LDOS - Earnings call 3 2023 | Leidos Holdings, Inc.

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Operator

Greetings. Welcome to Leidos' Third Quarter 2023 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

At this time, I'll turn the conference over to Stuart Davis from Investor Relations. begin. may you Stuart,

Stuart Davis

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

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

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

during presentation we'll included Slide GAAP between Finally, discuss non-GAAP A and on is the financial X as release slides. shown the press call, measures. reconciliation today's X, in and

who call With on the that, I'll Slide turn Tom over will X. begin Bell, to

Thomas Bell

you, quarter backlog. Stuart, I'm another flow, revenue, and good report cash good really morning, to pleased you It's strong be earnings, everyone. with Leidos quarter to of today. this bookings a record Thank for morning, and

accomplished fastest was of full growth we are cash ahead of proud flow grew X% least XX.X%. on Operations year-over-year operating our our even of segments and management Difficulty] $XXX remained $XXX to were X important with our guidance an we this million customers and quarter, stronger. the year-over-year with robust adjusted EBITDA missions. EPS Cash year already years of margin and our of XX% demand Revenue Non-GAAP at work was well excess pace Customer up [Technical -- million. our deliver existing in of guidance. of in collections implied across that all the

the quarter, XXXX we guidance across performance in are this measures. As momentum strong all financial and result a our raising of established quarter's our second

our were outlook progress driven made our improved team has our on and results call. delivering the during substantial by quarter's This last the articulated initiatives performance

First, analyzing performance; Made, quality; enhancing and Kept sharpening instituting strategy. here culture acquisition performance business improving backlog Leidos; development second, a Leidos' third, Promises and Promises at fourth, and

in to each of me these initiatives speak turn. Let

can a at First, challenging or well a ourselves reallocate Promises rather creating working team Kept be the culture needed. improved. ourselves creating twice that on course done The disciplined we're Promises resources that We're we're correct drumbeat. we is consistently having nice deliver about on one to understands conversations and Made, event set executing as Leidos not candid and here and to expectations ensuring actions is culture taking what when quarter-by-quarter but decisive what and this a for

SES the we're serve our This experience. Security better Dynetics or of supply financial in critical in taking will of chain contracts, definitive and manufacturing enhance and stages performance, derisk expertise our the customers products Second, In better full drive we're employee efficiency integration HR and proactive throughout significant business a better program final business, to Dynetics Dynetics, systems. and record. management actions engineering visibility into We've predictability management business added result to to programs businesses. all and across

I progress Shield persistent and the and and proposal effectiveness development recently all submitted X have production on rates X. Corps. Army identified The we're of and XXXX, in of up surveillance looking we're priority Force ramping satellite growth the In we're Moreover, our executing we in payloads, Dynetics X X last tracking wide Tranche field-of-view improve X small for strong payloads In for outlook on Protection, lower the quarter. making In testing Tranche we're level Enduring tracking Marine towards orbit. Tranche government costs. is areas our in Hypersonics, while layer in IFPC to needs early

In SES, with reflect At supply more lines took promises critically bookings. out our resiliency to we've business margin, and We we time, the the projections behavior. evaluated costs with and strong revenue the improvement quarter, customer to our geographies, team has same the unfavorable identify unprofitable bolstered and last the create on business sales chain predictability. updated to laid coupled consistent quarter out buying in and product saw current better of the

a noncash evaluations million. Based the of measures proactive $XXX we are and candid on rightsize pretax these business, to charge taking

As market and expected. SD&A won't has previously as return as pre-pandemic the the previously acquisition changed fast disclosed, to since levels

of to administrator Congress Broadly, testified As current rollout the a funding at and XXXX the to backdrop, point, be recapitalization line checkpoint customers decisions team completed the With sales delaying this at are until higher-risk, that recently machines CT business, of rightsize has product the lower-return as proof to moved holding TSA not on would unprofitable longer. and numerous geographies. existing levels. the discontinued a exit an

to markets border both earnings. prevention and we opportunity to where well and committed differentiated from This includes as concerns as infrastructure more commercial will remain markets. security The if taken Leidos. just providing offer forward, regulated for here Security long-term have market security products better a definitive in solutions. the our security we loss overall position growth the and going ports be We not as, technology-driven pervasive aviation will grow now margins business actions and

in progress in watermark made a new our performance third high Leidos. third billion $X.X also quarterly the initiative, delivering exceptional for on awards development quarter. is We business

what and is billion larger the our in and was time and quarter over trailing total objectives. I of brings to I ratio book-to-bill year-to-date growth backlog to Our XX-month last quality when backlog is our quarter's mentioned But growing our X.X. billion wins. of X.X our supports $X to me, ratios This important referring with margin last now quarter $XX than more

a largest me win ways known Systems The wins and CHS-X be to IDIQ award Difficulty]. $X.X was cyber of years. quarter a this with Leidos of complex supply Hardware streamlining quality provides resilient over Generation demonstrate single as meet potential Army to a on few technology, logistics to solutions and value Through be Common XX we'll transforming the touch risks. which billion supply Let chain a [Technical which differentiated disruptions those and optimizing Sixth is the chains

