Core Insights - Leidos is significantly expanding its summer internship program, with nearly 900 interns from 290 colleges and universities participating in 2025 [1][2] - The company has tripled its intern class size since 2016, emphasizing the importance of attracting and retaining top talent for growth [2] - A high percentage of interns, 90%, either receive job offers or return for additional internships, indicating the program's effectiveness [2] Company Overview - Leidos is a leader in the industry and technology sector, serving both government and commercial clients with innovative digital solutions [4] - The company is headquartered in Reston, Virginia, and employs approximately 48,000 people globally [4] - For the fiscal year ending January 3, 2025, Leidos reported annual revenues of around $16.7 billion [4] Internship Program Details - The 2025 intern class includes students from 38 different college majors across 34 states, the U.K., and Australia [3] - The CEO of Leidos, Tom Bell, highlighted the internship program as a crucial investment for the company's future, providing interns with valuable experience and insights into the industry [3] - Interns contribute fresh ideas and energy to existing teams, enhancing the company's operational capabilities [3]

Financial Performance - Talent Development Solutions (TDS) revenue grew by 1% to $99.1 million compared to the prior year[27] - Global Knowledge (GK) revenue declined by 16% in Q1 FY2026[31] - Total revenue decreased by 3% year-over-year to $124.2 million in Q1 FY2026[30, 31] - Adjusted EBITDA increased by $3 million, or 17%, year-over-year to $22.1 million in Q1 FY2026[34] - Adjusted EBITDA margin improved by 300 basis points year-over-year to 18% in Q1 FY2026[27, 34] - Free cash flow increased by $15.7 million year-over-year to $26.2 million in Q1 FY2026, driven by working capital timing[33, 34] Business Highlights and Strategy - The company reaffirms its fiscal year 2026 outlook, projecting both revenue and Adjusted EBITDA growth[14] - TDS segment has achieved three consecutive quarters of revenue growth[18] - The company is executing a transformation plan focused on expense reduction, margin expansion, and a return to topline growth[20] - The company estimates a $400 billion market opportunity in talent development, with a shift towards a talent development lifecycle approach[22]

Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $133.8 million, down approximately 2.8% year-over-year, while total revenue for the full year was $531 million, down approximately 4% year-over-year [35][51] - Adjusted EBITDA for the fourth quarter was $29.9 million, representing 22% of revenue, up from $28.3 million or 21% of revenue one year ago [41] - The company reported a gap net loss of $31.1 million in the fourth quarter, compared to a gap net loss of $245.3 million in the prior year [42] Business Line Data and Key Metrics Changes - Talent Development Solutions (TDS) revenue was $102.8 million in the fourth quarter, up 1% year-over-year, and $405.5 million for the full year, essentially flat to FY24 [31] - Global Knowledge revenue was $30.9 million in the fourth quarter, down approximately 13% year-over-year, with full-year revenue of $125.4 million, down approximately 15% year-over-year [34] Market Data and Key Metrics Changes - The company reported a dollar retention rate (DRR) of 105% for the fourth quarter, bringing the last 12 months DRR to 100% [8][33] - The market served by the company is estimated to be over $400 billion, with a focus on the talent development lifecycle within the enterprise market segment [12][13] Company Strategy and Development Direction - The transformation strategy focuses on two key objectives: fixing the basics and investing to grow, with a targeted shift of up to 20% of resources into the enterprise market segment [10][11] - The company aims to return to growth in FY26 while generating positive free cash flow [16][52] Management's Comments on Operating Environment and Future Outlook - Management is closely monitoring the macroeconomic environment and potential impacts of evolving government policies [7] - The company remains committed to its targets of returning to top-line growth and margin expansion in FY26 [16][52] Other Important Information - The company achieved $45 million in annualized expense reduction in FY25, with 40% to 50% of these savings reinvested back into the business [15][16] - The company generated $17.7 million in cash flow from operations in Q4, resulting in free cash flow of $13.2 million, compared to $5.4 million in the prior year [46] Q&A Session Summary Question: Impact of recent tariff news on customer base - Management noted no material impact from recent tariff news, as they are well-prepared and have been working closely with federal agencies [62][63] Question: Growth outlook for FY26 - The outlook reflects current business operations, acknowledging a fluid environment that may impact future performance [71][72] Question: Margin improvement in EBITDA guidance - Management indicated that while revenue is expected to grow, margin improvement will be modest, with a focus on leveraging earnings growth [74][76] Question: Go-to-market transformation progress - Management reported positive feedback from large deals and ongoing adjustments in sales strategy, with a focus on deploying resources effectively [88][91] Question: Engagement with AI-driven tools - Early indicators show strong customer engagement with AI-driven tools, with a notable percentage hiring professional services for implementation [99][100] Question: Global Knowledge margin contribution decline - Management attributed margin decline to a mix issue and expects improvements as the business stabilizes and product offerings expand [110][112] Question: Durability of dollar retention rate improvements - Management expressed confidence in the durability of the DRR improvements, supported by long-term contracts and ongoing resource shifts [116][121] Question: Seasonality of business and future guidance - Management confirmed that Q1 is typically the smallest quarter, and seasonality patterns are expected to continue into FY26 [124][126]