LDOS - Earnings call transcript Q1 2019

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Operator

Greetings, and welcome to Leidos Q1 2019 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Kelly Hernandez, Investor Relations.

begin. may You

Kelly Hernandez

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

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

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

Roger Krone

call. first for joining for us quarter Thank morning you, Kelly, all you XXXX conference earnings and our thank this

year. strong a Our results the quarter to in the start show

reflects in as of our and organization achieved we momentum continued new grow The records a and a again drive as EBITDA. notable Solutions we growth XX% winning the careful backlog margin at All of our business. growth, levels of management in We portfolio bookings. programs with above set our our in businesses revenue acceleration to Defense continued acceleration revenue driving

growth. we our at differentiators depth leveraging this weeks key has our improved sharing competitive our forward We with organization, this in to in we and Our and for look developed agenda and By we been This focus the our strategy success. rates will further our a revenue. positioning to We continuing to win year, differentiators positioning of the with you an conversion our on execute to ourselves Day. well strategy are provide strategy. pipeline more scale competitive of have of event, our these our more our where exciting Investor this you couple about business, to

a with of chance demonstrations hear our several from team and technologies. also to You'll of management see and innovative our have interact

of we our into to X.X bill to a active to on book $X.X added up programs. as for drove now results. development government ramp quarter continued From growth submits quarter. accelerate to billion new backlog, both the Revenue we booked temporary awards. we shutdown, Despite a had very the and which the in business of Turning awards a quarter's talent perspective,

billion reflected not another such, as in In our we protested, subsequently in approximately were also were during and $X awarded which quarter, are values addition, bookings. the contract

vehicles, also grow and which further an revenues. penetration won on new our several seats IDIQ expand to market We our allow opportunity us

slightly of gives We during $XX level win strong of in expected. combined over better quarter and ability continue rates outstanding submits with quarter level us During the exited record to our the confidence dollar Profitability with billion in our several decisions. quarter, we bids, growth the submitted backlog momentum. programs. came than our in When submits awaiting the including record multi-billion a significant

portfolio this as the of sheet deployable seasonal of fixed we for were area million sales of balance cybersecurity and inflows, better on very revenue activities. and our execution from first to the optimization differentiation drove a program contributed price our the was real transactions, together quarter cash than in significantly drive particularly of impact revenue to by The and divestiture the active of margins, and early in ramps. We profitability closed balance. two level new cash program which including and the volume business, cash from in strong our focus high cash work through phase increased use commercial augmented This generated Our offset operations. estate several $XXX

to and commitment cash Our our shareholders business manner. generating on thoughtful returning in equal capital our a by attention to balanced focus from the with is matched

philosophy both growth, shares. dividend Our M&A, remains quarterly repurchasing through and our for capital deployment organically and unchanged. maintaining Prioritizing regular investing

returned we million we execution through quarter, which share accelerated February. of shareholders an the the During $XXX in announced to repurchase,

invest Congress perspective, needs recognize country our returned We million to the which in regular At to our quarterly macro with are we proposed us keep safe it's adversaries. also and XXXX we enter by OMD too level. the fiscal predict government urgency to technologically point, From the assuming superior the $XX shareholders encouraged our infrastructure through to with new XXXX dividend. and budgets. and Both will initial fiscal continuing the early technologies a we're but the that this resolution,

what the being for Speaker deal focused McConnell said, in hopeful possible and That align our appears budget gains remain in as customers' driving control in Leader areas it early are talks. that priorities. Pelosi are a and with share is on on we our We Majority two-year bipartisan

to and culture of the to hand to mention our Jim, integrity. our Finally, I like dedication before a I'd awards and recent strong ethics over to a of commitment couple recognize maintaining call diversity that

committed outcomes of is gender highlighting the a These XXXX equality. of in better and women's result Index, reasons to our nurture an for unwavering and the and transparency the This care, in reporting cultures Bloomberg which several to advancing First, flexible was business strategy. atmosphere which healthcare, that to gender Company included perspectives, continue attained rankings categories and Company just include place to commitment distinguishes of employee we recognition Gender-Equality will best-in-class levels work, Leidos development at few great retention. our the and We is inclusion leads work. applauds a diverse family companies all diversity career our and to equality category,

day. our Second, World's sponsorship quarter, during influence societies reinforced are continued during lines, worldwide. of positive drive of of community in the robotics Companies by specifically and the the These embedded every designation Most the Ethical and that the one again in Ethisphere these program. employees quarter, our our business as the recognized values we companies first actions the Along culture by was Leidos and Institute. This recognizes change

stem communities which in with operate students real the providing world engineering Our in we education experience. program flagship

