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What changed in Leidos's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Leidos's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+464 added−462 removedSource: 10-K (2025-02-11) vs 10-K (2024-02-13)

Top changes in Leidos's 2025 10-K

464 paragraphs added · 462 removed · 381 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

103 edited+39 added−38 removed21 unchanged
Biggest changeSome significant laws and regulations that affect us include: • the Federal Acquisition Regulation ("FAR") and supplements, including the DoD Federal Acquisition Regulation Supplement ("DFARS"), which regulate the formation, administration and performance of U.S. government contracts; • the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; • the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information and our ability to provide compensation to certain former government officials; Leidos Holdings, Inc.
Biggest changeSome significant laws and regulations that affect us include: u the Federal Acquisition Regulation (“FAR”) and supplements, including the DoD Federal Acquisition Regulation Supplement (“DFARS”), which regulate the formation, administration and performance of U.S. government contracts; u the Truthful Cost or Pricing Data Act, which requires certification and disclosure of cost and pricing data in connection with certain contract negotiations; u the Procurement Integrity Act, which regulates access to competitor bid and proposal information and government source selection information and our ability to provide compensation to certain former government officials; u the Civil False Claims Act, which provides for substantial civil penalties for violations, including for submission of a false or fraudulent claim to the U.S. government for payment or approval; u the False Statements Act, which imposes civil and criminal liability for making false statements to the U.S. government; u the U.S. government Cost Accounting Standards (“CAS”), which imposes accounting requirements that govern our right to reimbursement under certain cost-based U.S. government contracts; and u The International Trade in Arms Regulation (“ITAR”), which governs the manufacture, export, and temporary import of defense articles, the furnishing of defense services, and brokering activities involving items described on the U.S. munitions list.
The predominant contracting methods through which U.S. government agencies procure services and products include the following: • Definitive Award Contracts. U.S. government agencies may procure services and products through single definitive award contracts which specify the scope of services or products purchased and identify the contractor that will provide the specified services or products.
The predominant contracting methods through which U.S. government agencies procure services and products include the following: u Definitive Award Contracts. U.S. government agencies may procure services and products through single definitive award contracts which specify the scope of services or products purchased and identify the contractor that will provide the specified services or products.
Similar to IDIQ contracts, at the time a GSA Schedule contract is awarded, a contractor may have limited or no visibility as to the ultimate amount of services or products that the U.S. government will purchase under the contract. • Other Transaction Authority (“OTA”) agreements. Under certain circumstances, U.S. government agencies can enter into OTA agreements instead of traditional contracts.
Similar to IDIQ contracts, at the time a GSA Schedule contract is awarded, a contractor may have limited or no visibility as to the ultimate amount of services or products that the U.S. government will purchase under the contract. u Other Transaction Authority (“OTA”) agreements. Under certain circumstances, U.S. government agencies can enter into OTA agreements instead of traditional contracts.
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract and the nature of services or products provided, as well as the achievement of performance objectives and the stage of performance at which the right to receive fees, particularly under incentive-fee and award-fee contracts, is finally determined.
Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract, the nature of services or products provided, as well as the achievement of performance objectives, and the stage of performance at which the right to receive fees, particularly under incentive-fee and award-fee contracts, is finally determined.
Contract Types Generally, the type of contract for our services and products is determined by or negotiated with the U.S. government and may depend on certain factors, including the type and complexity of the work to be performed, degree and timing of the responsibility to be assumed by the contractor for the costs of performance, the extent of price competition and the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.
CONTRACT PAYMENT TYPES Generally, the type of contract for our services and products is determined by or negotiated with the U.S. government and may depend on certain factors, including the type and complexity of the work to be performed, degree and timing of the responsibility to be assumed by the contractor for the costs of performance, the extent of price competition and the amount and nature of the profit incentive offered to the contractor for achieving or exceeding specified standards or goals.
At the time an IDIQ contract is awarded (prior to the award of any task orders), a contractor may have limited or no visibility as to the ultimate amount of services or products that the U.S. government will purchase under the contract, and in the case of a multiple-award IDIQ, the contractor from which such purchases may be made.
At the time an IDIQ contract is awarded (prior to the award of any task orders), a contractor may have limited or no visibility as to the ultimate amount of services or products that the U.S. government will purchase under the contract, and in the case of a multiple-award IDIQ contracts, the contractor from which such purchases may be made. u U.S.
We are a market leader in submarine collection technologies and anti-submarine warfare system installation and maintenance and are expanding our capabilities in these areas to meet market demand for this growing threat. We also provide prototyping and research and development support services to a wide variety of DoD customers from concept analysis to classified manufacturing.
We are a market leader in submarine data collection technologies and anti-submarine warfare system installation and maintenance and are expanding our capabilities in these areas to meet market demand for this growing threat. We also provide prototyping and research and development support services to a wide variety of DoD customers from concept analysis to classified manufacturing.
GDPR"),which creates similar compliance obligations for companies that process personal data of UK data subjects as are imposed by the GDPR; • the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, “CCPA”), which broadly defines personal information and provides expanded consumer privacy rights to natural persons residing in California, such as affording them the right to access and request deletion of their information and to opt out of certain sharing and sales of personal information; and • the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act, which establishes privacy and security compliance obligations with respect to the processing of protected health information by covered entities and business associates, necessitating investment in technical and organizational compliance measures and creates the potential for substantial fines for noncompliance.
GDPR”), which creates similar compliance obligations for companies that process personal data of UK data subjects as are imposed by the GDPR; u the California Consumer Privacy Act, as amended by the California Privacy Rights Act (collectively, “CCPA”), which broadly defines personal information and provides expanded consumer privacy rights to natural persons residing in California, such as affording them the right to access and request deletion of their information and to opt out of certain sharing and sales of personal information; and u the Health Insurance Portability and Accountability Act, as amended by the Health Information Technology for Economic and Clinical Health Act, which establishes privacy and security compliance obligations with respect to the processing of protected health information by covered entities and business associates, necessitating investment in technical and organizational compliance measures and creates the potential for substantial fines for noncompliance.
Securities and Exchange Commission ("SEC") on Form 10-K, Form 10-Q and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC.
Securities and Exchange Commission (“SEC”) on Form 10-K, Form 10-Q and Form 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC.
Item 1. Business Our Company Leidos Holdings, Inc. ("Leidos"), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc. Leidos was founded in 1969 by physicist Dr. Robert Beyster.
Item 1. Business OUR COMPANY Leidos Holdings, Inc. (“Leidos”), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc. Leidos was founded in 1969 by physicist Dr. Robert Beyster.
We generate revenues under several types of contracts, including the following: • Cost-reimbursement contracts include cost-plus-fixed-fee, award-fee and incentive - fee contracts. These contracts provide for reimbursement of our direct contract costs and allocable indirect costs, plus a fee.
We generate revenues under several types of contracts, including the following: u Cost-reimbursement contracts include cost-plus-fixed-fee, award-fee and incentive-fee contracts. These contracts provide for reimbursement of our direct contract costs and allocable indirect costs, plus a fee.
Multiple-award IDIQ contracts that are open for any government agency to use for procurement are commonly referred to as "government-wide acquisition contracts." IDIQ contracts often have multi-year terms and unfunded ceiling amounts, therefore enabling, but not committing, the U.S. government to purchase substantial amounts of services or products from one or more contractors.
Multiple-award IDIQ contracts that are open for any government agency to use for procurement are commonly referred to as “government-wide acquisition contracts.” IDIQ contracts often have multi- year terms and unfunded ceiling amounts, therefore enabling, but not committing, the U.S. government to purchase substantial amounts of services or products from one or more contractors.
Among other things, these laws and regulations: • require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; • define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; • require compliance with U.S. government CAS; • require reviews by the Defense Contract Audit Agency ("DCAA"), Defense Contract Management Agency ("DCMA") and other U.S. government agencies of compliance with government requirements for a contractor’s business systems; • restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; and • require us not to compete for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
Among other things, these laws and regulations: u require certification and disclosure of all cost and pricing data in connection with certain contract negotiations; u define allowable and unallowable costs and otherwise govern our right to reimbursement under various cost-type U.S. government contracts; u require compliance with U.S. government CAS; u require reviews by the Defense Contract Audit Agency (“DCAA”), Defense Contract Management Agency (“DCMA”) and other U.S. government agencies of compliance with government requirements for a contractor’s business systems; u restrict the use and dissemination of and require the protection of unclassified contract-related information and information classified for national security purposes and the export of certain products and technical data; and u require us not to compete for work if an actual or potential organizational conflict of interest, as defined by these laws and regulations, related to such work exists and/or cannot be appropriately mitigated, neutralized or avoided.
Leidos received 10+ year extensions to the ERAM and ATOP contracts for continued delivery of the evolving National Airspace System needs.
Leidos received 10 plus year extensions to the ERAM and ATOP contracts for continued delivery of the evolving National Airspace System needs.
The U.S. government uses IDIQ contracts to obtain commitments from contractors to provide certain services or products on pre-established terms and conditions. The U.S. government then issues task orders under the IDIQ contracts to purchase the specific services or products it needs. IDIQ contracts are awarded to one or more contractors following a competitive procurement process.
The U.S. government uses IDIQ contracts to obtain commitments from contractors to provide certain services or products on pre-established terms and conditions. The U.S. government then issues task orders under the IDIQ contracts to purchase specific services or products. IDIQ contracts are awarded to one or more contractors following a competitive procurement process.
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Leidos. The information on our website is not incorporated by reference into and is not a part of this Annual Report on Form 10-K. Leidos Holdings, Inc.
The SEC also maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Leidos. The information on our website is not incorporated by reference into and is not a part of this Annual Report on Form 10-K.
These companies span across sectors that include engineering and technical services divisions of large defense contractors, diversified U.S. and international IT providers and contractors focused solely on technical services, supply chain management, other logistics services and major systems operations and maintenance, homeland security and health solutions.
These companies span across sectors that include systems development and integration, engineering and technical services divisions of large defense contractors, diversified U.S. and international IT providers and contractors focused solely on technical services, supply chain management, other logistics services and major systems operations and maintenance, homeland security and health solutions.
We also provide enterprise IT solutions to the VA, National Institutes of Health ("NIH"), DoD and other federal health customers to help operate mission critical infrastructure reliably and at a reasonable cost. • Managed Health Services – We deploy a national footprint of health clinics and health providers to support care delivery services, including medical disability and behavioral health examinations for the VA, as well as serving other independent medical exam markets.
We also provide enterprise IT solutions to the VA, National Institutes of Health (“NIH”), DoD and other federal health customers to help operate mission critical infrastructure reliably and at a reasonable cost. u Managed Health Services – We deploy a national footprint of health clinics and health providers to support care delivery services, including medical disability and behavioral health examinations for the VA, as well as serving other independent medical exam markets.
For the contractor, this method of contracting may provide greater certainty of the timing and amounts to be received at the time of contract award because it generally results in the customer contracting for a specific scope of services or products from the single definitive successful awardee. • Indefinite Delivery/Indefinite Quantity ("IDIQ") Contracts.
For the contractor, this method of contracting may provide greater certainty of the timing and amounts to be received at the time of contract award because it generally results in the customer contracting for a specific scope of services or products from the single definitive successful awardee. u Indefinite Delivery/Indefinite Quantity (“IDIQ”) Contracts.
The U.S. government may revise its procurement practices or adopt new contract rules and regulations at any time. In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance trainings relevant to their position.
The U.S. government may revise its procurement practices or adopt new contract rules and regulations at any time. In order to help ensure compliance with these complex laws and regulations, all of our employees are required to complete ethics and other compliance trainings relevant to their position. Leidos Holdings, Inc.
For example, among others: • the European Union's ("EU’s") General Data Protection Regulation (“GDPR”), which imposes compliance obligations for companies that process personal data of EU data subjects, necessitating investment into ongoing data protection activities and documentation requirements, and creates the potential for significant fines for noncompliance; • the United Kingdom’s (“UK’s”) General Data Protection Regulation, ("U.K.
For example, among others: u the European Union’s (“EU’s”) General Data Protection Regulation (“GDPR”), which imposes compliance obligations for companies that process personal data of EU data subjects, necessitating investment into ongoing data protection activities and documentation requirements, and creates the potential for significant fines for noncompliance; u the United Kingdom’s (“UK’s”) General Data Protection Regulation, (“U.K.
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors. In the case of some subcontracts that we perform, the prime contractor generally obtains rights to use the programs and products that we deliver under the subcontract to perform its prime contract obligations. Leidos Holdings, Inc.
Generally, the U.S. government may disclose or license such information to third parties, including, in some instances, our competitors. In the case of some subcontracts that we perform, the prime contractor generally obtains rights to use the programs and products that we deliver under the subcontract to perform its prime contract obligations.
On T&M contracts, we assume the risk of providing appropriately qualified staff to perform these contracts at the hourly rates set forth in the contracts over the period of performance of the contracts. • Fixed-price-level-of-effort ("FP-LOE") contracts are substantially similar to T&M contracts except they require a specified level of effort over a stated period of time on work that can be stated only in general terms.
On T&M contracts, we assume the risk of providing appropriately qualified staff to perform these contracts at the hourly rates set forth in the contracts over the period of performance of the contracts. u Fixed-price-level-of-effort (“FPLOE”) contracts are substantially similar to T&M contracts except they require a specified level of effort over a stated period of time on work that can be stated only in general terms.
To support the physical and mental well-being of our employees, we provide many well-being and mental health benefits to all employees, including access to our Employee Assistance Program, Headspace, Virgin Pulse and meQuilibrium resources. These partners provide a multitude of free resources to assist employees with their mental, financial, and physical health.
To support the physical and mental well-being of our employees, we provide many well-being and mental health benefits to all employees, including access to our Employee Assistance Program, Headspace, Personify Health and meQuilibrium resources. These partners provide a multitude of free resources to assist employees with their mental, financial, and physical health.
In our work delivering a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide, our responsibilities range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more. We support cybersecurity across all integrated systems.
We deliver a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide. Our responsibilities range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more. We support cybersecurity across all integrated systems.
Generally, if our costs exceed the contract target cost or are not allowable under the applicable regulations, we may not be able to obtain reimbursement for all costs and may have our fees reduced or eliminated. • Time-and-materials ("T&M") contracts typically provide for negotiated fixed hourly rates for specified categories of direct labor plus reimbursement of other direct costs.
Generally, if our costs exceed the contract target cost or are not allowable under the applicable regulations, we may not be able to obtain reimbursement for all costs and may have our fees reduced or eliminated. u Time-and-materials (“T&M”) contracts typically provide for negotiated fixed hourly rates for specified categories of direct labor plus reimbursement of other direct costs.
We often partner with other companies, including our competitors, to submit bids for large U.S. government procurements or other opportunities where we believe that the combination of services and products that we can provide as a team will help us win and perform the contract.
We often team together with other companies to submit bids for large U.S. government procurements or other opportunities where we believe that the combination of services and products that we can provide as a team will help us win and perform the contract.
OTA agreements are generally exempt from federal procurement regulations. These exemptions grant the U.S. government the flexibility to include, amend or exclude contract clauses and requirements that are mandatory in traditional procurements. OTA agreements also grant more flexibility to structure agreements in numerous ways, including joint ventures, partnerships or multiple agencies joining together to fund an agreement encompassing multiple providers.
These exemptions grant the U.S. government the flexibility to include, amend or exclude contract clauses and requirements that are mandatory in traditional procurements. OTA agreements also grant more flexibility to structure agreements in numerous ways, including joint ventures, partnerships or multiple agencies joining together to fund an agreement encompassing multiple providers.
As a result of the diverse requirements of the U.S. government and our commercial customers, we frequently collaborate with other companies to compete for large contracts and bid against these same companies in other situations.
Due to the diverse requirements of the U.S. government and our commercial customers, we frequently collaborate with other companies to compete for large contracts and bid against these same companies in other situations.
Under an FP-IF contract, the allowable costs incurred are eligible for reimbursement but are subject to a cost-share arrangement, which affects profitability.
Under an FPIF contract, the allowable costs incurred are eligible for reimbursement but are subject to a cost-share arrangement, which affects profitability.
Our relationships with our partners, including whether we serve as the prime contractor or as a subcontractor, vary with each contract opportunity and typically depend on the program, contract or customer requirements, as well as the relative size, qualifications, capabilities, customer relationships and experience of our company and our partners.
Our relationships with our teammates, including whether we serve as the prime contractor or as a subcontractor, vary with each contract opportunity and typically depend on the program, contract or customer requirements, as well as the relative size, qualifications, capabilities, customer relationships and experience of our company and our teammates. Leidos Holdings, Inc.
Approximately 36% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 23% of our employees have advanced degrees, 52% of our employees possess U.S. security clearances and approximately 19% of our employees are military veterans.
Approximately 37% of our employees have degrees in science, technology, engineering or mathematics fields, approximately 24% of our employees have advanced degrees, 52% of our employees possess U.S. security clearances and approximately 19% of our employees are military veterans.
