- Earnings call transcript Q3 2022

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Operator

Greetings. And welcome to the Leidos Quarter Three 2022 Earnings Conference 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].

conference recorded. this reminder, a is being As It Stuart Relations. Davis, my pleasure your host to introduce Senior is now Vice President, Investor you, sir. Thank

You may begin.

Stuart Davis

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

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

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

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

Roger Krone

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

report in upper our Our the quarter demonstrate continue at business portfolio. end diversified growth momentum results we as to of third our across revenue the our guidance

position and quarterly dedicated targets world safer, to addition, well financial highest operations make forecast more flow the cash our full These us efficient. the our our team generated from results In our delivered we earnings of in healthier deliver and excess as year in on history.

performance, and financial performance, our allocation, people. I'll development touch business usual, on As capital

was of lines. X% in was both of quarter billion came and Record consensus XX.X% EBITDA at up bottom up top First, our the XX basis financial and sequentially performance the consensus. EPS non-GAAP Adjusted of points our were strong diluted $X.XX above margin revenue forecast and year-over-year. and for ahead

outlook revenue raise the earnings visibility and performance for enables and our third us full improved quarter year. derisk Our to our

in EBITDA our us It in We $XXX At us this roughly to strengthens we're revenues. also point journey, our for. cash generates shareholders. commitment of puts deployments cash It for example our the Cobham search on Which is of to track of allocation. acquisition margin. brings capital million Cobham immediately $XXX and our positions operations. and This sheet looking year, EPS This what capital accretive non-GAAP is great future strategic two, Aviation number and acquisition annual to record both a we aviation Special shareholders with generated unit. our all closed franchise to Services, business, access, market enables programs benefit Yesterday, meet at and rescue, approach and to complements business importance a from to and and the synergies. ours revenue future surveillance, force border a price point a benefit million provides expands and cost safety marine Australia's that me our a our of Mission strategic us balance flow airborne from below multiple existing for customer provides

million $XXX was collections September in out back of fiscal quarter the the as government half of end close especially the at the balance year. were cash Our strong to

debt X times. the to down of for ratio closer We paying Our paid leverage cash. to and target we'll is Cobham acquisition, our be accumulate plan just to some not move

in Our ways. productive balance to sheet us capital enables steadily deploy

book-to-bill government have that technology in Number current enabling on our deployable currency cash The driving ratio of long and the and is reflect doesn't in authority. of Given growth capital. development of continue extend strong With achieved and results towards steady net DoD marketplace share constant lag budget to repurchase a difficult history continue of billion bookings backlog billion a bases. $XX.X to and when our navigate $XX or to the billion environment. a demonstrate we X.X three, the to $X.X a we'll us timelines earnings lean valuation positioning business quarter, grew outlays strength that generation, company we our the

billion been third We globally. to had five-year rapid protests, order CXISR the $X.X $X protested. quarter insertion DoD some the awards a nearly Highlighting awards. would book-to-bill X.X. billion received support Absent to of also technology We enhance task important have missions with

booked contract. to the quarter. award, in the of life quickly. in and commanders value to policy, Sentinel, the We the we into award getting receive with all is But as over This theater the combatant known only expect $XXX our accordance about capabilities full million

our innovative within rapidly be fits the multi-domain As a and Command of part integrator, or agnostic All-Domain to find can integrated proven of and in Sentinel Joint operations. matured, Control role is umbrella. JADCX solution technologies that support

Force's decision Our and With Battle by Air enabling design deliver JADCX other well on was NAVSEA scale. awarded bolstered by System operational to Advanced Infrastructure oceanographic unmanned selection Consortium. vehicle four positioning Force's intelligence support vision battle members, to as distributed the for advantage Air provide a mine build medium-sized $XXX to Digital also the contract integration million sensing speed, and Management Leidos management Leidos will to of undersea autonomous the data and as security work countermeasures. a for at and consortium collection

received begin order with assumed Enclave order through sensors Dynetics, architecture framework first successfully develop the hypersonic and agencies have Development Space five to task a We also defense digital business operational modernization period transformation. the for a contract. Grumman will We DODNet and And the for responsibility common for the DISANet. Agency. in integrate consolidate, $XXX task completed our million Northrop $XX.X Services network on within and Defense win and and key to subcontract space transition we on lay billion optimize a The our received

track ballistic missile years of satellites Tranche and for part payloads of more electrooptical Layer space-based award, will Through variety payload than as We a sensor infrared for sensors a the orbit and missile build SDA's X have this and experience advanced Tracking low detect and we'll flying Tracking The of XX and proliferated for developing Earth defense architecture. missions. hypersonic Layer. threats constellation of and develop the constellation

contract, predecessor our power. payload year. resiliency these increase National new and will Space providing end is design to of missile form launch the on and Architecture, the coverage X country's coverage payload by scheduled of while The area, the of size, adding satellites On a in weight warning Tranche constellations the Eventually, core X reducing Tranche arena. the will Defense global