differentiated bookings contracts, contribute this backlog Please not Because a the and not of already award was our flow. the I earlier. offered mentioned that task Army because solution, -- truly record IDIQ note, to material protested, we orders not nature are QX and of did CHS-X to did beginning

a enhanced Security our enable Networks, like X a support while On Integration. capabilities technologies delivering new sharing cross-agency Service and to techniques Quantum and Resistant years Robotic we of and Recompete Cryptography, We identify awards our secure portfolio and Process large provide enhance $XXX had Automation Department prototype cyber tools, intelligence intelligence Homeland $XXX long-time for and their will that Classified contract come. to secure to an development contract million AI group operations, also capabilities in mission. develop we'll support to emerging to technology Cloud collaboration On million customer, a

fielded Dynetics' we've from out defend award $XXX ability the My on call And to it's example from final of Electromagnetic field systems is another and years. to R&D builds a doing capability. to transition Cyber for prototypes been testing million Army This Activities. contract weapon

spectrum systems. In we defense threats the cyber services. keeping focus vexing a and problem top on of and full Leidos next that encryption, wins. for common to persistent a notice cyber is is trust, with a continue theme these our of provider capabilities on Cyber each are generation anticipatory and customers, of cyber You'll approach in emphasis our network technology zero investment, physical of addressing proof with quantum attacks

that against AI, and cyber cyber this cognitive of pilots cyber years attacks. a convergence technologies number what into the capabilities anticipated in of we We've also AI-based matured ago. We call and area defend

our driver in in customers. critical invest of key business importance differentiators continue to strategy, a we'll development areas of our As to

our our do we hiring best employer even more under call talented people of Next. clearer next a unlocked retaining success. in level and multiphase Next robust most innovation, Next. and of This world, level goal inspiring in performance of we're next and Leidos is journey the a sharpening with new and that's and level The company of core Fourth, is the solving of Star. create the company a the strategic next much customer a become A Leidos We executing the this. to effort customers to technological execution the world to order in the the set the for problems Leidos North vision, want best of essence the

and the capabilities life on sciences company. Beginning and and cyber, enable promote technology us mission scale technology-enabled will for will discriminators. decision-making Civil to enabler to our are public This services will defined our around business better structure combine allow sectors tightly faster will customer operations create our structure align key more software of analytics. and Next, that specific in and Each we targeted focused billion be areas the and X all has collective capabilities operational strength of our focused in transportation. organizational and of As health, logistics, capability-oriented intel of care Health in bring and market XXXX, excellence, with enable sets an Leidos in we our repeatable clear we'll simplifying capability more we profitable differentiated for benefiting drive the investment deliver $XX highest of customers. to to solutions room unique operate area growth and in from efficient new defense the environmental serve, more customers expansion areas potential strategies each for solutions coordination, while and decision Security National sector ample for growth. allow security

And Digital to digital Commercial subsurface will transformation will space, and transformation and best-in-class defense and aerial, solutions our and surface our to serve Systems lastly, operations will energy, IT us scale manned commercial prior bring unmanned of better Dynetics develop defense programs. and greater will by with SES, and existing brought digital with repeatability International systems. our all our better Australian business about together businesses. This speed and efficiency. Defense customers combine produce and elements U.K. of allow combine advanced modernization

we'll responsive efficient to the and By organization encouraging be and streamlining customer levels, market changes decision-making the more at and appropriate needs.

development, existing Growth positions. in several strategy, executive upgrading relations, value one team centralize business under new also government I'm Officer. stream Chief communications, all leadership marketing, a We'll

rejuvenate we'll our such, As approach. customer-centric business

real new that estate commitments customers IT cost delivery as to Our our execution ensure management, we program Performance chain and supply as to well position efficiency management. world-class portfolio through keep Chief Officer spearhead drive will

those discovering, Technology Leidos technology, positions. Leidos and week, sector golden technology our presidents market serve Officer, our we'll North sharpened Lastly, organization-wide strategy. commitment development to Next Chief a key announce the will emphasis more innovation technology differentiating placing and Star of at will making Innovation profound the in bolts. also deploying forefront and who Later lead even now We're Center, our adding and this on developing innovation LInC, these

call, last the approach to of going both refine best resource element key internally our on value overall areas acted allocation, to a strategy we those last enterprise. towards Finally, to externally. mentioned be as our disciplined I and investment forward Internally, will our quarter,

Our opportunities debt to reduction pipeline are better BD top do teams reach to have as have and and Leidos. Externally, slightly resources ratio capital growth deployed surpass announced to December Shareholders a removed not clear a debt I an our dividend EBITDA. increase path previously line approved our of to dividend promised, Directors and in during X% dividend. a recommended leverage milestone reallocating acceptable will share, our for team on bottom our our the market realigning third a and achieve towards this in and acquisitions of and near-term years. first target Xx not over gross $X.XX our that business, Board priority of record this After for past receive the the a over increase with of XX X quarter reaching

us to deploy cash excess a the deployment remain we future, cash power, in as fully capital that committed capital stock to and share sheet for Our repurchase and With term. earnings policy. not expect capture to grow near enables look our we and And to to balance returns. focus we primary cash disciplined shareholder strong does earnings and a management the expect this to additional price generation be

work X with in momentum of toward strength. as building successful we're a position quarters closing, In ending we XXXX

organizational to speak grow XXXX. focus, new results our ability our for QX I'm and alignment excited generate robust Our cash the business, grow to conversion. earnings very about

business Our new full Star focus this indications the evident. and of coming into of potential becoming North

over call the for updated financial detail turn our performance and I'll Chris that, outlook. to With on more

