Leidos Holdings , Inc. (NYSE:LDOS) reported robust third quarter results for fiscal year 2023, with record metrics in revenue, earnings, cash flow, bookings, and backlog. The company also announced an upgrade in its organizational structure and executive leadership positions, alongside an increased focus on share repurchases with excess cash.
Key Takeaways:
- Q3 revenue up 9% YoY to $3.92 billion, surpassing guidance.
- Adjusted EBITDA increased by 21% YoY to $451 million.
- Raised 2023 guidance for revenue, profitability, and cash flow.
- Plans to centralize strategy, business development, marketing, communications, and government relations under a new Chief Growth Officer.
- Increased dividend and focus on share repurchases with excess cash.
- Unveiled two new products, Pro:Vision 3 people scanner and ProSight, aimed at meeting changing customer buying behavior.
Leidos attributed its strong performance to key initiatives such as creating a promises made, promises kept culture, enhancing acquisition performance, improving business development, and refining Leidos' strategy. The company is streamlining its organizational structure and upgrading executive leadership positions, intending to increase efficiency and effectiveness, thereby unlocking additional revenue and profit opportunities.
The company also announced organizational changes and plans for growth. It intends to centralize strategy, business development, marketing, communications, and government relations under a new Chief Growth Officer. The focus will also be on program execution, cost efficiencies, and technology innovation. Leidos deployed capital towards debt reduction and increased its dividend.
In terms of financial performance, Leidos' Q3 revenues were $3.92 billion, up 9% YoY, and adjusted EBITDA was $451 million, up 21% YoY. They raised their 2023 guidance for revenue, profitability, and cash flow.
Leidos CEO Tom Bell discussed the reallocation of business development resources in pursuit of higher-margin work. He explained that the company is focused on growing Leidos as a whole and will prioritize opportunities with the highest potential return. He also mentioned that each business area within Leidos will have different growth goals based on market potential and competition.
When asked about capital deployment plans, Bell stated that deleveraging is not a priority at the moment and that excess cash will be evaluated based on the interest rate environment. In terms of cost opportunities, Bell highlighted the enhanced positions of the Chief Technology Officer, Chief Performance Officer, and Chief Growth Officer as key factors in improving efficiency and effectiveness within the company. The company aims to achieve a margin target of 10.5% or higher for the next year.
The company also unveiled two new products, Pro:Vision 3 people scanner and ProSight, which are aimed at meeting changing customer buying behavior. The Q4 cash flow may be weaker due to the potential government shutdown and timing of working capital, but the company remains hopeful to exceed performance levels. The company expects the new organizational structure to increase efficiency and effectiveness, unlocking revenue and profit opportunities.
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