Leidos (LDOS) 14 Feb 232022 Q4 Earnings call transcript

Greetings. Welcome to the Leidos Fourth Quarter 2022 Earnings Call. At this time, all participants will be in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded.

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

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

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

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

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

With on to that, let me who X. Slide will over Krone, Roger turn the call begin

Thank us for the and beyond this all range guidance Day. our finish morning. for year. with a to EPS year revenue diluted and you, to us Leidos end driving top of joining a The our strong record the by Happy Valentine's banner way, you non-GAAP [indiscernible], and the range for Stuart quarter fourth marked thank revenue guidance EPS

and are our world's are that resilient helping people force on investments modernization, key most portfolio every Each and and challenges. day, validated digital diversified for the missions positioning missions execute customers us our protection. complex innovation performance growth technology hypersonics Our important cyber, and including and our meet customer our in XX,XXX and in

that our allocated XXXX, our us value challenging position talent grew we to programs base. for shareholders, won delivered Against deliver in multiple growth backdrop significantly future financial franchise commitments, and on for our capital the

enabled quarter $XX.X us provide Record $X.X financial in financial our to Number points. quarter commitments. me for the and one, margin to deliver each Adjusted revenue which represents on and more the performance XX EBITDA billion let the our we’re record strong fourth on adjusted So XX.X% detail of of these XX%. EPS growth diluted $X.XX, basis X% the up for of was year, which in X% up non-GAAP points a year-over-year, helped quarter respectively. drive billion of

margin of from For free well flow $X.XX, EPS adjusted above the cash $XXX to guidance. generated year, $XX diluted EBITDA quarter the We helped XX.X% in which and million. of was flow non-GAAP of our million lead cash operations of

cash that multiple $X despite from notably which year, operations of translates These year we’re levels. million a to the at protracted free most as proud in headwinds, weather and together nearly at supply to flow And billion were enough came these $XXX and For challenges. inflation, I'm how results of flow, the right constraints. guided start continuing needed. to leading nimble chain and resolution labor Even scale, the industry disruptions well pivot pulled team cash

shareholders. Number deliver we in allocated for to two, capital value our XXXX,

strategic in towards With key additional capital asset me airborne ISR business heavily our business while of light our to which and grow investing those aircraft layering just and Australian wins to development. through to deployment Over investments in three, was business CapEx hypersonics, the with weighted under model, expenditures revenues number large investments valuable takes seeing in performing of X% in acquisition shareholders, payoff we're and and year, still was R&D. internal capital the and return airborne core Dynetics missions

contributed fourth work typically of in IT X.X. the AEGIS to quarter, and have demonstrate industry, ratio we for awards segment year, in foundation They ability in in in and XXXX Social won us Defense, growth. the beyond. XXXX DES book-to-bill built for position Civil, in we programs This our In booked performance Programs that weakest Administration, franchise each take away net billion like Security the which $X.X for our Health, brand of is opportunities. to and target our new and

our was X.X. year, ratio book-to-bill the For

for the was Total $XX.X start stood billion backlog our picked with dramatically new in industry, a in which to XX% the fourth the is billion the of submits backlog backlog quarter at a up activity year-over-year. funded record improving. up year of is $XX Total contract the After importantly, $X.X funded. across quarter Most up volume slow and which XX% of submit relatively was end at X% is business. billion

of Administration spoke last IT that call task Taken the orders largest Security quarter. together, the in two were we award the Social

GAO program dismissed that the ramped. fully competitor's protest and has earlier than expected

won opportunities were pleased also hypersonics capability. us nation's picture contract backbone the including many join on awards, and the defense X, to able field first Mayhem, We're of so that at hypersonics of which $X.X the see major clear than of we side breathing We last that view December our more is Dynetics. air of Tranche to you get billion wide in a Huntsville in the

workflow we're to unique AI-based to to just modernization. of five and Our these invested levels for We generation critical achieve XXXX, We've continually to XX% as already In Independent awards enable to development were leading our the customers we and language large were security the annual years. compound rate of cyber $XXX drive combining over deployed at in grown million the landmark a invest are (ph) of advantage. on beyond research and investments wins they IRAD at edge that using compliance. procuring IR&D latest and models artificial develop transformations intelligence our proprietary last has processes in digital competitive tools and

the to days. by we adoption Readiness Level Trust announced less Zero a suite Speaking to our simplifies that earlier six Zero month, version Trust product digital tools this government consolidating working latest nine tightly drive of partners. process of organizations, than planning We cyber, for XX innovations month with our month

through were as month, XXXX the computing to confidential Premier a America's we've the ServiceNow example, Year. hardware-based attested And Partner last partnered environment. For execution demonstrate independently recognized we Corp. of trusted with just Intel

to four, more XXXX. talent than for and attrition than the more year Number in retention, subside. significantly fourth Headcount continue investment our base. have our synergy We've X% quarter we technical grew technology more than to significantly our and higher people engagement was We the up upskilling XX,XXX participation and and XXXX rates programs Employees initiatives. X,XXX we between XXXX. seen great compared in in doubled hired people in

is aligned programs enabling culture upskilling with strategy of broad competitive Our to innovation. technical and us and deepen participation position technology our enhance our are our

in software machine learning, cloud we Leidos a expanding operations, If new engineering. with and you learning want In software, intelligence over skills is XXXX, specialized great work. offerings offered place artificial in technical digital and and cyber, courses secure build career, development to to pass fulfilling a AIML. cyber rapid In your we're in XXXX,

where launch also we AI (ph), take and beyond AIML classroom. part company seventh with collaborative Palooza in and around is Perpetual We it a and learning newest will make engagement challenge culture of learning competition. creative will techniques our fun. from the some engage weeks annual the the now, employees we Two of our

up passed are increases, September. including defense funding business. on I'll Late over environment. last about Congress and signed across Before was through bill, XX%. overwhelmingly spending, the the the trends the which Appropriations Demand Chris, budget to Omnibus positive our President the very saw government current healthy Budgets touch for turning year, it board

safeguard we're Amidst support including in a facing aggression to security The stability China is critical respond. President of well-positioned budget and as the address country to military Russia address nation, calls bipartisan and concerns modernize Ukraine, partisan State highly from Union received and support. strong the challenges backdrop, national deter Leidos arising to a our and protect Biden's our

