LDOS - Earnings call transcript Q2 2024

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Greetings. Welcome to Leidos Second Quarter 2024 Earnings Conference Call. [Operator Instructions] A brief question-and-answer session will follow the formal presentation. 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 second call. operator, 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 I'll With GAAP between Finally, discuss non-GAAP A on Slide and on is turn the call who financial to X X. as release slides. shown the press call, Tom measures. Bell, reconciliation over will that, begin the today's X, in and

Thomas Bell

Stuart, $XXX proud fact cash. and for of our of this to good per again year. again remained of to raise to halfway later shareholder into all first the and in will our our update call. achieving financials, you EPS In on growth margin with converting turn, worth XXXX doing value to is plan. we've once shares you give a guidance has to last profitable to repurchase now year. quarter, team capital also earnings through adjusted industry-leading adjusted that you, allows us half to record this this XX% It's EBITDA of everyone. a complete growth Year-to-date, a report full grow the I'm robust our us In with Chris We're quarter XX.X%. this commitment guidance year. today delivered the be record continue deploy strong, great million organic diluted The than job for higher morning, an our allowed Leidos. excellent Thank

win to opportunity my I we're take I'd promises One progress on previous performance. to strategy, update Leidos' Leidos making meaningful I in all, business. you position great culture, on ability Leidos, forthcoming promises performance in see ourselves improving made, areas. journey these sharpening our out year new as like progress this focus ago, to the first our acquisitions, and X with to execute the this begin to a to best-in-class kept Instilling areas call our in laid strategy. Star to enhancing putting a North foundational you of

philosophy. First, a promises our promises kept team fully embraced made, has

is improvement, this, hold As second this quarter to results evidence conversion. culture made summarized each growth earlier taking part in and our drive and the XX-month cash to visible profitable are we've trend of best firm yet. other of simply of our commitment a The operational results robust clearly that our

that this second worthy our continue to year prudently time, potentially balance say of Our sheet to grow repurchases But over opportunities investment. strategy. bring brings must Star compelling and is new beginning growth strategy me into focus our Star North that to area exciting new This North creating work same focus Further value. allocate the us and shareholder an time to I are to strengthening excellent position currently strong capital share in possible. at puts

into While of purposeful focus the of year prosecuting are and also we program thinking because process are that deep are beginning our execution, to aggressively to we very come our deliver and strategic insights in-year strategy continue intriguing. energy robust

proprietary We've now the completed future. work on the of hypothesis Leidos

customers. will require technologies and our best the hypothesis Informed those challenges harness halfway challenges customers our for success crafting we must current now the face, solutions our position solutions to the strategy core we're for Our own strategy future, and businesses future exclusive will outstanding enhance prediction and the new differentiate uniquely of by our create us and our Leidos. in of a business both the for we leverage This through will foresee.

able of differentiators, innovation our recent Day, to Technology of and our technical And drive of will productive investments At team demonstrating customers' mission those our One we our how witnessed strategy bolts. golden remain trusted revenue firsthand, than disruption will who more you our we of Leidos. our and in Investor a focus component bolts, is depth Those brilliant in join AI trusted on enterprise-wide of now across clear X action are on went Technological AI. missions. total to us cornerstone growing. technology remain use golden mission our were X%

comes AI, when to market. mission believe that the the is it We

do deploy trusted mission AI #X opportunity federal benefit. mission of So the provider U.S. as everything an customers' and IT we the the #X is defense and government to to contractor our exploit for

area us for Another proactive of remains cybersecurity. investment

a investing by was for been it be agencies. Trust years federal for we've requirement before Zero in For instance, adopted there to

As the years, awards last received methodology cite Zero billion differentiated than $X our that a as of we've result, Trust a over X more strength.

These Quantum secured networks. We're executing currently ensure technologies post-quantum in to R&D enable and pioneering encryption quantum future market investing investing area We're and understanding contract ahead the in this of highly to Technologies will our These application customers for of developments give demand. our solutions. of to and some the computing. record examples track can approach our respond of forward-looking rapidly you DARPA in

satellite doubled X from large track strategic XXXX on down On we're and unlock to detection these Development Dynetics In in space sensor the proliferated fighting Space field XXXX, specifically wide we the on we automation. specific and value made of program within its we're the on and security, acquisitions Third, war Dynetics, Agency's to have positive supplier of trajectory. a robust key view areas. architecture. payloads, Each now a

were payloads tranche providing payloads low ones for first imagery. our all delivered orbit, and Zero have in actual earth We those on-orbit FDA the

