Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Fortune 500

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

America's Most Innovative Companies

Industries included in the sector are computers, internet services, IT services, semiconductors, and software companies.

Fortune Sector Leaders: Technology

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

World's Most Admired Companies

The companies on this list are mobilizing the creative tools of capitalism to help solve social problems.

CTW 2023-Leidos

John Hindman, a government contractor for a federal energy research laboratory in Pennsylvania, was working at home late one Saturday night in January 2017, when he had a thought. Over the next several weeks, the communications professional put that thought in an email, and sent it to the CEO of his employer with the subject line “A Father’s Request.”<br />
<br />
Hindman works for Leidos, a Fortune 500 company with 46,000 employees. He didn’t personally know Roger Krone, the company’s then CEO, but the message—a call to action, really—felt too important to direct elsewhere. The previous September, Hindman’s 30-year-old son Sean had died of an opioid overdose, a tragic end to his yearslong battle with addiction—details the family had included in his obituary, and shared for a local newspaper series. In his grief, upon returning to work Hindman was stunned by the number of colleagues and complete strangers who shared with him closely held stories of loss and struggle—proof of a nationwide epidemic that at the time few people spoke about.<br />
<br />
That’s what was on Hindman’s mind when he wrote to Krone, calling on Leidos—with all its resources and expertise in technology, science, and defense—to do something. And it has: In the years since, Leidos has implemented Mission for the Mind, a multiprong approach to addressing addiction and mental health issues that impact its workforce and the community. That has included starting new business lines—like providing counseling and mental health assessments to government entities. Leidos is also leading an effort to destigmatize addiction and mental health issues among the broader business community, an effort that 150 CEOs have signed on to so far. The company says these measures have helped reduce employee attrition, while also putting it at the forefront of one of society’s most pressing issues.

Change the World

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

This year’s Fortune 500 marks the 68th running of the list.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

This year’s Fortune 500 marks the 67th running of the list.

The defense, aviation, information technology, and biomedical research company works extensively with the U.S. Department of Defense and Homeland Security.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-289-Leidos

The American defense company headquartered in Reston, Va., provides scientific, engineering, systems integration, and technical services. The company works with the U.S. Department of Defense, Homeland Security, the NSA, and other U.S. civil agencies.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Sector

Industry

Industry Rank

Previous Industry Rank

Overall Score

Innovation

People Management

Use of Corporate Assets

Social Responsibility

Quality of Management

Financial Soundness

Long-Term Investment Value

Quality of Products/Services

Global Competitiveness

Change The World

Impact Segment

Culture rank

Process rank

Product rank

Years on list

Previous rank

Key Financials (last Fiscal Year)

Revenues ($M)

Profits ($M)

Assets ($M)

Total Stockholder Equity ($M)

Profit Ratios

Profit as % of Revenues

Profits as % of Assets

Profits as % of Stockholder Equity

Earnings Per Share (last Fiscal Year)

Earnings Per Share ($)

EPS % Change (from prior fiscal year)

EPS % Change (5 year annual rate)

EPS % Change (10 year annual rate)

Total Return

Total Return to Investors (last year)

Total Return to Investors (5 year, annualized)

Total Return to Investors (10 year, annualized)

Q2 2025

Q1 2025

Q4 2024

Get insights into Leidos Holdings including business profile, stock information, news, and rankings from Fortune.

Leidos Holdings (LDOS): Company Profile, Stock Price, News, Rankings

legacy

Leidos Holdings

leidos holdings

Greetings. Welcome to Leidos First Quarter twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Please note this conference is being recorded.

At this time, I'll turn the conference over to Stuart Davis from Investor Relations. Stuart, you may begin.

Thank you, and good morning, everyone. I'd like to welcome you to our first quarter fiscal year twenty twenty five earnings conference call. Joining me today are Tom Bell, our CEO and Chris Cage, our Chief Financial Officer. Today's call is being webcast on the Investor Relations portion of our Web site, where you'll also find the earnings release and supplemental financial presentation slides that we'll use during today's call. Turning to Slide two of the presentation.

Today's discussion contains forward looking statements based on the environment as we currently see it, and as such, risks and uncertainties. Please refer to our press release for more information on the specific risk factors that could cause actual results to differ materially. Finally, as shown on slide three, during the call, we'll discuss GAAP and non GAAP financial measures. A reconciliation between the two is included in today's press release and presentation slides. With that, I'll turn the call over to Tom Bell.

