LDOS - Earnings call transcript Q4 2020

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Operator

Greetings. Welcome to the Leidos Fourth Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. turn Investor over Relations. I’ll Senior Peter time, President, Vice this the to conference Berl, At Mr. Berl, may you begin.

Peter Berl

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

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

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

Roger Krone

quarter for year for thank morning this and call. earnings you. all conference you our and joining Thank full us XXXX Peter, fourth

our Family customers betterment the moment Before in we customers our last the Fourth with and Leidos we the business revenue $X.X Leidos’s COVID January. announced the of or billion backlog and that IV was billion that will light levels growing in protest Counseling pipeline period and a confidence This with more employees, points above any take what favor Year and further that our on in in optimization. basis wins, $X.X year, record this strong expansion $X was growth non-GAAP with program, our three that XXXX, a than new new and XX workforce by positions and up material $X.XX billion the XX.X%, fueled program prior a talented, trailing door sheet of resilience we our the in portfolio I'd Next above of bookings thank and inspired partners EPS us past revenue coupled a our a accomplished in balance of by reflect market margin growth the solve coupled our late performance EBITDA quarter in growth year, the diverse high for the the our challenges annual were and their the to beyond. Life acquisitions in collaboration reflecting is do the year, basis. delivered X.X the two closed resolved XX and engineer year X% us cost in These business for with our one provide healthy indirect times outlook results contributions historical up for slightly performance backlog Gen year resulted quarter I'm unwavering of award prior deliver book-to-bill under These challenges. adjusted in XXXX. closed of for customers in month for technologically approximately the communities reflects for to the and secure which together, from on to continue currently XX,XXX who that not solid strategic to needs. FAA commitment quarter. like compared Net reflect $X.XX X.X innovative Year QXs on quarter and Revenues from re-compete and the results solutions management New billion, times the in is and totaling evolving that mission. award NISC New Navy Military XX.X%

of the margins increase year represents Full adjusted $X.XX. revenue annual that year. growth over of the XX% per year, full prior an XX.X% yielded For of an we non-GAAP billion, generated EBITDA delivered XX.X%. $XX.X record revenue - earnings increase share This

guidance. $XX.X exceeding XX% generated Additionally, after end far XX% year $XX.X business contributed billion for position increase backlog. of initial backlog net or a a acquired $X.X XXXX Full bookings year-over-year adjusting over for over year of to cash billion, our billion of the of healthy year, the a from operations record

the US enterprise the $X.X if Turning program single to all our NGEN the now of Office of has Navy segment, options a Defense IDIQ will followed excursion Airborne award the the a contract, order, of no one-year as the Platform award, one-year will includes in Leidos known support to an and management support XXX unify, periods. shore-based operations, to the in of timing four Solutions several organic customers hub STAMP as of The construct. in service services, contract Sensor data Due improve total operate DeHavilland support, five-year to base SOCOM aircraft. network of one-year the a $XXX option decision, award task the actions period are sensor and fourth periods, were exercised. option Court billion, X operations that airborne for the Under of Navy's with base quarter the other Federal pilot where Digital approximate performance, King followed the Leidos. Dash a and value and the spoke and of support Program engineering Center three in provide business of to services and the booked The Solutions the under Department task also well and quarter. value of Also significant ruled has by period Claims million Defense programs maintain II segment, in significant In as Multi- path denied growth. GAO capability favor positioned Executive court's Air Tactical significant clearing orders Leidos by of US the networks the protest under performance one

classified, we these Additionally, the company community, global our $XXX contracts recent options encompass Similar the was acquisitions at are deepening of the relationships. if these within specific strategic customer of strategic second adding national deals strengthen counter services in two security. capabilities exercised. occurred last contracts threats to the intelligence that over all closed collectively framework we valued XXXX, help are support transactions awarded to mission-critical This that Though the of million, they announced nature several morning, and months. and

We acquisition EPS. specific & and design their and across of and in to offer & the Cox the and existing that our Group globe. be as expect Gibbs to capabilities & Xd and services, we add Cox architecture The dating highly engineering Cox the extend rich to will is specially modeling solution has XXXX, Maritime industry accretive to regarded our back history and XXXX workforce and set and a marine to customers. engineering, Gibbs non-GAAP immediately business naval such Gibbs

provides on second market & in the for domain. close and maritime business addition the reviews. being significant after the expansion of participation that tailwinds We of to the Cox unmanned next completion in positioned front generation accelerates Gibbs end anticipate transaction In the the in combination will undersea vessels, regulatory the quarter