And early remain their we we are Agency provider has X in teamed for Development deliver addition, recently issued tranche X. Space tranche to be birds. our The on to XXXX. Space payloads In with their RFI Tranche on Sierra their payload track X

tranches X position to and our expanding us and government pick critical existing for sum, role in prototypes, On emission testing. XX our So their deliver this continue space actual all and force believe we which to well mission. Shield during in through delivered way protection, if successfully on current comprehensive performance we've current are working

through developing The Army weapons. fielding production Leidos in XXXX. production unrivaled to capability, defense field delivery. we continues rate MOCTV scale hypersonics, These and to is the and rate begin And thermal recognizes on programs. a at by remain the play delivering glide nation's protection critical capabilities. We and test, hypersonic full our this supporting can body low hypersonic role in awards technology body United soon this we programs assess, in our developing track hypersonic XXXX accelerating for hypersonics and our system's which to common produce, systems and air and receive in glide States advance in progress advances -- expect progress pace and common

all, positive And hypersonics. about robust opportunities feel all this in of pipeline quite in we

financial of So its also XXXX focus maintains our year programs. a into maturation translate good seeing here promise for performance. better these to we're And be the

recast of in Our that first new profitability performance we organizational financials quarter, at the back in digits Defense as was our from the structure. level Systems as far double time

actions new sound SES to area. business team into our footing SES took Turning acquisition is the they on and swift of SD&A Though products. now is challenges because of that security last The fully our year. management remain, integrated

focused lines our and Leidos our shareholders. and product make have therefore, that efforts in most We investments the geographies and sense for

solid and of and we're up Our more operational manufacturing with this agreements bookings service level deliveries performing We've facility border new had is customers. large Charleston and against our solutions. consistent year better our

As is up a alone. achieved and XX% the X of almost year-to-date, year. and ahead year's of first profit plan earnings of revenues the in for are result, SES quarters revenue XXXX XX% SES last quarter the non-GAAP and for we've

net capture this to make enhance book-to-bill is on and bookings A a business and structure, quarter we of with new significant organizational acquisition quality. made, of sector kept. awards leadership emphasis promises promises common Digimo a new billion this X.X. progress theme $X with of on with performance emphasis cyber increased better alignment We've ratio execution our performance heavy continue improved resources brings backlog an and achieved and Fourth, which the to of

nearly funded backlog. of awards quarter currently the of total ended protest. $X billion including also with $X We billion under billion, We backlog have of $XX.X

and While growth performance our is account XXXX we adequately commitments, An this teams have better quarter's growth Leidos to soon. element top much reignite And our this on diligently customer-centric do are supports management. growth framework of ways our not of at strengthening satisfied. here all working our winning line been at

strategic of leaders X in mission importance. past the and dozens managers and customer each months, we've growth account of deep areas expertise Over key frontline with hired

Each of office integrate within managers technical underseas ensure Pacific the military their P&Ls strategy. that work illustrate fit both support for hypersonics exercises are examples our Aukus. of the our that Aukus technology we've strategic to to solutions. a this of respective X. best-in-class in which across deterrent are work our with Australia our obsession and account short front-line in hard awards Autonomy hires and couple in order, and Because U.K. won point Pillar very we seamlessly U.S. have fundamental sensors Maritime Two to and IndoPaycom recent best-in-class work teams and

of taken account the efforts development with needs. best to to step of Pillar the bring Navy managers to We've dedicating that of our partnership XXX capture are teams, the and full frontline submarine trainer Leidos they our in top Aukus efforts. Operating engineers of U.S. growth And within architects solution fit our best and customer our positioned some further X.

we're the getting had quality much up adjudication. more capture dramatically. improving end, future. With a bids awaiting performance billion quarter's set of business worth stream, we At the the And importantly, making in value improvements are is we $XX for better growth in

through our technical customer are greater aligned direction, each into solution. better proposals at our and strategic Our demonstrate pursuits doing pulling more are enterprise-wide expertise customer we with understanding,

then results Chris insight be call day break more walk now more that financial I'll and the your And people of join our detail. pleased execute over turn you provide excellent also to back to upgraded very year, the North the and I'm summary, momentum progress I'm smarter results position the making every emerging of collectively teammates sure the our of financial is into our We're Leidos smart strategy. an Leidos X areas. benefit outlook He'll best, best who carrying and Chris? I'm for customers. the making every Leidos could pleased we'll questions. Leidos in the with great we're to day in our of year. in focus very nation, of So the through the we smart for the us this that in take honored current proud limits. XX,XXX to into on our quarter our This Star puts and to

Chris Cage

and Thanks, joining Tom, today. thanks everyone us to for

yet a performance driving on quarter also our the second and of clear With results current Our again cash team more while demonstrate building intent, for financial power generation. focus is profitable future. prosperous our growth

non-GAAP generally achieved Turning headwind EBITDA the $XXX up benefits $XX of quarter the but through adjusted was execution were was second net the up points . Robust basis margin and adjustments net to EAC EPS Slide respectively. million X. XXX for low performance. highlight the XX%, up quarter and Revenues the cost was level the increased income $XXX was strong, demand of business management. -- statement revenue X.X% to attrition. and income intra were mix Program XX% year-over-year. million, non-GAAP this and EBITDA was for levels and record $X.XX, quarter, year-over-year, We billion, reflects XX.X%. million XX% $X.XX growth a for historically on diluted margin both margin very strong environment The Adjusted

income material net had on items no line the or Below impact EPS.

