Leidos Reports Strong Third Quarter 2024 Results and Raises Full-Year Guidance
Revenues of $4.2 billion, up 7% year-over-year
Net income of $362 million or $2.68 per diluted share
Adjusted EBITDA (non-GAAP) of $596 million (14.2% margin)
Non-GAAP Diluted Earnings per Share of $2.93, up 44% year-over-year
Cash Flows from Operations of $656 million; Free Cash Flow (non-GAAP) of $633 million
Net Bookings of $8.1 billion (book-to-bill ratio of 1.9 for the quarter and 1.1 for trailing twelve months)
RESTON, Va., Oct. 29, 2024 /PRNewswire/ -- Leidos Holdings, Inc. (NYSE:LDOS) today reported financial results for the third quarter of fiscal year 2024.
"Continued improvement in operating performance across all segments drove excellent revenue growth, record margins for net income and adjusted EBITDA, substantial earnings growth, strong cash flow, and robust bookings," said Leidos Chief Executive Officer Tom Bell. "These results demonstrate clearly how our collaborative and innovative workforce is focused on consistent execution for our customers and shareholders. With a healthy balance sheet, improving business development performance, and emerging 'North Star' strategy, Leidos is well positioned to deliver robust and sustainable returns as we move forward."
Summary Operating Results
Three Months Ended
(in millions, except margin and per share data)
September 27, 2024
September 29, 2023
Revenues
$ 4,190
$ 3,921
Net income (loss)
$ 362
$ (396)
Net income (loss) margin
8.6 %
(10.1) %
Diluted earnings per share (EPS)
$ 2.68
$ (2.91)
Non-GAAP Measures*:
Adjusted EBITDA
$ 596
$ 451
Adjusted EBITDA margin
14.2 %
11.5 %
Non-GAAP diluted EPS
$ 2.93
$ 2.03
* Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Management believes that these non-GAAP measures provide another measure of Leidos' results of operations and financial condition, including its ability to comply with financial covenants. See Non-GAAP Financial Measures at the end of this press release for more information and a reconciliation of our selected reported results to these non-GAAP measures.
Revenues for the quarter were $4.19 billion, up 7% compared to the third quarter of 2023. Revenues grew year-over-year due to increased demand across all customer segments, especially for managed health services.
With a net income margin of 8.6%, net income for the third quarter was $362 million, or $2.68 per diluted share. Comparisons to the year ago period are not meaningful as the result of the $699 million pre-tax, non-cash impairment and restructuring charge primarily associated with the Security Enterprise Solutions (SES) reporting unit recorded in the third quarter of 2023.
Adjusted EBITDA was $596 million for the third quarter, up 32% year-over-year. Record adjusted EBITDA margin of 14.2% increased from 11.5% in the third quarter of 2023. Non-GAAP net income was $396 million for the third quarter, up 40% year-over-year, and non-GAAP diluted EPS for the quarter was $2.93, up 44% year-over-year. The primary drivers of increased profitability were increased volumes on managed health services programs and improved program execution and cost control across the company.
Cash Flow Summary
In the third quarter, Leidos generated $656 million of net cash provided by operating activities and used $23 million and $257 million in investing and financing activities, respectively. Net cash provided by operating activities was driven by strong EBITDA and collections performance. Days Sales Outstanding (DSO) for the quarter was 59.
Investing activities consisted primarily of $23 million in property, equipment and software payments, which resulted in quarterly free cash flow of $633 million. Leidos returned $254 million to shareholders in the third quarter, including $203 million in share repurchases and $51 million as part of its regular quarterly cash dividend program. As of September 27, 2024, Leidos had $1,185 million in cash and cash equivalents and $4.7 billion of debt.
On October 25, 2024, the Leidos Board of Directors declared a cash dividend of $0.40 per share, which represents an increase of 5.3% over the prior quarter's dividend amount. The dividend will be payable on December 31, 2024, to stockholders of record at the close of business on December 16, 2024.
Business Development
Net bookings totaled $8.1 billion in the quarter, representing a book-to-bill ratio of 1.9. As a result, backlog at the end of the quarter was $40.6 billion, of which $9.1 billion was funded. Included in the quarterly bookings were several notable awards:
Veterans Benefits Administration (VBA) Medical Disability Examinations (MDE) Regions 1-4 Option Year. The VBA MDE Office awarded Leidos the next option year on the existing indefinite delivery, indefinite quantity (IDIQ), firm-fixed price contracts that were originally awarded in November 2018. Leidos QTC Health Services will continue to provide MDE to meet Department of Veterans Affairs (VA) and Department of Defense (DOD) requirements for separating and retired service members.
Army Global Unified Network (AGUN). The Army Program Executive Office for Command, Control, and Communications-Tactical Global Enterprise Network Modernization (PEO C3T GENM-O) awarded Leidos a five-year, $331 million contract to modernize the U.S Army's network in alignment with the Army's Network Modernization Strategy and Army Unified Network Plan. Leidos will deploy AGUN to individual Army sites to deliver a standardized, orchestrated modern network architecture that supports the transition to a Zero Trust Architecture and aims to make applications, data, and enterprise services are accessible, trusted and interoperable across the globe.
