LDOS - Earnings call transcript Q4 2021

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Operator

Greetings. Welcome to Leidos' Fourth Quarter 2021 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 over I'll with Stuart time, Relations. Investor this the to conference Davis At now begin. may you Stuart,

Stuart Davis

Thank And full you to earnings you, to call. our like Rob. conference fourth good morning, quarter and fiscal XXXX I'd year everyone. welcome

slides find Chairman supplemental of Joining Chris we'll CEO; you our that Today's is website, Cage, Krone, the financial on also Officer. and being Financial where and webcast today's me the Chief Investor during Roger and call. today call are presentation earnings our release our Relations use will portion

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

during as that, slide to two between call, who on the four. we'll slide discuss included reconciliation will Roger and is slides. on in release Finally, and A call the begin over financial turn press the presentation shown measures. three, Krone, non-GAAP GAAP I'll today's With

Roger Krone

organic you, growth And Thank for was industry-leading a expanded you joining and banner Stuart. year all with Leidos, morning. this profitability. for us thank XXXX revenue

Resolution, performance quarter strong billion, I'll market. scale, enhanced outlook, by capital allocation, market the are X% Despite bolstered people. were we Continuing added and offerings, important challenging our and positioned during the COVID-XX XXXX, with Number the technical and technical address to Revenues in topics, and our ongoing in year-over-year. year was we up acquisitions quarter addition, In In results business dedicated our four the extended workforce. an capabilities. and presence grow $X.XX a strategic for investments my that financial our despite differentiated impact of remarks, development financial one,

to the up adjusted cash and in sixth total For margin of across XXXX. reportable million XX% represented our $XXX XXXX, revenues diluted the XX% EBITDA million. of and EPS We margin were flow the grew cash and flow expansion organically up generated In segments all operations quarter non-GAAP $X.XX. to free XX% $XXX consecutive from year in year, compared was of of

a translates flow operations the [$X.XX new am and the billion For and tasking our free national our focus. interactions limited (sic) of In how Resolution, $XXX in to from security customers, pandemic, threats. despite most customers close protracted a XXXX, the our $X.XX contracts standout cash, These of cash our to ahead award and results of which which came of and cash was notably strong achieved both metric metrics, that in weathered productivity but Continuing transitioning all million billion] well community which the and resurgence guidance I through year, slowed coordination the headwinds. well-documented well new our with team with headwinds, we workforce expectations of on for existing a proud these came opportunities, of lowered flow. operational

flow cash collections two, cost allocation. and value grow to capital drive business strong our deploy enabled shareholders, and lean model, our asset-light efficient brings we that us Our generate structure number to which can me process to for

and data around the confident United investment national of is and security customers multi-decade will radio in quarter, enable paydown we innovative share repurchases. driving year, investment a this of we're safeguard and build serve the dividend balanced, frequency a to analytics, fiscal ratio, made XXX deployment mix strategic interest. target HawkEye allied strategic debt and key us to space-based the capital heritage HawkEye was customers. leverage on Over enhanced our States serving space XXX better solutions who with acquisitions, our an In towards fourth

LLC, Solutions we and products ledger, the & solutions we in shares. and divestiture Missile towards [ph] business services, repurchasing small In allows advanced a us put sweet XXXX, that On of the more leading-edge focus Dynetics. opposite our technologically to side $XXX million to on CEDAR are agreed This within Aviation our divest spot.

liquidity, our program million of repurchase from buyback In quarter repurchase Looking Directors on or on thought to Board current only it we is Number the bookings - representing in seasonally for authorization, to book-to-bill the the achieved share our operating a through financial authorized market valuation million new our authorization. more X.X replacing a on M&A of December million the shares, open had provide outlook, ahead, and including $XX share in the weakest Still, XX our will of market buybacks color shares three. privately Chris is prudent on aggressive we development, more and industry. the share can prior of the billion negotiated expect shortly. our remaining quarter, and We XXXX, to stock, XXXX our be our view the consistent that ratio up of transactions. increase Based of capability. business our seasonally shares repurchase X.X. transactions, net we environment, $X.X Under accelerated authorization in we a

awards about new work. Importantly, the were for of half

we the book-to-bill $XX.X for of year, of For booked a billion ratio awards X.X.

IDIQs, billion, we received future so support program Parent word growth. protested to awards Locator include XXXX many our we as In continues re-awarded each operational We're I don't for defense, makes with them. of like on and including the our have doesn't support speaks R&D NASA NGEN, of of at Health. attractive sector, Laboratory either backlog whether this known Combat tracking, Civil been Command orders any for the ISR developments earlier still which roughly the bookings $XX.X in networking almost anything system us the firm end utility quarter AEGIS. our GAO the task to for large of protest Dynetics Total national communications award traded backlog to twp the in at a billion awaiting object. include takeaway modernizing and our for of stood fourth we've Our Technology $X times work Federal publicly large single the positive denied the on we aerospace FAA and although to incumbent The X.X strong month, awards quarter, Energy want had Air another to a the to in us. that Support award the foundation total National to Service focus on support IT what in revenue, of