closed, leading Group, the December, we XXX cloud acquisition announced in provider. a to this and welcomed service a IT as XXXX is we specialists strategic Second, now the cloud and transaction of family. cyber quarter, Leidos digital modernization early and the nearly The

has a model technical robust that and as deep addition the scalable, affordable. talent, bench In is a delivery developed to company repeatable its of service

expand the customers leadership, As our process to see Organizationally, enterprise and with this solutions, our our market. to service are of our XXXX managed and CTO through team's Group to these the we accelerating capabilities And off-premise in across XXXX aligned leveraging on address new CIO benefit customers. our Defense of collaboration with will ability continue group. is the Group

law. budget XXXX. fiscal Looking to the environment, pressure before $XXX unlikely put to outlays passed the current macro now President's the XXXX is industry into Attention NGA year fiscal which billion to Defense pending year recommendation, on with year turns

Given rather flattish we with and administration's but major power leading our Also, solutions slightly to our with competition, on do customers that of not believe differentiated great particularly national the cuts, with well-aligned budget transportation, the anticipate security highest focus projected focus civil diverse numbers healthcare issues, and infrastructure, declining we reprioritization. and is demands, and priorities. portfolio increased modernization on

and that topic initiative well-being center over our an take a to other moment tackle has opioid mental our front to challenged XX epidemic, highlight more X.X and employees to the mental year, with well-being, organically free the and charge. to health efforts anxiety, app and same. the of companies added associated all we These contributors offering of benefits to to tendencies, for resources, increasingly want ago, past and years communities, grew commitment by I internal to for Leidos our also misuse Last to the months. our launched example, a exacerbated suicidal the part substance we Next, do address continued and Headspace of including both Approximately been families COVID-XX the underlying do the depression, end employees pandemic. health to

participating virtual In on global Institute's with Anti-Drug conversation of Coalitions our Foundation mental the health by support suicide most continued a America, with through in the both including strong We American we the national Community panels Health, of also Milken the working misuse. with multiple formed the back communities, substance and their recent in quarter, in the focused engagements take with days, relationship and Center DEA Public addressing for prevention. elevated for

Leidos Year. this DC, critical to needed of Alabama. We funds suicide. and nation's raised address critical and in these North experiences Additionally, well the Washington, citizens both stigma Suicide Out awareness, continuing health Darkness in look lead we initiatives to forward events, surrounding participated our Prevention At support New to as for in as virtual

our the I year ethical Financial global is mention Ethisphere core ethical standards Institute, and one outlook. companies the fourth of I turn on would for a like been over the This a by that, that XXXX world's results, Leidos Finally, Chief advancing for our in to value. most to Reagan, more the has as our this defining leader recognized our consecutive embody would worldwide, call With Jim and to practices. of detail who XXXX recognition business testament Officer employees

Jim Reagan

full start Thanks, our followed Roger, us for and joining of by both for to everyone overview of fourth quarter I'll by guidance. year, providing XXXX an the thanks results today. review and a XXXX

couple revenue, the experienced Security of and than delayed additional by period, customer year the organic in starts, Automation over due parts a on-contract of XXXX, an some grew with month. X% quarter well as basis, procurements partially On year, starting contraction COVID-XX timing offset new we XX.X% acquisitions driven Dynetics in which as more days portfolio. Detection fourth the and of final offset business approximately the prior which impacts, First, and to of its continuation program growth revenue new XX-week the by wins included businesses, and of the of

the growth found billion can be of guidance full two, organic was XX attributable expected previously on-contract website. Our on-contract end translated three, performance range calculation new contract acquired the the cost savings earnings $XX.X passed. occurred programs, estimated Next the COVID. our until year of reimbursable to of on indirect a Gen one, effects revenue due the and ongoing of NAVY revenue lower businesses Relations details into decisions award, year quarter on – which our gross in of on the on than that on is than better favorable which has Investor timing the available to slide presentation, and at excludes Full More decision lower later awards cost

a adjusted for year expect higher XX these EBITDA margins XX.X%, period. a quarter than become of tailwind were events We the prior number basis Fourth points to XXXX.

