Leidos Holdings, Inc.
CEO : Mr. Roger A. Krone
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2022 Q4 | 5.9% YoY | -1.9% | 4.0% | 2023-02-14 |
Chris Cage says,
Revenue Performance
- Q4 2022 revenues were $3.7 billion, up 6% compared to the prior year quarter.
- 2022 revenues were $14.4 billion, up 5% compared to 2021.
Adjusted EBITDA and Non-GAAP Net Income
- Adjusted EBITDA was $397 million for the fourth quarter, and $1.49 billion for 2022.
- Non-GAAP net income was $255 million for the quarter and $919 million for the year.
Segment Results
- Defense Solutions revenues in Q4 were essentially flat compared to the prior year quarter, and 2022 Defense Solutions revenues were up 3% for the year.
- Civil revenues were up 17% compared to the prior year quarter, and 2022 revenues were up 10% compared to 2021.
- Health revenues were up 10% compared to the prior year quarter, and 2022 revenues were up 5% over 2021.
Cash Flow and Balance Sheet
- Operating cash flow for the quarter was $105 million, and free cash flow was $52 million.
- For the year, operating cash flow was just shy of $1 billion and free cash flow was $857 million for a 94% conversion rate.
- As of December 30, 2022, the company had $516 million in cash and cash equivalents and $4.9 billion in debt.
Forward Outlook
- For 2023, the company expects revenues between $14.7 billion and $15.1 billion, reflecting growth in the range of 2% to 5% over fiscal year 2022.
- The company expects 2023 adjusted EBITDA margin between 10.3% and 10.5%.
- Operating cash flow is expected to be at least $700 million, and non-GAAP diluted earnings per share for 2023 between $6.40 and $6.80.
Roger Krone says,
Financial Performance
- Record revenue of $3.7 billion for the quarter and $14.4 billion for the year, up 6% and 5% respectively
- Adjusted EBITDA margin of 10.7% in the quarter was up 40 basis points year-over-year
- Adjusted non-GAAP diluted EPS to a record $1.83, which represents growth of 17% for the quarter
- Adjusted EBITDA margin of 10.4% for the year helped lead to non-GAAP diluted EPS of $6.60, which was well above guidance
Capital Deployment and Business Development
- Capital deployment was heavily weighted towards return to shareholders, while still layering in strategic acquisitions and investing to grow core business
- Investments in airborne ISR and Dynetics are paying off in additional aircraft performing valuable missions and key wins in hypersonics
- Won franchise programs in each segment that position the company for growth, including programs like DES in Defense, Social Security Administration, IT in Health, and AEGIS in Civil
- Booked $3.7 billion of net awards in the fourth quarter with a book-to-bill ratio of 1.0, and for the year, the book-to-bill ratio was 1.1
Independent Research and Development
- Invested $116 million in IR&D with IRAD (ph) growing at a compound annual rate of 23% over the last five years
- Continually investing to develop proprietary tools and unique processes to drive competitive advantage, including workflow transformations using the latest generation of AI-based on large language models
Talent Base Growth
- Hired more than 2,400 people in the fourth quarter and more than 11,000 in 2022, with headcount up 6% for the year and attrition rates continue to subside
- Technical upskilling programs significantly higher retention, and participation more than doubled in 2022 compared to 2021
- Offered courses in artificial intelligence and machine learning, software, cyber, cloud and digital engineering, and expanding with new offerings in cyber operations, secure rapid software development and specialized learning pass in AIML
Current Budget Environment
- Congress overwhelmingly passed and the President signed the Omnibus Appropriations bill, funding the government through September with budgets across the board seeing healthy increases, including defense spending, which was up about 10%
- Anticipating a series of noisy debates over the coming months around the debt ceiling and the 2024 appropriations given the razor-thin majorities and the deep divisions in Congress, contingency plans around a potential government shutdown are being prepared
- Built 2023 guidance assuming a continuing resolution beginning in October and extending through the rest of the year with no government shutdown
Q & A sessions,
Transitioning Support Organizations to DoD net
- The program aims to transition non-combat support organizations to new DoD net while ensuring a positive user experience and interoperability between support agencies
- There is potential for higher transformation and transition, but the company is not guiding to it
- The customer wants to move fast but not at the cost of negative user experience
Preparing for Government Shutdown
- The company has a well-developed playbook for government shutdowns and is currently preparing for it
- They conduct internal conversations with contracting officers to determine which programs will be deemed essential and how they can mitigate a shutdown
- Being prepared reduces the probability of using the plan
Dynetics’ Production Ramp in ’24
- Production for programs of records that are fully funded is expected to ramp in ’24
- There will be a significant growth in Dynetics due to the ramp in production
- They are optimistic about the growth and see it as attractive
Revenue Growth and Controlling Costs
- The company’s philosophy is to grow revenue faster than indirect costs to help control costs and achieve better growth every year
- They aim to have more product mix and diversity in their portfolio to grow nonlinearly with people
- They have fixed-price and cost-plus contracts and give back based on the contract type
Guidance for ’23
- The company expects ’23 to be at or better than ’22 levels due to $34 billion of submits pending awards
- The potential for a strong year and balanced guide exists
- Protests and adjudication court of federal claims may dampen enthusiasm
Customers Wanting to Get Things Under Contract
- Customers are keen on getting things under contract before an argument over the debt ceiling and potential government shutdowns
No bad stock 