Leidos Holdings, Inc.

Greetings. Welcome to Lido's first quarter 2026 earnings conference call. A brief question and answer session will follow the formal presentation. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker, Stuart Davis from Investor Relations. Stuart, you may begin.

Thank you, and good morning, everyone. Joining me on today's earnings conference call are CEO Tom Bell and CFO Chris Cage. Today's call is being webcast on the Investor Relations portion of our website, where you can find the earnings press release, and the presentation slides for today's call. As shown on slide two, our discussion today will contain forward-looking statements based on the environment as we currently see it and thus includes risks and uncertainties. Our press release contains more information on the specific risk factors that could cause actual results to differ materially from anticipated results. Turning to slide three, we'll also discuss both GAAP and non-GAAP financial measures. And today's press release and presentation slides contain a reconciliation between the two. And now, let me turn the call over to Tom, who'll begin on slide four.

Thank you, Stuart, and good morning, everyone. Today, I'm pleased to report a very strong start for Leidos in 2026. First quarter revenue was up 4% year on year to $4.4 billion. and profitability remained excellent to start 2026 with adjusted EBITDA of 14%. As a result of this strong core performance and the immediately accretive nature of our entrust acquisition, we are raising our 2026 guidance for revenue by $500 million, non-GAAP polluted EPS by 5 cents, and operating cash flow by $50 million. Execution of our North Star 2030 growth strategy is now in full swing. And these strong Q1 results set the stage for our multi-year growth trajectory beginning this year. Chris will go through our Q1 financials in detail later on this call. What I'd like to spend my time with you on this morning is the story behind these Q1 numbers. and the fact that they represent another proof point that Leidos is built to thrive. Our scale, our unparalleled customer understanding, our ongoing corporate investments in our golden bolts, our market-leading exploitation of AI, they are all allowing us to quickly adapt to this changing market dynamics and rapidly deploy learnings to all of our customers and all of our businesses. We are driving our business and executing our North Star 2030 growth strategy through a few simple principles. The first is increasing our investments in our five growth pillars. Our growth pillars, markets where we see robust revenue growth to deliver superior top and bottom line results, remain defense tech, managed health, digital infrastructure and cyber, energy resilience, and mission software. The second principle is continuing to make Leidos faster, leaner, and more focused, ensuring that speed is king at Leidos. And the third principle is leveraging our scale through technology insertion and learning across our whole business. Here are some examples of how we're delivering against this strategy in 2026. In defense, we're capitalizing on years of technological investment to work with the Department of War as one of their key disruptors able to reliably produce at scale. We are currently pursuing accelerated procurement agreements, such as framework agreements, to field a number of Leidos advanced products and capabilities. Let me illustrate a few for you this morning. Munitions is a clear area of focus by the Department of War and one of historical strength for Leidos. Following a string of successful flight tests of our small cruise missile, now designated the AGM-190A by our customer, we are working with the Department of War to accelerate production of the SCM itself, progress work on derivatives of this product, and feel iterations of this technology for even more challenging warfighter needs. All in all, we can clearly see a path to production runs of thousands of these products in this decade alone. We're also working to respond to the US Navy for a marketplace acquisition approach to produce MUSVs and mission payloads at scale quickly. Our offering combines Leidos, Gibbs, and Cox expertise, commercial boatyard capability, Leidos proven LAVA software, integrated command and control, our exquisite C5ISR and counter C5ISR-T to deliver real world scaled effects for the US Navy. Related to this, you probably saw recent press reports about one of Leidos' existing MUSVs, the Seahawk MUSV, being operationally, not experimentally, deployed as part of the Theodore Roosevelt Carrier Strike Group. This is the U.S. Navy's first and only medium unmanned surface vehicle to reach this level of customer confidence, relevance, and actual deployment. And we're also conducting advanced discussions regarding scaling production of Leidos' AirShield high-power microwave counter UAS technology. That technology consistently outperforms all competitors in range and lethality. In addition to these framework agreements and other agreements, we've begun serial production of our ALPS product under our $2.2 billion ABADS MD contract. ALPS is a Leidos-developed passive sensing system that delivers persistent wide area awareness at a fraction of legacy costs. In fact, you may have noticed last month at a Department of War Golden Dome update that our ALPS program was highlighted as a key sensor informing the Golden Dome architecture. Quoting General Gutlein