We continue to enhance our surface and subsurface autonomous and unmanned technologies to help make maritime operations safer and more efficient for government and industry by providing leading sensor systems, signal processing, communications hardware and software to support these vital missions.
We continue to enhance our surface and subsurface autonomous and unmanned technologies to help make maritime operations safer and more efficient for government and industry by providing innovative platforms, software solutions for vessel control and autonomous behaviors, leading sensor systems, signal processing, communications hardware and software to support these vital missions.
We believe we are a leader in the field of occupational health and safety (“OH&S”), and we place a strong emphasis on these activities, both internally and on behalf of our customers. Internally, we emphasize direct management responsibility, corporate policies and procedures, OH&S program implementation, employee training and compliance assessments.
We are a leader in the field of occupational health and safety (“OH&S”), and place a strong emphasis on these activities, both internally and on behalf of our customers. Internally, we emphasize direct management responsibility, corporate policies and procedures, OH&S program implementation, employee training and compliance assessments. Our corporate policies and procedures support compliance with OH&S regulations at work locations.
We provide resources, development, and experiential learning to enable employees to grow, including a talent marketplace where employees can fill temporary roles to develop skills or provide additional assistance. We provide leaders with the knowledge, skills and resources needed to coach employees and enable employees' career development. We value and develop a highly-skilled future-ready workforce.
We provide resources, development, and experiential learning to enable employees to grow, including a talent marketplace where employees can fill temporary roles to develop skills or provide additional assistance. We provide leaders with the knowledge, skills and resources needed to coach employees and enable employees’ career development.
Since our founding 55 years ago, we have applied our expertise in science, research and engineering in rapidly-evolving technologies and markets to solve complex problems of global concern. We use the terms "we," "us" and "our" to refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.
Since our founding 56 years ago, we have applied our expertise in science, research and engineering in rapidly-evolving technologies and markets to solve complex problems of global concern. We use the terms “we,” “us” and “our” to refer collectively to Leidos Holdings, Inc. and its consolidated subsidiaries.
Our company-funded research and development expense was $128 million, $116 million and $109 million for fiscal 2023, 2022 and 2021, respectively, which as a percentage of consolidated revenues was 0.8% for fiscal 2023, 2022 and 2021. We charge expenses for research and development activities performed under customer contracts directly to cost of revenues for those contracts.
Our company-funded research and development expense was $150 million, $128 million and $116 million for fiscal 2024, 2023 and 2022, respectively, which as a percentage of consolidated revenues was 0.9% for fiscal 2024 and 0.8% for both fiscal 2023 and 2022. We charge expenses for research and development activities performed under customer contracts directly to those contracts.
Our principal competitors currently include the following companies: Accenture Federal Systems, Amentum Services Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., General Dynamics Corporation, IBM, Jacobs Engineering Group Inc., KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Peraton, Raytheon Technologies Corporation and SAIC.
Our principal competitors currently include the following companies: Accenture Federal Systems, Amentum Services Inc., BAE Systems, Booz Allen Hamilton Inc., CACI International Inc., Deloitte, General Dynamics Corporation, GovCIO, IBM, KBR Inc., L3Harris, Lockheed Martin Corporation, ManTech, Northrop Grumman Corporation, Optum, Parsons Corp, Peraton, Raytheon Technologies Corporation and SAIC.
Using our cyber expertise, we continually enhance our techniques and processes to build systems that operate resiliently in the face of evolving cyber threats. Leidos is modernizing enterprise IT in classified and unclassified environments, including programs with the FAA, NASA, Department of Justice, IRS, U.S.
Using our cyber expertise, we continually enhance our techniques and processes to build systems that operate resiliently in the face of evolving cyber threats. Leidos is modernizing enterprise IT in classified and unclassified environments, including programs with the FAA, NASA, U.S. Department of Justice, Internal Revenue Service, U.S. MINT, U.S. Department of Commerce, U.S. Federal Trade Commission, and U.S.
Contracting with the U.S. government also subjects us to substantial regulation and unique risks, including the U.S. government’s ability to cancel any contract at any time through a termination for the convenience of the U.S. government.
Annual Report 11 Table of Contents PART I Contracting with the U.S. government also subjects us to substantial regulation and unique risks, including the U.S. government’s ability to cancel any contract at any time through a termination for the convenience.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed where the U.S. government issues a termination for convenience. These regulations and risks are described in more detail below under "Business–Regulation" and "Risk Factors" in this Annual Report on Form 10-K.
Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed prior to U.S. government termination for convenience. These regulations and risks are described in more detail below under “Business–Regulation” and “Risk Factors” in this Annual Report on Form 10-K.
As of December 29, 2023, our workforce consisted of the following: Gender of global employees (1) Male 65 % Female 35 % (1) Based on employees who self-identify.
As of January 3, 2025, our workforce consisted of the following: Gender of global employees (1) Male 65 % Female 35 % (1) Based on employees who self-identify.
Age of global employees Less than 30 years 15 % 30-50 years 47 % Greater than 50 years 38 % Ethnicity of U.S. employees (1) White 61 % Black 13 % Asian/Indian 10 % Hispanic/Latino 10 % Other 3 % Undisclosed 3 % (1) Based on employees who self-identify.
Age of global employees Less than 30 years 15 % 30-50 years 48 % Greater than 50 years 37 % Ethnicity of U.S. employees (1) White 59 % Black 14 % Asian/Indian 10 % Hispanic/Latino 10 % Other 4 % Undisclosed 3 % (1) Based on employees who self-identify.
Army, Navy and Air Force, U.S Space Force, DHS, DISA, FAA, Transportation Security Administration, CBP, DHA, VA, Department of Health and Human Services, NASA, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as Defense Advanced Research Projects Agency. These customers have a number of subsidiary agencies that have separate budgets and procurement functions.
Army, Navy and Air Force, U.S Space Force, DHS, Defense Information Security Agency, FAA, Transportation Security Administration, CBP, Defense Health Agency, VA, Department of Health and Human Services, NASA, National Science Foundation, DoE, the Environmental Protection Agency and research agencies such as Defense Advanced Research Projects Agency.
We recognize the value of a high-performing workforce where every member of the team has an opportunity to feel motivated, valued and fulfilled, and have a purposeful and long career at Leidos.
Leidos empowers and challenges employees to continuously seek, share and apply new knowledge, skills and behaviors. We recognize the value of a high-performing workforce where every member of the team has an opportunity to feel motivated, valued and fulfilled, and have a purposeful and long career at Leidos.
Cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts. Seasonality The U.S. government's fiscal year ends on September 30 of each year.
Cost-reimbursement and T&M contracts generally have lower profitability than FFP contracts. 12 Leidos Holdings, Inc. Annual Report Table of Contents PART I SEASONALITY The U.S. government’s fiscal year ends on September 30 of each year.
Contract Procurement Our business is heavily regulated, and we must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. government and other contracts. The U.S. government procurement environment has evolved due to statutory and regulatory procurement reform initiatives. Today, U.S. government customers employ several contracting methods to purchase services and products.
Annual Report Table of Contents PART I CONTRACT PROCUREMENT Our business is heavily regulated, and we must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. government and other contracts. The U.S. government procurement environment has evolved due to statutory and regulatory procurement reform initiatives.
We deliver many of the FAA's key automation systems and services, including the En Route Automation Modernization ("ERAM"), Advanced Technologies and Oceanic Procedures ("ATOP"), Time Based Flow Management, Terminal Flight Data Manager, Enterprise-Information Display System, Geo-7 and Future Flight Services.
We provide air traffic control systems that help manage the world’s most complex airspace. We deliver many of the FAA’s key automation systems and services, including the En Route Automation Modernization (“ERAM”), Advanced Technologies and Oceanic Procedures (“ATOP”), Time Based Flow Management, Terminal Flight Data Manager, Enterprise-Information Display System, Geo-7 and Future Flight Services.
During fiscal 2022, we completed the disposition of Aviation & Missile Solutions LLC within our Defense Solutions segment. For further information, see "Note 5—Acquisitions and Divestitures" in Part II of this Annual Report on Form 10-K. Leidos Holdings, Inc.
During fiscal 2022, we completed the disposition of Aviation & Missile Solutions LLC within our Defense Solutions segment. For further information, see “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K. KEY CUSTOMERS The majority of our revenues are generated in the United States.
Department of Defense ("DoD"), the U.S. Intelligence Community, the U.S. Department of Homeland Security ("DHS"), the Federal Aviation Administration ("FAA"), the Department of Veterans Affairs ("VA"), National Aeronautics and Space Administration ("NASA") and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.
Department of Homeland Security (“DHS”), the Federal Aviation Administration (“FAA”), the Department of Veterans Affairs (“VA”), National Aeronautics and Space Administration (“NASA”) and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.
Our corporate policies and procedures support compliance with OH&S regulations at work locations. We have a proactive compliance program of employee education, training, auditing and reporting that, through employee awareness and integration into our business operations, supports our commitment to a safe and healthy work environment.
We have a proactive compliance program of employee education, training, auditing and reporting that, through employee awareness and integration into our business operations, supports our commitment to a safe and healthy work environment. Leidos Holdings, Inc.
During fiscal 2021, we completed the acquisitions of Gibbs & Cox, 1901 Group, LLC, and an immaterial strategic business acquisition. See "Note 5—Acquisitions and Divestitures" in Part II of this Annual Report on Form 10-K for further information. During fiscal 2023, we completed an immaterial disposition of a business within our Defense Solutions segment.
ACQUISITIONS AND DIVESTITURES During fiscal 2022, we completed the acquisition of Cobham Aviation Services Australia’s Special Mission business. See “Note 5—Acquisitions and Divestitures” in Part II of this Annual Report on Form 10-K for further information. During fiscal 2023, we completed an immaterial disposition of a business within our Defense Solutions segment.
At the National Energy Technology Laboratory, we actively conduct and support fundamental and applied research efforts, including providing product and logistical support comprising strategic business development, technology transfer and agreements and education and outreach support for the effective and efficient execution of research programs.
At the National Energy Technology Laboratory, we actively conduct and support fundamental and applied research efforts, including providing product and logistical support comprising strategic business development, technology transfer and agreements and education and outreach support for the effective and efficient execution of research programs. u Life Sciences Research & Development – We provide life science research and development support to the NIH, Center for Disease Control, Army Medical Research community and commercial biotech companies.
Annual Report - 10 Table of Contents PART I Competition Competition for contracts is significant, and we often compete against a large number of well-established corporations that may have greater name and brand recognition. We also compete against smaller, more specialized companies that concentrate their resources on particular areas, the U.S. government’s own capabilities and federal non-profit contract research centers.
COMPETITION Competition for contracts is significant, and we often compete against many well-established corporations with strong name and brand recognition. We also compete against smaller, more specialized companies that concentrate their resources in particular areas, the U.S. government’s own capabilities and federal non-profit contract research centers.
We apply an open architecture approach to digitally connect the joint force across air, land, sea, cyber and space domains in support of the DoD’s JADC2 imperative and support through innovative solutions, essential services and enriched data management tools facilitating critical decision making. • Maritime Solutions – On and under the sea, we offer a wide range of capabilities.
We apply an open architecture approach to digitally connect the joint force across air, land, sea, cyber and space domains in support of the DoD’s multi-domain operations through innovative solutions, essential services and enriched data management tools facilitating critical decision making. u Cyber Operations – We offer full-spectrum cyber solutions to include offensive, defensive, and physical cyber operations.
With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended December 29, 2023, ("fiscal 2023") from U.S. government contracts, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.
With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended January 3, 2025, (“fiscal 2024”) from U.S. government contracts, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government. Approximately 8% of our revenues are generated by entities located outside of the United States.
Data Privacy and Security Laws Some of our operations and service offerings involve access to and use by us of personal information and/or protected health information. These activities are regulated by extensive federal, state and international data privacy and security laws requiring organizations to, among other things, provide certain privacy protections and security safeguards for such information.
These activities are regulated by extensive federal, state and international data privacy and security laws requiring organizations to, among other things, provide certain privacy protections and security safeguards for such information.
Leidos Holdings, Inc. Annual Report - 14 Table of Contents PART I These regulations and related risks are described in more detail below under "Risk Factors" in this Annual Report on Form 10-K. Company Website and Information Our corporate headquarters is located at 1750 Presidents Street, Reston, VA 20190 and our telephone number is (571) 526-6000.
These regulations and related risks are described in more detail below under “Risk Factors” in this Annual Report on Form 10-K. COMPANY WEBSITE AND INFORMATION Our corporate headquarters is located at 1750 Presidents Street, Reston, VA 20190 and our telephone number is (571) 526-6000. Our website can be accessed at www.leidos.com. The website contains information about our company and operations.
Our Gibbs & Cox subsidiary is one of the largest independent naval architecture and marine engineering firm by headcount in the United States. Our naval architecture services span the entire ship’s lifetime, from early-stage concept designs through detailed design, shipyard construction support, full lifecycle and sustainment support, ship alterations, service life extensions, and disposal.
Our naval architecture services span the entire ship’s lifetime, from early-stage concept designs through detailed design, shipyard construction support, full lifecycle and sustainment support, ship alterations, service life extensions, and disposal.
We compete on various factors, including our technical expertise and qualified professional and/or security-cleared personnel, our ability to deliver innovative cost-effective solutions in a timely manner, successful program execution, our reputation and standing with customers, pricing, the size and geographic presence of our company and past performance credentials.
We compete on various factors, including our technical expertise and qualified professional and/or security-cleared personnel, our ability to deliver innovative high value solutions in a timely manner, successful program execution, our understanding of our customers’ missions, the size and scale of our company and past performance credentials. 10 Leidos Holdings, Inc.
Environmental Matters Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations. In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability. See "Risk Factors" in this Annual Report on Form 10-K for further details.
Annual Report 9 Table of Contents PART I ENVIRONMENTAL MATTERS Our operations are subject to various foreign, federal, state and local environmental protection and health and safety laws and regulations. In addition, our operations may become subject to future laws and regulations, including those related to climate change and environmental sustainability.
Our reputation across climate science, environmental management and operations, nuclear security, power grid engineering, energy efficiency, infrastructure management, mission support and IT modernization provides the applicable expertise needed to transform operations while modernizing aging infrastructure and maintaining environmental stewardship.
We strive to ensure that our reputation across climate science, environmental management and operations, nuclear security, infrastructure management, mission support and IT modernization provides the applicable expertise needed to transform operations while modernizing aging infrastructure and maintaining environmental stewardship. We support the critical missions of the Department of Energy (“DoE”), National Nuclear Security Administration, and National Science Foundation.
Civil represented 24% of total revenues for both fiscal 2023 and 2022, and 23% of total revenues for fiscal 2021. • Transportation Solutions – Leidos is a trusted systems developer, service provider and integrator serving Air Navigation Service Providers around the world, including the FAA. We provide air traffic control systems that help manage the world's most complex airspace.
Health & Civil represented 30% of total revenues for fiscal 2024 and 27% of total revenues for both fiscal 2023 and fiscal 2022. u Transportation Solutions – Leidos is a trusted systems developer, service provider and integrator serving Air Navigation Service Providers around the world, including the FAA.
We teach employees how to use the tools and resources available to them and help them gain visibility across the enterprise. We assist managers and recruiters in identifying internal candidates for their programs. We conduct formal employee engagement surveys and pulse surveys to listen to employees and develop customized strategies to drive engagement, inclusion and retention across the organization.
We assist managers and recruiters in identifying internal candidates for their programs. We conduct formal employee engagement surveys to listen to employees and develop customized strategies to drive engagement, inclusion and retention across the organization. We invest in our current and future leaders in several ways.
Ministry of Defence and Australian Ministry of Defence, and customers across a variety of commercial markets. Within the U.S. government, our revenues are diversified across many agencies, including various intelligence agencies, the U.S.
Within the U.S. government, our revenues are diversified across many agencies, including various intelligence agencies, the U.S.
Annual Report - 5 Table of Contents PART I • Security Enterprise Solutions ("SES") – Leidos is an industry leader of fully-integrated security detection solutions, making security screening and checkpoints safer for aviation, ports and borders, and critical infrastructure customers around the world.
Annual Report 5 Table of Contents PART I u Global Security Products and Services – Leidos is a global leader in fully integrated security detection solutions, enhancing the safety of screening and checkpoints for aviation, ports, borders, and critical infrastructure worldwide.
In space we provide sensor, algorithm development and integrated payload capabilities to identify and track threats and cue defensive systems. We have developed and delivered full integrated small satellite systems.
In space we provide sensor, algorithm development and integrated payload capabilities to identify and track threats and cue defensive systems. We have developed and delivered full integrated small satellite systems and are under contract for payload deliveries on the Space Development Agency Wide Field of View Tranches 0, 1, and 2 programs.
Incentive fees that are based on cost provide for an initially negotiated fee to be adjusted later, typically using a formula to measure performance against the associated criteria, based on the relationship of total allowable costs to total target costs. Leidos Holdings, Inc.
Incentive fees that are based on cost provide for an initially negotiated fee to be adjusted later, typically using a formula to measure performance against the associated criteria, based on the relationship of total allowable costs to total target costs. u Fixed-price-incentive-fee (“FPIF”) contracts are substantially similar to cost-plus-incentive-fee contracts except they establish specified targets for cost and profit, a price ceiling (but not a profit ceiling or floor) and a profit adjustment formula.