Thank you, Stuart, and thank you all for joining us. Today, I'm pleased to report a strong Q1 for Leidos once again delivering above plan revenue, EBITDA, and EPS. In this excellent quarter for Leidos, our organic revenue increased seven percent year over year, adjusted EBITDA margins improved again to 14.2%, and non GAAP diluted earnings per share rose 30%. This strong start to 2025 builds on the significant momentum we built for our business during 2024, And we continue to push forward with optimism in our outlook. We are uniquely positioned in this environment to solve our customers' most vexing challenges by continuing to leverage our investments in and the application of cutting edge technology.

At the same time, as discussed on previous calls, 2025 was always envisioned to be a pivot year for us As we lock in the gains from our hugely successful 2024, invest in further new business momentum based on our new North Star 02/1930 strategy and actively get after the priorities of our nation's new administration. Given all this, I'm pleased to also announce on this call that we are reaffirming our full year 2025 guidance at this time. Since undertaking our year of deep strategic thinking last year, evidence is everywhere that the future we predicted is racing toward us at pace. It manifests itself in the geopolitics we see around us, in the challenges our customers are expressing to us, and in the administration's rapid actions. So we're excited to be playing offense in 2025.

Now in full implementation mode on our North Star 02/1930 strategy and leaning in to the robust opportunities this environment is presenting. So let me share with you at a high level our North Star 02/1930 strategy, its growth pillars, and their alignment to the new administration's priorities. Last year, we introduced the Leidos brand promise, Making Smart Smarter. That brand promise summarizes in three short words, the fact that everything we do, the core of our business model is making customer outcomes smarter and more efficient. That's why we exist.

And that's why we can confidently assert that Leidos is the digital mission and solutions leader serving customers with smarter, more efficient innovations. Under that entablature, our NorthStar 02/1930 strategy is supported by five growth pillars as shown on slide five. First, space and maritime, where we will be building off the franchises we have today and further programs in development to provide commercially based, rapidly integrated, disruptive hardware products in these two select critical domains to the US military. Second, energy infrastructure. In this growth pillar, we will continue to scale our electrical utility business within Leidos, serving commercial customers nationwide, making our nation's electrical grid more resilient and more secure.

And we do this through our core design, engineering, IT, and cyber capabilities further enabled by cutting edge Leidos AI tools. Third, digital modernization and cyber. Here, we will continue to leverage proprietary innovative technologies to build repeatable offerings at scale to make our customers' IT infrastructures more efficient, effective, and secure. Fourth, highly customized critical mission software. Here, we turn our deep understanding of our customers' mission to translate vast amounts of customer data into actionable information.

And we do this through best in class AI deployment, Cox integration, commercial development, and productionized software offerings. And fifth, managed health services. In this growth pillar, we will use our successful medical examination expertise, our existing infrastructure, and our robust provider network to expand our health business to serve new populations and offer additional related services. These growth pillars have been carefully chosen as our analysis shows clearly that they are areas where customer needs and spending will continue to grow robustly. Leidos has a proven ability to perform cutting edge profitable work, and Leidos has clear differentiated technical capabilities that can be actively advanced.

Our growth pillars are also squarely aligned with the priorities of our new administration, and we are sure they will remain national priorities well into the future. Our confidence is evidenced by recent executive orders and announcements, like the EOs on the electrical grid and maritime dominance, as well as orders calling for the modernization of federal technology and software. The president and the VA secretary having been very vocal in advocating for faster, more comprehensive healthcare services for veterans. This administration's clear preference to work with firms that solve problems and get things done, not consultants that study problems and publish reports. This administration's drive to make the federal outcomes smarter and more efficient through technology, and this administration's desire for commercial terms focused on outcomes.