himself, quote, the testing of the Army's advanced long-range persistent surveillance radar is tangible proof of our progress, end quote. This is a powerful customer validation of ALPS's ready-now role in enabling a layered, integrated defense network. All this momentum is translating directly into strong demand across our entire defense tech portfolio. In total, we've earned over $9 billion of awards for our defense tech business in the last 15 months alone. And we can see clearly a path to another $8 billion in our next 12-month pipeline. In health, we are injecting real-world digital sophistication into mission-critical care with excellent customer impact. A standout example here is our recent $456 million Military OneSource award. This program provides confidential counseling, financial planning, tax assistance, career coaching, and more to military personnel and their families. This directed award is a testament to Leidos' superior and repeatable digital innovations. By applying the predictive analytics from our military and family life counseling program to this customer's Military OneSource needs, we are shifting the focus from reactive care to proactive force readiness. This award is in the wheelhouse of our managed health growth pillar and grows our strategic moat in this market. By harmonizing these programs, MFLIC and Military OneSource, We give the customer optionality to sync these ecosystems into a single, high-efficiency care delivery model. We are embedding Leidos into the mission's digital DNA, ensuring long-term customer stickiness and proving our disruptive value across the managed health market. Elsewhere in health, we've secured a first-of-its-kind award for a pilot program called My Service Treatment Record. Here, we've been selected to exclusively develop an AI-driven tool to automate the medical record transfer for service members from the Department of War to the Veterans Administration. As the architects of MHS Genesis, Leidos was uniquely qualified to aggregate Department of War data at speed and scale necessary to expedite this transfer. a transfer that today is manual, paper-intensive, frustratingly slow, and laborious. This new platform acts as another strategic entry point into the broader disability examinations mission. It allows us to further stitch together fragmented legacy systems with a seamless end-to-end digital thread. With the ability to automate everything from record retrieval to claim submission, we are directly advancing both the Department of War and the VA's digital-first initiatives. In turn, this ensures Leidos and our technology are deeply embedded in both our customers' long-term operational roadmap. Also of note, in our ongoing Veterans Benefits Exam business, I'm pleased to report that our disability exam volume remained high through the first quarter, and customer satisfaction, veteran satisfaction, with their treatment at Leidos QTC Clinics remains best in class. We are very much looking forward to working with the customer on our continued leading role providing these mission-critical services to our nation's veterans, beginning with an industry day later this month. Together, these wins and our robust ongoing business give us confidence in our health growth pillar and its sustainable growth through the decade. Now, I'd like to take a minute to also update you on the three substantial portfolio moves we've undertaken in the last 12 months. Most recently, I was very pleased to have announced our intent to strengthen our nation's homeland defense by agreeing to combine our SES business into a joint venture with Analogic. Our joint venture will create a focused American leader in this critical global market. And through our significant minority interest in this JV, our shareholders will continue to participate in the market upside this JV will help unlock. Regarding our KUDU acquisition of last year, the non-kinetic effects you probably read about in Operation Absolute Resolve and Operation Epic Fury reinforced just how critical these capabilities are to our customers' missions. That demand is exactly what we foresaw in acquiring Kudu to combine with our existing business. The combination of Kudu's elite offensive cyber tools with our robust signal processing capabilities and our established defensive cyber leadership has created the integrated toolkit that our customers increasingly rely on. It also aligns directly with the recently published national cyber strategy. Leidos' full spectrum cyber capacity is delivering against surging demand. We currently see a total cyber pipeline valued at $24 billion, a 21% increase since the acquisition of Kudu. The acquisition has also accelerated our use of AI technology to deliver cyber mission software and operations with unprecedented velocity. And speaking of velocity, we executed a quick, clean close of Entrust this past March, just two months after we announced the acquisition itself. That speed sets us up to accelerate delivery for our customers at a time when demand for energy infrastructure services is expanding every day. And closing this deal rapidly allows us to quickly gain the top and bottom line efficiencies we envisioned for this transaction this year. Integration is ahead of schedule, the cultural alignment is seamless, and the financial upside is already surfacing in our consolidated numbers. Strategically, this combination expands our business's breadth and depth