LDOS - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the Leidos Third Quarter 2019 Earnings Conference Call. [Operator Instructions]. Please note, this conference is being recorded.

At this time, I will turn the conference over to Kelly Hernandez with Investor Relations. Ms. begin. now may you Hernandez,

Kelly Hernandez

Thank you, welcome Earnings I'd to morning, Call. and to our good you XXXX everyone. Third like Rob, Quarter Conference and

Joining results of environment will call the and market and management team. XXXX. our Chief Roger Roger our will well lead Officer; discussion remarks as expectations. we'll comments Jim quarter your call Leidos me Jim, highlights follow with discuss company's ending After open and we Reagan, from the XX, will for the our Financial strategy. questions. quarter members the as Jim the of on our our notable these our and Chairman with other a the and Today, today Roger are for off financial from performance CEO; Krone, guidance September

release discussion as environment to does risks on to and contains uncertainties. as cause differ the actual that we results could currently press more based forward-looking refer such Today's it and specific risk include for materially. the Please factors information on statements see our

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

Krone. that, the With to I'll turn over call Roger

Roger Krone

with momentum our our results, for XXXX this and new for and which Thank revenue, in our you us continued third Third thank Quarter in pleased Conference We're set you, Earnings morning reflected bookings. quarter records all joining for backlog business Call. Kelly, the

all results capabilities our Our our our to our ability success and deliver demonstrate across diverse broad growing base. segments of customer business in our underscore

in a Our the beyond record X.Xx. quarter seasonal million levels. contract in the efforts. were growth booked and several with business the of intelligence These awards We typical awards, billion services net in $X company: first of of warfare Starting even quarter, book-to-bill for and strong the new development including a Office resulting amount engine over aircraft Results results in electronics notable surveillance Program intelligence, of Army's reflect of support Executive our in business provision the reconnaissance sensors. defense a support $XXX the

designated million U.S. We Support contract of Logistics Administration passenger-screening hundreds business $XXX and in the the Civil TSA other at sustain were services territories. by awarded also across Transportation continue its our a equipment to facilities provide to to Security and airports Integrated

we our classified During we billion in the -- across quarter, run of awards customers won each growth reflecting Community. of our Intelligence roughly the $X.X customers, from

analytics Our mission-enabled development, success digital transformation. solutions software reflects and across transformational

level leading to record Our our success us our of to increase indicator pipeline in backlog future allowed our potential. $XX.X growth a billion, of a against executing

will Beyond NextGen, that, of programs: decision. proposals we awaiting the which This of expect still of Navy we and all in large also have a quarters. several II, submitted Hanford nearly GSM-O be couple $XX next includes awarded billion

across quarter another broad year-to-date another of diversity scale added our third of portfolio. organic with hiring new over in was year-over-year X,XXX XX%. our our continued growth to Revenue the X,XXX our growth Underpinning This the we quarter and people, all reflects to and growth based hires. of success accelerate was total as for growth the businesses of strong bringing

work. our have continues made for the our in investments hiring to place talent organization, areas we the and success our While a market our culture in great employees making our growth key in tight, in Leidos reflect be to

quarter, talent. them to attract nearly from more a maximize $XXX of $XXX Leidos, focus and in people and Strong more of work equivalents to every million to to in million. the very balance cash us and conversion to in cash rewarding make continued operations choose generate a work margins to life that XX,XXX cash top-performing resulting take on allowed quarter-end proud resolute and their retain are responsibility we We order seriously at day, nearly our our ability

During X.X the consistent $XXX outstanding. accelerated for philosophy, deployed the stated quarter, executed quarter, repurchases. in capital to including retirement investments we and with our with resulted growth, our dividends and balances returning share which capital during repurchase share million which We excess shares million the deployment capital of organic through M&A, a shareholders

targets, small. -- M&A acquisition to our be been very this, evaluating segments big our and pipeline opportunities have business continues and we of robust, big Beyond both for all across

for While us we -- enable in drive to and market opportunities a Many position opportunities of strategic improve the for evaluated criteria to our value. these evaluating process areas. assess disciplined shareholder the transactions have did run transactions we our that landscape routinely not potential we targets, meet ensure

However, we were pleased that X target did.

we announced IMX welcome are pleased during to the and and team. acquisition Leidos the IMX We Services the closed into quarter, Medical of Management

experience, service of combined Our positions player today the market we to medical in be as significant commitment a in and customer us commercial are federal the footprint evaluations to independent space.