Company-funded research and development includes independent research and development ("IR&D") and commercial and international research and development. Company-funded research and development expenses are included in selling, general and administrative expenses.
RESEARCH AND DEVELOPMENT We conduct research and development activities under customer-funded contracts and with company-funded research and development funds. Company-funded research and development includes independent research and development (“IR&D”) and commercial and international research and development. Company-funded research and development expenses are included in selling, general and administrative expenses.
Health Our Health business has been focused on delivering effective and affordable solutions to federal and commercial customers that are responsible for the health and well-being of people worldwide, including service members and veterans.
HEALTH & CIVIL Our Health & Civil business provides services and solutions to federal and commercial customers in the areas of public health, care coordination, life and environmental sciences and transportation. We are dedicated to delivering effective and affordable solutions that are responsible for the health and well-being of people, including service members and veterans.
Payment is based on the effort expended rather than the results achieved. • Firm-Fixed-Price (“FFP”) contracts provide for a fixed price for specified products, systems and/or services. This type of contract is typically used when the customer acquires products and services on the basis of reasonably definitive specifications that have a determinable fair and reasonable price.
Payment is based on the effort expended rather than the results achieved. u Firm-Fixed-Price (“FFP”) contracts provide for a fixed price for specified products, systems and/or services.
The user agency, or the GSA on its behalf, evaluates the user agency’s requirements and initiates a competition limited to GSA Schedule qualified contractors. GSA Schedule contracts are designed to provide the user agency with reduced procurement time and lower procurement costs.
When an agency uses a GSA Schedule contract to meet its requirements, the agency, or the GSA on behalf of the agency, conducts the procurement. The user agency, or the GSA on its behalf, evaluates the user agency’s requirements and initiates a competition limited to GSA Schedule qualified contractors.
Our website can be accessed at www.leidos.com . The website contains information about our company and operations. Through a link on the Investor Relations section of our website, copies of each of our filings with the U.S.
Through a link on the Investor Relations section of our website, copies of each of our filings with the U.S.
Although we do not currently anticipate that the costs of complying with, or the liabilities associated with, environmental laws will materially and adversely affect us, we cannot ensure that we will not incur material costs or liabilities in the future. Research and Development We conduct research and development activities under customer-funded contracts and with company-funded research and development funds.
See “Risk Factors” in this Annual Report on Form 10-K for further details. Although we do not currently anticipate that the costs of complying with, or the liabilities associated with, environmental laws will materially and adversely affect us, we cannot ensure that we will not incur material costs or liabilities in the future.
We invest in our current and future leaders in several ways. We provide a variety of leadership development programs, targeted for each level of leader, and numerous resources for leader development. Annually, we host a two-day Leadership Summit for approximately 350 of our most senior leaders aligning business strategy and transformation initiatives, alongside emphasizing the core values of our organization.
We provide a variety of leadership development programs, targeted for each level of leader, and numerous resources for leader development. Annually, we host a two-day Leadership Summit for approximately 350 of our most senior leaders to align our growth strategy and transformation initiatives. Through our ongoing talent planning processes, we identify and develop high-potential employees for future roles.
For additional discussion and analysis related to recent business developments, see "Business Environment and Trends" in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of this Annual Report on Form 10-K. Our Business Segments At December 29, 2023, our business has been aligned into three reportable segments (Defense Solutions, Civil and Health).
For additional discussion and analysis related to recent business developments, see “Business Environment and Trends” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report on Form 10-K.
Annual Report - 7 Table of Contents PART I Key Customers The majority of our revenues are generated in the United States. Our consolidated revenues are largely attributable to prime contracts or to subcontracts with other contractors engaged in work for the U.S. government, with the remaining attributable to international customers, including the U.K.
Our consolidated revenues are largely attributable to prime contracts or to subcontracts with other contractors engaged in work for the U.S. government, with the remaining attributable to international customers, including the UK Ministry of Defence and Australian Department of Defence, and customers across a variety of commercial markets.
Under a single-award IDIQ contract, all task orders under that contract are awarded to one pre-established contractor. Under a multiple-award IDIQ contract, task orders can be awarded to any of the pre-established contractors, which can result in further limited competition for the award of task orders.
Under a single-award IDIQ contract, all task orders under that contract are issued to the one contractor awarded the IDIQ. Under a multiple-award IDIQ contract, task orders are competitively bid by the contractors awarded the IDIQ.
We have a strong technical upskilling and reskilling program to develop and retain talent. We offer formal programs to help employees earn many industry-standard professional and technical certifications. Additionally, we offer tuition reimbursement and certification exam reimbursement to full-time employees at accredited universities. Our Internal Mobility Program has a dedicated team that proactively focuses on the redeployment of our employees.
Additionally, we offer tuition reimbursement and certification exam reimbursement to full-time employees at accredited universities. Our Internal Mobility Program has a dedicated team that proactively focuses on the mobilization of our employees. We teach employees how to use the tools and resources available to them and help them gain visibility across the enterprise.
Corporate Corporate includes the operations of various corporate activities, certain expense items that are not reimbursed by our U.S. government customers and certain other expense items excluded from a reportable segment's performance. Acquisitions and Divestitures During fiscal 2022, we completed the acquisition of Cobham Aviation Services Australia’s Special Mission business.
We model, simulate, and analyze cyber and electro-magnetic threats, develop threat emulators for range testing, and develop cyber-physical solutions. CORPORATE Corporate includes the operations of various corporate activities, certain expense items that are not reimbursed by our U.S. government customers and certain other expense items excluded from a reportable segment’s performance.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeAnnual Report - 16 Table of Contents PART I • Efforts by the U.S. government to revise its organizational conflict of interest rules could limit our ability to successfully compete for new contracts or task orders, which would adversely affect our results of operations. • As a U.S. government contractor, our partners and we are subject to reviews, audits and cost adjustments by the U.S. government, which could adversely affect our profitability, cash position or growth prospects if resolved unfavorably to us. • Our business is subject to governmental review and investigation, which could adversely affect our financial position, operating results and growth prospects. • Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation. • Our business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business. • Our business is subject to complex and evolving laws and regulations regarding data privacy and security which could subject us to investigations, claims or monetary penalties against us, require us to change our business practices or otherwise adversely affect our revenues and profitability. • We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence. • Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a material adverse impact on our business, reputation and future results. • A failure to attract, train, retain and motivate skilled employees, including our management team, would adversely affect our ability to execute our strategy and may disrupt our operations. • We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects. • Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time and resources accurately. • We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. • Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position. • Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability. • Customer systems failures could damage our reputation and adversely affect our revenues and profitability. • Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. • We have classified contracts with the U.S. government, which may limit investor insight into portions of our business.
Biggest changeAnnual Report 15 Table of Contents PART I u A failure to attract, retain, and develop talent with critical skills, including our leadership team, would adversely affect our ability to execute our strategy and may disrupt our operations. u We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects. u Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time and resources accurately. u We use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected. u Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position. u Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability. u Customer systems failures could damage our reputation and adversely affect our revenues and profitability. u Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. u We utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence. u We have classified contracts with the U.S. government, which may limit investor insight into portions of our business. u We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties. u Goodwill represents a significant asset on our balance sheet and any impairment of this asset could negatively impact our results of operations, and shareholders’ equity. u We depend on our teaming arrangements and relationships with other contractors and subcontractors.
The markets in which we operate are characterized by rapidly changing customer needs and technology and our success depends on our ability to invest in and develop services and products that address such needs.
The markets in which we operate are characterized by rapidly changing customer needs and technology and our success depends on our ability to invest in and develop products and services that address such needs.
Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and customers and could have a material adverse impact on our business, reputation and future results.
Misconduct of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and could have a material adverse impact on our business, reputation and future results.
These risks and challenges include: • failure to comply with U.S. government and foreign laws and regulations applicable to international business, including, without limitation, those related to employment, data privacy and security, taxes, technology transfer, information security, environment, data transfer, import and export controls (including the International Traffic in Arms Regulations (“ITAR”) administered by the U.S.
These risks and challenges include: u failure to comply with U.S. government and foreign laws and regulations applicable to international business, including, without limitation, those related to employment, data privacy and security, taxes, technology transfer, information security, environment, data transfer, import and export controls (including the International Traffic in Arms Regulations (“ITAR”) administered by the U.S.
Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations, or financial results, including that: • we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive; • we may not be able to accurately estimate the financial effect of acquisitions and investments on our business or realize anticipated synergies, business growth, or profitability and may be unable to recover investments in any such acquisitions and investments; • we may not be able to manage the integration process for acquisitions successfully, and the integration process may divert management time and focus from operating our business, including as a result of incompatible accounting, information management, or other control systems; • acquired technologies, capabilities, products, and service offerings, particularly those that are still in development when acquired, may not perform as expected, may have defects or may not be integrated into our business as expected; • we may have trouble retaining key employees and customers of an acquired business; • we may need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies, including those relating to financial reporting, revenue recognition or other financial or control deficiencies; • we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs, or may be required to comply with additional laws and regulations or to engage in remediation efforts to cause the acquired company to comply with applicable laws and regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; • we may face litigation or material liabilities that were not identified or were underestimated as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification, including intellectual property claims and disputes or claims from terminated employees, customers, former stockholders or other third parties, or there may be other unanticipated write-offs or charges; • we may be required to spend a significant amount of cash or to incur debt, resulting in limitations on other potential uses for cash, increased fixed payment obligations or covenants or other restrictions on us, or issue shares of our common stock or convertible debt, resulting in dilution of ownership; • we may not be able to influence the operations of our joint ventures effectively, or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations; and • if our acquisitions, investments, or joint ventures fail, perform poorly, or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.
Acquisitions, investments and joint ventures pose many other risks that could adversely affect our reputation, operations, or financial results, including that: u we may not be able to identify, compete effectively for or complete suitable acquisitions and investments at prices we consider attractive; u we may not be able to accurately estimate the financial effect of acquisitions and investments on our business or realize anticipated synergies, business growth, or profitability and may be unable to recover investments in any such acquisitions and investments; u we may not be able to manage the integration process for acquisitions successfully, and the integration process may divert management time and focus from operating our business, including as a result of incompatible accounting, information management, or other control systems; u acquired technologies, capabilities, products, and service offerings, particularly those that are still in development when acquired, may not perform as expected, may have defects or may not be integrated into our business as expected; u we may have trouble retaining key employees and customers of an acquired business; u we may need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies, including those relating to financial reporting, revenue recognition or other financial or control deficiencies; u we may assume legal or regulatory risks, particularly with respect to smaller businesses that have immature business processes and compliance programs, or may be required to comply with additional laws and regulations or to engage in remediation efforts to cause the acquired company to comply with applicable laws and regulations, or result in liabilities resulting from the acquired company’s failure to comply with applicable laws or regulations; u we may face litigation or material liabilities that were not identified or were underestimated as part of our due diligence or for which we are unable to receive a purchase price adjustment or reimbursement through indemnification, including intellectual property claims and disputes or claims from terminated employees, customers, former stockholders or other third parties, or there may be other unanticipated write-offs or charges; u we may be required to spend a significant amount of cash or to incur debt, resulting in limitations on other potential uses for cash, increased fixed payment obligations or covenants or other restrictions on us, or issue shares of our common stock or convertible debt, resulting in dilution of ownership; u we may not be able to influence the operations of our joint ventures effectively, or we may be exposed to certain liabilities if our joint venture partners do not fulfill their obligations; and u if our acquisitions, investments, or joint ventures fail, perform poorly, or their value is otherwise impaired for any reason, including contractions in credit markets and global economic conditions, our business and financial results could be adversely affected.
We are also experiencing increased competition, which impacts our ability to obtain contracts; see the risk factor “We face intense competition that can impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.” Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability. Leidos Holdings, Inc.
We are also experiencing increased competition, which impacts our ability to obtain contracts; see the risk factor “We face intense competition that can impact our ability to obtain contracts and, therefore, affect our future revenues and growth prospects.” Our failure to compete effectively in this procurement environment would adversely affect our revenues and profitability. 18 Leidos Holdings, Inc.
Annual Report - 20 Table of Contents PART I The U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion, and if we do not replace them, this may adversely affect our future revenues and profitability.
Annual Report Table of Contents PART I The U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion, and if we do not replace them, this may adversely affect our future revenues and profitability.
Due to the U.S. government's ability to not exercise contract options or to terminate, modify, or curtail our programs or contracts and the rights of our non-U.S. government customers to cancel contracts and purchase orders in certain circumstances, we may realize less than expected revenues or may never realize revenues from some of the contracts that are included in our backlog.
Due to the U.S. government’s ability to not exercise contract options or to terminate, modify, or curtail our programs or contracts and the rights of our non-U.S. government customers to terminate contracts and purchase orders in certain circumstances, we may realize less than expected revenues or may never realize revenues from some of the contracts that are included in our backlog.
Annual Report - 35 Table of Contents PART I We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties. From time to time, we pursue strategic acquisitions, investments and joint ventures. We also may enter into relationships with other businesses to expand our products or our ability to provide services.
Annual Report Table of Contents PART I We have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties. From time to time, we pursue strategic acquisitions, investments and joint ventures. We also may enter into relationships with other businesses to expand our products or our ability to provide services.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, "Note 3—Summary of Significant Accounting Policies” and “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. We depend on our teaming arrangements and relationships with other contractors and subcontractors.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Annual Report on Form 10-K, “Note 3—Summary of Significant Accounting Policies” and “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. We depend on our teaming arrangements and relationships with other contractors and subcontractors.
Some of our contracts involve developing complex systems and products to achieve challenging customer goals in a competitive procurement environment. As a result, we sometimes experience technological or other performance difficulties, which have in the past and may in the future result in delays, cost overruns and failures in our performance of these contracts.
Some of our contracts involve developing complex systems and products to achieve challenging customer goals in a competitive procurement environment. As a result, we sometimes experience technological, schedule or other performance difficulties, which have in the past and may in the future result in delays, cost overruns and failures in our performance of these contracts.
Any electronic or physical break-in or other security breach or compromise of our information technology systems and networks or facilities, or those of our service providers, suppliers, joint ventures or subcontractors, may jeopardize the confidential integrity or availability of information, including personal, confidential, proprietary or sensitive information, stored or transmitted through these systems and networks or stored in those facilities.
Any electronic or physical break-in or other security breach or compromise of our information technology systems and networks or facilities, or those of our service providers, suppliers, joint ventures or subcontractors, may jeopardize the confidentiality, integrity or availability of information, including personal, confidential, proprietary or sensitive information, stored or transmitted through these systems and networks or stored in those facilities.
Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. We design and develop technologically advanced and innovative products and services applied by our customers in various environments. The needs of our customers change and evolve regularly, particularly by complex and rapidly evolving technologies.
Our success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers. We design and develop technologically advanced and innovative products and services applied by our customers in various environments. The needs of our customers change and evolve regularly, particularly driven by complex and rapidly evolving technologies.
As a result, investors have less insight into our classified business or our business overall. However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts. Leidos Holdings, Inc.
As a result, investors have less insight into our classified business or our business overall. However, historically the business risks associated with our work on classified programs have not differed materially from those of our other government contracts. 30 Leidos Holdings, Inc.
Not every risk or liability is or can be protected by insurance, and for those risks we insure, the limits of coverage that are reasonably obtainable may not be sufficient to cover all actual losses or liabilities incurred.
Not every risk or liability we face is or can be protected by insurance, and for those risks we insure, the limits of coverage that are reasonably obtainable may not be sufficient to cover all actual losses or liabilities incurred.
Although we have implemented policies, procedures and controls designed to protect against, detect and mitigate these threats and attacks, we and our service providers, suppliers, joint ventures, and subcontractors have faced and continue to face advanced and persistent attacks on our information systems.
Although we have implemented policies, procedures and controls designed to protect against, detect and mitigate these threats and attacks, we and our service providers, suppliers, joint ventures, and subcontractors have faced and continue to face advanced and persistent attacks on our and their information systems.
For example, some customers, including the DoD, are turning to commercial contractors, rather than traditional defense contractors, for some products and services, and may utilize small business contractors or determine to source work internally rather than hiring a contractor .
For example, some customers, including the DoD, are turning to commercial contractors, rather than traditional defense contractors, for some products and services, and may utilize small business contractors or source work internally rather than hiring a contractor.
These decisions, along with the delays in airline travel infrastructure projects and disruptions in and higher than anticipated costs of servicing, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.
These decisions, along with the delays in airline travel infrastructure projects and higher than anticipated costs of servicing, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.
We, and the service providers, suppliers and subcontractors on which we rely, are also subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, cybersecurity threats, malicious insiders, natural disasters, power shortages, terrorist attacks, pandemics or other events, which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation.
We, and the service providers, suppliers and subcontractors on which we rely, are also subject to systems failures, including network, software or hardware failures, whether caused by us, third-party service providers, cybersecurity threats, malicious insiders, software bugs or errors, natural disasters, power shortages, terrorist attacks, pandemics or other events, which could cause loss of data and interruptions or delays in our business, cause us to incur remediation costs, subject us to claims and damage our reputation.
