LDOS - Earnings call transcript Q3 2024

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Operator

Greetings. Welcome to Leidos Third Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

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

Stuart Davis

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

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

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

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

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

Thomas Bell

you, Stuart, good everyone. Thank morning, and

always, with high-quality that entire I'm to of of portfolio. also fact again proud financial our has report team performance. all be the straight excellent sixth very you great happy to morning, And very the This wins I'm today. across the delivered As it's Leidos quarter

this guidance metrics. markets, regarding our improved all are across and we again As this provide our later growing forward financial important Leidos for outstanding increased on call. will of sustained XXXX our a business result performance our full performance, raising strong into XXXX capture momentum financial clarity and Chris guidance details our

cash of With earnings enabled now the margins XX.X% XX.X%, growth EBITDA XX record in adjusted This and quarter's organic of growth our organization. margin Promises us drive This a to months. portfolio philosophy solid deliver trailing result team's over throughout achieved we've EBITDA priority substantial our customer missions, flow. free and robust programs execution capability-based efficiency Kept of Promises investments our the Made, to of serving is the performance excellent industry-leading embrace

growth Our of performance in EPS flow cash free diluted of and conversion XX% this quarter reflects adjusted XXX%.

quarter of cash purchased Our shares million open this clearing share $XXX thereby repurchases $XXX $XXX of the planned to market, million collections year. on accelerate outstanding repurchases. our enabled the also million We for share worth us

As a again ongoing a and a increased sustained and result of performance X.X% December conviction Shareholders our on dividend our our our dividend. a dividend. $X.XX of quarterly we of profile, share, past will regarding increase record receive have our XX portfolio's cash earnings over

over the But of sharing strategy. and new additional Star continue will for Star begin the The a that growth more forward engines at on upcoming Investors Leidos potential prudently past our look months have our and Day be on to come We for North repurchases of XX new the strategy. suite focus capital capital year, about as growth important and remainder the March. share excellent gives purchase strategy focus uses future strengthening balance compelling of specific our purposeful part of we've undertaken this optionality, North be focused Star our we us sheet this on in to will to as growth more North payments its new into detail in down engines

Today, I'll update overview our I'll of time our today, an Health Leidos Civil segment. and this highlight from compelling Starting the one with take to time on practice to opportunity and start engines. growth

us. margin Over leader been a our the for growth Health and segment year, Civil and has past

and Leidos to deliver are in employ, broad synergies so, our Our superior Civil performance ologists, doing team their well. is extremely the for executing careers they customers. leveraging who optimizing results we in and to their portfolio. they refer this And within limits we newly complete segment, of experts to are what Health our set of come the as formed in And scientific break across

and positive full Institutes customers management Health solutions for various strong the systems of Health, our seeing and the of We're virtual work air developments the array customers, across performance health NASA, of National including and our traffic Civil's our customers.

One area you turn performance. which that many to segment of Health Managed I track of truly Services, solutions our bring truly customers, differentiated know where we this in is differentiated unlock

of disability customers, Currently, Labor, we perform FBI and U.S. for occupational active a examinations members Service. Secret Department Health Services of medical wide a Managed for offering within and evaluations the preparing and including flagship in is disability core the our health duty veterans programs, the Included discharge. these range to

for volumes Promise the in Act, into based as remained Act, Toxins from the eligible in this the the business elevated to August population PACT increase signed on XXXX. known have Exam Comprehensive law better of Address permanent

positioned speed and AI, to with this Because exams respond overall continue with to and and continued key business, of enablers quality our health PACT increased to volumes investments complexity virtual of investing in ahead-of-the-curve in the and we're creates. technology capacity, the Act other

our veteran those we mobile rural communities, in living meet These to the clinics members tribe populations. to fleet and example, Indian veterans. needs include expand an continued As homebound on have of reservations of underserved

Leidos and of algorithms their own care to help systems, the such and use imaging And care as the critical are ensure scan veterans coordination whole the their our clinics, timely assist the These quality care health for of beyond receiving ecosystem. CT machines, across veterans we've QTC processes cutting-edge VA. to optimize VA our developed

focused with case to service down exceptionally performance the to drive deliver we VA working nation's proud to our continue members. and timely our and service for exceptional backlog of I'm VA veterans for the are and and veterans, on

some and for last of recompete real profitability lack of of time an challenges the this because caution that in of this our this at I volume half our expressed budget relayed the earnings might challenged regarding I year. call, be business and On customer of work. second clarity that upcoming the

fronts. then Made, uncertainty the both prudent, given improved time. our greater at we these Promises was I'm much that with we now that that to Promises report Consistent clarity Kept happy guidance issued philosophy, on have

funding a request First, government by XXXX, passed approved and supplemental year this $X VA for was support. fiscal Congress bipartisan the with clear the billion