Chris Cage

QX. and compared Despite but Thank loss, underlying also only operating were discipline. strong the very our positive speak quarter cash position profitability board team, improved, third the strength Revenue and to a GAAP you, our management growth, market year-over-year, Tom. conversion results the to all across and not of

us puts outlook on enhanced track for Our an XXXX. excellent

our Revenue for billion, the to year X. year in million for in Customers X% was points scope expand EBITDA all existing reporting year-over-year segments, prior this in quarter. QX. quarter $XXX of to XXX EBITDA Health. up robust long-term XX.X%. adjusted to an was our and on was each $X.XX margin target compared of XX% increased Turning continue quarter has the environment. of to ahead accelerated and Slide budget uncertain contracts Growth the especially ahead basis Adjusted Revenues growth quarter, were up X

I'll get in but was granular quarter later, little and ago big line and year Health Defense a up were with Civil more the picture, substantially. profitability

interest which up increased a non-GAAP a was $X.XX, Below lower Non-GAAP and EPS expense. XX% about tax to offset to added EPS, net EBITDA, income effective was headwind rate both $X.XX compared year. $XXX from last diluted million, $X.XX

Defense Turning digital and and Defense to modernization, largest our X.X% from catalysts were cost year-over-year. strong increased quarter X% solutions revenues and The margin with on achievements Solutions X. defensive the income operating offensive milestone Australian business. XX to prior year control. increased Solutions Slide in non-GAAP segment points some the growth basis airborne hypersonics drivers

to EAC That decline development prototype we led margin. some down adjustments wind the have on a programs, of sequential did said, we point couple in XX unfavorable basis as which

are complete more dept, at committed technical As we systems Dynetics. delivering and add we better predictable and integration to returns

energy engineering at year-over-year to and mix of Civil increased the to by profitability for security non-GAAP in commercial year XX.X% compared in prior FAA revenues the margin driven infrastructure products, security continued operating product sales. a The was quarter, Civil recovery companies. income compared decreased support demand as year to XX% X% prior quarter. the increased spending the result of segment

contribute non-GAAP The margins. and rationalize a stabilize supply and product improved the will changes sequential that and increase going implemented, point margin we've did XXX leaner the forward geographic including Civil basis to portfolio chain cost enhance structure, and in

Act over by Non-GAAP Security the operating work. Health Social and driven revenues compared margin of XX% in XX.X% levels quarter, in The to XX% examinations medical increased from at performance quarter. prior in year profitability incentive segment and business. higher PACT and by IT our driven increased prior medical growth volumes the increased on income primarily the the year in strong Administration was came examination fee

$XX of This cover second similar pandemic. we as received income, a revenue equitable in recovery costs million and an to both to addition, In to the operating incurred COVID-XX quarter adjustment incurred result the adjustment added the of XXXX.

operate then the on through Tom and and these structure report sector We'll segments in to move X QX, we'll that X described.

For segmentation, segments. Systems Defense sectors and going Health digital economic their the their clearer be investors of modernization forward. provide and reporting similar remaining and sectors; own will picture reporting will X combine national International The analysts characteristics. on we new will security the Commercial We Leidos visibility Civil, and financial a believe and and segmentation based enhance

sectors. mapping by contract the contract completing into still We're the new

including segments and call, and for supplemental help the year XXXX disclosure for income full provide modeling, operating Our you to with new revenue QX we'll XXXX.

to balance the generated $XXX free activities now initiatives. ongoing cash We flow. million and $XXX cash million on of Slide flow flow collections from from capital Turning benefited strong improvement Cash and flow cash sheet and X. of working operating

DSO year-end. XX the customers their from benefit some of saw we addition, quarter our Government X-day fiscal improvement for payment at accelerating a days, was quarter XXXX. from U.S. In the second

gives debt million We quarter, paper in we EBITDA, cash quarter cash return actually ratio Xx $XXX achieving to reach of target ended with billion of to X.Xx, to debt. equivalents capital adjusted off and the and of shareholders. flexibility the to remaining $X.X $XXX paid During million which us our the leverage gross commercial

so and $XX separate cash we around asset are Tom $XXX product impairments provide details net are other impairment exiting. lines noncash income a of that and million, million to million recorded impairment and are statements. Goodwill that. mentioned $XX and inventory associated income, back charge this with the of cash X on There statement assets flow the the quarter, let me are of goodwill some statement asset components additional flows, of added basic both lines

inventory Restructuring and $XX on flows statement. other The of a with projections. be the margin line included is within financials. statement then sale, and of QX the majority in The unprofitable In earnings are impact and Dynetics reflected completed within impairment. in charge will income action the but resulting cash associated million asset been outlook revenues to within cost to has improve SES, for for an the the the of in vast we held also both with revenue current charges $XX impairments, SES Dynetics we've and no taken our significant million small sale

the year-to-date XXXX expect key raising area billion, $XX.X our been on the quarters, the X. to metrics. now last On results, strong an midpoint. We and QX delivered. Slide $XX.X the on team of a between over outlook for forward all X focus Profitability has at $XXX and guidance we're million Based and our has revenue increase billion

