BAE Systems Investor Day 2018 Electronic Systems/media/Files/B/Bae-Systems... · performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates

BAE SYSTEMS © 2018 BA E Systems

Non-export controlled. Releasable to non-US persons per INC-DSEA-2018-0081

May 14 - 15, 2018

BAE Systems Investor Day 2018Electronic Systems

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Plc Cautionary Statement

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All statements other than statements of historical fact included in this statement are forward-looking statements. Such forward-looking statements, which reflect management's assumptions made on the basis of information available to it at this time, involve known and unknown risks, uncertainties and other important factors which could cause the actual results, performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. BAE Systems plc and its directors accept no liability to third parties in respect of this statement, save as would arise under English law. Accordingly, any liability to a person who has demonstrated reliance on any untrue or misleading statement or omission shall be determined in accordance with section 90A of the Financial Services and Markets Act 2000.

Issued by:BAE Systems plcLondon



Safety

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• There are no planned fire alarms

• In the event of a fire or other event requiring evacuation

• Distinct alarms will sound

• Quickly and calmly proceed to the nearest exit (lighted EXIT sign)

• Follow egress routes and directions from Emergency Personnel



Agenda

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• 08:00 Introduction Charles Woodburn Auditorium• 08:05 Business Update Peter Lynas Auditorium• 08:15 Q&A Auditorium• 08:45 US Operations & Market Overview Jerry DeMuro Auditorium• 09:05 BAE Systems Inc. Portfolio Tom Arseneault Auditorium• 09:30 Overview of Electronic Systems Terry Crimmins Auditorium• 10:10 Break • 10:40 Q&A Auditorium • 11:10 Summary & Closing Remarks Jerry DeMuro Auditorium• 11:15 Lunch Tent• 12:00 Product demos NHQ/MER• 14:30 Tea & coffee Lobby• 14:45 Depart



Product Demo Schedule

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Group 2

• Coach Bus ride

• Product Demonstrations – Merrimack

• Space Solutions

• Thermal Targeting Solutions

• Electronic Warfare

• Optical Electronic Warfare

• Series Hybrid Bus Ride

• Product Demonstrations – Nashua

• Precision Munitions

• High-integrity Avionic Solutions

• Advanced Display Solutions

• Product Demonstrations – Nashua

• Precision Munitions

• High-integrity Avionic Solutions

• Advanced Display Solutions

• Series Hybrid Bus Ride

• Product displays – Merrimack

• Space Solutions

• Thermal Targeting Solutions


• Optical Electronic Warfare

• Coach Bus Ride

Group 1

• Attendees will break up into two pre-determined groups from 12:00 – 14:30• Each product demonstration will be 8 minutes and 2 minutes to transition to the next demo



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Charles Woodburn

Chief Executive



Introduction

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• First in a series of Investor events over the next couple of years covering our major

divisions

• Focus of this event is the Electronic Systems business

• Aim to demonstrate:

• Portfolio well aligned to US budget growth

• Strength and depth of our portfolio

• Investment in technology for now and the future

• Well positioned for medium term growth

• Chance to see a range of product sets

• Plenty of opportunity for Q&A and discussions with management



Strategic Priorities

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• Electronic Systems demonstrates our strategic priorities in action

• Operational Excellence

• Improving competitiveness and efficiency

• Advancing and further leveraging our technology



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Peter Lynas

Finance Director



Business Update

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• Guidance for the year confirmed in trading update

• UK – outlook stable from long term contracted positions

• Furthered by Astute Boat 7 award and Dreadnought funding

• Modernising Defence Programme review

• KSA Typhoon - Memorandum of Intent – negotiations progressing

• Strong existing order backlog - series of decisions expected by half year

• SEA 5000 – 9 ship Australian future frigate programme

• Amphibious Combat Vehicle

• Qatar Typhoon

• Cash – outlook unchanged – 2019 and beyond benefits of lower cash tax and interest



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Q&A Session



US Operationsand

Market Overview

Jerry DeMuroPresident and CEOBAE Systems Inc.