I'll hosting be the attending. investor interested reach And of is we'll December on re-award morning this Administration. visit at in Huntsville, Dynetics if Alabama Social that IT reminder, key final to our the Please site a you're As to the Stuart X. on in an support out Security touch win

after period our As of protested the constrain award X,XXX. an don't voluntary January point a in And review and quarter the the GAO third for talent. call, Leidos year re-awarded next hired the and plans than work early, just more resubmission and second right quarter, great X. we destination more was of SSA expect to of people attrition headcount previous And In the date, proposals, new we for people. X,XXX increased significantly is to our over still Leidos. year. once the by incumbent. attractive the the protested And hired trending staffing expires all lastly, but than will It's direction, is by that we've X,XXX The again award four. incumbent on number

people and differentiator are dedicated an Our for key national important capable asset. and a us

federal Before let touch turning the me Chris, it over to on budget landscape.

on still XXXX. beginning Congress funding fiscal expected, bodes passed until is bills get Chris, last for the until to year voted robust at the improve federal government year. which X we year's a well will the operating levels future will end December Nothing under As appropriations budgets growth. are but before the to the after is working of government expect XX. and Outlays authorization continuing calendar resolution November on over elections, you. that get for

Chris Cage

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

quarter Third the the and line with quarter gave call. second positive that were picture on results we in

and up $X.XX quarter in our for income EBITDA Revenues up $XX XX% slide net basis fiscal a compared million EPS third EBITDA or the was for to third compared currency the prior-year margin translation quarter Non-GAAP primarily Adjusted which highest quarter points the to were sequentially. share. the net million. driven an $XXX X. the were earnings and adjusted for business. respectively of XX.X%, was $X.XX of COVID diluted XX% the $XXX million billion, of the down X% in income to Non-GAAP history, was had year per quarter by which XXXX, headwind catchup Turning XX despite

half rates. Let me touch million fiscal rise a in in million the weighted to diluted was executed increased of the for $XX count of The we the driven interest quarter million compared Net expense below-the-line third the XXX the year interest few with in prior-year $XX ASR by the quarter of million average XXX first year. from to XXXX in drivers. quarter, share the on the

non-GAAP the the diluted tax foreign by across lowered effective basis state XX.X%, changes The which quarter EPS catchup rate for in the higher-than-expected tax was reflected up of cumulative revenues the sequentially, the XXX rates to and points mix $X.XX. Finally, for quarter jurisdictions. non-GAAP

and To another the all the six disability headwind. our Defense seen and margin Solutions also period the results operating program program. and growth The XX%, helped and businesses. to of but non-GAAP slide quarter. margin volumes compared DHMSM outweighed prior-year has competitors prior-year force quarter in much primary Defense we that increased more products Afghanistan drivers passed added year. NASA over benefit Solutions The on programs, the certain quarter, non-GAAP growth decreased in have compared for revenues although drive security the These quarters. exchange Now factors on high. our by with signaling quarter. support which to our X. up exams of on offset was the X.X% the end the revenue from which the we've prior-year the additional and came were we prior-year of revenues NGEN foreign from operating an XX.X% one to overview at the came in level Non-GAAP strong revenues the where on remain contracts Revenue was not drivers point, the mix exams of And Health XX%, caused fallen commercial the quarter. income Civil key Act backlog our energy in share contracts. increased this is disability X.X%. our PACT been various margin operating ramps income in for protection in to from quarter exam segment largest the last good The benefited at shift than year-ago highest saw the COVID-XX. driver, of X.X% by AEGIS quarter X.X%

and million free the Turning cash These flow Operating and of now balance and flow flow tremendously Leidos, was dedication. X. cash for $XXXmillion. cash for to $XXX numbers slide I'm focus on quarter the record team's and sheet were proud the was

the clear days addition, sequentially In the collected quarter at fiscal were some our X in customers invoices came the that in to XX, is and, the government been level. would their Great DSOs year have down entire team. target end of cases, which effort normally QX. looking to the paid in decks by

our Special of million the we the billion quarter, the we agreement. At the returned Aviation week debt. to through that acquisition of for cash Mission equivalents $XXX had at the closed cash in of program. ongoing dividend hedge end third this signing the definitive earlier taken million Cobham had $X of During $XX and quarter, $XXX we million shareholders inclusive the and primarily We

XXXX and balance of billion the In that guidance. to use our matures our on repay in focus On first cash reposition part addition, we to ratio of sheet our we'll and reducing the balances leverage dollars for future. of the debt continue of half to some XXXX

and the on between see strong revenues acquisition and revised of outlook from new on guidance last The as improved are $XX.X from contribution expect well. Our can includes Mission across billion. now $XX.X shown quarter billion slide Special XXXX company. the ranges the has based you two business months X We performance

after get to the So $XX prior $XXX we've adjusted million rates end, of even and the responded company the EBITDA guidance to we absorbing last margin foreign the reaffirming year, XX.X% spoke margin call. to range for do has that of of I'm proud of to our of top exchange million an range the in We're XX.X%. adverse to how the We still impact the bottom have added margin to entire million. of work $XXX pressures about on but back

cost, For and have We'll per also call. utilization our diluted and indirect our which earnings guiding improved share to labor to and on margins now look direct example, accelerating will $X.XX forward. between spending improve front segments. out QX real we additional all competitiveness taking across more decreased drive the report We're $X.XX. going non-GAAP estate a reductions on at three that We're

and ranges. So prior we've of top the bottom taken off $X.XX the

As rate headwind I be last to than is touched for an $X.XX quarter, previously on we earlier, a our full to confidence improved. going point year EPS. performance our creates effective expected, around to operating Compared the higher tax has which