EBITDA basis adjusted guidance. our of increase to points the on is on XX of new XX.X%, an XX Our top bottom basis previous range points the and XX.X%

operating non-GAAP our $X.XX And performance. high margin diluted at With $X.XX at end the improving to by is least raising year-to-date to $XXX end which $XXX million million revenue and the year, the at and EPS $X.XX cash we're an outlook, to low flow we're our at raising for target our $X.XX. right

The our includes current be the that guidance able Promises context a in guidance Made, of avoid will potential around to our Promises could of the hopeful our harder related is put us shutdown, to for current put bottom Kept, to assessment guidance explicitly EPS. flow XX-day me to closer spirit but impact the budget some on predict. the Congress shutdown. end shutdown Let environment. risk revenue We're government cash and of shutdown's of A full a

revised fourth reflects We generate the operating associated possibility the of in a government shutdown. potential disruption quarter our the with guidance expect to but cash cash flow modest

well Our sheet strong positions balance potential its to headwinds. navigate us

ready Shamali, that, some we're With questions. to take

Operator

from first the comes Wells question Instructions] line [Operator Akers Our Matt of with Fargo.

Matthew Akers

on I still for the some that's give if if next guess early of track us insourcing on kind to and activities could an SES, of follow you're Charleston going the on how curious you update year? up

Chris Cage

over Charleston to continued team future Yes, Matt, Yes, thanks last question. our few to important is definitely, the and the call strategy. progress the quarters for and course has steady make of the the

We go something it's QX. track. It's campaign. working the outfitting are We've on QX, that We're early whether hiring will live, launched late on our facility.

So that's it as still improvements course to the be, tracking chain we've supply it to quarter. relates and progress we to where made the over various want of

So the some business why signs quarter progress. SES again, that trended was and the with this of up the reasons improvement, really of one showing happy we're margins Civil

Thomas Bell

question to this question your tactical, we're wanted we it's first I just the the so impairment prospects the SES go the I very was going was take all Matt, about while glad charge, first. business fact add, to unfortunate of would about bullish I'm that while is Chris have because forward.

customer In X in products we customer directly that I show, at to fact, changing buying recently changing speak new unveiled Over a behavior. major in Europe my comments, referenced behaviors. this buying trade

scalable that call scanner, the a more any view any faster important wideband technology at that for a AI-based and secure screening A their platform the or operations better. asking create security product to ProVision airport system-wide customers and is operations X diverse suite are and features to lane. something customer's of of them enterprise to for and be gender-neutral integrates me, that we algorithms which higher a allow quality ProSight, machines And which imaging detection, people

market. the in allow future, tactical excited team the to decisions forward the regulated investment the very products the compete rightsize to us going only about will is also So and but business making and forward market in future the for the not that commercial win both

Matthew Akers

is of the Could kind on kind guess weaker. onetime Is touch lot of there like QX And capital, the working is mentioned, in you a cash of just guess, there? cash follow a anything else as then timing you flow, up. I of kind I that implied the

Chris Cage

be as raise We're benefit, may thing we nothing challenges than to No, with other by able the $XXX that We're And full of Yes. allowed or closed as we're Obviously, paying shutdown year million. more early Matt, the around and experience we QX. exceed guidance very level. may us out navigating that not performance that. some pleased that quarter did the pose. few third our to a and hopeful certainly is customers potential risk I to mentioned, things performance the the

So just customers to government we'll the strong, finish QX. doing motivated our into be cautious what teams we navigate but year as going are

Operator

Subin Our next line the with Bert from of question comes Stifel.

Bert Subin

strong Chris. Congrats for This one on the quarter. is

future As not earnings that Your we down benefit. earnings, no XQ to performance health is for there outside when the step in tax think case the you be a shutdown were items about in you just do closer is $XX in mentioned? of still the which $X.XX, XQ that and to quarter recur expected benefit benefit anticipate relative of factoring million from shy to just XQ

a out curious I'm ordinary if So well? if the really or is or of of something there pull business just security products performing forward just was

Chris Cage

looks Bert, than well. We consider the that a there $XX did that around onetimer. be exceptionally strong our see strong like Yes. load. million are things business outlook, what you did performance still could that as the onetime well. Act see those PACT When incentive high moderate performance The benefit normalize performed little in little quarter-to-quarter. anything the I'd that base range. XX% a from out, was QX. And bit of case were say margins We other fee our wasn't Health a to we highlighted QX bit kind I'd that

recur to those the EAC don't also fact Defense pointed bit to are and some contrary, adjustments that stepped due to things little a basis. on that the expect I But back an on we ongoing

on quite the really seeing risk and honestly progress takes we're revenue down We'll right where the we're But middle. So margin pleased with business government across QX, us. shutdown the growth. hopefully, the see