as year-over-year. Turning and on the and on growth research view development DES National increased and security several volume Slide revenues our as X. well programs We X% efforts. saw to segment contracted digital Sentinel

is comparison. may last NGEN recall Security spikes a impacted programs Digital in segment some year, modernization tough we large that also and by the protest. also and You National of notably year-over-year digital most Aegis, our had created which

a strong is margin income strategy achievements, focus increased and year Security Still, non-GAAP accelerating operating of program quarter XX.X%, discussion. to from the the prior execution. digital ongoing milestone basis and Digital excellent major points in national growth control cost security XX with and National some

came XX% of solidly in For prior profitability. the non-GAAP from plan operating has of up digital margin the first and security national increased on and revenues year Civil and ahead year half been a the quarter, XX.X%, Health ago. XX% over year, at income

DBA in on higher disability of driver an exam on catch-up and profitability higher increased X $XX requirements a products, deliveries volumes portfolio our primary by revenue primarily IT in incentive uptick U.K. mission The hardware managed of commercial our and software quarter scheduled and fixed-price extra energy health and our of growth in increased business and caused business, programs on international development offset refresh Australian in an write-downs business. volumes our awards was paced million contracts. fee our revenues drivers services These across security by X%, Commercial on changing slippages.

suppressed write-down growth the international quarter. write-downs, have X.X% in operating these and year-over-year margin posted U.K. commercial to revenue non-GAAP income The would operating margins X%. of non-GAAP income X.X% Absent

Although these they our team portfolio, on new of is action took the focus write-downs greater and the programmatic rationale they success underscore U.K. C&I within quickly long-term execution are operations. the the to structure. disappointing, for bringing The organizational international ensure

and we and by segment. Commercial performance within balance, remain operational We're signals we'll across back International U.K. confident on on that encouraged financial towards our strong And the demand our the and objectives get track

Systems, increased performance good over organically. is year non-GAAP that XXX segments portfolio. from X% margins Defense on improvements see X% on execution points the on Tom of making to the kind and total it prior the a basis we to basis financial revenues the in XX.X%. touched operating program expected Finally, increased and income And quarter year-over-year this

Leidos. potential development from XXXX towards towards we transition as of turning a future. driver growth key are optimistic and brighter margin a on we see We're this As Systems unlocking to point that for marks some production full and a the strides great significant business making programs, Defense

sheet quarter on balance $XXX QX Overall, sequentially. X flow. had now exceptional million repurchased debt. equivalents the from from the to shares, highest $X.X cash the $XXX was seeing ended days $XXX activities market the XX including days, collection We strong day year We DSOs of improvement X QX, in ever, In and of flows we're a a and million which throughout million the X. $XXX Slide of generated total million of with an in cash We and and flow organization. dividends. of cash on open we million for cash free and $XX Turning performance. focus led paid week operating million billion to cash on cash in a ago and $XXX quarter the our

gross Our at now financial which us flexibility. X.Xx, ratio gives leverage sits plenty of

Slide non-GAAP raising million, end adjusted $XX.X X. through revenue to the of outlook $X.XX for and $X. our We're $XX.X guidance enhanced new XX% our EPS we're go XXXX Next, I'll $X.XX by on billion range a of to range $XXX gives to EBITDA approximately lower a billion. raising We're which diluted of by our increasing guidance to new

enhanced the operating guidance year. approximately at broad-based first Our outlook the strong half cash reflects performance billion portfolio. for well across as momentum $X.X flow remains This entire for as our

potential walk recompete, business and strong margin exam performance an signaled headwind me VBA based some But the half seeing in we services drivers half second let through business. you of Last we're our on ahead of remains our the us. disability of Clearly, we're some upcoming which momentum second managed health modeling. in call, for revenue

the claims disability is straining addition, budget Act the by VA's the caseload In resources. unprecedented spurred of PACT

Earlier already approve dialing and including back VVA the its this reductions fund these in to implemented government this which several billion case risk volume. challenges, measures the suppresses near-term XXXX, with to customer 'XX veterans budget of manage in proactively change seeing year urged cuts through our month, budget The backlog. staffing, benefits industry case to We're and impact $XX VA Congress has to fiscal care. or gaps internal

veterans rebound caring our underlying in support, case mandatory, as Given budgets, fourth through broad we bipartisan to work discretionary not benefits that load veterans quarter. for expect is and funded

funding deliver ready the nation's the this continue stand service we VA. members to to service partner to issue, Notwithstanding temporary a exceptional mission to as trusted

lastly, in We half calls. robust up last we've for the a expect the back in consistent And year, moderate commercial and national margins half on and international fund X margins innovation our back to stood digital the growth. on the to snap and somewhat with focused second security of commentary

investments business Our position seed profitable our puts the in emerging performance sustainable, continue us corn to accelerate growth. as bottom to favorable strategy to drive across a line for

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

Operator

of question from line [Operator Perez the coming Mora Instructions] And of the from America. Mariana first Bank