Finally, $X us in tremendous we on performance billion guidance another we're at which keeping had flow operations greater. a puts cash from track strong cash year. Obviously, QX, for or

We continue potential annually. rules. to law, the million With operating to on in to change a of the to negative $XXX for capitalization capitalization impact about cost monitor Congress provision cash research the act no cost tax amounts flow

XXXX change. thereafter. Oh, take this costs will pay this we early this conditions made some turn to call that, year, do normal sorry, We the tax I'll a ready Maria. payments January plan Rob, legislative I'm continue we're to take federal of although make to $XXX in we of and quarterly over not Maria, resource to questions. can the as of haven't tax any Barring then inclusive and million fix, payments reevaluate expect some to, so related questions. to With we amortization impact

Operator

[Operator Instructions].

Our first Sachs. Gavin Parsons with question from Goldman is

Gavin Parsons

you staffing plan. look flow? Roger, at of an give in cash you significantly plan your early Could what expect to XXXX and don't margins maybe is revenue, mentioned you constrain terms that us

Roger Krone

We of don't year. XXXX to end until guide the the

provided though, you, if on Day, some that put we're go Day you What longer still Investor going not we're to we numbers goals back we tell our so, put we Investor any will is you. with out numbers. And confident and term to and the

quarter a I space think to ago. our it still great and But XXXX expect be we're and had excited a we year we on October strong. very going in about was what's

Gavin Parsons

little investments guys that you talked expected about us a payback defense, could the will and of have great. lot bit terms you making tell be in I a Maybe if there. about you're wonder that period, more

Roger Krone

Chris into come capability want We, can base to Well, the back especially the programs. find faster. maybe has then and start some to investments And to mission who to and area, accelerate our in. army make and contractor get I'll capability theater operations look airborne customers in them

work ago actually When And which do, ahead to get start on In year. average. it's that and corporate fact, think above tend an made I some investment a we and next be we consistent investments year, our our make that, margins like the program. we and out very it's usually RFP the next And came a week be hope we of already pretty airborne program string. those with that decision, to short will just a

Chris Cage

long been Everybody's where Layer. were the to items. in Yeah, lead our that's of of example make we've to made contract team that, about etc. appropriate to ensure we the needed right. we example Gavin, one talking investments win space sure the could just to ahead And, about capability had win Roger add some talked in talent, on then X Tranche the that supply acquire invest our Tracking that's to great to an materials as rooms, monitoring clean that chain got out successfully continue constraints. engineering and We've And

some talked you're down in a few it team the we've Dynetics, clearly So and about, of view some to the facilities, if trip firsthand Roger where our a those example. are able you give that made to capabilities. make The areas that'll investments of

Operator

with Spingarn from next Our question Melius Robert comes Research.

Robert Spingarn

highlight to markets. new segments investors end to diverse we talk we often your Leidos, when and Roger,

to where and see longer you based momentum segments term sales next into the And vein, year you wanted products interest among that beyond, your as a question on the and in head so ask market in I services.

Europe. in we what that, business. here build essentially, the we're crisis. and and the And course, have the Civil war here health a defense infrastructure how in We're So, handle obviously, And I pandemic exiting medical in of major you're a mean of US midst hopefully is the we a and in major rising budget rethinking the a business. in

for long term you how segments? about relative think of So the do growth each

Roger Krone

have and in for Of Health, lanes is moving that course, positioning the we we the saying shaping portfolio Defense, swim Civil have been both what to faster. be are been and years in company

course, Social Civil, great now growth see we're we're as continued driven But just had of on for And of been quarters really, pick customers Health with quarter us. business in for and really US, business strong levels. up finally I And revenue In the they COVID to Security, by have resurgence so, probably air last to the just attest. reflect can back our starting And those, our what's We're on think our in going normal kilometers the we three and almost continues resurgence as all a to meetings through has strong momentum. of I growth the CMS, all in really the in travel. and year. passenger about see catchup than internationally. we've performer DHA, Health all us seeing in SCS talked did And of last team certainly more it's

the I our require be a the invest, of defense and to very, very to maybe than complicated nation. a for lead again. actually and all bodes So orders, – complicated. both come it probably very in then place which to business. year otherwise more we've US we be And to you And they our as will And to lower if increased But continue business. issues think in like is allies traveling Defense, that our well thought which learn, we're the was security global continues world that sales ago to going the think would those growth increased – about

facilities. portfolio we And think held business one well. don't our often the of horizon held that thing. that smaller shape the some connected programs and a that energy interesting really it's are energy been and going don't made a great. We to want And Civil talk because that parts engineering owned us do we And put utilities so, to we business I'll the a But commercial And see large need be have It's in for really the growth and That to I up a emphasize highlight production changes utilities business. engine the has of just growing you engineering other towers decisions our XG I XG you huge savings about for to… the that out group, that for of has we Defense don't it we did. on speaks Chris, know, that. on view And double-digits. investor of it. turned business you within for been lot to as for anything has and on has business well. us up business future. And And

Chris Cage

the to about we're program be we've very hard business make SSA. XXXX. and been landscape This in sure that covered of and the well. again, fought the think is that. the I growth The that spoke proud on for Rob, talking a Roger for we we our term, say that years, running pretty battle RHRP That'll and ultimately Health finally, would sure. I prevail quite team about us confident. the near Feel catalyst up business, that, protests. in through a We're

grow is business very the And force business XXXX to into significant Health programs, when things you've feel near quantities. you've like ramp really you've that. that excited up room Dynetics beyond the space, really We're got and got then, really these program about the has in protection can got So term.