Championships. volunteered more employees competitions nationwide, Our which XX the teens sponsoring and than X,XXX to advanced mentoring hours of World

employees I'll has professionals. decade, donated to these help first important initiatives call as generation to Officer turn their My next our America's Chief Reagan, for nearly dedication of to the congratulations and more $X employees past support communities. we the over our Financial results. With education of quarter and stem details our million our Jim on that, to programs our have logged Over on Leidos faster on technical hours volunteer thousands

Jim Reagan

with for joining our We're by growth some start us from on Thanks, today. highlights sharing Roger, everyone the momentum. our thanks and pleased and the strong I'll year the to start to call quarter.

our growth ramp the deliver reflecting on prior of up share of and million. when performance sequentially of our our expectations. effective year. ASR capital. to invested quarter. our last program better $X.XX initiative cash was monetization sheet, flows certain San cyber our we some balance mix sale the to grew rate from programs. period our continue revenues commercial targets the margins quarter. and and of ongoing offset growth and year's over reflecting for tax lower continued business EPS non-GAAP million of $XXX proceeds Investing EBITDA than $XXX the from cash the three million buildings we transactions top to cyber commercial of demonstrating execution balance advanced impact track early million sale strategy business execution end reflects Note quarter Operating sale in $XX of year the on Adjusted Strong primarily our by year-over-year, and were million as execute the to the up the cash transactions higher XX% include slightly over new above of a revenues than Non-GAAP successful us transaction expected earlier a the on gain the our quarter from the Diego. lower First items of anticipated our putting from the phase solidly excludes that equivalents the levels the line to XX.X% flows our diluted awards. in closed $XX this roughly we payments seasonal count. increased These program proceeds work at of the and million were of of further in which that of The on $XXX from of capital expenditures several offset increased return the Combined, $XXX drive Gaithersburg these X.X%

deploy our against deployment excess thoughtfully to continue cash capital We stated policy.

repurchases. XX months, segment quarters meeting growth provide dividends our hiring given results, returned our to that importance and I'd through the I And update regular have more Over shareholders. three our to its $XXX share to million we the past through A an our of on than quarter before like turn to objectives.

market, thus for great we've year. on headcount Despite over this to to employees on in our X,XXX meet tight front progress far track just hired quarter, the Our year. the the labor been new this and we're first has goals

to on ramp programs new available ability the successfully heavily depends Our best on talent. our hiring

to use programs to continue aggressively growth will and our We momentum. recruit talent our innovative top maintain

Now from results. our segment for highlights some

level segment, period last growth. reflects have Defense expansion we the program decreased to Non-GAAP prior on in up of write-ups. bookings In of margin margins month a strength a X.Xx phase base X.X% XX% business as drove non-GAAP book-to-bill XX basis. resulting or accelerated net were the year-over-year in Civil the Civil $XXX the basis. quarter's our combined to of year-over-year quarter segment, book-to-bill level we programs operating from quarter a net lower to million a lower decline early net awards X.X% month in won that for year X.Xx basis our segment profit We revenues Solutions quarter by Defense first growth the trailing XX These the trailing Solutions strong of significantly due operating that net resulting For typical of growth compounded the continued the higher for ramp decline effect revenue depressed the to the $X.X of compared points new This booked year. otherwise business ramp to seasonal growth a cyber year-over-year our the of on in commercial the revenues in X.X in sale billion X.Xx of last prior our continue won business. as factors shutdown we the A a of year. and up on sequential reflect generated the year-over-year level with mix we profit quarter. for programs the write-ups government a XX

While the a result from as typically bookings quarter for this did a quarter for bookings Civil, shutdown. and the see delayed some activity impact award light of government

profit Turning XX.X% and on a higher now quarter significantly, in nearly to deployment Health operating in other our business. the ramp the up margins the the net in decline write-ups in reflecting of quarter. we business previously. grew level the Revenues programs, margins were of margin segment. growth our primarily program accretive to overall activity year-over-year, contract more year-over-year on areas decline, on Health well of Non-GAAP X% point DHMSM discussed basis the which reflects as XX certain a the year-over-year be return to The have as profile the And level lower company. normalized to despite a of continue

a of bookings an achieved drove to our all Our our of existing programs. X.Xx. which Health in our furthers expected ability segment to the services very the strong based modifications Net businesses to received growth primarily our saw targets. Overall, book-to-bill volume bookings deliver confidence in on a quarter, our and reflected of strategy on in increase guided

