Leidos Holdings, Inc. Third Quarter Report 2024

Leidos Holdings, Inc. (NYSE: LDOS), a leading science and technology solutions company, reported a strong financial performance in its third quarter of 2024, marking its sixth consecutive quarter of growth. CEO Tom Bell and CFO Chris Cage announced on [date] that the company has raised its full-year guidance following a record adjusted EBITDA margin of 14.2% and a 44% increase in adjusted diluted EPS.

Leidos also reported a significant free cash flow conversion rate of 159% and is nearing its $500 million share repurchase target for the year. The company's quarterly dividend will be increased to $0.40 per share, effective December 16, for shareholders of record.

Key Takeaways

• Leidos reported a record adjusted EBITDA margin of 14.2% and a 44% growth in adjusted diluted EPS.
• Free cash flow conversion rate stood at 159%, with the company repurchasing $200 million in shares.
• A quarterly dividend increase to $0.40 per share was announced, effective for shareholders on December 16.
• The company secured $8.1 billion in net bookings, resulting in a total backlog of $40.6 billion.
• Revenue for the third quarter was $4.19 billion, a 7% increase from the previous year.
• Leidos raised its 2024 revenue guidance to between $16.35 billion and $16.45 billion and adjusted EBITDA guidance to the high 12% range.

Company Outlook

• Leidos raised its 2024 revenue guidance to $16.35 billion – $16.45 billion and adjusted EBITDA guidance to the high 12% range.
• Non-GAAP diluted EPS guidance increased to $9.80 – $10 with lower single-digit revenue growth anticipated for 2025.
• The Investors Day in March 2025 will focus on the company's strategic direction and growth opportunities.

Bearish Highlights

• The National Security and Digital segment faces challenges due to budget shifts and staffing issues.
• Q4 is expected to see a modest revenue step down due to seasonal factors and potential funding disruptions.

Bullish Highlights

• The Health & Civil segment is performing strongly, particularly in managed health services, driven by increased demand from the PACT Act.
• The Defense Systems segment benefited from the IFPC Enduring Shield program and expects growth from new programs like small glide munitions and Black Arrow.

Misses

• While the National Security and Digital segment saw only a 1% revenue increase, it is focused on pivoting to capitalize on digital modernization.

Q&A Highlights

• The company is investing in innovation within the VBA and expects future competitions to incentivize innovation.
• Leidos is optimistic about the long-term contribution of the CHS-6 program and future multi-year contracts with the VA.
• Strategic investments in Q4 will focus on innovation, technology, and employee engagement, with solid margins expected to remain around 12%.

Leidos Holdings, Inc. has demonstrated a strong financial performance in the third quarter of 2024, with significant growth in key financial metrics and a robust strategy for future growth. The company's focus on operational efficiency, high-quality contracts, and its North Star growth strategy are poised to deliver sustainable growth and profitability. With a solid backlog and a strategic focus on key segments, Leidos is well-positioned to maintain its competitive edge in the science and technology solutions industry.

InvestingPro Insights

Leidos Holdings' impressive third-quarter performance is further underscored by several key metrics and insights from InvestingPro. The company's market capitalization stands at a robust $24.92 billion, reflecting its strong position in the Professional Services industry. This aligns with the company's reported growth and raised guidance for 2024.

InvestingPro data reveals that Leidos has achieved a remarkable revenue of $16.01 billion over the last twelve months as of Q2 2024, with a healthy revenue growth of 7.86%. This growth trajectory is consistent with the company's reported 7% increase in third-quarter revenue to $4.19 billion.

One of the InvestingPro Tips highlights that Leidos has raised its dividend for 6 consecutive years, which is in line with the company's announcement of increasing its quarterly dividend to $0.40 per share. This demonstrates Leidos' commitment to returning value to shareholders, a positive sign for investors.

Another relevant InvestingPro Tip indicates that Leidos' net income is expected to grow this year, aligning with the company's reported 44% increase in adjusted diluted EPS and raised guidance for non-GAAP diluted EPS to $9.80 – $10.00.

It's worth noting that Leidos is trading near its 52-week high, with a significant return of 104.83% over the last year. This performance reflects the market's positive reception of the company's strong financial results and optimistic outlook.

For investors seeking comprehensive insights, InvestingPro offers 18 additional tips for Leidos Holdings, providing a deeper understanding of the company's financial health and market position.

Full Transcript – Leidos Holdings Inc (LDOS) Q3 2024

Operator: Greetings. Welcome to Leidos’ Third Quarter 2024 Earnings Call.

Stuart Davis: Thank you, and good morning, everyone. I'd like to welcome you to our third-quarter fiscal year 2024 earnings conference call. Joining me today are Tom Bell, our CEO and Chris Cage, our Chief Financial Officer.

Tom Bell: Thank you, Stuart, and good morning, everyone. I'm very happy to report our sixth straight quarter of excellent financial performance, and I’m proud that the team has delivered high-quality wins across the entire Leidos portfolio.

Chris Cage: Thanks, Tom, and thanks to everyone for joining us today. Our third-quarter results again showcase what is possible, as we lower performance risk focused on high-quality wins and drive efficiency through the organization.

Operator: Thank you for participating in our Q3 2024 earnings call. We look forward to updating you again soon. Have a great day.

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