So VBA year current fully And to Congress VA's already contract. billion exercised the fiscal regions has our the approve second, the year XXXX. in for $XX expect request we option contained

VA receive addition, the coming a contract we award work forward expect In be long-standing continuing veterans. what contract weeks. and this nation's new much important a the a service we to our partnership have same in believe to look to our bid X-year submitted we the compelling to very for for We for in work, with

year very With new option confident hand the the performance this ahead, in ongoing contract this and X-year business. current we of in are financial

our and margins on back future be of work here volume in the We throughput to investments we've the and make sustained to expect the continue quality. made of and

remain drive beyond award, of the encouraging we into in to to plays looking this more even X-year veteran this ability new strengths. to The And continue VBA And services our offers its serve is confident long-term set next our differentially before our award innovation contracts. to and veterans. nation they

mission timeliness to demonstrate better and and greater satisfaction. focus scale to ability customer mission and talent trusted we our poised of in our team, handle AI excellent technical our of even volumes cutting-edge With and investments in the quality, are exams depth, our with

business to development. now Turning

and quarter with ended ratio the this quality you book-to-bill our We quality performance $X.X the over I'm quarter This importantly, billion, excellent size including by of with we've with of focused billion, $X.X of this $XX.X focus backlog. a return fundamentally As future funded pleased yielded resetting our on X.Xx. backlog, of the expectations third know, an improving future a of been bookings work. very representing on of backlog total improved and net billion

Quality all our mix wins with across of new this quarter drivers. a were segments, rich growth balanced

wins over is new sampling. capability in we've the full in an a cyber. million $XXX early in this is It's our Here This our sector. investments takeaway testament made We from repeatable modernization a to competitiveness spectrum also in solutions and in success digital won market. and

principles. quarter intelligence a developing our this Army's community. of capability classified A takeaway to deliver Zero of transport new large Trust the next-gen we a for couple general include a compliant And with network unified awards key member to contract mention won

for tapped The digital $XXX its command optimal coordination management on rapidly Force component analysis network of Air the oversee augments and Battle different allows our award and battle assets, operations joint comprehensive digital Air links of to to growing million as Force control domain Air combined to battlefield. advanced commanders of portfolio planning, integrator programs. Force a This core The and network. changing enables Leidos network, its the system respond all all the together infrastructure between situations units

for a Reflecting and XXXX. successfully government-led segments. Enduring billion our rate we remain on intercepted product $X.X additional and Shield, development mix a unmanned we net of contract production targets. an This XXXX more full on had received four our we within in to production development contract rate portfolio after a receive tests in bookings launchers Systems Defense low award work there, IFPC maturing track means cruise of and missile And

This SDA's Tranche serve provide We will satellite on continue X our means the finalized of X to we View X, and contract with our to payloads. Tranche nation Wide-field payloads satellites. X

Agreement ago program. contract a from restart Glide a Cooperative production blossomed of Operations and Command This we've units. Development our U.S. to more delivered or CRADA received now than and Munitions Special from We decade Small Research a the program X,XXX

produced small a critical customer that Arrow in fall. multiple that DoD's be Recently, meet quickly on for We fielded will were called creative for standoff more tests note, the and system next-generation and flight missile completed this ranges systems Black advanced Of tests affordable volume. even cruise also will Arrow help strike undertake at can Arrow. Black need believe Black

see focus and across portfolio. significant results encouraging on these our to growth other from our entire It's

by high submissions. was proposal of marked volumes The third quarter also

now So the positions capture believe awards, very bids awaiting the in looking quarter. well $X adjudication stands our We of of business forward, of even by grew future. and for QX $XX pipeline end the large the at billion this billion even us performance number at with greater

rigorous into can has picture undertaken have unveiled That and Day. As the because exciting front kaleidoscope strategic work spawn hard our that the conversation, compelling of will team of has process for financial to opportunities years. Investors cash accelerate bottom the I of line, deep referenced From us thinking, in come that has growth, opportunities Leidos say the March new the the our focus. the forward clear of focused of focus us, into path will year earlier Star top XXXX confidently of and North our coming put set it strategy our line in over we an be

improved our outlook. turn in the detail to now over provide Chris insight call I'll Chris? results to financial our and into through additional walk

Chris Cage

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

Our cash on is on efficiency growing is third to quarter lower what This as again value. risk laser possible, we through showcase and sustainably and shareholder earnings the focused and drive performance results wins team focused deploying grow then them responsibly high-quality organization.