needs immaterial also or Providing health deployed largest a Modernization and Leidos of completed In DHMSM, regulated does a Management our business major industries. the of best: health the in the transformation one military September augmentation to staff GENESIS staff wave sale recently services marquee military focus commercial highly milestone in our to providers. business This programs We government IT Systems area, meet treatment successfully our Leidos history delivered our Capital. partnership helps of augmentation that was Alvarez which health this the overall Healthcare on complex The program, divestiture was or a solutions health what Marsal the in DoD divested X, facilities of the complex portfolio, other it quarter, to system. MHS defense on care new a for of XXXX. divested in services that piece The small, & we

very of Wave at Defense Travis. Officer the he for Executive Healthcare Program successful Management called release us customer, lauded our release, the Systems, Following a what

As of CV including safety patients' to our conditions. before, Pax, capabilities GENESIS various that added a We is system X used wave, #X technical priority. new this treat I in can heart be to MHS said advance

Within did Air capability attack the Force hours go-live exist using before a heart treated not that Travis Base, CB a Pax, was patient XX at first at of GENESIS. successfully this MHS hospital

introduced during a this wave site. We training the also each in enhanced increase curriculum and speed adoption significant at of noticed

behind make on Vegas, schedule. right Pendleton in us, San which These which substantial program, Pendleton, this have We on California. which XXXX. Camp Nellis Nevada; track are to progress are Force Wave Wave Air predeployment includes Wave just continue includes next we and live X in activities Nellis, and to is the off go on with ahead looking Diego, June kicked Nellis in wave this Base Las waves, to

turning which budget creates to the spending provides of defense both environment. Finally, the Conditions now a line foundation accounts, to growth agreement, spending for amounts and macro The supportive continue our favorable. business. top X-year remain non-defense continued for

XXXX. government through CR first the we year the quarter last have with starting as even and While a last the the no potentially end we we lasts impact resolution the for from XX year of through see material continuing that the government fiscal are fiscal years, could full XX of

occur. we will avert for that While prepared we also shutdown, a should optimistic this government are we it are scenario

revenue the expectations and year strength all gives look ahead, to the our the in us in thus raise the year guidance results far we growth acceleration across of metrics. for continued As confidence our

guidance. hand revised third the Chief I'll quarter our Financial Reagan, Jim now details more call results to and on over our Officer, for

James Reagan

your and Roger, In and the results to by getting focus Roger. to thanks Thanks, joining my today. everyone on us to press the summarized for I'm disclosed our providing comments context on questions, call going interest in some of the release to

high and and as you cyber the organically contribution programs from levels growth in EBITDA staff XX.X%, based strong of the the as and normalize ramped margins broad Adjusted Revenue business the augmentation XX% driven divestitures. XX% when of on-contract growth grew reflecting during quarter. new effects were was well margins core following. and increased which health Organic the commercial by

a legal relating million work. of net award $XX performed million government on cash certain this the $XX the provision million and Civil in payment international $XX the And segment long-overdue effect a Greek work receipt benefit. items by operating to A by a collected to Greek offset the our for thanks reduction expenses $XX that and million in this was for an Olympics partially the big recognized this significant results. net from item. team of effort receivables, in this X in other the back was First, of We XXXX. these on The arbitration reflected resulted was

expenses downward And we with most our on a the in material in margins count, pressure The program an EPS of to along lastly, normal new the incurred lower quarter. over revert margins. $X.XX, diluted items, to significant the $X.XX large we drive business, increase share startup expect prior of reflect put on notably third helps second, non-GAAP volumes, where to a quarter higher revenues certain of year. back levels These in Civil fourth wins, mix which

of which days. and sales quarter reflects accounts flows year-end million seasonally cash XX reduced the as $XXX Operating in our days advance strong the outstanding contributed higher in the receivable reduction payments to as well government fiscal to

high low We level expect us XXs. advances getting to DSO the back typical quarter, to reverse in fourth these to more much of the a in XXs

resulted and of a company $X.X an Bookings consolidated high in increase backlog ending the billion. for book-to-bill were reflects all year. all-time X.X is segments the an XX% $XX.X over across billion prior with This once again of strong and

XX a basis prior declined sequentially business the despite grew program revenues for on uncharacteristically revenues points X.X% In business Solutions programs Organic of by the of of plus declining sequentially revenue compared of materials basis X% an elevated both sale Now in was protest on over were mature Defense lower results. XX-month Non-GAAP points and for closed the and XX the low, margins operating and quarter revenues. which grew adjusting from resulting And the margins revenues Solutions over Civil XXX elevated $X.X during X.Xx a higher the prior operating and trailing and year of points the from on-contract commercial our year in in segment Non-GAAP points segment net awards, quarter. primary quarter, book-to-bill primarily new X.Xx an when basis year overview Civil prior basis. grew of for and XXX of XX.X% quarter. driver write-offs. X.X% program Civil year-over-year. our year growth cyber revenues. billion sequentially increase The sequentially quarter, our our segment, first on booked of to basis new XX.X% the growth in our Defense the levels activity prior driven

