LDOS - Earnings call transcript Q1 2022

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Operator

Greetings. Welcome to Leidos ' First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone today should require Operator assistance during the conference, [Operator instructions]. is conference this note, being recorded. Please time, Davis, Senior this I'll turn Stuart to over conference Vice the At President, Relations. Investor may you now Stuart, begin.

Stuart Davis

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

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

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

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

Roger Krone

Stuart all and thank us joining morning. you, for Thank this you

Our to record of from XXXX backlog strong a levels technology standing first in our and with backlog the position marked revenue, leadership government quarter start market.

reputation We business resilient diversified, performance in continue portfolio. innovation record track systems our to our across digital -- build of and technology, innovative cyber and

confidence increase X. I'll strong delivering the organize Our picture messages. around federal our our remarks four in and full first quarter financial my results on budget year commitments. improving

X. to the meet results our ability commitments market. Our financial outperform demonstrate our and

X. our differentiated testament Development Business in position to Our the are a market. results,

value, and capital consistent drives allocation Our X. approach shareholder

success. them workforce and develop X. attract we to the for able are We need long-term

of the was plan with a for in XX.X%. Non-GAAP and towards margin and an strong both is Our of X.X% quarter of X.X% $X.XX for of ahead lines. bottom was metrics the $X.XX billion quarter. the financial All EBITDA once diluted the up organically again total EPS were top which market. our three up top year-over-year, Revenues the were adjusted performance at

X, flow dollars cash Finally, track of cash billion cash million. of we generated of $XX the our organic $XX book-to-bill operations remain million this more a operating We of achieved growth momentum sustained flow in Business representing a Number year. quarter, Development on X.X. flow drove net year, and industry-leading to than we $X.X of that from generate last bookings the billion free ratio

awards In and enterprise billion quarter end and up at -- that at As was Information agents data cloud a the civil, and Solutions. a quarter including segments facilities. and center three were takeaways of cybersecurity rich advanced cyber. new and where We're program, total XX.X% year-over-year. result, We in successfully backlog The stood key Technology capability lengthy XX-year two completed constant which across protests. $X.X areas, across the and the NASA won $XX.X centers billion, record large will in our all digital of balanced concentrated transformation and business awards we Global communication, services provide

integration our IDIQ XX aerospace $X.X billion a The continue of with single is more we'll than FAA, across years on the award national the a support For systems XX years. ceiling support contract NISSC new contract.

disability modernization in examinations two award planning, analytics transition systems conferences, the totaling flight won air multiple to we In provide Our aircraft administration. benefits unmanned of and over billion and support a working efforts. strategic and half about data for IDIQs veterans $X.X control, security, safety, and years Health, six procedures, traffic

a United us, first the a United exams new for The pre and re-compete the -discharge outside is was for States, in the States. exams second area

$XXX the Agile services. new million two security inspection Gibbs focusing more DevOps, competition cyber for within totaling our programs and internationally. and future about for cyber service won $XXX on U.S. In million, design and won award the and services excited Secure management we're audit opportunity Although to five-year We program. assessment, Defense combatant Navy's continuous expand monitoring, a ship Solutions, our we'll have business, Cox engineering legacy subsidiary

contract common our also had Information $XXX biggest, is impactful a not simulation the IT takeaway Agency. Defense bookings. IDIQ We And national a the This training The a the Systems included framework. serves DES digital Defense million win single-service enhance billion systems. We single-award a in into support Services gunnery in XX-year readiness of services across modernization the for win Army's defense. on focused were most provider on modernize is quarter to awarded work consolidating spectrum to by the $XX.X Enclave contract the program operational

in is mid to this now expected, award decide with protest schedule a June. GAO As in

X, because bring our one further wide X,XXX us to to One partnerships access. what our that this generate value differentiated talked the our on range of technical in initiatives, creating infrastructures the we edge recognition And Partner strategic a digital success a a repurchase. for customer through share BD partnerships, our has $XXX of M&A to the quarter, to X. only will areas technology We fostered Amazon to technology greater and more we about Web digital accelerated quarter, for honor as with programs. such Alliance set proposals year. AWS that XXXX we truly gives We're accelerates our be with most ons hired business Last And pursue strategy. enable to on focus and capital ability and do. careers. attracted sector We'll heart next-generation that to followed for review build the at with the deployment. continue the significant People view collaboration cash differentiator are groups. and regularly for of repurchase. value. we drive Number XXXX to successful target vendor solutions and a was the awarded and to us of a our Leidos XXXX, and AWS am founded keys is We employees to I that continues development large Leidos the important in ratio cloud with - keys that grow Leidos cloud recognized allocation Network, for shareholder this I all partners Leidos people. talent of well-positioned including partners firepower consulting of levels This the innovations partner share leverage million One we than capital strategic which illustrates greater our look at near transformation. company. actions as deep are This relationships Services. is, of company we people capabilities deepen plan to in to reason Leidos across drive of add network build proud with and our public

