PresentationSeth SeifmanJPMorgan Chase & Co, Research Division Good afternoon, everyone. Welcome back to the Aerospace and Defense track at the 2026 JPMorgan Industrials Conference. I'm Seth Seifman, the A&D analyst, and we are very grateful to have with us Leidos, and we have CFO, Chris Cage, and we have Stuart Davis from Investor Relations, who I'm sure many of you know. And we'll do -- I think we'll do some Q&A here with Chris. And we'll ask for some questions from the audience as well. So feel free to r ...

Summary of Leidos (NYSE: LDOS) 2026 Conference Call Company Overview - **Company**: Leidos (NYSE: LDOS) - **Event**: 2026 JPMorgan Industrials Conference - **Date**: March 17, 2026 Key Industry Insights Aerospace and Defense - The current administration has shifted the focus towards demonstrating capabilities rather than just proposals, requiring contractors to invest upfront to meet customer needs [5][6][7] - Leidos is positioned to leverage AI to enhance mission outcomes, emphasizing the integration of AI with customer missions [9][10][12] - The intelligence and digital segment is expected to grow mid- to high-single digits, with a focus on intelligence programs driving growth [15][16][18][21] Health Sector - The medical exam business has been a significant driver of financial performance, although modest declines are expected in 2026 due to recompete processes [27][28][29] - Leidos aims to expand its role in veteran services and explore new opportunities in rural health and behavioral health [30][32][33][40] Homeland Security - The lack of appropriations for the Department of Homeland Security (DHS) is noted, but the overall impact on Leidos is expected to be modest [43][44] - Leidos is actively working on modernizing airport security experiences and enhancing software capabilities for the FAA [45][51][52] Energy Sector - The energy business is projected to reach $1.3 billion, driven by infrastructure projects, disaster response, and modernization efforts [59][66] - The acquisition of ENTRUST is expected to broaden Leidos' geographical footprint and customer base in the energy sector [65][67] Defense Segment - The defense segment is anticipated to be the fastest-growing area, with significant programs like the indirect fire protection program and Air Base Air Defense (ABADS) driving growth [78][83][84] - Leidos is focusing on expanding its capabilities in maritime and space sectors, leveraging its existing expertise and technology [85][94][95] Additional Important Points - The company is investing in AI tools to enhance operational efficiency and customer service across various segments [10][67] - Leidos is preparing for potential growth in the health business, particularly in the context of rural care and veteran services [30][33][40] - The defense business is expected to see increased demand for missile production and related capabilities, aligning with national security needs [96][99] This summary encapsulates the key points discussed during the conference call, highlighting Leidos' strategic focus areas and anticipated growth drivers across its various business segments.

Reston, Virginia-based Leidos Holdings, Inc. (LDOS) provides services and solutions in the defense, intelligence, engineering, civil, and health markets. With a market cap of $21.2 billion, the company provides scientific, engineering, systems integration, and technical services and solutions. Companies worth $10 billion or more are generally described as “large-cap stocks,” and LDOS perfectly fits that description, with its market cap exceeding this mark, underscoring its size, influence, and dominance ...

Core Insights - The Pentagon's testing office indicates that sufficient data to evaluate the combat effectiveness of the US's first hypersonic missile will not be available until early next year, highlighting challenges in keeping pace with China and Russia in hypersonic weaponry [1][4]. Group 1: Testing and Evaluation - The Army's Dark Eagle hypersonic missile has not produced enough data to assess its operational effectiveness, suitability, and survivability, with concerns also regarding its resilience to cyber-attacks [2]. - The testing office anticipates that adequate data will be available after operational testing is completed in March 2027, despite the Army's initial plan to field the weapon this year [2][3]. - The annual report from the testing office, which will be published soon, reveals that the hypersonic missile was originally expected to be ready by September 2023, but insufficient data remains a significant concern [3]. Group 2: Competitive Landscape - China and Russia are significantly ahead of the US in hypersonic missile development, with capabilities to fly at speeds exceeding five times the speed of sound, making them harder to intercept [4]. - Russia has reportedly utilized hypersonic missiles in its military operations in Ukraine, underscoring the urgency for the US to advance its own hypersonic capabilities [4]. Group 3: Program Challenges - The Army has faced repeated failures in demonstrating the success of the Dark Eagle system during real-world testing, with issues related to the launcher, launch sequence, and missile production quality noted by the Government Accountability Office [6]. - An Army spokeswoman stated that the service cannot comment on the report before its finalization, although a recent announcement highlighted a significant advancement in military capabilities without mentioning the readiness of the missiles [5]. Group 4: Leadership Commentary - The annual report includes a letter from Army Secretary Dan Driscoll, emphasizing the Army's commitment to accelerating the delivery of effective capabilities, although it does not specifically address the hypersonic program [7].