Adjusting for million impact. a for the strong a basis. Margins profits and next contributed reflect are of the a segment two quarter. in recognized involved resulted materials bad slightly reflected these costs X associated which component. earlier unusual the for I Civil the large were: within expense once XX-month program drove the on up X.X margins items in $X.X these with again X.X Civil -- book-to-bill a of time, in is startup basis that the in made this, XX.X%, over for $XX quarter period, the buy margin years the over from new First, combined, of to drove margin the quarter. items were related points quarter; ramp the XXX is debt a and and billion business payment expenses prior bookings headwind new this X And a over negative results in trailing charge program, program and second, a and Because the were to of the the referred

of bookings for over growth, driven contribution growth, margins of during performers variety best the of and ramp book-to-bill wave DHMSM a quarter all strong execution the basis on grew in XX.X% deployments in the at a and were revenue the of the largely sequentially points the of in basis. programs. and quarter. segment, quarter operating growth $X.X by were a X.Xx higher on-contract This mix variety trailing year, basis mature prior revenues Strong period. from on-contract Non-GAAP factors: a billion, Health levels for Health very XX portfolio. driven across new increased our XX-month by bookings and X.Xx Growth margins programs other and a company previous of XX recompete by revenue the in XX.X% decisions. in year resulted were there the the than points higher In the driven strong Revenues was

for growth With over along the guidance a on the submits QX are follows. confident strength and path upwards pipeline large continued continue will we as our of as results that such, we the been of our year. we've now we remain outstanding, XXXX revising And

million for the guidance our the billion, revenue the into increase far midpoint fiscal the X.X% at year. a $XX.X confidence increase year has Further, and $XX prior billion XXXX. about XXXX and thus our the continued results We our growth previous $XXX visibility from momentum in year a midpoint into between and the of expect over increased in further our

on more call. earnings our conference As our fiscal guidance always, fourth we provide quarter in information will XXXX

diluted We expect to count This net higher from reflects resulting guide. the We margins between $X.XX and in the the XX.X% point XX completed an $X.XX, the prior adjusted the $X.XX share from the per now from ASR of increase previous share of lower midpoint expected QX. year EBITDA between earnings the increase a and expect for at guidance. non-GAAP XX.X%, basis midpoint income

$XXX the capital million, is from approximately to $XXX cash the estate flow. primarily floor by million, One spending. which additional up reflecting We $XX is now Greek expect award. we expect driven expenditures flow of arbitration cash year at $XXX lower for expected to of guidance real the $XXX from our related which note prior be lower million, prior than Finally, least million, operations of free million

Rob Now some so I'll the with to turn that, can over call we questions. take

Operator

Instructions]. [Operator

comes Caso line Edward of with Fargo. Our first Wells question from the

Edward Caso

your Defense cloud? I the as by here. does the curious was hearing what the cloud about accelerating wake whole, we're Leidos play particularly in Congrats an the to JEDI Great. How the decision. transition Department positioning, of in

Roger Krone

to as by cloud purchased tend utilize good the Ed, Thanks, customer. our morning. We and

contract. our as the but not we typically, think transformation services some of of to from the contracts, cloud is actual cloud. as AWS, applications the And a cloud with legacy the So our of moving Azure or business contract in provider for or in provisioning will pass-through, cloud whomever

Health of whether true legacy in Civil So we the our to across tend in value-added really that's to the converting be or And do or cloud. DoD it board, a business.

of that So transformation, go us. decision versus Microsoft We be decision the this in the by Department of AWS won't immaterial is sort we our affected areas call really -- of way. in And one with to Defense by it's and digital the pipeline. Azure largest to of any

Edward Caso

what question the does a a you but around talked little the CR, we're have at least looks extension CR start second I outlook? the it to one. about -- a like bit At that's heading impact forward point of to

Roger Krone

Yes. Yes.

maybe all. For we've looked then We've -- through And very of at us, November first the and really through if looked at done of we little, quarter. the end end then we analysis first year. thought

would it fiscal it's our lot have And run so XXXX of I we've year. Now starts a we in don't for the say pipeline, new minimal. full

what's it's You pipeline. X, us but it's immaterial our in say never really to relative to for want

where complicated in of the But prior purpose put we're year year it's for the budget, I our to term. budget two we've customers come we think it's had and for with long process CR, shape. who good the are the think budgets complex actually pretty because trying increase that and of the together off

Operator

line The Crédit with next question of from comes Robert Suisse. the Spingarn

Robert Spingarn

for might. those couple that So of if your start I assets? acquisition? commercial things, today. expand with you're to strategy more targeted Is of wanted to as this Roger, it IMX specifically a is light wanted in I a seeking business Or stands the ask I to