is Officer, thus Initiative. He Steve quarter, Group has have lead for in new experience XX prepared made new as thank to at I Resources and This before as He'll Chief will Group pleased for role. excitement programs experience of and with role, his new at on King Human him ensuring the outstanding Leidos Deputy We're and retention his Dave and employee an and shaping brings Dynetics both remains strategy with from background technical I welcome to recruiting Maureen, team. about at Dave's Steve's President. X,XXX people his for strategic Watterson, enhance step far, matters journey new want several Angola years focus. cleared funded to Dynetics importance. areas stepping of a well an decided with back for smooth key the continue the a that, forward continue our Life human working Dave capacity. deputy. President. will his we leadership capital our talent, with change our industry-wide here Leidos Paul Leidos capacity, in Leadership team moves our advising through set commitment contributions Cook Leidos critical strategic vacancies and impressive look and to and levels. up will consulting who Board as leading Executive him of to and Maureen background, Her team Dynetics NASA skill and his extensive shortage to

the missile on awareness. lead focus will national space security a for surveillance, with Paul and situation Leidos addition, space space warning, In business

capabilities. to modernization his role CIO from an the of team within CIO our and cyber portfolio expanding enterprise solutions technology. of Chief To Next, under Carlini, will CIO the differentiated to (ph) operation is lead Jim moved We've our our the demands and meet with move business defense Hall technology as our growing Officer, rapidly tightly align growing Technology digital business, Steve group.

where Boeing, many joined more operations, led and Shanahan areas. of government, and acting Directors. commercial Finally, other than levels the served Board highest relevant Defense programs, He of Pat and Defense, Deputy including chain industry, supply Secretary years airplane including XX at with Secretary (ph) has and our he

advancement and control, communication. driving he While benefits at shareholders as for was technological cyber computing, security, Pat, for digital command, customers. DOD, champion our the and a department, of modernization well wealth passionate and offers and tremendous as cloud AI, expertise in of

I'd half includes and hands also spending omnibus Before the fiscal $XXX in fiscal But Congress federal support with budget fiscal this work like time remainder his new billion for budget Since in increase momentum in budget It year spending, includes devastation for trillion non-defense a in and $XXX given spending. request. over will X.X 'XX budgets funding of emergency $XXX billion of released through in the year call defense provides spending year, XXXX fiscal billion passed President the the of defense positive in non-defense $XXX the government billion to request fiscal $XX new The billion from the of the turning increase Ukraine at address individual to year package This the XXXX, also to and take environment. congressional back has spending the supplemental Biden opportunities. their and from XXXX Chris, programs of call, $X.X way year into Russians. current spending the QX XXXX the X.X the 'XX.

have country. United donation people are significant more mobilize rising supply are the those with we've fiscal estimates In million help grapple send The displaced. XX made To teams finalizing process, relief to supplies. Nations that the and and impacted, increase people lost to kicking medical continues of of over passing thoughts legislation hope call and the their who and project to conflict replace. measures. a Ukraine. The closing, than When it year will of will that the colleagues our 'XX ends, friends rates, Ukraine be Cage. now to struggle. Chris inflation markets, infrastructure to COVID-XX remains a in And billion with to on our $XX Congress strained in chain off the energy competitiveness congressional addition Ukraine family also people budget with American bipartisan only Congress In lifetimes turn war will the China. the have take beginning focused to emergency issues, I

Christopher Cage

Thanks, thanks Roger. to everyone us And joining for today.

QX said, the for quarter strong team Roger proud was I'm the across and board, of operating As an delivering performance. outstanding such

XXX fiscal the normative decreased EBITDA of year-over-year, right billion, as Adjusted EBITDA up the beginning $X.XX benefit down primarily first results, Slide given Alliance jump net was $XXX to move down with across for for million was we hiring but the the from expectations fiscal income indirect Mission the $XXX for a the XXXX, Support first more and was organically to our of X.X% Revenues the with weighted share joint accelerated million the to which period. compared for estimated which the three Interest quarter $X.XX, prior-year X. million was the quarter XX.X% statement robust the & the year. Revenues past XX.X% quarter, Non-GAAP and for tax year-over-year into the was first margin and in prior-year compared acquisition non-GAAP to over million quarter, in up down quarter. the the million were quarter, quarter. diluted levels Adjusted repurchase. million reportable shares the high of first return Gibbs result grew $XX Let's $X Non-GAAP on the as was The to rate as was a the fund year quarter diluted EBITDA all pandemic. X% to projected XX% XXXX. and was borrowing XXX net quarter year-over-year below first EPS which same as XX.X% well the related segments, utilization. spending share was quarter in was line the expense X.X% additional venture quarter income XX.X%, adjusted for $XXX average the to with labor compared count year million Cox recorded for The down

growth an prior Dynetics MSA quarter. operating within to programs. completion margin as X.X% overview of support prior on X.X%, quarter. Non-GAAP support compared was support Solutions, our engineering compared more was primarily volume in which well Civil the to energy profitability primarily were the in write-down existing venture pick to for year key the as on X. for taken program. Civil, prior decline and drivers income The by our by increase quarter and a compared the The our came attributable contract XX% largest minority the and offset providers. contracts. human engine Now, the if the the system-based gain the as Health increased as Defense Hanford the of revenues compared to quarter. was of investments margin segment Afghan well on to drivers programs, to quarter. compared Defense the growth revenues prior-year Slide XX% down the Solutions of which to quarter, in results year than ramps, landing end Non-GAAP prior-year interest prior-year developmental revenue the including the result the X.X% segment the driven revenues X.X% on joint The by to FAA, at in in increased as higher period, increased was commercial operating