Thermal that for Our headcount system long-range up Critical also the one novel research, hypersonic funded recruit, and the weapons a program the weapon but Dynetics $XXX ways is our we're the a the support the We long-range the prototypes Capabilities prompt was common-hypersonic Dynetics system. We're contract will contractor is Technologies navy cost-plus-fixed the million for at the relatively year body awarded top supporting Hypersonic grow subsidiary prime success. environments U.S. contract, ability year. System The Army's hypersonic to to weapon for weapon and XX% develop to our retain, from protection materials seen These this critical have program. center quarter and extreme and navy Rapid thermal hypersonic key fee from Under their of Protection right Office. flight. strike also and The the and were inspection elements working and of efforts. made system motivate Dynetics were standpoint jointly of and army our conventional acceptance a just Number programs system the priority, flat people them. shields four, X the in is well hypersonic subcontractor broader glide for are during

health would they and truly in We a our record and executing the mission COVID been plan asked clinicians date, and delivered, has tough have an MHS successfully transition moment for their customers largest of collaboration our commitment first lot tough as XX,XXX deployment ahead of to unwavering XX,XXX like additional delivery as employees of GENESIS to just complex been for the a people. this I and NGEN our year challenges. its system providers our thank and three put As part to Leidos or delivering market, a it's light teams to them whether take as months the for wave customers. of electronic for

of all and of and that a is access to for One and respect equitable resources provides support we fosters through a the intrinsically linked ways yourself welcomes and others. integrity contributions sense people are Inclusion everyone. and the our opportunities that belonging, responsibility perspectives to company culture by

from Our employees employees and culture of are creating a as a values, and makes lives that committed doing better. to to uphold our empowered We're incredibly are in our of standpoint, well making the diversity we're that how proud unique. continued communities their transparency Leidos as we

so our the information consolidated our we on regarding progress chart the time, journey. on website, diversity, can our we'll report For publish EEO-X which detailed includes first workforce

agreement non-defense Biden the Chris, Authorization last the Since presidential $XX to the defense request. to QX year budget the for defense X the and levels Senate of National CR. year be passes fiscal over Bipartisan House NDAA programs. fiscal Defense law. Senate a after the year billion authorizes approximately XXXX I'd Congress won't leadership spending call, reached it Spending Before February panels the line announced and above turning into and $XXX to for current bill increase signed the programs, passed billion address President legislation environment. like The Act numbers on well original XXXX appropriations and an on publicly until top another

for for increase non-defense and for a Ultimately, there consideration. XX will appears packaged appropriation larger will it defense floor be accounts. single However, into slightly increase an bills accounts omnibus bill a be

it are by the call by X CR approved and to that, so approve for before can the XX With be will XXXX March can President that deadline. - the Cage now Senate details the our and the Chris March more by our results omnibus turn I'll President outlook. it then so We signed floor on be over hopeful the the to brought

Christopher Cage

jump everyone billion, Revenues Thanks, let's Roger. statement into cover, income to joining on five. prior lots quarter. the slide today. the quarter beginning up And the $X.XX the X% were year thanks right with to for for With to us compared results,

revenues revenues acquired $XX million, organically. increased X% Excluding of

onset gave organically by revenues the the the were the cost especially than meet about quarter, lower on lower XXXX. behavior that factors sectors, and CR was with billion, XX% higher of time on reimbursable the which guidance and continuation up off to direct led customers back the last call. call, For exacerbated with on that worried on we cited half This some total by to the the extended limited X% we we anticipated contracts. and defense variant paid the range where than Omicron These normal QX labor in the was intelligence employees $XX.XX given ability the our compared usage of in in to of funding. year, a customers, saw revenues held and In

XX.X%. basis of lowered earnings. were to Margins prior XX and Turning margin Adjusted our $XXX for higher lower from than the for leave fourth adjusted million an was although favorable points margins with impacts to normal and consistent XX messaging, expectations. than EBITDA down our quarter EACs below normal sequentially taking EBITDA net year-over-year,

EPS margin. year. basis adjusted $XXX an joint venture improvement year was that For EBITDA generated quarter quarter gain income disability adjusted million was the because recorded XXXX added in was benefited the $XXX which $X.XX the to up first and the we of the In quarter backlog was XX These for diluted a over year, XX EBITDA $X.XX related XXXX which billion, net the XXXX. and XXXX exam the million to XXXX. year, $X.XX were to the margin and $XX Mission non-GAAP XXXX, XX% points Adjusted over for two points for from of pushed XX% the cases million Alliance from fiscal of of for items of EBITDA COVID. basis Support Non-GAAP

and year, XX%, reduction during year. up The diluted For a of repurchases non-GAAP tax income X year shares growth in came in line for XX.X% million and the XXXX. which to from at non-GAAP compared year, EPS rate the respectively, was net EPS non-GAAP effective expectations. XX% benefited about from fiscal the were with

year prior results Defense drivers of by Now X% Solutions billion to slide six. and key on QX revenues overview $X.XX for segment of quarter. compared an our the increased

Group, Defense the & a Afghanistan. the system-based Solutions supporting organically. the were revenue Gibbs NGEN the human up and than growth the ramp, in largest offset operations of acquisitions Cox of SMIT within was completion Excluding Dynetics landing acquisition, which The contract program driver small X% strategic XXXX more and