Roger Krone

to opportunity team end terms to done us able acquisition, to a And you it an a And our consolidate believe doing will, come medical Sure. we as built such, industry for we've and and work successful corporations, private the capability of we marketplace. if starting the And care Thanks, we IMX. We is that for parallel commercial back for were the employers. process have for is what through the government there's do an be was sort the to just in to to a to pleased Rob. foothold the and health disability see to exams and with We've as take, apply disability VA. that way been get and at assessments assessments. national in think centers, we easiest

Robert Spingarn

I be but the at and And idea higher wanted sales relationship this also the backlogs address that appears expanding across the Okay. a growth then backlogs record to industry. to of between level, duration

is growth might little you So duration if slow bit. meaning expect that a extended, to

how about So I a think wanted those is to growth ask you two double-digit-type this for supportable will you factors. Or while? just

Roger Krone

Let's see. A of quick couple comments.

As we the look in duration approximately at our same. backlog, it's the

really the we speak contracting. stretching I of us, rest or don't can't it So industry, for for see the

And programs the so in large backlog, for system takes flow actually forward-looking organic sustainable high that, and we what's we as to the budgets backlog growth, we in into have what our forward. the our wins, for turn very, us. outcome very duration It although of that's of or we confident just out, of predict this can't X-year right, we through so business sort in And momentum. about laid a like looking we a through to to therefore revenue of the start, or election you X- is feel calls. that prior years post our happen then increase This And now long, for multiple the for talked you will PPBS -- if if number follow see logic backlog.

Operator

with Cowen The the next and of von line question comes from Company. Cai Rumohr

Cai von Rumohr

either protests of won specifics phenomenon causing things update think with status maybe of lots bookings Hanford to happening So on lost. case, moved a decisions on maybe And and number you things NextGen your kind One, have Two bids? outstanding late. you've of protests, have us have your X of been And of competitors your GSM-O, noted right. this by or some in do what the the slowed is of that certainly and kind questions. you've

Roger Krone

award so we time because would But right. the seasonal momentum, just it's And customers came think that protests, a early. see. like It's so XX you the getting or decision sometimes through programs typically, sustain some to award. a tell actually a much they Cai. expected And and almost it I -- to can reviews dates building delay. sort I they get out Let's the are it to so want we've -- white-glove days promulgated always mean these people, delays getting add that program actually take they I of peer by protest. of are don't then had to Thanks, staffing, just in atypical. that that because

In end without I sort of seasonality time, the are very of lot maybe at that protests were seen. quarter a or summer us, front, in to awarded the at just and lost, we've seen happen protest, have some nothing, or think offense down two government that of typical some that's what the that therefore awards, fiscal then and everything lot protest we increase. that's the year, almost to protest of going through a with of government And that's volume the awards in with we cycle, a a ago, the now things either we were that And defense. that we've awarded

I our I'm quarter, you shortly be GSM-O in remind would On or maybe at expect time, thought thereafter. and me, awarded sure But fourth NextGen the first we probably major Hanford programs, Hanford July. would one in quarter

end get year. we their we of and the hope these -- award our before customer, close things and they so fresh, keep we And process through get the to all awarded we that bids stay the

Cai von Rumohr

last the defense, Jim, the one. you mentioned margins a just In looked adjustments in And lower. Civil. little your

much us and little us And Can -- granularity you You materials some those up. maybe give on down. yes, the issues? being being mentioned how EACs give of a more the -- some

James Reagan

Yes.

Army seasonal, lumpiness materials contract, -- where think We And have write-ups Cai, -- even they margins. that year it a purchases I a ago. lower EAC there predictable the mentioned, margin was I entirely some as have of make a an that higher support-related in in a some the carried some call quarter that not within we period And had wouldn't won headwind. I we level were then

change margin the So to those defense primary contributors the year-over-year. are X

Operator

next of comes the Seth from JPMorgan. The line Seifman question with

Seth Seifman

behind any more what what there detail bad issues gives the that can any you about $XX you, charge give the is million of wonder, that Civil? additional Sort are I is and contract you in debt. confidence

James Reagan

our Seth, contract. get Yes. to provision don't we that contracts the on overseas to efforts around we receivables, collected. you group, into decision primarily some specific get I a in receivables the the can details conditions Civil though status these where the had the relate saw based I on to on and which that want the ground on were tell take outstanding to was

was a mentioned that geography the collection the about outstanding, the recovery we it. on as thing -- taken earlier quarters see you in reserve world, our on do the years, charge we different of we've it. similarly, can can because or several maybe for future, we've to right to And stop award of prudent easily see not that. efforts scenario receivables course, a But that thought a this where a Of on provision we'd for I Greece was to taken the couple there for in we're take simply arbitration a a sometime long recovery even now, going in

Roger Krone

a those provision recovery other of we overseas Greek $XX was boil award the $XX about and down a took that million. all between net Seth, the arbitration on receivables, on charge. When it the million you it's And

Seth Seifman

a just And Right. then follow-up.