quarter. compared the improvement on was benefit certain introduced increase Family on attributable Military into in timing. the the in non-GAAP continue procurement year The ramp on efficiencies prior profitability XX.X% dim program a margin segment We sum large Life was income from deployment had Counseling delivery to and Health primarily and based year-over-year XX.X% to operating contracts. to and

the segment As to previously, for we we've discussed expect margins mid-teens Health year. in land the

million. which and was balance to expenditures, the cash on Slide flow, million the capital of was quarter is free Operating cash and $XX net now flow $XX Turning flow sheet cash X. for

about in program shares ASR The the few quarter, shareholders, after time. program that we'll earnings with days and end receivable funding repurchase call. impact During Ukraine, $XXX borrowings next the liquidity. X.X our markets sold we commercial we've the was immediately February through will we AR to market commercial of paper. remains quarter-end, When and the cash monetization by million hundred program. place returned have cleared Russians quarter-end, exited the on-hand our there we the the our shares. volatile able for $XXX to issuance At and retire outstanding still so put at first if constant, a quarter. share became no short-term accelerated the for of retire price Since principally CP million the proceeds million had million more of on were from cash We that CP another within two We're so share relatively weeks, through thousand invaded we $XX two then, some paper flow accounts combination

investment-grade a $XXX of our the had we committed and our XXXX, remains debt. to three same levered long-term and in leverage being balanced to strategy of target our rating, first both equivalents billion organically fiscal on in outlook, XXXX. to growth, a and dividend shareholders maintaining year tax and inorganically, reinvesting are shareholders, efficient returning manner. we now, excess returning quarterly shown guidance On our a to for X, Slide as forward April remain of $X.X We million of and deployment consists times, appropriately capital maintaining for and cash the cash As cash ratio

$XXX. a range few call, or still we will around a $XX.X XX.X mentioned average offer last $X trading Specifically, and with non-GAAP encompass we was billion quarter's mid I the current $X.XX modeling. for share to of and EPS comments $XX.X quarters earnings price billion our per On share from between share operations year. three a adjusted the between benefits from said, outcomes to diluted in plan, now We're XX.X% of cash believe ranges likely forecasting implementing $X.XX the 'XXs. expect of were help volume repurchases. the I we and and greater. revenues the EBITDA With go, stock That When between billion margins weighted

has addition, costs. has rates interest borrowing risen with have which In world tightened, increased liquidity and events,

we $X.XX be projecting addition Given factors, program than $X.XX. QX now these from ASR to to closer the are the

current multiple in growth, long-term exploring and may we execution. increased the addition, benefits we're investments and opportunities These to In Business environment Development, Leidos could come see where shareholders. our favorable pay towards investments prudent R&D, program and is

Finally, as Roger generate to flow. of mentioned, operating we track billion remain on a dollars cash

back both cosigned of research cash capitalization generated before be the We is delay in of year. from number have operating of As end who year. the implementation of members tax half pattern, the the costs, our pro share lion's will still rules, the that expect will we legislation believe the restore Congress usual given retroactively parties policy tax the of new to innovation flow

our costs lower we $XXX However, target we over I'll million. amortize were the pay taxes to by some and turn operating currently take a can flow questions. be if Rob research so call to the cash required, will With that, approximately

Operator

a question-and-answer poll Thank you. session. Thank you. we Thank be questions. We'll you. One please, conducting Instructions]. [Operator Instructions]. while now moment, [Operator for

from Our will proceed Baird. line Peter coming question the first with of Arment your be with question. Please

Chris. morning, and Roger Good

Roger Krone

Good morning, Peter.

enacted could you we're maybe bit a talking certainly even 'XX fiscal when seeing the looks about, and about you're little the the better Roger, for came 'XX for outlook in how longer-term talk budgets.

the how there. think Dynetics about, of Leidos when context program a just records, you outlook and fairing there. talked And the you and about in the of also kind business the Just think is I lot

insight could area in Ukraine? products and benefit. some you type where know benefit I you give potential activity is do any from defense have of you envision kind If any there

Roger Krone

two. or sentence in up broke last you Peter, the

Ukraine. regarding Just

Roger Krone

Yes, okay, great.

I products? have any Area opportunity there Defense Is you know some there when

Roger Krone

talk me general. let in Yes,

have to not anyone. we sure of switchblades program, probably for said, make is worked fully in there to that we are of that which significant but more because the that don't and And have because to that more stock probably Yes, we think now, so war, didn't of the then, be a the for it's went we're Fires inventories bad community. to down supported. effort that I the for and javelins giving -- direct think think seeing That of we think the to some of replenished. to world, I used be We're peers for. that's sector We're will nations and bad being providing probably long money and programs which be have it's really not I a First back got hypersonics we've because think, that things away in meant conflict our a extent and [Indiscernible] the the that, emerging it's weapons and to is support of our of but we're for business comes we've will Certainly I of we probably the U.S. industry. bad, and country. in good some mind. in And But labor higher Indirect said, and and tempo that accelerated overtime, weapons the also like seeing really and business tripolar But those business Ukraine. our supplemental the from I'm spending. is appear global Ukraine, yes, were op spend expect for defense deterrent I and will in some being the the all, on plan stratification cost bad anybody term the business, threats that it going Europe, and we future, more the take