billion, on $X.XX for remains Customer Turning historically to the third retention X. up standout Margin statement and the were the once X% quarter employee a remains year-over-year. income again high. performance Revenues Slide was in robust quarter. demand

million of Adjusted year-over-year, $XXX and watermark for a up new XX.X%, EBITDA to increased EBITDA basis adjusted Leidos. was XXX margin high points XX%

our EAC for $XX was net adjustments positive, performance execution level Program in one years. nearly X were million performance. margin catalyst a best

respectively. million income XX%, EPS Non-GAAP $XXX and diluted was non-GAAP was and up $X.XX, net XX%

tax slightly interest expense. rate On share higher a our and net count quarter year-over-year our basis, diluted the fully in lower slightly offset

footprint keeps see in corporate neighborhood in spaces, the of from Looking expect improves annualized $X and million, $XX these release another the our and costs associated check. the we impairment The press presentation of additional over which benefit corporate actions actions $XX closely and and exiting lowering or and see you'll X GAAP reconciliation charges the non-GAAP quarters. so managing consolidating in our estate million tables be million full the we'll of of next lease will underutilized real in savings We're charges from competitiveness costs XXXX. with at million appendix, $XX our to

which view the X. perform discipline ahead and across the portfolio, Slide very programs. segment plan. modernization to on Security slowness continue pleased year-over-year. broadly the as community of offset segment to our We saw I'm revenues with intelligence of they volumes Turning Digital increased margin National several grow X% across digital

our the intelligence as highest utilization National income prior well Security in early on repeatability the fees the non-GAAP points quarter margin XX.X%. This XX and and as from community and to award excellent increased of year, operating it margin Digital basis reflects programs. digital initiatives was year modernization success

in Civil customers year As a XX% to up the shareholders. and margin earlier, came over to year increased operating XX.X%, for Revenues alluded continued income Health non-GAAP ago. quarter, prior Tom and XX.X% deliver and from at

that overperformance in Profitability margin anticipated, able as primarily unlock to incentives. more health the and managed Revenue were line and QX and Tom exam receive was requests levels. higher our with in differentiated disability services spotlighted, we than portfolio roughly was solutions performance

increased X%, highest margins Non-GAAP level this business energy pleased top operating Commercial and deliveries line The area of products with X.X%, and I'm and and the engineering trajectory International segment the increased services. quarter, positive their and bottom with this a U.K. business for was the positive revenues were contributor overall. in year. security

the to points the of year from this highlighted many see by It's IFPC Shield. XX% increased in move segment, to the Finally, non-GAAP Defense and performance portfolio. the expected to financial Systems There bright stage spots evaluation we that year-over-year prior basis margins and quarter, initial kind rewarding over operating the operating XXX on increased XX.X%. test were revenues Enduring

across continued digits And as the of from strength for its X for remaining structure. we recast entire execution, the had a portfolio. far higher set organization and segments. Health the sectors margins segments I'm points Civil at X if and back most basis and than Civil up in have by Looking were ago first been growing you encouraged they've year financials. XX aside, Health as but new time broad-based double strong the the We Clearly, the

and now flow sheet to the cash on balance Slide X. Turning

cash flows With end flow. of of we We cash government generated and performance. $XXX the activities fiscal exceptional the $XXX million had operating million free year, from cash of

cash the of paid we million in market in $X.X shares, $XXX ended million repurchased billion $X.X million debt. cash quarter dividends. billion and total We in $XX and with In equivalents including and the QX, in a of $XXX open

We and in invest shareholders have growth. significant cash to capacity to return

operating billion, outlook enhanced on Slide our We're high $XX.XX guidance EBITDA to our diluted million X. $XX.XX range $XX, an through go increase the flow cash non-GAAP guidance lastly, approximately is $XXX at approximately by range. to $X.XX narrowing guidance raising increasing We're of for for the the raising an midpoint. and our which We're adjusted guidance XX% to I'll Next, narrowing $X.XX and the $XX for $X.XX increase to EPS from And at range midpoint. to to XXXX XX% we're revenue million of our billion year. increasing billion

third the the by Our new for guidance but reflects not just outlook and the Health outperformance segment improved all also quarter, spurred through our recompete visibility in region's Civil positive across and in quarter, segments the of increasing fourth the momentum an X contracts.

$XX growth step $XXX below and expectations million for your put year. diluted to remain As to levels. about the expecting tied quarter and models, in together QX expense, fourth original or count you year near share plan interest tax rate to QX at We million the CapEx we're end investments up our

deep year brought long-term has give Tom ready focus. or Star clearer but strategic current to indicated, orient you I new to North strategy yet Finally, to thinking We're our our want targets, into our not year's next of thinking. as guidance

in Our midpoint very yields and diluted of growth XXXX. level quite year. of in raises repeat our point, in we're of growth strong XX% to range same this revenue The guidance EPS bar revised expecting performance for growth the not X% XXXX. of XXXX that next At

or to to building near the implement to the the expect the currently company towards be levels in XXXX We growth we committed importantly, margins Most revenue XXXX lower strategy. levels year growing our growth as XXXX above. retaining in are single from to time. we see pivot company potentially are outlook we the and as back sustainably we're current robustly over longer-term and diluted with digits, EPS We

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

Operator

Instructions] with from [Operator Baird. the coming Our question line Arment of Peter first

Peter Arment

and could just you through, color really -- cyber, new new plus this this highlight and are flow Obviously, to on just spectrum more so doing -- maybe to many see kind Chris, -- there the you impressive. and about talk we company's full where of you it's super about expect Tom $XXX maybe But million fronts. the takeaways well talk in guys where takeaways?