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Current Landscape

• Recent budget agreement provides stability and growth

• Two year increase of $300B above budget caps

• DoD Investment accounts increase by 21%

• National Defense Strategy Issued

• Emphasis on peer threats

• Priorities well defined

• Core programs and adjacent markets well supported

• Congressional restrictions on Gulf Nations arms sales lifted

• Commercial Aviation backlog at record levels

• International budgets driven by same threats as the US - Partners and Allies increasing defense budgets as a result

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Strong near-term uplift to defense budget

• Bipartisan agreement raised defense budget caps for FY18 and FY19

• FY18-19 increases will result in higher industry sales over next several years

• National Defense Strategy will guide future growth areas

• Nuclear modernization

• Space and cyberspace

• Missile defense

• C4ISR and lethality in contested environments

• Military application of autonomy, AI & machine learning

Source: OMB

FY19FY17 FY21FY18 Enacted

FY20 FY22

+11%

FY23FY16

$B

National Defense (050) Top-line Budget Authority, Then Year $B

Actual FY19 President’s Request

778760743733716

634607

701

0

100

200

300

400

500

600

700

800



Portfolio well aligned with DoD budget growth

FY17-19 %

Growth

FY19 Budget ($B)

BAE Programs & Opportunities

Nuclear Modernization 135% $6.7 ICBM systems engineering, submarine missile tubes

Combat Vehicles 102% $6.8 Combat vehicles for Army, Marine Corps, partners

Long Range Strike 83% $4.9 B-21 bomber

Long Range / Precision

Fires53% $11.7

Missiles and precision-guided munitions, extended

range artillery, railgun

Space 38% $7.3Threat detection, secure communications, ground-

based C2/battle management

Navy Ship Depot

Maintenance11% $9.8 Non-nuclear ship repair

Fighters 10%* $16.1 Electronic warfare suites for F-35, F-15

Estimated DoD Spending by Category

* FY17 to F18 grow th is 25% due to C ongressional plus-ups

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One of the world’s largest defense companies

BAE Systems, Inc.

• Operates under a Special Security Agreement for over 25 years

• A U.S. company chartered in Delaware

• Top 6 US defense contractor

• Over 32,000 employees worldwide

• Locations in 35 states and 27 countries

The HonorableMichael Chertoff

Chairman

former Secretary of theU.S. Department ofHomeland Security

Admiral Jonathan Greenert

(USN, Retired)

former Chief of Naval Operations

General John Campbell(US Army, Retired)

former CommanderResolute Support Mission

& U.S. Forces-Afghanistan

The HonorableMichael G. Vickers

former Undersecretary of Defense

for Intelligence

The HonorableEllen O. Tauscher

former Member of Congress &

Undersecretary of State

The HonorableKelly A. Ayotte

former U.S. Senator & Attorney Generalof New Hampshire

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BAE Systems, Inc. Rich Heritage

Electronic Systems

Platforms & Services

Intelligence &

Security



BAE Systems Inc. US major site locations

San Diego, CAC hula V ista, CA

Phoenix, A Z

Honolulu, HIEWA , HI

Wahiawa, HI

Mobile, A L

Radford, VA

Norfolk, VAC hesapeake, VA

Stafford, VAReston, VA

Manassas, VAMcLean, VA

Springfield, VASterling, VA

Dulles, VAWallops Isl., V A

Washington, D.C.

San Jose, CA

Elgin, O K

A nniston, AL

A iken, SC

York, PA

Sterling Heights, MI

Minneapolis, MNA berdeen, SD

C harlotte, NC

Kingsport, TN

Jacksonville, FLMay port, FL

A rlington, VA“Headquarters”

Endicott, NYGreenlawn, NY

Rome, NY

Hudson, NHMerrimack, NH

Nashua, NH

Lexington, MABurlington, MA

SagamoreBourne, MA

Pittsburgh, PAF t. Wayne, IN

A ustin, TX

Dallas, TX

F t. Worth, TX

Way ne/Totowa, NJMt. Laurel, NJ

C lear, AK

F t. Walton Beach, F L

A nnapolis Jct., MDC alifornia, MD

Rockv ille, MDSt. Inigoes, MD

Lexington Park, MD

Summerville, SC

Hill A FB, UT

* Sites of 50 people or more

Key port, WA

St. Louis, MO

Day ton, OH

Middletown, RI

Kings Bay , GA

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Served Markets

2017 Sales – Domains

Air

42%

Land

30%

Maritime

22%

Cyber

6%

73%

16%

11%

US Defense, Intel & Civilian Agencies

International Defense

Commercial

2017 Sales – Market Breakdown

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Diverse Product/Program Portfolio