Annual Report - 19 Table of Contents PART I The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoD or other budgetary priorities, reduce overall U.S. government spending, or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues.
Annual Report 17 Table of Contents PART I The U.S. government also conducts periodic reviews of U.S. defense strategies and priorities, which may shift DoD or other budgetary priorities, reduce overall U.S. government spending, or delay contract or task order awards for defense-related or other programs from which we would otherwise expect to derive a significant portion of our future revenues.
The competitive bidding process involves substantial costs, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, may be split among competitors, or that may be awarded but for which we do not receive meaningful task orders, and several risks, including the risk of inaccurately estimating the resources and costs that will be required to fulfill any contract we win.
The competitive bidding process involves substantial costs, including labor cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, may be split among competitors, or that may be awarded but for which we do not receive meaningful task orders, and several risks, including the risk of inaccurately estimating the resources and costs that will be required to fulfill any contract we win.
If a review or investigation identifies improper or illegal activities, we may be subject to disgorgement of profits, fines, damages, litigation, civil or criminal penalties, exclusion from sales channels or sales opportunities, injunctions, or administrative sanctions, including the termination of contracts, the triggering of price reduction clauses, suspension of payments, suspension or debarment from doing business with governmental agencies or other consequences.
If a review or investigation identifies improper or unlawful activities, we may be subject to disgorgement of profits, fines, damages, litigation, civil or criminal penalties, exclusion from sales channels or sales opportunities, injunctions, or administrative sanctions, including the termination of contracts, the triggering of price reduction clauses, suspension of payments, suspension or debarment from doing business with governmental agencies or other consequences.
Any decisions by the U.S. government to not exercise contract options or to terminate, cancel, modify, renew on less favorable terms or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability. In addition, we have experienced and continue to experience performance issues under certain of our contracts.
Any decisions by the U.S. government to not exercise contract options or to terminate, cancel, modify, renew on less favorable terms or curtail our major programs or contracts would adversely affect our revenues, revenue growth and profitability. In addition, we have experienced performance issues under certain of our contracts.
Failure to comply with these environmental, health and safety laws and regulations could result in civil, criminal, regulatory, administrative, or contractual sanctions, including fines, penalties, or suspension or debarment from contracting with the U.S. government. In addition, our failure to maintain adequate safety standards and equipment could result in reduced profitability and loss of work or customers.
Failure to comply with these environmental, health and safety laws and regulations could result in civil, criminal, regulatory, administrative, or contractual sanctions, including fines, penalties, suspension or debarment from contracting with the U.S. government, or reputational harm. In addition, our failure to maintain adequate safety standards and equipment could result in reduced profitability and loss of work or customers.
More generally, increases in scrutiny and investigations into business practices and major programs supported by contractors from government organizations, legislative bodies, or agencies may lead to increased legal costs and may harm our reputation, revenues, profitability and growth prospects. For a description of our current legal proceedings, see "Item 3.
More generally, increases in scrutiny and investigations into business practices and major programs supported by contractors from government organizations, legislative bodies, or agencies may lead to increased legal costs and may harm our reputation, revenues, profitability and growth prospects. For a description of our current legal proceedings, see “Item 3.
We believe our success will also depend on the continued employment of a highly qualified and experienced senior management team and its ability to retain existing business, generate new business, execute our business plans in an efficient and effective manner, and our ability to adequately plan for the succession of our senior management team and continually develop new members of senior management.
We believe our success will also depend on the continued employment of a highly qualified and experienced senior leadership team and its ability to retain existing business, generate new business, execute our business plans in an efficient and effective manner, and our ability to adequately plan for the succession of our senior leadership team and continually develop new members of senior leadership.
We will also be subject to numerous emerging and as yet unspecified cybersecurity requirements under the FAR and through federal regulation, to include the DOD Cybersecurity Maturity Model Certification ("CMMC") program, which, once implemented, will require successful assessment by a third party against specified cyber controls.
We will also be subject to numerous emerging and as yet unspecified cybersecurity requirements under the FAR and through federal regulation, to include the DOD Cybersecurity Maturity Model Certification (“CMMC”) program, which, once implemented, will require successful assessment by a third party against specified cyber controls.
Our receipt of adverse audit findings or the failure to obtain an "approved" determination of our various business systems from the responsible U.S. government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process.
Our receipt of adverse audit findings or the failure to obtain an “approved” determination of our various business systems from the responsible U.S. government agency could significantly and adversely affect our business, including our ability to bid on new contracts and our competitive position in the bidding process.
Companies that do not have access to U.S. government contracts may perform services as our subcontractor, and that exposure could enhance such companies’ prospect of securing a future position as a prime U.S. government contractor, which could increase competition for future contracts and impair our ability to perform on contracts.
Companies that do not have access to U.S. government contracts may perform services as our subcontractor, and that experience could enhance such companies’ prospect of securing a future position as a prime U.S. government contractor, which could increase competition for future contracts and impair our ability to perform on contracts.
Presidential Administration as a result of the upcoming election cycle, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.
Presidential Administration as a result of the recent election cycle, increasing political pressure and legislation, shifts in spending priorities from defense-related or other programs as a result of competing demands for federal funds, the number and intensity of military conflicts or other factors.
Adverse changes in fiscal and economic conditions, such as those related to federal budget cuts and the nation’s debt ceiling, deteriorating market conditions for companies in our industry and unfavorable changes in discount rates could result in an impairment of goodwill and other intangibles.
Adverse changes in fiscal and economic conditions, such as those related to federal budget cuts and the nation’s debt ceiling, deteriorating market conditions for companies in our industry and unfavorable changes in discount rates could result in an impairment of goodwill.
Competition for skilled personnel is intense, and the costs associated with attracting and retaining them are high and made even more competitive as a result of the external environment, including increasing rates of job transition and low unemployment.
Competition for skilled talent is intense, and the costs associated with attracting and retaining them are high and made even more competitive as a result of the external environment, including increasing rates of job transition and low unemployment.
A significant decline in overall U.S. government spending, including in the areas of national security, intelligence, and homeland security, a significant shift in its spending priorities, the substantial reduction or elimination of particular defense-related programs or significant delays in contract or task order awards for large programs could adversely affect our future revenues and results of operations and limit our growth prospects.
A significant decline in overall U.S. government spending, including in the areas of national security, intelligence, homeland security, and health and civilian services, a significant shift in its spending priorities, the substantial reduction or elimination of particular defense-related programs or significant delays in contract or task order awards for large programs could adversely affect our future revenues and results of operations and limit our growth prospects.
We are subject to numerous state, federal and international laws and directives and regulations in the U.S. and abroad that involve matters central to our business, including data privacy and security, employment and labor relations, immigration, taxation, anti-corruption, anti-bribery, import-export controls, trade restrictions, internal and disclosure control obligations, securities regulation and anti-competition.
We are subject to numerous state, federal and international laws and directives and regulations in the U.S. and abroad that involve matters central to our business, including but not limited to, data privacy and security, employment and labor relations, immigration, taxation, anti-corruption, anti-bribery, import-export controls, trade restrictions, internal and disclosure control obligations, securities regulation and anti-competition restrictions.
An inability to retain appropriately qualified and experienced senior executives, our failure to do adequately succession planning, or our failure to continue to develop new members could cause us to lose customers or new business opportunities. We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects.
An inability to retain appropriately qualified and experienced senior executives, our failure to do adequately succession planning, or our failure to continue to develop new leaders could cause us to lose customers or new business. We may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects.
Any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future.
Any significant claim may have an adverse effect on our industry and market reputation, leading to a substantial decrease in demand for our products and services and reduced revenues, making it more difficult for us to compete effectively, and could affect the cost and availability of insurance coverage at adequate levels in the future. Leidos Holdings, Inc.
In the competitive environment in which we operate as a government contractor, the lack of pricing leverage and power to renegotiate long-term, multi-year contracts, coupled with reduced customer buying power as a result of inflation, could reduce our profits, disrupt our business or otherwise materially adversely affect our results of operations. Leidos Holdings, Inc.
In the competitive environment in which we operate as a government contractor, the lack of pricing leverage and power to renegotiate long-term, multi-year contracts, coupled with reduced customer buying power as a result of inflation, could reduce our profits, disrupt our business or otherwise materially adversely affect our results of operations.
Department of Commerce’s Bureau of Industry and Security), sanctions, and other administrative, legislative or regulatory actions that could materially interfere with our ability to offer our products or services in certain countries or have an adverse impact on our business with the U.S. government, and expose us to risks and costs of noncompliance with such laws and regulations, in addition to administrative, civil or criminal penalties; • increased financial and legal risks arising, for example, from foreign exchange rate variability, imposition of tariffs or additional taxes, inflation, restrictive trade policies, longer payment cycles, delays or failures to collect amounts due to us and differing legal systems, and which may adversely affect the performance of our services, sale of our products or repatriation of our profits; • political or economic instability, international security concerns and geopolitical conflict in countries where we provide services and products in support of the U.S. government and other customers in countries, which increases the risk of an incident resulting in injury or loss of life, damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof; • the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S. and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals; and • the ongoing Israel/Hamas conflict and its regional effects.
Department of Commerce’s Bureau of Industry and Security), sanctions, and other administrative, legislative or regulatory actions that could materially interfere with our ability to offer our products or services in certain countries or have an adverse impact on our business with the U.S. government, and expose us to risks and costs of noncompliance with such laws and regulations, in addition to administrative, civil or criminal penalties; u increased financial and legal risks arising, for example, from foreign exchange rate variability, imposition of tariffs or additional taxes, inflation, restrictive trade policies, longer payment cycles, delays or failures to collect amounts due to us and differing legal systems, and which may adversely affect the performance of our services, sale of our products or repatriation of our profits; u political or economic instability, international security concerns and geopolitical conflict in countries where we provide services and products in support of the U.S. government and other customers in countries, which increases the risk of an incident resulting in injury or loss of life, damage or destruction of property, inability to meet our contractual obligations or retaliatory measures taken in respect thereof; u the ongoing conflict between Russia and Ukraine, which has resulted in the imposition by the U.S. and other nations of restrictive actions against Russia, Belarus and certain banks, companies and individuals; and u the ongoing conflict in the Middle East, which continues to expand.
In addition, multi-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As a result, we may not be able to obtain these task orders or recognize revenues under these multi-award contracts.
In addition, multiple-award contracts require that we make sustained post-award efforts to obtain task orders under the contract. As a result, we may not be able to obtain these task orders or recognize revenues under these multiple-award contracts.
In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a "continuing resolution," which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives.
In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a “continuing resolution,” which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives.
Our current and previous ownership and operation of real property also subject us to environmental laws and regulations, some of which hold current or previous owners or operators of businesses and real property jointly and severally liable for hazardous substance releases, even if they did not know of and were not responsible for the releases.
Our current and previous ownership, leasing and operation of real property, and disposal of hazardous substances also subject us to environmental laws and regulations, some of which hold current or previous owners or operators of businesses and real property jointly and severally liable for hazardous substance releases, even if they did not know of and were not responsible for the releases.
Risk Factors In your evaluation of our company and business, you should carefully consider the risks and uncertainties described below, together with information disclosed elsewhere in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of this Annual Report, and other documents we file with the SEC.
Risk Factors In your evaluation of our company and business, you should carefully consider the risks and uncertainties described below, together with information disclosed elsewhere in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of this Annual Report, and other documents we file with the SEC.
If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected. • We could incur significant liabilities and suffer negative publicity if our inspection or detection systems fail to detect bombs, explosives, weapons, contraband or other threats. • We face risks associated with our international business. • Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.
If we are not able to maintain these relationships, or if these parties fail to satisfy their obligations to us or the customer, our revenues, profitability and growth prospects could be adversely affected. u We could incur significant liabilities and suffer negative publicity if our inspection or detection systems fail to detect bombs, explosives, weapons, contraband or other threats. u We face risks associated with our international business. u Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results. 16 Leidos Holdings, Inc.
More generally, any increased or unexpected costs or unanticipated delays in the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, rising inflationary pressures, and fluctuations in interest rates, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable.
More generally, any increased or unexpected costs or unanticipated delays in the performance of our contracts, including costs and delays caused by contractual disputes or other factors outside of our control, such as performance failures of our subcontractors, rising inflationary pressures, and fluctuations in interest rates, natural disasters or other force majeure events, could make our contracts less profitable than expected or unprofitable. 26 Leidos Holdings, Inc.
Any of these changes could impair our ability to obtain new contracts or renew our existing contracts when customers recompete those contracts. Any new contracting requirements or procurement methods could be costly or administratively difficult to implement and could adversely affect our future revenues, profitability, and prospects. Leidos Holdings, Inc.
Any of these changes could impair our ability to obtain new contracts or renew our existing contracts when customers recompete those contracts. Any new contracting requirements or procurement methods could be costly or administratively difficult to implement and could adversely affect our future revenues, profitability, and prospects.
A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S. government. Leidos Holdings, Inc.
A termination for default could eliminate a revenue source, expose us to liability and have an adverse effect on our ability to compete for future contracts and task orders, especially if the customer is an agency of the U.S. government.
In addition, many U.S. government programs require contractors to have security clearances, certain of which can be difficult and time-consuming to obtain and personnel with such security clearances are in great demand. As a result, it is difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth.
In addition, many U.S. government programs require contractors to have security clearances, some of which can be difficult and time-consuming to obtain and talent with such security clearances are in great demand. As a result, it is difficult to retain employees and meet all of our needs for employees in a timely manner, which may affect our growth.
Further, if our security and inspection systems fail to, or are perceived to have failed to, help detect a threat, we could experience negative publicity and reputational harm, which could reduce demand for our inspection or detection systems and adversely affect our business. Leidos Holdings, Inc.
Further, if our security and inspection systems fail to, or are perceived to have failed to, help detect a threat, we could experience negative publicity and reputational harm, which could reduce demand for our inspection or detection systems and adversely affect our business.
In addition, our ability to grow in advanced technology areas, such as hypersonics programs, space exploration, and classified programs, will also be affected by the overall budget environment, whether development programs transition to production and the timing of such transition, all of which are dependent on U.S. Government authorization and funding.
In addition, our ability to grow in advanced technology areas, such as hypersonics programs, space systems, maritime and undersea systems, and classified programs, will also be affected by the overall budget environment, whether development programs transition to production and the timing of such transition, all of which are dependent on U.S. Government authorization and funding.
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially harm our business, financial condition or operating results. In that event, the trading price of our stock could decline, and you could lose part or all of your investment .
Additional risks and uncertainties not currently known to us or that we currently believe are immaterial also may materially harm our business, financial condition or operating results. In that event, the trading price of our stock could decline, and you could lose part or all of your investment. 14 Leidos Holdings, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report, “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Report, “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Following contract award, we may encounter significant expense, delay, contract modifications, or even contract loss as a result of our competitors protesting the award of contracts to us in competitive bidding. Any resulting loss or delay of start-up and funding of work under protested contract awards may adversely affect our revenues and profitability.
Following contract award, we may encounter significant expense, delay, contract modifications, or even cancellation of the contract award as a result of our competitors protesting the award of contracts to us. Any resulting loss or delay of start-up and funding of work under protested contract awards may adversely affect our revenues and profitability.
Any future impairment of goodwill or other intangible assets could have a negative impact on our results of operations and shareholders' equity in the period in which they are recognized. For additional information on our accounting policies related to impairment of goodwill, see our discussion under “Critical Accounting Estimates” in “Item 7.
Any future impairment of goodwill could have a negative impact on our results of operations and shareholders’ equity in the period in which they are recognized. For additional information on our accounting policies related to impairment of goodwill, see our discussion under “Critical Accounting Estimates” in “Item 7.
If insurance or other risk transfer mechanisms are unavailable or insufficient to recover all costs or if we experience a significant disruption to our business due to a natural disaster, it could adversely affect our financial position, results of operations, and cash flows. There is also an increasing concern over the risks of climate change and related environmental sustainability matters.
If insurance or other risk transfer mechanisms are unavailable or insufficient to recover all costs or if we experience a significant disruption to our business due to a natural disaster, it could adversely affect our financial position, results of operations, and cash flows. There are also concerns over the risks of climate change and related environmental sustainability matters.
Our total revenues from contracts with the U.S. government (including all branches of the U.S. military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government generated approximately 87% in fiscal 2023, 86% in fiscal 2022, and 87% in fiscal 2021.
Our revenues from contracts with the U.S. government (including all branches of the U.S. military), either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government, generated approximately 87% of our total revenue in both fiscal 2024 and 2023, and 86% in fiscal 2022.
Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 49% of our total revenues for fiscal 2023, and 44% of our total revenues for both fiscal 2022 and 2021. U.S. government and DoD spending levels are difficult to predict and subject to significant risk.
Intelligence Community, either as a prime contractor or subcontractor to other contractors, represented approximately 48% of our total revenues for fiscal 2024, 49% of our total revenues for fiscal 2023 and 44% of our total revenues for fiscal 2022. U.S. government and DoD spending levels are difficult to predict and subject to significant risk.
