Leidos (LDOS) investor relations material

Executive summary

• Second quarter revenue reached $4.56 billion, up 7.2% year-over-year, with 4% organic growth and record operating cash flow, driven by defense tech, energy, and intelligence demand.

• Net income was $356 million ($2.81 per diluted share), down 9.4% year-over-year, impacted by higher costs and acquisition activity.

• Adjusted EBITDA was $631 million (13.8% margin), with non-GAAP diluted EPS at $3.26; adjusted EBITDA margin declined year-over-year.

• Net awards totaled $5 billion, resulting in a 1.1 book-to-bill ratio; defense segment posted a 2.2 book-to-bill ratio.

• Completed $2.4 billion Entrust acquisition, enhancing Homeland segment growth and energy infrastructure capabilities.

Financial highlights

• Non-GAAP diluted EPS grew to $3.26 for the quarter; non-GAAP net income decreased 1% to $413 million.

• Operating income was $514 million, with a margin of 11.3%, down from 13.4% year-over-year.

• Operating cash flow hit a Q2 record of $793 million, with free cash flow at $761 million and conversion ratios above 180%.

• Cash and cash equivalents at quarter-end were $748 million, with $6.0 billion in debt.

• Paid down $300 million of commercial paper tied to the ENTRUST acquisition.

Outlook and guidance

• Fiscal 2026 revenue guidance raised to $18.20–$18.40 billion; non-GAAP diluted EPS guidance increased to $12.20–$12.50.

• Operating cash flow guidance raised to approximately $1.85 billion; CapEx expected closer to $250 million for the year.

• Guidance excludes impact from pending SES joint venture with Analogic, expected to close in H2.

• Approximately 63% of $20 billion in remaining performance obligations expected to be recognized as revenue over the next 12 months.

• Expects organic revenue growth of ~7% and adjusted EBITDA growth of 19% in 2026.