LDOS - Earnings call transcript Q2 2018

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Operator

Greetings and welcome to the Leidos Second Quarter 2018 Earnings Results. At this time, all participants will be in a listen-only mode and a brief question-and-answer session will follow the formal presentation.

As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Kelly Hernandez, Senior Vice President of Investor Relations. Please go ahead.

Kelly P. Hernandez

good and Rob, you, morning, everyone. Thank to earnings conference like welcome you XXXX quarter second our call. to I'd

of Joining me members today Jim are quarter will does Roger Krone, our our for results our Chief these management Today, risks the our refer off on open Officer; based with financial on June discuss include and discussion Leidos Please cause our performance well the the on and Reagan, as from we'll Chairman that information Financial more lead statements with materially. company's such press Jim highlights for specific follow results the our forward-looking the and uncertainties. guidance environment to and will strategy. risk the XXXX. Today's other of discussion XX, the factors ending actual will expectations. team. from notable could Jim, we a questions. comments contains market call remarks our and CEO; Roger and the After and it as as environment call we your differ release for to see Roger as currently quarter

at of over supplementary website as call press section Krone. information file is the With financial turn The release and reconciliation GAAP measures. discuss Finally, between available our provided we in the well also are the and the that is in presentation, and Roger financial Relations the slides. non-GAAP call, during release we will on Investor that, to issued morning two as included the press A this ir.leidos.com. presentation the I'll

Roger A. Krone

for a share, our Overall, all we conference over XXXX the operations. like areas. quarter. operating And earnings across I'd numbers including you and in to per financial call. the board go highlights delivered few Kelly, morning in flow revenue, cash margins from these bookings, We're and Thank for quarter joining with thank earnings us results second and pleased second you, our this strong

Business grew the seen largest sequential growth revenue revenue XXXX. from we Martin our sequentially. First, X.X% in This IS&GS marks Lockheed since have the of acquisition

expected, down couple the for Enterprise UFS Information Agency While revenue ITEMS Services and will programs User our ramps still program; trending NGA the in Technology Geospatial-Intelligence program, ACE-IT revenue work throughout of and A our support contributing Engineers-Information year. more efforts our National which team's U.S. the under contributions is new to the Technology the also or year-over-year significant growth include as nicely program we the expect of Corps several programs. of we further Management of accelerate from our of or classified Army Facing sequential

margin Next This quarter. our XX.X%, our EBITDA growth during and at targets. grow increase points and to above to roughly deliver adjusted at committed revenue sequentially always we basis growth margins our and we these allow that EBITDA our to growth but a execute thoughtfully on ensure to the win adjusted management balance and margin, higher looking programs that to XX between business on reflects or there's increased quarter, remain revenue, target. long-term our than careful trade-off margins increased strong Clearly, while long-term us of sustaining last XX%

backlog into X.X. Exiting win quarter, $XX.X net of our quarter, billion. ratio the was continued of in in book-to-bill to saw backlog booked a $X.X bookings rates. We up for billion we For improvements quarter awards the the our in

of center Technology program through modernization the infrastructure services. included a the million Laboratory to more computing National information million the continue of Energy consolidation Energy Department $XXX engineering and VA's significant Department $XXX cloud with a services Some contract to and of data efforts with research Affairs the of awards provide to Veterans and the support

growth community. account. in intelligence Additionally, our seen strong relationships expanding In we on our continue to the NGA across focus have we particular,

we signed VA. subcontracting modernization EHR Cerner in implementation program the to assist recently for of the relationship Finally, a with their

roles over their management bookings will work notable another operations rather proud flow of the in on of to program the in from a program. enabling reflecting role contract, a meet DSOs significant in scope expect with $XXX Due program booking, our discuss the and level for a of improved with our will robust level quarter guidance. service in the structure cash to varied his us of of a relationship course the office, in one-time in we of deployment sustainment, something that strength on continued in families. don't program the veteran Our the of well activity our reflects the include healthcare in of the and and We're implementation, duty our Jim quarter million operating our had Cerner active security. in reduction and moment. flow, track Cash keeping remarks members generation period, We the helpdesk cash

sell quarter, an commercial cybersecurity to with agreement the our into we entered Capgemini During business.

to the services to solutions, decision make Capgemini's is cyber, markets, an on commercial business a commercial highly Our core the and strategic including set Leidos providing our industries. regulated them engagement in Leidos' of of the broad result transition ideal fit and cyber deliberate focus markets to cybersecurity business. Capgemini for our governments,

regulatory of approvals. the to deal year end subject close the expect to We the by

of also proceeds continue close, optimal we've from While for our upon growth, of We'll subject value capital, philosophy shareholders. enable to to the share debt expect increased the and for past. quarterly disclosed, additive indicated balance which be the investments regular cash not capital dividends, consistently driving an and will pay-down, while to we in the cost repurchase sale, same deployment terms for deal expectations flow the year the to the are our

targeted more leverage ratio, beyond achieving debt we As our amounts. we've recently, plan repay indicated don't to since required

repurchase brings During million $XX which to year-to-date to program QX, stock on share buying total an we $XXX back our continued in execute the additional million.