Leidos Holdings, Inc. Annual Report - 18 Table of Contents PART I Industry and Economic Risks We depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects could be adversely affected.
Annual Report Table of Contents PART I INDUSTRY AND ECONOMIC RISKS We depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects could be adversely affected.
They also review the adequacy of the contractor’s compliance with government standards for its business systems, including a contractor's accounting system, earned value management system, estimating system, materials management and accounting system, property management system, and purchasing system. Leidos Holdings, Inc.
They also review the adequacy of the contractor’s compliance with government standards for its business systems, including a contractor’s accounting system, earned value management system, estimating system, materials management and accounting system, property management system, and purchasing system.
Although our international operations have historically generated a small proportion of our revenues, we are seeking to grow our international business. Our exposure for violating these laws will increase as our non-U.S. presence expands and as we increase sales and operations in foreign jurisdictions.
Although our international operations have historically generated a small proportion of our revenues, we are seeking to grow our international business. Our exposure for violating these laws will increase as our non-U.S. presence expands and as we increase sales and operations in foreign jurisdictions. 34 Leidos Holdings, Inc.
To the extent that proposed and future organizational conflicts of interest laws, regulations, and rules or interpretations thereof limit our ability to successfully compete for new contracts or task orders with the U.S. government, either because of organizational conflicts of interest issues arising from our business, or because companies with which we are affiliated, or with which we otherwise conduct business, create organizational conflicts of interest issues for us, our financial metrics and results of operations could be materially and adversely affected.
To the extent that the U.S. government's OCI laws, regulations, and rules or interpretations thereof limit our ability to successfully compete for new contracts or task orders with the U.S. government, either because of OCI issues arising from our business, or because companies with which we are affiliated, or with which we otherwise conduct business, create OCI interest issues for us, our financial metrics and results of operations could be materially and adversely affected.
Any future epidemic, pandemic, or similar outbreak may have similar impacts, and we cannot currently anticipate the potential impact on our business and results of operations due to any such outbreak.
Any future epidemic, pandemic, or similar outbreak may have similar impacts, and we cannot currently anticipate the potential impact on our business and results of operations.
We have insurance against some cyber-risks and attacks; however, our insurer may deny coverage as to any future claim, our insurance coverage may not be sufficient to offset the impact of a material loss event, and such insurance may increase in cost or cease to be available on commercial terms in the future. Leidos Holdings, Inc.
While we have insurance against some cyber-risks and attacks, our insurer may deny coverage as to any future claim, our insurance coverage may not be sufficient to offset the impact of a material loss event, and such insurance may increase in cost or cease to be available on commercial terms in the future.
Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. One of the significant differences is that the U.S. Government may terminate any of our government contracts, not only for default based on our performance but also at its convenience.
Annual Report Table of Contents PART I Government contract laws and regulations can impose terms or obligations that are different than those typically found in commercial transactions. One of the significant differences is that the U.S. Government may terminate any of our government contracts, not only for default based on our performance but also at its convenience.
Annual Report - 26 Table of Contents PART I The overarching complexity of data privacy and security laws and regulations around the world poses a compliance challenge that could manifest in costs, damages, or liability in other forms as a result of failure to implement proper programmatic controls, failure to adhere to those controls, or the breach of applicable data privacy and security requirements by us, our employees, our business partners (including our service providers, suppliers or subcontractors) or our customers.
The overarching complexity of data privacy and security laws and regulations around the world poses a compliance challenge that could manifest in costs, damages, or liability in other forms as a result of failure to implement proper programmatic controls, failure to adhere to those controls, or the breach of applicable data privacy and security requirements by us, our employees, our business partners (including our service providers, suppliers or subcontractors) or our customers.
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately. We generate revenues under various types of contracts, including cost-reimbursement, FP-IF, T&M, FP-LOE and FFP contracts.
Our earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time, and resources accurately. We generate revenues under various types of contracts, including cost-reimbursement, FPIF, T&M, FPLOE and FFP contracts.
We have expended and may further expend resources to monitor, report on, and adopt policies and practices that we believe will improve alignment with our evolving ESG strategy and goals, as well as ESG-related standards and expectations of legal regimes and stakeholders such as customers, investors, stockholders, raters, employees, and business partners. Leidos Holdings, Inc.
We may be expected to expend resources to monitor, report on, and adopt policies and practices that we believe will improve alignment with our evolving ESG strategy and goals, as well as ESG-related standards and expectations of legal regimes and stakeholders such as customers, investors, stockholders, raters, employees, and business partners. 24 Leidos Holdings, Inc.
In addition, our reputation and customer relationships may be damaged as a result of our practices related to climate change, including our involvement, or our customers’ involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
In addition, our reputation and customer relationships may be negatively impacted as a result of our practices and policies, actual or perceived, related to climate change, including our involvement, or our customers’ involvement, in certain industries or projects associated with causing or exacerbating climate change, as well as any decisions we make to continue to conduct or change our activities in response to considerations relating to climate change.
Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East, and Asia, and the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world, including the ongoing conflict between Russia and Ukraine, the ongoing Israel/Hamas conflict and its regional effects, and increased tensions in Asia, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability.
Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East, and Asia, and the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world, including the ongoing conflict between Russia and Ukraine, the ongoing conflict in the Middle East, which continues to expand, and increased tensions in Asia, have created and may continue to create economic and political uncertainties and impacts that could have a material adverse effect on our business, operations, and profitability.
Increasing scrutiny and changing expectations from governmental organizations, customers, and our employees with respect to our ESG-related practices may impose additional costs on us or expose us to new or additional risks.
Increasing attention and changing expectations from governmental authorities, customers, and our employees with respect to our ESG-related practices may impose additional costs on us or expose us to new or additional risks.
Annual Report - 27 Table of Contents PART I If our ESG practices, including our goals for DEI, environmental sustainability, and information security, do not meet evolving rules and regulations or stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could our attractiveness as an investment, service provider, employer, or business partner.
Annual Report Table of Contents PART I If our practices and disclosures do not meet evolving rules and regulations or our stakeholder expectations and standards (or if we are viewed negatively based on positions we do or do not take or work we do or do not perform or cannot publicly disclose for certain customers and industries), then our reputation, our ability to attract or retain leading experts, employees and other professionals and our ability to attract new business and customers could be negatively impacted, as could our attractiveness as an investment, service provider, employer, or business partner.
Some of our services and operations involve using, handling, or disposing of hazardous substances. These activities and our operations generally subject us to complex and stringent foreign, federal, state, and local environmental, health, and safety laws and regulations, which have tended to become more stringent over time.
Some of our services and operations involve using, handling, or disposing of hazardous substances, including explosive, chemical, biological, or radioactive materials. These activities and our operations generally subject us to complex and stringent foreign, federal, state, and local environmental, health, and safety laws and regulations, which have tended to become more stringent over time.
A finding of significant control deficiencies in our system audits or other reviews can result in decremented billing rates to our U.S. government customers until the control deficiencies are corrected and the DCMA accepts our remediations.
A finding of significant control deficiencies in our business system audits or other reviews can result in the suspension of payments or lower billing rates to our U.S. government customers until the control deficiencies are corrected and the DCMA accepts our remediations.
Annual Report - 21 Table of Contents PART I Moreover, instability in the credit or capital markets in the U.S., including as a result of failures of financial institutions and any related market-wide reduction in liquidity, or concerns or rumors about events of these kinds or similar risks, could affect the availability of credit or our credit ratings, making it relatively difficult or expensive to obtain additional capital at competitive rates, on commercially reasonable terms or in sufficient amounts, or at all, thus making it more difficult or expensive for us to access funds or refinance our existing indebtedness, or obtain financing for acquisitions.
Annual Report 19 Table of Contents PART I Moreover, instability in the credit or capital markets in the U.S. and related market-wide reduction in liquidity, or concerns or rumors about events of these kinds or similar risks, could affect the availability of credit or our credit ratings, making it relatively difficult or expensive to obtain additional capital at competitive rates, on commercially reasonable terms or in sufficient amounts, or at all, thus making it more difficult or expensive for us to access funds or refinance our existing indebtedness, or obtain financing for strategic projects and acquisitions.
Annual Report - 22 Table of Contents PART I Legal and Regulatory Risks Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
LEGAL AND REGULATORY RISKS Our failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.
Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.
Annual Report Table of Contents PART I Investigations, audits, claims, disputes, enforcement actions, litigation, arbitration, or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.
Annual Report - 33 Table of Contents PART I Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.
Internal system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.
For a variety of reasons, the global economy in which we operate has faced, and may continue to face, heightened inflationary pressure, impacting the cost of doing business in both supply and labor markets. These inflationary pressures have been and could continue to be exacerbated by geopolitical turmoil and economic policy actions, and the duration of such pressures is uncertain.
For a variety of reasons, the global economy in which we operate has faced, and may continue to face, heightened inflationary pressure, impacting the cost of doing business in both supply and labor markets. Although inflation has moderated somewhat in 2024, these inflationary pressures have been and could continue to be exacerbated by geopolitical turmoil and economic policy actions.
Examples of events or changes in circumstances indicating that the carrying value of intangible assets may not be recoverable could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, adverse contract acquisition performance, loss of key personnel, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed.
Examples of events could include a significant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, adverse contract acquisition performance, loss of key personnel, or a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or otherwise disposed.
Annual Report - 24 Table of Contents PART I As a result of increased scrutiny on contractors and U.S. government agencies, audits and reviews are conducted rigorously and the applicable standards are strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome.
As a result of increased scrutiny on contractors and U.S. government agencies, audits and reviews are conducted rigorously and the applicable standards are strictly interpreted, increasing the likelihood of an audit or review resulting in an adverse outcome.
Any epidemics, pandemics, or similar outbreaks such as COVID-19 and its variants could create economic uncertainty and disruptions to the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations, that could impair our ability to manage or conduct our business.
Any epidemics, pandemics, or similar outbreaks have in the past created (as in the case of COVID-19 and its variants) and could again create economic uncertainty and disruptions to the global economy that could adversely affect our businesses, or could lead to operational difficulties, including travel limitations, that could impair our ability to manage or conduct our business.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeAnnual Report - 44 Table of Contents PART I Board's Roles and Responsibilities We have a Technology and Innovation Security Committee, comprised of six board members, with relevant backgrounds and experience, that oversees and advises the Board and management on matters involving the Company’s overall strategic direction and significant business risks and opportunities in the areas of technology and information security.
Biggest changeBOARD’S ROLES AND RESPONSIBILITIES We have a Technology and Information Security Committee, comprised of six board members, with relevant backgrounds and experience, that oversees and advises the Board and management on matters involving the Company’s overall strategic direction and significant business risks and opportunities in the areas of technology and information security.
Additionally, we have a Leidos Security Council that is co-chaired by the Chief Information Security Officer and the Chief Security Officer to address “all security hazards” across our global enterprise to ensure cohesion and effectiveness of our combined security governance and risk mitigations. Leidos Holdings, Inc.
Additionally, we have a Leidos Security Council that is co-chaired by the Chief Information Security Officer and the Chief Security Officer to address “all security hazards” across our global enterprise to ensure cohesion and effectiveness of our combined security governance and risk mitigations.
For more information about these risks, please see “Risk Factors – Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position” in this Annual Report on Form 10-K. Leidos Holdings, Inc.
For more information about these risks, please see “Risk Factors – Cybersecurity breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position” in this Annual Report on Form 10-K.
We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations and exercises, and continually evaluate our internal governing policies and procedures to help detect and respond to cybersecurity events in order to reduce harms or impacts from breaches and other information security incidents.
We also conduct periodic internal and third-party assessments to test our cybersecurity controls, perform cyber simulations and exercises, and continually evaluate our internal governing policies and procedures to help detect and respond to cybersecurity events in order to reduce harms or impacts from breaches and other information security incidents. Leidos Holdings, Inc.
Leidos CSIRT also provides intrusion monitoring of networks and information systems and continuously monitors the Leidos computing environments and performs triage and analysis of events to identify potential incidents. We employ multiple security and monitoring devices and applications throughout the Company to identify, alert, report and log all authorized and unauthorized access to the Leidos enterprise networks.
Leidos CSIRT also provides intrusion monitoring of networks and information systems and continuously monitors the Leidos computing environments and performs triage and analysis of events to identify potential incidents. We employ multiple security and monitoring systems and applications throughout the Company to identify, alert, report and log authorized and unauthorized access to the Leidos systems and networks.
Our efforts include regular monitoring of Leidos-managed programs for internal and external cybersecurity threats, providing cybersecurity training to our employees during the onboarding process and annually, and continually reviewing and refining formal policies and procedures designed to deter, identify and remediate cybersecurity incidents.
Our efforts include regular monitoring of Leidos-managed systems and networks for internal and external cybersecurity threats, providing cybersecurity training to our employees during the onboarding process and annually, and continually reviewing and refining formal policies and procedures designed to deter, identify and remediate cybersecurity incidents.
Governance Management's Responsibilities Our global information security program is led by our corporate Chief Information Security Officer, who works closely with key corporate functional and line of business stakeholders.
Annual Report 37 Table of Contents PART I GOVERNANCE MANAGEMENT’S RESPONSIBILITIES Our global information security program is led by our corporate Chief Information Security Officer, who works closely with key corporate functional and line of business stakeholders.
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Annual Report - 45 Table of Contents PART I

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAs of December 29, 2023, we owned the following properties: Location Number of buildings Square footage Acreage Huntsville, Alabama 7 801,000 90.7 Columbia, Maryland 1 95,000 7.3 Orlando, Florida 1 85,000 8.5 Oak Ridge, Tennessee 1 83,000 8.4 Decatur, Alabama 1 50,000 5.0 The nature of our business is such that there is no practicable way to relate occupied space to our reportable segments.
Biggest changeAs of January 3, 2025, we owned the following properties: Location Number of buildings Square footage Acreage Huntsville, Alabama 7 801,000 90.7 Columbia, Maryland 1 95,000 7.3 Orlando, Florida 1 85,000 8.5 Oak Ridge, Tennessee 1 83,000 8.4 Decatur, Alabama 1 50,000 5.0 The nature of our business is such that there is no practicable way to relate occupied space to our reportable segments. 38 Leidos Holdings, Inc.
Our major locations are in the Washington, D.C., metropolitan area, where we occupy a combination of leased and owned floor space of approximately 1.9 million square feet. We also have employees working at customer sites throughout the United States and in other countries.
Our major locations are in the Washington, D.C., metropolitan area, where we occupy a combination of leased and owned floor space of approximately 1.8 million square feet. We also have employees working at customer sites throughout the United States and in other countries.
Item 2. Properties As of December 29, 2023, we conducted our operations in 427 locations in 44 states, the District of Columbia and various foreign countries. We occupy approximately 8.5 million square feet of floor space. Of this amount, we own approximately 1.1 million square feet, and the remaining balance is leased.
Item 2. Properties As of January 3, 2025, we conducted our operations in 412 locations in 44 states, the District of Columbia and various foreign countries. We occupy approximately 8.4 million square feet of floor space. Of this amount, we own approximately 1.1 million square feet, and the remaining balance is leased.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeAdditional information regarding such investigations and reviews is set forth in "Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Biggest changeAdditional information regarding such investigations and reviews is set forth in “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10- K.
Item 3. Legal Proceedings We have provided information about legal proceedings in which we are involved in "Note 21—Commitments and Contingencies" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. In addition, we are routinely subject to investigations and reviews relating to compliance with various laws and regulations.
Item 3. Legal Proceedings We have provided information about legal proceedings in which we are involved in “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. In addition, we are routinely subject to investigations and reviews relating to compliance with various laws and regulations.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeWaterston served as Chief Human Resources Officer for Pratt & Whitney from November 2015 to March 2022, Chief Human Resources Officer for United Technologies Building & Industrial Systems and Chief Human Resources Officer for Otis Elevator Company. James F. Carlini 59 Mr. Carlini has served as Chief Technology Officer of Leidos since June 2019. Prior to joining Leidos, Mr.
Biggest changeJames F. Carlini 59 Mr. Carlini has served as Chief Technology Officer of Leidos since June 2019. Prior to joining Leidos, Mr. Carlini founded and operated a national security consultancy from May 2006 to October 2018. Previously, Mr.
He previously served as Chair of the North American Board and a member of the Global Board of the Institute of Internal Auditors ("IIA") from April 2022 to March 2023. He has been involved as a volunteer leader with the IIA since becoming a member in 2011. Mr.
He previously served as Chair of the North American Board and a member of the Global Board of the Institute of Internal Auditors (“IIA”) from April 2022 to March 2023. He has been involved as a volunteer leader with the IIA since becoming a member in 2011. Mr.