the if time having can we a I we get We the a still world. place is budget we you the is think think very broken defense money is, across up every the lower budget. country out the put will, learned the and peace that I as in comfortable that view back because complicated world to broader end defense

between to the a the Leidos is up, that strong now almost be will future. the prospect at defense the seems So budget long defense bar iron I for And us budget there's think defense an has side like as foreseeable civil and for term is what's good see especially the side. we moved

seeing benefit a us all So commensurate which the are of we really civil in side rarely now side, a without across on provides increase defense our the segments. increase

the I payer, was my And broad real this the debt and positive to all that about But CEO, the will, Leidos budget within so to position able the as as that. a as which been the has from and company for and for national all federal tax strategy someday and I we I citizen, of government. a the worry a markets be implemented, now address about worry balancing

of some government. the And international

of So both another PBB like we'll see be as I our just come place system said start then to year 'XX relative government in at I to that frankly, the to second my going half through think sides. industry. money follow. looks will comments, strong favor in And 'XX to we're and it's the 'XX going That's on a spending.

your So thanks question, Peter. for

Operator

you. Thank

is Proceed coming Kahyaoglu of your next with with the Our (ph) questions. question from line Sheila Jefferies.

Sheila Kahyaoglu

you. Thank Chris. Roger, Morning

Christopher Cage

Sheila. morning, Good

Sheila Kahyaoglu

we Morning. of your back And Good was regards to do need mentioned how profitability? costs see program you if regard QX specific are it or in this come quarter. levels? execution to or investment the from seeing step program up comments, cadence Chris, is the profitability year, broader? does with you Does R&D in for just be, in investment it

Christopher Cage

Sheila. Thanks, Right.

singular more than program. it's a So

could just a payoffs In to teams that been we where those variety bring seen they and fact, longer-term cases, be to lead of encourage and number see our opportunities opportunities. of we've creative it a business And forward opportunities.

that on that we're make were and time all schedule deliver on in performing on, to budget. and on we programs sure on Some

there. customers. those the but also to we one be invest And will on will opportunities of believe generation to we certain areas there's believe that so continue because example, want next see technologies performance where we to we those in future programs That's demand with lead those

progress an of had As for build, through it we factors. relates the to the that variety the of expectation pattern would always we year that as profitability year, through

we're There's plus that the of deliveries more into over to program for and program, to a or year the to have work loaded that of nicely. the project back now product that end visibility half the opportunities, move as year. NextGen, sees Some Programs deliver ramping continue we timing more been has the little very just the of maybe which customer. X bit performance, like team the back into course up months Navy we which,

as quarter certainly surprise So I think inflated being first trade some modest and the will the We of your the as increases spending we're as counterbalance where far the were not the back, in on with of as it's things over us. pattern the Health seeing the course being close margins year involved you getting some shows saw. But that that indirect question, necessary. to the a bit with on anticipated in road, a little

And pricing our we as built incorporated for year, those so, we the expectations. certainly rates

Sheila Kahyaoglu

you. Thank

Roger Krone

you. Thank

Christopher Cage

Thanks, Sheila.

Operator

Thank you.

question of proceed next Please is with Our coming questions. from Caivon your the with line Cowen. Rumohr

Caivon Rumohr

Yes. Thanks much. so

April, it's and the earnings and funding quarters. of onto help quarter the of up cadence a the XX stronger. week se, sales Can on next in had to us here of cadence color per is in Khaki, terms in guys in some the you your quarter throughout Maybe X.X that. terms of over funding they're X.XX like So following picked some revenues whether give three although the and trailing you

Christopher Cage

What mind will orders more to Funding the see an on our customers anticipating one Sure, issue. more as gets hasn't in on being do? see notably with issue earnings? funding seeing way wish play there been And program don't customers. things would I those time. question these funding particular revenue of funding starting on of an progression potentially second available fact, So the a little tell we and part won, and And be and that your that that Cai. of it some the there way sorry, to on VBA bit of comes on a where the was we're contracts, us we're particular so things immediate was could over particular funding. types we I'm out. the It I'm just some one you, the And we say recorded, of the to right other It now, example programs. funding than we come that's varies

Caivon Rumohr

progression and the the over year. revenue Yes, of earnings

Christopher Cage

the in That obviously, the of see Right. that talked there was year. modest program, There's start the uptick will we no AEGIS programs some talked through our playing award and contribution It's contribute a just just about we really new second started. second build as quarter. out; that year Roger got the so the to about. in more obviously we first other half start of

rates the run we how think dial little moderate volume modest bit see of Think course but that of certainly health and to the back steady growth will that I will margin down. the increases see will exam within the variables rate key more moderating, be normative growth uptick a stronger, One that was discussed. in over the the And levels so you'll as you rate know those the we've half year. with down back of continue about year anticipated profile coming last we've the

Roger Krone

and very some where When these programs, aggregate us we whole process would very, on I add on start to cycles. the large side. bills officer process billing program of getting a the the work as smoothly getting a takes couple that as and mature Cai. funding Hey, of it we contracting will

the programs, getting invoices, these that we and officers, process which new new programs. just so and submitting of because us level, the of getting do more to some mature are And invoices, with as contracting available the customer to at process are efficiently aggregating as working operate it's funding not our it's of on

on, that will see that goes year the you reverse. as expect we So

Caivon Rumohr

Thank you.

Christopher Cage

Thank you.