The quarter year far, we've Looking two quarter. margin quarter. thus reach range the of confidence you fourth it What something margin for at through years, XX.X-ish in we're guidance, last looks the seen down the margin? that EBITDA fourth gives like in the kind looking the tick the the to in fourth

James Reagan

remarks, bit generate than mentioned the be -- see revenue But price QX revenue of with little prepared We'll for the strong and we're really And quarter. that even margins that unit visibility expecting normally Yes. I is do as QX it has fixed will looks the are I higher what Civil mix And like that. stronger I what the again, a margins recover to price-related got we've that to understand QX implied question, Seth. good mix fourth your see. QX. Actually, think work in could during the a there. in margins. some Actually, back stronger-than-normal we to on

Operator

question next line Sheila Jefferies. the from of The is with Kahyaoglu

Sheila Kahyaoglu

maybe to segments. regards with on expanding all the Just last X question

about new had margin revenue You've a wins impacted of think and XXXX? and mix, How bridging been the most think how it's bunch where growth. strong you about do into that you

James Reagan

group margins expect we we're that lower Sheila, we the of ramp, see and to about program had of QX. -- early said all time. certainly that before, and for as a a be phases certainly in in the results. program new little appreciate tend well, to I are the on, program. the this to In seeing don't normal programs, some We question, some in think ramp-up Civil the you than provision take the upfront of The we've bit some had new and QX they ramps the the of recur. -- this life of We that it

growth one revenue we think pressure than what that margins forward. guided some on going would is previously, as that, And have might to additional higher might put

couple of programs. recovered dip that's first accounting as the in I in across discussed. of fact, on had in program you a as we that where Civil, haven't to seen that quarter I execution, the margin well as and the in of an future have we see we artifact that And gets mentioned, In for strong speaks we periods. pressure previously some ramps program leased that much think And had that equipment

strong and pleased thinking Health even the mature you're now And of we're that Health -- very Particularly continue Health our the execution if the believe we to on very within the about continue in and to sustainable. we in be some programs were newer the with more margins, which -- group. margins, are quarter,

Sheila Kahyaoglu

about Great. And to that you looks what that. adding you're augmentation IMX, maybe that been about think think Roger, or the The IMX business. business margins few Health earlier. thanks do that portfolio? over have you a color How question quite strong, on the just on do of health for years? Kind how then the next like expanding divesting expand on

Roger Krone

in you implied, the the well. Well of course, Sheila, investing doing of that's as we're business part

were that wasn't lower-margin the for that in our business So sell of our give margin. portfolio. Clearly, that confidence been would should part We us really us. able to have in

do someone will better of who's focused that it hands the more think business. I in on

double group. to to us are of fit be what on to But don't continue by expect about to going strategy that's did. we parts in we're would very Health going portfolio the do the segment. obviously, guide Health down We're exit and don't confident it not here. our you those and -- But performance We the doing forward, business our that and that well exactly our we

Operator

The next Barclays. Akers line with from question the of is Matt

Matthew Akers

what guess ask I seeing to on if market, M&A you're bit I wanted there. you could little elaborate a the

Where have it fallen the you looked at You remarks, far? of deals they kind mentioned good a have been short? Is valuation Leidos? lack of fit just little something bit in of the so or with just a opening but kind sort the what of that's that

Roger Krone

runs it gamut. the Matt,

opposed we're just value net kind we present as can't -- to Some, multiple people people. of

X-year looking and off a forecasts. M&A, looking do like we -- look we're of XX-year set a we're So we -- at

then we and discount back. -- So that

value. So that drives

other we think are. where and really are We're off the buying company. people that's multiple, not I long-term looking of a value for in

there's So us. have priced away some from been that deals

familiar I'm you're with sure the process.

high like that course, an diligence, when company then what offering looks was management more everything memorandum to be get and value-added great. of or training do company a due get in looks presentation. often a you and or thought something. And happens, a And You

want to that want And make want be we civil because we consolidation to lot look so tracks and well sure to part and defense a of I strategies. we our at that. with think there continued is But it

the very we we'll to front We on again, end don't -- end in many. of be transactions. will there lot And of at involved a be the so expect

Matthew Akers

think Got the X,XXX mentioned then us number? you attrition guess, that it. could was? headcount you what adds quarter. the I Was I give gross in so, And if the And