fiscal omnibus agencies was work prior on signed spend to the finalized approved will The third convert would authority unobligated to The of XX. important further of XXXX as government March year outlays. the macro fiscal now, the budget broadly remaining projected quarter, years our final in with authority the and up favorable more budget outlays is which increases Looking environment unspent will remains then against quarter budget to that increase beyond. balances determine the year, over much be for and how

billion. we Senate's the look the well previous the XXXX As passing bill in are towards process, year, Tuesday at fiscal spending year years with bills next ahead of of $XXX authorization legislative

will Although with levels of again congressional that the start length the leadership on the we and it bill authorization appropriations month, continuing conference likely resolution, the be the to year fiscal XXXX are this committed is lag a will bill than elections. year a fiscal start is likely year fiscal of outcome by XXXX will in Even determined the year would were which they under fiscal higher current XXXX. service XXXX mid-term fiscal significantly year CR, which at however,

outlays position value the positive with higher and and our fiscal to and and strong technical is backdrop differentiation to uncertainty XXXX While for business. still our XXXX customers drive remains, committed grow in we're our year competitive leverage

Next, quarter. I'd directors changes notable during like to board to highlight respect a the with our we've few of made

appointed role. XX Lead board of years has and on roles, finance of was Bob's executive with the Independent our Electric First, in look his leadership that XXXX contributions serve Larry, forward Dallas. Bob continues to the Director the governance continued Chair board. to experience the and and as management appointed been a and who served recently the in Finance Oncor Nussdorf new and board of CEO in guidelines board leadership Shapard Bob most Audit in in Director, was board our on role. We more in replacing than since Larry accordance rotation Bob May, XXXX, has brings to since of Committee.

at directors. our brings of Kovarik more and appointment experience than XX corporations, of & Ernst including Young. risk auditing also serving of for We June Bob in board announced in a the as major management Bob to years Partner

of the and on Bob as Investment and of serves Additionally, Chair sits its Finance Trustees Board Committees. CareFirst

further our the strength We are and have Committee, Bob Audit board. join pleased increasing to of Finance our

we've benefits and our improvement order further attracting competitiveness and our talent. through the in quarter, made year-to-date improve training to retention During the hiring we our and our programs notable of overall a seen areas our will in and through to We'll solutions rates talented year, organization. ability continue the best-in-class workforce investments development to assess We've additional to in improve the employees in versus that retaining in to and success good talent customers. prior strengthen innovation new and had provide

year with our While we to on With Chief a the me profitable progress quarter that, for still loaded Financial to-date, committed profile, to Jim the achievements have details go Reagan, guidance. quarters pleased driving back-half we're and Leidos' and over call Officer, and in to growth remain our growth. hand two more the let and

James C. Reagan

results the for the pleased on everyone, our Overall, generation. thanks, sequential growth demonstrate which with joining across bookings, solid robust quarter quarter include and second strong you, Thank call for Highlights today. cash Roger, profitability growth, and financial revenue the we're us company.

which highest non-GAAP in Additionally, of we generated the quarterly years. earnings we've five is EPS seen $X.XX,

in in our Our performance bookings bookings in $X.X quarter generating all of the generated quarter. strong solid segments, across profitable X.X resulted was which net X.X. ratio each growth book-to-bill during another ratios of on continued of a focus billion QX, and of book-to-bill above This

substantial few. the the the efforts in again, the of Specifically seen the This segment net the book-to-bill by in trend prior Energy, last business was now. strong in also billion of strong for our Army a development. a at XX-month about made year also million, were extends of quarter Trailing segment resulting and the Trailing to second TSA, business Engineers, $X.X segment, in our wins generated team net the Civil of our by investments from we've billion we've book-to-bill Corps quarter's has X.X. the increase quarters, into XX-month development a segment couple Department than bookings, more our name Bookings that in Defense in segment reflecting bookings, is process Solutions in $X.X X.X. X.X, in book-to-bill put $XXX at highlighting Civil with driven that

the with others. strongest that VA, $XXX the the in net the quarter million generated the Health wins Defense bookings resulting and during segment Health Our Agency, X.X, from several at CDC, book-to-bill reflect

programs. on moving as revenue ACE-IT, as existing the and well Consolidated grew of items revenues to X.X% the P&L. as with sequentially, new expansion reflecting quarter the Now, scope NGA many of from growth the wins our on-contract program for and such growth

the We the of to expect rest ramps accelerate these year. through

Our respectively. and non-GAAP demonstrating current margins from sequential both revenue XX non-GAAP programs managing the had sequentially growth our in XX.X% margin The growth. we've increases profitable XX.X% income in EBITDA in of XX% for operating success in points XX%, to last program and increased quarter increased GAAP resulted the quarter, basis and