Foundation in providers, the Solutions an existing commercial organically. For in of the the and the FAA the Civil energy were and National in small to billion, increased total year $XXX In products number programs X% the quarter, deliveries segment. with were and increase quarter, the $X.XX Defense year, revenues of from lower Science security revenues down total of million demand a transfer compared outweighed on full X% programs and the prior Solutions of organically. X% $XXX Defense quarter million

increased across For revenues million $X.XX billion, Automation contribution year business the full billion the and with as year, in increase many growth of from Health the and increase by to XX% year-over-year of and the $X.XX quarter, to acquisition. disability $XXX Military Technologies and Civil LXHarris the programs was largest in prior examination the driven quarter, XXXX from a Security for on-contract organic. up growth an program Counseling revenues were Life was compared that all DHMSM business, of year Family nicely and well. The Detection

for Health XXXX from fourth I from year, quarter on over quarter were cited the the the last we were the drivers quarter. the third $X.XX of the XXXX. billion for completed cases same previewed for with down we XX% call, as As segment revenues Health revenues up the backlog that

margin X.X% quarter seven. XX%, for the at sequentially X.X% the were was operating quarter XX.X% decreased XX.X% on to relatively year. price security in compared for non-GAAP the slide for to prior on year year year the from quarter volume Declines primarily Health Non-GAAP non-GAAP non-GAAP profitability prior quarter quarter. the XX.X% and but quarter from in year operating the programs. operating to primarily front, X.X% for year attributable Civil the to came deliveries. Solutions up for margins compared for from margin compared was execution. margin was prior from year XX.X% segment XXXX X.X% enhance increased in margin to XX.X% down fixed prior Civil margin Defense operating year the On long-term Health in XX.X% lower for XXXX. operating quarter and year in stable. volumes the the margin the XX.X%, to non-GAAP in which fiscal to investments the of unit from program in increased primarily product were in

now enabled the to year cash is the have exceptional million expenditures, headwind CARES $XXX $XXX performance every us of free million, XX% with exceeded was cash flow was conversion well was flow the our of deferral, balance across This million $XXX Operating Free for sheet segment above flow million. for a guidance cash Turning out for of tax quarter to and the year net $XXX which flow, and rate. $X.XX billion, slide on the and eight. operating capital conversion target was our cash million. the threshold Act flow would Without XXX% $XX fourth cash the we from for straight year. close

As of times. we target remain to committed leverage a close the three out year, ratio we

outlook the shareholders; quarterly now inorganically; and same shareholders growth, levered on Our our tax long-term, to the cash strategy slide rating; remains consists On capital to efficient dividend maintaining deployment forward and investment our in returning manner. balanced being excess appropriately returning a of and to organically a reinvesting grade both for and nine.

me XXXX close targets. 'XX and Day. projections the our end X Investor out the let achieved or forecast XXXX, year of on exceeded of our FY we period, gave commenting financial at we a Before marked all financial first

cash Over flow the converted growth period, adjusted XXX% versus net above grew of into a target. a organically and we versus a of target rate or target, greater compound income XX.X% margin achieved XXX% XX% greater annual an free at or adjusted X% of EBITDA our X%

large cycle; for that, through a that through let's approach we protest. are forces We take XXXX, we awards be some of consider. it's likely two significant take can't there should no unknown, last will to protest coronavirus We receive There that long there are through the that impacts metric. in get expect walk delayed the takeaway it and omnibus that we'll Omicron large year drivers As the with. With that be get measured, how won't contend our we continuing awards guarantee this guidance, outside the look variant. recognizing sure to the is will will balanced be February; and are bill to towards each spending factors to to an important COVID want

billion, organic $XX.X context, the year let's growth To between when would consider divestiture mentioned. from revenues remaining with into revenues XXXX X% billion and almost range This XXXX. growth fiscal that to the put acquisitions balancing expect XXXX from growth in over be of X% the and We $XX.X XXXX. reflecting to the puts Roger moving that entirely takes

NGEN that the ramping the On visibility good into positive side, upside. have some still that wins are other we and provide

side, in $XXX volume program. all as of the about human and known negative system from the discussed Since These QX have headwind a Afghanistan emerged. reduction another drawdown, additional million the million from then, exam landing and $XX On $XX have about of disability few headwinds we call. were million the

were our we into with work of than about that to First, UDS. NGA the UDS double if won consolidated the opportunity was UFS procurement. XXXX amount million represented we to follow-on awarded not had that UFS the more in $XXX revenue

addition, customer year are RHRP of In from about now pushed January not notified us million to been program they $XXX recently revenue until the transition. ready generate and yet complete has that the the should date start September. a This has

pushed to QX. as FAA at procurement multibillion-dollar award just FENS in QX expected least the Finally, has been from known date an network