Core Insights - U.S. defense spending accelerated by 8.5% in February, a significant increase from the 1% growth in January, indicating a robust upward trend in military expenditures [1] - Leidos secured a $459.6 million contract to modernize the U.S. Air Force's Cloud One platform, enhancing cloud capabilities and security [1] - TAT Technologies announced two maintenance contracts totaling $36 million, reflecting ongoing demand for MRO services in the defense sector [1] Defense Spending - Total U.S. defense spending increased by 8.5% in February, up from 1% in January, with operations and maintenance spending rising by 5% year-over-year [1] - Research and development spending saw a 13% increase year-over-year, accelerating from 11% growth in January [1] - Procurement spending grew by 11% in February, following a 3% increase in January, contributing to a total spending increase of 5% so far this year [1] Company Contracts - Leidos received a $459.6 million contract to modernize the U.S. Air Force's Cloud One platform, collaborating with major cloud service providers to enhance security and reduce costs [1] - U.S. Special Operations Command awarded Leidos a $12.46 million contract for long-lead material to support its Small Cruise Missile program [1] - TAT Technologies secured two MRO services contracts worth $36 million, including a two-year extension for existing services and a new four-year contract for additional APU platforms [1] Market Performance - Defense stocks showed mixed performance, with AeroVironment leading gains at 2.7%, while Leidos stock experienced fluctuations below its 50-day moving average [1] - TAT Technologies rose by 1.4%, indicating profit-taking after a previous breakout, while Karman Holdings declined by over 5% [1]

Core Insights - Leidos will modernize the U.S. Air Force's Cloud One platform under a $454.9 million contract to enhance secure cloud capabilities and accelerate mission readiness [1][1][1] Group 1: Contract and Collaboration - The contract aims to transform the Air Force's multi-cloud environment by collaborating with major cloud service providers including Amazon Web Services, Azure, Google Cloud Platform, and Oracle Cloud Infrastructure [1][1][1] - The modernization efforts are intended to boost security, increase automation, and simplify operations while reducing costs [1][1][1] Group 2: Strategic Importance - The initiative is designed to create a secure, repeatable cloud foundation that can be adopted by other Department of War organizations, facilitating broader cloud adoption [1][1][1] - By streamlining cloud processes, the program aims to enhance mission readiness and strengthen cyber defenses across Air Force units globally [1][1][1] Group 3: Company Overview - Leidos reported annual revenues of approximately $17.2 billion for the fiscal year ended January 2, 2026, and focuses on technology and cybersecurity innovation for the federal government [1][1][1] - The Cloud One modernization aligns with Leidos' NorthStar 2030 strategy, emphasizing large-scale technology and cybersecurity advancements [1][1][1]

Core Viewpoint - Leidos will participate in the 2026 J.P. Morgan Industrials Conference, highlighting its ongoing engagement with investors and the market [1]. Group 1: Event Participation - Leidos announced its participation in the J.P. Morgan 2026 Industrials Conference in Washington, D.C. [1] - Chief Financial Officer Chris Cage will conduct a "fireside chat" on March 17, 2026, at 1:40 p.m. ET [1]. - A live audio webcast of the event will be available on the Leidos Investor Relations website, with a replay accessible for 30 days post-event [1]. Group 2: Company Overview - Leidos is a leader in industry and technology, serving both government and commercial customers with innovative digital and mission solutions [1]. - The company is headquartered in Reston, Virginia, and employs approximately 47,000 people globally [1]. - For the fiscal year ending January 2, 2026, Leidos reported annual revenues of approximately $17.2 billion [1].

Core Insights - Leidos partners with Dropzone AI to enhance U.S. federal agencies' cyber threat responses, addressing the challenge of alert fatigue in security operations centers (SOCs) [1] - The collaboration aims to deploy AI-driven capabilities to automate routine cyber investigations, allowing human analysts to focus on more complex threats [1] - Leidos is leveraging Second Front Systems' Game Warden platform to facilitate the secure deployment of Dropzone AI's technology within government environments [1] Company Overview - Leidos reported annual revenues of approximately $17.2 billion for the fiscal year ended January 2, 2026, and employs 47,000 global staff [1] - Dropzone AI specializes in using AI agents to enhance cybersecurity, having automated over 160 years of manual analyst work across more than 300 organizations [1] - Second Front Systems focuses on accelerating software development and deployment in government and regulated networks, aiming to reduce deployment timelines significantly [1] Strategic Goals - The partnership seeks to improve response times to cyber threats, reduce analyst fatigue, and ensure compliance with federal security regulations [1] - Dropzone AI's technology is designed to enable security teams to respond to threats up to 90% faster with less manual effort [1] - Leidos' investment in Dropzone AI emphasizes a commitment to delivering trusted cyber capabilities to government customers [1]

Group 1 - Leidos Holdings, Inc. has been recognized for its Small Cruise Missile, designated as AGM-190A by the U.S. Air Force, highlighting its affordability and adaptability for military applications [1][2] - The AGM-190A missile demonstrated a stand-off range of over 400 nautical miles during testing, showcasing its advanced capabilities [2] - This recognition aligns with Leidos' NorthStar 2030 strategy, emphasizing innovative and cost-effective defense solutions [3] Group 2 - Leidos is advancing the DODNet transformation, transitioning eight additional Defense Agencies to its program, part of a $11.5 billion, 10-year Defense Enclave Services initiative [4] - The company plans to transition nearly 100,000 users to the DODNet program over the next 1.5 years, marking a significant operational expansion [4] Group 3 - Leidos Holdings operates across various segments, including National Security & Digital, Health & Civil, Commercial & International, and Defense Systems, providing services to both government and commercial customers [5]

Core Insights - Albert Anthony is a Croatian-American business author and analyst contributing to Seeking Alpha and other financial platforms, with a focus on REITs [1] - He has launched his own equities research firm, Albert Anthony & Company, which operates remotely [1] - The author has a background in political science and certifications in Microsoft Fundamentals, CompTIA Project+, and Risk Management [1] Company Overview - Albert Anthony & Company is a Texas-registered boutique equities research firm managed entirely by the author [1] - The firm provides general market commentary and research based on publicly available data [1] Industry Engagement - The author has participated in numerous business and innovation conferences, trade shows, and panel discussions [1] - He is also growing a YouTube channel focused on REITs, reflecting his active investment in this sector [1]