invoicing interest exited share indicated repurchase activity Net income in $X share million prior million million including QX. count costs. of the Non-GAAP million of $XXX the and with adjustments, quarter. reflects from from amortization on quarter the million operating in in XX highlight our weighted QX was $XXX X from financial $X.XX. expense at a $XX quarter diluted million with restructuring were was XX $XX These flows quarter, reduction coming reflect from processes. DSO million to fully the the that XXX outstanding, non-GAAP and down fully the in operations quarter of Roger EPS a from since the shares of the and grew count Cash $XX line average systems in basis share actions taken expectations. diluted impact largely intangible we've the of to with and consolidation in prior shares, earlier. Our prior of continuing operations in the We million excludes during our acquired of flat XXX reflecting in seven-day quarter calculated the improvement million diluted the streamline billing This integration in earnings

company. We but to current to a be optimize the level consider for to continue areas, these DSO level the normalized will close

within and credit million triggered the financing our a on Beyond $XX by $XX made agreement. includes the payments which million share contained flow sweep we provision outstanding our in outflows, repurchase in payment activity debt, cash

a quarter. up by X% of highlights in expect driven year-over-year forward of generally one-time year-over-year period. flat, Defense as Solutions' period few the largely continued segment The Revenue the segments. the losses impact continue reflecting Civil our during grew prior-year a slight bookings driven prior basis timing programs. segment provide sequential the program declined the particularly prospects. X% the the year. Now, ramp-up driven effective and sequentially reflects let leading program in growth were programs offset that primarily sequentially, margins was throughout in contraction to growth losses. by Civil on by The Civil program from wins, sequentially, from prior-year strong, as increased operating program revenues a the the Civil quarter, Solutions X% substantially share ramp-ups experienced operating X% segment new in me its down Revenue which basis, also business period. of our we and year-over-year XXX materials other changes. purchases certain segment of revenues Health to Non-GAAP the sequentially strong which new revenues revenues reflecting mix of good driven the completions the about by programs positive wind-down declined program was segment indicator on points Defense prior-year both On in of write-ups. increase, volume non-GAAP were largely the XX.X%, our margins existing in contract offset increased

growth have basis great growth typically T&M on-contract visibility to teams done points by forward non-GAAP some cycles margins of the On-contract and new as growth operating customer-facing Health has sales Additionally, a where is XXX increased over this an driving our takeaways. wins we area XX.X% than with our less or shorter have job programs. sequentially in segment driven

we've achieve this. is the and year our factor an with as growth plans team's we're on-contract to for However, certainly actions in growth our help pleased indicated, important

Now, guidance. onto our

well long-term above results continued reflect revenue and billion, and million. In cash we or conclusion, and $X.XX, And results to our the between XX.X%, margins, to-date and expectations flow revenue, us with billion sequential to our in the and $XX.XX out recent EBITDA our Our position reiterate, particularly operating range deliver in for previously and at well us we've flow XX.X% on $XX:XX EPS cash guidance between adjusted quarter sequential position we our the the wins laid revenues are pleased targets. expect margins growth, of to increase $X.XX which $XXX in bookings deliver non-GAAP and margin, growth. diluted to

for up like New our upcoming Kelly, in for and open questions, York. other Roger, mention Analyst of I'd September I it to that members we've also Day Before date the the to set on With to be up of and I, let's to take to it update executive hands we company you an our will seeing that, and forward questions. and team Rob, many present on open strategy, look the there. XX

Operator

Thank you.

first the is from your of Citigroup. Please questions. The proceed question with Raviv line with Jon

Jon Raviv

the Good morning, Hey. everyone. Thanks taking for questions.

Roger A. Krone

Jon. morning, Hey. Good

Jon Raviv

and Jim. Roger Hey,

on maybe picture can pieces any bigger terms give of flipping sort that second those just you the you've the pick-up, headwinds essentially in Just tailwinds and experienced just a interact another? half how of from on take two with one

Roger A. Krone

I have half. about the we you're the talking Yeah. and know second the growth in ramp

I'm On about headwinds, with book-to-bill to that in the headwinds, of backlog. quarter, relative this seeing the most in the a lot is not I worry

contractor of that us. incumbent the we company to revenue? the you'd majority been a to what often therefore business for very where people the get And we've another to and when successful workforce is, it work generate of call, work are Some come get contract winning programs another contractor, the takeaways normally we can that on and from say, capture these leave a in And you well, had. to that's

we're the with workforce on billing so, and talented revenue and doing the to contract get very and And performing actually ability comfortable the recognition. therefore

risks don't see to of the the a government I there's administration, we year-out. are headwinds. year-in those the So, face but and shutdown, we happens what that mean, lot usual

book we where forward. very are. we obviously to about in confident It are get comfortable with we and great this one So, going the was feel