October multiple committed we of margin consistent time. laid the range margin we XX.X%. on, EBITDA extra and the XX.X% gain mid-point target range MSA with load. at the The $XX XXXX long-term case with same adjusted million out exclude is expansion exam our over expect the We're Moving Investor disability top is levers as between to margin when And and the XXXX the the end of Day. you

levels. between $X.XX which basis shares unchanged non-GAAP of million outstanding, is quarter earnings the per and $X.XX on year the from diluted fourth XXX expect We for share

flow incorporates million Finally, guidance $X This final we deferral. XXXX CARES the operating of billion. payroll the least at repayment cash Act expect of $XX tax

was of Jobs As of effect year amortize that went a aware, that costs. you're development and XXXX into provision at there Tax requires and the and to Cuts of capitalize research the us the Act start

our share repurchases, flow guidance of operating flow update XXXX operating cash share Depending we $X.XX towards any estimate be XXXX allocation year Our about as timing estimate all operating you we fiscal to modified $X.XX comments, to we'll or a for Expanding significant we environment. cash $XXX be repurchases, any cash of our material The operating provision the and deploy to operating could on developments $X.XX on deferred, flow repurchases, assuming will to we - cash currently We million. of capital that provision range year. XXXX upon the assumes to Rogers in repealed. price portion flow impact the currently no unforeseen expect this non-GAAP through add and $X.XX provided not does go account EPS. the the

slower a industry a year the we've revenues Given expect normal decline addressed, in which QX, that to the in start factors is with we us. sequential for

both expect revenues year. and to the We build throughout margins significantly

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

expense Capital rate XX%. tax We $XXX are expenditures of or a of revenues. million roughly about interest and approximately expect non-GAAP X% approximately net of million targeted $XXX at

activities violations counsel Board have employees retained been XX-K conducts up to of our I code of the self-reported ultimate portion comment international investigate. to or late to and outcome questions, third In our to a our the on conducting of and our laws, we internal conduct will open XXXX, we're our not parties potentially in upcoming business by something you we applicable anticipate able internal our led impact. SEC. like our there raising filing concerns We're ongoing, that investigation of including for that investigation through certain independent processes and discovered see may operations. Before to committee related the the voluntarily outside of an FCPA. Because have We investigation and DOJ by is an would

Rob issues our customers navigate recognize As and our believe what Ultimately, we're for industry With and I'll in transitory call a questions. that, offer we the the well are positioned we XXXX, we our can we the industry. value some but urgent facing capable compelling so as the look to turn challenges, them. company can remain take proposition needs are most that to over largest, to

Operator

Seth the question. JPMorgan. Thank Instructions] you. our of Please line first with And comes question proceed from Seifman with your [Operator

Seth Seifman

Hey. Thanks good morning. much. very And

Roger Krone

Hey, good Seth. morning,

Seth Seifman

caught for to know, you up maybe I you outline if you And think could or that. probably, where able to the it offset the I so adds like $XXX places guess you I to Chris, it headwinds mentioned, sounds expect XXXX. if million it be

it of next like that that, given Just overcome by seems you year? a headwind amount know, to reasonable itself,

Christopher Cage

up. mean fortunate that for ramp Seth. that No, absolutely. strong how will we the to visibility Sure, really into the second year the going continue I of program question. work we're NGEN Thanks program, into have job And that's we're excellent as now And kudos on project done of see the to to early. that starting that just to follows our some program that well. team an getting transitioned

So We several transition catalyst. that up Life protection program excited featured Family the to is There Dynetics certainly won third program. in IFPC ramp we going a we previously things Military continuing one thermal that program as and that's about, the protection we're within quarter, program. Counseling system forward. thermal on the nice talked about the Roger

a us the that pushed to on hopeful guidance gives those delay today. the one this by later award. big If be, don't, the in AEGIS year. the will us we're expect both provided be it that So further modeled with for We growth would of for we how action had that what upside potentially months come the line. growth been we AEGIS. because anticipating happens We've we've were But to to positioned it but year ultimately, a six revenue then that's obviously, potentially in they within be big have been And We that's catalyst into mode. swingers now. RHRP out expected, will transitioning still other incumbent

Seth Seifman

but $XX Okay, so just it's Health overall about and headwind. even I - by to bit about But running of a just in about been if of at just overall And talked we for level has great. of Health discussion Health, in about level more. maybe the just that thought just business little because thinking then been the you million segment, Thanks. the contraction piece or the guide the margin know you hot, exam dig don't qualitative the pressure? level, - growth guys

Christopher Cage

to we Health to as able do our we grow be business. continue Well, said, expect to

continue with position, performs programs important and on like has But nice we've begin DHMSM consistent being is given have execute. on large potentially that us of track backlog The We're win be XXXX of to how and up might that profitability We other and ability case in the we the pipeline. particular with knew visibility to And gives those there ramp their RHRP which excellently, expectation. a we're come line segment We for which our a with Ultimately, contributor. have to procurements we've been to But the margins opportunities an we're worked is will revenue timing that when out mid-teen what been talked still number had trying but area. seen the would those be coming been that performance. about just COVID down. delayed, the that business is in pleased very cautious about procurements there. down,

Seth Seifman

much. Thank Okay. you very

Roger Krone

you. Thank

Operator

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

Sheila Kahyaoglu

Seth… Good morning, Hey. Chris, since Roger,

Roger Krone

morning, Sheila. Good

Sheila Kahyaoglu

ask well about margins, the I as might balance sheet then. Asked the about

both you repurchases. M&A Obviously, share more your know, that's mentioned little deviating aggressive bit strategy. with You a from