Roger Krone

employees to actually going can obviously, quarter-to-quarter. really we the confident ability have our and we And our place clearances people great number. this I net also that come in headcount But the our we've to recount we in educational workforce But a out has we talent is right continue Leidos And think great and and the with us. also That's gross so treat in to image and acquisition -- background. I be are how number number that there there's the headcount does less for attract track about some Yes. the and our be the release the made we work. than you something appropriate and made to team think to security put a that. how don't that the net But changes experience people, we've

Operator

question next is Jon Raviv Citigroup. Our of from with line the

Jonathan Raviv

for double adjusted to margin two now stuff. guys. think back I called years somewhat Health you a the XQ sustainable the And the EBITDA. mid-XXs, as result in down the moment, XX% you a Implied nicely Just row, in question booked on higher-margin

is the to right still forward XX% So the about normative here? -- normative going think rate

James Reagan

profile margin -- the -- currently are know Health we some up margin looking continued time, of to the how orders is pipeline be that of you're you're What adjusted for with a for this set is the recovery about in And is XX%. is margins margins EBITDA of what group thinking Jon, for Civil we're we what QX. sustainment on for in It is things. based XX% longer-term nice is Yes. think north been past in we said but nice strong also or in the going Jim. right certain that has QX which,

the that full And so we the in QX both to that margins. speaks have and confidence year

Jonathan Raviv

is growth missing? small is running strong, things bigger-picture company you to mentioned what is What the an to weigh getting BD in place you machine mean, -- and the in the big How then big. interested question a quite nicely, where Okay. a machine on running do of does big nicely? you're M&A thing adding seem with strategy. to And all-new that I mean be kind you? both And Roger,

Roger Krone

Yes.

Okay.

tends big $X be way, the million to to in in small revenue. over By $XXX to So million tends $XX revenue. billion be the

I X in big. just that on really I've -- see that customer. would mean looking to be will the And not I look we did deal at and So we're is like strategy at don't capability just -- ISGS-size landscape we is things, the our 'XX. anything M&A on an and share

our that we our business a customer have to think have that access, a customer portfolio customer? marketplace address Or we may that performance for is we're today? we would not not. don't it I don't an addressable need a able that to like call is we the time. we're significant complete segment aspect actually amount appropriately there So to in this at we're base And everywhere, a of scale There's not we of seem there of some that be calls, past know

areas. look our at about back Day at we that our those and we a the again, Investment got that And we've in talked to filter May, use so are And criteria criteria we M&As. we those use

James Reagan

for growth investments the organic internal And QX in the investments growth that Jon, think right some in line be kinds strategic of we to on going financially, our in and to us about in top see And And accretive organic significant been as you're much you -- reflected we've the that of seeing acquisitions. our we you're think last looking we're as the the same those and getting years dividends focus and making couple over for way. about continue long on when full right, M&A, are investments, accretive investments as for can as year. both ways, nice many

Operator

Sommer line from Tobey comes SunTrust. of question next with The the

Tobey Sommer

I constraints What to company's start you growth? ability Roger, of was sort to could limits about organically? wondering are grow to the can -- if we the talk

Roger Krone

Well, okay.

relationships put can So Access all revolve our around our pursue develop into and of with Because you low. good strategies and our couple X I as probably talent, multi-year which a markets Our procurements, today, customers those is to break been And our business, us. of in for of has never it and and a for the categories. haven't to of campaign kind development cost people team is capital a it people ability yet. we're those would we categories: that borrowing to as business found us is

people, the proposal commodity have rare are the probably so people. today. business our And have the customer people, to And in you most those the relations market development

want if you to staff program post backside, don't on bid then a And the award. on you cannot

we to and really, about on we're really what bid our ability so people. thoughtful attract And

all to national very, the in hire we As know, very difficult region. capital

going excited look And we're at can Maryland, Virginia, we we as forward, staff the things so the than about opportunities Delaware. where places program in other Washington,

place Louis, or the was program economic for St. growth has be of So us simply already area. to a in that because great a the look all or here that D.C. in then if occurred Springs would Denver there Colorado

Operator

from comes question Parsons Gavin Goldman line of with Sachs. next Our the

Gavin Parsons

raise On guidance, the revenue second it's the year. this

surprising just movement there better plan? it's wins, rate, relative could curious about a any to of little business customer, more would So color higher more just on-contract you by be talk initial what's If faster win you recompete new bit kind great. your growth, the if