Advanced Battle Management System-Digital Infrastructure (ABMS-DI) Network. The Department of the Air Force's (DAF) Program Executive Officer Command, Control, Communications and Battle Management (PEO C3BM) awarded Leidos a five-year, $303 million contract to oversee the planning, analysis, and operations for the DAF ABMS-DI network. This contract extends Leidos' collaborative role with the DAF to design, develop, and deploy modern Combined Joint-All Domain Command and Control (CJADC2) capabilities for the Air Force and Space Force.
Automated Installation Entry (AIE) Next Generation Support. The Army Program Executive Office for Intelligence, Electronic Warfare & Sensors (PEO IEW&S) awarded Leidos the AIE Next Generation contract to enhance security at 92 additional Army and select joint-service installation access control points located around the world. Under the six-year, $249 million contract, Leidos will continue to transform the Army's enterprise physical access control system to a fully extensible, cloud-based solution with advanced biometrics modalities.
Forward Guidance
Leidos is updating its fiscal year 2024 guidance as follows:
FY24 Guidance
Measure
Current
Prior
Revenues (billions)
$16.35 - $16.45
$16.10 - $16.40
Adjusted EBITDA Margin
High-12%
Approximately 12%
Non-GAAP Diluted EPS
$9.80 - $10.00
$8.60 - $9.00
Cash Flows Provided by Operating Activities (billions)
Approximately $1.35
Approximately $1.30
For information regarding adjusted EBITDA margin and non-GAAP diluted EPS, see the related explanations and reconciliations to GAAP measures included elsewhere in this release.
Leidos does not provide a reconciliation of forward-looking adjusted EBITDA margins or non-GAAP diluted EPS to net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income may vary significantly based on actual events, Leidos is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income at this time. The amounts of these deductions may be material and, therefore, could result in projected net income and diluted EPS being materially less than what may be implied by projected adjusted EBITDA margins and non-GAAP diluted EPS.
Conference Call Information
Leidos management will discuss operations and financial results in an earnings conference call beginning at 8 A.M. eastern time on October 29, 2024. A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leidos Investor Relations website (http://ir.leidos.com). An archived version of the webcast will be available on the Leidos Investor Relations website until October 29, 2025.
About Leidos
Leidos is a Fortune 500® innovation company rapidly addressing the world's most vexing challenges in national security and health. The company's global workforce of 48,000 collaborates to create smarter technology solutions for customers in heavily regulated industries. Headquartered in Reston, Virginia, Leidos reported annual revenues of approximately $15.4 billion for the fiscal year ended December 29, 2023. For more information, visit www.leidos.com.
Forward-Looking Statements
Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates," "guidance" and similar words or phrases. Forward-looking statements in this release include, among others, estimates of our future growth, strategy and financial and operating performance, including future revenues, adjusted EBITDA margins, diluted EPS (including on a non-GAAP basis) and cash flows provided by operating activities, as well as statements about our business contingency plans, government budgets and the ongoing Continuing Resolution, uncertainties in tax due to new tax legislation or other regulatory developments, strategy, planned investments, sustainability goals and our future dividends, share repurchases, capital expenditures, debt repayments, acquisitions, dispositions and cash flow conversion. These statements reflect our belief and assumptions as to future events that may not prove to be accurate.
Actual performance and results may differ materially from those results anticipated by our guidance and other forward-looking statements made in this release depending on a variety of factors, including, but not limited to: developments in the U.S. government defense and non-defense budgets, including budget reductions, sequestration, implementation of spending limits or changes in budgetary priorities, delays in the U.S. government budget process or a government shutdown, or the U.S. government's failure to raise the debt ceiling, which increases the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession; uncertainties in tax due to new tax legislation or other regulatory developments; inflationary pressures and fluctuations in interest rates; delays in the U.S. government contract procurement process or the award of contracts and delays or loss of contracts as a result of competitor protests; changes in U.S. government procurement rules, regulations and practices; our compliance with various U.S. government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. government and other customers; our ability to respond rapidly to emerging technology trends, including the use of artificial intelligence; our reliance on information technology spending by hospitals/healthcare organizations; our reliance on infrastructure investments by industrial and natural resources organizations; energy efficiency and alternative energy sourcing investments; investments by U.S. government and commercial organizations in environmental impact and remediation projects; the effects of health epidemics, pandemics and similar outbreaks may have on our business, financial position, results of operations and/or cash flows; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; our ability to accurately estimate costs, including cost increases due to inflation, associated with our firm-fixed-price contracts and other contracts; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; cybersecurity, data security or other security threats, system failures or other disruptions of our business; our compliance with international, federal, state and local laws and regulations regarding privacy, data security, protection, storage, retention, transfer and disposal, technology protection and personal information; the damage and disruption to our business resulting from natural disasters and the effects of climate change; our ability to effectively acquire businesses and make investments; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts; the failure of our inspection or detection systems to detect threats; the adequacy of our insurance programs, customer indemnifications or other liability protections designed to protect us from significant product or other liability claims, including cybersecurity attacks; our ability to manage risks associated with our international business; our ability to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar worldwide anti-corruption and anti-bribery laws and regulations; our ability to protect our intellectual property and other proprietary rights by third parties of infringement, misappropriation or other violations by us of their intellectual property rights; our ability to prevail in litigation brought by third parties of infringement, misappropriation or other violations by us of their intellectual property rights; our ability to declare or increase future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable law and our agreements; our ability to grow our commercial health and infrastructure businesses, which could be negatively affected by budgetary constraints faced by hospitals and by developers of energy and infrastructure projects; our ability to successfully integrate acquired businesses; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face.