That the anticipating razor-thin divisions the ceiling coming the in majorities over appropriations given we're around a debates the and noisy the said, debt XXXX Congress. series of and months deep

a guidance, believe But beginning plans through are of We the shutdown. we As October no shutdown. this most year and rest assuming resolution extending continuing government is our potential the preparing likely we in with a matter a outcome. XXXX the of government built prudence, around contingency

we adjusted with revenue, record the summary, the backlog In non-GAAP as posted and XXXX year. hiring, the that highest new EBITDA good in EBITDA marked well strong important revenue for funded adjusted Leidos, attrition EPS another of In by and levels year diluted company. the I'm and of anticipate pleased lowest fourth and momentum growth the as for quarter, solid the margin rate performance wins, and be will operating We income.

I that, turn will to on for XXXX our more details With the Chris and call our over outlook. results

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

range our guidance how to top gratitude the year, revenue entire Roger the for navigated for team We end all executed unexpected delivering and Leidos our throughout in above echo guidance at QX our the many and to in range ruling year, we adverse deliver arbitration challenges including XXXX. while express EPS an me the of Let customers. my for

X. quarter. Slide the for year Revenues billion, up quarter $X.X prior X% Turning to were the to compared

'XX. which revenues laid Solutions year, Australia ago a to the segment. were targets through with revenue up UK XXXX, despite our primarily compared the for in and $XXX Defense headwind XXXX was we in from movements, months foreign from For work currency 'XX million performance billion, in-line that $XX.X out X% the was XX

the or on to million was programs large for more XXXX the our $X.XX performance that XX.X%, EBITDA year margin and a XX.X% $XXX higher midpoint was held of an on some right at above management. year. on expectations quarter margin earnings. growth the better all programs, for EBITDA cost EBITDA guidance highest based of fourth margin disciplined we've Adjusted of billion adjusted and for of Turning profitable adjusted

and non-GAAP about $X.XX essentially $X.XX diluted of XX% for one-time year. for that past. the as EPS events we've $XXX generated Non-GAAP net year, Non-GAAP million diluted EPS for quarter year the result quarter income and the was a up for quarter for the the for some which the the talked flat $XXX in of million was and

The increases our research and effective and the the planned for drivers credits compensation non-GAAP $X.XX about certain EPS. which tax was in EBITDA. federal than from benefited came our The Looking rate credit at tax XX.X%, international below key at tax deductions. expectation added rate limitations, and tax stock to in below quarter higher

in interest $XX In fourth $XX quarter net XXXX. increased the from expense of million to million in quarter addition, the

count quarter weighted in repurchase XXX as Finally, average diluted a first of for prior of $XXX in year accelerated million share XXX quarter, primarily XXXX. year the the the share million quarter was compared implemented agreement fiscal million the the result to

an $X.XX for our X. key the year. to up revenues billion overview flat X% revenues $X.XX Defense in quarter. essentially year for Now compared QX Solutions Slide prior were billion the Solutions drivers were results Defense segment on of XXXX and of of

the and quarter, primary The NASA XXXX. AEGIS and $X.XX driver were revenues were on quarter the Civil million quarter up was $XXX the growth to compared billion, for in XX% prior the to program. XX% compared the revenues XXXX the year year up ramp in

had In good energy sales our we addition, as maintenance. as commercial increased security products, well and business growth within

were Health revenues by of the work the new were plus strong same quarter billion quarter, I increase revenues X% for compared DHMSM up program. and $XXX year performance an year, performance on XX% Life and primarily on quarter, our $X.XX XXXX, million the cited Family SSA drivers for Counseling that with the Military Health on the IT. for over prior driven to the

Solutions excellent Slide Civil Defense mix program more their highest a some on performance. On and X, the margin than front, in margins year on based posted and

quarter. Defense For up XX% to up came in Civil compared year X.X%, quarter; non-GAAP points in the prior prior the the came XX.X%, at basis year from margin Solutions at quarter, in and operating XX

talking some a matters X.X%, calls, non-GAAP non-GAAP consistent XX.X%. operating prior the $XX from program operating from Solutions was margin the points XXXX. in expense we've new operating prior and from time. margin year XX.X% Civil non-GAAP investments year down in for year startups. been $XX was non-GAAP what that margin million was for margin quarter driven down for Defense in a with was operating Health in addressed year, Health for X.X%, million primarily the the the XX for XXXX, legal gain at XXXX in we've which by finished XX.X%, basis about

