained cybersecurity experts.

LOCKHEED MARTIN COMPLETES ACQUISITION OF SIKORSKY AIRCRAFT

Lockheed Martin has closed on its $9 billion acquisition of Sikorsky Aircraft, a world leader in military and commercial rotary-wing aircraft.

Aligned under the Lockheed Martin Mission Systems and Training (MST) business segment, Sikorsky Aircraft is now known as Sikorsky, a Lockheed Martin company.

The acquisition expands Lockheed Martin’s core business into the growing areas of helicopter production and sustainment.

CUBIC ACQUIRES TERALOGICS AND GATR TECHNOLOGIES

In December, Cubic Corporation announced the acquisition of TeraLogics, LLC and the signing of a definitive agreement to acquire GATR Technologies, Inc. (GATR).

The addition of TeraLogics and GATR will enhance Cubic’s stated strategy to expand its defense systems business by investing in a Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) portfolio focused on secure and expeditionary communications, and ISR Processing, Exploitation and Dissemination (PED).

3 | Government Contractor | Quarterly Market Update | Q1 2016

NOTABLE M&A TRANSACTIONS

4 | Government Contractor | Quarterly Market Update | Q1 2016

SELECT MARKET ACTIVITY

Note: *Announced – not yet closed as of 12/31/2015

Date Closed / Announced* Target Buyers/Investors

Deal Value($mm) Business Description

*12/21/2015 GATR Technologies, Inc. Cubic Corp. (NYSE:CUB) 232.5 GATR Technologies manufactures next-generation inflatable satellite communication terminal solutions and network applications for deployment in remote and unforgiving environments.

12/18/2015 TeraLogics, LLC Cubic Corp. (NYSE:CUB) 39.0 TeraLogics provides full motion ISR video processing, exploitation, and dissemination (PED) for the DoD, intelligence community, and commercial customers worldwide.

*12/08/2015 L-3 Communications -National Security Systems

Unit (NSS)

CACI International Inc. (NYSE:CACI)

550.0 L-3's National Security Systems business unit is focused on cybersecurity services, including defending networks and equipment against attacks and deterring breaches. The division supports military and government customers with cybersecurity solutions.

11/30/2015 SRA International Computer Sciences Corp. (NYSE:CSC) - U.S.

Government Svcs. unit

- The CSC Government Services unit (CSCGov) and SRA completed a merger in late November, following the CSC division's separation from its parent company. The two companies serve U.S. defense and intelligence agencies.

11/30/2015 DVTEL, Inc. FLIR Systems, Inc. (NASDAQ:FLIR)

92.0 DVTEL is an industry-leading enterprise-class security and surveillance solution provider located in New Jersey. The company develops advanced video analytics software as well as thermal cameras and related encoders and servers.

11/23/2015 Global Defense & National Security Systems Inc.

(NASDAQ:GDEF)

STG Group, Inc. 165.5 GDEF and STG agreed to a merger in late November. The combined entity will be called STG Group. GDEF is an acquisition company focused on the defense sector, and STG is an intelligence contractor specializing in software development and cybersecurity.

11/23/2015 iMapData Inc. PlanetRisk, Inc. - iMapData and PlanetRisk merged in mid-November and the combined company will be called PlanetRisk. The combined entity offers technology solutions for risk and opportunity management to customers in both the public and private sectors.

*11/23/2015 TeleCommunication Systems Inc. (TCS) (NASDAQ:TSYS)

Comtech Telecommunications Corp.

(NASDAQ:CMTL)

430.8 TCS is a leading provider of both mission-critical C4ISR solutions for government agencies as well as 911 emergency services for U.S.-based cellular communications and VoIP providers in support of public safety.

11/16/2015 Data Networks Corp. ASRC Federal - Data Networks Corp. (DNC) is a woman-owned business providing IT services to the federal healthcare, defense, and homeland security markets. Services include enterprise architecture, systems development, and data integration and management.

11/12/2015 CxAnalytics, LLC RMF Engineering, Inc. - CxAnalytics is a building commissioning company located in Williamsburg, VA, serving the federal government, government contractors, as well as the healthcare and higher education sectors.

11/06/2015 Sikorsky Aircraft Corp. Lockheed Martin (NYSE:LMT) 9,000.0 Sikorsky is a military and civilian helicopter manufacturer in the U.S., delivering light turbine and piston helicopters to governments around the world. The company offers maintenance, repair, and overhaul services, as well as manufacturing and assembly.

11/03/2015 GSM Consulting, Inc. Preferred Systems Solutions, Inc.

- GSM Consulting is a software engineering and cybersecurity firm that develops and delivers software and IT solutions for the federal government and Fortune 500 companies.

11/02/2015 SPARC, LLC - Software Services Business Unit

Booz Allen Hamilton Corp. (NYSE:BAH)

- The Software Services Business Unit of SPARC specializes in Agile software development and open source development, delivering highly integrated systems for the DoD, the VA, and commercial enterprises in the U.S.

10/31/2015 Novetta Solutions The Carlyle Group (NASDAQ:CG)

- Novetta is a government IT contractor specializing in IT analytics, data protection, cybersecurity, and other technology-enabled solutions. The company's customers include the DoD, DHS, and other agencies, as well as commercial enterprises in the U.S.