Robert Spingarn

example, I three long-term from you years think last company, the faster that is XXXX. But see for overall Chris, growing five up same do the in segments, than of out? Dynetics that five to about if relative part, So, the now, talked the rest about the years you when on timeframe, portfolio, sizes

Chris Cage

would say No, I that…

Robert Spingarn

double. biggest the by is Defense piece

Chris Cage

But to half to, if hope up defense XXs, get DES the we has hardware don't into modernization start the those really ramping grow you programs. program substantial think the the the to too if more opportunities forget, we've way into on side Dynetics of back digital things out got I the side. with play Yeah,

So well. for us that big defense as should be in catalyst a

of So wouldn't Health the see count half I beyond accelerating can growth probably, year, and we're them Defense back in I what Civil, that seeing out. but segment

Roger Krone

enduring we're company little the of bit, now the development XX% we're laser, of health you generating programs up, high Health Rob, will primarily the fires, XXXX kind a well change about about, stuff XX% there X people years our the services Tranche provide of we'll margin and active the managed And five And I and in have think some and complexion through is a we the military Body, been is month-over-month help programs think a and a we've energy point grow the services in will than [indiscernible] Tranche higher years average. the the the Tranche or production. I way, driven coming from business an of that so veterans X. SS, others. production in By going it now, X. five would make the programs to and is be a just of which But and on is from to they'll and a talking as Gide or doing Common-Hypersonic to now, continue what look ramping significant that that XXXX

will think what you to from that we if program. So we've the some production will always have above it, now, that kind we add we like had years and five will of look business significant about base base

the So now. company we're about years five from really excited

Operator

Our Cai Cowen. next from Rumohr question with comes von

Spencer Breitzke

was limit you Breitzke in in Spencer Cai. the about Pentagon talk seen Can This a activities on for if you've September? lifted award since pickup occupancy is

Chris Cage

we've we'd seen. or that a before a That difference noticeable I after, that honestly. quite really Spencer, wasn't don't know, seen constraint

the has activity Pentagon I think been generally bookings. expected, as the

our see Roger Defense of did October. dropped of RFPs course a we in As number here business the mentioned, over

in active pits recently. our very been that's proposal So very

a Pentagon big we pre post. noticed that's impact volume, exciting see. to the or I wouldn't say But So

Roger Krone

will I There exec he's office, LaPlante would real Senate Pentagon acquisition need the by the as the the we've comment was since And of is say been that's finally I confirmed in and put confirm whether Pentagon. where Pentagon the positive been we've it's accelerate of sort would I get more seen But RFPs Bill occupancy the make I a to, trying have to I A than be. upbeat sign. the quarter limit to tri And taken Bill. the year. half with would in on I a look of towards industry. I and And in not, couple been in accessible I or very they service Pentagon. think, to think more meetings activity. the Bill's the delivered last that in think outlays on probably in than we first were the would he's

I that these – procurements activity we'll increase under the all well So some and of will bodes contract. think it get

Operator

Our Akers next with from is Matthew question Wells Fargo.

Eric Yan

Eric This on is Yan for Matt.

the so to Just CR, Just today in compared impact environment Also, last extended seen think talk get into the CR of kind could have little it'll year? a year? next you what far? from we're about you bit on again you if

Roger Krone

the to last last the happened finally the seem can, State talk before None quarter duck first to year. it more we after the of the from compare what end the I did us year. we'd as this – almost level. last captive whole you're committed the lame Alabama, we all period I'm senator that senior get predict this when but we to if bill. prior-year the have Especially of time And Yeah. optimistic to can't get was a to a bill optimistic it And slow members everything future. I guess It year took just in an get done that of election. they because of impact. I year, to Congress, caused recount year,

end have that but omnibus I we'll no more predict, can before year, issues. pretense of the calm get one of the an so, And lots

that going had all think I and we're about year did we're we'll and than will the I today a reading to year. the things feel that get I an extended we ago go. avoid But better election the how newspaper CR last omnibus

Operator

Our Arment question next from with Baird. Peter comes

Peter Arment

update adjustments we you're thinking line, with how inflation and about salary Chris, how could dealing kind just labor be maybe that regarding and top impacts on you that? how of through any should flows us the just

Chris Cage

definitely. And lot most of leadership on even throughout time we've Well, certainly, something as the a spent recently and a team. year

we've doing the been is, ahead been up pool course again think three the it'll I over obviously, expect looking two that merit budget and years we're consistently our increasing to has tick seen we've and what XXXX. of past as So to

past, So over one-off we'd then kind sub and annual the of X% pool that course was some in a increases have the the of year.