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

million $XXX the airborne the was fourth flow For conversion just $XXX rate. the In billion Australian a and business, purchase the and acquisition search surveillance the capability for was the of border was year, $X we XX% operations Maritime acquired. response rescue cash approximately which completed of shy quarter, cash of Safety for $X free maritime Australian and provides operating of for Authority, force flow net Australian consideration cash million, million

quarterly cash repurchases. $XXX including XXXX, part the its of shareholders, to and program share Leidos $XXX million dividend During million fiscal in million year returned regular as $XXX

in $X.X December year. in of of the and had in billion May. As company debt equivalents due that Roughly million come cash $X Most it in XX, debt. will this billion and cash of $XXX XXXX,

million million fully the We to the ASR acquisition loan repay short-term support of then to and expect the the Gibbs tied originally & on of rate program. will efficient bonds tied and in $XXX remaining interest rolled loan term refinance increase We'll well the $XXX given Cox environment. in as still the over the but to an LIBOR expense maturing as bank current flexible manner, A

on approach commercial benefiting we transactions. to in We're outlook. signals improved debt to the borrowing paper and BAAX with which on pleased rating, upgrade debt Moody's the stability As their market, expect and carry we're credit through our already confidence terms that from the our recent from financial

remain of target committed times. a year, As to X we we out ratio close leverage the

balanced and appropriately grade maintaining inorganically long-term quarterly and tax and investment both strategy capital our a manner. growth, excess in remains of deployment reinvesting rating, a levered the dividend shareholders, efficient same to Our organically our returning cash and to for being shareholders returning consists

Onto forward outlook Slide the X. on

range $XX.X process still revenues number XXXX our ramping, in XXXX, and budgets, and billion, growth programs year fiscal XXXX. to a the X% between is Demand remains enter over we $XX.X X% billion as robust are of procurement of protracted. For expect strong we execute that but the with customers reflecting

expect XX.X%. margin and adjusted between EBITDA XX.X% We XXXX

that in consistent of to estate. XXXX. back our out And The our impact we our margin and at the levers multiple closely long-term same demonstrated chain corporate the Day. the We're a margin XXXX. XXXX is October midpoint real cost end We're on with offset supply pull of Investor focus of inflation special laid as expansion, on the managing half top target range committed cost structure, we to with the and is as we'll the

lease net corporate our GAAP exiting XX% and space. million from our and quarter competitiveness that the X beginning underutilized square in of over income our $XX real which costs million impairment space keeps our we've post-COVID, optimize improves consolidating to about of footprint out journey reflected feet, Getting in charges estate is of Since office spaces. exited check.

from XX%. provide and year. diluted of earnings that on for quarter fourth of million interest a non-GAAP context is range, to levels. rate between expense two an share XXXX around we $X.XX expect EPS $X.XX We per expect shares XXX XXXX net These basis between To approximately non-GAAP amount the of and items outstanding, some about which tax $XXX and XX% million headwind $X.XX the unchanged for

year operating Finally, primarily Tax development the taxes approximately Act guidance capitalization we expect to million $XXX fiscal of provision at and cash XXXX $XXX additional amortization reflects million. the cash and This least flow XXXX, to Cuts compared and of research requiring Jobs related of of costs.

any awaiting Section payments didn't we're make we action, congressional XXX year. last tax As potential related

'XX. We installments XX both this in and we So in 'XX expect year. the throughout and January, to paid to cover taxes Section XXX year taxes payments pay quarterly the need to make the we'll XXXX

targeting free some airborne approximately X.X% From cash we're well surveillance as some the product chain. investments capital of on timing a flow revenues in-sourcing Australian expenditures U.S. perspective, of and based supply security the of in of as

and for QX As ability in first the payments our of end shareholders with weighted deploy tax generation be along to the usual QX, in year. and debt will the the is limits XXXX, pattern, half cash back capital this in

the as throughout update does account any you range and we go for As EPS the a result, not year. repurchases, guidance we'll

the can turn over some we call to I'll that, take With so Rob, questions.

[Operator comes Research. the be from Robert Melius of And you. with will question. this proceed your our At you. Spingarn session. question conducting time, Instructions] with line first Thank Thank Please question-and-answer we

Hey. Good morning.

morning, Good Rob.

Good morning, Rob.

margins a I guidance, the a do the the across about to the look segment on the to ask how us some X% on Chris, segment drives more might wanted you then basis? X% basis give not segments relative the to you -- and for 'XX if what performance detail growth

don't you give but know we guide commentary. Rob, by additional little Well, I'll color that a segment, you

our across good bid strong Civil and really And Solutions, across and of We're growth we're our Defense opportunities to We three all segments: that. have segments. leaders signed demand all, seeing all and up feel Health. of about planning that. First on pipeline

the this 'XX been in moderate On overheated some were margin margins and Health communicating Those we've for front, started to time. 'XX. down.

You quarter build can saw that we of a that sustainable, forward. then and that believe the fourth they're going to is we in coming place that off

you tell communicated. very drive Defense that's about how focused we to segments two margin mid-teens Civil. and see is Solutions in would health I the what we've continuing we're So playing the is out But as expansion, other in

how that additional color the year generally gives see commentary. you hopefully, that's we And playing So out. enough

Roger, parts you back then, to security And bring chain going there, the what the products supply of business that in-house? and might Yeah.

the pieces used for manufacturing. if then now have -- we've And expertise you think Dynetics it we're for of parts very, more of equipment. very the a of and of assembly Some final some lower the those the about We've the level with of -- operations of had we and some comfortable -- internally. contract doing with organization manufacturer

the control. can more supply have We chain. manage We

think drive cost having are been a manufacturing our can the and conversations great of we excellence part And the of company. of strategy, think evolution about Frankly, really down. of center we the is part which that's I a we the

through build system, you which in-house. And so provision I'm be manufacturing that well look go you confident if sure at, and very can all will, that larger we can like the we

Thanks much. so

Rob. Thanks, Yeah.

from comes Kahyaoglu Our proceed questions. your next Please line with with question Jefferies. Sheila of the

Good morning, everyone and thank you.

morning. Good

don't can we basis, think growth guide you health, the moving on follow-up your but Just a about give us on as know rate. you a I pieces maybe and segment

we incremental And from that RHRP. about and starting quarter SSA DHMSM? the in in do offset You the seeing from contribution How contribute burn pit think what you're to mentioned then XXXX?