impact primary impact standard, spend that ASC like the of on the our the new the I statements. which to presentation discuss the outlook, our I'd moment is to lease discussing leases quarter, a Before standard of financial the during new we of balance sheet. adopted operating requires XXX The forward

long-term short-term and new two an As on operating lease find within $XXX lease and is balance of our our of liabilities. lease operating asset payable million line The right-of-use sheet, million. of $XXX such, beginning liabilities will items this reflected accounts liabilities portion quarter, you operating light accrued

are our provided Note details XX-Q. in Additional X of

our P&L I'll forward the adoption statement outlook. cash both standard onto of immaterial has impact Importantly, this an on flows. and the now the move With of that

share $X.XX accelerated $X.XX executed our a a non-GAAP range $XXX the by to $X.XX. we are in repurchase as to result the of million First, of guidance quarter, increasing EPS first range

at the reflecting are for incremental million operating results to And investment our strength or balance far Second, million CapEx ongoing above guidance expectation year-end for in are our of year. of year we for increasing the the also view our $XXX we reflect monetization million so on finally, flow program-related our the by items, $XX $XXX an sheet assets. of full and approximately updating to cash

be We this expect accretive fully and in beyond. program will investment through XXXX ultimately recovered revenues margin

We revenue XX such continue our adjusted the included good expect a And so to makes of million that that, with in $XXX as again have we it for The CapEx result full earnings back And margins unchanged. sense of inclusive EBITDA disclosed. real questions. the investments the remain approximately year will of related estate some over occasionally investment, for will made and previously call where assets Brock, practice. we Guidance financial we is on I'll and can take detail Slide presentation. this of turn the

Operator

we question comes today Thank a from At Rob question-and-answer Please you, will this sur. conducting go Credit of Our session. be Suisse. Instructions] ahead. [Operator first Spingarn time,

Rob Spingarn

morning. good Hi,

Roger Krone

morning. Good

Jim Reagan

Hi, Rob.

Rob Spingarn

especially of profiles operating over I margins big how start just the on these of margin? margins these a to you forward? the in guys, sense up line pricing And contracts? top the lower or as driver And growth, decline Do is consistency with wanted Health this a get on margins. that to there. the wanted reflective the time, numbers, Good go I the mentioned recompetes though going

Jim Reagan

result, last Jim. a what why off couple the the the recompete. prior periods, we of Health that rolling been we're is is of as one than today. relatively a had flat expect for Hey, talked we've seeing through. be kind delayed, programs that margins and can for had in that through That as up This jump quarters had I we Rob. Thanks business Health into cycled In an And margins That which in about previously a of has our were expectation. higher business into year, set the recompete we now, think to year.

Rob Spingarn

it with we should think plateau? they ramp? these Roger was how I Jim, the that about think what to just then, contract book-to-bills? driving of these their And where Okay. to are and maybe bigger you in are terms DHMSM do called then DHMSM or And – regard VA each we extent When in see

Roger Krone

Okay, that. Rob, parts I'll start off, there's like three to

period we're talked First of all, us fall, that this that years. allow is before. the program about for a turn to are year books of I'll we've second on ramp to in some that. for DHMSM, wave it and the the literally The what And refer again we backlog as DHMSM mods some smaller allowed and that And not kind events collect it's prime about and although in VA program, program, on over comments will we start a and further And we talked X we've you X that. and on to piece wave, of Jim ramp the any that our the Wave there in will were again, program. to some of for is us

Jim Reagan

of just in the that DHMSM of program, bookings. Yes, as a and nice much that came a visibility A that us in that resulted the we've a of piece from result gives of program definitization mod Group, the saw Rob, and where terms again additional it slug Health in the of of received, the rest X.Xx. we better book-to-bill contract

Rob Spingarn

business, where $X programs of there quantify a annually way the two peak? doing the to so a and in billion or they'll Is you're Health percentage as these are where

Jim Reagan

Yes. about the point the there kind you've the – they well is something of talking and segment. consider Security and you of we VA, to us in in VA and I all across on we segments that want with haven't Social the executing just executing we're if but it very are Health before, would business percentage know heard We guide don't and and of precision, what is that don't habit and any Health Health talk previously, DHMSM terms and about are I the of programs with and overall the get work But out of more on program, than VA-EHR in being other within DHMSM CMS is business. the that we to

Rob Spingarn

you. I'll thank Okay, back jump in.

Jim Reagan

Great, thanks, Rob.