Jon Raviv

is in of win? And following following quantify, sales it do plan, quantify in perspective. Essentially, how or need on then, And would how How you control second your second much in the control? much up customer? you half sit thanks much your in how look to perhaps to out How can't as where needs just much that we – half then years you And is perhaps backlog? previous not that, come for plan? today if to you at of terms just compares

James C. Reagan

is This Jon. Hey, Jim.

number. comfort is that that's for up here I expected that worth there But said year, reminded again, million growth the of on realized backlog kind mentioning, of it of a that our other or about end of has re-compete. of of when or I some million, or say pick on with million. being the X% balance gives lot $XXX One contract reason, thing us go-get, that me being back $XXX probably that above guidance, the I reiterated for hitting easily For is Kelly roughly meant our also $XXX cash number; flow target to in at

Jon Raviv

Thank Understood. you.

James C. Reagan

Okay. Thanks.

Roger A. Krone

Jon. Thanks,

Operator

The next Spingarn Good questions. Robert Securities your LLC Suisse Credit morning. Please with Spingarn Suisse. M. question with line is (USA) Credit Robert proceed from - the of

James C. Reagan

Hey, Good morning, Bob.

Roger A. Krone

Spingarn you Robert the through update the GENESIS GENESIS on I and progress? So, thought two LLC about think right pretty time the rescission. us then Securities also morning. programs And right those address to an (USA) is, Suisse good or maybe M. the Good and can and the this VA compare the where - two is what's maybe just and context Credit to way for win walk

Roger A. Krone

Well, than first DHMSM in VA we (sic) sits. we the contracts I'm contract comments and on put our booked relationship the were you it's Health still more of remarks. always a There's in call current and track. event. on Defense And what the single we expect program some be program or to with rather on Systems again, planning there [System] Modernization program. that program, quarter Cerner around able was lot all, on On a the is as able that going basis Management prepared their VA relative sign sure we then that you that to to of And been Cerner to interest my where negotiate noticed a noticed

the off that get production and which various so or sites in there program then, deployment that sites IOC are expect roll over environment. next begin running, wave will to We is the will us the out QX, and the from to to we moving activity year. XXX And

it's and deployed on going so, program support program. on that the fully great by hill track, talking for legislators to the forward, support funded, fully from strong And be again, should and up we were XXXX. We

on So, all customer, on of M. those (USA) Securities the in Spingarn sort we've their Robert a a there's sometime news lot timing does, the thought - QX. schedule does I that Roger, the clarify. you're numbers expect, this but be LLC sites holds I still It announce like would it sounds to in past Suisse negative program way for you saying will given been their of Credit and you hold? again, this and

Roger A. Krone

Yeah. a Thanks. characterize have what read lot of I may negative people news. don't as

plans, this, is I do HR of important. and management That's program list. get they do to way a going see it ground, And like what have tough didn't and what a our that think system go and business on to deployment a those don't is relative knowledge, they you go you DHA into the health forward. is system, what on a the Guard we we the in are been to long like added and new been really, lot we interested ledger see, those doing has and the records put the go to change after huge put installation benefits – and what reaping definitizing because in why the lot hospital. healthcare take to we changing read program. a the electronic was Guard a liked the what care way our didn't to about I you up standardizing program for together that of Madigan gain of install is would really us the large DHA Coast occurred part in think electronic of benefits the to IOC they're lessons a if learned, you're the whole know the you that. an understand is site, There system one put successful environment The with you clinical change, that's and we've people was clinical Anytime why but reason record system, see it program we're you you and IOC IT really do this implementation results. Coast mention looks phase I sites. the customer Madigan of workflows like. did people this, discussions unified commercial a are I when shortly implementations. And with users that. at do of And that's the a ask probably like, have in any in And and general or change we and elected

strong The working support system the program. So, is on well. again,

M. active both (USA) And benefit will scope VA to for from and veterans just militaries the versus or Credit thing? on we case backbone the Securities for programs. do on be - the sub? doing in Cerner having Roger, same with think we're Suisse the contract? think I Spingarn and just the VA Robert involved the DoD that, it same the pleased how the contract what about It's essentially you're Is you're second LLC piece

Roger A. Krone

exactly Well, probably the not same.