Thomas Bell

very you, Well, segment. Security Digital thank and excited we're about yes, Peter. National And the

about extremely think got we've well. segment the that I history franchise programs, of always in multibillion-dollar has it that programs. As and done really big fantastic Leidos, is a franchise always the what core core core and the of of of winning has segment And been Leidos

trust. that like far business. starting we getting the to ways in so back quarter, business our team this beginning We've winning you're a our put third in we that in us that leadership in And already that see of And business. foot

about look forward. So we and going forward very to about cyber more that, excited conversations wins

cyber At the investing a of competency as Bolts Golden whole Leidos the core that time, has for history. same we've been our in of been one

team very especially so of community cyber importance that's intelligence not the wins, our our in leveraging we for very only And the cyber are customer. proud chops very, for

we're as also win is capabilities in Zero of markets on fact reason gravitas our customers our proud frequently Trust very also. But that other the we and a commented by cyber

of we're Leidos investment and business getting an does. cybersecurity return So on everything the in our underlying as very we're capability proud of

but and committed Obviously, these about are our and face those are, government our we're earth. smartest the of we're help on more have excited to the it, be very where government to than win we already say we much very, very what can't where we about really capability customers expanding too programs the

Chris Cage

about been we But to into beyond. has too investments we've the work fits can't that there arena, and give team we that color 'XX focused lot that positions AGUN of and area on. more clearly, well Yes, was Tom into something but talks us classified that much Peter, of business on obviously, a and certainly differentiation we'll been make making as the the grow really to head continue robustly that as

Operator

next Sheila the Jefferies. Kahyaoglu And coming of line our with from question

Sheila Kahyaoglu

Tom, Tom as well, and was Chris, for on script helpful in that the thanks segment. super one honing

I'm going ask of course. Health and about to Civil, So

the if reach with it's where and about funding? from -- So how timing the understanding, year? be as how about there should could can seems like it talk significant into given outstanding still if are, that my you EBIT maybe risks and The VA Civil Health just give could on we but think we positioning about head you us you're thinking and we and some potential growth next

Thomas Bell

Thanks, Sheila, great with to morning. be again and you this

Yes.

So in my quarter third as fantastic a highlight had Civil in I tried and remarks, our Health business. prepared to we've

to that And before that. want I overview serve get for National space National that, that is do the everything are services, critical secret a the into logistics FBI, the Health the at and of exams station Institute the We the Science We customers broadly our again, We of work than managed NASA making Foundation. from business to, Department service of sure Labor. I do much maintained. more and just for health fact the and variety customers, the

it business, and of our broad in is of those facets. business So outperforming a that is a all segment really it's

question. fog that's next only been of I of the longer the our the future. On we that quarter the year since X, through for but helped appreciate the us a lifted not great VA or war clear and now and has We air. the into Kind fact the see had your much on VBA way that,

them option current currently we As the has extended had. the year customer they I have that the mentioned, with contract

terms throughput We're contract. we'll contract maintain them that we that same the business next to of our over for very fact confident the be our have years, formally our expect in to volume, profitability today. the and able essentially as X the business We along that

talk about the incents And needs, it as my you with Sheila, terms next up deep talking is remarks, Leidos. are It incents prepared in for about I innovation, you're suggested VBA of competition. very missions excited the we And critical also setting the technology. when customer what technology

that about excited very business. we're So

we currently bring innovate to more and don't wait our efficient to for solutions continuing and RFP in making for invest it. forward the We're sure effective We're even customers.

so Health long-term business on And in for Civil. we're and very we're the bullish

alert, see going a And spoiler in this to when fact, is March, core strategy that growing come of business forward. you'll growth our you

business begun So it only is see that far apex, growth it to for we that's sunsetting its from us at just or a seeing Leidos. as business as engine be a a

add? to Chris, do you have anything you'd like

Chris Cage

A with this prominent couple great incentives quarter to again, Clearly, that future. customer our with part the doing foreseeable performance, differentiation. provider space of Those us points, that work of are high the will related things was a Sheila. the in for satisfaction, to third additional be compel

other see year. work years. health the X don't want to it's our of seen, additional that count Leidos that would you indication justification put a they next to DHMSM and extend but on out the The of thing chickens, us. continue We that's brings should That on itself done military middle out our hopefully the customer to might side have that where another not current value authorization really an customers yet. sort for with relationship -- But want the strong program