Operator

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

Robert Spingarn

good Hi, morning.

Roger Krone

morning. Good

Christopher Cage

Rob. Hey

Robert Spingarn

SDA Roger, recovery. I that's where improving and with if business on wanted the to the that's ask traffic running

of it it XX% I -- it. at made where was it acquired trending know, you I think don't when was maybe about,

Roger Krone

is it road proposal there's takes there stop, out we're better lagging. just more, is again. process, And when And any regions, traveling a come but like it started the there's international then getting air RFI, the again and our Lessee, certain RFP with time. activity to essentially on so more engaged and an there's you we're more. traffic is acquisition But is or cycle in U.S. than still still at team lagging, customers in

And who in In that's the think been forward is trying a airports passenger been get coming experience, forward now airports modernization technology. fact, checkpoint of both of take the are post President Grail talking of of COVID, which touchless a to time. airports. plans going overseas to us investing has Group Holy to new But want which baggage. all will with include We're just and kind to I through to the go we've

been has before into get slow well back. going it's 'XX recovery the to we and take So us

Robert Spingarn

the that business? can a for Chris, have quick you And international what domestic is split And you. Okay. one I then remind us versus in

Roger Krone

that. bounce it's it see signal Rob, to the Where we the where little demand a does from internationally of I future internationally occur. we'd back Roger's given more But point, will when know precise less that don't that right. in comes be more in service. days, and that But a that focused. estimate domestically Because ebbs these demand flows, bit focused focused

Robert Spingarn

maybe base, should've about think is probably better the it installed it? way I'd to that's asked

Roger Krone

More now. internationally. this test to more base installed internal going We're --

Robert Spingarn

to And Chris annual ECI and escalators what much of protect or backlog, price is fixed on Okay. those to do have a just CPI then that extent how like bit? contracts

Christopher Cage

tell revisit in pricing inflationary take spent health are necessarily building assumptions time our those a well oftentimes you, And are in the up you building we're fixed we into increases don't and unit things price on. consideration this rate rates awards opportunity I quarter of deviate, have our customer. to large we that And that. lot of an if like would we escalator a pricing. prescriptive by But cost the protection, the Well, in estimate have forward

as concentration moved our far revenue. the much As percent overall, fixed-price hasn't as a of

So the lines what new historically. you're of seeing in come seen same we've along orders the

Robert Spingarn

Okay.

long-term expectations So no real change to from your inflation? margin

Christopher Cage

that and certainly as more gives the backstop time. the come plus the some that certainly portfolio still priced this the in at you opportunities thoughtful best mix We're bids. price we not installation, but fixed can XX% we being new pricing No, cost back to we're of components doing having than about new

Robert Spingarn

Sure. Thank you.

Operator

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

Gavin Persons

Hey, good morning.

Roger Krone

Good Gavin. morning,

Christopher Cage

Morning, Gavin.

Gavin Persons

the couple XX don't lose purchasing point ago, the customer of customer for if -- inflation. budget. like now placeholder we just budgets Fiscal doesn't raise DoD have the made a Roger, on follow for their power a the the in quarters Maybe inflation Seems they that inflation question. will you a necessarily

purchasing the is the it is in of both So, customer sense your government cognizant inflation terms and cost of real that inputs? power environment

Christopher Cage

for, understands let's a the of that impact of customer of the inflation me immediate Gavin. is in point growth have judge they increased complete budget. for It's say, Department the see. the large, they a in out problem the and Certainly tempo hard op especially have to The we fund. And their buy Well, fuel whether would I comes out, to of versus variety cost Defense, as to. writ real government working talk fuel customers capital

are are -- going that is don't at level, see they're things view going depth a top-line my I that for cap the SEC are supplemental completely SEC of in And happening increase. understand on enthusiasm to to think down variety that. get of inflation. the that macro there I the depth economy the so -- sort And they

back we pandemic, sustain in here the is of as come get and I'll as with thinking town is, 'XX. overall this we -- the just impact Washington look the Is they're I also as and through you we share that whatever that But think inflation not rate. to of rhetoric normal Ukraine, the around what at I at the budget out to is will they 'XX

Roger Krone

talk give will little temper over the to normal that back level to at quarter which But there's a lot will Inflation I know these a this sustain of quarter-by-quarter to top-line I'm bit won't a but of - will focus pre level. down. this on I Maybe and come reading the the numbers. next economists real more or are And levels, two, reports that -- COVID not them economic that more

Gavin Persons

range a Appreciate you you what factors take were just you've Okay. the risk terms little for Could maybe the the are, talk lot of bit reiterating a that higher guidance, of And would the that in de that the insight. in low originally place towards moving pieces seems of you guided. then -risked end like about when year?