XXXX, our margins the of our driven this existing our performance and million and delivered year of higher margins or XX% over which long-term the impacts, programs full XX.X%, rates. exceeding robust EBITDA EPS end our guidance. guidance After XX.X% diluted estimated used performance. due of period. with on XXXX primary were was have increase consecutive range. would top Contributions operating for $XX the exited gain write-ups Our X% performance drivers and been higher were of matter, program and target. adjusted This new $X.XX a margins COVID-XX year-over-year. reduced to of strong million. the our $X.XX EPS by net Fourth EBITDA quarter programs increased over the existing indirect XX% from matching adjusting adjusted diluted non-GAAP non-GAAP year at volume comparable and favorable VirnetX on the fourth margins program We year $XX strong represents the grew legal quarter and on new is We of the activities to end in prior Cash programs growth from $X.XX, year upper

projected resulting net in is driven As the shareholders. at the year in call, cash noting in of return facility, third outflows worth also the the value facility full quarter, to end. quarter repayment our delivering our share commitment by we $XX completed earnings the monetization accounts of utilization It receivable of on zero that repurchases fourth million to the were

payroll labor utilization, increase $XX items, XXXX operating management, under drove previous balance the the collection flows VirnetX share Full exceeding matter over remaining approximately billion These net primarily received planned and million two the million Act XXXX cash the receivables from deferred $XXX benefited with coupled higher legal accelerated for non-recurring shares. previously CARES sheet year operating of flows. authorization cash a $X.X items is our and of Our of repurchase program million taxes. strong X for XX% from guidance

flow cash cash four deferral, the that You a original recap, two, - ending of in first, million cash payments higher and was $XX.X Bookings record utilization payroll $XX book-to-bill four, to XXXX the of billion. in staff resulted cash stronger tailwind $X advance for CARES guide times million, quarter from excuse of with flow recall net for flow And – of year. Act tax was three, a about million, XXXX of operating $XXX resulted for may me, X.X $XX $XX billion the of the the that million three issue $X.X billion. that from VirnetX backlog

times ramping and quarter and This legal from over X.X%, material $XX.X our segment was and a operating this the for the of net XXXX, offset full reduced organically. the Defense And XX year, the Solutions Defense points The legacy in XXXX results. of quarter primary delays the awards, driving for Defense new a of book-to-bill increase contracted volumes Dynetics revenue X.X% of of and Solutions higher contracts. and a an over outstanding the For contracted the program the to contracts, we year year which XX.X% And XXXX, over in grew quarter. growth year, for segment reflecting in XX.X% in X.X% prior the X.X a Non-GAAP organically. X.X net booked settlement such including awards, timing booked billion the the over margins reduction drivers year NAVY Solution times basis now of resulting Defense over book-to-bill change prior billion the Solutions for fourth year. were $X.X increased II of an XX% and awards, new in volume a ago. successful drove matter STAMP strong quarter. margins of as Driving NGEN the programs. was partially acquisition by growth overview on

year, over was the of nearly net and full a programs a as line prior as timing by and on of segment, The recorded This write-ups a an increased In rate Foundation and mix, basis $X X.X XX%, X.X% and existing book-to-bill Year. And the a the with Automation quarter, Civil for in National of booked With product offset margins the bookings segment quarter grew – business's Science awards, times we top growth and margins very quarter. new Defense year reduced of at business points prior year were in efficiencies wins. segment the driven Defense certain the delivered delivered by the quarter, Security the XX and Solutions favorable program growth our was revenue cost drivers XX volumes And the are regard strong with positioning impacts New operating XX.X%, operating programs over full reduced the FAA XX.X% driving The forma over commitment. pro prior acquisition indirect contracted contracts Businesses increase increase Solutions year. year increase organically. Dynetics on due contribution over Civil segment. increased we over with The million X.X our X% the $XXX of impact the this COVID-XX year year net pleased Detection particularly annualized full to full year. prior basis M&A, non-GAAP Civil as on for net The times revenue X.X primary billion in are customers. rates. and For to the X% point the pleased to the non-GAAP book-to-bill for Dynetics resulting year. well to times COVID-XX margins our Civil and full book-to-bill

longer travel, business revenue decline Turning Despite the competitive SD&A of for approximately Health prior after business. the purchases pleased the adjusting activity, expected and turning was driven begins quarter. latter the The programs, in contracted X.X% pandemic, impact extended to with positioning resulting market impact by its and during lower On segment. recoveries, finally segments than the for COVID-XX year lower we segment segment business reduction of on organically. our offset delays, by X% was to a recovery divestiture new Health over certain and as M&A, our Health the XXXX. partially path material a our basis, And the grew CMS acquisition air full previously Medical are Exam to by in revenues particularly global effects technology half the year. the in year and

to existing volume quarter, operating on increase risk non-GAAP over Our performance XXX margins on margin record certain write-ups our our continues prior was programs, be XX.X% to and commercial on program generating the of segment - a driven This strong quarter point contracts, investments venture. due by the avoidance in of high. business year Health highest a segment, favorable net lower basis hardest IT