These are only some of the factors that may affect the forward-looking statements contained in this release. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission ("SEC"), including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, all of which may be viewed or obtained through the Investor Relations section of our website at www.leidos.com.
All information in this release is as of October 29, 2024. Leidos expressly disclaims any duty to update the guidance or any other forward-looking statement provided in this release to reflect subsequent events, actual results or changes in Leidos' expectations. Leidos also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others.
CONTACTS:
Investor Relations:
Media Relations:
Stuart Davis
Alyssa Pettus
571.526.6124
571.526.6743
LEIDOS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
Three Months Ended
Nine Months Ended
September 27,2024
September 29,2023
September 27,2024
September 29,2023
Revenues
$ 4,190
$ 3,921
$ 12,297
$ 11,458
Cost of revenues
3,428
3,334
10,192
9,809
Selling, general and administrative expenses
247
239
704
709
Acquisition, integration and restructuring costs
3
5
14
14
Goodwill impairment charges
—
599
—
599
Asset impairment charges
6
88
6
88
Equity earnings of non-consolidated subsidiaries
(10)
(8)
(25)
(21)
Operating income (loss)
516
(336)
1,406
260
Non-operating income (expense):
Interest expense, net
(46)
(53)
(146)
(163)
Other income (expense), net
—
1
4
(4)
Income (loss) before income taxes
470
(388)
1,264
93
Income tax expense
(108)
(8)
(295)
(115)
Net income (loss)
362
(396)
969
(22)
Less: net (loss) income attributable to non-controlling interest
(2)
3
(1)
8
Net income (loss) attributable to Leidos common stockholders
$ 364
$ (399)
$ 970
$ (30)
Earnings per share:
Basic
$ 2.72
$ (2.91)
$ 7.19
$ (0.22)
Diluted
2.68
(2.91)
7.13
(0.22)
Weighted average number of common shares outstanding:
Basic
134
137
135
137
Diluted
136
137
136
137
Cash dividends declared per share
$ 0.38
$ 0.36
$ 1.14
$ 1.08
LEIDOS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
September 27,2024
December 29,2023
Assets:
Cash and cash equivalents
$ 1,185
$ 777
Receivables, net
2,706
2,429
Inventory, net
323
310
Other current assets
451
489
Total current assets
4,665
4,005
Property, plant and equipment, net
992
961
Intangible assets, net
558
667
Goodwill
6,123
6,112
Operating lease right-of-use assets, net
459
512
Other long-term assets
541
438
Total assets
$ 13,338
$ 12,695
Liabilities:
Accounts payable and accrued liabilities
$ 2,287
$ 2,277
Accrued payroll and employee benefits
903
695
Current portion of long-term debt
592
18
Total current liabilities
3,782
2,990
Long-term debt, net of current portion
4,081
4,664
Operating lease liabilities
467
516
Other long-term liabilities
341
267
Total liabilities
8,671
8,437
Stockholders' equity:
Common stock, $0.0001 par value, 500,000,000 shares authorized, 133,337,275 and
135,766,419 shares issued and outstanding at September 27, 2024, and
December 29, 2023, respectively
—
—
Additional paid-in capital
1,469
1,885
Retained earnings
3,179
2,364
Accumulated other comprehensive loss
(34)
(48)
Total Leidos stockholders' equity
4,614
4,201
Non-controlling interest
53
57
Total stockholders' equity
4,667
4,258
Total liabilities and stockholders' equity
$ 13,338
$ 12,695
LEIDOS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Three Months Ended
Nine Months Ended
September 27,2024
September 29,2023
September 27,2024
September 29,2023
Cash flows from operations:
Net income (loss)
$ 362
$ (396)
$ 969
$ (22)
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amortization
71
82
211
248
Stock-based compensation
19
20
59
57
Deferred income taxes
(29)
(104)
(96)
(192)
Goodwill impairment charges
—
599
—
599
Asset impairment charges
6
88
6
88
Other
3
19
5
25
Change in assets and liabilities, net of effects of acquisitions:
Receivables
(75)
14
(260)
(109)
Other current assets and other long-term assets
95
92
102
141
Accounts payable and accrued liabilities and other long-term liabilities
25
220
(149)
22
Accrued payroll and employee benefits
198
137
208
105
Income taxes receivable/payable
(19)
24
38
(101)
Net cash provided by operating activities
656
795
1,093
861
Cash flows from investing activities:
Acquisition of a business, net of cash acquired
—
(2)
—
(6)
Payments for property, equipment and software
(23)
(50)
(63)
(129)
Net proceeds from sale of assets
—
—
2
—