Hull served as the CIO of the Lockheed Martin Corporation's Information Systems & Global Solutions business area from January 2013 through August 2016, ensuring operations and security of IT systems for over 20,000 employees. Mr. Hull has over 30 years of experience in the IT field. Leidos Holdings, Inc. Annual Report - 48 Table of Contents PART II
Hull served as the CIO of the Lockheed Martin Corporation’s Information Systems & Global Solutions business area from January 2013 through August 2016, ensuring operations and security of IT systems for over 20,000 employees. Mr. Hull has over 30 years of experience in the IT field. 42 Leidos Holdings, Inc. Annual Report Table of Contents Part II
Hull has served as the President for the Digital Modernization Sector since January 2024. Previously, he served as Executive Vice President and Operations Manager for Enterprise and Cyber Solutions at Leidos from March 2022 through December 2023, and Chief Information Officer ("CIO") at Leidos from August 2016 through March 2022. Prior to joining Leidos, Mr.
Hull has served as the President for the Digital Modernization Sector since January 2024. Previously, he served as Executive Vice President and Operations Manager for Enterprise and Cyber Solutions at Leidos from March 2022 through December 2023, and Chief Information Officer (“CIO”) at Leidos from August 2016 through March 2022. Prior to joining Leidos, Mr.
Bell was President of Rolls-Royce Defense Aerospace, having joined as President, Customer Business, North America in mid-2012. Christopher R. Cage 52 Mr. Cage has served as Executive Vice President and Chief Financial Officer since July 2021.
Bell was President of Rolls-Royce Defense Aerospace, having joined as President, Customer Business, North America in mid-2012. Christopher R. Cage 53 Mr. Cage has served as Executive Vice President and Chief Financial Officer since July 2021.
She served as Vice President and General Manager of the Missile and Weapon Systems ("MWS"), division of Boeing Defense, Space & Security, from April 2021 to November 2022, and prior to that role, as Vice President of Weapons for the MWS division from October 2018 to April 2021. Steve Hull 53 Mr.
She served as Vice President and General Manager of the Missile and Weapon Systems (“MWS”), division of Boeing Defense, Space & Security, from April 2021 to November 2022, and prior to that role, as Vice President of Weapons for the MWS division from October 2018 to April 2021. Steve Hull 55 Mr.
All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal. Name of officer Age Position(s) with the company and prior business experience Thomas A. Bell 63 Mr. Bell serves as the Chief Executive Officer of Leidos. He joined Leidos as CEO in May 3, 2023. Mr.
All such persons have been elected to serve until their successors are elected and qualified or until their earlier resignation or removal. Name of Officer Age Position(s) with the company and prior business experience Thomas A. Bell 64 Mr. Bell serves as the Chief Executive Officer of Leidos. He joined Leidos as CEO on May 3, 2023. Mr.
Stevens served Lockheed Martin Corporation in a variety of executive level positions for over 20 years, most recently as Vice President of Global Solutions under the Information Systems & Global Solutions business, and has also been integral to the merger and acquisition of several companies during his career. He serves on the Board of Directors for Cornerstones. Leidos Holdings, Inc.
Stevens served Lockheed Martin Corporation in a variety of executive level positions for over 20 years, most recently as Vice President of Global Solutions under the Information Systems & Global Solutions business, and has also been integral to the merger and acquisition of several companies during his career.
Fasano also served as the Company's Chief of Business Development and Strategy Officer, and led the separation from the Lockheed Martin Corporation and the integration of the Information Systems & Global Solutions Business into Leidos. Prior to joining Leidos, Mr. Fasano served Lockheed Martin Corporation for over 30 years. Jerald S. Howe, Jr. 68 Mr.
Fasano also served as the Company’s Chief of Business Development and Strategy Officer, and led the separation from the Lockheed Martin Corporation and the integration of the Information Systems & Global Solutions Business into Leidos. Prior to joining Leidos, Mr. Fasano served Lockheed Martin Corporation for over 30 years. Daniel J. Antal 53 Mr.
He has served in several capacities throughout his 25-year tenure with Leidos, including Senior Vice President, Chief Accounting Officer and Corporate Controller, Senior Vice President for Financial Planning and Analysis and Chief Financial Officer for the Health Group. Leidos Holdings, Inc.
He has served in several capacities throughout his 25-year tenure with Leidos, including Senior Vice President, Chief Accounting Officer and Corporate Controller, Senior Vice President for Financial Planning and Analysis and Chief Financial Officer for the Health Group. Daniel Atkinson 46 Mr. Atkinson has served as the Senior Vice President, Chief Accounting Officer and Corporate Controller since 2024.
Stevens has served as President for the National Security Sector since January 2024. Previously, he served as President for our Intelligence Group since July 2021, and before that, as Chief of Business Development and Strategy. Prior to joining Leidos, Mr.
Previously, he served as President for our Intelligence Group since July 2021, and before that, as Chief of Business Development and Strategy. Prior to joining Leidos, Mr.
Sanglier has also served as a member of The IIA’s Audit Committee, Guidance Development Committee, North American Publications Advisory Committee and multiple task forces. Maureen Waterston 59 Ms. Waterston has served as Chief Human Resources Officer for Leidos since March 2022. Ms.
Sanglier has also served as a member of The IIA’s Audit Committee, Guidance Development Committee, North American Publications Advisory Committee and multiple task forces. Leslie Fautsch 52 Ms. Fautsch has served as Chief Human Resources Officer of Leidos since October 2024. Ms.
Item 4. Mine Safety Disclosures Not applicable. Executive Officers of the Registrant The following is a list of the names and ages (as of February 13, 2024) of our executive officers, indicating all positions and offices held by each such person and each such person’s business experience during at least the past five years.
Annual Report 39 Table of Contents Executive Officers of the Registrant The following is a list of the names and ages (as of February 11, 2025) of our executive officers, indicating all positions and offices held by each such person and each such person’s business experience during at least the past five years.
M. Victoria Schmanske 61 Ms. Schmanske has served as the President of the Commercial and International Sector since January 2024. Previously, she served as the Executive Vice President of Leidos Corporate Operations since July 2021, and before that, as President for the Intelligence Group. Ms.
Previously, she served as the Executive Vice President of Leidos Corporate Operations since July 2021, and before that, as President for the Intelligence Group. Ms. Schmanske has also served as the Leidos Chief Administrative Officer and Deputy President and Chief Operations Officer for the Health Group. Prior to joining Leidos, Ms.
Prior to that role, Ms. Porter served as the Department of Defense Information Networks & Mission Partner Program Director. Prior to joining Leidos, Ms. Porter served Lockheed Martin Corporation for over 20 years in several capacities, most recently as Director of Army IT, a portfolio of IT programs for the U.S. Army . Roy Stevens 55 Mr.
Prior to that role, Ms. Porter served as the Department of Defense Information Networks & Mission Partner Program Director. Prior to joining Leidos, Ms. Porter served Lockheed Martin Corporation in several capacities, most recently as Director of Energy Initiatives, Corporate Engineering and Technology. 40 Leidos Holdings, Inc.
Carlini founded and operated a national security consultancy from May 2006 to October 2018. Previously, Mr. Carlini served at Northrop Grumman Electronic Systems from July 2002 to May 2006, with his last position being Vice President of Advanced Development Programs.
Carlini served at Northrop Grumman Electronic Systems from July 2002 to May 2006, with his last position being Vice President of Advanced Development Programs. He also served at the Defense Advanced Research Projects Agency (DARPA) for six years, with his last position being Director of the Special Projects Office. Mr.
Prior to joining Leidos, she served as Chief Financial Officer of CACI Products Company Inc. and Senior Manager in Ernst & Young’s Aerospace and Defense audit practice. Gerard A. Fasano 58 Mr. Fasano has served as Executive Vice President, Chief Growth Officer since January 2024. Previously, he served as President for our Defense Group since October 2018. Mr.
Fasano has served as Executive Vice President, Chief Growth Officer since January 2024. Previously, he served as President for our Defense Group since October 2018. Mr.
She serves on multiple outside boards to include the University of Virginia School of Data Science Advisory Board, the Virginia Engineering Foundation Board of Directors, and The Women’s Center. Cindy Gruensfelder 58 Ms. Gruensfelder has served as the President of the Defense System Sector since January 2024. Ms.
Schmanske served Lockheed Martin Corporation for over 30 years, most recently as Vice President for Operations IS&GS. She serves on multiple outside boards to include the University of Virginia School of Data Science Advisory Board, the Virginia Engineering Foundation Board of Directors, and The Women’s Center. Leidos Holdings, Inc.
Annual Report - 46 Table of Contents PART I Name of officer Age Position(s) with the company and prior business experience Carly E. Kimball 48 Ms. Kimball has served as the Executive Vice President, Chief Performance Officer since January 2024. In addition, she served as Senior Vice President, Chief Accounting Officer and Corporate Controller since July 2021. Ms.
Annual Report 41 T able of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Age Position(s) with the company and prior business experience Cindy Gruensfelder 59 Ms. Gruensfelder has served as the President of the Defense Systems Sector since January 2024. Ms.
Annual Report - 47 Table of Contents PART I Name of officer Age Position(s) with the company and prior business experience Thomas C. Sanglier 63 Mr. Sanglier has served as Senior Vice President and Chief Audit Executive since July 2022. Prior to joining Leidos, Mr.
Annual Report T able of Contents EXECUTIVE OFFICERS OF THE REGISTRANT Name of Officer Age Position(s) with the company and prior business experience Roy Stevens 56 Mr. Stevens has served as President for the National Security Sector since January 2024.
He also served at the Defense Advanced Research Projects Agency (DARPA) for six years, with his last position being Director of the Special Projects Office. Mr. Carlini is a former member of the United States Army Science Board and the United States Air Force Scientific Advisory Board. He is currently a member of the Department of Defense’s Defense Science Board.
Carlini is a former member of the United States Army Science Board and the United States Air Force Scientific Advisory Board. He is currently a member of the Department of Defense’s Defense Science Board. M. Victoria Schmanske 62 Ms. Schmanske has served as the President of the Commercial and International Sector since January 2024.
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Kimball also served as the Company’s Assistant Corporate Controller. Ms. Kimball has over 25 years of experience leading large teams and has extensive proficiency in accounting, auditing, financial reporting, acquisitions and integrations, as well as business operations.
Added
Item 4. Mine Safety Disclosures Not applicable. Leidos Holdings, Inc.
Removed
Howe has served as Executive Vice President and General Counsel since July 2017 and as Corporate Secretary since September 2023. Prior to joining Leidos, Mr. Howe was a partner at Fried, Frank, Harris, Shriver & Jacobson LLP, where he served in the firm’s litigation, government contracts, mergers and acquisitions and aerospace and defense practices. Prior to joining Fried Frank, Mr.
Added
Previously, he served as the Company's Assistant Corporate Controller since June 2021. Prior to joining Leidos, Mr. Atkinson was Director of Technical Accounting and Revenue Recognition at Booz Allen Hamilton from April 2018 until June 2021. He also held key leadership roles within the controller's organization at CSRA, Inc. from October 2016 to April 2018. Gerard A. Fasano 59 Mr.
Removed
Howe held general counsel positions at TASC, a leading aerospace and defense company, and at Veridian Corporation, a publicly traded company that provided advanced technology services and solutions to the intelligence community, military and homeland defense agencies. Steve Cook 56 Mr. Cook has served as President for Leidos Dynetics (formerly Dynetics Group) since April 2022.
Added
Antal has served as Executive Vice President and General Counsel since April 2024. He rejoined Leidos in April 2024 after serving as General Counsel for Rolls-Royce Defense and North America since January 2021. Prior to joining Leidos, Mr. Antal served as U.S. senior counsel for a Canadian based A&E firm, and previously spent 10 years with MWH Global.
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He previously served as Deputy Group President and Operations Manager of the Leidos Innovations Center from February 2020 to March 2022. Mr. Cook joined Dynetics in 2009 as the director of space technologies before leading the Dynetics Space Division and then later overseeing Dynetics’ corporate development efforts.
Added
He held a variety of leadership roles at MWH, including as Associate General Counsel, Director of Risk Management for the Middle East, and completed a two-year assignment in the UK in operational capacity, where he led the integration of a strategic acquisition and assumed the role of International Managing Director. Elizabeth M. Porter 54 Ms.
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Prior to joining Dynetics, he enjoyed a long and successful career at NASA, serving in such roles as the deputy manager of NASA’s Marshall Space Transportation Programs and Projects Office as well as the manager of the Ares Projects Office at the Marshall Space Flight Center in Huntsville. Elizabeth M. Porter 53 Ms.
Added
He serves on the Board of Directors for the Intelligence and National Security Alliance and Cornerstones as well as the Advisory Board for the Center for a New American Security. Thomas C. Sanglier 64 Mr. Sanglier has served as Senior Vice President and Chief Audit Executive since July 2022. Prior to joining Leidos, Mr.
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Waterston has over 25 years of experience overseeing talent, recruitment, and development; employee and labor relations; compensation and benefits; and diversity and inclusion across a global workforce. Prior to joining Leidos, Ms.
Added
Fautsch has held several key leadership roles at Leidos, including Senior Vice President for Human Resources Operations and Total Rewards, Vice President of Human Resources Strategic Operations, and Vice President of Human Resources for corporate and enterprise functions. Prior to joining Leidos in 2011, she held senior leadership roles in Human Resources management, employee relations, and ethics at Northrop Grumman.
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Schmanske has also served as the Leidos Chief Administrative Officer and Deputy President and Chief Operations Officer for the Health Group. Prior to joining Leidos, Ms. Schmanske served Lockheed Martin Corporation for over 30 years, most recently as Vice President for Operations IS&GS.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAnnual Report - 49 Table of Contents PART II Comparison of Cumulative Total Return Company/Market/Peer Group 12/28/2018 1/3/2020 1/1/2021 12/31/2021 12/30/2022 12/29/2023 Leidos Inc. $ 100.00 $ 193.07 $ 206.95 $ 177.59 $ 213.19 $ 222.79 S&P 500 Composite Index $ 100.00 $ 132.82 $ 157.02 $ 202.09 $ 165.49 $ 205.59 S&P 500 IT Services Index $ 100.00 $ 142.47 $ 173.97 $ 182.45 $ 148.63 $ 195.36 Purchases of Equity Securities by the Issuer and Affiliated Purchasers The following table presents information related to the repurchases of our common stock during the quarter ended December 29, 2023: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) September 30, 2023 — $ — — 14,934,512 October 1, 2023 - October 31, 2023 — — — 14,934,512 November 1, 2023 - November 30, 2023 1,669,887 104.56 1,669,887 13,264,625 December 1, 2023 - December 29, 2023 233,306 107.35 233,306 13,031,319 Total 1,903,193 $ 104.90 1,903,193 (1) The total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.
Biggest changeS&P 500 Composite Index S&P 500 IT Services Index Company/Market/Peer Group 1/3/2020 1/1/2021 12/31/2021 12/30/2022 12/29/2023 1/3/2025 Leidos Inc. $ 100.00 $ 107.22 $ 91.99 $ 110.43 $ 115.41 $ 158.58 S&P 500 Composite Index $ 100.00 $ 116.11 $ 147.34 $ 118.69 $ 147.45 $ 183.70 S&P 500 IT Services Index $ 100.00 $ 120.77 $ 125.47 $ 100.99 $ 132.74 $ 147.85 PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS The following table presents information related to the repurchases of our common stock during the quarter ended January 3, 2025: Period Total Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Repurchase Plans or Programs Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (2) September 28, 2024 - September 30, 2024 62.00 $ 157.06 — 9,819,502 October 1, 2024 - October 31, 2024 — — — 9,819,502 November 1, 2024 - November 30, 2024 1,471,766 169.86 1,471,766 8,347,736 December 1, 2024 - December 31, 2024 942,326 159.18 942,326 7,405,410 January 1, 2025 - January 3, 2025 — — — 7,405,410 Total 2,414,154 $ 165.69 2,414,092 (1) The total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.
The number of stockholders of record of our common stock is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers or nominees. Dividend Policy During fiscal 2023 and 2022, we declared and paid quarterly dividends totaling $1.46 and $1.44 per share, respectively, of Leidos common stock.
The number of stockholders of record of our common stock is not representative of the number of beneficial owners due to the fact that many shares are held by depositories, brokers or nominees. DIVIDEND POLICY During fiscal 2024 and 2023, we declared and paid quarterly dividends totaling $1.54 and $1.46 per share, respectively, of Leidos common stock.
Stock Performance Graph This stock performance graph shall not be deemed "soliciting material" or to be "filed" with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Leidos under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
STOCK PERFORMANCE GRAPH This stock performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Leidos under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
The following graph compares the total cumulative five-year return on Leidos common stock through December 29, 2023, to two indices: (i) the Standard & Poor's 500 Composite index and (ii) the Standard & Poor's 500 IT Services Industry index. The graph assumes an initial investment of $100 on December 28, 2018, and that dividends, if any, have been reinvested.
The following graph compares the total cumulative five-year return on Leidos common stock through January 3, 2025, to two indices: (i) the Standard & Poor’s 500 Composite index and (ii) the Standard & Poor’s 500 IT Services Industry index. The graph assumes an initial investment of $100 on January 3, 2020, and that dividends, if any, have been reinvested.
There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors' discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018.