More than 9,500 Active Contracts

• Ranging in size from $10k to $1.7B

• 75% Firm Fixed Price Contracts

• 25% Cost Reimbursable Contracts

Diverse Customer Base

• 1,400 different commercial and defense customers

• 80+ countries

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BAE Systems, Inc. Sectors

Employees

32,100HQ

Arlington, VA2017 Revenue

$10.0B

Intelligence & Security Platforms & Services

Electronic Systems

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BAE Systems Inc.Portfolio

Tom ArseneaultChief Operating OfficerBAE Systems Inc.

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From the depths of the ocean…

An impressive and diverse portfolio of products and technologies

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…to the far reaches of space

NASA image

An impressive and diverse portfolio of products and technologies

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Electronic Systems

Platforms & ServicesIntelligence & Security

Employees

32,100HQ


$10.0B

BAE Systems, Inc. Sectors

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On land, at sea, on target



Platforms & Services

Hägglunds

Combat Vehicles U.S.

Ship Repair

Weapon Systems

Combat Vehicles

Amphibious & International

Employees

11,400HQ


$3.8B

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Combat Vehicles

M109A CV

1.1

M88

BradleyA MPV PA R 8X8 (FNSS)

MPF

CV90

BvS10 Beowulf

Modernization New Platforms

International

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M109A7 Self-propelled Howitzer

Modernized indirect fire platform with increased survivability and capabilities

• Modernized legacy artillery platform for the U.S. Army

• Over 500+ sets needed for force modernization

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Transitioning to low rate production in 2018

• Multi-variant replacement for legacy M113 armored personnel carrier family

• Over 2900 vehicles required to support modernization demands

Armored Multi-Purpose Vehicle (AMPV)

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Amphibious Combat Vehicle 1.1

Competitive award announcement anticipated in June 2018 timeframe

• Wheeled amphibious vehicle for U.S. Marine Corps

• Requirements for 700 vehicles to meet sea and land combat conditions for the Marines

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Mobile Protected Firepower (MPF)

Competitive down-select anticipated in late 2018

• Light tank supporting the U.S. Army’s Infantry Brigades

• Potential initial demand for over 500 vehicles

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Robotic Combat Vehicle – Black Knight

Helping shape the future of unmanned combat vehicles

• Semi-autonomous combat vehicle

• Demonstrates our commitment to investing in future technologies

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Weapon Systems and Technologies

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Precision-Guided Munitions, Weapons and Technology

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Supporting the U.S. Navy’s maintenance requirements to meet operational needs

• Lead east coast surface modernization capability

• Located with the fleet

U.S. Navy Ship Repair - Norfolk

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Meeting the Navy’s maintenance needs to support the pivot the Pacific

• Lead west coast surface modernization capability

• Investments in dry-dock capacity a discriminator for critical naval maintenance and modernization

U.S. Navy Ship Repair – San Diego

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Intelligence & Security

Air Force Solutions

Integrated Defense Solutions

Intelligence Solutions

Employees

6,900HQ

McLean, VA2017 Revenue

$1.6B

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Air Force Solutions



Intelligence Solutions

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Integrated Defense Solutions

US Navy image

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Electronic Systems

FAST Labs TM

Survivability, Targeting & Sensing Solutions

Electronic Combat Solutions Controls & Avionics Solutions

Power & Propulsion Solutions

C4ISR Systems

Employees

14,400HQ

Nashua, NH2017 Revenue

$4.6B

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43

Terry CrimminsPresident, Electronic Systems

Electronic SystemsOverview



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• Overview

• Business performance

• Our portfolio and markets

• Moving forward

Agenda



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Electronic Systems – Our footprint and our people