Roger Krone

lot don't lot Chris quarter, of that happen what's of Leidos, to didn't still still lot take and in away first our you we uncertainty. start I'll didn't that numbers than when we're team made a they you range. we the here gotten to But still meet the Yeah. is protest, risk quarter, of a has to put is going upper comment of that and going And within I our have a talk have although good in know we can been lower retired a certainly of and pluses should guidance add. there's we I for Enclave there's And at Ukraine. obviously we our is We But the we by standpoint year. a in when more range a lot marketplace, we confident first ability Defense we're the bounded have hadn't the out in said things are were remarks clearly from and more we're budget, the about know out our but guidance. our confidence ages it's so on What prepared within minuses. Services. balance a forecast my within in

Christopher Cage

new think orders that which over that watch we've the Yeah evolve. -- bidding certainly were we learned months. There's we're some programs process could been at carefully flows through on. positive year, environment thought budget that we through, to -- Gavin, exciting last have and we'll of speed The The lot we've went next that's from a couple here. things to the

months positive at us. trajectory. about that over for so year we're believe point nice certainly the could on three decision to ranges But be at next And upon it this in those and premature depending the catalyst so timings we in, time. a this changing the think to was time, for two still overall We're

Gavin Persons

Makes you. Thank sense.

Roger Krone

Thanks, Gavin.

Operator

Seifman of the with JPMorgan. proceed comes The question from from Seth Please line next your questions.

Seth Seifman

Thanks very much. Good morning.

Roger Krone

Good morning, Seth.

Seth Seifman

start health what's going high-margin decline? nearly better exam on very think last I there not with off wanted in if How is I guess. what a Just necessarily know medical win profitability Saw to there year, it's and margin, about quarter. the cause was was a contract the than we that normalized that the a but and to to should XX%

bit what an closer went high You'd something to, rate more maybe, so, probably that's have there. give a to visibility that Were little and still drove And cans? you the and up? drivers sustain do medical ability exams margin the down year-on-year if

Christopher Cage

Yes.

pile start Roger can me let on. So and

an first and driver featuring exam primary delivery remarks. margins. So for we as our doing strong doing the saw, more it we're to deployed more the we we're the give quarter, They're delivering not and more, dim and prepared I businesses, seeing just the excellent so. job for team. in to about to finding have the they've efficient customer, for software again talked And sum efficiencies. they're procurement get How opportunities

I won have opportunity position think remarks, levels about that And we're you maintain a The year Margin a a that to help business to same well. So things. quarter. which where I in there. helped one X, talked we expand exam carefully prepared ago. haven't is about read onetime area the a say ongoing contribute little if the an Number in excited really pickup, before. it basis bit. actually will we would we provides us largely two but doing little that That was profile bit our business of were on internationally, a been

watch one On side, contract, know regions, the on perform dynamic will potentially margins also area will re-awarded out and and but but that far there, one and we some load anticipating an to downward areas wait could that as added that's the they see. year, potentially of on, that a certainly play how our were to we put on have case course the we're couple the don't additional over how of suppliers, gets the flip We moderate mix. pressure so the distributed as we'll of have we'll to

Roger Krone

Seth, Yeah,

Christopher Cage

the of go they a period. add I'll week, the through potential customer will year strong we the review. there exams discussions a maintained next just with do that this bit and colors The of is back little and year had per that day, number we've is per of

So have the other some what call customers. they those things to [Indiscernible] of that presumptive what forecasted. exam with above cases, prior and discussions volume the had sustain business the sort related -- We've in of might things we

actually served six, will which timely presumptive you it's We go yet, to as the for haven't another when and bit more it our two through talk the volume see. more on be is added cases. transition district go added active exam you this military by, because and the so important the there country. through seen of it's contractors that anticipation your of They way come provide And the VA. volume all to really, people about quarters but can we a the And exam wait -- customer medical lead really added the who a the to

just want And I and exams have have out. more the into we'll capacity add they system it to we'll so more because plays see to think wait how and

Seth Seifman

in expand through outlook that margin seems And With regard with company you investments. it unsustainable pretty Thanks. rates regard like seems for is the an margin follow-up. had the has health to quick probably as year. to and guidance, some Great. a level place about then, Okay. talked a the revenue but just year, had It in strong more the the QX,

what's rate? in So the driver margin improving of

Christopher Cage

on the see and There's a questions, Well, term first things, the Seth. over variety to above we're all, of fund if we believe we the smart investment investments, of even those for if going were long they Roger deliveries, are where the plan. now, will SDA our ultimately as we of business guidance. be. although not is of But it the we about to obviously, I talked holding alluded product to, right as hope some

margin. our down up of a at portfolio. the portfolio, program more half but a we're Dyne We're increase engine. other ramping That are off little of over the is parts not some new to loaded anticipating in for and is a the obviously projects performance work We'll delivering Project products of the are we what back-end up preparing year. be health course the year. and the in [Indiscernible] goals We not We're are and moderating far off There's the this some those far of are, factors over some loaded, the working on right, that continue the shipping year. moderating of across bit tics back-end will variety still better you're wins. of back scale

Seth Seifman

much. very Thanks

Christopher Cage

Thank you.

Operator

from Our the line is Stifel, question. with your coming please with next question Bert of proceed Subin

Bert Subin

morning. good Hey,

Christopher Cage

Hey, Hey, good morning. Bert.

Bert Subin

you last quarter So of something following ballpark million several said SD&A higher. on Roger, up in normalization question, $XXX the the was

or up see into than could heading XXXX, not? to business you greater could you tailwind So for a organic X.X that

Roger Krone

the And my -- doing without math head in

Christopher Cage

to that all get It not we'll think increase, we ultimately We're be that's where step expecting we'll right? get function back able Well, but yes. back overnight, a bounced to.