I think or Xs X higher above to now cases. what we're is – seeing certain mid in

XX% the And the reimbursable tailwind top on portfolio. so, that of of order a line I'm aware programs, will roll through as cost the which sure you're are the in

better. managing contributor for could been we've this And successful a that strong act at on ahead there XX.X%, But QX. would and top I growth. So The goodness fixed is programs. to quarter line say that balancing price the on looking that's T&M been we're managing margins the there. have

rates. pricing our Certainly, pricing passing it's are and But cost can. that as especially forward we we we're management together inflationary something in up along as of building absolutely to being a our pressures be spending talent the on areas thoughtful, lot thoughtful and highest where time the put customers in for priced next So year's on team those demand. very we're a it'll of

Peter Arment

you Difficulty] the us a can there. [Technical aviation greenshoots Roger, Thanks. XXXX. might business. just a out know I to just that on screening still of put of update in you follow-up, maybe And as But it going kind be any there you kind just be that seeing was this

Roger Krone

funded success this technology, it's business domestically I we certified, quickly. certified. business competitors. to of There's process at we've as our And the on. or through go along the computer And always see And checkpoint continues new with the in compete tomography the insert appropriations. an That what we for do business. US, sort in described for CT our And well. of really if and RFP, get see to authorizations continue getting I can we're call US equipment the to carry opportunities or

the great. So the be is business that is tends that will and growth surcharges. of the business funded return ticket in really to by What drive international international business business,

more related And in it's is government. the it's where So travel essentially US to federal a than funded it the it's by lag. volume

traffic put And confident they structure, back, has airport tickets, governance they be they RFPs, equipment, The we there's And it before up. has ticket build the award, the then have there. do that authorities, you out certified, you volume you a the a base, talk, every or to two months So right. an to it. the to demos, engage get deliver the go start with and you to year or go has contractor airport literally is takes come volume acquisition, get different then we

this team the So, done about year-over-year. the all airport to And point. to demos, And available. the unfortunately, what's we news at owners the the front this before. I'll is the is another operators is, and But up activity, literally over said talking flying significantly I timeline end, We've for like recovery. good specifications world, our and there's make a that RFP the long requests have

from our that time, we are the that asked we worldwide were realize benefiting in sure wanted to our what that equipment. used are it of wasn't kind them. that that of We up But wanted algorithms we couldn't had our we detect, are There tweaked the make to to that, leading when sure being us product. and we're a technology as competition them. and want investment period, period, we variety an There is we competitive. and reasons to why at be. airports have And But took team one the fentanyl it our offer. state-of-the-art the took production And to make opportunity And During some in we edge products other COVID in we that invest new required tweak technology use to customers maybe US. talk detection and they've to to to that with algorithms. substances right, where the come our of to on us now,

excited we're So that. about

Chris Cage

the probably the the there. we're probably that probably optimistic Peter, Hopefully, had follow. we're visits, most further receptiveness, in behind. European But the Especially more area Asia seeing most say will things market, on we've some I'd that's there's that's

Roger Krone

down had everyone Yeah, Pacific dampen shut COVID trips and But is that China that does still in Chris essentially is right, of we've the I Europe. think knows region. to travel lot for a

Operator

Our next Barclays. is with from question Canfield Colin

Colin Canfield

defense about airport you over here are discuss And Investor through and to production from recovery you you bridge how programs kind the under price maybe of production? that on just cash maybe XXXX's of the to Day XX.X%? getting risk and guys us back comments, which developing fixed can margin target think talk versus then Certainly that

Chris Cage

on. start Roger Colin, can I'll pile and

More margins, plan I'd management. with ahead to out, that us expected potentially We'll business kind of off defense and and we where increase where earlier, XXXX discussion detailed the in security have margin I point say products but all XXXX news target give played this gotten oriented a bounce out. volumes, as and But, outputs and with and more quarter where was say, XXs XXXX, margin up I But more to the more looking how a it's And coupled to basis. we'll some Health baseline we've production work the certainly, But bridge, the platform at to quarters, think jumping what that when of look picture Roger us point. So, back to side earlier, definitely, down asked get term. that the in good bullish when this to some expand done. the came the we right? a paint that's portfolio. of plus have together kind in keeps opportunities back out, mid-teens on SES, in time. be was longer not to a So, we inflationary we're to at there. liked we to a normalized be great quarters Civil going modest good showed of from more and balancing is, is XX.X% of the I'd of when put the falls indicative capable increase that's feel on you

when good I give year, year know flat you that we we're bridge an XXXX place I guidance. up on to So if be don't think to come more or the in but it'll that. a

Roger Krone

I'll footstall just Chris or kind what add of a discussed. two, sense

changing their have Performance contracts on we drive margin. have we the then mix, higher existing on ways two face that really that so So, the and programs revenue opportunity.