In short, our administration is driving toward federal outcomes that are better, faster, cheaper, right in Leidos' wheelhouse and synonymous with our core business model of making customer outcomes smarter and more efficient. So we're now actively advancing our NorthStar two thousand thirty strategy, the right strategy at the right time. We are confident that our business, our strategic investments, and our go to market engine are all aligned with the needs and pace of our customers. You can see our conviction in how we've allocated capital so far in 2025. We've taken advantage of the current market conditions to significantly speed up our planned 2025 share buyback program by executing a $500,000,000 accelerated share repurchase agreement right out of

This accomplishes the majority of our 2025 share buyback plans. And I'm very pleased to have signed a definitive agreement to acquire a leader in full spectrum cyber, our first acquisition in two and a half years to accelerate one of our aforementioned North Star 2030 strategic growth pillars. Cyber has long been a core competency for Leidos. With the largest cyber operation across the federal government, we see firsthand every day the complex, destructive, and coercive actions from nation state threats, threats our customers defeat with our help. So with the cyber threat growing, customers' needs becoming more complex, proven Leidos success in the cyber market, and our tangible ability to double down on technical differentiation, full spectrum cyber is a key piece of our five North Star 02/1930 growth pillars.

We've also foreseen the cyber risk from AI adoption that creates even more vulnerabilities and attack surfaces for bad actors. Over the past five years, we've invested more than $75,000,000 of our own r and d to develop patented technologies that change the cyber paradigm. Our pending acquisition brings additional exquisite cyber capabilities to strengthen our cyber growth pillar. Their expertise in vulnerability research, reverse engineering, exploit development, and the converging cyber electronic warfare markets are squarely in line with our cyber strategy. Our acquisition is focused on the DOD and the intelligence communities with deep roots in DARPA as well.

This delivers to us a unique additional active value added role in the cutting edge future of cybersecurity technologies for national security. Leidos will leverage this acquisition both directly for our customers and in support of enhanced, informed, and resilient defensive solutions across our own corporation. The acquisition will add to our deep pool of cyber talent and strengthen our competitive position in the $15,000,000,000 worth of pure cyber opportunities in our pipeline and even more across the related network and cloud pursuits. As this is the first acquisition under my watch, I wanna make it clear that when I do deploy capital inorganically, this is precisely the kind of move you can expect us to make. Focused technology risk rich companies in the wheelhouse of one of our five growth pillars, poised for rapid integration into Leidos with a strong value unlock formula.

Another very positive sign for our new North Star strategy is the administration's willingness to collaborate with industry to drive better performance across government. I've sought out and secured more meetings with cabinet members and key administration executives in the last month than I was able to secure during the whole of the last administration. And we're seeing significant receptivity in those meetings to big ideas we are bringing forward. One of these big ideas is also one of the administration's highest priorities, establishing our nation's next generation air traffic control system. Air traffic management in The US is highly fragmented with multiple outdated systems and technologies with an overreliance on human intuition and intervention.

We are deeply aligned with the FAA's mission. For years, we have invested millions of dollars to develop and deploy both in The United States and overseas essential capabilities for achieving optimal cost effective air traffic control outcomes. These investments are fueled by our comprehensive understanding of the complex environment, mission critical requirements, and innovation needs, putting us in a great position to help transform the performance and safety of The US air travel for decades to come. Additionally, our defense systems team is moving out quickly on one of the Pentagon's top priorities, building a next generation multilayer mission defense shield or Golden Dome. From the moment that executive order was signed, we have been actively collaborating with key Golden Dome customers and stakeholders.

With the administration's attention on the significance of the space domain for Golden Dome, Leidos stands very well positioned to contribute meaningfully to this mission. Our space based sensing and tracking capabilities are deployed and in production for low Earth orbit missions across all tranches of the SDA's tracking layer. At the same time, we are working to expand our role within the broader proliferated war fighter space architecture. Golden Dome also requires an underlayer to defend against land and surface launch threats, such as cruise missiles and swarming drones, which can originate from virtually anywhere and strike with limited response time. Notably, we already lead the rapid production and deployment of the Army's latest air and missile defense capability, which plays a vital role in the defense of Guam, a strategic stronghold essential for deterring threats in the Pacific.

And we are already getting interest in potential deployments to defend the Continental United States and key infrastructure and installations within The US. While we expect greater specificity regarding the Golden Dome opportunity to be outlined in the President's twenty twenty six budget request, early funding signals in both the space and underlayer domain are very encouraging, and again, supportive of our growth pillar. So in summary, I'm thrilled to be out of the blocks with a strong set of Q1 results. We're confirming our 2025 guidance. I'm excited to be in execution mode on 02/1930 strategy.

