Leidos Holdings, Inc. - 10-Q Filing Summary
Business Context and Reporting Period
This filing covers the quarterly period ended April 4, 2025 (Fiscal Q1 2025). Leidos is a technology and services company serving U.S. government agencies (DoD, Intelligence Community, DHS) and commercial customers. The company operates through four segments: National Security & Digital, Health & Civil, Commercial & International, and Defense Systems.
Key Financial Metrics
| Metric | Q1 2025 | Q1 2024 |
|---|---|---|
| Revenues | $4,245 million | $3,975 million |
| Operating Income | $530 million | $415 million |
| Operating Margin | 12.5% | 10.4% |
| Net Income (Attributable to Leidos) | $363 million | $284 million |
| Diluted EPS | $2.77 | $2.07 |
| Cash from Operations | $58 million | $113 million |
| Total Debt (Gross) | $5.13 billion | $4.67 billion |
| Cash & Equivalents | $842 million | $547 million |
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 6.8% year-over-year, driven by volume increases across all segments.
- Profitability Expansion: Operating income rose 27.7% to $530 million, with operating margin expanding 210 basis points to 12.5%.
- Segment Performance:
- Health & Civil: Operating income surged 34.7% due to increased case complexity and volumes.
- Defense Systems: Operating income jumped 61.9% driven by program wins and lower amortization.
- National Security & Digital: Operating income grew 5.7%.
- Debt Restructuring: In February 2025, the company issued $1 billion in new senior notes (maturing 2032 and 2035) to retire $500 million of notes due in May 2025 and fund an Accelerated Share Repurchase (ASR).
- Accounting Policy Change: The company changed its policy to exclude outstanding payments from "Cash and cash equivalents," recasting prior period balances. This reduced reported cash by $94 million at the beginning of the period but did not impact net income.
Guidance, Outlook, and Risks
- Backlog: Total backlog stands at $46.3 billion ($7.3 billion funded, $39.0 billion unfunded). A policy change now includes estimated future revenue on sole-source IDIQ contracts, increasing reported unfunded backlog by $5.1 billion.
- Bookings: Net bookings were estimated at $2.1 billion for the quarter, down from $3.8 billion in the prior year quarter.
- Capital Allocation: The company continues an active share repurchase program. In Q1, it executed a $500 million ASR and paid $53 million in dividends.
- Risks & Contingencies:
- Government Investigations: The DOJ closed an inquiry regarding international operations in December 2024; an SEC investigation remains ongoing with uncertain timing or outcome.
- Antitrust: The company is cooperating with a DOJ Antitrust Division investigation regarding procurements in 2021-2022.
- Acquisition: Leidos agreed to acquire a full-spectrum cyber company for approximately $300 million, expected to close in Q2 2025.
Investor Verification Checklist
- Verify the impact of the new backlog policy on future revenue recognition visibility.
- Monitor the outcome of the ongoing SEC investigation regarding international operations.
- Assess the integration timeline and expected accretion from the pending $300 million cyber acquisition.
- Review the sustainability of the 12.5% operating margin given the mix of contract types (cost-reimbursement vs. firm-fixed-price).
- Confirm the final share count and discount realization from the Accelerated Share Repurchase (ASR) agreement upon completion in Q2.