10/30/2015 MAR, Incorporated Oasis Systems, LLC - MAR, Incorporated provides IT and cybersecurity services for government agencies including DHS and the Nuclear Regulatory Commission.

*10/21/2015 SolarWinds, Inc. (NYSE:SWI) Silver Lake Partners and Thoma Bravo, LLC

4,446.3 SolarWinds is an IT management software and service provider for U.S. defense agencies including the Army, Navy, Air Force, and DISA, as well as civilian agencies. The company delivers affordable, hybrid IT infrastructure management software.

10/13/2015 ForceX, Inc. L-3 Communications (NYSE:LLL)

- ForceX specializes in the development of ISR mission management software and geospatial applications. The company provides cueing system software, hardware, and tactical processing, exploitation, and dissemination (PED) solutions.

10/05/2015 Foreground Security Raytheon Company (NYSE:RTN)

- Foreground Security is a government contractor with a strong reputation for providing virtual security operations centers (SOCs), managed security service solutions and cybersecurity services including advanced cyber monitoring and threat hunting.

5 | Government Contractor | Quarterly Market Update | Q1 2016

INDUSTRY AND AGENCY NEWS

CONGRESS PASSES $1.15 TRILLION SPENDING BILL

In December, Congress passed far-reaching legislation to fund the government through next September, and also passed tax breaks for business and low-income families.

The bill cleared both chambers easily, first in the House, which passed it 316-113, followed by the Senate in a 65-33 vote. President Barack Obama signed the measure. The $1.15 trillion spending bill helped to avoid a shutdown.

AGENCIES MAKE LITTLE PROGRESS WITH FITARA

The top 24 federal agencies got their first report cards on implementing the Federal IT Acquisition Reform Act (FITARA), and the results showed little progress.

The scorecards were compiled by the Government Accountability Office at the direction of the House Oversight and Government Reform Committee as a means of measuring agencies’ progress on IT reform, particularly in four of the seven areas covered by FITARA.

GSA PILOTING AGENCYWIDE DATA CLOUD

The General Services Administration is developing a data-as-an-asset platform in the cloud to drive enterprise-wide consistency in the reporting of its various business lines.

Kris Rowley, appointed GSA chief data officer in April, is piloting the project with the guidance of a new agency data steering committee.

DHS PUSHING FOR MORE PRIVATE-PUBLIC PARTNERSHIPS

The Department of Homeland Security is looking to further expand its cooperation with Israel on cyberspace over the coming year, according to DHS Deputy Secretary Alejandro Mayorkas.

The last significant and formal cyber agreement with Israeli partners came in 2008 and Mayorkas is looking to build on that, with an increase in the public and private partnership realm.

FAA RELEASES DRONE REGISTRATION RULES

Private owners of small unmanned aerial systems will be required to begin registering the drones with the government, according to new Federal Aviation Administration (FAA) rules released on Dec. 14th.

Drone owners need to submit their names, home addresses, and email addresses to the FAA. The disclosures are meant to encourage users to be more responsible, officials said.

DEPARTMENT OF DEFENSE LOOKING TO PUT CLASSIFIED DATA IN COMMERCIAL CLOUD

Defense and intelligence officials are discussing when and how to allow commercial cloud providers to handle Level 6 classified data, according to Rob Vietmeyer, an associate director for cloud computing in the office of the Department of Defense CIO.

Defense officials are hoping that cloud computing systems can help save the department billions of dollars as part of an ambitious plan to consolidate its vast amount of data centers.

Allowing contractors to handle Level 6 data, the highest designation of data sensitivity, is a work in progress that will require numerous security concerns to be met, according to Federal Computer Week.

IRS LAUNCHES ONLINE CYBER SAFETY CAMPAIGN

In the wake of the breach that exposed 100,000 taxpayer accounts to hackers, the IRS is now regularly publishing online information for taxpayers on how to “protect personal and financial data online and at home.”

The tips include everything from from using strong passwords and security software to avoiding unsecured public Wi-Fi networks.

The campaign will feature a new tip each week throughout 2016.

REPRESENTATIVE TRANSACTIONS

6 | Government Contractor | Quarterly Market Update | Q1 2016

For further information on our

Government Contractor Services,

please contact:

SC&H CAPITAL

Christopher HelmrathManaging Director

chelmrath@scandh.com

Matthew RobersonPrincipal

mroberson@scandh.com

Greg HoganPrincipal

ghogan@scandh.com

Kevin O’SullivanPrincipal

kosullivan@scandh.com

www.scandh.com

Baltimore, MD(410) 403-1500

McLean, VA(703) 287-5959

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SIPC. Licensed to sell securities in California, Connecticut, District of Columbia, Florida, Maryland, Massachusetts, Missouri, North Carolina, New Jersey, New

York, Pennsylvania, Tennessee, Virginia, and West Virginia. SC&H Capital is a registered trade name of Stout Causey Capital Corporation, a subsidiary of SC&H

Group, Inc. SC&H Group, Inc. is a member of SC&H Group, LLC.

7 | Government Contractor | Quarterly Market Update | Q1 2016

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