Leidos Posts 7% Increase in Q2 Revenue; Thomas Bell on Tech Upskilling Efforts, New ‘North Star’

Leidos (NYSE: LDOS) saw its revenue climb 7 percent year-over-year to $3.8 billion during the second quarter of fiscal year 2023 and reported $210 million in net income and diluted earnings per share of $1.50. 

The defense and information technology services contractor said Tuesday the revenue growth was driven by increased demand for hypersonics, digital modernization and medical examination platforms across customer segments.

The Reston, Virginia-based company reported $2.9 billion in Q2 FY 2023 net bookings with a book-to-bill ratio of 0.8 and ended the quarter with a total backlog of $34.2 billion, with $8.3 billion of that funded.

The company increased its revenue outlook for FY 2023 and now expects to record between $14.9 billion and $15.2 billion in full-year sales.

Adjusted earnings before interest, taxes, depreciation and amortization for the quarter was $420 million, while cash flows from operations hit $164 million.

Leidos CEO Thomas Bell told analysts at an earnings call Tuesday that the company’s business foundations are its team of talented professionals, technological innovation and its scale and agility. To advance technical innovation, he said the contractor has invested in efforts to broaden workforce capabilities.

“So far this year, we’ve upskilled well over 3,000 of our people in fields ranging from AI to cyber, to software to digital engineering, and it’s open to all our employees, not just our technical wizards, so that all can be conversant in our golden bolts,” he added.

The chief executive said the company is working on a new “north star” that would guide strategic decisions, enhance win rates, better serve customers’ needs and drive margin enhancement.

“While this north star is currently a work in progress, I can give you a few initial indications of where we’ll be going. We’ll take steps to simplify our organizational structure to promote operational excellence, allow for faster decision-making, and more tightly align our business across our key technology differentiators,” Bell told analysts.

“We will focus more on the bottom line via greater cost discipline and by refining our investment strategy toward those areas of best opportunity, best overall value to the enterprise,” he added.

Chris Cage, executive vice president and chief financial officer of Leidos, mentioned during the call the Leidos Innovation Center and how it provides the company access to key customer sets.

“The team has to perform and deliver, and that’s what I’m most encouraged by seeing progress that they’re making on having improved discipline on bidding and execution, improved supply chain management, all those things that are critical as we ramp some of these programs up towards low-rate production and full-rate production,” Cage said of LinC.

He noted that the company has a robust pipeline of opportunities pending award decisions.

“We expect to put another $20 billion of proposals through the back half of this year. So, very active, and again, our track record over the long haul has been strong,” Cage said.