This this what year. gave has relates our business color to has it a as expectations we looking had for commentary. year. everybody's XXXX, ahead Now and Civil outperformed to that's fantastic Health

range we're the to sustain Growing the do of near XX% our for Our us margins an goal and that. focus that's we'll that solidly confidence and corporation. keep that longer-term what for is certainly of in be off to will very horizon, in the confident able level be gives of the in performance, base to term to intermediate ability area

Operator

you. Thank

Sommer of line the with Securities. Your Tobey question next Truist from coming

Tobey Sommer

if could while. in calls that these smallish wonder talked give program about an on haven't we update us a you a on I

what utilization and your capabilities curious in what growth the the is data for like? company-owned those collection like program I'm and the is of prospects Sort Buckeye unclassified others. of assets for

Thomas Bell

those in very strong segment. of part utilized, deployed Defense business be of fully have very I'll Yes, the mission that call the we so it, fact, in Tobey. payments quarter of in the fourth assets further those missions capital using Yes. Where years. this have within well. for and Buckeye are a sweating continues for some for growth And down are assets coming we're to expansions we what we're our Thanks,

sometime Personally, But rely decade next other that assets we're manned that replaced that specific critical and proud the these to by niche and focused of fighters and are here I probably or two, in want. expect they going capabilities ISR our in the capabilities. customer war on, are now, need be capabilities those to serve very

programs other of and remain and Buckeye very we're with. the it's of Cindy's it a part So a happy like business business part

Chris Cage

to Yes. look on we we're customer mean, ecosystem of And those Tom's investment support Those provider just been point, strong we still I missions. I'd we when a select even actually high so though won, plays return for And see to the haven't to we'll when are some to make there's they increase Tobey, types in of sense. programs are them, investment. we'll point, airborne that ISR Tom's seeing, add, opportunities to continue and our make

Operator

question And America. the Mora Mariana coming of Bank Perez line our next from with of

Mariana Perez Mora

of already expected you about And from low opportunities AUKUS. is the FY is growth? talk year ammunitions, missiles, you GENESIS the this about areas DHMSM actually going conservative a hypersonics, of coming all Chris, 'XX, transition so growing lot missiles, extended, or not And traction, single-digit MHS those side you're are to next growth. you think but enthusiastic the said you to terms risk. year into really AUSA, as mentioned Then I at to things. counter be that are So getting mentioned, be see ready actually portfolio some that going to defense in are it's was actually not that What or everyone the

Chris Cage

we're themselves some Well, right, what Defense question, that you're Growth it nice in enthusiasm. get we a do time a Mariana. also things the period been manifest mean of thanks are there number but the like across very longer excited momentum, Systems I your seeing to we're some today. we've to gestation good business appreciate those But a upward is and there. take for things learned about. of took the And has on portfolio

As be how level posture stacking ahead 'XX, in like growth our to we But we accelerating away. of a the more the up. of Health feel We company to in is Civil off position. performance muted about and near good is elevated really look this term, do clearly, going substantially

did potential talk national a We clearly risk digital, there's play extended growth past. see some of there. is We've about election security seen disruption. we're and at in accelerating the out momentum in look that There the year. backdrop, wins you an we But of the an and CR some of in

better several position of refine year. next of early into we're things. see we'll in going months as we to be be about the So here the today, that point we cautious part a landscape to the in those view And if get going ahead, clarity more

Thomas Bell

might the I your share it. optimism. Mariana, for add, appreciate I business, enthusiasm really too, I and

will clearly year our growth growth as Day, we of is engines available of there tremendous that within think portfolio March Investors strategic thinking. XXXX feature of on the have result identified been of that I our be And for those focusing Leidos. see deep a the

very excited it. So about we're

But I then we XXXX. in can't and not analysts our attended Day in that investors remind Investors XX.X% profitability of XXXX promised who --

guidance we XX.X%. here so to are this committing And of year

even be the of XXs, ago. where this years to envisioned ahead fact was year and streets X next with the just portfolio we're is, solid And

just continued This year It's indication and needs greater growth is that resting laurels will kind that. our a We of XXXX just for for. a there. our critical but of pivot on a an be us reward the of portfolio not pivot is great pivot year customers to brings, year that growth

with the conversation in look months. bullish coming about next Leidos. forward that's of over future that very focus the we're and So to you the having We March,

Mariana Perez Mora

may, And if just I a quick follow-up.

billion $XX recompetes? versus in of businesses submitted those pipeline, the bids On that you new how of are have the much like