James Reagan

think on you hit them. of all I again, Well just

how just it. a able to be process have put with job of in to in we we customer a alluded terms helping need fantastic us We're around the recruiting pleased revenue. HR the of to to more the department. needs. convert meet Just to talent little Roger attract bit and doing and had able capabilities color They're backlog that being doing into our we're

focus addition backlog been when takeaway. of work or additions working there's the existing And the the acquisition additions lot growing the every it we business X/X X/X to and is of one is either in then on-contract And through customers. growth, that the of and second years quarter, The growth. people backlog this another of had of we've with option which at day about of a And that successful are from much across of -- recompete to about are X/X programs, sold new actually of components business. on-contract look comes then book-to-bill is by the

a certainly -- So is. it's if balanced like look kind sounds to it and of way it it, a it at feels

previously the execution, both than and And return made in side program a better way to people strong we're business that and getting our that think great we've and the so I the expected teams. on revenue development investments the is on process just

Gavin Parsons

no Does extension Or supported soft kind looks book-to-bill that the great, but is implications total has mentioned been duration. little a longer you a here? that's XX-month for by The kind funded of in maybe kind backlog? to then have next on relative that of growth total And bit backlog period it. basis. lumpiness just trailing XX-month any Got the of

James Reagan

the the it is worried in the piece That backlog, speaks gets how to funded in downtick funded. We're of backlog lumpiness some really the not about Yes. -- Gavin.

in rate I more the of I gives our point putting the there think we is guidance it like out out our not to that other comment to that on it expected is that QX duration that is materially of confidence growth it that when the -- in beyond prepared 'XX. we'll been what for and growth made relative do us post we've there, looking speaks the changed, have And the out we'll during XXXX the more remarks put call. comment coming backlog, which XXXX the

Gavin Parsons

could I if last a And sneak one Okay. quick in.

any them flow get to doing the people get -- to kind Or people is cleared a on through needs operating faster? leverage as sort the great Are that or mentioned, able contract? you as of you job of contract those you hiring. more still there get on quickly margin Just

Roger Krone

it's a be better. or out just hope, process maybe a the to that I'm I streamlined. will is celebrating continue little industry there's yet. don't -- in Yes. bit I Gavin, X year, think months mean anyone

have our sort maybe and they Or number we approach have that hires. X,XXX them for us a to have little easier a of often midcareer models clearance, call a to to college One you we is image mental college of We already more they XX% get means is that have we come and really, may secret, to hires. hire, of secret. it's in recruit with And tend maybe people, only what then us try that security business have a they if the a clearance. our

they picture typically a university and get and and start out time paperwork, than cleared them getting So you have our getting a of an somebody journey. mental and shorter may tends generating from it's to revenue and of XX-month be contract X-month, you the often their hire college them to onto

part on workforce the So adjudication strategy process. they've a of where it's our been already attracting through

through and still process both But the a months. the significantly is itself long gotten contractor the is and but minimum the side way, has reduced, X But process of the clearance by of it probably side. the better, government way flow backlog and is and on -- the in on too work

long And months. depending overseas, as some as you've upon people, could lived be XX if

Operator

of is The Seth the line a next JPMorgan. question with from follow-up Seifman

Seth Seifman

about that all was DoD from Roger, the reform. And Fourth on on we just wondering, I kind something wondering Leidos I days impact potential you're fair was think whether of amount if on these and hear a you at space. there's and Estate that's any focused services

Roger Krone

on Defense, a noncombat to as not create refer this organizations, like Secretary reviews Head to of apply the X-digit some are Secretary Acquisition Fourth maybe for in view therefore there and DISA, Estate and organizations organizations. everybody the and lot going technology a And directly to the that agencies on that area. be Shanahan Obviously an in intel of budget was are the Maybe to Yes. more new organization. else of tends We -- Defense viewed able Department doing spend Estate. know on that call, the as when to the Fourth maybe harvest Secretary there, of there combat the Esper, direct combat to to efficiencies, on some DLA, opportunity

great these the and work with have balance We closely them. a organizations. services We between support

out these the some had, top tends into costs. to mean In it's contracts organizations. like numbers around we've of I we we've efficiencies of business taken what really line driving XX% be Our do.

and we contracts view that the organizations activity that's So as new the opportunity for we agencies with for opportunity going already us, contracts DLA. both on actually in right these now in an have like

transformation know, procurement their rewarded Kingdom a system. into United where purchase you driving done win based we enough United fortunate -- the As to efficiency upon there were called essentially program our in commodity Kingdom. of we LCST have and And the distribution digital we in get all

to Secretary a procurement and and lessons and the to of like here customer would processes. they run Fourth how transform, to some think you RFIs organization to forward some We about We learned a of U.S., how in what look those modernize help applicable how Defense think RFPs will, lot to directly Agency do have opportunity if to respond are the to and Logistics these in we organizations. the Estate our the about can learned