Health Management prime. program, DHA the Defense the program, we're On the

So, hosting, Accenture, through Cerner all Henry Schein, the us. flows organization, cloud

significantly So, that revenue we more recognize program. on

the VA is role, serving to that them. Cerner program, we're support and a On

only value-added will recognize And we different. provide. we be our role will that certainly So, the

integrator. We're contract value-added with going responsibility the not we name as provided We're cybersecurity, We're do That's the help going not program. the help We the just we do security lot be office. contract. to But We're integration. going will will we sustainment. performance program helpdesk. the program do. prime that going a what don't manager. going of to We to be on DHA under to in not the again, have We're them and them the with be to

from our elected electronic is supportive possibly that of the get M. program that of supportive the And structure But, we're thing Credit and than of recognize because the the standpoint, this revenue the profit, way best the LLC that can make And sure Robert VA industry Spingarn VA less records committed fully of the - be program way to we're on say to that's and not program Cerner we and healthcare and system goal will has the to But works. go the the significantly will customer. no? we does, Defense completely to Securities going on or same We success Suisse (USA) would prime. the the provide. we're your be and mission vets on Health it forward contract our

Roger A. Krone

haven't Spingarn Credit I I And of We think for nature about it. the - relative (USA) to question in the same contract has VA going disclosed apologize it's this, this, anything But Securities it order higher profit And but last is be M. program. Robert why been Affairs magnitude. on year don't on Suisse would this significantly to different. the confusion or say lower. one to shorter-term and of expect and the LLC base... We Veterans that don't be it no, to sticking there I

Roger A. Krone

larger of – the that's DHA I'm for environment. the or the we're a VA speak Robert They're VA the three mean, order comparable to lot are the a we programs. program year-by-year best starting team is out The DHMSM of they a is DHA the service LLC than Spingarn XX-year into size program, Securities Suisse Cerner for orders task services roughly of, you relationship there the M. facilities because We're we program, Thank more contract duration, just VA. task is because lot is program both with by not really contract of like implementations implementation not talk of I will (USA) on an but year-over-year VA – program time. Cerner There a the about. to of of more how are buy over VA of with us, But years and from because our later the probably a task number basis. same clarifying. will buy which and the the there's details. roughly are kind size order the of umbrella Credit program, getting between for negotiate can't they sub. in than - I similarities program. Okay. The there the the

Roger A. Krone

Yeah.

You're welcome.

Operator

Our next with the von Please comes Company. from Cowen & Rumohr of questions. line proceed Cai question with your

Cai von Rumohr

Thank of two percent Roughly, the what doing, years. you're is first guess VA revenues of I you. build? follow what relatively profile your up. have And quick will you have? you little Cerner would has that in Very expect the Given you do what the program

James C. Reagan

value between lot we're or larger this going program to for look and going Right get. program the going be But shows be are to indicated, be. is DHMSM. size now, Jim. subcontractor But size this on a how books subcontractor to going a will and Cai, at be going Like VA we it's different. to in probably be how up of on lot percentage big time to is point, going appropriate same Cerner, Roger that certainly, the of our add it guess way to difficult a similar up are continuing it will asking. to VA we're Thanks a to of the overall to what to to total elements how it's of size. because not is overall that's venture the this be And we

Cai von Rumohr

basically years, fair two because you is in functions And your say they have don't it to that the implementation? much are first look revenue related like to

James C. Reagan

next on – There But as individual year, start-up some program. the commenting be programs size be size going is the next to policy. it's element phases generally material might of of of of there some Cerner be going for the might minimis. – revenue But to certainly start couple again, the we the help quarters, with into de revenue not our

Cai von Rumohr

it. Got

are midpoint that low When you shall of think target. you talking half of indicated a in that the So, the implies make revenue backlog. the two before guide, the end, you high that? Jim, had end, how revenues That certain are XX% about comment, we about

James C. Reagan

I we kind was Meaning, to what to have be that I – sure of go has was make to is is clear, still X% us... to just awarded Well, saying go-get. it still

Cai von Rumohr

hit number? what what, sort of a to revenue get Go

James C. Reagan

midpoint. the hit To

Cai von Rumohr

Midpoint.

James C. Reagan

Yes.

Cai von Rumohr

yeah. much. Okay. And then, Thank – you very

James C. Reagan

that things we've on So, contract upside about the some there in health is talked volatility growth. have that upside is in group. There

it revenue for The still exactly see and is guidance some or say really got we've upside other hard where our because we ramp the possibility something wide. still again, So, is fairly of to volatility. velocity

Cai von Rumohr

Thank you. QX. bench revenues, compare And in discussing against them you them, you

people look things the you whereas year-to-year pattern? square a normal that to with So, quarter-to-quarter usually, in sequential basis. have a we seasonal in at Normally, quarter. How build a fourth seasonal this compare; downtick on business should tend

James C. Reagan

workdays results The the typically of and have seasonality around we past in the number that seen in seasonality vacations.

where contractors in seen last we've and taken at bookings such from we're get and contract looking phases built – of where over strong to we bottom-up, people away from Here, happening ability see out. how that hiring off to couple is see our Cai, guide. where to and quarters confidence the waterfall rebadge really a we've we incumbent going the We've full-year the the and work our we others from that

Cai von Rumohr

Terrific. very Thank you much.

James C. Reagan

past. that's this on commentary in speaking in time we your to year-over-year, And why, some point to on the have growth for spent compared sequential our quarter rates focusing

Cai von Rumohr

Terrific. Thank so you much.