and is already producing new opportunities. For instance, as a result of our combined prowess, we've received our first energy generation plant RFP, and we've been selected to perform detailed design for Canada's largest battery electrical storage facility. Building on this momentum, our team is focused on targeting a refreshed order pipeline of $10 billion. This represents growth of 230% post-close, made possible by rapidly bringing our teams together to prosecute the market as one. And on the operational side, we've deployed Leidos' AI tool, Skywire, across the new organization. Teams are already seeing significant opportunity to deliver high-quality services and solutions to more customers faster and cheaper. This is exactly what our North Star 2030 strategy is all about. Our KUDU and Entrust acquisitions provide us tremendous accelerants in high growth markets where scale and technology unite to deliver superior top and bottom line returns. And we aren't just looking at acquisitions to drive growth, I'm also pleased to announce that we are balancing these strategic moves with a surgical venture stage investment to ensure Leidos stays at the forefront of the market's innovation curve. We have committed a multi-year $100 million investment in a marquee PE firm with a proven track record in the federal technology space. This partnership gives us early access to a vetted pipeline of high-growth disruptors with mission-ready capabilities in AI, advanced cyber, and autonomy, to name a few. By continuing to be at the forefront of technological breakthroughs of all types, we ensure our customers have the technology they need tomorrow integrated into the Leidos growth pillars today. To close out my prepared remarks this morning, I'd also like to spend a moment on AI and what it means for Leidos. As I've said on past calls, we are not reacting to AI. AI is nothing new to Leidos. We are scaling with AI. AI is not a threat to our business model. It's an accelerant of our business model. because at our core, Whitehouse exists to make customers' outcomes smarter and more efficient, and AI allows us to do just that, work faster, at greater scale, with higher impact. What AI is doing in very practical terms is simply compressing the bottom of the solution value chain. It's making it easier to do things that were historically hard to do but it does not obsolete things that are hard to get. So things like routine development, basic analytics, data integration, AI is compressing the time to deliver these results. And that compression is of great value to us. We welcome it and are exploiting it because it frees up our highly specialized talent to focus where we create the most value, leveraging the multitude of things we have that are the very things that are hard to get, solving our customers' most complex mission-critical problems with deep customer understanding, the right people with the right specialty security clearances, real-world regulatory permission, Leido's privileged access to our customers' digital infrastructure at scale, et cetera. AI makes us faster and AI makes us more efficient. And all these shifts reinforce, they don't erode, the digital advantages that Leidos enjoys. Our market position in highly cleared environments, our deep regulatory experience, our access to proprietary data and most importantly the trust we've built with customers over decades these are not disrupted by ai they are amplified by it in our markets real costs are not measured in dollars they are measured in risk mission accomplishment risk and as ai increases the clock speed of our customers mission execution That risk only grows. So in turn, this only further strengthens our position as the trusted mission AI experts, the sober, cerebral, experienced, relatable experts deploying AI for our customers' success in ways they know they can trust. As part of this, as I've just alluded to, is an often underappreciated advantage for Leidos in this booming world of AI, the sheer scale of our federal digital infrastructure business. Our digital infrastructure business, the very large privileged position we enjoy today in our customer's digital ecosystem, is not a vulnerability in an AI world, it's a strength. because that ecosystem is foundational to how our customers are and will adopt AI securely and effectively. Every day, more than any other company, we deliver open, secure, repeatable, and mission-critical solutions for our customers. Capabilities we're currently grouping into four offerings uphold our Cyber and Resilient Networks product suite, Insight, our secure cloud and data product suite, Forward, our customer digital experience product suite, and Headway, our information advantage product suite. Taken together, these product suites strengthen Leidos' position as the scaled, trusted integrator of AI-enabled mission systems in our customers' environments for their mission success. That's why we believe we are uniquely positioned to continue to lead in this market, and that's why we continue to see scalable growth in this business. So Leidos is out of the blocks in 2026 playing offense. We are very excited about where we are today and where we are taking this business tomorrow, all guided by our clear North Star 2030 growth strategy. I'll now turn the call over to Chris to review our Q1 financial performance and provide an update outlook on the rest of 2026. And then I'll look forward to your questions.