And that? for about larger deals? your think of appetite kind you do what's how So

Roger Krone

that some bigger we what really transparent on Thanks, about capability We new tend this and is those. on focused about We're cash less transformative, give M&A our is the And Sheila. capital talked efficient We're to to something a then enthusiastic really barring course, excess we've morning. smaller. is that invest we it over way we've for which and be tax those has things shareholders. major level out years the we're that not debt our access good is a need to find several course, against or to performing the dividend, And company, we stay transactions back done deals. we pay of past before, our have - adding maintain this the allocation cash. the Sheila, that a And in going indicate And and said way customer, pretty been, quarter there. is of some we our now is to really we that and

you a So will, are we but cash as take that generator. such great

raise the will impressive, dividend, think, to continue year-over-year the buy that shares, we back we're believe I is and saying just ability in future. Our

Sheila Kahyaoglu

then segment. And maybe one Civil on

I it the in of unlike and it's the was think it think segment the market Day in end it Analyst declined XXXX, your quarter, outlook. growth one - but lowest was I

talk you the and XXXX? growth can kind there expectations of So of kind for drives about what reacceleration of in your Civil

Roger Krone

FENS FILMS thought it area a The program Well, and I'll in have time protests talk and quarter follow. an looks 'XX about where first program a is a delays protest. 'XX. we it let was been 'XX quarter us. one which and is couple Chris named things, third could protest. at a like AEGIS was now it's of award, [ph], I'll Civil program in really and hurt We a had

and Chris, the in happen. acquisitions going both still us, by programs for of piece my the across board. of took to I think I have, Civil industry think, these these the hurt a major of mentioned, part we are way, - as the in delay that. And But the So brunt

position. way enthusiastic has period. the to And we're our through so through get the to competitive to got then happen to them we protest we've don't got sort with get about The awarded our know And to and AEGIS. AEGIS, and we mentioned acquisition cycle they've just customer going what's

be we Federal get at air detection and of D.C., be and that were Omicron for sort hoping in will seen levels. Court know, of protest business variant come of then the right we'll maybe behind in we kind upside, that although but earlier. resolved what nominative stronger rebound security like And the of a could if there Some fingers there's I've nowhere But round our that Omicron, our look travel leisure, crossed, kept near again. frankly, We we'll it. of before, have at said much of somewhere it - And another variant don't a Claims, hoped. had off in I another here have we rebound, but back could

Christopher Cage

Yes. we're a bigger only to IT opportunities those And a within take get few. a to near is set. not that beyond. decision also longer of I'd they and continue like be and growth tend tend he the mean we modernization through to digital for will catalyst We of but to Roger But in the Civil a pipeline. 'XX mentioned that term positioning transformation, SD&A, customer aspect Sheila, mentioned assuming number something the continue be I that certainly see thing and add, process, but that the to

Sheila Kahyaoglu

Okay, thank you.

Roger Krone

Yeah.

Operator

question comes the with Fargo. Akers questions. of Matt Please your with line Wells from proceed Next

Matt Akers

morning, for questions… Good the guys. Hey. Thanks

Roger Krone

good morning. Hey,

Christopher Cage

Morning.

Matt Akers

question. will think from kind can think if X% X% in could I mentioned if you sort you just comment us last growth to sort kind biggest it be long-term was are longer if gap the - you of term? of of walk I what you on wondering And bridge 'XX But I at you just give Civil of some the the maybe where of know of could growth the a to organic the target. things.

Roger Krone

Enclave hallways, mean that. at how day award program. And another it's I'll that that against a more program office, we're Defense a you can't Services, program, I'll right underestimate And that's let and I be just about competitor, is. a what a things the add. award. with it's And But a of Well, than big were large talking maybe it probably competitive you were there's the will we in couple very we're know quarter least mention XXX first protest, that Chris hoping a I if and - up will the around

assuming And then so And in that maybe full will a a ramping. later that of of will RHRP the start start We'll to ramp, win get year things. touched we couple NextGen. year. Chris on

quarter to Ukraine to right going range we a CR are did the guide, lot to Omicron saw positive. can uncertainty. where the here we where with we in end that's for a get you the can everything on and thing on, first the that's positioning we thought guide. and And of and We're we very, there's that But it's high going to a that. very do amount are do. on ourselves else with everything the happen of But us nice So frankly fair the was

Christopher Cage

That's X couple we ultimately right. a towards especially horizon, expectation the on prototype be talked things a programs, which as 'XX, Dynetics programs and scale couple every I'd those of they're be Matt, below and positions other that look the of I Again, that mention. just winning, aviation continue full for excited return about those about in to out more programs pre have we time but dollars we cautious year catalysts the pandemic production million turn as years. as far XXXX, hundred growth the business could market, we're will goes. several line for levels combined significant top into outlook The again, that 'XX screening

whether big it So that future pipeline. programs be area. many and growth we're a couple or tracking, more AEGIS, mentioned FENS, a that of be there's the DES could Roger catalyst in then the And

anticipate the near with So things year position about growth outlook. But more will we course that's on can bring kind term visibility, we'll of our There's we how we rate. things this us for over the it. those several be cautious in that until think accelerating of

Matt Akers

- Great. you discovered you get resolved? Is that there year issue I That's us helpful. you give the there can is violations. might tell us when that more you on on late potential FCPA And the or mentioned any of last anything guess more magnitude can

Roger Krone

We we we investigations, what we're you these wish you. open restrained have when can on Yeah. could. really tell But

think and let - the tell more you, Chris K. when to you we proceeding. is it's But have pretty what in investigation in litigation tell the section see an paraphrased we the paragraphs we're open we'll you right will you much and But So I know. now,

more the in sometime we'll And future, to say. have

Matt Akers

Thanks. Understood.