We have control and your always And company. on that's focused of indirect lean and overhead. a we're performance, write write ups versus and costs very downs

billion, overhead for potential. success, operate $XX corporate and adding in office focus are have but we've senior is of below programs special than corporate we the that. the and over XX.X% have were And transformation margin we do our less success. those businesses higher those tend important our project and have if our get company. that, we a And important to had can that, And complement Even we the average. nation, those that time, billion all the drive programs higher We in with we achievable. to where can And programs, for our we if of we executives those story programs do that on If be we with run XXX not to production $XX talked programs, earlier. to do do in mix, about been But margin. portfolio the Antarctica, we M&O. to And continue on can we digital enhancements, in is we work, some want then company large costs. in now indirect that's some years, We

Colin Canfield

put XXXX. looks XXX% get out strategic by the to like suggested DoD like And out GENESIS plan MHS we plan Friday. It roll it a that seems the on

and interacts So, your kind program on revenue can if maybe around with stepdown that you of Health us that how just the cadence multi-year margins. update

Chris Cage

the I down time. GENESIS this has this the pivoting approximately deployed where us done point bit, excellent at program point are a team again, a year. for in going two-thirds job. certainly Colin, growth to into it's we're has an think through taper we and And been a driver

So, what XXXX the we'll see will Roger coming take of growth available continue software of that, the base the been capability there's this, can discussion on And that the lot cadence. What that the I full advantage customer. lot getting suite will of on say we've to a been capabilities enhancing but is, and the certainly, deployment, then the on elaborate discussion, customer, and that are. of that a opportunity back there's and got of

of to And So, little to been working Health to…? down that. team find the we're that. as how on cognizant deployments to very hard paint much you want early the of Roger, a has see the offset opportunities we'll moderate. step But picture

Roger Krone

is the We Ian. our cost finish The continued on program the in Really deployments group. through and average schedule on the Hurricane or to schedule. Health DHMSM cost probably below program, under frankly, on

understand military with am of where you've solid to the we're programs the trying if for to just you've we've as doing and that treatment a about as the be you it and from the different program the nature GENESIS very position And down the volume kind point margin the But replace treatment said, get installed and going of where tails sure military shape. portfolio, excited system that the a We're program and the I facilities performance. opportunities But operations there of we're some to the So we work, [indiscernible] a takes all even facilities. all beginning, software and the frankly, it do definitely down. get followed the there at maintenance the program. the come you But might improvement. other are is portfolio way the it's shapes to

Operator

next is Stifel. Bert Subin with with Our question

Bert Subin

think start side to both and those seeing staying things, in get for during the and compensation. Health that something bill XXXX? is And you the on VA result remarks year-over-year benefits just sales that applying veterans that backlog that could that about But, aren't impacting the XQ back you Chris, into we prepared in Act then to should PACT your yet. Maybe Health an growth? of uptick How as should note seem

Chris Cage

of Part set just VA definitely. is Well, the we're yet. track a to explicitly that necessarily didn't what not way up that seeing

otherwise. something, of to we the Right? quarter, So And, fourth up yes, the coming the the to to contributor point a is, I to as the sure catalysts But were Act as be versus through that be team us. if cases us would range understand could is think is an could example. it be what's the margin working push PACT this it of one make ahead in main happen,

overall settled volume that's that areas recompete of and XXXX, one part, there. to of maybe more the And XXXX. to PACT this certainly there's We that's were volume. most certainly, plays So bullish referral some little why of to a I But that navigating for reallocation But case the on that there's the other a for we're range good But competitors. the go. our for out. seen us drive of how at growth we've multiple year work be bit Act can in out, look throughout

Bert Subin

$X.XX sort Just of potential on each a to XQ, seen range from guidance year. at below quarter anywhere guys of you sort that outcomes be would midpoint implies pretty the which the range. have what wide think, and your narrowed from comments The EPS you've on I margin of $X.XX there for earnings, in this

guys expectation? driving Just if have that? that would to to And do that you closer low you were end, what think curious up what's driven end

Chris Cage

on rates we things and headwind XXX going $XXX of as at there. trending right? million we'll quarter been a Diluted be where rounding the down. little to interest round have still couple we're That'll fourth share below-the-line a a bit a so Bert, see up. look count, up, the it million, Obviously, could There's on scenario item. pop at of

at play higher we tax So, a is end the were play of kind being of there. in team to But minimize the there. I'd do, say that items are The tax as hard, of expense. year. we of in they working the it's always the rate, below-the-line right? talked than the kind more that's taxes And tax expected driver, the about So, rate

think, the business. operationally, about I we trajectory the of feel solid

Bert Subin

quickly. clarification you, could Roger, a I just question, if And for

XXXX You SG&A. noted with timeline? full sort on of you some Are sticking the recovery positive commentary

Roger Krone

Yeah. Yeah. above We're at expecting XXXX or levels. pre-COVID to be

Operator

next Our with Jefferies. is from question Page Ellen

Ellen Page

about? to XXXX drivers [ph] are And there successes, hear understand that RHRP of? but are want losses major program beyond about think we there the I and be SDES always you don't guidance. aware give any your to any But to

Chris Cage

play the SSA, and out. Aegis volume case Act the Those full we little are the RHRP, year will can the about volume. talked Obviously, have PACT a bigger that ones. just of a on where disability

the of some So those that's contract, are kind not that will the loss, for that So a talked but beginning It's items, ones as right? the UFS great. well, DES the of bag loss. And recent in catalysts. at that you year example, of we growth NGA are about mentioned a the be as

half portfolio. continue That'll third for year the fall the We to out on the quarter. of execute through that