Mariana Perez Mora

I question like So imagine you recompete actually could And Because and have advantage good competition is share of base coming. think that care. what health really to are you margins on actually have really you they to perspective, incremental managed you a really really, in first strong. like we there the moat incremental market? moat. How strong But my what these a have think this ahead post growing about the installed the margins, you guys that keep allows from should that go like and is else technical a this your for as margins

Stuart Davis

your technology ahead we additional veterans. to serve part we're investment Thanks, very is its opportunity very, serve appreciate a more of. performance proud we're had take we the to came an nation were the and And to passion is business as curve so of to Mariana. out of related directly our more this our part Really The question. in COVID veterans. of that in poised And volume of and achieving obviously, the portfolio and

more of investments We're proud we're same management need and case very that allow veterans over to that input for our very years. of output of and this, increases coming veterans modeling the proud the serve what and those stays and us the

What bullish us overall volume partners. we're that sees their future ensuring is we're our the that volume. the in VA as on very absolute affect So doing to

in challenges they invested are success they right now. sure their in budgetary we've leaned have we their So that to make help that understand and

probably the recompete for fourth this more quarter, And like that quarter. third coming the that's well or in fourth positions us

invest to that veterans technologies expect we And opportunity better. are. customers our customer us even the to very We bullish for we're to serve to expect serve continue to the the us about the continue way in

So team to and the is business, to challenge over that we've her business time. increase but how hold Liz on this not how given to this

favorable this of the our are plateau of given year We're of to very as and which peak Liz thinking, we her that. So springboard part not as seeing strategic to from as the that's we're this of we've business. a it deep challenge team XXXX continue seeing and responding her business

Thomas Bell

to you add Chris, want do anything?

Chris Cage

critical Yes. Mariana, we've over. past a provider clearly, to the key is beyond record added we bear. of evaluate under great of customer of looking things then, course, demonstrate locations, that metrics that is investments accuracy, There's your the Shapers that, times the won a And satisfaction, performance great recompete VA this customer technology all touched But focus track leadership aspects. and what on over with to I those we've of the equation mobile for. locations, been has that's the major been? networks, strong been would. Tom And Liz several throughput, staff, And all in going Larry performance come multiple we've long-standing clearly, here. partner made a We've can years. to physical the

sharpening very So to area about it's putting we're feel But an we're ourselves position encouraged that position in defend best critical work for possible sure this we ourselves. to our our make on. pencils the obviously,

Mariana Perez Mora

what managers terms in the And have you the on challenges and capture may, hire? talent, that hiring focus things if of question both people about, on as you are the and these account my next you training is I

Thomas Bell

mentioned talent But really choice best Leidos sure ecosystem. the as of the I've out brightest bound of war and previous determined, in is for There's destination there calls, that's make people. are talent of these a for to and type the on we

dozens allocated be these I And we've for see, have of our an in so we've Leidos started that to solutions, people and what hired hundreds new mentioned account of solution environment compelling. architects our is we managers, we've to

employer an of We are choice.

team. And be people want the more the the win, more winning will on to we

that in in challenges. of question going fully so and this serve most the who serving line a Leidos to of disenfranchising are a front it's make a passionate them to them People difference. joining -- customers. line this business a understand customers business we're that's about in to of customer question a of in they are much not make for It's for the is of opportunity do want And helping person the support them. So investment for can not their thing because you is them

and is coming So affect compelling attracting the bring processes that and in a them to hearing for from an about most we're great And is the thing people, strategy, to their to Leidos that investment creating that and investing positively and them work Leidos others allow tools result. we're as differentially. solutions talent customers

Chris Cage

is the of missions Tom's to the add, I'd multiple can Mariana, that technology course, with they ways we right those other the question. passion right customers And offerings road we mean in amount as that them critical, that to be good invest most that support And capability that's there's so the help that to breadth that thing want understand in. of as a that's to been well. is, continuing an screening our a reason have are need brought there's customers many behind only Area and partnering of critical. but I very The the area why to down Leidos, is to that tremendous up people right. the people clearly to serve architect them solutions bear have them helping is we to have into get that

He's momentum our taking that office. and a growth half here about focused leads second that very in Fasano the the Gerry we're plan, year. on rollout of excited of So lot

Operator

next of the question from Akers Fargo. line coming with Matt our Wells And

Matthew Akers

I Thanks the for up. Tom, follow to question. wanted

pruning and whole looking inning kind initiatives give what . an are could Kind update on of you kind us portfolio of at. we there where kind that in of You you're some talked about of the process? we of stand

Thomas Bell

Yes, Matt. Thanks, sure.

building the future. like remarks, therefore, of world prepared my in This in business challenges in facing done the XXXX that proprietary halfway exclusive XXXX of XXXX. affect customers what our proprietary said view result looks a and view hypothesis is own that our I and with order to As the through We're we're as the of our are by future. affected in strategy are what Leidos

very it's meeting forward and backview today, a view So much future in a XXXX.