Bert Subin

DHMSM. viewpoint on the and a both There's and maybe Maybe X about. you some just there's follow-up give there's big as Defense think side. I guess Can to us CHS-X just there's of a Health of the we yet. happened contracts there, about doesn't headwind. DES, to how going contracts was It I you're know Maybe ceiling on expected seem some those value. that sort repurposing that's DHMSM forward? think be should like

So I'm and just those curious are going X -- how going are think to to DHMSM up you to down? going ramp step then those is

Thomas Bell

me jump customer you in DHMSM Well, pleased and from how very mind. first, don't full Bert, satisfaction end and of with for locations the and year. if DoD out team let we're that [indiscernible] track on by X.X to to It's I'll X.X take deployed deployed we'll of of they very, to great this date. deliver proud talk million we're envision Obviously, beneficiaries the all about about first, million them DHMSM and to there. time XX% the

to I is, my this program have the expects first of whole more X-phase DHMSM analysts what when quarter phase What first margins. about Health the a most program that tails customer of me and of of programs we actually, suite with while this is what's going conversations to regarding around past X-month most the just learned exciting us been is do are But off.

a the us of rest efforts position great the performance the the date is customer compete what work to for is of to efforts to program satisfaction only how and continue on of customer not interesting positions and us DHMSM, So in to is looking for. the to follow-on excellent but also me puts our

excited we're very So I'm about going. actually where

Chris Cage

capabilities. And point, the got horizon that modernized. talking this Digital that information I as to duration And the a contract won too, under quarter, Well, think We've and -- horizon digitalization talked about the phase relatively I Yes. more that the umbrella. am contract, trying starting is deployed, but about, has -- this taking extended to a We was are DHMSM team First successful. once next a definitely Tom. to patient it to not system next add the very And that how benefits on a digitalizing and it's huge, shorter Tom [indiscernible].

moderate because the lower deployments of an help we're year see deployment at of will it into the which QX line able is than end. But kind this holding been sight to had that so of 'XX, And the impact QX of the is in It earlier to level to going excellent. coming phases.

quickly we're seeing expected said couple on of right the DES orders performing And dollar last and some what million task up with is nice consistent hopper now, we quarter. multi-hundred in other X, ramp then one was... as A are the task

Thomas Bell

we major even the one million $XXX fact, just and Difficulty] a larger term. In award this there's another [Technical in near likely quarter in got of

Chris Cage

That's right.

So it a be us will growth for catalyst in 'XX.

'XX in finally, Won't orders be as little for any catalog. their to then seems the that but a but task on prevail activity team they catalyst and motivated buy to very CHS-X, speculate what notable those activity of more to 'XX, rounding bit get CXISR are, the we're Tom until can of support highlighted, as to early very clarity the Customer we're us test. much in up we from mission. to proud And too without approach see positioned it to a growth use

about So and that really running. one getting excited up

Thomas Bell

just And mind. if pile that on to you Bert, don't Yes. one,

customer the team. their asked XX to of part days proud The for plan the So a team XX in in running for up XX RFP for important be -- free stream. days. this value transition and accomplished The it of

blocks. quickly so into customer the So out the excited team and able was of just to lean that satisfy that about super the

Operator

Bank of from Perez comes Mariana with America. the Our Mora next question line of

Mariana Perez Mora

X questions. have I

we of once cost picture. long? this How how And is think First is done? going big timing? in like workforce much it's and the one should How structure structure more should we How think organizational to cost? about terms the about

Thomas Bell

Yes. Thanks, Mariana.

current all, rest of So in year. first through we will the operate this of structure the

stay the our team, year communications us, home, on this our to hammering So in our on structure, to focused customer. to rely deliver relying I've all customers the the on fact, team current organizational my of promises Leidos in been on and I'm

and the frankly, X articulated be it's it's increase construct organizational to our fresh repeatability, markets? effectiveness simply products going tended look How for increase realignment at across in main existing structure post-pandemic will customers and a where with really they that's customers of take January The that last siloed business had? not a we Leidos on prowess new a the How reorganization, the organizational better I and organization do the goal. place the we we satisfy in to do efficiency

my in I'll that unlock the at the organization that and plans are is growth competition, we'll X potential suite the is or compete see the the doing full In those business revenue the unlocking effectively. squandered plans, expectation to of squelched and we'll each And the for ] that in challenging looking potential of each we new expect to be need regard, going I of growth technologies growth it's sorts win that leadership create whole new and so opportunities. And executive And full that new currently is [ capabilities in growth plans one marketplace, first environment. businesses. current profit be to for team the things the new all year of

I'm very So hopeful about it.