There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors’ discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018. 44 Leidos Holdings, Inc. Annual Report Table of Contents PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange ("NYSE") under the ticker symbol "LDOS." Holders of Common Stock As of February 6, 2024, there were approximately 19,005 holders of record of Leidos common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed on the New York Stock Exchange (“NYSE”) under the ticker symbol “LDOS.” HOLDERS OF COMMON STOCK As of February 4, 2025, there were approximately 16,202 holders of record of Leidos common stock.
The comparisons in the graph are required by the SEC, based upon historical data and are not intended to forecast or be indicative of possible future performance of Leidos common stock. Leidos Holdings, Inc.
The comparisons in the graph are required by the SEC, based upon historical data and are not intended to forecast or be indicative of possible future performance of Leidos common stock. Leidos Holdings, Inc. Annual Report 43 Table of Contents PART II COMPARISON OF CUMULATIVE TOTAL RETURN Leidos Holdings, Inc.
The shares may be repurchased from time to time in one or more open market repurchases or privately negotiated transactions, including accelerated share repurchase transactions.
(2) In February 2022, our Board of Directors authorized a share repurchase program of up to 20 million shares of our outstanding common stock. The shares may be repurchased from time to time in one or more open market repurchases or privately negotiated transactions, including accelerated share repurchase transactions.
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Leidos Holdings, Inc. Annual Report - 50 Table of Contents PART II (2) In February 2022, our Board of Directors authorized a share repurchase program of up to 20 million shares of our outstanding common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeAnnual Report - 53 Table of Contents PART II Results of Operations Our results of operations for the periods presented were as follows: Year Ended 2023 to 2022 December 29, 2023 December 30, 2022 Dollar change Percent change (dollars in millions) Revenues $ 15,438 $ 14,396 $ 1,042 7 % Cost of revenues 13,194 12,312 882 7 % Selling, general and administrative expenses 942 951 (9) (1) % Acquisition, integration and restructuring costs 24 17 7 41 % Goodwill impairment charges 596 — 596 NM Asset impairment charges 91 40 51 128 % Equity earnings of non-consolidated subsidiaries (30) (12) (18) 150 % Operating income 621 1,088 (467) (43) % Non-operating expense, net (218) (202) (16) 8 % Income before income taxes 403 886 (483) (55) % Income tax expense (195) (193) (2) 1 % Net income 208 693 (485) (70) % Less: net income attributable to non-controlling interest 9 8 1 13 % Net income attributable to Leidos common stockholders $ 199 $ 685 $ (486) (71) % Operating margin 4.0 % 7.6 % NM - Not meaningful Segment and Corporate Results Year Ended 2023 to 2022 Defense Solutions December 29, 2023 December 30, 2022 Dollar change Percent change (dollars in millions) Revenues $ 8,732 $ 8,244 $ 488 6 % Operating income 636 541 95 18 % Operating margin 7.3 % 6.6 % The increase in revenues for fiscal 2023 as compared to fiscal 2022 was primarily attributable to program wins, a net increase in volumes on certain programs and a $94 million net increase in revenues related to our Cobham Special Mission acquisition made in the last quarter of fiscal 2022.
Biggest changeAnnual Report 47 Table of Contents PART II RESULTS OF OPERATIONS Our results of operations for the periods presented were as follows: Year Ended 2024 to 2023 2023 to 2022 (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 16,662 $ 15,438 $ 14,396 8 % 7 % Cost of revenues 13,864 13,194 12,312 5 % 7 % Selling, general and administrative expenses 983 942 951 4 % (1) % Acquisition, integration and restructuring costs 16 24 17 (33) % 41 % Goodwill impairment charges — 596 — NM NM Asset impairment charges 11 91 40 (88) % 128 % Equity earnings of non-consolidated subsidiaries (39) (30) (12) (30) % (150) % Operating income 1,827 621 1,088 194 % (43) % Non-operating expense, net (188) (218) (202) (14) % (8) % Income before income taxes 1,639 403 886 NM (55) % Income tax expense (388) (195) (193) 99 % 1 % Net income 1,251 208 693 NM (70) % Less: net (loss) income attributable to non-controlling interest (3) 9 8 (133) % 13 % Net income attributable to Leidos common stockholders $ 1,254 $ 199 $ 685 NM (71) % Operating margin 11.0 % 4.0 % 7.6 % NM - Not meaningful SEGMENT AND CORPORATE RESULTS Year Ended 2024 to 2023 2023 to 2022 National Security & Digital (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 7,365 $ 7,196 $ 6,745 2 % 7 % Operating income 720 672 606 7 % 11 % Operating margin 9.8 % 9.3 % 9.0 % The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes on certain programs, program wins and net write-ups, partially offset by the completion of certain contracts.
Our significant initiatives include the following: • achieving annual revenue growth through internal collaboration and better leveraging of key differentiators across our company and the deployment of resources and investments into profitable growth markets; • continued improvement in our back-office infrastructure and related business processes for greater effectiveness and efficiency across all business functions; and • disciplined deployment of our cash resources and use of our capital structure to enhance shareholder value while retaining an appropriate amount of financial leverage.
Our significant initiatives include the following: u achieving annual revenue growth through internal collaboration and better leveraging of key differentiators across our company and the deployment of resources and investments into profitable growth markets; u continued improvement in our back-office infrastructure and related business processes for greater effectiveness and efficiency across all business functions; and u disciplined deployment of our cash resources and use of our capital structure to enhance shareholder value while retaining an appropriate amount of financial leverage.
Senior unsecured Registered Notes: $500 million 3.625% notes, due May 2025 $750 million 4.375% notes, due May 2030 $1,000 million 2.300% notes, due February 2031 $750 million 5.750% notes, due March 2033 Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended.
Senior unsecured Registered Notes issued by Leidos, Inc.: $500 million 3.625% notes, due May 2025 $750 million 4.375% notes, due May 2030 $1,000 million 2.300% notes, due February 2031 $750 million 5.750% notes, due March 2033 Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Leidos Holdings, Inc.'s ("Leidos") financial condition, results of operations and quantitative and qualitative disclosures about business environment and trends and market risk should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of Leidos Holdings, Inc.’s (“Leidos”) financial condition, results of operations and quantitative and qualitative disclosures about business environment and trends and market risk should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K.
We calculate net bookings as the year’s ending backlog, plus the year’s revenues, less the prior year’s ending backlog and any impacts from foreign currency or acquisitions and divestitures. Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts. We segregate our backlog into two categories as follows: • Funded Backlog.
We calculate net bookings as the year’s ending backlog, plus the year’s revenues, less the prior year’s ending backlog and any impacts from foreign currency or acquisitions and divestitures. Backlog represents the estimated amount of future revenues to be recognized under negotiated contracts. We segregate our backlog into two categories as follows: u Funded Backlog.
Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase ("ASR") agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.
Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase (“ASR”) agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements.
General Services Administration ("GSA") contract vehicles, have increased competition for U.S. government contracts, reduced backlogs by shortening periods of performance on contracts and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.
General Services Administration (“GSA”) contract vehicles, have increased competition for U.S. government contracts, reduced backlogs by shortening periods of performance on contracts and increased pricing pressure. We expect that a majority of the business that we seek in the foreseeable future will be awarded through a competitive bidding process.
Government Markets We generated approximately 87% of our total revenues from contracts with the U.S. government in fiscal 2023, as compared to 86% of our total revenues from contracts with the U.S. government in fiscal 2022, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.
GOVERNMENT MARKETS We generated approximately 87% of our total revenues from contracts with the U.S. government in fiscal 2024 and 2023 as compared to 86% of our total revenues from contracts with the U.S. government in fiscal 2022, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.
Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion ("EAC"), which require us to use estimates of the revenue and cost associated with the design, manufacture and delivery of our offerings and services.
Under the cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion (“EAC”), which require us to use estimates of the revenue and cost associated with the design, manufacture and delivery of our offerings and services.
During the third quarter of fiscal 2023, the SES reporting unit refined its portfolio and made strategic business decisions to exit certain product offerings, as well as cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.
During fiscal 2023, the SES reporting unit refined its portfolio and made strategic business decisions to exit certain product offerings, as well as cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.
Revenues under contracts with the DoD and U.S. Intelligence Community, including subcontracts under which the DoD or the U.S. Intelligence Community is the ultimate purchaser, represented approximately 49% and 44% of our total revenues for fiscal 2023 and 2022, respectively.
Revenues under contracts with the DoD and U.S. Intelligence Community, including subcontracts under which the DoD or the U.S. Intelligence Community is the ultimate purchaser, represented approximately 48%, 49% and 44% of our total revenues for fiscal 2024, 2023 and 2022, respectively.
Non-Operating Expense, Net Non-operating expense, net increased by $16 million for fiscal 2023 as compared to fiscal 2022, primarily due to a net increase in interest expense driven by higher interest rates and refinancing activities. Provision for Income Taxes Our effective tax rate was 48.4% and 21.8% in fiscal 2023 and 2022, respectively.
Non-operating expense, net increased by $16 million for fiscal 2023 as compared to fiscal 2022, primarily due to a net increase in interest expense driven by higher interest rates and refinancing activities. PROVISION FOR INCOME TAXES Our effective tax rate was 23.7%, 48.4% and 21.8% in fiscal 2024, 2023 and 2022, respectively.
The decrease was primarily due a net decrease of $296 million in stock repurchases driven by the accelerated share repurchase agreement in the prior year and an increase of $1.4 billion in proceeds received from the issuance of debt in the current year, partially offset by an increase of $1.5 billion in payments of debt. Leidos Holdings, Inc.
The decrease was primarily due a net decrease of $296 million in stock repurchases driven by the accelerated share repurchase agreement in the prior year and an increase of $1.4 billion in proceeds received from the issuance of debt in the current year, partially offset by an increase of $1.5 billion in payments of debt.
In fiscal 2022, we entered into an ASR with a financial institution to repurchase shares of our outstanding common stock. We paid $500 million to the financial institution and received 4.8 million shares (see "Note 16—Earnings Per Share" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K). All shares delivered were immediately retired.
In fiscal 2022, we entered into an ASR with a financial institution to repurchase shares of our outstanding common stock. We paid $500 million to the financial institution and received 4.8 million shares (see “Note 16—Earnings Per Share” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K). All shares delivered were immediately retired.
The increase in operating income for fiscal 2023 as compared to fiscal 2022 was primarily attributable to increased earnings from incentive awards and a net increase in volumes on certain programs, partially offset by a net decrease in the recovery of expenditures in the medical examination business.
The increase in operating income for fiscal 2023 as compared to fiscal 2022, was primarily attributable to a net increase in earnings from incentive awards and a net increase in volumes on certain programs, partially offset by a net decrease in the recovery of expenditures in the medical examination business and the completion of certain contracts.
Annual Report - 52 Table of Contents PART II Operating Expenses and Income Trend. For fiscal 2023, operating expenses increased by $1.5 billion, or 11%, compared to fiscal 2022. Operating margin for fiscal 2023 was 4.0% compared to 7.6% for fiscal 2022. Operating income was $621 million, a $467 million decrease compared to fiscal 2022.
Annual Report Table of Contents PART II For fiscal 2023, operating expenses increased by $1.5 billion, or 11%, compared to fiscal 2022. Operating margin for fiscal 2023 was 4.0% compared to 7.6% for fiscal 2022. Operating income was $621 million, a $467 million decrease compared to fiscal 2022.
We estimate variable consideration at the most probable amount that we expect to be entitled to, based on the assessment of the contractual variable fee criteria, complexity of work and related risks, extent of customer discretion, amount of variable consideration received historically and the potential of significant reversal of revenue.
We estimate variable consideration at the most probable amount that we expect to be entitled to, based on the assessment of the contract specific variable fee criteria, complexity of work and related risks, extent of customer discretion, amount of variable consideration received historically and the potential of significant reversal of revenue.
The repurchase program may be accelerated, suspended, delayed or discontinued at any time. During fiscal 2023 and 2021, we made open market repurchases of our common stock for an aggregate purchase price of $225 million and $237 million, respectively. There were no open market share repurchases in fiscal 2022.
The repurchase program may be accelerated, suspended, delayed or discontinued at any time. During fiscal 2024 and 2023, we made open market repurchases of our common stock for an aggregate purchase price of $850 million and $225 million, respectively. There were no open market share repurchases in fiscal 2022.
For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility.
For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility. 52 Leidos Holdings, Inc.
We have identified the following accounting policies as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. • Revenue Recognition • Goodwill and Intangible Assets Revenue Recognition We perform work under various types of contracts, which include FFP, T&M, FP-LOE, cost-plus-fixed-fee, cost-plus-award-fee, cost-plus-incentive-fee and fixed-price-incentive-fee contracts.
We have identified the following accounting policies as critical because they require significant judgments and assumptions about highly complex and inherently uncertain matters and the use of reasonably different estimates and assumptions could have a material impact on our results of operations or financial condition. u Revenue Recognition u Goodwill REVENUE RECOGNITION We perform work under various types of contracts, which include FFP, T&M, FPLOE, cost-plus-fixed-fee, cost-plus-award-fee, cost-plus-incentive-fee and fixed-price-incentive-fee contracts.
We have letters of credit outstanding principally related to performance guarantees on contracts and surety bonds outstanding principally related to performance and subcontractor payment bonds as described in "Note 21—Commitments and Contingencies" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
We have letters of credit outstanding principally related to performance guarantees on contracts and surety bonds outstanding principally related to performance and subcontractor payment bonds as described in “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Our future payments do not include $114 million of income tax liabilities, primarily as a result of uncertain tax positions, and the timing of such payments, if any, cannot be reasonably estimated. For additional information, see "Note 18—Income Taxes" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
Our future payments do not include $162 million of income tax liabilities, primarily as a result of uncertain tax positions, and the timing of such payments, if any, cannot be reasonably estimated. For additional information, see “Note 18—Income Taxes” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
For more information, see "Note 10—Leases", "Note 13—Debt", “Note 19—Retirement Plans” and "Note 21—Commitments and Contingencies" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. We have interest payments related to our outstanding debt and finance leases.
For more information, see “Note 10—Leases”, “Note 13—Debt”, “Note 19—Retirement Plans” and “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. We have interest payments related to our outstanding debt and finance leases.
Department of Defense ("DoD"), the U.S. Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs, National Aeronautics and Space Administration ("NASA") and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses. Approximately 9% of our revenues are generated by entities located outside of the United States.
Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs, National Aeronautics and Space Administration (“NASA”) and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses. Approximately 8% of our revenues are generated by entities located outside of the United States.
As of December 29, 2023, borrowings under our Credit Agreement were based on a Term Secured Overnight Financing Rate (“SOFR”) with a 0.10% Term SOFR adjustment and an applicable margin range from 1.00% to 1.50%. At December 29, 2023, the applicable margin for SOFR-denominated borrowings was 1.25%.
As of January 3, 2025, borrowings under our Credit Agreement were based on a Term Secured Overnight Financing Rate (“SOFR”) with a 0.10% Term SOFR adjustment and an applicable margin range from 1.00% to 1.50%. At January 3, 2025, the applicable margin for SOFR-denominated borrowings was 1.25%.
Sales Trend. For fiscal 2023, revenues increased $1.0 billion, or 7%, compared to fiscal 2022, primarily due to program wins, a net increase in volumes on certain programs and a net increase in revenues attributable to our business acquisitions. The increase was partially offset by the completion of certain contracts. Leidos Holdings, Inc.
For fiscal 2023, revenues increased $1.0 billion, or 7%, compared to fiscal 2022, primarily due to program wins, a net increase in volumes on certain programs and a net increase in revenues attributable to our business acquisitions. The increase was partially offset by the completion of certain contracts. Operating Expenses and Income Trend .
Annual Report - 57 Table of Contents PART II We may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
We may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
Summary of Cash Flows The following table summarizes cash flow information for the periods presented: Year Ended December 29, 2023 December 30, 2022 (in millions) Net cash provided by operating activities (1) $ 1,165 $ 992 Net cash used in investing activities (211) (313) Net cash used in financing activities (715) (865) (1) Net cash provided by operating activities during the year ended December 30, 2022, was recast to present the effect of foreign exchange rate changes on cash, cash equivalents and restricted cash as a separate line in the consolidated statements of cash flows.
Annual Report Table of Contents PART II SUMMARY OF CASH FLOWS The following table summarizes cash flow information for the periods presented: Year Ended (in millions) January 3, 2025 December 29, 2023 December 30, 2022 Net cash provided by operating activities (1) $ 1,392 $ 1,165 $ 992 Net cash used in investing activities (142) (211) (313) Net cash used in financing activities (1,084) (715) (865) (1) Net cash provided by operating activities during the year ended December 30, 2022, was recast to present the effect of foreign exchange rate changes on cash, cash equivalents and restricted cash as a separate line in the consolidated statements of cash flows.
Failure to pass the appropriations bills or another CR by March 1 and March 8, 2024, will result in a partial or complete federal government shutdown. Trends in the U.S. government contracting process, including a shift towards multiple-awards contracts, in which certain contractors are preapproved using IDIQ and U.S.