Sheila. Well, you nailed there, all the big players

of you're So on top it.

mean, I all, thing. did and with right the did transition, the the the that fact job, an team SSA outstanding customer of First the happier be couldn't

expect and started so is quarter, the get XXXX, off running, in a contributor we that fourth significant that us and solid. in Let growth be we're to to

up the feel the at the in that end think onward There'll confident the that quarter. from that, first some activity be through we here ramp but March, building start rest about will finally, of of tail to RHRP, QX very as year. really

So that [indiscernible] again is gives us growth solid still early. momentum.

team story got in because I'd doing a work last the QTC. is complicated went pre-discharge work little of excellent multiple The say year some the competitors. to

the work that that's We up also have won ramping year. international we this

So I'd say -- we down as that the or on but growth color area, get quarter in that's that a we expect more two road.

year, DHMSM, work continue been side, end doing to within would to year, towards the we've the And the ramp got capabilities work expand the I have offset to say, been then, finally, that on this excellent of software there's, the that's to down the deployment teams but tail deployed.

to continuing you'd more Roger, we're opportunities there's anything know, to don't so add find if do I And that. there.

really. not No,

I'm about talked that address heard burn pits union took the of President Although, care sure in Sheila, the we veterans. state you've sure and that of making

than seen, to likely business another has our it expect so and year. exam we've we throughout slow, hold again, That's year. volume our But margin. more and strong forward that continue solid momentum in but to to look the well volume been up affect And would

the to but And quarter, QX as think helpful. No, QX mainly there. good then margins stable about I have talk that's was was really performance it that solid wanted in Okay. defense I and seen in well,

I of had larger sort particular mentioned in So there. think you on? but what's programs, anything didn't going You

think the the the margins we what's in better and second of the Civil forward driver do of year? half how So about going performance

nicely nice work. It's does about quarters area have will energy that volume contributor. that will prepared we little our higher margin job quarter-over-quarter. -- a an some there. And on excellent have there. products less, up. commercial certain Team ramp a has but in the that talked always business performance Civil again, Certain -- grown will bit Well, seeing the security is remarks Steady quarters more

programs, modernization A of AEGIS costs one lot work digital And in, side, on more then not but helps that profitable. base. into coming it's programs our other great higher-margin the a absorb make go employees just helps of elsewhere,

pipeline modernization so that digital like in IT additional see of the unit we And well. that we as opportunities

has the they company the kind was efficiencies in cost They everybody them team focused kudos. the drive back and where Sheila, went that could lastly, got year, been half And above to beyond of organization. finding mantra into on the of management, and sustainably civil give the the across opportunities

And like how is performance that so trending. we

for if segment we base And long about could, We've followed I Antarctica. What's We infrastructure DOE. time. in run our other some know Sheila, work is Hanford it's because for contract. I business. We that is add, a you would business sort that a been us civil growing. of have got great the I business do of support that

not margin And the of as company. is, does the that great work it carry traditionally of the rest

is And the line, adding and shifting mix margin because as you the sort civil. grows so increase the at of in new see we're Civil business margin top

more of infrastructure the the more constant, great we you're the to has margin growing. grow civil a growth done going we hold the there And see. job So team in business and

Great. Thank very you much.

Yeah.

Thank you.

is you’re question Stifel. line with next Bert your of questions. Please from the proceed Subin The

Hey. Good morning.

morning. Good

an up Chris, across aviation -- at recovery. of we the or in I maybe security question. just a ‘XX if maybe couple continued to the you've if got look portfolio Leidos follow I items earlier Roger, If

You guys noted the growth energy. in commercial

the of the orders. You're going have to SSA task annualization

just This few. is debt. name [indiscernible] to the got a You

All growth would X% growth, of that there mid-single puts X% range? the mechanisms to organic that offsetting be would are down which think digit to What I you mid-single tailwinds.

it. we… about There lot You tailwinds, no you're But make easy, a so it sound Bert, right. of are doubt

always the peak. off coming program DHMSM the We've about talked

by delivering and such a we on to on and soldiers. schedule programs and about half us, in the slow way, but our great been than we're of as we now, performance the company, past. line think line start done just -- frankly, better of time for has will And I bottom one both marquee program real the top that down the and talked One have for to program

So programs coming that's one of the down. that's

point pressure also our fairly to still out. of revenue go spots public, how it this plays focus And program go see how has a would way. some could lost ahead if (ph) process. take room the items It's it fully area put long procurement Fox growth an in doesn't some couple I that while to been that of there's Intel business. our then, a on That's that things and And be is ago, -- we called a UFS. year