We're very well positioned as this administration drives its agenda of making government outcomes smarter and more efficient. I hope you all can feel the productive sense of urgency with which we're approaching this exciting next chapter in our history. Today more than ever, our mission is compelling, our strategy is clear, and our opportunities are growing. With that, I will turn the call over to Chris to walk through our results for the first quarter and our outlook for fiscal year twenty twenty five. Chris?

Thank you, Tom, and thanks to everyone for joining us on the call today. Our impressive start to the year is the result of the resiliency and tenacity of our entire team. In the first quarter, we maintained the exceptional level of performance delivered in '24 while navigating an intensified macro environment. We worked proactively with customers to bring forward innovative ideas and never took our eyes off execution. I think that it's clear that the diversity of our portfolio relative to peers benefits us now more than ever, creating fruitful inroads to support a wide range of enduring missions and at the same time providing insulation from meaningful industry shifts.

Execution was strong across the entire portfolio. Three of our segments delivered solid mid to high single digit growth, and commercial and international posted double digit growth for the second straight quarter. This broad based performance enabled another quarter of exceptional earnings, well above initial expectations. With that, let's dive into the details, starting with the income statement on slide seven. Revenues for the first quarter were $4,250,000,000 up 7% organically year over year.

Bottom line performance continues to be a key focus, and it shows. Adjusted EBITDA was $6.00 $1,000,000 for the quarter, up 23% year over year, and adjusted EBITDA margin increased 190 basis points to 14.2%. Non GAAP net income was $391,000,000 and non GAAP diluted EPS was $2.97 up 2530%, respectively. Turning to the segment drivers on slide eight. National Security and Digital revenues increased 5% year over year.

We're seeing traction on the new contract awards from the second half of twenty twenty four, as well as additional tasking on some of our franchise programs. Non GAAP operating income margin of 10.1% was in line with the prior year quarter. Health and civil revenues increased 8% year over year, and non GAAP operating income margin was 23.6%. Continued strong demand in our managed health business, one of the five growth pillars in our North Star 02/1930 strategy, drove the bulk of the revenue and income growth, though the entire portfolio performed ahead of plan. Commercial international revenues increased 12% year over year from robust deliveries in SES, continued strong performance in commercial energy, and increased volumes within The UK business, including reaching a critical milestone on one of the challenge programs from last year.

Non GAAP operating margins were 8.5%, up 20 basis points year over year. Finally, Defense Systems revenues increased 7% over the prior year quarter, driven by increased activity in our space sensing and hypersonic programs. Non GAAP operating margins of 9.1% expanded by 110 basis points year over year from excellent program execution. This portfolio is buzzing with opportunity from a rapidly maturing portfolio of innovative solutions. And in keeping with that outlook, Defense Systems delivered its third straight quarter with a book to bill above one.

Now on to cash flow and the balance sheet on slide nine. In the quarter, we generated $58,000,000 of cash flows from operating activities and $36,000,000 of free cash flow. DSO for the quarter was sixty two days, unchanged from a year ago despite modest customer delays from the administration transition. Let me provide a little context around cash performance. The first quarter of twenty twenty five included an extra week of payroll, which hasn't happened since 2019.

Also, we made a minor change in our cash accounting treatment effective this quarter. We now exclude outstanding payments from cash and cash equivalents on the balance sheet and statement of cash flows. This presentation is more aligned to industry practice and will enhance the predictability of our cash flow with no change to DSO or the income statement. The new policy had an immaterial impact to cash flow for the quarter, and today's press release has recast twenty twenty four financials for this change. To start this year, we made a series of three coordinated moves to solidify our balance sheet and allocate capital aggressively with conviction in our strategy.

First, we issued $500,000,000 of seven year notes and $500,000,000 of ten year notes with fixed rates of 5.45.5%, respectively, using the proceeds to repay the $500,000,000 bond due in May. Second, we took advantage of the persistent market dislocation and executed a $500,000,000 accelerated share repurchase agreement. And third, we targeted and signed a definitive agreement to acquire a fantastic company to strengthen our cyber golden vote and our digital modernization and cyber growth pillar. While the additional debt and higher interest rates add about $30,000,000 of interest expense this year, the share repurchase and pending accretive acquisition more than offset the earnings impact and significantly enhance our financial and strategic position for the future. We ended the quarter with $5,100,000,000 of debt for a gross leverage ratio of 2.3 times.