But So recently, has that's we'll rate strong. quite recompete that our more of win headwinds have. been the one

that. about good feel so, And

that And have can't XXXX. so, we'd material downer another to think of into I overcome heading

Roger Krone

material been when great billion what's really us. were at a was X journey Ellen, about we is ago $X XX for really, the program Leidos or years losing

Now, probably $XX of we're stuff north of in billion worth bidding year. a

do like won. that a a significant win And All impact. everything, and so, not we billion so program a $X not there business don't Usually clearly, we if this. we new lose to tends were have have It are and to and, programs recompete. – not companies takeaways, that

that's we we year. on more Like those. to the lose, lose but many we between but a we end do. dropped the have said, as programs. of RFPs and how of strike maybe work Chris helps do bid amazing lose team And our a to build lot now have a to It's in next and busy our with over our our those, a than proposals outside trying reporting little week, bid the the and and the zone, and a to tends relationship program, all of maybe way segments what we win business be it win groups industry. stretched is, two five things then which Not frankly, we're writing is across of customer. Sometimes the But we we three we something work companies, bit which holidays, And every all how often. the do when lot

Ellen Page

about Just little into do we and first the How program beyond? half. that revenue NGEN, in and on a think on lower QX was profitability profitability

Chris Cage

done it ahead are quite one that's has best think Revenue days a settled profitability range, levels that great are say I the staffing goes, I honestly. a robust. as of nice into would job, team's far as

I our manager, But And so, Hall that our done would our DJ, expectations, program [ph] have for our we margins to say, to for an program excellent our you still beyond. manager, movements, significant will success. XXXX should preparing look tailwind expect ops ahead team, (XX:XX), Steve job tick up. don't should us think and continue as but it be I a nice

Operator

with next of Bank Perez America. Our is Mora question from Mariana

Mariana Perez Mora

[indiscernible] acquisition clause, NATO what's your appetite increase to exposure? international and/or

Chris Cage

International. Roger that extensively, Mariana, Cobham I one. would very about talked say, obviously, about excited well,

know You like we UK. a the in got do we've presence large in Australia just

be that those and NATO challenging scattershot see But has them, customer areas a successful certainly don't internationally, done very to. would think work been we're programs. quite you'll of more on So capability for programs ours adding I We've And excellent international comfortable some other beachheads. some some then, around of historically.

think have movement. SES our work we'll kind be lot selective we of major Obviously, I does internationally. where business a of a muscle very

I that do say if we'll areas top probably UK their perspective, strengths and And in one complement to our right But to look would now, service Australia are that's playing strengths. So, to our capabilities there's it's a our from priorities. the that. business delivery the is

Roger Krone

is world now, Mariana, the to tend complicated. go The we Five are and that NATO the Eyes we right places go countries, growth. countries, to we aligned the the goes. tend US where and see Europe Rim Pacific then where And

countries. that. manufacturers And excited XX SES different supporting countries mentioned, we have Not direct, XXX probably business people we maybe SES is of but products different the so, Chris I is some commercial that in of all think some that through about equipment reps, of through airports. sell And at to XX, maybe the we're

Mariana Perez Mora

would you of like look like add mind point your M&A you from reminding to do that us capabilities, to portfolio? Would terms an view, contracts what you customers, of in at

Chris Cage

access either big scale business. and opportunistic, add some M&A. compelled been don't the the the a Xs. very a new for scope time. of is talking Challenger a line an or example of The first business, We aircraft, new footstall. feel that Cobham We capability places like type Dash same and really the to can that we get It's capability and like of customer. with. where We size, quite a complements we're about actually acquisition the portfolio. comfortable do we an really We've to M&A fly We XXXs And existing of the

to coastline. really miles familiar Australia it with in services. to So, important of literally search that's that they the allowed rescue thousands important country. that customer those has really the Australia new surveyed, provide of to hardware, really are extend but a and And and us really,

our hadn't a extend in saw base And so, before. that Australia, access customer existing access that and to in with footprint we our we combination new business to

will So just stop posture it's M&A. we We're a would again. an But perfect in aggressive I on not example put look what of for.

deploy think I and as going we're execute we book business forward creates to in for and go opportunistic, a on our be our shareholders. cash of way that value our

Operator

question from is Tobey next Our Truist Securities. with Sommer

Tobey Sommer

or the standpoint, why a a business, which aspire and from of you are versus increasing solution have what of improving year? you over that where the a do standpoint of areas where And I current is into From product maybe sort portfolio next to you any is asked? the You satellite, visibility mix perspective, mentioned sort time? to margin higher shift LEO

Roger Krone

From do where comfortable sticky worked a valuated hard solution don't put program bigger those solution the have offering. business some glove. it work our the part would of that the a very I to slight on from we've bit the that through provide to solution tell to And make to add hardware we where the way. is we've wins really that the actual in love we special we're we with to numbers. our IP. work been component the of hardware But working hard out project M&A tends Toby, customer, way, a and way, to go you do, By go, contracts. through component – hand we position in have pretty and by a things more hardware to standpoint, moved we

you tend to on longer lived hold programs go. the to to facility, manufacturing a as got you've program. If tend be They

or XX-year products add the at five the portfolio have production although X-year part some four to connected to said runs. portfolio. a You things in our at production to hope hardware. runs, you that have have actually production to more we And now, years have from our is significant And as we is some beginning, are of our five production,