costs, of In Chris? terms

Chris Cage

effectively. get That modernization, of automation, exercise to example different have this each structures, can this, I it's better. that. of businesses will Tom as case But primary cost-driven not we solutions, continue more and Defense engineering to as talked lead in those those these about. is having types debts. But delivery a the not is back objectives do things. it office structures, we Systems, do listen, to businesses this relates in In technical the digital obviously, those to repeatable Less see investing, motivation the hey, of been and efficient aligned of invest more to

excited next get that, to the in to a we'll to we get on share lot very and we're Mariana, So have potential, full QX. to as more that call

Mariana Perez Mora

to expectations the your And in follow-up then more you on are my is Could fee us down like for come specific of healthcare. sense medical near the give not? again. that measure to or was strong please quarter the once a how examination and Incentive performed term for that

Chris Cage

year, an this associated they area et on volume, as This those had has with team Absolutely. customer only timeliness, the is and PACT and job where incentives up, doing ramping And volume some contracts. but Act cetera. of these not Mariana. was customers Yes, earlier an been always excellent modified throughput, both satisfaction, the disincentives the

deliver make The to they is of yet motivated demand. because to we're customer bar continuing volume a again against want raise to high sure the

potential in to we'll So those that full prospect as we of recalibrate quarter, excited not on only look the that say what in but would the to contribute fourth ahead I continue XXXX. incentives we're But looks continuing about like. just

Thomas Bell

team. the challenging piling our And don't taxpayer, to as of you The customer. just contract. And should Mariana of proud if so be Yes. standards expectations customers proud frankly, each mind, the us raise a me on, and raise

threw And strike little and it changed strikes. did. the We They bit. performed. so zone We they a up tightened

the have can expectation I than better team so even XXXX. that every throw in And strikes they did in XXXX

Operator

Our Rumohr next of von line question comes Cai Cowen. TD with from the

Cai Von Rumohr

To Great results, maybe Mariana's guys. on follow up question.

in you going period, kind which big was out -- did they've mid-teens. terrific $XX we incentive they Because us at in the the point, up. you're I how And do if Health. are that tightened margins of so million you So Could it mean to prior quarter? go quantify it were if accords COVID, tighten which hoping to XX.X%, one is take down? sense think those give I some

like this quarter. Now, it you're looks doing XX.X% XX.X%,

forward? And that a shutdown impact you see do from you because is potential to go? likely where what government as potential issue that mentioned So going

Chris Cage

he we're of worth Look, we to in this you year at that I quantify and results. incentives. those going Yes, year, incentives to 'XX, a have not our will say go just in the Cai, Tom can. if let around me if on, look not full specifics the wants here, add would

contribute we good to expect news the that is something can be a that So year. for 'XX, full

high. being But standards have and high, because the we also, our we'll veterans high that to game to stays stays the our up make stays increasing the the that sure want served, throughput all step well quality to customer relative are timeliness the

-- a it's benefit. nice a is been it So

have fee more and ones maximize contracts our exceptional Our -- try we objective and service is variety across happen deliver incentive those. just to to These a noteworthy. structures to of be

mid-teens sustain of we in we can picture performance. that's we level XX% endeavor zone, the previously big level and hey, now Obviously, that margin better But whether better are we the business. good health, said, think to was had on doing and for XX%, than a we'll

back in an risk, we're glove end work and deadline so most employees is get needs $XX through. to the to unable as were managing right this the that lot Big potential the current shutdown, that's OI to and of our happen. we right with we quickly the if our to September. we'll to we've with the up we make But picture, of to but mean but of they're because if important an what customers hopefully, then that work got of the a assessment, through science, order to kind we understand continuously to up it's we imperfect is at a to thing risk perform revenue they refresh hand customer million sure spent On that $XX of work I find work opportunity our potential million on one close on deadline. think we it $XXX do, will of million-ish they're work

Thomas Bell

But guidance. his in just XX-day risk is mentioned full little shutdown of of the lower as -- it included in Cai, pit Chris to end a the bit, our stop our comments, a

So that of Promises shutdown risk Promises the Made, possible, risk. incorporates is consistent given full with a XX-day the guidance Kept

Chris Cage

to have lot have the well a Cai, backlog, funded mean and navigate of headwinds. we good a news, we these we're essential lot positioned I of programs is

Cai Von Rumohr

a the or as across is be is the that the to company... that So for million $XX OI, $XXX clear, follow-up, million in Health just to in $XX million

Chris Cage

company, no. Across Cai. No, the no,

it relates least of one that's areas. As Health, to the impacted probably

the company. So that's across

Thomas Bell

service. essential an is veterans -- Veterans

Chris Cage

right. That's

Operator

Our of comes next Jefferies. Kahyaoglu from with line question Sheila the

Sheila Kahyaoglu

you development and ask and programs sort you're those? I get other the the wanted deal through to how with to Dynetics just hurdles to what get of development through about on guys comfortable of sort stage production -- looking to And there?