We also had $842,000,000 in cash and cash equivalents at quarter end. Though we still have ample capacity for additional capital deployment, given the current environment, we feel comfortable holding cash in the short term. As we get more clarity through the coming quarters, we expect to further allocate capital, potentially paying down some of our term loans, repurchasing additional shares, or completing additional accretive bolt on acquisitions to generate long term shareholder value. Moving to the forward outlook on slide 10. Tom and I are confident in the enduring missions we serve for our customers.

Most of what we do is essential to the customers, their constituencies, and the nation. No legislator wants to see the sensitive systems vulnerable to hackers or veterans unable to receive their benefits. For example, our exceptional Q1 performance de risked the potential unknowns in this volatile environment, so we are reaffirming our initial guidance of revenue between $16,900,000,000 to 17,300,000,000.0 adjusted EBITDA guidance in the mid to high 12% range, non GAAP diluted EPS between $10.35 and $10.75 and operating cash flow of approximately $1,450,000,000 for the year. This guidance does not include the pending Cyber acquisition, although we expect the partial year revenue and EPS contribution to be relatively immaterial to 2025 financials. Consistent with our promises made, promises kept ethos, we take our guidance very seriously.

This quarter, we took a clean sheet view of the risks and opportunities in our plan. We believe that our ranges accurately reflect the current realities and can say and contain the foreseeable outcomes. Relating to the top line, what we have seen so far has confirmed our belief that the year would begin with relatively soft bookings, as is typical with any change in administration. In the first quarter, we generated $2,100,000,000 of net bookings to end with a total backlog of $46,300,000,000 Our strong finish to 2024 sustains a solid 1.3 book to bill on a trailing twelve month basis. You'll note that our backlog is up about $3,000,000,000 from what we reported last quarter.

At the beginning of the year, we adjusted our backlog policy to include the expected value of single award IDIQs. We believe this approach provides enhanced visibility for investors and more accurately captures the health of the business. Absent the change, this quarter's bookings would have increased slightly. You can find the recast quarterly bookings and backlog for 2024 in our press release. With a robust opportunity pipeline of $226,000,000,000 including $25,000,000,000 proposals submitted and awaiting adjudication, We remain confident in our awards prospects for the back half of the year.

But history suggests those wins will be more impactful to 2026 revenue than 2025. The midpoint of our revenue guidance implies $120,000,000 of growth above our Q1 run rate, which is prudent based on current conditions. And as we look beyond this exciting pivot year for Leidos, we're confident in our North Star 02/1930 path ahead. With that, operator, we're ready to take questions.

Thank you. We will now begin the question and answer session. And our And our first question coming from the line of Peter Arment with Baird. Your line is now open.

Yes, thanks. Good morning, Tom, Chris. Nice results. Hey, I guess one, Tom, on

your larger contracts like NGEN and just thinking under like the current contracting environment, we've seen some of the Navy leadership kind of canceling some of your peers' software contracts. I'm just wondering how things are going on that contract, kind of the expected run rate. And then if, Chris, you could just thanks for giving us the details on the backlog and what the changes were. But just the Health and Civil segment was the only one that saw a decline. And just if you could

Yeah, so first on the macro actions this administration is taking, yes, there's been some impact to our top line revenue in 2025, but I would define it as negligible, Peter. The impact on our revenue is certainly in the very, very, very low 1% range. And so we understand what's happening. And at the same time, we're seeing the administration lean into some opportunities. You might remember on the last call, I talked about the opportunity that DISA has with Defense Enclave Services.

And we're actually seeing great traction in the DoD for the Fourth Estate in looking to turn on additional acquisitions and additional modernizations of our IT infrastructure throughout the DoD. So a little bit of what I would call puts and takes. Certainly, are some minor takes, but there is more opportunity coming our way, and those are the opportunities we're excited to be leaning into.

Yeah, Peter, and I'll just add, we've been contemplating this backlog change for some time. The team did some good work last year to lay the groundwork, and we do think it enhances your visibility into our book of business and our future revenue stream. So we put those single award values into backlog. As it relates to Health and Civil, they recently just won, as you know, the big VBA recompete that went in last year. There's not a lot of large single award IDIQs in that business area, so they didn't benefit from any adjustment there.