Bert Subin

a Can hypersonic Okay. follow-up. And on things the then with just stand just give where business? quick you an us update

Roger Krone

the but up Sure. and production are, the have production, body customer. Huntsville And glide common our can't manufacturer, is we We make down fully first in the I Leidos glide Dynetics ramping delivered ramp. fairly funded. to it's - a we common are program share hypersonic body numbers The what hypersonic steep

This the goes won is the the outside common this - protection body. talked about in on past the thermal that coating glide hypersonic -- system also the we've contract. of We

above we're though the launcher, tranche so think And rates clearly the the which capacity but although hypersonic there manufacturing we our And our is weapon. significantly what we're parent in And long-range we business. believe what in those launchers. contracts program, training. written, we we excited We there upside need, on with position associated producing get then the hypersonic army to the in doing system. financial additional near-term of the program. put thermal in build a is a huge and protection contracted delivered forecast, more with there's our And also will And conservative we're about for. say this, we we're launchers to And I in makes we're first ample have had raise as

Christopher Cage

But is we're the really great a doing job. but excited team

Roger, to the fact, fly plane recent out it really of because on some of are today In later had to celebrate Huntsville they've park. successes executives other down getting they're myself, a and few the a knocking

Bert Subin

Roger. Chris. Thanks, Thanks

Operator

with The Wells Fargo. next question proceed is from the line of with Akers your questions. Please Matt

Matthew Akers

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

Roger Krone

Hey. Good morning.

Matthew Akers

fast wanted I realizing ask morning. And about good that kind that sort should program? how pacing of under you come the about we could And year, how expect does still assuming should ramp -- think about run that the ask what's that some point back we of rate to up? of But that just to wanted I programs to ultimately, this at later protest. DAZ. on

Roger Krone

of clearly to it. Yeah. We're can another sharpen slow very part the overview on Chris quarter time, then round of protest. and you Claims. give Federal to could go But Well, GAO I'll the it the a go optimistic an protest. it numbers in We're that ramp. rule is Should

program will, So let this across, a is approach common are to me you network is, if the describe this -- DOD. come over to taking environment IT more

by networks will the of this agency basis. agencies so DOD outside happens of we transform services and other agency And

come billion-dollar The it but a first the we couple by Almost out I of your this very June, relatively than more not would is in small. time. builds putting small. we model. dividing revenue caution much and protest that double-digit XX.X If in And transform a then XX year over are agencies that. will

our We is win have there mean, to achieve that. models. It's potential to years that smaller it's in IDIQ an I and several level a out, That's but not that at that. do ceiling. than

a the contract internal level. actually become our customer at that But spend how works, that significant be room to take a at will and to to it level. on program that slow If own you're years in ramp modeling, grow familiar from gives that we'll

Christopher Cage

Obviously, I'm probably defend high the win ourselves. get dodge protests. question your of team. Very we excited ahead They more. degree notification, have confidence don't going want how know Matt, to mean, to to to a I of our in get even

point, potentially, within through in to like That's that top really we'll and years the customer, great do I that the go a maximize will because we means program in years. programs And multiple multiple what process. deliver don't the up and DoD will to we capability not so But see for take It to news 'XX we're believe, June. this going can happens is continue the we're that And there. to about growth this for good to Roger's our of one think feel everything Estate. value expect to drive going of delivering We're agencies XX Fourth 'XX. will to it but get become, that to in contract, probably the

Matthew Akers

environment any are the on get people it. I if you Got Is hire new work you hiring Thanks, and work? What seeing? just this enough And one easier can all guys confident lot people? kind helpful. of are you more had And you to here. getting won have new to do could support it a that's then of

Christopher Cage

And interesting. the the almost resigning every if are resigning unquote from really are every Company to great Leidos. day, We're clearly, about People resignation, means work going talking we're they're someplace moving. that and people And if It's coming people at and from hiring. else, work someplace to Leidos are hour else, they

So are days. of that our XX we XX% XX fill accepts of positions our between offers and make. the We most the in

are a lot. we They we're COVID So all it's people and And not out to have. of coming a hiring try something different retention doing it's I've so got looking around. want a and kids problem, problem.

how lot on job we work, do continue we're stay. place always were but a and a attractive you we to to But our our time to an better. Leidos great If have in a doing talent team. make great we acquisition meetings They are can come spending to not of

job this Python like we're Not This people. I can computer listened is to in successful emphasis been upskilling, We've from have was to of and hiring a they that if But and Intel employee can't new standpoint. our about this new the and cleared a there's talking always work the they they where development, science so And of all know so future them a resignations And that's the will. focusing same majors, or investing there's the always on But a so that I in shortage and access be hiring. you're languages Leidos, have world, retention. much development. we a career problem of things going you very attracting is you great on hire teach challenge. our employees. call what now is of and And not in stay very, our you competitors should the and like with at some lot --

Matthew Akers

That's helpful. Thanks.