James C. Reagan

Okay.

Operator

questions. with question proceed is the Vertical Please Research. of Sinha next from line Our Krishna with your

Krishna Sinha

Hi. Thanks.

DHMSM you it it a installs? DHMSM follow timeline just contract, Because the VA terms in overlaps closely VA the installation about that mirror of in the first I the of was install when how was or of being you press, in timeline. with the would talk or case know released press can it the part about On the big talked

overlap sense installation programs between two you how sites us of and terms can in the a waves? those happens So, give just of

Roger A. Krone

for of a asking probably answer. Well, qualified to beyond level I'm which detail you're

program the and program, implementing work programs the under Let quarter. that third is has getting a will go the the program. configuration into of go an the through they'll will under and DHA essentially a through probably are prototype that talk right. VA of period kind follow the years be roll and The of be they are time. specifics behind the inform some where of mind. role I phased, program, And the Cerner, from that's They'll what's I all one And you benefit starting prime on our of VA. side in on then rollout that the me VA the we their Cerner it the Cerner And about it's will DHA has the waves that. go They'll period and is will that program, way to general. would talk program think us IOC in really the the really going to that same with process Because they couple program of really handle been to the DHMSM. the way behind good or program did done production we'll by probably the in prepared what position all for started on product production. through kind of with DHA a plan you the we to us position contractor, And some because But probably the we're DoD and are to for best in direct VA support and is on customer a

Krishna Sinha

award terms wins you new it's your also, average the when talk you up can when a timing then, bidding the contract then, just on you on contract Okay. how about what rates, can for did bid awarded? about your did you sort is? between quarter, begin the that stack average win the of And So, rate of time award? talk – what win between bid you And that had and this in and that and when

Roger A. Krone

ever first put we actual win Well, all, rates. of don't out

started a business some short to actually And quarter, have up. board what are our very and and they're to business, about could protests in two bid the delays actually give And we cash pursued are backlog, that we in X when the when to call quarter that growth comment frankly, So, have to literally on-contract we in do categories, a try from cycle across numbers and could award. to when healthcare made commercial sense programs even years. we know. something business, And weeks awarded. that be is three we kinds trending is you other we something and I'm the with we pursuing of re-completes, It's any And can the talk where within you of all awards nearly government, a years be be we sure it and of new quarter, that you. what certainly we as in add complex to then, have takeaways, our XX

somewhere is it's carry to to figure a probably between bag, XX in fairly XX of months but good mixed a hand. So, merit your

James C. Reagan

business win some flip amplifying worth is Yeah. with pleased really been things has saying, pretty VA that. less others you takeaways, it's probably particularly and we've the it's rates success cases, contract is in And was performance our worth probably is get that to that if our place by in pretty gratifying. difficult that win quickly which new But, and rates, building on that one back held of an been increased are on realize example to one than

Krishna Sinha

last was sequentially? I'm in what if quick on I the it sorry bids your one increase missed pipeline. is the amount your of what remarks, prepared and but And one outstanding

James C. Reagan

$XX bids billion. just The about is Yeah. outstanding under

quarter, we billion have awarded. it's that of the think with things coming had consistent $XX.X pipeline been I it's roughly we last because primarily and like of what new saw lot a out

So, it's that's why, flat. roughly

Krishna Sinha

Okay. Thank you.

Operator

you. Thank

is Wells of Our your go question. Caso the Edward next from Securities. Please ahead with question with Fargo line

Edward S. Caso

as Hi. the And of Can a come in that how have a is sort back to uptick numbers? where you fall that the and you – full of outlook also, TSA bridge, the about as second contract it and that half? appears far to would how bookings into opposed contract part to being stands talk it as the for the

Roger A. Krone

color much I'll as give Yeah, as have. we you

for very program a we a to think, it the refer to that TSA or incumbent, and partial I Ed, Integrated lost. was were which heated we Support a Logistics we talking ILS competition contract, that you're as

lost perform re-compete unilateral we under that what were say, And with negotiate you today that call have. continue protest, the on do just we period TSA come a that future, We for and unilateral a time, together that it bilateral in a appear in year maybe, to we inspection As what expect, to us new their package our And think get to basis. for we us talking and They procurement a a new will the a that lead the you support the that discussion needs the to new to us contract asked go come future with we bilateral bridge a they to think proposal. to and out with extend to sometime write they want you street, protest. to request that to They'll a put that a of they sometime the TSA can It a up could will solicitation are and that where a we out a about contract back know, to but for extension the through and equipment would literally effort. a have in will the and has be filed they that legacy will TSA we're that contract. that right will re-procurement that in airports, extension. to leads

that a in you're us, might a we We Again, very a could the that of we RFP, there and bridge been third we minimis. comes in If do out, book quarter. with it And XXXX extension de we'll about. the needle-mover business, a allow with all period we goes. year, it Then, was of travel so, TSA customer unilateral year-plus, year's of a we'll contract short-term a lot which bridge. probably and all maybe bid on backlog, a worth be well months get our to new like business a results travel, expect to procurement, saying, TSA will in the and negotiated, that, keep like come in can out to quarter, have committed then program that. for the not that We're soon. assess through hope that equipment to when us we we and care that's that month airports. the or The but likely support do but where all maintained see and like that a something we to might

