Leidos eyes missile defense, border security tech as growth avenues
CEO Tom Bell also unveils a first cut of the company's new "North Star 2030" vision with more details to come. Courtesy of Leidos.
By
Ross Wilkers
In talking with Wall Street, CEO Tom Bell said the company has "prepared some big ideas" in both areas for the new Trump administration and other senior stakeholders to consider.
Missile defense and border security represent two key items on the new Trump administration’s agenda, plus a pair of specific areas Leidos believes it can be a main participant in from industry.
During Leidos fourth quarter and year-end earnings call with investors Tuesday, chief executive Tom Bell referenced President Trump’s executive order for the U.S. to start working on a national missile defense system called “The Iron Dome for America.”
Iron Dome is Israel’s system to protect cities and other installations from missiles and drone threats from relatively short range, or about 50 miles away. President Trump’s border security push emphasizes his desire to drastically reduce immigration, especially along the U.S.-Mexico border.
Bell told analysts that he in fact was “up on Capitol Hill” on Monday to discuss one of those two items, that being missile defense and border security, but added he “won’t tell you which one.”
Even still, Bell said the company has “prepared some big ideas” in both areas for the administration and other senior stakeholders to look at.
A large portion of Leidos’ work in missile defense can be seen in Dynetics, its subsidiary for applied research and testing of next-generation defense products. Leidos acquired Dynetics in early 2020 for $1.65 billion.
“All the capabilities that are requested in Iron Dome for America, from space surveillance and understanding to counter-effects for incoming cruise missiles and hypersonic weapons is right in our wheelhouse of what we do,” Bell said. “That's one of the reasons we are really focused on it because the Space Development Agency has asked for RFI responses within 30 days, and our team is laser-focused on answering that mail with compelling, really adroit, opportunities to satisfy that need quickly and affordably for our customers.”
The Space Development Agency published the request for information Bell spoke about on Jan. 27 to ask industry for information on what capabilities can be “delivered or demonstrated” in two-year increments, or “epochs” as the RFI calls them.
The agency says that means no later than Dec. 31, 2026; Dec. 31, 2028; Dec. 31, 2030; and “beyond” Dec. 31, 2030.
Regarding border security, that domain will certainly involve a combination of hardware products like unmanned aerial vehicles and software to control them. Artificial intelligence is also poised to be a key tech area there.
“It plays again right to our wheelhouse, from the equipment at airports, to the equipment on borders, and the equipment necessary to see low altitude UAVs coming across borders,” Bell said.
Leidos' current identity was shaped by its blockbuster 2016 acquisition of Lockheed Martin's information systems and global solutions business. Since then, the company has been heavily rooted in IT services, particularly focusing on digital transformation and modernization of government agencies' tech environments.
Reston, Virginia-headquartered Leidos even gave one of its segments the Digital Modernization name after seeing commonalities in that need across its entire customer base.
The Elon Musk-led Department of Government Efficiency has identified federal IT environments as needing to be modernized, with a view that IT can also be more of a lever to increase efficiency.
DOGE also appears to be a means for increasing privatization through fixed-price contracting, where companies assume more of the risk but the potential for a greater reward on the margin front.
“We are always open to and eager for outcome-based contracting, whether that's fixed price or whether that's privatization, whether that's paying for a service at a fixed rate,” Bell said. “There's different tunes you can play within that song, but we’re eager to grow that.”
“When we own the outcomes, we own the inputs and the technologies that we can deploy into these areas that allow us to differentially serve our customers and have better results for them, and so we're very excited about it and leaning into it,” Bell added.
Full-year revenue of $16.6 billion was 7.9% higher compared to 2023’s top line, while profit of $2.1 billion represented a 29% year-over-year increase in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization). Leidos ended 2024 on an adjusted EBITDA margin of 12.9% compared to the 2023 figure of 10.8%.
Leidos’ initial outlook for 2025 has sales in the range of $16.9 billion-to-$17.3 billion on an adjusted EBITDA margin of mid-to-high 12%.
Also during the call, Bell unveiled more of Leidos’ next long-term vision for itself that the company is calling North Star 2030. Bell has given glimpses of it over time since he joined Leidos as CEO in May 2023.
Bell called out IT modernization, transformational warfighting capability and increased privatization as underlying themes and megatrends that emerged from how Leidos created its 10-year hypothesis of the future.
Leidos’ next Investor Day will take place in the summer and feature more detail on this North Star 2030 from Bell and other key executive team members.
Here is what Leidos said during its last Investor Day held in the fall of 2021.