the bookings years and with before two year, the in the event. books, our guidance, the billion. we Investor X.X to running we our segment XX.X%. and points XX.X% versus With laid full at XXXX Day. our EBITDA go approximately recall, Health Free The one net is revenue the next XXX% total in to Day flow with of quarter, For you of the balanced transition X.X% XXX% adjusted I $XXX that CAGR margin $X.X margins out a at targets target saw versus [ph] update exceeds may book-to-bill now organic segments already of with where we conversion a Health you in floors line is to you on growth well deployment year X% cash of at non-GAAP deployed stand of were Investor driving or financial want of X.Xx full with an year's XX increasing times. book-to-bill better three operating shared target basis ahead year And had give established a XXXX billion also $X.X of million As plan, year a XX% we've we to cash I

to efficient As we the shareholders, tax a rating, remains investment capital manner. returning philosophy allocation XXXX, returning a remain reinvesting both excess being growth We levered to committed shareholders maintaining and dividend inorganically and disciplined our for to and quarterly cash in appropriately our organically our head into same. grade

that guidance, closing. the announced our call we past, regulatory morning, Gibbs deal not we've will next and at to after done Cox & provide quarterly this receipt approvals, include does update and our on in XXXX of Now the as deal conference we earnings which an the

the $XX.X For reflecting to billion, to of of revenue XX% growth XXXX, XXXX. billion expect over in we XX% range $XX.X range the in

recent and growth last driven XX% most in expect additional organic the and recovery more health by contracts we as quarter, Navy is acquisitions mentioned NGEN cleared the II, our grow Neflect our to new segment. organically. As the than growth three in protests, from factors, including business, successfully Medical such STAMP accelerated [ph] from and Exam contributions win we business, This that

million XX.X% for from net EBITDA consistent matter, We adjusted XX.X% the for gain and in After are impacts, COVID-XX of the XXXX VirnetX the margins adjusting with adjusted realized to XXXX. year. the expect EBITDA XXXX estimated $XX margins legal

non-GAAP $X.XX expect shares diluted between on outstanding. $X.XX and of the EPS We million XXX basis

of increased $XX top CARES customer million reflects also We growth. least line expect cash partial Act million. and deferrals, of at operating working XXXXs XXXX and tax the in in support of of XXXX guidance to net capital $XXX the in burn $XXX in incorporates years payroll million This repayment down flow increased $XX income million advances prior XXXX

free across income delivered the For XXXX. flow of conversion through three-year XXX% additional cash of the context, has time business frame net XXXX

one conversion to across expect to going forward. other And time comparable deliver note. We intervals XXX% above item

While time monetization short was our in we established cash for receivable not guidance XXXX does from may any flow strategic or utilize early contribution term that the to from our actions, include accounts operating facility time facility XXXX.

Now to a comments with XXXX. help couple modeling other of you

interest transaction approximately $XXX We of million, expense expect excluding related net expenses.

expenditures are decrease We expect XX%. XXXX higher XXXX. X% Capital also of rate non-GAAP $XXX million, approximately a tax at slightly from targeted in a

you capital were activities. new due headquarters out the costs XXXX real estate other recall, As may with the investment elevated optimization and real our associated estate of to build expenditures

at we And over take - with me, that, is to questions. for I'll run can Our revenue. rate so excuse below targeted forward for CapEx Rob, of some normalized the X.X% call go CAG turn

Operator

Stifel. Thank line We'll proceed question-and-answer with conducting you. our now Joseph from And with question your you. first Please of be Instructions] DeNardi session. Thank [Operator questions. the the comes

Joseph DeNardi

Good Thanks. morning.

Roger Krone

morning. good Hey,

Joseph DeNardi

Jim.

Just – good morning.

you're and in of Just the can maybe how recovery from $XXX an you that your to of business I more that to contribution expecting air passenger business much volumes, and know, was for levered versus service-related assumption of kind And mean, kind from hardware? million have so commercial, how of that that business terms we SD&A idea the what's XXXX? is the

Jim Reagan

is is don't deferred reduction roughly - it driven that, of customers what in about Well, guide that we product sales, by is this the reduce half its for or I you're division, are a ways roughly, of the we their obviously, know, and have surface, that funded would where lot is by in fees, of less and that half looking bulk for machines that lanes what business, is that, a making is Joe. of services reason kind customer of customers you with of lot that driven talked it and lower orders closed, lower there's orders, then receipt And by passenger as outlays say services. seeing, But and on require of to what thing.