we're in to this Chris that out starting starting a that of are ideas going in strategic from be we here. the are we're are done obvious that, we future. although in, not that now These do corn because the to put we're going And emerge there comments to we future compelling be want putting C As areas his articulate to not waiting know winners. year to investment it, out trailed whole in small so process those deep we our areas fund the things thinking to we've that are investing do for affect there are to

that. very excited about So we're

pivot strategic cores objective of I parameters Now a the a to the on pivot. a we're it overall pivot our XXX-degree year's It's or thinking, I for in going mentioned XX-degree going the to deep now. call, and our that be be Leidos, it's think last variations not in

have be very also wagons to scale to concerned to complex models. concerned going to people that focused problems repeatable hitch but We And down focus customers to the with differentially. be we're so speed. they're really are going on on our doubling have strengths. their speed, We're solve know core that business our on really We're to they the going

So trusted and speed scale, AI. mission

on futures for that going facing in unlock to compelling day are current are to businesses the we're And because is whole for we think mission adjacent those continue the look serve. focused we our customers investment. areas a AI all for reason technological white across a the we trusted that of space we're to it markets There's a had

also in going in Matt, calls the spreading Now parts do year. are there's every last not portfolio of I be I've going your not to around we invest. the flower peanut this believe bloom. question, watching butter in mentioned differentially and obviously, of spirit to

its that think in differentiated differential does the business any results. But I process for raising obvious is this the Leidos. is also it's part belong head yet about not strategy all there saying of investment in not is

to way pruning, grow So to don't as All welcoming we're about the investing maintain, thinking think discussed you full that and in to. that of That's Think to Investors investing will process. Day portfolio we this be to March our strategy this investing as exponentially. simply of grow look our forward

Matthew Akers

Great. be stuff upcoming recompetes, could should That's I more, watching do lay X on helpful. year? that anything And for this we I just guess big if the

Chris Cage

Yes. bit, Matt, of to course, the that's mind little VBA of business, a navigate into talked the obviously, as we about top exam we QX and of QX. end

next late an Beyond that, year. with There hypersonics the common important is and contract mean, in not exciting first customer. to needle this it's extending glide look an as opportunity is contracts our or many or we hypersonic movers. I forward and whether there's body there year the There quarter logistics arena TPS integrated converge, an support work with TSA that

The can other is is making our out of looking in work that is we proposal team DHMSM contract. XXXX, that, business us. in elsewhere the big specializes a partnership putting fits, forward, that for of between mid logistics the we're the to side. already follow-on an do think The piece important C&I in obviously, our I ahead that early sure foot work sometime X to but the obviously, to next year, middle point best then 'XX. that's imagine And you and I'd is the And

Thomas Bell

billion pile awaiting And qualified our in We've sorry billion $XX months, just pipeline. decisions. Reclame have We've Color the approaches almost whole here. to we second quarter. got In a pipeline plus got $XXX have billion submits on the $XX customer in and to a XX a Matt, for billion. next our bit, pipeline of

and that's the there of go much focused the excited business. pump teams talent to grow get with on out this who opportunities So very about business we're priming very can differentially we why capture our and are

Operator

coming from Barclays. Strauss the next David with Our question of line

David Strauss

like security and half. half, national same on the signaling you're hit guys you sounds but like in second about sounds on but second time, half, digital at Tom, there the acceleration talking the I growth Question the think it margins in you're slow the it lower first in

So second half? just what's of kind half dig in exactly there on the first can versus going in the you

Thomas Bell

Yes.

Our national core the are my We be know X win security we in the it business segment, sure never David, and Steve this top. what can much core the And make the partnered planet. to focused these the But business challenge over comes and Roy in the story. the we pipeline. on in areas. being of be a margins of double this speed digital is that can with in is to there to customers segment type smartest how our where an put the think our customers, growth to past. And back mind, do we and There going more future. . The here won Hall. we low is before. scale help in I conversation this revenue going in have had we They're the our this area a is we've the Leidos. are And Stevens in arguably of customer is they most to our talented leaders, of that don't government Obviously, we've and a that is help deterrents in are on We digits.

they of the aware scale solve have who problems speed Our them. fact requires to scale have the of are that and increasingly people that customers the

whole the off in our to in looking Fasano So Gerry that with area make Roy leaning we're this and growth Carlini in and partnered are way. sure nation any and Jim into back serving Steve with enterprise not to technology in

that's we'd indication not give. to guidance gave softening So here, want if the probably you we an of

Chris Cage

fundamental more here. And the things encouraged. we're the investing I we highest time. teams no add an think on the of milestone unlocks Tom's margin there's future in will in we're repeatable those issues to And fact, here And mod Digi upside in some see just how this to actually around on and that and be never and move can be point, expecting. margins. year our around, things will over work we of I'd margin first timing like are but business, very excellent upside David, see that are To nature space do models I project part that special we is Yes, because mean half there some much But had that of that. NGEN. on programs

did that team to to task take under But growth is key getting his critical some us. I and want into important defense is Steve next for That the program. quarter, a contract important services overlook unlock enclave in the drive for place that wins don't order

migrate the that the additional for for So to over agencies way XX state network the DoD clears time. on to

comes So that we've what as that, we're 'XX beyond. about been behind waiting excited and get and we into for

David Strauss

Chris, a follow-up. Great quick color.

capital performance the half to You rest year. noted first the pretty the relative about you working working prior of year? thinking in the good the capital are How through year of the

Chris Cage

Yes.