14,400 people1,000 customers

>6,500 Active Contracts

San Jose, CA116 employees

Austin, TX423 employees

Ft. Worth, TX76 employees

Ft. Wayne, IN836 employees

Endicott, NY1244 employees

Greenlawn, NY603 employees

Rome, NY69 employees

Hudson, NH1034 employees

Merrimack, NH982 employees

Nashua, NH3366 employees

Lexington, MA104 employees

Burlington, MA232 employees

Wayne/Totowa, NJ676 employees

Mt. Laurel, NJ75 employees

Arlington, VA 71 employeesReston,VA88 employees

Manassas, VA250 employees

Guaymas, Mexico

Rochester, UK1308 employees

Singapore

Rokar, Jerusalem, Israel100 employees

Dallas, TX65 employees

San Diego, CA848 employees

Pittsburgh, PA87 employees

* 417 people work at other sites with less than 50 employees

1,845 hold advanced degrees

14.5 average years of service

990 U.S. patents

296 U.S. patents pending

246 non-U.S. patents



Diverse product/program portfolio

Over 6,500 active contracts

• Ranging in size from $10k to $1.7B

• 70% firm fixed price contracts

• 30% cost reimbursable

Key franchises


• Engine/Flight Controls

• APKWS & THAAD

• HybriDrive® Systems

• IFF & Datalinks

Our portfolio

60%

Business MixUS Defense 60%

Commercial 22%

Int. Defense 18%

Lockheed 15%

US Air Force 13%

Boeing 13%

US Navy 11%

Restricted 9%

International 5%

Metro/Municipalities 5%

Airlines 5%

US Army 5%

Other Defense Primes 4%

General Electric 4%

BAE Plc 2%

Northrop Grumman 1%

DARPA 1%

All other 8%

Our Customers

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4.0

4.5

5.0

5.5

2014 2015 2016 2017 2018E

$ b

Revenues

12%

13%

14%

15%

16%

17%

600

700

800

900

2014 2015 2016 2017 2018E

RO

S %$

m

EBITA ROS

How the business has performed

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EBITA

• Top-line growth across the period driven by the diversity and resiliency of portfolio

• Closed 2017 with record order backlog (> $7b)

• Track record of consistent ROS delivery

• Performance driven by strong program execution

• R&D investment capacity increasing while delivering bottom line



48

Electronic Systems – Our structure

Electronic Combat

Solutions$1.3b

Controls & Avionics

Solutions$0.9b

FAST Labs ™

$0.2b

Power & Propulsion

Solutions$0.3b

Survivability, Targeting

& Sensing Solutions$0.8b

Command, Control, Communications,

Computers, Intelligence, Surveillance & Reconnaissance Systems

$1.2b

We maintain 5 business areas aligned to distinct market streams, with a sixth business –

FAST Labs™ – serving as an innovation engine for the entire enterprise



Competitive LandscapeU

S D

efe

nse • Key

Competitors: Northrop Grumman, Raytheon, Harris

• Activities / Trends:

• Standing up new (or strengthening existing) business units focused on advanced technology

• Partnering with small, innovative commercial firms for disruptive technology

• Competing for scarce talent, esp. in STEM

Inte

rna

tio

na

l De

fen

se • Key

Competitors: Raytheon, Northrop Grumman


• Standing up wholly-owned subsidiaries in-country

• Leveraging franchise positions developed for U.S. markets to address international force modernization opportunities

Co

mm

erc

ial A

vio

nic

s • Key Competitors: UTAS / Rockwell Collins, Honeywell, GE Aviation Systems


• Consolidating to address OEM demands for price reductions

• Investing in emerging trend for more aircraft electrification

• Ramping up production rates

Hyb

rid

Po

we

r • Key Competitors: Cummins, Allison, many other players; highly fragmented competitive landscape


• Hybrid power growth continues, all electric emerging

• Battery tech players driving market shifts

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50

Electronic Support• Rapid detection, identification and

tracking• Precision direction finding and

geolocation• Passive targeting support

Electronic attack• Electronic attack of military and

commercial communications, navigation and radar systems

• Threat analysis and response

Self Protection• Multispectral (RF/IR) Countermeasures• On Board & Off-Board technique

generators

Electronic Combat Solutions2017 Sales: $1.3b



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The market is strong and growing