And so the we're leadership did the good great rolled support to to during Intel but off news is a continue program. customer the transition, XXXX fully team throughout job now that

that's really bit XXXX. but But I that known, the have tailwinds had our behavior into year large, there. performance are success a There So by headwind. great we a worried customer also fiscal little environment take are on budget team's recompetes. if about longer. seen And especially we've government lot transitioning of and the love a of they're

be to the is, our We'll through build you we'll positive in able and momentum direction. we'll hope have So update year. successes, some a

outcomes before from some being super be on I I talked And has That's that one the still you're of the how or 'XX and should Obviously, range in significant at about of millions it by Maybe sales and looking helpful. think really and is item, talked company. thought a of that potential for about dollars Yeah. the that that for ramp maybe side that from doubling ability as had then to you the starting we range driver gave 'XX then ’XX, Roger, DES. in that year? contract good Thanks. this how to about tens you color

Yeah.

but long model. a to yesterday, do build all all a when do I it with ready, will to we these way. your on net. good call interoperability will we support we is move we want customer to program. DoD support between it I we're the way. We the -- right about help This had save to It what money. the non-combat We all actually, want but move fast a and because we want to way to new, And fast. think was it that's want do it agencies, right And meeting transitioning organizations want to

a want negative to for the create experience We user the people that are don't military. supporting all

And -- some was, at that. the up we're well, of transitions, the can and move discussion okay, some are the we we of transformations so and looking

So but our we're be to as to I there it what is you the higher, to we'll not success And that. talk ramp. we've and for increase been think to been has potential guiding quarter-by-quarter able to whether

it And will I tell 'XX 'XX. and very we're enthusiastic you, about in

ramps As 'XX, do fast, we don't really described you wants of to if fast I you the well, how these what to can not fast. want user want we more fully sometimes move you're much conversions, all move create than and ahead get have you, we're the can it you doing move and know -- in But we experience, customer too to we ourselves. and you tell yet a we see. But serving user negative to

Thanks.

Yeah.

Bert. Thanks,

your Our next question. Fargo. with Wells question the of Akers line comes with Matt from Please proceed

the Yeah. Hey, guys. Good morning. question. Thanks for

Matt. morning, Good

if I 'XX. I you kind it's back flow I think year-over-year. ask the flattish wanted think of cash about XXX, Section And guidance for out to

other payroll any being I working capital from Is in think 'XX. that sort higher? the offsets tax of are goes or there maybe preventing away to that that

like the there to an with customer. program in procure we've for for growth programs. the example, growth of there's that some us, we're capital a particular FINS, we support are and equipment amount see of able had investments you to Matt, to again, win If initial modest few have -- a that Well, ahead working on and board the investments bring

that things like anticipating. few a that are there our in pipeline So we're

that's and at DSO, days the XX year We finished good performance.

drive business even on with think that focused finance lines I of that we're leaders. as there's lower our to a opportunities team and

nothing never not the the win as slam a a out grow So few is some to to working are $XXX momentum start million. programs but mean of it's the ordinary them. focus anticipating we'd continue capital but we there our But as we it them we to needing that support investment, on relates build thought are a and at I side. year dunk, cash

Thanks. sounds are then the And there's a if planning contingency doing it. shutdown? do some guess sort get shutdown, of we be you're a share I what it willing if impact quantify to you kind like of Got around would

and we -- be then haven't to be planning Well, we that figure how have no, which deemed through go haven't then because essential, which first of date deemed pick level where to would we'd and order we of -- to out mitigating. essential a not we've have -- programs to all, would in go gotten programs and quantify, really would

and do, we a have so we continue. our deemed or perform in contract many government unfortunately, easy. to understand would are We go we way will our X,XXX and as each and times those essential. try know shutdown done some this and through we What organization, They're contracts contracts how get too

we not Some essential. will know be deemed

never And to then start middle could we them President with the officers meeting. and about McCarthy prepared. we are, And way, be ever have by we want it to things the a us contracting we preparation, we'll in shutdown. the have likely that but less ways and we behooves mitigate the the just plan. as have part that maybe would a of prepared it learned conversations with the to be use better might And is, our work on

haven't in if then through this it that prepared, I we unfortunately, to again we and our best get we as the manage think comes June, off. a And And can. done that's we're we a shutdown have kicked done that and weeks. of out have they're we really government And job of going meet to process not to before. couple

off. a playbook out it gotten playbook pretty dusted have we well-developed and and we have So our

Thank you.

Yeah.

Thanks, Matt.

from line you’re the with of your Peter is Please question proceed Baird. Next Arment questions.

Roger, morning, Chris. Good Yeah.

Hey. Peter. morning, Good

update just can doing. on how is NGEN you us Maybe

of think hit I expected we are of ramp. terms in state kind a of that? kind to steady in a thoughts your on What's XXXX

NGEN?

Yeah.

program okay? task We're the full much of Well, but we've network the Network, Peter, you're really custodianship first doing the it's know of that. pretty ramped. you done fully well, know Asure to was So possession I the And well. in take our

we of keeping the new we're to up, quality network, And modern call to get up Now the in transform of maintaining process the center service while that environment. the is challenge network trying move technology. the to the to

And task that. special opportunity, projects we And some and to are through for year this there we growth in see on-contract scope believe, orders. is of additional starting

a prior have in But see to talked free. we break have to to was coming. of starting in that manager, program and think some talked the little calls and we're I we Navy slow that talked frankly, I've our

technology We Navy. add the the experience see can where of lots to user value opportunities in

which you end to up to do don't customer the that know, can And about but so constantly the to up want and we're user. add? for end making in suggestions quality for in Chris, be importantly, more things the network would done of growth I would us, improve better service

program. No. first into program, it's XX And got can we're months an I outstanding that a team this we've our mean, largest and imagine, running of thing. all, as you year, only

the there but mission can days we and say, So the are interested for lead that, that let's in help point, areas customer pursuing we're to pace and support where we're at course, customer. better identifying of makes that To modifications. and the would just sense And actions the the clearly best it. contractual ahead of Roger's