Roger Krone

Yeah.

Operator

with Our next with line the Sachs. comes Parsons of Please Goldman from questions. question Gavin proceed your

Gavin Parsons

morning. Hey, good

Roger Krone

Good Hey. Gavin. morning,

Gavin Parsons

you gave Chris, the quantify full on help year the of any specific this those numbers you appreciate I the impact COVID-related revenue all us tailwinds. quarter the procurement the Could headwinds us? CR, bridge color just and a program delays, utilization, the that of of, other assume the on aren't headwinds

Christopher Cage

kind Well, in. tied of it's all

kind as made activity, fourth also the some took quarter a of of or of that, Matt might new - on of view the and be we decisions As chasing than layering about kind we're growth when and in far thought programs on as saw normal that third we in we lower on-contract really activity what Gavin.

So shaved the again, timing those of point-by-point couple of all might growth, we we ordinarily it's things we points been. mid-point of where as more and decisions. the obviously, have where kind position a a pipeline considered, of thought through our award But off of and

Gavin Parsons

Got it.

the conservatism also a So of of to which does flip. think kind from Roger, unpredictable it DES, you're headwinds a be have how level about how some maybe then like sounds given encapsulate contribution maybe coin that you could of that, assuming But these been? do lot

are thinking you've about you of that conservatism how level So in the here? baked

Roger Krone

there the potential budget the awarded, And get an the year. your variant, not government call in throughout balance, programs then to with going are, really a people on many opportunities I conservatism, some or rather shutdown. for not, with quarter. as we of think to multibillion-dollar we here we first I to that we going But even State position - release we are potential the want, a omnibus. words, omnibus, so COVID need that to really everything we especially the be of get Well, ahead mine, if just And would we're year, be us could where as these and Washington an can we can another that's haven't are skinny want in mean, get of we then there rebalance Union there's balanced in risk, And this had saying I we the it still these decisions, by President. need here

lot a uncertainty if So of there's here listen in to radio. D.C. you

in as items And we've to a and good released. position the can we got work in so range, away a where risk these get just range we want up be

Gavin Parsons

to year and a 'XX? year this range? X% of it. question. quick Matt's normally to X% Is to disrupted X as And Got just after clarification X% should it. it's appreciate I X% we still think the Or right

Christopher Cage

Yes.

changing we near the Gavin, year dynamics DES pointed more year lower kind outlook. X there. as to you the on last point than continue major had And months, paths get to hopefully, We to not starting such anticipated to be outlook, of this as clarification time, but term, others have we we CAGR give many in that at haven't as that couple able we'll - There's and resolve that given we're right. played these over the out some of X swingers of in point

Gavin Parsons

Thank it. you. Got

Operator

the next with Our question is proceed Melius with your Spingarn of question. line from coming Robert Research. Please

Robert Spingarn

morning. Good

Roger Krone

Morning.

Christopher Cage

Robert. Morning,

Robert Spingarn

does March, segment I how in margin a 'XX little Roger the but ask I or got lingering a hey, improved security COVID Chris, you we a revenue about wanted transitionary this, to yeah, of you Civil, with wanted but on the 'XX? the down from bit want do margins don't a perspective. know one detection. take CR of which that to if the try, and going perspective. to to And a you've it's How year from And about which question normal? sequentially, think being So compare talked still into I

Christopher Cage

have lines business might the we've and too, elevated internal to at start where I'll are some would time opportunities going now going was from that moderate that to level taking. around Robert. margin what and to for we I running come Well, and are around that some signaling say thoughts having that and an you been Health here, business tell been other of have was Roger And the been we've those expansion conversations actions I'll down. the

finding in built expansion confidence and drive balanced on thoughtful challenging but as way to time. good pull the their And we business our levers to leaders portfolios. that the across so that a opportunities reality we're and And a over to XXXX, have margin make we're doing

So that's to the off rebalancing that you margins little getting I the to should of position what see, is grow that the we is think across a group bit can more continue there. a stable, then Health portfolio of and

margins way And should the so you play out that's far as go. as for 'XX

Roger Krone

- and And question. ask go Rob ahead your

Robert Spingarn

to interrupt want didn't Roger. I you,

Roger Krone

No, don't Rob, you. I to want interrupt

Robert Spingarn

type frame of to an getting XX% should back Well, number, that time what like term, be? longer