Chris Cage

look we billion, that, I you can't to XXXX can when tell the is takeaway. in Well, business I that and what portfolio, portfolio almost ahead the of XX% new but $XX give next year's is you

point and percentage So Mariana. also don't a on new be exact takeaway, but an high I have business of $XX that billion, would the

The recompete clarity about obviously landscape the soon, system health we military of the play DHMSM does business here not We're is if quite here program We've X recompete. on modest. have VBA really that way about hope. out talking talked and years substantial any next the the

attacking BD year. So in our be new position that's with next great for team to really a to be work vigor

Operator

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

Cai Von Rumohr

Terrific of Health. so more recompete, see attract with The you Usually, a results to tend in when you profitability is Yes. profitability, the kind that entrants. markets good.

be different you will Now that are today. not incentive opportunity or competitors more a pretty good that will and been about profitability money, the plus. improvements. making recompete, so they Can make structure color you're the and us you expect comparable? as entry give Or I the good you you do result, But that barriers upcoming know that's get be any and a there as much high, mentioned a but quite

Thomas Bell

look at. the profitability I very we suggested, forward the next that the business can in and we're confident Cai. there. very questions I course, of years, really this there's some sense in recompete answer the say I same things the as we're of And appreciate of of at the incents can't continued your couple to time, over it I you, Thank question. But excellent that because,

there solutions to we want, and for be business help AI have. bring been us, volume. which processes other able confidence we sweat us to feel they in down space is what that able good fixed innovative satisfaction the to mission allowed we've the get to VA the how about this trusted and that same customer time, our is, At the So costs very into our lean we'll assets into and that weave

And our so result, of it Leidos. for as the parts expand opportunity this a to business core for are strategy profitability growth us for the and of

line. be don't hold area the we to we're as and an the So to where but top it profitability rather negative, a net see able expand to on going

Chris Cage

exercise. Chris. we you, remind I mean option just would get the I your did the

focused the the we investments again, and now, with of right there. return we've contract we're made. on customers. our have on recompete, on a can't But the But under detail the point, to how we our really at position get Tom's team we give So time, same clarity competitive maintain a work performing do a lot

work it's managed Tom spotlighted going more other there's with going work in that we're much in the VA. not for. on doing just the And on services health customers

of enables high margin the portfolio level entire a us visibility retain that So and the of ability performance in expansion to have to there. confidence the

Cai Von Rumohr

Dynetics. And may one more, Terrific. I if

better fully potential For When you converting talk further it's next and in out, growth bucket? as lots year, that. single-digit had and years, really low Dynetics growth had that trouble basically of has then of is move we

Chris Cage

mean, confidence Dynetics us is of and that things on think then are this the accelerating book-to-bill, excellent results of featured full away. low again, a to into a are in to years kinds -- get I watering, Tom rate It eye and quarter bucket. the is give programs that uplift. about that definitely type forward couple will a had production they BD mode, the those rate take moving

hypersonics how our dependent have partners. customer will still up quickly to We're ready. ramp We scale. the on We're work. We're clarity industry ready don't upon full

So future, there for the is growth definitely expect but things there exciting for that that ahead it. some of momentum the that and continue, are best to years are business we still

Thomas Bell

fact, excellent add an Chris about I'll Cai, talks on. book-to-bill. just In

little to defense Just that, that's a context for segment. just Xx greater than a our put on book-to-bill

quarter the had. kind that's So of they

team the fight to we're focus future. to things the focus really of DoD really are for now on customers the opportunities our what and always to there, to are the been starting that's there and important to that leadership from starting And see, potential kaleidoscope that Cindy

talked for of we customer the SOCOM things the glide about was line restarting production a small So one munitions.

In that's because to huge that more Leidos gone product. of fact back and customer come we said, dormant had need that has and line the

result this ability And of us that for on a glide direct our only prototype start test and has cruise now I prowess to that Black spawned small Arrow, not munitions. referenced. the small to That's missile,

us The standoff capability the small for missile. test position frankly, our also fighters war rapid to capabilities exactly together what program, has scale, at But put rapid and production is need. those in weapons. remember prototyping, Gremlin bringing affordable X cruise that's a And

potential ability the it. bullish, out we're as for team make about and the of Dynetics that diamonds says, to current of very So of and the future Chris management all take

Operator

our from Melius question And Mikus coming of Research. line next Scott the with

Scott Mikus

wondering you're won the I dilutive little accretive are over up? the are margins a was program Chris, Tom, to that as Or you overall ago, guys business? investments they still far? a about how for making CHS-X. that's year could to talk if you ramped ramp the And so

Chris Cage

team a year of in Yes, job program done Scott, the ramped I'd X. getting has say the that up great

both the on will flurry imagine, that volume beyond. is of can phases early reaching for revenue and potential in and 'XX increase the full lead activity aren't in buying CHS-X. an their We you early longer help saw things As programs same true

and security would look in say great of as long we and I But aren't the where expect we're for despite So margins seeing to the the be yet. that, at them -- national haul performance digital.