Joseph DeNardi

That's a it. suggested then if was all could of a Okay. a ended a there amount Roger, perspective company that size know, an And I you and filed about were answer Friday meaningful way lower to of your helpful. want to But proxy in on maybe a stock I ask this albeit question can that made wondering equity M&A. for offer, [ph] willingness talk price, am use, up. just at you your you

M&A? Just you. this point the larger kind philosophy overall on of Thank at

Roger Krone

Joe. thanks, Hey, Yeah.

or not close we in have know, don't potential comment deals And with we that all and may we in And have smart said what partners. may and always the market. you on want of our is, competitors dialogue to be process deals Of course, be. be that don't want to we

and scale. We've deal relationship on in discussions. in great particular we all a market past. have said But have our that size time, at no with We like we particular any our absolutely have the the the so any space, I in leaders And and companies or comment. often

at the now about are added that and two years. we in made And going in our our they've team you the the street significantly We we provide board. with have into and you last our a we acquisitions and insight have to marketplace, scope, all to excited what's capability. the to But some that told is we on believe know, management have really everything look responsibility

the a at should we everything. And look close. will at so But deals that you take look

Joseph DeNardi

you. Thank great. Okay,

Operator

Our with Please next with the is Seth JPMorgan. proceed line question of your questions. from Seifman

Seth Seifman

you you in and the Thanks in earnings sales sales of, of very much, that of against next kind bumped In delayed by on timing procurement bit few starts the I elaborate quarter, can and during most? the And $XXX quarters? last prepared little stuff where where just of quarter you this range. wondering, see at new you a kind raise talked remarks. I that came I the guess about breaking and how came guidance of was you the terms loose little million it know, morning. of the a up guess bottom maybe up the good more, bit kind over the

Roger Krone

of before at Yeah. Seth, a if that it When the in about happen We and get Claims we second bit Federal Claims would of GAO Federal calendar guidance, then happen. our November. was the and is programs actually kind Court And holiday. on of would one not touch thought of unpredictable. we of the let like. start estimate didn't Gen, Navy frankly, best Thanksgiving a rule, in Next did the and had XX-day until of Federal Federal And Court the talk That process, thing. And we the our out we which it Court it Court week Unlike December. was time, ruling Claims would a me Jim raised he - numbers has can the of is Claims. little a rigorous

which, So program, delayed that the of know, thing that you least to up buy COVID, difficult the month, very then COVID start other think of wave this And I predict. Gen happened the is with Next at third maybe a more.

costs down our Our cost, saw to drivers. the G&A had and it were further two over overhead revenue a it. telework. indirect we back wants pulls it a color. anticipated, as costs went see more half and contracts, further, go to major if those he some we type in down reduction Jim, even even I'll add cost we of to because is mandatory about than when And went we turn with And down Maybe portfolio our

Jim Reagan

some we want bit of the business, recovery indirect of of four to. a was being about program a you previously was contract had be equally a start-ups indirect quarter little just Roger our [ph] about it's it ended think the quarter for to things Exam think than issue, is kind the just it wins. then thought bigger that alluded rest we the midpoint lower there there prior it, roughly of the if the COVID-XX And a NGEN, Then rate spread, there And where the we it the up, Yeah. Medical and volumes delta the cost in would between in about group. of Sure. of quarter the and Civil delays in forecasted, was of issue impacts other guide,

Seth Seifman

helpful. Thanks. Okay, That's okay.

so, the Okay, when out in than there top what's - Is press guys was press line? about see - the that in called release, we on Is release. the is the more that item like the you million $XX and impact. then in COVID talk

Roger Krone

I'm Seth, sure could understand your maybe? you I not restate I question

Seth Seifman

yeah. Oh,

Just I COVID XXXX the about $XX talks - revenues release, for the think adversely like in year impacted by million. it quarter fiscal in the and

you to So due there to impacts sort is things And an what know, were kind of to that that expected? actual on year-on-year that in referring Or you of, what terms other happen COVID. know, decline is you're there didn't? supposed versus that were is just of the - COVID you then

Roger Krone

year-over-year when us know, the you we see results to Yeah. is know, about talking our you few Well, you relative ago a minutes discussed what during, declines COVID.

Seth Seifman

Okay.

Roger Krone

different. talked to we had What we obviously, be forecast, about previously what versus number that's when going we - the

of there's the So COVID-XX that business you've that growth by one the delta, got as well. amount we year-over-year components, got also impacted but expected, two

Seth Seifman

Thank pass great. it on. Okay, you. I’ll

Roger Krone

you, Seth. right. All Thank

Operator

of line next Please is question questions. proceed The from your Strauss coming with with David the Barclays.

David Strauss

Thanks. morning. Good

Roger Krone

Good morning, David.

David Strauss

about you organic basis? an - you Morning. talk annual the rising $XXX program plus that into on idea, what growth an up NGEN, can XX% us up? year your guides for Can terms give you know, talked into about, baked this ramping to that you have of million you when ramping revenue revenue, program in

Jim Reagan

the we for or XXXX mean guide that had You for XXXX?