Christopher Cage

needs I Well, margin the about to mean, it piece volume That's to for Civil, above that's a critical right. increase if average there. aviation that if there's rebound Civil an our of screening the portfolio, gets market, significant you're to across talking and XX% specifically, portfolio,

security to that contribution the But without wouldn't aspects in see from XX% this the there. those decent growing signaled, and to be we're portfolio point continuing products levels we've As get hopeful, at time, in we'll a the business. starting of across XXXX core

Roger Krone

make I point earlier. make that to I'll the Rob, was going

marketing been and really two to scale, raise operating through business, that. ways, benefits size, efficient, You you've our because right. And in from spend performance, you have seen margin R&D, less more real being journey, being we've capital, able on right, that less less some

value-added and or differentiated you've business right. years relatively margin X on don't programs LPTA as where a to roll so or bid X cash quickly perhaps mission we low maintenance work, your generate us highly in and like customers. to the doesn't by got perhaps lot support bid portfolio other a good of change you mix bids, are if those you doing you system. way, a off contract would way change they build investors and mix, maintenance the like can We our And like. But as with that's those they would operations thermal X% you're raise have contracts our things relationships on is protection The and the help

chain been more things up the discretionary then But better. shying fronts, bidding and better, our moving and have on we both and also, funds away operating commodity. using being on on differentiated that time are really work So you efficient, value if more more moving from over will, LPTA

Robert Spingarn

was just... the enterprise-wide, Okay. I when XX%, thinking I mentioned And Chris,

Christopher Cage

the mix areas, level the from at depending portfolio, XX% as to for great Yes, is will that we and XX from to. Investor the that that to and We expansion work to was expectation Rob, aren't we pursue in enterprise, well, today our on pointed continuing well, Roger pointed you're year, couple opportunities - upon then to give areas a out, Again, contracts, challenging a as long-term our going came of margin there. Day. us points me basis do then get believe, that as target items repeat. signaled XX.X% last year

Robert Spingarn

it. Thank you, got both. it, Got

Roger Krone

you. Thank

Christopher Cage

Rob. Thanks,

Operator

The next line with your comes of with Please the Barclays. question from Colin questions. Canfield proceed

Colin Canfield

question. Thanks guys. morning, for Good Hey. the

single first - just With question. to digit that digit. on in getting kind a headcount follow-up you us that FY and just and Matt growth us headcount talk the growth assumed applying to 'XX, So the respect of Gavin's into talk growth FY your about targets organic to organic mid rate? high are single accelerated 'XX Can about of

Roger Krone

mean, can. Well, we yeah, I

our really at out maybe don't being or XX. thousands, in able to more number XX,XXX will have left, have but comfortable numbers, and ability that have at that week. XX see, we The K, of be people obviously by hired with add people left about We're the nominally XX,XXX. heads. need. to the people exact great attract who a we've the And we to Let's every of have that number putting And people at who team, continue the or attract of something industry of or when your significant like to we number. retain a that's we And look literally retired really you to leadership out put people actually, the little I short just as resignation again, workforce number around is we a the And the to the and company. specific risk a in look question add still the without have either gone we competitors. And think to we the - are

in skills we're some need based have and a usually of also in people. language. inflation, The are the wage is frankly, of paying our a that numbers is just like to I'll opportunity the we what seeing bit right one, and coming But seen guidance. we all programming It's And other we're uptick grads college college, lower about rate. Python at that, little our of question we some out wage hit get hire

allows to which career effect. people some us beneficial cost earlier that into our so has structure in And a bring

is want we XXXX. that frankly, come say the in been risk culture a work. always fortunate we pretty done we've already create that six - where people been to we've to hiring the first have weeks workforce our to but us, and year So the on of And a company a item impressive for

Christopher Cage

at the only rate of have for would he's thousands because is Colin, as I the doesn't it right, same to add comment, to but pointed the and we the business we on manufacturing more come don't Those level growth product to to of and going the are those that market to revenue the expect. SD&A catalysts Dynetics headcount require and revenue that thing 'XX grow 'XX of employees, it's Roger's contributions not same side, uplift. of things drive programs return production - in the some the

So to but a to it's relationship not the on one-for-one we're focused get challenge, it's a outcome. it, big

Colin Canfield

vein then competes just of you're you assuming Can price Leidos Rob's sort where rate Thanks. of of can kind both with kind margin kind it. you to mix the up and thinking, us shift that to what are of hardware work. following versus talk type assuming capability? you And on of about competitive Got better question, CACI respect contracts into on win and

Roger Krone

very, of draft competitive digital lot on is bidders, a bid. not of large some to The process I'm say, a maybe sure bid, on RFP, then bit. I than, transformations the digital hardware our even see. versus transformation large know selected hardware little describe process, I'll The very different acquisition down competitive opportunities. number digital are Let's for a transformation. us just RFP

a and R&D On production that simulation and actually a get a eventually can maybe investing a a take large the side, out then getting we where program limited prototype our to with concept in which in it it a own a or it. in cooperative research lead and interested shoot to or a order, field create to And and order. CRADA, we customer we leads a production prototype spending the demo hardware like a starts

of widget digital the off somebody rarely how other again, the we people And we've else's for transformation is our fighting we're developed. our process, in So jobs, speak I in widget why which, competing to and it industry, and us, we against like are Very where of there. we mix. compete, taking our in we're the win really areas widget a our it's proposal large can't in that some in differentiated out this we third-party's typically technology

our long-term. said little you then in benefits we differentiation that like over a where the the can of we the we've If reap followed a invest we story hardware, a over product, bit and bit little would long more more term, can