be to in contributor hasn't So will and good full certainly there over spot the a potential time, team the is portfolio its a nice it yet. reached but CHS-X

Thomas Bell

just a on little pile to bit. Scott,

One the customers can we've been been the things approach have experts of the business we art also to retool development communicate we is, possible. we've as who our ensuring the of doing

that to is Army, not now, understands ability is of that right variety of tool a the is, out One the wide and we've their capabilities. things CHS-X that have within understood we buy people the universally ensuring customer to products our there discovered use CHS-X and

about of that the we're good that. full out very we have. the incentivizing feel contracts we And IDIQ our potential to so program And managers fill

very business it help good going blocks we're but for that our development that to of and us the program, about and we little we that its the hasn't maybe be supercharge fact a that of hit are part the slow program I'm Army, So on forward. to success stride our yet, feel convinced going out team able

Operator

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

Noah Poponak

line but extension the I X-year years. inside the VA, the Chris, work thought make Just Q&A I heard to from on correct. sure in time you you Because, VBA then referencing, multiple the have I thought, want of the referenced Civil Health and

how much the actual a recompete, is then recompete whenever now now visibility guess, revenue is exactly you funding much on recompeted? when do And there what and expecting I are have how being mechanisms? So you

the to on business? reasonable And hearing this am north XX% that margins, believe then of you medium- margin correctly framework is long-term you I adjusted a segment operating for

Thomas Bell

No.

go some the me in will I'll then first, Let give big fill details. and and plates, Chris tectonic you

contract. currently the year First, option an on as we're to we current said,

ongoing. that's So

to Second, be weeks. we award coming X-year in expect made the a

call let's similar The will contract So to have we that what of in November, that November. sometime largely terms be now.

contracts be And contract, they'll assumes new way point. awarding then after multiyear for forward at that customer that the X-year the

an So year. option on we're currently

placed, then cede multiyear As of that year be terms a soon on there'll as beyond the new the gets will that. the contract. new contract will option be award and X-year And

Chris Cage

Right.

of So the activity no, the contracts entirety we that work other regions. the set. well. There's not It's lay kind gives the down for the X you It's the of of of do VA. as

a again, a substantial business compelling forward we that, bid it's So of we've piece put for, but believe. --

We've XX-ish-plus to for code over relates segment here, going right as last margins, yes, X outperformed right? As quarters. it percent you're as the this that forward, the in I think forward. Going ZIP far

feel is range. I You've team. seen the that XX% the like numbers results in excellent by

about performance going something clarity of forward. and see certainly now is on feel much we that north So XX% increased that sustaining more bullish

Thomas Bell

do March. provide. by to the doing more that, now going achieve More but suite we're in of we only services what And not expanding of that we

Operator

And question Seifman with from coming . our JPMorgan. next Seth

Christopher Barbero

Rocco Seth. what moving on segment like that and Are the security the notable accelerate This any for is in weighing forward? there pathway national look on have And does to digital growth? factors been growth the

Chris Cage

shifting been some power there's smaller not tectonic priorities community customers, intelligence we towards and shifts, budgets featured Digital, but Security National competition. so in focused our Well, of of more in our some great shifts, call,

an Some inability the always is cleared in get to the that right personnel spot inhibitor.

of very wins call Our business going national will and around that digital that work team that as and and I up some catalysts in successfully, has A think growth new for lot show managed featured security increased in has key we the there. forward. positioned the

area, business in those also course us they of that the substantial been There's ultimately for once protests, some this some that's clear drivers but par growth unfortunately, are process. for

So has we're looking a results pivoting to the and shifting the returns a portfolio, modernization digital seeing But forward portfolio, going side, that resolution bit, on the expect even team digital the of been we're early there. there and greater forward. positive part

Thomas Bell

would have government in our mission challenge that earlier an in when suggest the we our to or Rocco, us be of earth. smartest universe see relatively I to declining face that is customers that helping help mentioned helping fulfill stable one government you inflation price the on flat budgets. budgets I our question place the in the as them

taxpayer wants hear that. And so I know no to

our against with threat intelligence top incredibly security and a ceding. environment But growth work challenged national is diverse community line and is not really limited that

as to on little to line our earth. things help love would face growth, a do so able more the customers and I love government to most of more know our top would So brilliant be the bit to I be the see government

Operator

the Ken with from Markets. line RBC coming of question Herbert next Our Capital

Kenneth Herbert

fourth nice range what the Maybe, sounds any think there? X% of quarter? Chris, really for top expected results in we 'XX can in out again that -- for like results. moving a really quarter, guide step with maybe guide fourth pieces implies Chris, of and sort sort of down the the you about updated Tom Civil. line the the give segments the Health nice If and within How do granularity the in

indicator the is or a adjusted at look of is or as the of quarter guess fair sort I of your starting of earlier? top parameters comments and maybe some look line it based operating how maybe the higher point And could good EBITDA in part that, 'XX level to upon fourth