Edward S. Caso

to My there is, And number? around it's to the the then, that is the corporate revenue. believe EBITDA right the other Is on of is below side? about question the divestiture the Is question more average, tail the divestiture end Capgemini. or possibly margins $XXX million above M&A come average? in I

Roger A. Krone

for regulated really divest The reason a we is the place capabilities in in continuing and decision size for cyber Ed, that was of much a we it all where business support We divesting that current it's Capgemini we to the governments fast again, is industries where that business provide that that made and carrying. been your had the customers, our more like in the a thanks question. it or business to disclosing that and of business are cyber of we're main margins primarily haven't the simply the better home play.

would additional but see about never In to terms that through next say the never we're but of to going say expect portfolio quarter, divestitures, reshape ways on on we're future divestitures, one I thinking never acquisitions. to that. say always And never you should wouldn't I

Operator

you. Thank

Sachs. Our Please of next question the proceed Poponak Goldman Noah with from with comes line your question.

Gavin Parsons

Noah. morning, on Good for Hey. It's everyone. Gavin

Roger A. Krone

Gavin. Oh. Hey,

James C. Reagan

Gavin. Hey,

Gavin Parsons

cash pretty strong free quarter flow. Hey. on A

already. strong seasonality to number half the DSO back if just but of wondering I its of that full-year good XX% bit have should typically I was expect Obviously, a think pretty we near quarter. it, you're pull in had there the target thought pretty you a little forward much if was this

James C. Reagan

there very of that And pull was cash. what Typically, between quarter XX% And Gavin, on the in forward normal. half in to reduction the than our normal the of to was we year, had seasonality of with some first obviously our the because Yeah. we're out balance the pleased just year. was that of achieved DSO that's faster XX%, cash continue a is ability said, with ring sheet. target and XX% this because full-year

execution just we'll what's programs. contributing we're cash. happy So, makes of on isn't This I or that more comfortable executing. strong we've customers think It that thing. million-plus number how proof a well pay part to also point that that that's us a $XXX faster, is of is And that overachieve articulated. on good This achieve certainly and billing

Gavin Parsons

comment? that wanted down? XXXX to a of is need level. that stretch more Is number that see Do normal you million beyond to if bring said we to a or you of you that normalized Correct. have targets kind I number, believe would a $XX what close

James C. Reagan

XX-ish suggested, the process. that we million. that fair we that to receivables always But and of to There's some out to would through have XXs to $XX we're be those say, And the way end And on days is to relate going be part conversion into capital down certainly as take focused programs I a continue never term year. to million you for stop their we're on down. number million a going ways reasonable I Yeah. think few the that think continue of that to the looking that the looking a longer will it's work of

Gavin Parsons

Great. in Great And if I could, just one book-to-bill quick quarter. last one. the

or the curious XXXX as Just rate. X% we you more contributing over up of how short-cycle go-get versus bookings I to how year? contributing had XXXX that bookings should and versus that long-cycle rest maybe of think the of the know phasing said stacks of those growth thinking to you

James C. Reagan

Yeah.

continuing we're and award those having and the quarter. or to seeing we order think XXXX. average QX. have And into that the think average continue should of you increase lengthening award as that we're reason to that average the lot QX see think trend a and will quarter I task contact XXXX think second last that I a some of probably We commented that contribution of to into duration length contract to

Gavin Parsons

you Got Thank much. very it.

James C. Reagan

Thank you, Gavin.

Operator

with is Jefferies. question. from line the next of Our Kahyaoglu Please your Sheila question proceed with

Sheila Kahyaoglu

Hi. morning, Good everyone.

James C. Reagan

Hey, good morning.

Roger A. Krone

Hi, Sheila.

Sheila Kahyaoglu

just idea programs ramp And to some you if as and any forward? are could and down as guys what going ramp then, how we me sort up of get the programs anniversaries down also, second give changes comment on an you large of profitability are half? the Can that ramping of

Roger A. Krone

A detailed ramp have roll-up complete the I can't those, roll-offs you did QX. lot that what of those are. of we tell down their in however,

a in inflection see this growth that growth we're basis year-over-year to but, going seeing on we're QX. didn't to of again year-over-year why QX, that's so, course, We in And up take look QX and the and bottoms-up in growth expected our rates where at we and it's QX. you sequential rate the and a at come growth look waterfall, QX with the book-to-bill when the see

Operator

questions. your is Thank next Please Joe from question DeNardi with you. The proceed Stifel. with

Jonathan G. Ladewig

Jon Joe. quarter, Good Hi. Ladewig is Yes. This guys. for

corporate to wanted income Just ask really about the line. other

over had and rate years. step were few just are thoughts next the quarter for curious this a You number your we long-term what on this a down

James C. Reagan

that you're The seeing getting there number closer to seeing. is you're what

we're continue begin on and streamlining to see including annualized corporate an to corporate converge reduction staff, expenses, basis. to going we on look As including to and going of at expect our estate you're real to what

Operator

is question the proceed with from The Tobey you. next Thank with line question. of Sommer Please your SunTrust.