Tobey Sommer

otherwise might know, years many To follow-up from some quarters as a better able stuff, would, I market yourselves does a low kind maybe the opportunity even sort buyers, to you perspective, provide forward M&A, in I a question prior on basis not to rates? of been interest, higher you've they than being but a financial for acquisitions with on with multiples strategic next, more the recent have compete go so flexibility such don't for interest successfully to about of put that lower the with pay out over and rates know maybe same higher leverage, able PE

Roger Krone

I And basis the a think strong theory. good a that there's it's you make. Toby, in points

First available to a And I'd seems firms, strong of point out our so of billion through and going one money equity. markets. be raise, there capital without some did in a lot $XX to is, is still very specific the private just PE

fundamental, play would balance strategy rate. makes it's a market. change we for the that's the tied is we up approach interest see kind So, things we everybody. of for that and then business try used price on the buy back could kind can It and really in of if everything I we good our case don't those sheet and the PE going that we we've What of them rates leaving get it up and strategics bought. fit just strategic try not with bit to and it's and business capital see our It our does of do look do Do the cost Interest think case. get forward. We to happen. market? in sense change rates interest knitting then bad power us. Interest little a also at we drive us. need closes really can a And But more the for come to go, business how which the to come in rate, a case. stay come close go, that business, M&A at and it And the

Stuart Davis

we're Maria, the at just top like the hour. looks it of

more we think time question. one So I for have just

Operator

Our RBC Ken last question from is Herbert Capital Markets.

Ken Herbert

just Roger, to ask wanted I you.

milestones on? of in to side. hardware this through and XXXX number about I look either defense What portfolio an on that in XXXX this what milestones, as at a of your we sort step obviously, think got, in you You've business, tracking opportunities the watch downselects? key in you XXXX portfolio, up alluded the as what focus contract key How if we And are you've should the think about anticipated terms and could should of highlight items?

Roger Krone

is By kind great the provocative the Ken, question. of lots. good way, a news

field both transition fires, into in up to get going no we're to is enduring got those to space, We've we've high program, energy get to laser, view into to So, missile space, Tranche no the single X test. drives got the of downselect business. X the we single and which enduring, need up wide our get Tranche

have those into things the We side, test. on get weapons some need to

we On competitive Bombardier the the program need XXXX Army airborne airborne, for ISR is which a their win class aircraft. the with program, enhanced next to

of, just lot it's so, singles go we call is it, and portfolio won't a and around Series but I And doubles, World the season.

singles home that no there there need is really are we they of kind big the execute and out run strategy. So to doubles,

they fielded, of And into development. getting so, in you so at program in press MUUV look things we went just now talked orbit? these I have Our are we so successful about, content. things hardware and programs, that in releases the getting we kind Are

production. need into to building vein. they continue UUVs. to in that CDR go. that We So needs start PDR, just And

Chris Cage

detail business, shill the on like end milestones November, the the those talk what of X we're feel certainly team like. at of in will a I but look some Dynetics more for December

more that opportunity Roger we additional a And it. hit a out some and And where Dynetics. that. but the team than deeper will out We're rate got handful things But, orders order has excited there. be just production have right SES an visit you against to so, we've on, some hopefully that on see of site of there's contractual you'll maybe focus dig to low again, give will executing

Ken Herbert

just could, one quick I If follow-up.

positioned just move of these like some government's to You're, in obviously, well risk how around of is forward maturation some early ability a we'd the the these, markets, lot much of technology to to a in scale see? growing in relatively on stage which

Roger Krone

By the way, come talk different about the in Huntsville, about to we'll products. we'll technology, the talk technologies and

programs be First are say, then of of if programs. the level doing essentially all, about production, And the enduring TRL risk technology across programs. TRL technology. We're kind we behind about, want those of higher to low work starting going with have to fires to if lifecycle programs, talk When we're I is the DARPA, think us.

it, that those those. kind it ranges standpoint, system, then, Office out fire work the from it make early shoot to on it we kind So, AFRL customers we of it. need to XXXX need are and to and the and take fail and do programs take And to with we stage an programs, work, we to apply it the and Research fast of risk, we under, need connect of technology, DARPA. like call love Naval But we invest, the [ph] control invention having we of need kind demonstrate

make if technical financials in those impressed on be bought that working we we is, how the mature down significant think love with gotten the programs through people And the Our and going CDR, to of in forward, technology have are you can we've technology I that ones those, Huntsville. but you'll risk. level our it PDR,

Operator

time. to no Okay. like Mr. back the Davis at this to I closing floor over comments. now further for would There questions turn are

Stuart Davis

Maria, We thank I joining want your morning to your and Leidos. day. you great on for morning's you us you this updating a assistance look Have thank soon. for to this in And forward everyone call. again interest

Operator

teleconference. This today's concludes

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

Leidos (LDOS) 1 Nov 222022 Q3 Earnings call transcript