Christopher Cage

differentiation thing we're there, attribute allows The us more that, we've be successful other front, I'd but And speed. Colin, about is to agile. other nimble, talked only on that more the the we're is add

fielded more And emerging capabilities, a be that we positioning more get so quickly, we're for and as because can successful. at ability characteristic looking to quickly, sometimes is to respond that allows our us delivered

Roger Krone

Yeah.

an there, airborne months. our you part And this within to example Just concept really a excited delivery needed about tell because business. asset. can of that who we're we went from XX We an had customer

fielded got airplane, months. put GFE, one [ph] bought we airplane, some gave of we we think, that we customer we the the is program, a and speed, security minded and differentiators. went equipment we So XX within scale, And our through test in, us the

Operator

you. Thank

proceed Next with question the comes Mora from Please questions. America. Mariana of of Perez your Bank line of

Mariana Perez Mora

everyone. Good morning,

Roger Krone

Morning.

Mariana Perez Mora

a could and not is growth under words, X% to over to deliver? normal is you from the digits this makes new this environment, in given just confident promise environment? next years why not and slow you So what a in X% organic this growth, uncertain mid-single that X macro get and start other a the So

Christopher Cage

that Mariana, the over last right? giving see. the Well, and see 'XX guidance that these challenges also But in sure the only pipeline. same we're these at seen, to we trying factors today, we've on the needs it those months, we're we And X reflects opportunities time, make so based

our us is rate we things the achieve and we try we But is they growth. customer themselves. for will a paint still the to right, believe that that we now, give today. it a be right a we aspiration growth funding so ultimately of at picture environment ability the where levels that given uncertainties resolve how look some here we depending sit you're there more upon going our But And little and that think these buying of the increase term that as longer be how today, they and could the demands will 'XX, that time, over uncertainty have cautious to bit the of start for in have

Roger Krone

in we've Mariana, this we about talked is And future. to to the will where be past, position have Yeah. think company been in trying the we the puck the

look the we non-defense. greater omnibus, at an there's growth be even So - going in to and think as we

benefit Health bolstered the space to past years. And our for we competition, been that within areas we in like we will So electronic which hypersonics power positioning things and then shift business, several benefits Defense, think over warfare, Civil and again, great and years. us have have which the now that

risk just are. a lot of there's of be enthusiastic to And why needs that term. XXXX, we're long so about first the we retired is are quarter we In where which

Mariana Perez Mora

strategy? the discuss Thank pricing [indiscernible] scale affected win doing more you. as could [ph] and sculpt also on please some you industry competitive dynamics being And then are rate players pressure

Christopher Cage

price typically. the do so decision, we a to have Competitive great going not say great we would of I our believe that competitors upon team set team. to leading only it competitive have always clearly, and that on we And we our in business that To be pipeline mean, a away early is we market looks same a based where up good like, is try it's pulse different. We Roger's approach dynamics, But each steer and earlier to win point, think each competitive so development, the good in one things that I managers, compete. - oriented a we're procurement that's capture we the go what to against want price process are we way.

highly put different ball, competitive, off anticipating to we after need So go we're always foot be forward. eye best we there's our no it's our to everything, the that - going taking not

And the bids the our in pipeline. prosecuting we've way so been that's

Mariana Perez Mora

Thank much. you very

Roger Krone

like the time looks we more for Rob, think of up And I it top to the have hour, we're question. one coming

Operator

Tobey Yes, question Securities. Truist will the of be that Sommer coming line with from

Tobey Sommer

that your new and give may I re-compete your work? was a if for you the to could on us look aperture for this pipeline you the of business that proportion business inform how year takeaway wondering next in have perspective up development and and

Christopher Cage

our is our 'XX, some add internal to lower-than-normal Chris, say I a book-to-bill actually and on what Roger be it's we Hey, that Tobey, this of and goal our can informs target is. kind in think and color. more needs year what would so

So ad that absolutely, win percentage after, takeaway opportunities with increased comes of it's and we're that expected an new business going lower rates.

forward. have very is don't the on our we're best put eye it lower great. we to volume that So our take the a ball about is be we any average than re-competes and certainly, And year, foot prosecuting thoughtful through. But which off

attack on in ordinarily more definitely we're So 'XX be. than the we might

Tobey Sommer

well? true Would that 'XX as for hold

Christopher Cage

there tell probably that visibility with mind year. our re-compete broken of not down I are top would great coming one next that that yet. for you I haven't we a cycle to XX mean up that come programs is

but that Tobey. get through -- as we way on color our more So the year,

Tobey Sommer

Thank you. Okay.

Christopher Cage

you. Thank

Operator

management I remarks. now floor for turn you. will back to Thank the closing

Stuart Davis

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

Operator

your This will conclude participation. Thank today's for you conference.

at may lines your You time. disconnect this now

Leidos (LDOS) 15 Feb 222021 Q4 Earnings call transcript