So improvement -- and we're margin to and moves as that continue next growth we'll it hopeful into the year year around see program that there's after.

of parts where of things. things some press lot a gained Hey, (ph) color. mentioned that obviously you you recently to and Are and really here you seeing AI that improve GPT opportunities really potentially appreciate automate insertions your I chat business in has Roger, with technology can the kind margins? other

and because in we our a And it it. Microsoft popular now put debated really is seems term going we is available it to Peter, whether being engine everyone about environment, to think GPT smiling what do I Absolutely. and we out who wants technologies guess a understand it. to anyone make and we're use I under them. are chat have such ought to super to actually those search But needs of And talk all

the capitalize who the on company. people the those only we of spend to goes outside not billions money but benefit spent internally, the technology think money that's I And

accounting, things we much that. other it. very modern about Chris' process automation GPT area. so in mean chat And We're we've aggressively don't using platforms. we certainly deployed are like We're it customers. talk And language I like using robotic in doing and for AI

analyze you using to dirty the that to to computers in our collect. you human and dull, discernment like whether the human, linguist, to right, images best, and do the call it data we of or and through able applications petabytes then to, I do or right, in financial But accountant crunch gigabytes the is functions which internally be if we what we're analyst will, an the the an that all linguistic. can also now add dangerous, and let Program our does be a imagine. use terabytes that the what up and free the cognitive even that imagery or computers and a analyst

Appreciate Roger. the details. Thanks,

Peter. Thanks,

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

very Thanks Hey. morning, much. Good everyone.

morning. Good

maybe should frame? and the bit how could growth your particularly kind be the little the I talk you Omnibus if the up of time in set Dynetics was a XXXX about expectations that that's programs, wondering 'XX in for coming

Yeah.

Okay. two, Those are subject. would you -- lightly linked I say,

talk me let And have me them best debt my is after to a on, and ceiling year can the I the Hill, hope McCarthy, plan think up the Chris is on raise date. before way and a when I the going about mistake. what's the make long we June So President expect. given Omnibus find I'll and through But the clean the our

past hoping commitments we're higher XXXX fund made, paying already the a bit little funding it and levels. really been made, for the we're have country years is than debt the for and will government. probably that appropriations has authorizations that that been And And just the

that. I can on think we count

and nondefense, the And defense defense, of this all amount. the I do little raise but off we're of a will tamp we defense, think may robust And that coming who it's a want defense between to raise in year non-defense then okay. as a we and that raise elected you there's down if such know, at group budget officials bit always equal discussion the a budget

the roll Now in in a I'll low are little were how if seen of into of stage initial what a you bit Huntsville again, rate Dynetics? preproduction We're is a aggressive would that that productions fairly and lot be age does you have units by that or month, first week, down And talking one instead program, will a production. one production where we're a two followed significant in building the week. ramp of describe a 'XX and

go case, monies and program, I records okay? different an talked then program is get will by Not won't much December funded. ramp be that certain I And omnibus we because in we programs. authorized if won't of but are could that fully now. are already pretty do programs every go appropriate, in through the the we that Those these about

won't the will There Ukraine omnibus. high it probability some a how I a that lessening. to may We is realm do, which if there's they'll possible. growth could debt the the and think scenarios appear an within the is all of there's and doesn't into or in It government supplemental be reason upon get it. it be depending go a things all have the ceiling goes certainly certainly

production we're in with 'XX, pleased. expenses the then think those cover have past. may they in we So the And very ramps are our which again, they done as supplemental

be would Dynetics we they're very I'll significant let Chris think in add would see and attractive. I 'XX, growth fully funded in to and that. Those

to an I we understood Omnibus we Roger's members Not about affairs which way came of team future really 'XX good like add. you mostly key ‘XX Seth, focused and the programs. the out. some we obviously, came our our felt And tell making job, clearly mean, does we can from lot of the were and importance excellent comments, sure Leidos out, were a towards how

and like. us well we this year. that key and came programs with You out don't thought sets up we level at funded for balance, everything protected the get nicely that on you'd But exceptionally well

Excellent. Cool.

there Okay. I’ll for very much. Thanks this leave it morning.

you. Thank

Next Ken from with questions. Herbert of coming Capital Markets. question RBC with Please the your proceed line

Good Hi. morning. Yes.

morning. Good Hey.

for some Maybe know in did job really of you on to this. Chris all of second to keep 'XX And margins. a a like the around maybe you physical your half or comments footprint, that But guide items first of some number sounds from labor nice you're through your also it savings. Roger, going half the went sort that I not sequentially insourcing, obviously in

are with would mean how question into dynamics do able how corporate side? and where 'XX? what's view to level you're necessary sort in look the how to level cost as the corporate My opportunities these do the 'XX? you the be, view much the incremental of share is at competitive sort keep, how you be cost from discussion opportunities the customer at incremental you win in And I of marketplace? into And the business of terms

might me pile Roger on. started. let Ken, Well, get

we're areas So half that front. of a of on despite had team, improvement proud fact have some the first we better. and the cost honestly, we we the of done that very team, where of really program control, all, could as And was year second quite showed rallied capable margin the

us think I so 'XX. going and some And gives confidence momentum into that

The right? margins. on Health Group keep Now of for to a mind. finished in things couple XX% overall above the still year