• Increasing sophistication of adversaries• Growing demand for smaller systems

Our capabilities address market drivers

• Threat detection, tracking, & situational awareness• Broad-band electronic attack• Self-protection countermeasures

We win by differentiation

• Threat knowledge & exploitation• Discriminating lasers

Major programs

• F-35 (AN/ASQ-239 EW/CM system)• Eagle Passive/Active Warning Survivability System• Digital Electronic Warfare System (AN/ALQ-239)• EC-130H Compass Call Weapon System• Long Range Anti-Ship Missile • Advanced Threat Infrared Countermeasures • Common Missile Warning System

RF and OpticalElectronic Warfare

X

Domains

Air Land Sea Space Other

– World leading EW market position

– Our systems are on 80% of U.S. military fixed-

wing aircraft



52

Overview of Electronic Warfare



53

Actionable intelligence for our warfighters through electronic products and innovative technical solutions from the depths of the ocean to outer space and everywhere in between

• SIGINT sensors• IFF systems• Mission Workstations• Space Processing• Acoustics• Geospatial exploitation and analytics tools• Mission planning for aircraft, manned and UAVs• Datalink Networks

C4ISR Systems2017 Sales: $1.2b



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Robust market demand• Growing threat to U.S. space assets• Significant funding directed at ‘space security’

Our capabilities are market disruptors• World-class Digital/RF/IR/Optical

technologies • Platform protection domain expertise

We win with differentiators• Industry leading RH45® semiconductor

technologies • Moore’s Law enabling ‘air breathing’

capabilities to migrate to higher altitudes

Major programs/products

• Radiation-hardened computers & components

• Space sensors & digital receivers

• Hallmark program (DARPA)

Space– Technology driving

key strategic wins in

space

X

Domains




Space Security

55



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• Flight Controls: Fly-by-wire systems, Active Inceptor Systems, Vehicle Management Systems

• Engine Controls: Full Authority Digital Engine Controls (FADEC)

• Mission Avionics: Defensive Weapon Systems, Stores Management, Mission Computers

• Flight Deck Systems: Control Panels, Detection and Alerting Systems

• Aftermarket Solutions: Spares, Repair and Overhaul, Asset Management, technical support

Controls & Avionics Solutions2017 Sales: $0.9b



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Portfolio of major commercial avionic equipment

Denotes where an engine that has our

controls (GE, CFM) is the sole powerplantfor the platform

FC – Flight ControlsFADEC – Full-Authority Digital Engine Controls

737 NG / MA X 747-8 / 747-400 767 777 777X

Bombardier Global

7000 / 8000787

A irbus A 320 C EO /

A 320 NEO

Embraer Legacy

450 / 500

Bombardier C -Series

C S-100 / C S-300

FC, Cabin/Cockpit Systems, FADEC (exclusive on 747-8)

FC, Cabin/Cockpit Systems, FADEC

FADEC

FC, Cabin/Cockpit Systems, FADEC

FC, Cabin/Cockpit Systems, FADEC (exclusive on –F, -300LR, -200ER)

FC, FADEC

FADEC FC FC FC, FADEC

http://www.aircraftcompare.com/aircraftimage/Embraer-Legacy-500-MSJ-Pic-1/948

http://www.aircraftcompare.com/aircraftimage/Embraer-Legacy-500-MSJ-Pic-1/948



58

Portfolio of military avionic equipment

C -17

FBW Integrated Flight & Fire Control

A -10

GCAS/FBW

F -15F -22

FBW

F /A -18

FBW

GCAS & DFLCC

F -16

F -35

FBW / ACS

B-2

E-2

AFCS

FBW

P-3

T-50

FBW / ACS

AFCS

JA S39

FBW

FBWFBW

C H-47 V -22

FBWAFCS

S-92B525

FBW

A W609

FBW

Q F-16

Ty phoon TornadoHawk

FBWFBW FBW

ACS – Active Control SidesticksAFCS – Autopilot Flight Control SystemGCAS – Ground Collision Avoidance SystemFBW – Fly by Wire – Controls all primary & secondary surfaces