And as we look ahead, you know, they've got a couple large things pending this year. The follow on to the MHS Genesis, still something we feel very good about. The customer's intent to drive that our way on a sole source basis, that should be a future booking, and then we've got a Reserve Health Readiness Program follow on to. So there's some big needle movers out there, but they're well funded and have ample capacity as it relates to supporting their trajectory, and you see the great start to the year they got off to.

Thank you. And our next question coming from the line of David Strauss with Barclays. Your line is now open.

Hi, good morning. Thanks for taking the question. This is Josh Korn on for David today. So wanted to ask specifically about the GSA request that was out about a month or two ago regarding potential contract offerings. I wanted to ask if you were asked to make any proposals, if so, what sorts of things that you offered?

Sure, Josh. Yes, we were excited to lean into the opportunity to engage the GSA on an active conversation about how we could help them and their charge to make the government smarter and more efficient. And so we actively engaged in both rounds. You might have heard about two letters and two back and forths between the GSA and we. That's been supplemented with face to face meetings and an active e dialogue in the margins.

So I feel very good about the relationship we're building with the GSA. Josh and Steven are very passionate about their role in helping make this government smarter and more efficient. And I believe we're positioning ourselves to be part of the solution, not the problem in so doing. One of the things that we've taken a little bit of issue with is the fact that while we've been lumped into a consulting review, we've never used those words back to the GSA. Less than 1% of our revenue could generously be considered consulting revenue.

And so all of what we do is mission critical work that is key to our customers' outcomes, the customers of the GSA, if you will. And so what we've been doing is leaning into the GSA and saying, here's how we can make your customers, the active agencies that used our products and solutions, better, faster, cheaper by doing smarter things with technology, aggregating contracts, getting to commercial outcome terms, and looking for more efficient ways to deliver services. So net net, we're in the early innings of this ballgame, but we're leaning in and we believe Josh, Steven and the GSA team are leaning in also. Thanks.

Thank you. And our next question coming from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

Thank you and good morning, guys. Great quarter. Maybe if we could talk about, again, focusing on Health and Civil and diving into the budget a little bit more. The skinny budget included funding accelerating for the VA's EHR modernization work where Leidos is a sub to Oracle. How are you thinking about the opportunity there, just given the news we've had on VA for the last year or so, and just the longer term opportunity for Leidos, and given the DIMPSON success?

Yeah, thanks for that, Sheila. Yes, as you will note in our North Star 02/1930 growth pillars, managed health care and managed health services is one of our growth pillars. And that's because everything we knew would happen with demographics last year as we were undertaking our year of deep strategic thinking, and every action and comment by this administration has reinforced our view that better choices, faster choices for veteran services will be a key part of the next years for our nation. So we're leaning into our health business. We're expecting to grow it over the next five years.

And the early indications, the volumes coming through the VBA, the volumes of veterans coming through our clinics and having health benefits exams is actually raising and going up and continuing to go at pace. So we are very optimistic. We're bullish about the business. We're bullish about our opportunity to use the core capabilities we have and pivot into more services for more customers. And we expect to be talking a lot about growing our health care business over the coming years.

Sheila, I'd just add that we've had a long successful partnership with Oracle, of course, on the military health side, and our best proof point is to continue to deliver excellence on that program. And as Tom mentioned, we're a great partner into the VA. You would imagine over time there's opportunities for us to expand our offerings into the EHR rollout there too, but that is something not directly within our control, but again at some point in time, you would imagine as they integrate further, could help them in a more meaningful way. So we'll continue to position for that.

Just to follow-up quickly on that point, Chris, so are the margins in Q1 reflective of the full year performance? Is that how we should think about it?

Well, the margins in Q1 were excellent. We're super pleased with how we got out of the gates as a company. And as it relates to Tom's comment on the managed health services business, the dialogue with the VA on that side is we need to sustain and increase the level of activity going on. We want to continue to work off the backlog. We want to treat the veterans.

We're well funded, we're well positioned, we're thinking about the future but delivering in the present for that business. And so I think that we're very capable of delivering at that run rate going forward, certainly.

Thank you. Our next question coming from the line of Colin Kenfield with Cantor Fitzgerald. Your line is now open.