David Strauss

know, do ramp how fully should much expect to ’XX? XXXX in have For other the how you ‘XX? how And guide? much be benefit So that you in NGEN in you as fully we words, ramps -

Jim Reagan

to X be will revenue organic the The in it points expect we ramping up, growth X.X of ramp to for NGEN XXXX, about year. for be it

million think the So you $XXX $XXX million in of somewhere being as can range. to that

Roger Krone

the programmatics, to have we Yeah, doing you're period. half the and as a about period, people, Leidos just these transition we're transition and give take programs, about XXXX you employees in

in will employee that in in year, the started second be ‘XX. still fully So of year. earnest, there of the will ramp the the we And but we to begin the significant up, end by really half growth really will ramped close haven't be

of as you another to three well. growth NGEN ‘XX, expect two from points in might So

David Strauss

with happens about, helpful. Okay. budget And the from Thanks. on what here. you That's view Defense Roger, talked your

characterize maintenance Given on the and Defense at of business your operations some acquisitions portion Defense you know, as would of to, side modernization? to how exposure the point, of opposed looking things, you the the your just at budget, this

Roger Krone

even obviously, our been what, our trying within know, is doing we've Defense You group portfolio. to adjust

administration Biden dollars the Group trillion, $X.X seen, for So really as areas we're And some to the XXXX strong we've in in we the service that the set even And see moving has growing. is a IT. aside platform.

see call know, people hypersonics, that platforms, about unmanned still than continue of today. the we technology really we've of would got have newer see great us to we X% some we less is have that's modernization modernization one you is always So excited to business. programs, announced you vehicles, the I the that although be. a is a know, what and mean, place We support we IT deployed, we deal operations, and mix, got where what But - we

stay try again, balance. to the to been marquee always we away has services. in platforms large philosophy And the three Our from

is, of big, and smaller, we think what our more more and are agile, know, know, customers you have. be we airplanes, ships, surface and ships tend You that responsive and capabilities trucks big the that to undersea think tanks

David Strauss

very you Okay. Thank much.

Roger Krone

Yeah.

Operator

Our comes next question Konrad of Please from proceed the Jefferies. Greg line your questions. with with

Greg Konrad

Good morning.

Roger Krone

morning, Good Greg.

Greg Konrad

little you bit the Just at that new you NASA, about to some transferring out Can pause, under changes, they maybe a Defense figure maybe is business? NASA forward. least particularly maybe around expectations Dynetics, opportunity, there a administration, any where path of or talk at kind from and the know, the

Roger Krone

mean, needless I keep source it NASA for the space administrator leading technology. a of the and We're about about programs, indicator. that to watch over been the to the of all And were made the both has think rover always Mars, I administration brought of military we country. couple television the the everyone say, council, decision think innovation. on and have the us days, And is glued think We're land NASA a else. I last program announced. to the excitement waiting perseverance space comments and that like to and about The Well, space we're the enthusiastic which a be

call we've that is the space but still NASA, at everyone lot goes Lab know, about with which we're that enthusiastic Johnson our Dynetics, the National would I don't before food existed significant into presence out Dynetics. a made always remind the on Food of Center. So have of is Space that we very position NASA A people in

the where Specifically what focus, done the to our a where have Lander end are design on you'd we about we Lander phase the is program, like call I think, we which contract, of me configuration. at base preliminary

customer, received then the the a they that make April, or as of they consistent with a program, that either evaluation time, [ph] bidders. Lander extension two-month We for that the an will will then development March And and expect on competitive has about in the three XXXX. we they and NASA award relatively from have administration will XXXX, with budget forward whatever remaining Biden does move their in

Greg Konrad

level acceleration half through become impacts, less? stuff loaded? you more little ramps of throughout are I you continued one back of maybe impact of XXXX. last some lifted, of about those is the know don't as headwinds bit just I of then some the you know, them revenues up of we breakout When - the Or to of guidance. I COVID like QX. some And kind probably the a up growth year? it helpful. the should mean, follow to That's think a around XXXX, in maybe you. mean, some provide necessarily questions quarterly see Thank NGEN And organic in the

Roger Krone

great question. backend a loaded. It's Yeah. We definitely see the more being growth

it As resolution but recent we and real impact to us QX until see the And the give opportunity you're the quarter, that. the QX, these the of contract going really now begin you of see some to know, isn't of wins. first in ramping, protests,

Greg Konrad

Thank you.

Roger Krone

Thanks.

