Leidos touts hiring success as backlog grows

Leidos is scoring some wins on the recruiting front as the government services company looks outside the Washington, D.C. metropolitan region for new sources of talent amid ongoing robust competition for skilled technical talent.

During Leidos first quarter earnings call Tuesday, executives said the company added 2,000 employees during the January-March period as it targets headcount growth of 5-to-6.5 percent for the year. Leidos reported nearly 32,000 employees on its roster last year.

The company and its peers have to grow talent as their backlogs also increase. Leidos reported a record $21.5 billion backlog as of the first quarter’s end with $6.1 billion of it funded. The company booked $3.3 billion in awards for the quarter at a book-to-bill ratio of 1.3, which indicates future revenue growth as that reading is greater than 1.0.

Reston, Virginia-based Leidos is one of several contractors that have embraced the so-called “onshoring” concept to find more talent outside of a D.C. area many economists see at essentially zero unemployment, or even negative unemployment as another way to put it.

Amazon’s future "HQ2 site in Arlington’s Crystal City is a main factor to consider in the fight for technical talent in both the public and private sectors.

CEO Roger Krone said Tuesday the company does “significant software” work in Denver, Colorado Springs and San Diego. That is in addition to the software factory opened last year in Morgantown, West Virginia and a second one being built in Charlottesville, Virginia -- both within the vicinity of the University of Virginia and University of West Virginia.

“We still have some customers who want our team within 15 miles of their facility and that puts some constraints on where we hire,” Krone told analysts. “So there's always this emphasis in the National Capital Region.

“I won't call it a sea change, but we are seeing more flexibility on behalf of customers for us to move the work to where we can hire people.”

As Krone pointed out, the National Geospatial-Intelligence Agency is one example of a government customer being more flexible. NGA is building a second major campus to be called “NGA West” in downtown St. Louis.

Leidos’ first quarter revenue of $2.6 billion showed a 5.5-percent increase over the prior year period. The company left its revenue outlook for this year unchanged at $10.5 billion-to-$10.9 billion for the year, which would show growth of 3-to-7 percent.

Profit margin expectations remain at 9.9-to-10.1 percent adjusted earnings before interest, taxes, depreciation and amortization. Leidos indicated in January they were prioritizing sales growth this year and that would pressure margins somewhat.

Here is what Leidos is also expecting this year: a continuing resolution to start the 2020 government fiscal year Oct. 1. Despite a stopgap spending bill being “always a little bit of (a) dampening,” Krone said he is hopeful for another two-year budget agreement to “get us on the other side of the presidential elections.”

What is Leidos is waiting on this year? An award on the $3.5 billion Navy NGEN IT services contract it is looking to wrestle away from incumbent Perspecta, plus a decision on the Defense Information Systems Agency’s $6.5 billion “GSM-O” contract to run DISA’s global information grid.

Leidos is the incumbent on GSM-O and Perspecta is pursuing that award as a takeaway opportunity.

Leidos is also awaiting the outcome of a protest on a $2.9 billion NASA end-user IT services contract they won in February from incumbent Perspecta. A Government Accountability Office ruling on that protest is anticipated by June.