Roger Krone

Rob. Thanks,

Operator

ahead. The Rumohr Company. next von Cowen & question Please comes go from Cai of

Cai von Rumohr

much so and Thanks Yes. good quarter.

to did compare EACs, EACs last the relative year? how mentioned You

Jim Reagan

QX of of in EAC the the we We net ago more And we lot heard in say numbers now. year year of lower you forward-looking up true-ups look modeled than that What like that it the – those in write-ups, some the than ago. than what level notable commentary, all That And detail that we year – a segments lower and is did graft is had a is while there a certainly QX, the is we write-ups consistent a more EAC by EAC group. it the when in Cai, it on had was is margin. to had our of notes ago, have write-ups guidance. provided will we had financials across with

Cai von Rumohr

update bookings to you NEST? and when turning GSM-O, expect protest NextGen decisions And coming bookings your up the on expire potential, us Thanks. the Okay. large to that And on are? Hanford maybe are any

Roger Krone

see. Let's

actually opportunity it's as are be order. in know protest. unpredictable, a have also we bit cover will the is in XX but hopefully smaller things XX-day all see assuming of or in We we'll our month those those the that's day hope little Cai, June, reconcile We we a think Let's can NASA that. NEST’s second that period.

sort large That's air programs, force. bid the contractors of our I all in three think the Navy that. a behind probably the And first quarter. NextGen, month then it's with

another So the – the can It's we decision. those by a or of Solutions sort sort year. dollar been Management-Operations program there's be the to expect later have Hanford, where on that we protest. behind and one probably go mid-year with pushing GSM-O in protest expect and are large could And may then us, again, year. a protested. that same to that, may of schedule, the is program. which fall, how actually XXXX booked and you on it's could submitted again the if Global this be multi-billion any a GSM-O, of for be not, And end probably that then then things one And Hanford or in subject

interesting NextGen, although Hanford three it's this So all get GSM-O, year, and may Cai. awarded

year, out it's next protest. think course, year. of bill bookings likely that I protested But, of they're winner the push not this then into will because those may of book then if

Cai von Rumohr

Thank much. you very

Roger Krone

Yes.

Operator

The Shelia Please Jefferies. of ahead. is next from question go Kahyaoglu

Shelia Kahyaoglu

you. morning, Thank Good guys.

Jim Reagan

Hi, good morning.

Shelia Kahyaoglu

Just pipeline. the on

$XX Just $XX bit little a bids. it, What's give billion a last billion could follow-up that, from color That's on more quarter. mentioned you up driving if in you there?

Roger Krone

they the dollars. multi-billion bid of are bids Shelia, currently tell quite they don't you to, the that I just we what are in was, but because price the mostly kind referred

And awards delayed was a because so volume, probably shutdown. the it some – although civil I think are usual also in certainly of the

journey been of is to for it's this Hanford a kind when on that's But bit little team where bidding so high. is what Navy was That's a dollars number do. there's kind us of bit there. of pipeline has up high for while, accumulation you're these pipeline that and this that of $XX But record billion of awards. those NextGen, what a an exciting, it who've billion So unbelievable able a little been amazing multiple and the us given drives GSM-O large

Shelia Kahyaoglu

Okay, got it.

I increased quarter. NextGen on sequential than the the color else. I anything you this Navy X% just And the then, headcount So think by probably appreciated headcount, more

demand, Just of a in? you any Thank areas there is hiring you that. you. are more in more give little on or timing when color just could what of coming the workforce is bit sense the If

Jim Reagan

up the the you're we Group, – what about would last about Jim, of which in Health continuing year the particularly as Group, segments, of is second on ASIT in the this we I the Civil award what We're think quarter. think the that growing Shelia, you when ramp that. tell ramp across in I Yes. would DHMSM the up won all we nicely is ramping

contracts last We have DOE nice Defense that won And course, a segment. the of a won in over then, Solutions we program we've year. large slug classified of

to are headcount. these of be All requiring adding us

across X,XXX And we business the the so, employees all our hired when – – heads about X,XXX we've talk and across associates business of there segments.

Shelia Kahyaoglu

color. for you Thank the Okay.

Jim Reagan

Thanks, Sheila.

