Leidos (LDOS) Stifel 2024 Cross Sector Insight Conference summary

Recent performance and organizational changes

• Achieved 8% top-line growth and 20–25% EPS growth, with over 100% free cash flow conversion in the past year.

• CEO transition in May 2023 brought renewed focus on execution and portfolio optimization.

• Undertook a reorganization to better integrate acquired capabilities and unlock higher performance.

• Increased investment in innovation, with further increases planned for 2025.

Health & Civil segment developments

• Health business, especially VA disability exams, saw strong growth due to the PACT Act, with elevated demand expected through 2025.

• Leveraged automation and process innovation to increase throughput and quality, aiming to expand managed health services beyond VA.

• Health & Civil segment posted a 19% margin in Q1, with operating income up over $100 million year-over-year.

• VA contract recompete is highly competitive, with performance and service quality as key differentiators.

• Civil side sees growth in FAA software and international expansion, with a strong pipeline in digital and analytics.

National security and digital business outlook

• National security and digital business guided to ~3% growth in 2024, with margins in the high 9% to low 10% range.

• Defense Enclave Services and CHS-6 contracts expected to ramp up over multiple years, driving future growth.

• Margin improvement targeted through contract maturity and operational optimization.

• Digital modernization seen as a key growth area, with opportunities in both mega and mid-size programs.