Tobey Sommer

Thanks.

the starts love Thanks. hear kind going the additional funds perspective additional how to think few as that? you most? that's manifest do just starts, to government new funds the it be Is of as your spend Over to on budget, next a the months, part of existing obligated going to itself to contracts,

Roger A. Krone

going on that. across We good in feel There's we're board. than but what's of attention diversified lot a remember, more the the on DoD, pretty

maintenance, headlines which happening more So, buy to airplanes also that more all What's overhaul, us trucks which is, the the the is to I headlines. to they're and readiness money spending good. and DoD, they're ships, going are that's important tends they're is as and And R&D, and and think to more in repair money is spending us, important in which well. grab

service uptick side from see benefiting So, the we the in outlays.

in Agencies periods in seen get mission. money we've time their is some start to are of they money of the we've is, the flow with awarded. finally seen So, the long procurements The been And omnibus finally have effectiveness for And a end. got an we've good to do news protest seen come signed. increase the through. We've that trying what to that to spend now that come pipeline.

And not bad it's so, a summer.

all hoping get it that passed. as we're I in like. fall, But at smoothly we looking as the smoothly, says and all never quite this process, legislative we that and would the history think legislation we Washington bills midterm, the things here our goes get and and goes

Operator

your Ruttenbur with Hamilton. next you. line is Thank proceed Drexel the Please question of Brian The with from question.

Brian Ruttenbur

Thank you very much.

in I've the trends? Is about flush are huge see than talk more with that seeing so of out bit not what strong quarter, or quarter Just quarter, where a the bit a stronger? be normally a about some things going into quarter companies flush quarter. talk fourth heard can normal maybe you so do budget and a that of seasonally fourth bookings seasonally Can in third be little into you're maybe you question on to comments of – bookings? quarter far coming you third and the third you it terms overlapping this variety strong little have as budget

Roger A. Krone

Brian, about a it. talk little Well, bit I'll

quarter results Of we're quarter. course, not and this announcing second is a third for call the

time it knows that cyclically third has I fiscal third want had on the strong they to get First will now all be quarter, year. of quarter period quarter. second but and It what a I the for had versus government always that all, awards end again. is quarter think second out a And indications street, very been that always We quarter we've nice the a funds everyone judge of wants are get their our really to us can't when obligated strong a third before quarter. is the of the

third. programs rollover We we were There that were see that some quarter. in second awarded again. expect into thought I might Honestly, to they

than in have is don't third fiscal quite seen the end Budget third has bit they prior nothing quarter. civil got the to of second from see a within to different it money, as is two-year that there That's before been DoD, quarter was past. of as aggressive agencies. obligated we to the maybe they So, we've little true quarter of of that movement going get I not most so not completely flush, of some says structural be But, the know years. what it year. in

with may will us for a this bit third continue frankly so the the little we've And be that in see of the have the been giving a far. quarter civil a we all strong So, to push away, and from anything companies quarter we without agencies. indications for But, pleased quarter other sector.

Operator

turn Hernandez Kelly to for floor back the I'll this Thank At closing time, call remarks. you.

Kelly P. Hernandez

forward you all, for our report. York. seeing Analyst on to and you. your look in results our you, We Day in at Thank September the Thank XXth interest our of New

Operator

today's conclude will This conference.

at lines Thank you time. your disconnect may your You for participation. this

Kelly P. Hernandez	Leidos Holdings, Inc.
Roger A. Krone	Leidos Holdings, Inc.
James C. Reagan	Leidos Holdings, Inc.
Jon Raviv	Citigroup Global Markets, Inc.
Robert M. Spingarn	Credit Suisse Securities (NYSE:USA) LLC
Cai von Rumohr	Cowen & Co. LLC
Krishna Sinha	Vertical Research Partners LLC
Edward S. Caso	Wells Fargo Securities LLC
Gavin Parsons	Goldman Sachs & Co. LLC
Sheila Kahyaoglu	Jefferies LLC
Jonathan G. Ladewig	Stifel, Nicolaus & Co., Inc.
Tobey Sommer	SunTrust Robinson Humphrey, Inc.
Brian Ruttenbur	Drexel Hamilton LLC

Leidos (LDOS) 26 Jul 182018 Q2 Earnings call transcript