Operator

Please question of is line von with from Cowen. proceed with the next Our your Cai question. Rumohr

Cai von Rumohr

very much. you Thank

just of you their kind in So profitability acquisitions, in? what these color terms they us fit did little of Roger, and in a terms they give and would revenues, maybe two how of is add how much maybe

Roger Krone

don't course, that. of Cai, we Well, do

we and win. services as Gibbs trend an on is about our transformation us, will segment. fits we We've fuel disclose just file We're the - nature. bid, had So regulatory the will offer about a which where I we about service Cox, things will, design. with & we & Maritime our we're come Cox rather in very opportunity all be filings. is sensitive the very, strategic for as which and to And to And think really XXXX the And between we that excited for And and our our ship that didn't very digital signing both business, how don't lot learned of I'll bring, forward. equipment the closing. in exciting good but and revenue learned mission basis, mission we’ll I EBITDA business very and And business the a period believe back we that think talk naval significant capability autonomy, MUSV for Gibbs Cai, the the they and on Defense & you Gibbs there if equipment. after around is Cox going our as the design we really were Gibbs an the deals us. ability a growing about Navy in competitive starting how in about in you lot in don't we Again, Cox, their industry. accelerates excited And our - & on the we're and growth and discussions architecture to we're closing, clearly autonomy systems. ship ship know, a with more a we were brings program, of

little where us. we talk going we'll we're to about a Gibbs let so that going. and Cox, that and And all behind and history reach And more get you to see bit out & then its

Cai von Rumohr

Got are expected then maybe it? for And us the of could impact, what COVID. of programs, not COVID because the you review there sort you revenues know,

back turn and of know, the on? that milestones what You are those could kind

Jim Reagan

COVID But XXXX. some Well, I'll in a where the is with Cai, a programs gym. we will what some you just normally into of are this review There see would impact have number impacted. are of examples that

a would risk be been we been deferred down or COVID later our back, material largely be the to not that [ph]. of and First, that have down that now the in doing will with the when lower, Foundation have COVID volume customer, Antarctic a have our coming and gone Science to that considered that people year, to significant of [ph] are has there's gone abated National project will construction ice bringing

where business well combined that get our Another synergies had the date. we're where I while the example the obviously, get had impact SD&A cost to consolidate are and been forma working business is we've the on to above impact the operations, about there, acquisition margins on talked mean, we've revenue a pro

what we're volumes - impacts, getting the COVID than other business. Medical in to still Exam and The normal higher the recovering be wouldn't

in volume but the margin a see included where And a and pretty a lingering going. business that that, we with outlook is close and in So Intelligence business seeing customers of there the we're know, our a is that largely, our view we're are you lingering XXX%, they're pleased has XXXX. backlog And in impact, lot business, where off know, getting of that places to impact run to then significant it. not you not

are So examples. those a few

Roger Krone

businesses down our some and could this economy. of would you view things about a and border just reiterate. I think being we've business this know And COVID how going of a the of really come our XX associated tailwinds very air know, seems volumes in informed until ports, pandemic very for disability because programs. learned back. and affects travel really, taken excited think, lot well. just the part business pushed outs. XXXX. of from that be it last that our they're, through then year We I And it's programs with are Cai, that affects a XX or or be we're go clearly all year, will Yeah, And ins how I some we guidance down and it transportation, view said, thoughtful taken And that reality. and their That is mean, the we've and quite about. to business, to There we've

a we is COVID a impact have that our view it mixed so and bag, thoughtful And just take of should the XXXX in for guidance. our program-by-program taken is gone literally through and portfolio, you comfort

Cai von Rumohr

much. you very Thank

Operator

with is question Please questions. line from next proceed coming the of Baird. Peter your Arment Our with

Peter Arment

morning, Roger, Good Yes. Jim, Peter.

Roger Krone

good Hey, morning.

Peter Arment

on the really you and moving Can also think Health at parts that there a about the just of that looking the be maybe of to When going margin the segment, at about just bit impressive continues just there? just new of you Thanks. ramping the up kind sustainability performance these highlight contract little all off, business, are levels. a

Roger Krone

we to win solving think to there will solution for that to customers is value in Group, sustainable. And while of are historically Health again, who we there, the one our pay what the us Sure. being higher in margins programs, our we're finding get differentiated growth our because that and that the are normally which back is in would And willing to the are didn't Health problems like, have for and customer first under that's what I of growth protest the a it the with say performance we that, the in business place been average the view track can our the seen ability Yeah, bringing then, margin you've with thing overall see two in Group it as to of above we than the where bring, has company. past. terms continue margins our growth average by And areas where Peter, potential. you large apply Health evidenced else know, approach the Health in we

Peter Arment

annual just quick you follow this a helpful. is know, And I just basis. about you your next… on up, into you're year, anything But you growth that's heading know, this call there that a something deal when outlook with would on about, Okay, thinking daily thinking out just for and is on re-competes.

