Leidos(LDOS) - 2023 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For the full year, revenue growth was 7%, non-GAAP diluted EPS growth was 11%, and operating cash flow growth was 17% [60][61][75] - In Q4, revenues reached $3.98 billion, with an adjusted EBITDA margin of 11.4$1.99, reflecting a 9% year-over-year increase [111][112] Business Line Data and Key Metrics Changes - Health segment revenues increased by 17% year-over-year, surpassing $3 billion, driven by strong program execution and increased volumes [88][130] - Civil revenues grew by 2$4.2 billion in revenues, up 7% year-over-year, with a non-GAAP operating income margin of 14.5% [96] Company Strategy and Development Direction - The company is focusing on business capture and enhancing its employee value proposition to attract top talent [63][65] - A new branding campaign, "Making Smart Smarter," aims to improve brand recognition and highlight the company's unique capabilities [80][82] - The company is committed to long-term margin expansion and expects to exceed previous financial commitments [69][118] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate funding uncertainties and maintain strong customer demand [127][190] - The company is preparing for potential growth in the Health segment, particularly in disability examinations, while remaining cautious about overall revenue growth due to budget uncertainties [130][190] Other Important Information - The company repurchased over $200 million worth of shares in Q4 2023 and paid$51 million in dividends, maintaining a strong balance sheet with $777 million in cash [61][91] - The company expects to guide non-GAAP diluted EPS between$7.50 and $7.90 for 2024, reflecting a conservative outlook amid budget uncertainties [93][117] Q&A Session Summary Question: What are the assumptions in the outlook related to the DOD budget? - Management indicated that the 2024 guidance is conservative due to funding uncertainties on Capitol Hill, not assuming growth in the Defense budget this year [127] Question: Can you elaborate on the Health segment's performance? - The Health segment has shown significant outperformance, with expectations for continued growth driven by strong program execution and increased volumes [130] Question: What are the margin expansion opportunities in the National Security segment? - Management highlighted the potential for margin expansion in the National Security and Digital segment, particularly through digital modernization efforts [135] Question: How does the company view the hypersonics market? - Management expressed optimism about the hypersonics market, noting strong customer demand and the company's positioning to capitalize on this growth [138][160] Question: What is the company's stance on M&A in 2024? - M&A is not a priority for 2024, with a focus on other cash deployments [175] Question: How is the Civil margin expected to trend in 2024? - Management indicated that the Civil margin is expected to stabilize, with a focus on improving profitability through better program execution [177]