But QTC higher. performance more that there fourth in going was other in from expectations what line still are that was and forward. definitely year, So things earlier with and drove stronger some quarter the caseload

intend down that we're business. and do capture Defense And realize done moderate to still upside savings to been a will able we've civil sure. but the the other that bit, in Solutions margin in parts not in we and for So the of

to competitive rigorous still we and we in win that on need to as have sure And We keep intelligence making while our the capture that us of of competitive pricing, where can be in to to factor with kind our we upside. price build trying front. a we margin tune process team some remain a with

side continuously. focused that the on XX.X% reduction there's year. there's target we're momentum is greater for there. balanced still by that low-hanging fruit long-term But or on do wouldn't guidance because the and next hitting do, more I there's can again, XXXX. that So cost on super focus any say margin And we we

have don't add, points much Ken. get that couple I the Yeah. make not I'm we of to I'll food sure a stomp.

way all so great we'll a a I and creates we debt control, the we in see we've I like headwind And which if interest wish a instruments, mitigate I up do tax can, $X.XX on we're headwind. EPS. could market, and we we're got department, replacing don't. rates manage expiring and Unfortunately, are interest taxes our and That's but that can balance always we'll that. sheet, the and So

is philosophy really, revenue can then faster our we year. But costs, than indirect grow we our grow if get every better we

this rest growth And of to really control expect Again, continuous line control helped us really costs growth had And in We so for the has growing the good challenge year. below second we've the the people half. people was is the top costs. that number but some of then one a are that thoughts costs right? with dependent our And we've found somewhat to had have right? -- of so growth, grow business we revenue like on grow, we

if to where nonlinear faster one, products, not to and Dynetics that terrific the can we And product in and We allows people with so in building indirect that HR but the people. and have programs a our about, little we we can more think get rates, grow mix. leverage bit talked all -- well, about the in than with the and it's -- things, benefits workforce, bit us more training is and little diversity wanted one you have our Part more we've that grow so that we're our past we want can to our we a ramp of portfolio. we

just philosophy. that's our of kind So

we did how what you type. the got plus. I good about back think mechanics Chris know based job a saying, to give And have sure fixed cost of the And price and contract are we upon I'm

and there back. Thanks, stop Chris. Thanks, I’ll Great. it Roger. pass

Yeah.

Ken. Thanks,

Cai the of with & your Our from Please Company. Cowen proceed with is line next Rumohr question questions. von

much. so Thanks Yes.

your go those X% to area growth, X%. wages think and would I headcount payroll up about up I talked is and square would revenues Help you say in to assume X% on, early X% about up are which items? us of have X%, two So the

So growth right? of talked rata were Well, got first materials, the headcount of got kind Roger that subcontractors. of half content. is portion growth. them We've that And on about, Cai, We've we year you're year. pro the year, brought that's adding keep We in the of headcount only mind, throughout I last the Leidos that that right? all, of the the business kind a focused was revenue over on course people mean, our of X,XXX

it's this going plans on incremental like around that's we adding into all again year. have be that heads to heading 'XX. that additional plan not the But said, big being So we

of So should headcount the up. be combination factors,

the top cost correct. reimbursable that you on immediately gets You're There's that payroll growth gives upside, on some of passed that, through programs.

You suggest, don't programs. necessarily to we're if that part fixed momentum and price would too, get successful, we immediately like the on major any that equation, uplift losses, that's on we our we continue side. the of your fair we But share, win don't the see have growth

strong Roger, you 'XX we bid submits. mentioned budget. very And have very strong the have second And one Thanks. a is, you FY

color on of some 'XX Can suggest So for 'XX? us what give might that lots in and would you you expect money be your what there's available. book-to-bill

know And, Cai. not. course, we've And our $XX submits of we a it's was about billion record And of submits $XX early. quarter last awards. had got Sure, I whether billion pending -- don't or Yeah. of

was. probably it think I

lot there. out a of just got we've So things

in of happen There's get expect 'XX But gets and a be to 'XX program better. 'XX. which or And of ‘XX, to where is we couple levels we early that to at win. then with would And It hit always ‘XX so says going were wild we or the we've start the cards. the the you feel we so out certainly past. strong. 'XX seen better be in -- we leaning and And forward it's pushed protest

There guide that years, -- fans, just that What and portfolio. FIS awarded of hasn't but soon. what that balanced years And been could then year. say, for we sort are win those the see and and is it be would do top we'll again, maybe the very year, above to awarded the like for really still couple, we we're been hopeful potential more for guide. which really we're plans square strong in I end. has We And again, years a build one didn't fuel a as and to clearly around would over our X put trying in the our we've got a will

you, quarter. been has tell asked pricing I'll next thought a without that program to there's in first just we be protest us awarded into customer the our the year. would that Cai, And details, to under going extend

process tends our the get -- to once as Every protest we and a some are. we down adjudication damp there's enthusiasm. disappointed So of do of the federal court while, in claims enthusiastic as and

be so And in XX, XX in out strong we there. first know thoughtful the submit awaiting very award, the quarter, strong we're what year number, going as have submits. you backlog, well. to But we'll a 'XX XX put our in about And

Thank you very much.