Thomas Bell

financial On forward. that we convinced I'm team are as of my comments, and We've ahead Sheila. you management convinced going again. to adding speak Good there. we're and got to to expertise success Yes. great in a Dynetics, alluded its Thanks, ensure us. And Dynetics to I still technical to the best down are days

biweekly. Dynetics good eager find but burn at major are from force small team people tracking, success 'XX team really actual those and the and not into business. The plan feel hypersonics tasks who and the of us to which markets satellite XXXX. we to XXXX, feel on X really have down months, and to through for X The have page or that spoken down be them, about we help and each only X And focused is now as Defense successful So I on our the there we are in hit to Sheila, success good protection. to payloads, go that is find really turn

but purposely So we've knocking the got is a down complete road team by one map, one.

providing. chain are challenges? we're acute on those solutions for customer-focused there the all demand customer Are is and But events the ground. their both supply We're Always, now frankly, X is at sorts that testing heighten desire challenges, for the the that happening to having challenges at engaged of The in Pentagon solutions spaces challenges, challenges, there's world to these team level. wrestle and that we're it. operational only right

about very them. feel good we So

will And Huntsville bear business a more of Dynetics management of XXXX, of this technology our part benefit being broad teammates. into Dynetics bigger organization and and engineering program Defense new be for I that the from to think is going the even capabilities benefit brought to where

Chris Cage

a in obviously, business And there. the growing in excited trend 'XX, on year, ramp that, the continuing event, a later item. right IFPC to about point Yes, putting for signs on resources us it's 'XX. be to fuller is to the could related We're very any In be on all higher, the deploying. the Sheila, inflection long-term moving to all the The point to Dynetics but -- will steeper Army volumes the it. high-priority capability focused prospects could be

Sheila Kahyaoglu

ask Okay. EBITDA to And wanted remarks, you criteria backlog, last you grew chatted, margin I about mentioned But think I'll you potential that Tom, it in about your $X time the you wins. later. up said as on it a prepared I mentioned to the added billion. on this follow we

some can you So have you now? of these think EBITDA wins pipeline about how should new be that talk you margin in the on

Thomas Bell

Leidos. talked but right, that increase expected expectations Sheila. not increase development supporting only my backlog, adding about is about for doing all why criteria you're What margin pipeline And cash the Well, I as that's is the the businesses, talk the margin? of, business what in our the we're opportunities and across we for I'm in well, the comments,

much increased with health accretive in you cash been and in has the the helping So -- accretive of general stay that very potential has could on pipeline a the margin is us assume profitable track future. business very the in

Operator

comes of question Sommer next with the Our Tobey line Truist. from

Jack Wilson

that Could This margin into is Jack work? reallocation resources you development pursuing down Wilson Tobey. a little on that in those more dig light higher of for of business

Thomas Bell

of really [ was high the business company one not Jack, a running in It the spending given philosophy at we're the ] the are not for we My the It's that with target, Leidos SP and where science. each talents making general that win our rocket and it's sure opportunities mean pipeline, and looking was people, my growth Leidos. businesses each simply I generally to Sure. are area benefit philosophy. highest which was that's Leidos. is same called the on

the for X bottom grow is those business to and top buck. to areas flow we today to and Leidos trying in that and talent that line the line are and X of biggest that the that we'll opportunities the the going businesses have between ebb We're aggregate resources XXXX, bang or have the have we businesses development as key

will a sometimes resources others. and that all Instead it was incentivized grow grow to really matter disproportionately low-margin businesses Leidos chasing that's I interested each so growing no business And what. as in some work whole, because of attriting is. means am to

be Chris development market market the extension, by not all in, kind line Leidos that line businesses those Leidos. years, this And and commensurate team, will In areas themselves that future, and there X greatest for with time them Therefore, years, present putting competitions next of and and the of that that in for year, the years. for they're redeploying the those the opportunities on potential for have out whole X touched goals. same of the the X shareholders. market the of customers measuring bit. our a bottom philosophy top return the I'll the to X talent and and our business that's little

Operator

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

Seth Seifman

targets of follow the numeric of maybe you out. Not new question Just to little expecting anything rates growth on any kind sectors about bit kind that But or a that. and that just up relative like laid Tom, that deployment sense, think rates other relative each in to should plans? fits sectors how internal different we growth out about also how in, your and capital it relative with laid the a you those in

Thomas Bell

And frankly, Great Seth. you, I don't Thank question. to because, have to yet Yes. specifics hypotheses. we right, I'm you're not have but them get going

that going bring better they hypothesis you can because bottom the sectors going them businesses, at businesses, of And programs line as are to demand is, for so we're calling of if be provide. are growth an some X and solutions so aggregation line the forward, top look positioned of results. more them customer to Other they

top X business line story. time, doesn't and and also each in top over line be bottom a growth time, mean line a also growth countercyclical story X, in growth businesses bottom may I that is line years, that is business but over think ever hope My growth any not

objectives term? long according for be near the technology are each the does have we'll to predict exercise ecosystem? planning will those in plans. development in how year? we And in the business unfold Where resources deployed strategic what customers How full of therefore, the business? a potential using and behaviors, the is the be and term around resources, business goals coming they So they'll that the And very buying XXXX do purposeful to what are customers'

scrutiny survived and, therefore, capital. follow the It's to planning investment going money is simply the for most have strategic our process going plans the have be of the of to that the merit