Operator

from Thank questions. next line Barclays, of is with you. please your The Canfield the with proceed question Colin

Colin Canfield

good XX. Unchanged like that hit Hey, growth suggests XX, need guidance [Indiscernible] year. to that's you the morning. roughly X% organic, this

chain? out Really, pain So what those then issues, that we look to are it some guys between does over a as not multi-year take what period, levels? of achieve at split you are points looking headcount the supply

Christopher Cage

a horizon go talking about can Well, Roger feature time we've that multiyear things them some over wrong of of and just here been Colin, retention.

people a have sure issue So hiring per headcount, retain that to we for certainly se, not it's level to need achieve making can growth. the it's we of

for on of at the lower we we guidance range. in we start. in put We're about But end catalyst future point multiyear and knew First updating of guidance guidance We're this all, things were we when like good talked put a this year's not DES We out that the year's this momentum. time. off out that October. just to

the in longer-term away watching becomes, it would objectives. on like take indicators us things So from at this can people time you So those are nothing we supply All those still Can execute? feeling achieve carefully. you then get we're the chain? can very all point

all we and every customers time as through on day. go that's the on. execute So deliver the clearly our and we trajectory But focus we're something for

Roger Krone

talked still there's of are and that program, delayed programs win. the We've Colin, been pipeline. our which series to a are to And fall some FENS multi-billion-dollar have the still big there opportunities in we now about

spending business now, right and execute the fund. So to how fully do win re-prioritize customer a big federal happen, significant frankly, and there to a staff, modernization 'XX pretty combat Maybe continue we the looked long-term is hopeful we'll hire has we in have on won't war area, actual I if programs we development the And solid. 'XX from the operations. to U.S. get is way a future. then overdoing, effect that in But We're a actually the that sea view think people, if have where that programs. And could within government. but the into the the involved, to chain,

Colin Canfield

you're you the Got your in return that And of for contemplating just and metrics within portfolio? it. can some then biggest investment terms discuss the year, CapEx areas that of

Christopher Cage

Yes. When year, a variety of and our the laundry list needs we put a together of all there's business our CapEx plan items. have for of

classified investing. to with area bigger ones look that certain we space, returns teens, we're as on ISR areas generate were the at not strength some Some new and made invest an in we've There of facility side of some IRRs. mid we areas, And our business, much manufacturing in we're are if we and returns, generated having obviously, overall are to trying our we're to exceed and still especially better. look an We weighted in the of average high airborne as -- investments investment, money cost footprint. the putting that the Certainly, at tried certainly and facilities that. densify risks that's intel into capital, to excellent the

second be of and biggest then the expense across a just so area will And it's variety our company. probably facilities initiatives smaller

Roger Krone

just Rob, question. it for have time we one looks like more

Operator

That is Mora the America. Yes. question of Mariana of line of from Bank coming Perez

Mariana Perez Mora

gentlemen. Good morning,

Roger Krone

Morning.

Christopher Cage

Morning.

Mariana Perez Mora

My is question. Cai's a question up to follow

up to better from re-compete. the you how in low-single-digits some market loss us new would ramping is the like growth much is contracts, programs. related trends here, or organic guidance growth As legacy we How to story, organic much how on or of our is the company-specific and on in versus related try understand giving X% color related how implied of to much much the mind to

Christopher Cage

Loss re-compete.

bit That's still couple a points continue of obviously the look to certainly that contributing then minimum, customers. and we about At aegis. will about our to area what this to between on talked, ramp expand of of So growth plan down is growth and look for we that seeing that us story be We've I services Family programs. little I continues we're our profile, up. Star budgets you're that inflationary for uplift pressures New some Engine on-contract what question, Counseling talking cost look those. featured within every Mariana, dissecting heard as kind We we year. to opportunities we and because certainly existing comes a and Military we think organic capacity growth of many year growth. from programs that's there's a call just talked contract for reimbursable build to Life for a an

still So about I then next some growth. Roger as if the multiple of necessary. point we're mega us expand on to confidence those just year's new programs this probably question, programs beyond is continuing pursue the and I'm happy that sure to are our not would rich And your to to trajectory. but growth talked exactly thing pipeline on that to, hit fuel give

Mariana Perez Mora

bolt-on customers, you are looking of that's we And Now, acquisitions? what those could packing how outreach good M&A, for some on capabilities are pipeline color today color. on companies, mind or terms us then, you and through giving watching in the

Christopher Cage

us. to too again have far but in up of as properties a we in to mega case as sense unless Roger arena, followed strategy you things, won't you back fit come we some we his quarter M&A really the to of I That's out We're for something would remarks, are follow. at that to that certainly space market. to a at larger seeing our bet it companies talked saw this but But in quarter, niche to going we arena accelerate we're to of things much a We last give and lot we're compelling Mariana, specifics way about to us. Well, where come continue interesting properties, be thoughtful not market. makes the immediate and tell prepared what about the engage, has to we interest the ones probably look the looking really an strategy.

Roger Krone

to thinking early, by partnering out that technology advance, rounded space we in our where with have to if we're customers accelerate we federal that. a And value said transactions allocation, company there a see there's areas another develop long technology Yeah, to that internally. and larger Mariana, that customer. relationship how or a we our a really to We're able be And so now capital I company our our the with Otherwise, we're customer be you, We portfolio relationship with, rather than would way as term with so or don't relationship great happy as as we just would to our still some in really has about portfolio. do then I a foot at that back shareholders. access we trying M&A are to and portfolio it through time-to-market fortunate accelerate today, get do a able will always couple stomp. were benefited and look think

the for thanks question. So

Operator

the floor remarks. time, closing Stuart this Davis At to turn for you. Thank over back I'll

Stuart Davis

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

Operator

today's conclude will conference. This

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

Leidos (LDOS) 3 May 222022 Q1 Earnings call transcript