Growth looks certain, but Leidos keeps 'careful eye' on broader trends

Conditions are right for Leidos to keep growing, but the company also sounds semi-cautious about how the economic landscape might shift around it.

Its own financial picture aside, Leidos sees the macro environment all government contractors participate in as giving at least one year of budget certainty with a watchful eye on other dynamics much less in their control.

During Leidos’ fourth quarter earnings call Tuesday, CEO Roger Krone indicated the company’s analysis of past history regarding budget negotiations in an election year foreshadows a conclusion before the current fiscal year ends Oct. 31.

“(At) the end of a first term in the White House, there is a reason to kind of get the budget done before we enter the election cycle in the fall,” Krone told investors. “I don’t see a lot of appetite for having the budget process roll through the election season. There are other people who think we’ll be in a CR (continuing resolution) through the end of the year, but I’m more optimistic than that.”

The Trump administration’s proposed fiscal year 2021 budget is on the table as of Feb. 10. In that request, the administration planned for relatively flat defense spending at $740.5 billion but with a $2.1 billion-boost to research-and-development funds. Non-defense spending would see a 5-percent cut to around $590 billion.

But if past is prologue, the Democratic-led House will likely not agree to the planned cuts for civilian agencies.

With that optimism comes a semblance of possible skepticism about the overall economic environment and risks to it. The U.S. economy is in the midst of its longest-ever streak of expansion at 126 months of gross domestic product growth, which exceeds the prior record of March 1991-to-March 2001.

“All of us in business look at that with a careful eye and thinking, ‘Okay, what could be out in front of us,’” Krone said. “We look at the coronavirus, we keep an eye on interest rates. The economy is running well and we continue to see economic growth, but I think we’re all being thoughtful.”

Reston, Virginia-based Leidos’ outlook for itself on the financial front is slightly more straight-forward by comparison. Revenue climbed 8.8-percent last year to $11.1 billion and the company sees $12.6 billion-$13 billion in sales this year, well above the consensus analyst expectation of $12 billion and including $900 million in acquired revenue from Dynetics.

That forecast includes around 7-percent organic growth, excluding Dynetics and the pending acquisition of L3Harris Technologies' security detection and automation businesses.

Contract bookings totaled $14.5 billion for a trailing 12-month book-to-bill ratio of 1.3 times, which means the backlog grew faster than sales were booked against it. Total backlog hit a record $24.1 billion versus the $20.8 billion recorded for last year.

Not included in that and still to be determined are Leidos’ three biggest wins of late at $18 billion in total ceiling value. Those include two Government Accountability Office rulings to come in April on protests over the company’s largest recompete wins.

A third possible protest could come regarding its takeaway of the Navy NGEN network services contract from incumbent Perspecta, whose debrief with the Navy is set for Feb. 24.

Leidos’ outlook for its bottom line is somewhat different. The company sees this year’s adjusted EBITDA margin (earnings before interest, taxes, depreciation and amortization) at 10.0-10.2 percent compared to last year’s 10.5 percent. Early investments in new programs such as NGEN, pending the protest scenario, are a part of that as are the sizes of the two acquisitions.

But Krone sounded quick to note that the company is not lowering the bar in terms of its business development pursuits.

“There may be people who feel like we have to bid on a broad array of programs even if they don’t meet our expectations for return,” Krone said. “Even at the size we are today, we have the opportunity to pick and choose what we go after. If we don’t see the potential for our corporate average return on a program, we have the strength and the will to not bid those programs.”

The company separately announced Monday that James Moos has been appointed full-time president of its civil group, which he has led on an acting basis since October after then-group president Angela Heise left the company.

In that release, Moos was credited with spearheading efforts related to Leidos’ pending acquisition of the L3Harris airport security technology businesses. Moos was the civil group’s chief operating officer and deputy president prior to Heise’s departure from Leidos.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.