Leidos(US:LDOS)2025-11-04 14:02Financial Data and Key Metrics Changes - The company reported a revenue of $4.47 billion, reflecting a 7% increase year-over-year and a 6% organic growth [20][21] - Adjusted EBITDA for the quarter was $616 million, up 3% year-over-year, resulting in an adjusted EBITDA margin of 13.8% [21][25] - Earnings per share (EPS) grew 4% to $3.05, supported by a lower share count [21][25] - Operating cash flow reached $711 million, with a free cash flow conversion ratio of 171% [25] Business Line Data and Key Metrics Changes - National security and digital revenues increased by 8% year-over-year, with 7% coming from organic growth, driven by contract awards and increased volumes [22] - Health and civil revenues rose by 6% year-over-year, with a record non-GAAP operating income margin of 25.7% [23] - Defense systems grew by 11% year-over-year, marking its seventh consecutive period of high single to low double-digit growth [24] Market Data and Key Metrics Changes - The company experienced a 27% sequential increase in funded backlog, indicating strong customer demand [16] - The energy infrastructure business has grown significantly, now representing over $600 million in annual revenues [9] Company Strategy and Development Direction - The company is focused on its North Star 2030 strategy, which includes growth pillars such as space and maritime, energy infrastructure, digital modernization and cyber, mission software, and managed health services [8][12] - The company is investing in AI and automation to enhance operational efficiency and customer outcomes [7][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current government shutdown, noting that most programs remain unaffected [4][19] - The company raised its guidance for 2025, reaffirming revenue guidance of $17 billion to $17.25 billion and increasing EBITDA and EPS guidance [18][26] Other Important Information - The company repurchased $100 million worth of shares and accelerated the payoff of $450 million on its term loan [17] - A dividend of $0.43 per share was announced, marking a 7.5% increase [17] Q&A Session Summary Question: Thoughts on M&A in the current environment - Management indicated a shareholder-friendly approach to capital deployment, focusing on both organic growth and selective M&A opportunities [30][31] Question: Growth in defense systems segment - Management highlighted tracking 10 franchise programs expected to deliver about $15 billion in potential value over the next five years [36] Question: Sustainability of health and civil segment margins - Management expressed confidence in sustaining high margins through innovation and technology investments [45][49] Question: Bid expectations for next year - Management expects a significant increase in bid submissions next year, with a robust pipeline of $69 billion in near-term opportunities [55][58] Question: Impact of the government shutdown on Q4 - Management acknowledged potential risks from the shutdown but remained optimistic about returning to normal operations quickly [74][75] Question: International business performance - Management expressed confidence in growing the international business, particularly in Australia and the U.K., aligned with growth pillars [100] Question: Potential spin-off of Dynetics - Management emphasized the value of Dynetics within the Leidos portfolio and plans to invest in it rather than consider a spin-off [106][108] Question: Recompete contracts for next year - Management noted that it is too early to specify recompete contracts but highlighted several areas with growth momentum [90][92]