Operator

question from is the next The of Joe DeNardi Stifel. with line

Jonathan Ladewig

takeaways wins Can Joe. recompete your driving you of and for kind on your new how plays in on of the us Jon win? success kind and is update into This what's this

Roger Krone

if higher -- have even boy, probably Well, might wouldn't I what I rate. exactly a knew I working, gosh, was

see. Let's

inherited and You our think, do of thought really through how both took couple and our customers; we we call for top-to-bottom processes rebuilt the the it the our was qualify that do relationship processes processes no-bids from of our do a and to pursues; quarters. IS&GS really, how And much as a were know all we pricing all business out there expected. and we sort development what we overhaul do this hoped and really of around write and offering went whole how we Leidos create of then years or an been ago, whole in we we not And pipeline; development have had felt you proposals? a was from way And do as organization. on winning or and we we how back bid, some process through the and with best we business our

long write process? And seeing flow or is the hard response go in months of cycle. do evaluation how the PPBS through call take couple you an I through ago. proposal and it what we RFP, what to when you're had sort work constant was on is proposal address statement, the losses then story a actually time was their issue, to of and of that pursue course the XX it now that's of of months ago. the that does don't go months see X because work And based a to lot win a XX takes opportunity, we the that work how XX long good a implement X program If customer until proposal an with it you a years today on new really And later in a process, have procurement, upon I or get done

I your that question. Jon, answers So hope

Operator

coming question the Robert follow-up Crédit a with Spingarn line have from of We Suisse.

Robert Spingarn

structure, kind to thought specific, that it company-owned, sort and ISR wanted one the ask a guess Just business you thing. but I the And have, interesting company-operated was COCO what you're this I or world. of Kind is with Army more doing you a thinking of to business which you big assets. safari where COCO Is ask -- about how opportunity, of this other of sort you're approach? what own this opportunities? if this the want a wanted the I to risk you grow, you there? And

Roger Krone

Let's see, Rob.

and the provide customers that comfortable will were GOCO, of program, And Army business X, we from multiple back want you related be -- in host all of you XXX in to airplane As work, airplane And all ago, we work mission the X to support we going reconnaissance know, OCO we we OCO we the customer. collection that we DD aircraft had. be doing forever. significant work all theater we our and have then a been simply that with specifically with the enhanced said a to we amount actually we business models, had years how low to a -- Army in is to providing when an support much to role for OCO airplane, back in were -- and that mission was modern missions. ARL-E used What ask it program, have

of to the overweighted. opportunities capability again, responsive, capital, business. And the part our with more then had and capability. those some be portfolio and to more It But in provide COCO invest field mission control. opportunity is seen we're, And going not faster be model. bit to to get have have late of a in aircraft, a We of as those is little our our support to pleased that as it's entirely we've within us allowed provide it because to to

find Mi-XXs and the Afghan in have support hangars And aircraft program. where, if same were support go support Force time, other look we our of in of contract, Air direct Army the on course, stable you And would actually programs, our the At Afghan the an theater. program we you to that's a our to other then models. at through

multiservice we again, have broad So our business. portfolio in Army of contracts ISR and

Robert Spingarn

just say work you've COCO opportunities the for profile you too Would was risk where turned down high?

James Reagan

to the to with with of and at return. COCO been what shape our able they our pay return kind we've customer for delivers what kind service that our acceptable profile predictable the that is investment. think it's I customer And able do the Rob, right of gives that so for cost, customer us we're -- us to Well the on collectively it availability, wants a right and

Roger Krone

Yes. means And you do -- not do we us. do. that of some are clearly customers. have and that But preliminary with there very we know edge Rob, thinking always We're going opportunities conversations don't we are being to And that not capital-light. we're

to on that we an that's to a an aircraft We the long think want investment. invest it's lessor. history, can understandable, don't return customer mission COCO we we we're a a We We a execute where have are tend not ILFC, model be that our business. make where or and it's capital over we go not in can

us to go a to is walk otherwise be really a a not might standard ships already allowed going That's CapEx the is and that able where But and or to been to heavy thinking So access to is government we surface this contract add we're we by conversation investor had aircraft whatever. customer to the nice our want a model of up This business asset not our you have customer. is typical away going or in where sort it a going. I that don't owned from really we're access. that

Operator

reached Hernandez end to for session and question-and-answer today, Kelly I'll for We've of closing turn the our you. back remarks. the Thank call

Kelly Hernandez

day. you Great. all quarter. Have your a Leidos. Thank great time and for this you, forward to Rob, and look updating thank your you We in next morning again for interest

Operator

conference. today's concludes This

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

Leidos (LDOS) 29 Oct 192019 Q3 Earnings call transcript