Hey, thanks for the question. Maybe talking through the takeaways from the supplemental defense bill, What are your understanding in terms of that being more FY '25 or longer dated money? And then maybe talk through the opportunities that you see at the segment level, specifically missile defense as well as the maritime domain? Thanks.

Sure. The bill that is currently working its way through Congress, the reconciliation bill, represents tremendous upside for our customers and for Leidos. FAA modernization is a net net winner in the reconciliation bill, and we expect to be a major part of helping the Department of Transportation and the FAA be a solution for the challenges of our nation's infrastructure when it comes to air traffic control. Border security is also an area that is getting a lot of attention in the reconciliation bill and the skinny budget that's been published for FY 'twenty six. So again, we have an active dialogue going on with the Department of Homeland Security around how with technology and the deployment of products we have at already today, we can help secure the border even more.

There is a tremendous amount of energy building around Golden Dome, as I said in my prepared remarks. And frankly, while we talked about the space layer and the underlayer, there are a myriad of programs and solutions, technology solutions we have in our defense business that can plug into the various aspects of the Golden Dome architecture that will be required to secure the Continental United States. So net net, Colin, again, reconciliation, the skinny budget of FY 'twenty '6 points very squarely in the attention of our five growth pillars and gives us great confidence that when we picked these five growth pillars and we picked these subsets of the pillars, we were picking the right depths for us to, pivot to, to find new revenue growth in 2026 and beyond. So very, very optimistic about the early signs we're seeing.

The only thing I'd add, Tom mentioned a number of things, didn't even mention maritime, which is another area the team's very excited about, and we're seeing customer demand signals for a couple of our unmanned capabilities at record levels. So the team is actively working opportunities there for medium unmanned undersea vessel, for our small vessel as well. So we're excited about seeing those things accelerate as we get into the back half of this year.

Thank you. And our next question coming from the line of Mariana Paris Moura with Bank of America. Your line is now open.

Thank you. Good morning, everyone. Hi. So when you think about these opportunities, but also the risk of actually having a continued resolution, a long continued resolution into fiscal year 'twenty six, were the are these any of these opportunities limited by actually the lack of funding, how you think about that? And on the other side, is there any way you could benefit from this administration or the agencies that are actually extending some programs that were supposed to mature or be recompeted within the next, like, twelve to twenty four months and are actually extended by five years to good performers?

Like, do you have any programs like that?

Well, thank you, Mariana. Yes is the answer to your question. We think we are in a relatively good position to have programs that are continuing from programs that are already in execution mode. So we're not looking for new program starts or new technology investments. These are franchises that we've invested in over the past five years and are now up and running.

I mentioned, for instance, IFPC and the underlayer. That is a program of record within the US Army. And so DoD can continue to exercise options for additional units as opposed to a NuSTAR program. We think the investment we've made in our defense business, in our other businesses, in the programs of records we have gives us a tremendous opportunity for customers to hit the easy button and extend them and continue to build on them as opposed to requiring a new start program under a continuing resolution, which as your question suggests, is more difficult. Thanks.

Thank you. Our next question coming from the line of Jason Gersky with Citi. Your line is now open.

Tom, wonder if you could spend a few more minutes on the situation with the FAA here in The US and air traffic control and the system that we have here in The United States. Maybe talk a little bit about from your view, what's broken and what it's gonna take to get this fixed, you know, quantum of of money that might need to get spent, how much time it's gonna take, and what kinds of capabilities and skill sets are going to be needed to fix this problem?

Thanks, Jason. Yes, so I mentioned in my comments that this administration has been very open to meeting with industry and engaging in conversations about what solutions look like. The Department of Transportation and the FAA are part of that. And so I'm very pleased to say that we've had high level engagements with those entities. And we've discussed very clearly the challenges and opportunities we see to modernize the air traffic control system in The United States and make it the envy of the world, which is, as President Trump has suggested, is his goal.

The Department of Transportation is keen to do that within this presidential term. And we are, again, very well positioned with about ten, twelve programs that we do for the FAA now that are both systems that manage air traffic over the oceans, missions that systems that manage air traffic over land, systems that manage air traffic when it's on the ground, and the terminals that the air traffic controllers use. So we are positioned throughout the life cycle and throughout the mission of air traffic control, both in The United States and globally. We're a key technology provider for NAT in The UK, which is a very successful countrywide air traffic control system. And we also deploy elements of this system globally for something called Skyline, which is in service in multiple countries around the world.