Chris Cage

Thanks, Ken. Yes.

even intentional investments fantastic on term, a more fantastic year quarter employees we're the on engagement. that so around but making that position both us ourselves has technology, to long we've some innovation year, the and and employee also again, be for and our fourth had And to positioned in

So you'll some QX. in manifest of see themselves things those

any risk time in. for following disruptions always time of of and QX obviously potential don't things vacation those, higher election. we're baking And those any around that in on just does the hope there's allowing funding have a off, potential. we but of from types We that right, see level

margins, in XX%. Ken, solidly year next I for the to it to relates our would look comments more as

in strong We is you next into year. how the business see a gates out the step So of we there, so modest QX performance that. down indicative and not expect running of see should

ebb budget that But we could well just as and employees vacation disability work, happens and timing look and cautionary been There's it's because probably deserved. revenue leave are our for note what of flow. QX takes. puts some QX the on at there flattish with environment materials from I and volumes, as into the mentioned, some performance But exam

Operator

line And Louie our from question the of DiPalma next coming Blair. with William

Louie Dipalma

the XQ, your and discussed continue Chris quarter fourth was and that Stuart, to Based level you that in terms in exam stimulating volumes. and the Tom, the PACT of on XXXX? peak the exam ball, was in XQ how crystal Act trend exam higher volumes? should is Or volume

Thomas Bell

sorry. I'm Chris. Yes. Go ahead,

Chris Cage

broadly, saying there of But I to I we've level as and to Louie, see performance forward. demand going sustain spectacular mean we don't was uptick signal QX is just that I it QX Ken, what over QX performance. see the an seen for as showing

of at years and couple a of stats substantially you pending claims, where ago. claims on the from backlog of some When were they look remain elevated they

quarters in expectation elevated several the over that that probably and not So is level. beyond, at the next see we zone an but

Thomas Bell

agree. I Yes,

Operator

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

Joshua Korn

that going This full so ask forward. and I I Josh just done capital wanted million that about share talking just now and is about. David. repurchases the repurchases been wanted ask, in about you QX priorities Korn had on to just for you've of to deployment $XXX

Thomas Bell

capital obviously, outstanding, Yes. of Yes, complete uses same internal the evaluating and we'll time. at Thanks the $XX million will be alternate we certainly uses against for that.

be me, dividend think I And investor-friendly. But on view we'll or for how -- as my at formal year customer-friendly to I increase excuse a should that. the in look our comments, as you trailed payment in we this down continue

Chris Cage

into clearly. still realize, with sense. great Yes. it of Josh, the the in we'll stock ahead of the position, QX. days out our position moving market we're a with in coming comfortable us, cash to We mean as see when makes And you continue I strong value be best

Thomas Bell

We just more. have time for one

Operator

Our are of Akers line last coming Wells question with Matt Fargo. the from

Matthew Akers

comment, I profitability the uptake -- health other wanted I X X over other this kind in up guess, but margins quarter, lot a good had last to help have segments obviously, of pretty margins year.

other about if sort just in of I and margins to kind what's further of driving talk higher segments? you wonder could much that push those So there is of terms how

Chris Cage

Civil Yes. Thanks, the Matt, through this solely just getting not hold for recognizing profitability. Health business, but that opportunities the taking really to question. We to drive and we're our appreciate you that other done leaders of increased

Start and Steve offering. team can operating and Digital. that we on. franchise kind of repeatable Security programs on practice National through featured and already that with just on efficiencies capitalize We really in areas we're a that leadership are these all

some do there, name help think desk returns you portfolio it our support, seen across cloud opportunities we contracts. more we've and of how So migrations, for early we there's

of just their some and more that's In bidding beyond a again, phases better The those got they on as team of programs, rigor showing advance program the Defense lot initial prototype up. discipline, discipline. to Systems, execution programs has

prepared I X EAC my remarks, performance, years. in as in trailed And the the best

program great great that So work work business, to them, the by gets on across our managers the execution side. program

we're again, not done. so And

the in tank there's think the in I more gas portfolio.

Thomas Bell

potential that to segment is best-in-class our And incentivized of are all segments leaders profitability. our I'll the while be reflect different of all add, profitability, market all realities Matt,

by for stand So more.

Stuart Davis

for the time and look soon. appreciate forward a to updating I again us your thank joined just And and that I your the for want interest morning Matt. in your everybody thank you this call, today's day. assistance on here Have great operator Leidos. We to question,

Operator

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

Leidos (LDOS) 29 Oct 242024 Q3 Earnings call transcript