Operator

The Research of next Krishna go Vertical ahead. from question Partners. is Sinha Please

Krishna Sinha

this quick, those the that advanced like thanks. Hi, you us? can booked size guys quarter, for what payments Real you were

Jim Reagan

of that we Well, couple as business. a business I in kind you've the the our would soon dollars, and customer. call balance we payment back are – beauty parts us sheet, And about talk of a of heard as those them about million various over of advance think hundred different moving other from we our – another parts off get

the So health the in stay half the them on still of sheet balance at the balance will run the business, on end these roughly be part run of particularly going and sheet, year. and they're our of to

year move were So we it happened – than the move it needle in non-cash really those does earlier deployment. us in of guidance, just needle We expected our full thinking and to. the capital them working help it year helps our the on on us

Krishna Sinha

then line, top a back-half And kind weighted this you. talked line you the top Got guys about had on year. of previously acceleration

much was obviously, expected. better quarter, than This

what should rest more throughout about throughout of year back just bit we revenue to the is growth it can still little the cadence kind see hit a level So talk now? year that the loading you of growth or of Is more X% the target? half-weighted,

Jim Reagan

that quarter. to is we to hiring dependent be somewhat upon that was expected before be until second delayed this about thought it had we way the Yes, going the

the this year really revenue of in bring to last some pull forward. end starting end of the enabled year results us it hiring quarter and QX back Our in back from early the

stick, hockey stick. hockey it not much so a that makes So the

to there. And We people backlog guided us on confidence said in we've the it. now our targets have gives the like got it we've line. more the top on execute so And

Roger Krone

add, Yes. were And literally shutdown, than good we Krishna, couple the a about we when year our people close work. recovered would put full customers anticipated out first our of year. We weeks we back perhaps from and were quarter guidance out getting just I and were to also shutdown better in the the

And so, we four able balance were to better the quarters.

Krishna Sinha

Great. And then, you mentioned your numbers finally goal a sort this to headcount, of on headcount hit year. growth

First, heads And that I hired this terms growth is number? a secondly, year? headcount does any that hit then, net include many to that quarter, hit have of number? So I in additional for X,XXX that that from how that you to trending how full attrition growth here had? will now more that number you X% you are mean, heads hire guess, to the you

Jim Reagan

hire will on the to at pace on X,XXX execute headcount number QX. expectations. XXX. our puts cover line being number gross need we about and And over will total numbers, in it think guide think is are We net be covers need top growth but hire is the but that a people the for of It growing, the number same we hiring to to our us the Well, a did number, programs to the also to need attrition. pace that don't

Krishna Sinha

queue. guys. back you. in That's Thanks Got I'll jump the great.

Jim Reagan

Krishna. Thanks, All right.

Operator

from comes Please Poponak question next The go of ahead. Goldman Sachs. Noah

Gavin Parsons

Gavin Hey, Good Noah. everyone. morning, for this on is

Roger Krone

Yes, Gavin, good morning.

Gavin Parsons

growth of of you leverage and over kind growth a can follow-on percentage headcount headcount? question. get the just Maybe quick rate the What above on

Jim Reagan

notion that, the had our leverage asking once is we've as ability to really are your level get add the line we us the executed, we way adding strong. is billable. people either to need we I we it who think I on programs, really, and question the combined since to we're and direct program way grow these understand is, that we have correctly, are when any with of manage Do top IS&GS fully these people the is commensurate help direct overheads about cost synergies it if Gavin, with which business the you're efficiencies the the synergies,

the So view relatively non-billable of we level – be small. overhead overhead to

we line, costs it us as said, growing more of to business. enable the that with top Now the terms grow in absorb does

initiatives more future So it more on enables to more R&D, ads growth B&P and more marketing us spend dollars. in hire

Roger Krone

Yes, is have that much maybe and different. major I Leidos contract how in all is a And our and and we more And more how then question, much is content although, heard to second added part our suppliers? which to is bids. strive own Gavin, of value every material

If you we add that think about in when and when material a that maybe a there effect multiplier our XX%-ish, because quite content hire so comes but we not normally other growth, it's partners. the on person, two-to-one is being with contract people, a suppliers

not on a one-to-one it's one-to-one. people, actually it's So better than

Gavin Parsons

helpful. really That's

agencies I might the is weren't budget dollars, you about year the had to expect environment? willing maybe less spending more the but think sound this on mentioned, bit typically actual actual talked a you You the budget year, disruptive CR Last confident the in their to be spend the in little growth it expectations be? mentioned to some dollars, positive customer pretty Do as than actually – budget, your for CR start you year. next