So we feel like we're in a great position. Obviously, and the White House are also poised to fund this. That is the first thing you need. You need determination that you want to do it. And the second thing is you need funding to do it.

I'll leave the quantum of that up to the administration. But suffice to say, as the country puts their system together and their thoughts together about what the future system looks like, I'm very, very sure Leidos is going to be a part of that solution, both in pieces and overarching architecture. Thanks, Jason.

Thank you. Our next question coming from the line of Tobey Sommer with Truist. Your line is now open.

Good morning. This is Tyler Barishaw on for Tobey. Back to back quarter's 12% growth in the commercial and international segment. Can you discuss some of the drivers of this and maybe the sustainability of this going forward? Thank you.

Yeah. Thanks, Tyler. And, no, it's, it's something we're really excited to see from the team. They've been working very hard towards that goal. You know, there's a number of things that are going well in that portfolio.

I mentioned the remarks earlier that on The UK side, the team was able to recover from some challenges we encountered last year and get a critical program on the right track, achieve a key milestone that provided some uplift on growth and profitability. We have been working, of course, on the security solutions side for the last couple years to get that business poised for a successful future. A lot of gains have been made there, and as Tom trailed earlier, we're really excited about the opportunities in the ports and border space, but core service and maintenance uplift in the portfolio have driven some growth there. And then finally, one of our key growth pillars in commercial energy is in that portfolio. That has been a strong grower now for multiple years.

It continues that pace. So those are the elements that we're seeing taking off, and the future continues to have more prospects internationally for things like AUKUS and other uplift. But the team's made great progress, and we're excited to see that momentum continue.

Yeah. The second straight quarter of double digit growth is wonderful, but it's only a down payment on what we expect from this sector and the segment going forward. The fact is every element within commercial and international is very robustly positioned for the future. Chris just mentioned at the end, AUKUS. As I've said on previous calls, the needs of AUKUS pillar two are exactly in line with the capabilities Leidos brings to fore.

So we're leaning into AUKUS both in The United States and over in The UK and Australia. Energy is one of our growth pillars. It's critical vulnerability. Everybody knows that critical infrastructure in The United States is in a challenged position right now, and especially as energy demands grow, that the the grid resilience and the need for us to secure our electrical grid is going to grow with it. So energy is a is a huge area of focus for us and a huge growth area for Leidos.

And last but not least, SES, ports and border security, airport security. We were talking about the FAA before, but we weren't talking about the airports themselves. We play a key role in securing ports, borders, and airports. And so everything in the commercial and international business is poised for robust growth as this administration sets about its priorities. And we're very optimistic that Vicki and her team can continue to turn in great growth quarters as we go out of 2025 and into the future.

Thank you. And our next question coming from the line of Scott Micas with Melius Research. Your line is now open.

So a quick question on the decision to reaffirm the guide. Chris, if I add back about $0.35 of charges you booked in 2024, the EPS guide's essentially flat. And if I annualize your first quarter results, your EPS would be 10% above the high end of the guidance range. So the question I've been receiving from clients this morning is given the decision to reaffirm the guidance and the 0.5 book to bill this quarter, are the core fundamentals of the business expected to significantly deteriorate over the next few quarters? Or is the guidance just extremely conservative due to Doge and all the executive orders in the new administration?

Yeah. Thanks. Thanks for that, Scott. No. There's nothing in the core business performance that, we're concerned about as it relates to fundamentals.

I think those have been proven to the opposite, right? Multiple quarters in a row where the team continues to drive improvement, our highest margin quarter when it wasn't even our highest Health and Civil margin quarter. So you see uplift in other parts of the portfolio, national security and digital, C and I, defense are all showing strength. It's more the latter where we're positioned for helping our customers accelerate. As we see the opportunity set ahead of us, as we've laid out NorthStar two thousand and thirty in our strategy pillars, we want to make sure we've got capacity to provide jumpstart in critical areas where there's a unique opportunity here in the coming months to capture significant positions on meaningful priorities of the administration, in addition to partnering with critical agencies like the GSA to make sure we're part of the solution for the future.

Leidos Holdings (LDOS) Q1 2025 Earnings Call Transcript

Company Participants