Acquisitions

Knight Point Systems, LLC

On July 31, 2019, Perspecta acquired all of the equity interests of Knight Point Systems, LLC (“Knight Point”) for $250 million plus customary purchase price adjustments, totaling an estimated purchase price of $265 million. Knight Point delivers end-to-end managed services and solutions focused on modernizing IT systems, protecting critical networks and driving digital transformation to improve customer transparency and operational efficiency. Knight Point leverages a portfolio of intellectual property to solve complex customer challenges in cloud, cybersecurity and agile development and operations (“DevOps”) environments.

The Company recognized preliminary fair values of the assets acquired and liabilities assumed and allocated $116 million to goodwill and $125 million to intangible assets. The goodwill is largely attributable to the assembled workforce of Knight Point and expected synergies between the Company and Knight Point. The Company’s preliminary allocation of goodwill to Perspecta’s reportable segments was as follows: $22 million allocated to Defense and Intelligence and $94 million allocated to Civilian and Health Care. The intangible assets consist primarily of program assets of $102 million, developed technology of $18 million and backlog of $5 million. The estimated fair value attributed to intangible assets is being amortized on an accelerated basis over a range of 10 to 12 years for program assets, seven years for developed technology and one year for backlog. The fair value attributed to the intangible assets acquired was based on preliminary estimates, assumptions, and other information compiled by management, including independent valuations that utilized established valuation techniques. All of the value attributed to goodwill and intangible assets is deductible for income tax purposes. The fair values of assets acquired and liabilities assumed are preliminary and based on a valuation using estimates and assumptions that are subject to change, which could result in material changes to the purchase price allocation. The final purchase price allocation is expected to be completed by the first quarter of fiscal year 2021, pending a working capital adjustment and final appraisals and other analysis of the fair values and tax bases of acquired assets and liabilities.

The results of operations of Knight Point have been included in the statement of operations beginning August 1, 2019. Pro forma results of operations for this acquisition have not been presented as it is not material to the consolidated results of operations. The acquisition was considered an asset purchase for tax purposes.

Unaudited Pro Forma Financial Information for the Spin-Off and the Mergers

The following unaudited pro forma financial information presents results as if the Spin-Off and the Mergers and the related financing had occurred on April 1, 2017. The historical consolidated financial information of Perspecta has been adjusted in the pro forma information to give effect to the events that are (1) directly attributable to the transactions, (2) factually supportable and (3) expected to have a continuing impact on the combined results. The effects of the Spin-Off are primarily attributable to interest expense associated with the incurrence of debt in connection with the Spin-Off. The effects of the Mergers primarily relate to amortization of acquired intangible assets. The consolidated financial information of Perspecta includes merger and integration-related costs that are not expected to recur and impact the combined results over the long term. The unaudited pro forma results do not reflect future events that have occurred or may occur after the transactions, including but not limited to, the impact of any actual or anticipated synergies expected to result from the Mergers. Accordingly, the unaudited pro forma financial information is not necessarily indicative of the results of operations as they would have been had the transactions been effected on April 1, 2017, nor is it necessarily an indication of future operating results.



	Six Months Ended September 30, 2018 Historical Perspecta⁽¹⁾		Period from April 1, 2018 to May 31, 2018 Historical Vencore			Six Months Ended September 30, 2018
(in millions, except per share amounts)	Six Months Ended September 30, 2018 Historical Perspecta⁽¹⁾					Effects of the Spin-Off			Effects of the Mergers		Pro Forma Combined for the Spin-Off and Mergers
Revenue	$	1,861	$	244		$	—		$	—	$	2,105
Net income (loss)	$	53	$	(57	)	$	(7	)	$	12	$	1

Earnings per common share⁽²⁾:
Basic	$	0.32									$	0.01
Diluted	$	0.32									$	0.01

⁽¹⁾Revenue and pre-tax income includes $490 million and $71 million associated with Vencore for the period of June 1, 2018 through September 30, 2018. The pre-tax income excludes amortization of acquired intangible assets, acquisition financing and the allocation of certain corporate overhead costs.

⁽²⁾ Historical and pro forma combined earnings per common share information is computed based on 165.54 million basic weighted average shares and 165.82 million diluted shares. See Note 5 – “Earnings Per Share.”