Revenues of $4.1 billion, up 8% year-over-year Net income of $324 million or $2.37 per diluted share Adjusted EBITDA (non-GAAP) of $559 million (13.5% margin) Non-GAAP Diluted Earnings per Share of $2.63, up 46% year-over-year Cash Flows from Operations of $374 million; Free Cash Flow (non-GAAP) of $351 million Net Bookings of $4.0 billion (book-to-bill ratio of 1.0 for the quarter and 1.1 for trailing twelve months) RESTON, Va., July 30, 2024 /PRNewswire/ -- Leidos Holdings, Inc. (NYSE:LDOS), a FORTUNE 500® innovation company, today reported financial results for the second quarter of fiscal year 2024. Thomas Bell, Leidos Chief Executive Officer, commented, "In the second quarter, Leidos continued its industry-leading profitable growth and strong cash generation, showcasing the progress we've made towards our key operational priorities and the dedication to our "Promises Made, Promises Kept" philosophy. Our collaborative innovation strategy and capabilities-based organization position us well to deliver on our commitments for the remainder of 2024 and beyond." Summary Operating Results Three Months Ended (in millions, except margin and per share data) June 28, 2024 June 30, 2023 Revenues $                  4,132 $                  3,838 Net income $                     324 $                     210 Net income margin 7.8 % 5.5 % Diluted earnings per share (EPS) $                    2.37 $                    1.50 Non-GAAP Measures*: Adjusted EBITDA $                     559 $                     420 Adjusted EBITDA margin 13.5 % 10.9 % Non-GAAP diluted EPS $                    2.63 $                    1.80 * Non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Management believes that these non-GAAP measures provide another measure of Leidos' results of operations and financial condition, including its ability to comply with financial covenants. See Non-GAAP Financial Measures at the end of this press release for more information and a reconciliation of our selected reported results to these non-GAAP measures. Revenues for the quarter were $4.13 billion, up 8% compared to the second quarter of 2023. Revenues grew year-over-year due to increased demand across all customer segments, especially for managed health services. For the second quarter, net income was $324 million, or $2.37 per diluted share. Net income and diluted EPS were up 54% and 58% year-over-year, respectively. Net income margin of 7.8% increased from 5.5% in the second quarter of 2023. Adjusted EBITDA was $559 million for the second quarter, up 33% year-over-year. Record adjusted EBITDA margin of 13.5% increased from 10.9% in the second quarter of 2023. Non-GAAP net income was $360 million for the second quarter, up 43% year-over-year, and non-GAAP diluted EPS for the quarter was $2.63, up 46% year-over-year. The primary drivers of increased profitability were increased volumes and higher earned incentives on managed health services and improved cost control across the company. Cash Flow Summary In the second quarter, Leidos generated $374 million of net cash provided by operating activities and used $21 million and $159 million in investing and financing activities, respectively. Net cash provided by operating activities was driven by strong EBITDA and collections performance. Days Sales Outstanding (DSO) for the quarter was 58, a 1-day improvement from the second quarter of 2023. Investing activities consisted primarily of $23 million in property, equipment and software payments, which resulted in quarterly free cash flow of $351 million. Leidos returned $165 million to shareholders in the second quarter, including $114 million in share repurchases and $51 million as part of its regular quarterly cash dividend program. As of June 28, 2024, Leidos had $823 million in cash and cash equivalents and $4.7 billion of debt. On July 26, 2024, the Leidos Board of Directors declared a cash dividend of $0.38 per share to be paid on September 27, 2024, to stockholders of record at the close of business on September 13, 2024. Business Development Net bookings totaled $4.0 billion in the quarter, representing a book-to-bill ratio of 1.0. As a result, backlog at the end of the quarter was $36.5 billion, of which $8.0 billion was funded. Included in the quarterly bookings were several notable awards: Defense Enclave Services (DES) Department of Defense Network (DoDNet) Services. The Defense Information Systems Agency awarded Leidos a $823 million, five-year task order to provide long-term operations and sustainment for the DES DoDNet program. This award expands support from over 30,000 users to more than 160,000 users, including 14 additional Defense Agencies and Field Activities (DAFAs) to be migrated to DoDNet, and is projected to support approximately 370,000 DAFA users and workstations once complete. The work provides a more diverse and scalable service offering for the DoDNet user community, while also improving cybersecurity, network availability and reliability. Air Force National Capital Region Information Technology Services Follow-On. The U.S Air Force awarded Leidos a single-award, indefinite delivery, indefinite quantity (IDIQ) contract with an estimated total value of $738 million over five years. Under the contract, Leidos will support all components of the U.S. Air Force in the national capital region and National Military Command Center, including cybersecurity, enterprise IT operations, IT asset management, program management and other engineering services. Development, Integration, Acquisition, and Bridging to Logistics & Operations. The U.S. Army Contracting Command - Aberdeen Proving Grounds awarded Leidos a 10-year, $631 million contract to develop, acquire, field and provide lifecycle support to aerial intelligence, surveillance and reconnaissance sensors and integrated systems across a broad spectrum of multiple intelligence capabilities. NASA Cargo Mission Contract Follow-On. Under a five-year, $476 million contract, Leidos will continue to provide cargo mission engineering and integration services for NASA's International Space Station Program and Artemis campaign. Since 2004, Leidos