Cai. Thanks,

Jason of line Citigroup. your proceed question. Gursky the from is question next with Our with Please

Hey. Good morning, everyone.

bookings. follow of to with want the thinking kind that Cai to follow-up up the Just had of on line there a question there

hearing get the now? get the You of the and is your we've for mentioned what things in remarks quite bid awarded? protracted things some prepared on then better how if assumptions this out in can are And environment your to the kind you normal quickly year? expecting or place. Are acquisition I'm wondering worse time now. for process something that's That's just been

what Yeah. I is, top this I mean, Chris can talk add kind I'll just think. of level. in. And

looming get end I'm there's discussions. who in under is to things lot customers knows wanting written So ceiling. of debt that's comes is over what the everybody has out a government we before think this being argument shutdown, up I what their opinion those seeing With contract

going work a now you've you're you've appropriated those and really If get to committed between got hard June. customer and funds, got to

that And and and so we try little are move will to hopeful a activity, seeing a faster we're little things contract. these more folks under bit get these

going as got time McCarthy be what smart about we will know just to not happened, probably future some term. there to sequester. -- some cut the could -- deal of for my constraint. some I that and that's years. the don't be. put what how balance I that's an a on enough ceiling a I I'm kind to trade that a agreement budget on kind run don't really we but this a mean the it I a of seems But numbers, look But damper unbelievably suspect budget Again, be be it then with up how debt long that's not But is I speaker, budget with will perhaps what by end on the level and kind Last And of like. understand in you could top read budget got going difficult. XX elected job, I something

to You're XX%, right? starting talk now

you And so a get you have in well. you're hard speaks get a a I you going can and as to that's And work you 'XX revenue. I program requirements, 'XX suspect as know, 'XX. 'XX, to money an things you in And that award mission if as that we think and with those committed have have then 'XX,

has The strongly. our the health very been strongly. is the again, group then growing our think, has we future, Civil And So portfolio, very in relatively group looks growing plus still diversity been bright.

So of make been we've to what resistant the Leidos our from working hard vagaries really happens somewhat officials. elected to

Chris, know, anything? don't I you add to want

the many contracting acquisition has defined. you Sim think shops I of staffed. well cases. I'd customer only Fed Sim. are more They're thing No, One use in I we runs covered process. the not path we were rules more say, fully well. wish think mean successful it been that good a Fed is

competing And customers success we've going direction. that with we arena, in that had our in some see so teams more and

I Okay. clarification. And ask Can then one clarification. quick

Australia. of down I to going you X.X% CapEx of recent curious driven part You with mentioned think the at mentioned if acquisition the on just has by And this do being year. that on. kind what's I'm specifically there, and is that

Yeah. question, Jason. Good

through investment. Airborne does. continuing -- kind business, We're So system they acquired that knew we software we the When major the management were of mission halfway it a Australian in that investment capability.

in completed in be but factored will that 'XX, fully valuation the of that was the business. So

And period that's a elevated of so for time.

more maintenance mean, know, ongoing we'll will elevated of over there think business, that in the Arbor like CapEx that of the But of continue that pipeline rest Then full slightly capability, for U.S. are development just some on the time. more business normal more just there be 'XX, to some additional I it we've there. as spend got CapEx as fitting and as that maintenance, capability. preventative airborne we're you we've that some out in put forward number run mission, then in our bids And to we're based that acquiring optimistic and

Great. Thank you.

Thanks, Jason.

but Hey, little a for have one Rob, bit we're question. over, time running we quick

from Sure. DiPalma will of with coming Blair. That line William Louie be the

Gabe, and good Stuart Chris, morning. Roger,

Good morning.

Good morning.

summer, to The balloons on have vehicle more in Congress's million unmanned vessels focused success and increased surface of your Sea unmanned Ukraine to last for drones Shaw participated a potential, Australia? surveillance recently, surveillance and in $XXX develop contract medium unmanned provide on Hunter or a model the systems for and that undersea similar have in Navy successful and several some Is in demonstrations. the Thanks. Roger, of of Navy service for U.S. to even as programs convert to there record the Leidos unmanned you're to doing cocoa platforms a these

some we things you another way, are that, a when probably Dynetics. programs drone the I Louie, some I down really Huntsville, and we on programs. and that a Jeep actually to can Yes. and mean launch a drone. vehicles drone, -- By would you that you attack our it exposed have unmanned have I Well, to made understand where well, or counter were think we go we that's have of add in following are little radar really we to great. bit

work is see has see that XX,XXX a tell of done. in I -- we'll surface of in already has and There's will vehicles lot and And the XX,XXX up air, we what it all, on call you so the been rare between first robust. the under the but you use been -- the uninhabited of exactly water it air,

The MUUV record. is of program a

demonstrated and of record vehicles So a Navy capabilities. we that's doing Hunter really record have the in won They're but lot experimentation. doing some the that fully is that, in program things The yet Sea Navy not that's are the Mid-East funded. some of a programs the autonomous of

As you for Sea have Hawk those. Sea mentioned, we've is believe done there a And Hunter demand and Sea Innovator. with a lot strong we

which for not of the us but do to faster. next a they on program under us, full for experimentation, much vehicles that their they buy The thing additional record, OTA would think happen an surface. may can be may extend I

really have fleet with development all to spending They that to away, that MUSV, need. and well LUSV the bring a unmanned I capabilities, funds significant their to having up there. percentage There's believe be the and that optionally capitalize think, to our we them things they the Navy and of Navy us to But other we understanding committed autonomy going is the their is manned. but a programs. But program the set There capability years those get that software demonstrated of are unmanned their the won't both and there's couple on And of that I out mean middle are and are be in way that further would processes. to through the of right that to doesn't record, experiment activities.

question. So Louie, thanks the for

everyone. Thanks Roger. Thanks,

Yeah.

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

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

you. Thank conference. today's will conclude This

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