Roger Krone

see of on on then see more and are a Yes, positive elections. budget at, given other on those we'll deal way presidential the full but actually a a a the side hopeful the small we probably points, the CR, that get side on both non-defense I'm agencies maybe two-year defense of us for looking to both and

of low the to as near-term a versus view long-term of The And of better bit probably course, are will numbers in XXXX. with environment. on with in seems sort non-defense the we what growth and balancing it's dampening, that is, are to a positive. probably It's CR the be to they're of Congress X% XXXs. infrastructure. the So the of be net like little President And one XXX, XXXs and spend. is if on out-year hearing side and meeting look and a the spend and a for about deal starting budget budget agencies as defense now we the – We're always the get two-year about but readiness we're kind we speak

time, presidential all a it So get can customers lock into XXXX through I seen far the us long politics, XXXX. think in we in have spending get that really our the from deal we standpoint and and two-year a as and if stabilizes

Gavin Parsons

Okay, thanks much. very

Operator

Summer question go of next comes SunTrust. from The ahead. Tobey Please

Tobey Summer

Thank multi-year of or wrapped at business looking services of product sort company versus perspective, you. what whole, vision the much From to were a your as products now maybe tethered the a how an company? is the around broad for the

Roger Krone

little numbers, Jim, a then but made out the let bit he me talk restate. and I'll Yes. exact

First to mission and tend very foremost, aligned. very, we be

we with where so, even of in customer a agencies healthcare. contracts And we the mission their execution or we in partner at go look in

think you Affairs, healthcare Health the Department records more mission their military to electronic is active opportunity If what and with is provide and healthcare our efficient. do make we for to to team them of their of

products helping would would we I grow in our recently we what Obviously, better just line and call into amount we where and balance kind TSA, along there. to be we of always in electronic to that And inspection manufacturing a mission. comfortable product faster, comfortable that are going and or baggage help of Our reasonable it's light products have electronic we are that do customer do portfolio, cheaper. a our programs play, content pleased manufacturing. we fab. but of do CBP come mission to fab relatively more said know, our to us And as content, I achieve make the vehicle the with they we with And like there's be see

to expect a controls a written, that's you we we in make was product. be the or I said like know, like as in us think ago that some that equipment. business some small vehicle are don't there I do. was two displays. standalone communications things ground kind We have the something make week as may to We of Those

of a ship don't that we autonomous product that we is technology really is shipyard in to the team worry when them. you shipyard, what don't the And if go course, think And we if shipyard and to into portfolio we that surface Hunter, for market build appropriate we're autonomous about we with keeping own the the will Sea about have done, you the bring have ship, we their which an that is autonomous then use to ship. find and mission, an call full. our shipyard Of try have then and this actually and to the the Navy we what construction

know that's Jim So that don't wants or add our to of I whether not. kind products. view of to

Jim Reagan

Roger it think, I Yes, said well.

level and revenue manufacturing factory, is more you're And today And us much that usually of it's into relatively is more said, by our and Roger talk about manufacturing a having comfort and being this small. services prototyping. help to it's in about about how And thinking like we're driven our hardware we where when us typically with that's light enables with manufacturing, strict thinking conjunction with product not performing customer more mission. were services on integration going. than If

Tobey Summer

Sure.

of hiring come investors the disproportionate to mix, As from a for this trying up at modest and to know seems labor the we sense are area? outside tight you I'm look with also time DC Metro hiring because year, that to a get market time. you just strategically

Roger Krone

we're Springs And want certainly in factory, their XX within Charlottesville. software it that. Diego. constraints customers emphasis significant who our of Virginia, Morgantown, a one We're hire. in an and facility on where now we some Colorado team some We San another have miles puts think Denver, We that and of still West have will, you software doing on have we in if building a

what's then presence adding will schools a St. facility, locally place really today, be other significant area, a the actually of want that to this larger course live. is to in is and second one And work UMSL can called Missouri. is the of example There in seeing people what obviously, second a region. they're customers, headquarters, we've people, NGA a some won't National And from West are as hire is a we downtown St. And build where actually behalf hire there are they great of that us we in more the St. people. building the have to and move to it there. for we flexibility where millennials seachange, emphasis call schools lot on always will seeing, and – so and that our a we of biggest of we is And team in facility bet, it team St. to to a customers Louis to there's Agency Louis Louis large region. University I Wash But I but hire do national call capital hope the we great U that a of wouldn't and course, Louis, building we Geospatial and but terrific in

Tobey Summer

you. Thank

Roger Krone

Yes.

Operator

ahead. The Please of next question go DeNardi from Joe comes Stifel.