Roger Krone

coming, less this ‘XX know, terms of to you to lot year is Yeah, to going in a this re-competes compared the year XXXX. have - prior

to have with of in We record XXXX. the not But but awaiting that of we another over that we pipeline. $X.X significant do has decision year think have of a one we our is one a amount large of of are billion to a bids And are contract little an customers. you said, with over value - that that, $X.X re-compete a It's a re-competes range. the year of so If know, much increase second was Army that have is in that our by kind have our only largest still of backlog. intelligence is that a $X re-competes, customers We you be But billion. HRXD, going yet feel definitely billion. called one contract XXXX is XXXX a of Engineers. of have record a number And Corps then we and

Peter Arment

Thanks very much.

Operator

line from proceed Parsons is with question questions. your with Please the Next of Gavin Goldman Sachs.

Gavin Parsons

morning. good Hey,

Roger Krone

Good morning, Gavin.

Gavin Parsons

do you if visibility factoring could for Appreciate to operating have bridge, of much been bridge flow call million $XXX the at as the non-recurring, year. for thinking mean, cash all good point them I ask, receivables. the I wanted one the recurring as on you - know, XXXX just this you'd year-over-year think color But benefits. you as into you still

this an in option just you So and is didn't curious why that guidance? include one-time year still items for any

Roger Krone

touch me let some And on Jim the through details. strategics. you the walk of Yeah, can

tax do First, to we the deferral. administration is Biden payroll what going think we understand on the

defer if not if non-recurring we And in discussion that so so positive be that about come, could deferral, we a to you was XXX be year, have it, the could item. a a there's some that's trillion, the but to another put likely so, There $X.X that in decide guidance. know, it - that may into they they defer our subsequent bill

that and what based the XXX there using day that's upon revolver program, back we borrowing? accounts when really receivable, as it is the use to, commercial know, is the or of facility On for, a asset Right, you a program, facility. like we're opposed paper advantageous cost

capital. goes payments, got really we thought in we of in you out And cash been But XXXX fourth exceeded So achieve happened some then we you that some take a XXXX. far And would what that fourth and XX% reversal. to quarter, tried as we advantageous growth overall through non-recurrings, a we rate. in had that year, that great XX% have this you we we interest paid, what requires was working depending result, in and upon know, we to next some got and would know, the And expect - we story quarter. advance had

working a have We’re business capital. capital light model, we but still

and when so t And don to difference want add more the just comes out you I grow we Jim, between and of color? that know assets, to us liabilities cash. requires fund do

Jim Reagan

Yeah.

when it can't there, that we be they will be issue non-recurrings. thing the could term, it We don't We the Gavin. could do And you one recurring, come the I two years. on It Just there know, year, is - out as you that's VirnetX tailwind. a think come. forecast a what are, use know a internally bluebird could same just here,

in not that's our forecast. so And

advance consecutive The next represent also balances, those and big flow upside some But can previously years we're ending cash time know, we it could working that other payment is we look this when how year customer off. forecast, advance the customer two operating forecast We're you a now payments. with year. it on to at

Gavin Parsons

I including million that three in the think Cai’s been just impact in up that for And XXXX, back contract headwind both just maybe like guiding try I ramps, pretty a delayed a quarters can something to didn't And COVID direct on obviously, $XXX the on Got you'd materialize. if helpful. impact. Again, year. it. something the the and sets starts comp That's then question growth easy of

most assumes a how - of just that, know, XXXX curious I guidance approach, Thanks. conservative you that beyond? curious, or taken if you know, just recoup you said much you but you versus of you just assume recover So you've that actually growth in

James Reagan

million is and that pushing more that, that think $XXX of baked Yeah, is that really our about million, there's and I $XXX $XXX guidances, right. the million that view in still un-recovered probably effect, our into to

customer And know, still be into movement we're to what's that you implicit right. there more there's this. requirements So, the while to might that's in more work going be push XXXX, about of how thinking

Gavin Parsons

you. Thank

James Reagan

Sure.

Operator

At you. Thank session. time, we've our this the of question-and-answer reached end

for Berl hand to back I'll closing floor remarks. Now the Peter

Peter Berl

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

Operator

Thank you. today's conference. conclude This will

participation may a You you time. day. disconnect for Thank at your have this your lines and great

Leidos (LDOS) 23 Feb 212020 Q4 Earnings call transcript