So pleased performance management. the team's with on I'm very cash

that done we've interested industry of And payable in in progress and we an be capital. as say I working think don't accretive see more our steady side. suit. job. We're quarters. that strongest right goes. major terms that But always performance be attacking it's strong this anything some excellent I could vendors, standard now, DSO usually on with I gains at the more point some on And side. to And made our time year to ideas she affect managing We've business. the great follow year. the we're regard year, made this are QX this I and last really focused QX in use we've would been a would

Operator

Thank von you. of Cai Rumohr Cowen. line question with coming And the TD next our from

Cai Von Rumohr

results. terrific Tom, much Thanks

assume the next of at be where the on lower to you I health going year, of given terms all at we'll that. takes have we the kind Should are -- You exam the medical it we because be incentives at guys that are least and But under not business plateau. moat new is in point mentioned a get of a peak, contract. early expect the you assume doing time well until that margins to it's

is year? that it and So next health likely will be profits down

Thomas Bell

answer contract because to to but your is hate comes that the the this I that don't what the this know we're the do. an real at awaiting end end to RFP actually us quarter. wants We we way, the tells answer of know question customer

We're new incentivize to long and to we industry an our -- time. best a don't to we're current or contract, that's of not going how know a a a the We period extension going for bring contract is sure RFP period throughput veterans. be contract fixed to to new And for the awaiting to of for most going are VBA its time its the future. if if the have

So we have profitability, a in our decrease a is no minds, own big unknown reason to RFP. in model but await there while we the

Chris Cage

I signal more veterans been demand they that's right? know care, only is money, for the a see throughput. that Yes add, always the strong do Cai, out And need need Congress we that's that has there, priority. more And I'd the what mean, asked BDA

or of call quarter gap. I that's will a how through approaching is health X. become way imagine in where situation have our us funding this a temporary 'XX navigate But next about early levels. we you for they clearer we're mean team And do grow conversations of the to 'XX can a we're things as lot get Now it, off Tom with that our is it. the we right.

to at everybody's our around to we And continue eye to earnings. performance and sure levels grow optimize so opportunity elsewhere make looking clear there every

Cai Von Rumohr

on quick your business. X One new

the been think, had submits, your also is in of see in we billion up of so you some pick process, billion terms guys in. Should what the are I book-to-bill successful $XX half? there. $XX awaiting, classified you've second have have takeaways chasing think we award should a $X You billion about in large You you big in of book-to-bill? And

Thomas Bell

and X of ratio and if determined mission was profitable earliest The the talked book-to-bill in and swingers XXXX that on possible that building it's what more team book-to-bill what business than big are my are be And in book-to-bill they with really focused way to over I chasing backlog these in to that. will some the ratio remains quarterly business. again, meet slightly There about I'm that on And the or quality there, a a time they far focused Cai, call, But many break really the that year fool's fact exceed better incentivized the for have. of that's is of exceed our we should mind. my capture team. committed

book-to-bill? that. backlog The that we how got potential And look we've of our the XX at future looking is with trailing that on the How team growth do at is months very on books. focused that

mentioned I our start as will capability way. we job bring I a of the in will reward in and our many are that backlog doing things remarks, Leidos those better feel if to my adequately As of that we're break bidding prepared for for technology the and the

SKUs. getting the ahead very our So on we're without bullish of future

Operator

And line our from question of coming Arment next Peter the with Baird.

Peter Arment

Tom, had good you have would just guess, results. maybe Terrific maybe had confidence performance little year, the talk the of either to just in write-down international, commercial better. focus on pretty about, half and just I to you the just the Absent kind margins write-down, in guess, quarter. back of be where a on level expected bit the are, your the write-down margin I

Thomas Bell

all, Yes, new sure. perspectives of and with eyes first fresh looking that's business. is benefit organizational Thanks. this Well, the on structure very new much of having a the

feel write-down very a the that is we primarily price U.K. in increased a with also under we've contracts that this customers, there's more. of the confident a looked scheduled rocks decided As lap requirements fixed take to taken the robust we we X that have but slippage, to that through have mentioned, and we've and around Chris the conversations not because and make block sure changing

want She's are quarters, about and watch job and these the first and last our scrubbing Pillar talent in so. steps very we some that in portfolio bullish Aukus after I her really synonymous her some her can I business. X portfolio. as team the So Leidos prospects quarter this to featured and doing you great cut make programs that that half taken hiring for call, call, number we've get allocating feel X making and by in of a Vicki we last in with heard the by mentioned really

her and the here focused customer Aukus. team we're in in are bullish excellent together So and very the Vicki commercial and Australia around States, international. very We've U.K. and on points and United the opportunities team touch on the for bringing obviously got