Jon Ladewig

on the how lines on And is about the quarters? that civilian environment should I along was quarter. think cadence of guys, two talk about Hey, Jon Joe. could for hoping the Civil of Defense we for kind this Good the sides. and you for next awards both

Roger Krone

feel Let to me a answer asking clarification. follow-up – what I free with think you're

On awards. question. the to with then relatively impacted were can't And on customer. And the most me start on civil, was Let may shutdown. of some that shutdown and a speak that is a disruptive for it's the frankly And track how shutdown the only quarters significant civil track, but pipeline last delays we have by and I some couple the have start-stop on Civil awards. been been our weeks, the might by things of and in

months And seeing XX we so to things if the the things administration. are we Civil. characterize will administration got environment, being customers the have getting some And That to I through we different until overall move see pipeline. right or said, we've the were in our normally same

going, initiatives come get we now almost other XXXs, There's ways, under and XXXs, call agreements of stuff And under things have result, get to think of customers and we lot at administration. think of stuff a and I think what a a to efficiency contract how change seeing this out transaction we're as XXXs, lot started start through. across are to I a the before this need we contract. trying So to potential our board new

environment the the So little of writ Civil large delay shutdown. is in a bit a because a with positive of one

Jim Reagan

Yes.

to decision about of we'll the And resolution The would to other the that, we're I get looking awarded NASA with remember forward their Civil, pleased that that program, NEST expecting opportunity and been the protest. growth Hanford. number, looking a we're forward pretty on nice revenue post business, – book-to-bill sometime revenue to to Civil year getting see this late have in and thing say the

Jon Ladewig

the Okay. color, guys. Thanks for

last seeing approach approach for and and Does reason this to new latest question. markets? your change Just at being Thank does looking change bid it one M&A? the your overall into the expanding And On entrants, one to it's a to KeyW. perhaps you. you're M&A, some Jacobs, industry adjacent

Roger Krone

see. Let's

Jacobs of all, First industry and has I diversify seen the we seen their broaden portfolio. think have and we –

provides market, So to see about we're used I M&A to our our and years KBR fortunate it's we had be looking moves We what our fully change, to clearly going play. capability to now important find line. years be when about careful bottom But meet we to or being M&A. don't We're it's that not have maybe about don't the aspects we and top we're, we Jacobs And around it to we're markets two see And the integrated and or a our so and here. where three we change we the look value. and that that we Company be then want And is are think properties as that. integration. the supports want be We access line trend. very way word got to were thoughtful us customer attractive for whether a enhances have deal strategy; that is think to think like or that don't really do our both for we we long-term honestly, into and we're for our able heavy strategy, were something recently intrinsic want than and get if it's ago positive more thoughtful the that excitement to I our done we strategy long-term I that have, others ago. on said, our where that be; AECOM. it think But we always strategy. surprised balance and make; speaks to sheet It able doesn't we an

Operator

question next Justin ahead. Wells The Donati comes of Securities. Please from Fargo go

Justin Donati

is Justin taking Ed. this on questions. Hi, Thank my for you for

can mix. one bit first The had, talk about you contract little a I

XX or of to time fixed you plus a this cost price months? grow If and able and little materials were than bit last quarter the faster kind over

Jim Reagan

is Jim. This Yes.

and percentage cost we dropped the material what and consistent – point, XXXX. fixed mix plus don't now last we actually saw think T&M with the It's through the move little as around move price a bit pieces, that right Justin, which maybe year fixed being probably by year. relatively can a in and of between that is

based, to but opportunity that customers, be business. that isn't to company expand to it's in shape moving opportunities the an needle us So fast which margins, new right good now, this goes we we like to is for be outcome really believe something for able and more gives good

now at can XXXX. just mix forward you right of least So I that think in think having same going us as the

Justin Donati

questions some clients the seeing in few you Or to of your spend? spending Okay. segment a been of are just that federals full are clients on appropriations have some And But their on of kind all asked back levels,? the holding of of earlier. of jumping kind kind

Roger Krone

Yes, I'm sure say not I would back. holding

organizations efficient just at are the is in Pentagon things to services some a turning faster and we've and in accelerate the getting fairly of organization that that. I appropriations The Secretary authorizations their more others emphasis procurements seen in think mature and execs Shanahan slower. is and out are acquisition purchased into

really which the come work authority. And services, other some three and on acquisition moving from the transactions have now of have authorities fast

so we've seen And there. encouragement

right. around FAA, – other of is nothing there Department But As slower, a it's they're fast as the moving. we how agencies, Energy, is all to go bag NASA, that mixed

the to some trying all than others. at move are think I it agencies faster, are So better just

Justin Donati

for the just one And appreciate last I color. the Great. me. then

of color Now that much provide sale how year-over-year? to you any on you for done. the that's cyber Can is going of commercial be the headwind kind

Jim Reagan

or you of is full Yes, can year full-year run roughly a of growth. point a basis think rate it basis on

Justin Donati

you. thank Great,

Jim Reagan

Okay.