Factored and sharing and going time to strategic with XXXX you nutshell planning process come in through results as those a suggested, excited that fruition. about we're as more Chris over and

Seth Seifman

focused. just maybe little more for And model follow-up, a a quick

be given we million and just -- due than an should be coupon intention potential it's capital to deployment about we the we low than think out and As that's there to assume think repay think XXXX, about in and for that most I probably that, other would of pretty $XXX cash the cash would other uses replaced with to need higher? returned? a something And be that would

Chris Cage

could I be Seth, The picture, think you're with we right. vastly thinking We big interest rate leverage mean, it environment are. where I of 'XX. Yes. hit happy We're our different target. than

Delevering it over program So a that quarter not it's a at time at that's not program. of only of cash, dividend the $XXX revenue. little year. this rate think increase something close uses something in million lot We've priority, but but around attention And always a pay the you've cash Tom then got of fourth we'll is I environment. generate excess a interest got we'll right. year But next an just relative that to. to talked we'll a X%, we've CapEx got evaluate a about X.X% further

Thomas Bell

have. a will to nice It be problem

Operator

from of DiPalma, comes next Our line question the William Blair. Louie

Louie Dipalma

do competitive think VA the the with How volumes forward exam Within XXXX. how back? could in there dynamic be there? been the about referenced change of we And healthcare going DHMSM care, has going into Health you stable tailwind the any pack

Chris Cage

be rate, a news once right? good exit down just we 'XX time, are down, to again, as relative we, lower, Louie, significant the of trending QX been deployments step is at a it's in as our but did. clarification of DHMSM, this -- little stable a don't ramped see will on kind It

great that's news. So

time, this because mean, to possible veterans to always their a been robust growing highly that benefits a the hard VA throughput keep up to are predict have We'll VA and in more to capture the listen, are of competitive as portfolio. as I ensure and a months, see wants game it's high have we color the get At stable 'XX. they that motivated the stepping we that and allocation much On side, dynamic the few competitors part you they the but need of it's deserve.

on going too. to in RHRP things program good VA us The will Health, a the for growth sorry, other well. There's program catalyst RHRP -- continue as be in the

not PACT with pleased just Act we're Health it's very now, So the the great But team and performance favorably, and right leadership of delivering very trending results. that's the really volume.

Thomas Bell

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

Operator

comes last Ken the from with Capital of RBC Our Herbert question line Markets.

Kenneth Herbert

here about everything of a are biggest details in focus what as all now you the terms obviously and you've But just the the the back. think take do the transitioning and backlog else. XXXX, appreciate the into maybe opportunities reflected cost think wins Tom, and business to standpoint sort as we from step business you business, there in I you're obviously sharper opportunity? in quality Obviously a for in in do outlined margin bids of looking higher opportunities? specifics a about doing cost is how which standpoint what the we not the guidance, but much terms of think should think and support of the

Thomas Bell

Yes. leaders But can opportunities we're us. start your I'll Well, the where about we number to talked I put point call X at of it enhancing I to that functional attention can't the imagine because on now that positions. only front in their a the are

at our more will insert creating R&D technologies those for our forward. First Bringing those on our and that benefit help going businesses technology the focusing compete about business, Technology win us technology pipeline going LInC and I'm new Technology to win is of Chief and into all more current on businesses of really and in to and enable Chief become Officer. excited of effective propel foremost, businesses. us and the deploying Officer, our efficient areas

us think great I opportunity there's So office. for CTO in the

that as the possible, Officer, of that be to wheelhouse sure world-class have make procurement, of will IT, best-in-class ensure to doing business all we CPO I'll leader me corporate are the we field that. of corporation. but estate, In The Chief in only management ask product Performance internal the everything Chief a makes quality the an Performance not responsibility of Leidos real at to to the program new to Leidos Officer the the office, going the are is efficient, effective when we I mentioned effective our also level. on cost individual are comes it as put make that as

for the Growth complete position of us least, in marketing, but aggregating growth in will where ensure as to value sales, to we the then -- communications, the how customer going puck RFPs. unparalleled we're relations, and the And stream have we're chasing skate understanding to just going last where to going put be Officer Chief not prime customer a to of all opposed is strategy, government

efficient. more I So and this cost-cutting efficient again, Leidos This not of us net aggregate way as isn't -- said, a -- in make all the But sum is better to that Chris more us this of and to effective effective believe, of it's capabilities make the can, corporation. exercise, realignment. a will a

Chris Cage

demonstrating XX.X% say, I leaner And is Clearly, a that I'd that corporation we're of area an already only ongoing that's up focused line on showing behind. we're and results. on mean, that, and in that's our of think That's and goal environment have I next feeling of target. kind seeing operating sight now, the margin we still a rallying delivering plus to we're

Operator

I for Davis the back would this to now question-and-answer to our session. And conference closing Stuart turn concludes any like remarks.

Stuart Davis

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

Operator

today's And conference. this concludes

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

Leidos (LDOS) 31 Oct 232023 Q3 Earnings call transcript