And Vicki, I who the from and want had team. SES that all platform year. credit to a tip solid to gotten on Van we Mike really make a business around that really arms to the half Also, of sure and a to which is hat first good grow. their have are that very to They Gelder

her So heading very is also. optimistic in about business where portfolio that

Chris Cage

has some that didn't commercial Peter, piece that business, Tom mention the margin year have The are is back sometime I'd fee on only thing There a to tends been extremely the pattern year. is critical award the in business and there half a happen there, add the of where and well stronger that performing is incentive later of our basis. energy and the determinations

to the on So great half. a And of footing that second deliver strong believe continue we business expect results. other well-run to we the portfolio, are piece the for

Peter Arment

exposure the a continues the of UAS evolving strategies about Leidos That's counter-UAS here. when business the very counter or just some about Dynamics thinking and changes lot guys portfolio quickly, And has you're and helpful around Tom, that just know commentary. thinking to DoD I How then make you are today?

Thomas Bell

within got if Dynetics. technologies have Shield is Obviously, Leidos for we during capabilities can our talk timely deep all UAS. dive Innovation our and affect later very briefing -- Defense our this about, I a other most myriad Link Peter. into a counter question, pick a customers. our thing we've It's of and that Systems classified week the the to for Center, about But segment, Counter-UAS capabilities

our this there to now. things we we're that investing it very, technology going So back got a when to help of with customers comes everything in decide are take and that they're to some very be step this at problem we've year in should pantry the vexing look uncovering kind

. will So that we the about very to something have customer. for question in be our pantry bullish The opportunity is the serve. do compelling

Operator

coming question Citi. Jason of Gursky line Our from with next the

Unknown Analyst

us Jason Jeremy pipeline for Could growth the on kind walk and from us might segments each of Jason outlook. and through 'XX. of the update an impact how capacity that production team. for you And give 'XX Gursky's

Chris Cage

But you. year of high-level for in down of pipeline is small all metrics. billion the we by by rest north dollars. robust segment some the the going able feel Jeremy, millions $X We're in to assured each dissect Tom be has way that to tens not probably opportunities gave of to segments it opportunities the you of some strategic

big our $XX approximately numbers billion. million like overall positioning we there. ticket So The pending, billion $XX pipeline, again, $XXX

X/X decided on be our work in to the energized. take 'XX, expect away, new great growth are position of side and and highly that teams We being BD

Dynetics the fill we've is waiting the As in satellite needs. the up relates that it capacity feel down side, that on We've field Huntsville. we've good augmented like enduring of news team up got payload -- the production shield. a from to the been in some had to We facility standpoint a capacity, like capabilities built areas white

we take spoke So of we're our advantage on we expand capability just excited last even full fact, And that we built about months. few a new there's that of great side in the And It's in in footprint team's facility we've the room Charleston to that previously got toured out. out. then place ability to facility the built the SES about there. what plenty the in

look that those and so. the happy expand entertain a pipeline, there's on we always investments needs the compelling XX It's at foresee to in we're good I if ideas up big the see or that but in able to shape great something months next be areas. need over expansion a to we're to we major So don't to

Thomas Bell

million have, that a And big The awards home of -- Jeremy. not but XX more. only mean that, $XX got runs pending we or of I little awards to deck, billion just is Yes. we've bit billion $XX on pile $XX XX, on on that several

in So we've proposals got lots work. of

positive should relatively a capture -- the problem. we've business And average internally example used of We've batting be so that. the had on

with talent, the to we XX over inertia, break energy so going we're and that to new very imputed the build momentum months. And next now XX have And with processes energy new about excited tools. to energy, that's

protested. take in that they're customers' appreciate You'll environment, almost all our And decisions ultimately, time.

the And leader so good it wins, but to little the highly in Jerry momentum is a confident right takes of a energy the inertia we're bang that forward. a becomes to us place, of flash and actual break while of before we're bring

Operator

line And question Capital. the next with Herbert coming from of our RBC Ken

Kenneth Herbert

quarter. I to start nice and just wanted off. Tom Chris, first really

half guidance You little second of driving with there the in particular we the think the about the should a flow conservatism keep anything obviously the from year when you exception make of in operations. cash in the mind more Is outlook or bit raised cash there?