has performed cargo mission support work for NASA by providing analytical and physical processing, engineering maintenance and operations support, as well as developing and certifying hardware for mission objectives and supporting logistical and integration functions to maintain adequate crew provisions an supplies to sustain human presence in space. Forward Guidance Leidos is updating its fiscal year 2024 guidance as follows:  FY24 Guidance Measure Current Prior Revenues (billions) $16.1 - $16.4 $16.0 - $16.4 Adjusted EBITDA Margin Approximately 12% Mid-to-High 11% Non-GAAP Diluted EPS $8.60 - $9.00 $8.40 - $8.80 Cash Flows Provided by Operating Activities (billions) Approximately $1.3 Approximately $1.3 For information regarding adjusted EBITDA margin and non-GAAP diluted EPS, see the related explanations and reconciliations to GAAP measures included elsewhere in this release. Leidos does not provide a reconciliation of forward-looking adjusted EBITDA margins or non-GAAP diluted EPS to net income due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. Because certain deductions for non-GAAP exclusions used to calculate projected net income may vary significantly based on actual events, Leidos is not able to forecast on a GAAP basis with reasonable certainty all deductions needed in order to provide a GAAP calculation of projected net income at this time. The amounts of these deductions may be material and, therefore, could result in projected net income and diluted EPS being materially less than what may be implied by projected adjusted EBITDA margins and non-GAAP diluted EPS. Conference Call Information Leidos management will discuss operations and financial results in an earnings conference call beginning at 8 A.M. eastern time on July 30, 2024. A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leidos Investor Relations website (http://ir.leidos.com). An archived version of the webcast will be available on the Leidos Investor Relations website until July 30, 2025. About Leidos Leidos is a Fortune 500® innovation company rapidly addressing the world's most vexing challenges in national security and health. The company's global workforce of 48,000 collaborates to create smarter technology solutions for customers in heavily regulated industries. Headquartered in Reston, Virginia, Leidos reported annual revenues of approximately $15.4 billion for the fiscal year ended December 29, 2023. For more information, visit www.leidos.com.  Forward-Looking Statements Certain statements in this release contain or are based on "forward-looking" information within the meaning of the Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by words such as "expects," "intends," "plans," "anticipates," "believes," "estimates," "guidance" and similar words or phrases. Forward-looking statements in this release include, among others, estimates of our future growth, strategy and financial and operating performance, including future revenues, adjusted EBITDA margins, diluted EPS (including on a non-GAAP basis) and cash flows provided by operating activities, as well as statements about our business contingency plans, government budgets and the ongoing Continuing Resolution, uncertainties in tax due to new tax legislation or other regulatory developments, strategy, planned investments, sustainability goals and our future dividends, share repurchases, capital expenditures, debt repayments, acquisitions, dispositions and cash flow conversion. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Actual performance and results may differ materially from those results anticipated by our guidance and other forward-looking statements made in this release depending on a variety of factors, including, but not limited to: developments in the U.S. government defense and non-defense budgets, including budget reductions, sequestration, implementation of spending limits or changes in budgetary priorities, delays in the U.S. government budget process or a government shutdown, or the U.S. government's failure to raise the debt ceiling, which increases the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession; uncertainties in tax due to new tax legislation or other regulatory developments; rising inflationary pressures and fluctuations in interest rates; delays in the U.S. government contract procurement process or the award of contracts and delays or loss of contracts as a result of competitor protests; changes in U.S. government procurement rules, regulations and practices; our compliance with various U.S. government and other government procurement rules and regulations; governmental reviews, audits and investigations of our company; our ability to effectively compete and win contracts with the U.S. government and other customers; our ability to respond rapidly to emerging technology trends, including the use of artificial intelligence; our reliance on information technology spending by hospitals/healthcare organizations; our reliance on infrastructure investments by industrial and natural resources organizations; energy efficiency and alternative energy sourcing investments; investments by U.S. government and commercial organizations in environmental impact and remediation projects; the effects of health epidemics, pandemics and similar outbreaks may have on our business, financial position, results of operations and/or cash flows; our ability to attract, train and retain skilled employees, including our management team, and to obtain security clearances for our employees; our ability to accurately estimate costs, including cost increases due to inflation, associated with our firm-fixed-price contracts and other contracts; resolution of legal and other disputes with our customers and others or legal or regulatory compliance issues; cybersecurity, data security or other security threats, system failures or other disruptions of our business; our compliance with international, federal, state and local laws and regulations regarding privacy, data security, protection, storage, retention, transfer and disposal, technology protection and personal information; the damage and disruption to