Operator

Suisse. Credit of Spingarn Rob ahead. from comes go question Please next The

Jim Reagan

Hey, Rob. Hi,

Rob Spingarn

that at But in to Air and the you jump some revenue to record that talked some past. we closed and think merger the should Navy if things from from do Hi, other I I general, expanding in behind pipeline. wanted just this submits ask are budget. about pretty see you context, back the fair? the about Assume have know outgrow the you of sense fourth you've I wanted pipeline Is How synergies we've explained it level come about quarter. the a or the sizable here? now bid Systems

Roger Krone

There a sure doing, our our go program a grow adjacencies to with program. we a to we and agencies that $X.X definitely kind where to time we grow and to fact, with be multi-billion kind will choose our go Well, after a And will are wanted how procure maybe jobs. but marketing was, larger mean the customer they is and where we dollars. funds ability at will versus that program. large growth continue have want But are top points we in a IT. at the not, yet, to point of made generate where presence pursuing pipeline business to not rethinking we to quite We're what like to we're plot agencies are is dollar their make don't billion there $X merger planning for today. fully there there expand we and we a And not use the in line year we yet. and on as the taking a point Army new done We of through we're this if our one have And we that. while, size scale we had our couple the of million

multi-billion. that be we're would like, so what army look the with likely to discussions having on that's And

can so in still have pipeline And we go plenty chase there's of that markets we today. that addressable the

Rob Spingarn

headcount. had question on I the Okay. was And just other then the

is there. that leverage there operating mentioned You

So we the on your increase, thinking or sales net X.X% should your headcount for year against goal? what be X%

Jim Reagan

their looking execution terms I the net-net, on goes programs our content lot can are you how of versus increase, X% think to that depend increase to of between is the X.X%. and mix That's requiring much And that in and we're just own think subcontracted going of heads. of ramping, headcount headcount a terms how in

Rob Spingarn

So that it at the at high out could level end? sales grow

Jim Reagan

you I operating outgrowing bit we've of said, think probably there's because play it, sales, leverage of in think than as rather with pace little be there, that as to got being at a it Rob.

Rob Spingarn

would is be figured right, sales growth. lower a number it why which I than Right,

guess I well. with Although, to additions the the it as timing a of lot has do

Jim Reagan

being number, pressure put on business. it upward the is grow that I take as part employees good enables Leidos is back us that which to subcontracted, to the headcount that Yes, some could thing, part for said, extent us will we're gross of revenue a increasing of and things from share to the into of it that that margin as an content other to grow the that able with opposed plow

Rob Spingarn

you. thank Okay,

Roger Krone

you. Thank

Operator

comes of Partners. Sinha from ahead. question go The Vertical next Krishna Research Please

Krishna Sinha

Hi, the follow-up. thanks for taking

question a fee. pretty So large subcontractor and has on component on fee some Obviously, you can't DHMSM a margin trajectory. put just

sort going you from wave and other that trend as bogey? that few mean expectation that ramps Is above XX% of DHMSM the over that adjusted order target of what the I contribution your is to your upwards? next up in to margin years margins, during you So terms keep Does as your does if EBITDA pressure in that from downward are phase. ramps put margins segments? expecting on then

Jim Reagan

Yes, no, question. I the understand

that As DHMSM remain program consistent. profile the for margin grows, will

not not the putting thinking margins. of we should thinking, be you growth is should downward on the be So DHMSM in pressure program

Krishna Sinha

rest of DHMSM is a will overall program XX%. becomes the I'm and for somewhat put therefore, the not everything, margins? are stay lower that but let's say for just that it's there, the X% your I of on than that for margins margin grows your for the corporate as like that And out margin? corporate mean whole margins part numbers the and bogey say does company same, pressure that understand I throw downward bigger how

Jim Reagan

program operating average of because Krishna, rest the be for on the will no, it as margin the grows with is the company. income the answer level The at the DHMSM in line

Krishna Sinha

you. Okay, great. Thank that's

Jim Reagan

you. Thank right. All

Operator

back to Kelly no time. hand for now further closing are over this the call I'll Hernandez There remarks. questions at

Kelly Hernandez

day. and We for of you more Investor joining sharing great us in you Thank look be forward Day to at Brock, live you, cannot businesses join you you on couple and May all again, strategy Thank thank long-term have with for our will The us our a a webcast weeks person. today. in our of who XX. event and about those

Leidos (LDOS) 30 Apr 192019 Q1 Earnings call transcript