59

Exploiting the Electro Optical/Infrared spectrum to provide unmatched infrared countermeasures, precision guidance and seeker solutions, advanced targeting solutions, and state-of-the-art tactical imaging systems

• Missile threat warning (CMWS, LIMWS)• Infrared countermeasures• Precision munitions guidance systems• Strategic missile seekers• Thermal targeting systems• Helmet and Head Up display solutions

Survivability, Targeting & Sensing Solutions2017 Sales: $0.8b



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Immediate and long-term market pull

• Restoring depleted stockpiles – key US priority• Robust international demand (esp. Middle East)• Need for low cost solutions for precision strike• Growing ballistic missile threat

We are driving next generation capabilities

• Accelerating development of discriminating tech• $35M+ in relevant CRAD to supplement IRAD

We win on technology and best value • World class seeker manufacturing • Advanced seekers at affordable price• Innovative DASALS® technology • AJ-GPS navigation

Major programs

• APKWS® – four military branches, 24+ LOR• Missile Seekers – USG & FMS

Precision Munitions

– More than 35 years of missile technology

development experience, world class seeker

factory & proven IR seeker development and manufacturing

X X X

Domains




APKWS® Laser-guided Rocket

61



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• Delivers propulsion and power management performance with innovative electric products and solutions

• Serves a diversified market footprint: Advancing vehicle mobility, efficiency, and capability in markets such as; transit, marine, military and truck

• Holds a significant IP portfolio; patents world-wide; using technology evolved from over 20 years of investment in aircraft controls and power systems

• More than 8,000 electric drive systems deployed worldwide

Power & Propulsion Solutions2017 Sales: $0.3b



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Researching, developing, and integrating advanced electronic technologies that provide discriminating capabilities to BAE Systems’ products and services.

Advanced Electronics Autonomy Cyber Electronic warfare Sensors and processing

FAST Labs™2017 Sales: $0.2b



Our technology pipeline sustains our growth trajectory

Year 1 Year 2 Year 3 Year 4 Year 5

Market

R&D Seedlings

64



We leverage our customer base to drive technology forward

Our customers supplement our

shareholders R&D investment 18 to 1

68



Electronic Systems – Moving Forward

66



70

• Electronics portfolio is well-aligned with The U.S. National Defense Strategy and will prosper in the near term budget surge

• Our defense products have broad international appeal

• Commercial markets provide profitable adjacencies, and fold back capabilities into our defense base

• Success in all these growth markets create resilient franchises in long cycle businesses

• Ensuring future market leadership

• Investing in emerging technologies

• Leveraging customer S&T funding

• Capitalizing business to drive operational excellence and sustain profit margins

Summary

Continuing to create significant shareholder value



68

Thank you



69

Break



70

Q&A Session



71

Jerry DeMuroPresident and CEOBAE Systems, Inc

Closing Remarks



Closing Remarks

72

BAE Systems Inc. holds a strong position in the Defense and Security Market

• ES and P&S US very well placed for mid term growth and I&S is stable

• Continued investment in the business

• Strong profit to cash conversion



73

Lunch



74

Thank you



Acronyms

75

• AJ-GPS: Anti-jam Global Positioning System• APKWS: Advanced Precision Kill Weapon System• CRAD: Contract Research and Development• CMWS: Common Missile Warning System• DARPA: Defense Advanced Research Projects Agency• DASALS: Distributed Aperture Semi-active Laser Seeker• FMS: Foreign Military Sales• IFF: Identification Friend or Foe• IR: Infrared• IRAD: Internal Research & Development• LIMWS: Limited Interim Missile Warning System• OEM: Original Equipment Manufacturer• RF: Radio Frequency• S&T: Science & Technology• SIGINT: Signals Intelligence• STEM: Science, Technology, Engineering and Mathematics• UAV: Unmanned Aerial Vehicle

BAE Systems Investor Day 2018 Electronic Systems/media/Files/B/Bae-Systems... · performance or achievements of BAE Systems or the markets and economies in which BAE Systems operates

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