Chris Cage

to guide of in, Yes. see earnings pretty on Ken, always that up we're last extra here our $XXX Chris some stepped you're the that focused that we million, going quarter a these comes chance Obviously, And by in January cash here. increase, converting significant into versus there's clearly cash. December.

of just that no So But We're didn't managing X at our just the this was X/X and ahead of the it time. to of we're there's middle. at guidance down feel to kind with time, this quarters go, foreseeing. point the us, commitment year we headwinds cash in for increase it prudent

Thomas Bell

about to challenges that, into We're the on performance the the customers budget that with uncertainty we're election have still around heading just their Obviously, dealing of And an the some right, of year, uncertainty. with market build talked in their business. year. we issues still and at dealing beginning

fourth the with of our going third of half or again, raise we to We're that year pleased we're quarter to. overpromise. the while our extremely us to make them deliver going to the -- skis that expect allows ahead our get way so to And first keep dry guidance not powder the sure we're and

Kenneth Herbert

buyback great some you see nice. capital to in there? think sounded from maybe to really around cash I upside deploy just And to maybe can timing. million. want how as year, it part your the guess the in of the But here about of considering is you change returning the well expected there That's you like could, what $XXX you're -- this talking remarks if investments quarter, more that reset great, prepared today. of And I capital the But could any to that Tom. in framework about terms might be the shareholders

Thomas Bell

when the I flow quarter a sign comes. a very We our And had trailed sure. the business comes like is of coming to robust commit quarter. how great for third to It's the typically, cash quarter only it know great Yes, relatively you that is in more. second little a reason a the quarter cash robust didn't cash bit We wave had the -- in. And it and business.

third recommitted comes it. historical this in repurchasing that committed -- norms chance in continue us revisit the million quarter allocators We're shareholder-friendly that a the it give to cash that halfway because as may cash Ken, . The the fourth thing stated, to continue say, to But of and going assume program. we look not year. prudent third the If state now. We're more X fear shares I to I is that the $XXX quarter. quarter, unfolds, obvious, just not. toward per in to a on be will through So manner. we're but We'll -- be worth to of

don't worry so to about in my my And used as say. this burning a hole pocket grandmother

Operator

And next our Noah of line Goldman Sachs. Poponak coming from the question with

Noah Poponak

Good morning, everyone.

margin to historically and pretty the second need than would but be margin for quarter, So be earnings lot in for percentage I it's be lot the first range of the absorbing to strong been also to half the Obviously, a half margins. year. a lower you're the civil second second in as guess be C&I a the has the year the half health to in in lower this the at the total XX% EPS the EBITDA than

me what moderate you of lot, I through the year? back thinking about that? half how segments the that health or you can through which Chris, are margins mean growth -- maybe, a walk really So revenue just margin

Chris Cage

first Sure. guidance get we No. XX.X year, guidance, XXs with looks call opened months full a little the high relative in And half excellent stepping X year Thanks, let's year more the right? it, bit implies, the on roughly first ago, but Noah. the it, the modest. year. an of Excellent the And we of XX% half the second to to But margins back, second just of half expectation margins. half

the expecting disability primary sight look come will allowed As perhaps examination XX a margins how look the percentage as down, even let's we to, -- lower to the fourth the say, VA able back. kind around those as and be . And at by of ourselves and snap we're right? quarter to throughput we levels of we the where in really being delivered see pleased kind reason, say, still the work business. we're scenario that's line ahead next to is the into be months, navigating some quickly then we've of cautiousness few -- that So look

primary where are So there certainly that's scenarios do could better. that backdrop. much But the

obviously, portfolio, first As security those of those and we at half a rest always are signal levels. potential national we look able did strong margins, on has there's very the digital sustain to the at that had the

then progress back depending taking on But upon of again, the last dial and the we've sure pulled And we milestones, half or a point innovation what being start looking an jump on guidance. at back for to bit that's some Noah, funding got I'd of we the XXXX. that the dial that made that up second sure this a to the advantage piece, make is really we're opportunity fund can make investments,

We board So across are the feel business that. the of about in fundamentals good great the shape.

ahead on still areas some management. the are after cost still on there fact, side optimization indirect to we us have In that of get

'XX. really I feel So as positioned we're at well we like look

Thomas Bell

Chris that the by said in hit second having quarter. our XQ in X in profitability worth prepared something is No, of put remarks, and his incentives was I'll aided just quarters'

business that been. as that. it as of was solid enhanced remains of profitability because the So business underlying The ever has

Noah Poponak

or that -- the without it sliding I imminently guess saying don't an Chris, an sounded like more maybe yet like you Does extension recompetes is out? sounds don't that It VBA -- And Okay. don't make guys even are an I unlikely, yet. RFP RFP have you likely?

Chris Cage

scenario, whatever can any here. That's do a how able short more It's but and is to been can't versus an that VA and fluid. becoming and is some rehearsing been see for of to prepared more the kind We're to commit we just it. extension likely but in order that. We've recompete, we preparing it's there adapt

Noah Poponak

while out? But expect to the slow them you down being activity still sorted that's

Chris Cage

and At help new into they've got fiscal government them will until new budget that year, least a get a environment.

next they over but be activity this Congress levels they our term, aided the in few baseline time assumption Now could muted are in as by near -- point the months. again, at more

Stuart Davis

like we've beyond gone Livia, the it looks hour.

the Q&A So think we'll at this I call point.

up to the thank we your you call want assistance forward with I to thank interest you for the on everybody Leidos future. today your catching . look in on So call the for in and and

Operator

participation, and that now does you conference conclude gentlemen, you and our your for disconnect. may Thank Ladies today. for

Leidos (LDOS) 30 Jul 242024 Q2 Earnings call transcript