our business resulting from natural disasters and the effects of climate change; our ability to effectively acquire businesses and make investments; our ability to maintain relationships with prime contractors, subcontractors and joint venture partners; our ability to manage performance and other risks related to customer contracts; the failure of our inspection or detection systems to detect threats; the adequacy of our insurance programs, customer indemnifications or other liability protections designed to protect us from significant product or other liability claims, including cybersecurity attacks; our ability to manage risks associated with our international business; our ability to comply with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act of 2010 and similar worldwide anti-corruption and anti-bribery laws and regulations; our ability to protect our intellectual property and other proprietary rights by third parties of infringement, misappropriation or other violations by us of their intellectual property rights; our ability to prevail in litigation brought by third parties of infringement, misappropriation or other violations by us of their intellectual property rights; our ability to declare or increase future dividends based on our earnings, financial condition, capital requirements and other factors, including compliance with applicable law and our agreements; our ability to grow our commercial health and infrastructure businesses, which could be negatively affected by budgetary constraints faced by hospitals and by developers of energy and infrastructure projects; our ability to successfully integrate acquired businesses; and our ability to execute our business plan and long-term management initiatives effectively and to overcome these and other known and unknown risks that we face. These are only some of the factors that may affect the forward-looking statements contained in this release. For further information concerning risks and uncertainties associated with our business, please refer to the filings we make from time to time with the U.S. Securities and Exchange Commission ("SEC"), including the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Legal Proceedings" sections of our latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, all of which may be viewed or obtained through the Investor Relations section of our website at www.leidos.com. All information in this release is as of July 30, 2024. Leidos expressly disclaims any duty to update the guidance or any other forward-looking statement provided in this release to reflect subsequent events, actual results or changes in Leidos' expectations. Leidos also disclaims any duty to comment upon or correct information that may be contained in reports published by investment analysts or others. CONTACTS: Investor Relations: Media Relations: Stuart Davis Melissa Lee Dueñas 571.526.6124 571.526.6850   LEIDOS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) Three Months Ended Six Months Ended June 28,2024 June 30,2023 June 28,2024 June 30,2023 Revenues $        4,132 $        3,838 $        8,107 $        7,537 Cost of revenues 3,427 3,271 6,764 6,475 Selling, general and administrative expenses 231 237 457 470 Acquisition, integration and restructuring costs 7 6 11 9 Equity earnings of non-consolidated subsidiaries (8) (7) (15) (13) Operating income 475 331 890 596 Non-operating income (expense): Interest expense, net (51) (56) (100) (110) Other income (expense), net 2 (1) 4 (5) Income before income taxes 426 274 794 481 Income tax expense (102) (64) (187) (107) Net income 324 210 607 374 Less: net income attributable to non-controlling interest 2 3 1 5 Net income attributable to Leidos common stockholders $           322 $           207 $           606 $           369 Earnings per share: Basic $          2.39 $          1.51 $          4.49 $          2.69 Diluted 2.37 1.50 4.42 2.67 Weighted average number of common shares outstanding: Basic 135 137 135 137 Diluted 136 138 137 138 Cash dividends declared per share $          0.38 $          0.36 $          0.76 $          0.72   LEIDOS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except share and per share data) June 28,2024 December 29,2023 Assets: Cash and cash equivalents $           823 $           777 Receivables, net 2,615 2,429 Inventory, net 333 310 Other current assets 458 489 Total current assets 4,229 4,005 Property, plant and equipment, net 984 961 Intangible assets, net 592 667 Goodwill 6,102 6,112 Operating lease right-of-use assets, net 480 512 Other long-term assets 522 438 Total assets $      12,909 $      12,695 Liabilities: Accounts payable and accrued liabilities $        2,235 $        2,277 Accrued payroll and employee benefits 703 695 Current portion of long-term debt 567 18 Total current liabilities 3,505 2,990 Long-term debt, net of current portion 4,109 4,664 Operating lease liabilities 486 516 Other long-term liabilities 299 267 Total liabilities 8,399 8,437 Stockholders' equity: Common stock, $0.0001 par value, 500,000,000 shares authorized, 134,709,785 and135,766,419 shares issued and outstanding at June 28, 2024, and December 29, 2023, respectively — — Additional paid-in capital 1,654 1,885 Retained earnings 2,866 2,364 Accumulated other comprehensive loss (65) (48) Total Leidos stockholders' equity 4,455 4,201 Non-controlling interest 55 57 Total stockholders' equity 4,510 4,258 Total liabilities and stockholders' equity $      12,909 $      12,695   LEIDOS HOLDINGS, INC. UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Three Months Ended Six Months Ended June 28,2024 June 30,2023 June 28,2024 June 30,2023 Cash flows from operations: Net income $         324 $         210 $         607 $         374 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 71 84 140 166 Stock-based compensation 20 19 40 37 Deferred income taxes (42) (45) (67) (88) Other 8 1 2 6 Change in assets and liabilities, net of effects of acquisitions: Receivables 96 43 (185) (123) Other current assets and other long-term assets 42 58 7 49 Accounts payable and accrued liabilities and other long-term liabilities (73)