Failure to pass the appropriations bills or another continuing resolution by March 14, 2025, will result in a partial or complete federal government shutdown. Trends in the U.S. government contracting process, including a shift towards multiple-awards contracts, in which certain contractors are preapproved using IDIQ and U.S.
For more information on these risks and uncertainties, see “Risk Factors” in Part I of this Annual Report on Form 10-K. International Markets Sales to customers in international markets represented approximately 9% of total revenues for fiscal 2023, as compared to 8% of total revenues for fiscal 2022. Our international customers include foreign governments and their agencies.
For more information on these risks and uncertainties, see “Risk Factors” in Part I of this Annual Report on Form 10-K. INTERNATIONAL MARKETS Sales to customers in international markets represented approximately 8% of total revenues for fiscal 2024, as compared to 9% and 8% of total revenues for fiscal 2023 and 2022, respectively.
Net cash used in investing activities decreased $102 million for fiscal 2023 as compared to fiscal 2022. The decrease was primarily due to $190 million of cash paid in connection with our Cobham Special Mission acquisition from the prior year, partially offset with higher capital expenditures of $78 million in the current year.
The decrease was primarily due to $190 million of cash paid in connection with our Cobham Special Mission acquisition from the prior year, partially offset with higher capital expenditures of $78 million in the current year. Net cash used in financing activities increased $369 million for fiscal 2024 as compared to fiscal 2023.
The activity for fiscal 2023 included a $1,210 million payment to discharge the existing Term Loan Facility, a $498 million payment to discharge the $500 million 2.95% notes, due May 2023, and a principal repayment of $320 million to discharge the 364-day term loan credit agreement.
The activity for fiscal 2023 included a $1,210 million payment to discharge the $1.9 billion 5.77% senior unsecured term loan facility, a $498 million payment to discharge the $500 million 2.95% notes, due May 2023, and a principal repayment of $320 million to discharge the 364-day term loan credit agreement.
For a discussion of these items, see "Note 10—Leases" and "Note 21—Commitments and Contingencies" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
For a discussion of these items, see “Note 10—Leases” and “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
As of December 29, 2023, and December 30, 2022, we did not have any commercial paper notes outstanding. We made principal payments, excluding the impacts of our Commercial Paper Notes, on our debt of $2,045 million, $545 million and $106 million during fiscal 2023, 2022 and 2021, respectively.
As of January 3, 2025, and December 29, 2023, we did not have any commercial paper notes outstanding. We made principal payments, excluding the impacts of our Commercial Paper Notes, on our debt of $18 million, $2,045 million and $545 million during fiscal 2024, 2023 and 2022, respectively.
Net cash provided by operating activities increased $173 million for fiscal 2023 as compared to fiscal 2022. The increase was primarily due to faster collections on receivables and favorable timing of customer advance payments, partially offset by higher tax payments of $260 million mainly in connection with the TCJA provision.
The increase was primarily due to faster collections on receivables and favorable timing of customer advance payments, partially offset by higher tax payments of $260 million mainly in connection with the TCJA provision. Net cash used in investing activities decreased $69 million for fiscal 2024 as compared to fiscal 2023.
Operations of the Security Enterprise Solutions ("SES") reporting unit rely heavily on the sales and servicing of security and detection products, which continue to be negatively impacted due to delays in airline travel infrastructure projects as customer budgets recover from the pandemic.
Operations of the Security Enterprise Solutions (“SES”) reporting unit rely heavily on the sales and servicing of security and detection products, which prior to fiscal 2024, have been negatively impacted due to delays in airline travel infrastructure projects as customer budgets recover from the pandemic.
Annual Report - 60 Table of Contents PART II Statement of Operations Information for the Guarantor and Issuer of Registered Notes December 29, 2023 (in millions) Revenues, net $ 10,382 Operating income 538 Net income attributable to Leidos common stockholders 8 Critical Accounting Estimates Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").
Annual Report Table of Contents PART II STATEMENT OF OPERATIONS INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES (in millions) January 3, 2025 Revenues, net $ 10,564 Operating income 807 Net income attributable to Leidos common stockholders 119 CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
Funded backlog for contracts with non-U.S. government entities and commercial customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on the contracts. • Negotiated Unfunded Backlog.
Funded backlog for contracts with non-U.S. government entities and commercial customers represents the estimated value on contracts, which may cover multiple future years, under which we are obligated to perform, less revenues previously recognized on the contracts. 50 Leidos Holdings, Inc. Annual Report Table of Contents PART II u Negotiated Unfunded Backlog.
Goodwill and Intangible Assets Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
Annual Report 55 Table of Contents PART II GOODWILL Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date.
As of December 29, 2023, future scheduled interest payments on our outstanding debt and finance leases were $242 million, expected to be paid in fiscal 2024 and $1.3 billion expected to be paid thereafter.
As of January 3, 2025, future scheduled interest payments on our outstanding debt and finance leases were $208 million, expected to be paid in fiscal 2025 and $1.1 billion expected to be paid thereafter.
Annual Report - 58 Table of Contents PART II Off-Balance Sheet Arrangements We have outstanding performance guarantees and cross-indemnity agreements in connection with certain aspects of our business.
OFF-BALANCE SHEET ARRANGEMENTS We have outstanding performance guarantees and cross-indemnity agreements in connection with certain aspects of our business.
The increase in operating income for fiscal 2023 as compared to fiscal 2022 was primarily attributable to program wins, a net increase in volumes, improved cost control and net write-ups on certain contracts, partially offset by the completion of certain contracts. Leidos Holdings, Inc.
The increase in operating income for fiscal 2024 as compared to fiscal 2023, was primarily attributable to improved program execution on certain programs, a net increase in volumes and program wins, partially offset by the completion of certain contracts.
Accordingly, we recognized a non-cash goodwill impairment charge of $596 million for fiscal 2023 (see “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K). We performed our annual test for impairment as of September 30, 2023, which resulted in no further impairments being identified.
Accordingly, we recognized a non-cash goodwill impairment charge of $596 million for fiscal 2023 (see “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10- K).
Our credit facility, term loan facility, commercial paper notes and notes outstanding as of December 29, 2023, contain financial covenants and customary restrictive covenants. We were in compliance with all covenants as of December 29, 2023. We paid dividends of $201 million for fiscal 2023 and $199 million for both fiscal 2022 and 2021. Leidos Holdings, Inc.
Our credit facility, term loan facility, commercial paper notes and notes outstanding as of January 3, 2025, contain financial covenants and customary restrictive covenants. We were in compliance with all covenants as of January 3, 2025. We paid dividends of $208 million, $201 million and $199 million for fiscal 2024, 2023 and 2022, respectively.
As of December 29, 2023, future payments on our deferred compensation arrangements and purchase obligations for long-term purchases and service agreements were $51 million, expected to be paid in fiscal 2024, and $157 million expected to be paid thereafter.
As of January 3, 2025, future payments on our deferred compensation arrangements and purchase obligations for long-term purchases and service agreements were $65 million, expected to be paid in fiscal 2025, and $371 million expected to be paid thereafter.
We allocate the transaction price of a contract to its performance obligations proportionately based upon the individual selling prices. The standalone selling price of the performance obligations is generally based on an expected cost-plus margin approach. For certain product sales, prices from other standalone sales are used.
We allocate the transaction price of a contract to its performance obligations primarily based upon the proportional individual selling prices. The standalone selling price of the performance obligations is generally based on an expected cost-plus margin approach.
Recently Adopted and Issued Accounting Pronouncements For a discussion of these items, see "Note 2—Accounting Standards" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
RECENTLY ADOPTED AND ISSUED ACCOUNTING PRONOUNCEMENTS For a discussion of these items, see “Note 2—Accounting Standards” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. 56 Leidos Holdings, Inc. Annual Report Table of Contents PART II
In addition, we consider business performance by contract type to be useful to management and investors when evaluating our operating income and margin performance. Leidos Holdings, Inc.
Bookings and backlog are also useful measures for management and investors to evaluate our performance and potential future revenues. In addition, we consider business performance by contract type to be useful to management and investors when evaluating our operating income and margin performance. Leidos Holdings, Inc.
Annual Report - 61 Table of Contents PART II For the impacts of changes in estimates on our contracts, see "Note 3—Summary of Significant Accounting Policies" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
For the impacts of changes in estimates on our contracts, see “Note 3—Summary of Significant Accounting Policies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K. Leidos Holdings, Inc.
Year Ended 2023 to 2022 Corporate December 29, 2023 December 30, 2022 Dollar change Percent change (dollars in millions) Operating loss $ (130) $ (108) $ (22) 20 % The increase in operating loss for fiscal 2023 as compared to fiscal 2022 was primarily attributable to higher legal costs, increased expenses in integration and restructuring activities, partially offset by the impact of foreign payroll tax reserves.
The increase in operating loss for fiscal 2023 as compared to fiscal 2022, was primarily attributable to higher legal costs, increased expenses in integration and restructuring activities, partially offset by the impact of foreign payroll tax reserves.
We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date. Goodwill is not amortized, but instead is tested annually, at the beginning of the fourth quarter, for impairment at the reporting unit level and may be tested more frequently if events or circumstances indicate that the carrying value may not be recoverable.
Goodwill is not amortized, but instead is tested annually, at the beginning of the fourth quarter, for impairment at the reporting unit level and may be tested more frequently if events or circumstances indicate that the carrying value may not be recoverable.
The decrease was primarily attributable to a net increase in impairment charges of $647 million mainly in our SES reporting unit (see "Note 8—Goodwill and Intangible Assets" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).
The decrease was primarily attributable to impairment and restructuring charges of $689 million at the SES reporting unit in fiscal 2023 (see “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).
Accordingly, our business performance is affected by the overall level of U.S. government spending, especially national security, homeland security and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. government. On January 18, 2024, Congress passed a third continuing resolution (“CR”) to avoid a federal government shutdown.
Accordingly, our business performance is affected by the overall level of U.S. government spending, especially national security, homeland security and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. government.
Revenues by contract type as a percentage of our total revenues for the periods presented were as follows: Year Ended December 29, 2023 December 30, 2022 December 31, 2021 Cost-reimbursement and fixed-price-incentive-fee 48 % 50 % 50 % Firm-fixed-price 39 % 38 % 37 % Time-and-materials and fixed-price-level-of-effort 13 % 12 % 13 % Total 100 % 100 % 100 % Liquidity and Capital Resources Overview of Liquidity As of December 29, 2023, we had $777 million in cash and cash equivalents.
Revenues by contract type as a percentage of our total revenues for the periods presented were as follows: Year Ended January 3, 2025 December 29, 2023 December 30, 2022 Cost-reimbursement and fixed-price-incentive-fee 44 % 48 % 50 % Firm-fixed-price 43 % 39 % 38 % Time-and-materials and fixed-price-level-of-effort 13 % 13 % 12 % Total 100 % 100 % 100 % Leidos Holdings, Inc.
At December 29, 2023, and December 30, 2022, we had outstanding debt of $4.7 billion and $4.9 billion, respectively. In February 2023, we issued and sold $750 million 5.75% fixed-rate senior notes. The annual interest rate is payable on a semi-annual basis.
As of January 3, 2025, and December 29, 2023, there were no borrowings outstanding under any revolving credit facility. We had outstanding debt of $4.7 billion at both January 3, 2025, and December 29, 2023. In February 2023, we issued and sold $750 million 5.75% fixed-rate senior notes. The annual interest rate is payable on a semi-annual basis.
Contract awards may be negatively impacted by ongoing industry-wide delays in procurement decisions and budget cuts by the U.S. government as discussed in “Business Environment and Trends” in this Annual Report on Form 10-K. Leidos Holdings, Inc.
Contract awards may be negatively impacted by ongoing industry-wide delays in procurement decisions and budget cuts by the U.S. government as discussed in “Business Environment and Trends” in this Annual Report on Form 10-K. We expect to recognize a substantial portion of our funded backlog as revenues within the next 12 months.
Contract Types Our earnings and profitability may vary materially depending on changes in the proportionate amount of revenues derived from each type of contract. For a discussion of the types of contracts under which we generate revenues, see “Business—Contract Types” in Part I of this Annual Report on Form 10-K.
For a discussion of the types of contracts under which we generate revenues, see “Business—Contract Types” in Part I of this Annual Report on Form 10-K.
Discounted cash flow analyses rely on significant judgment and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins.
Our quantitative analysis utilizes discounted cash flow models and market multiple valuation methods to estimate reporting unit fair values. Discounted cash flow analyses rely on significant judgment and assumptions about expected future cash flows, weighted-average cost of capital, discount rates, expected long-term growth rates and operating margins.
Our business has been aligned in three reportable segments: Defense Solutions, Civil and Health. Additionally, we separately present the unallocable costs associated with corporate functions as Corporate. For additional information regarding our reportable segments, see “Business” in Part I and "Note 20—Business Segments" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
For additional information regarding our reportable segments, see “Business” in Part I and “Note 20—Business Segments” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Key Performance Measures The primary financial performance measures we use to manage our business and monitor results of operations are revenue, operating income, cash flows from operations and diluted earnings per share. Bookings and backlog are also useful measures for management and investors to evaluate our performance and potential future revenues.
While we evaluate the impact of higher tariffs, currently, we do not expect tariffs to have a significant impact to our business. KEY PERFORMANCE MEASURES The primary financial performance measures we use to manage our business and monitor results of operations are revenue, operating income, cash flows from operations and diluted earnings per share.
Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks. Changes in international trade policies, including higher tariffs on imported goods and materials, may increase our procurement costs of certain IT hardware used both on our contracts and for internal use.
Changes in international trade policies, including higher tariffs on imported goods and materials, may increase our procurement costs of certain IT hardware used both on our contracts and for internal use. However, we expect to recover certain portions of these higher tariffs through our cost-plus contracts.
Balance Sheet Information for the Guarantor and Issuer of Registered Notes December 29, 2023 (in millions) Total current assets $ 2,464 Goodwill 5,517 Other long-term assets 1,241 Total assets $ 9,222 Total current liabilities $ 1,983 Long-term debt, net of current portion 4,663 Intercompany payables 2,523 Other long-term liabilities 599 Total liabilities $ 9,768 Leidos Holdings, Inc.
BALANCE SHEET INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES (in millions) January 3, 2025 Total current assets $ 2,550 Goodwill 5,673 Other long-term assets 1,498 Total assets $ 9,721 Total current liabilities $ 2,677 Long-term debt, net of current portion 4,052 Intercompany payables 3,319 Other long-term liabilities 820 Total liabilities $ 10,868 54 Leidos Holdings, Inc.
In addition, certain contracts with commercial or non-U.S. government customers may include provisions that allow the customer to cancel at any time. Most of our contracts have cancellation terms that would permit us to recover all or a portion of our incurred costs and fees for work performed.
However, the U.S. government may cancel any contract at any time through a termination for the convenience of the U.S. government. In addition, certain contracts with commercial or non-U.S. government customers may include provisions that allow the customer to cancel at any time.
The decrease in operating income for fiscal 2023 as compared to fiscal 2022 was primarily attributable to a net increase in impairment charges of $665 million, restructuring charges of $10 million and higher margin offerings on certain programs in the prior year.
The decrease in operating income for fiscal 2023 as compared to fiscal 2022, was primarily attributable to impairment and restructuring charges of $689 million at the SES reporting unit in fiscal 2023, and write-downs on certain programs. The decrease was partially offset by an increase in volumes on certain programs.
Annual Report - 54 Table of Contents PART II Year Ended 2023 to 2022 Civil December 29, 2023 December 30, 2022 Dollar change Percent change (dollars in millions) Revenues $ 3,664 $ 3,464 $ 200 6 % Operating (loss) income (413) 234 (647) (276) % Operating margin (11.3) % 6.8 % The increase in revenues for fiscal 2023 as compared to fiscal 2022 was primarily attributable to a net increase in volumes on certain programs and program wins.
Annual Report Table of Contents PART II Year Ended 2024 to 2023 2023 to 2022 Health & Civil (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 5,015 $ 4,238 $ 3,945 18 % 7 % Operating income 1,095 574 448 91 % 28 % Operating margin 21.8 % 13.5 % 11.4 % The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes and case complexity within the managed health services business, an increase in net write-ups on certain programs and program wins.
We may perform qualitative or quantitative analysis to test for impairment. Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit. Our quantitative analysis utilizes discounted cash flow models and market multiple valuation methods to estimate reporting unit fair values.
As of January 3, 2025, and December 29, 2023, goodwill represented 46% and 48% of our total assets, respectively. We may perform qualitative or quantitative analysis to test for impairment. Qualitative factors include macroeconomic, industry and market considerations, overall financial performance, industry, legal and other relevant events and factors affecting the reporting unit.
The increase was partially offset by completion of certain contracts and a net decrease in the recovery of expenditures in the medical examination business.
The increase in revenues for fiscal 2023 as compared to fiscal 2022, was primarily attributable to a net increase in volumes on certain programs and increased earnings from incentive awards. The increase was partially offset by a net decrease in the recovery of expenditures in the medical examination business and the completion of certain contracts.
Annual Report - 59 Table of Contents PART II Guarantors and Issuers of Guaranteed Securities Leidos Holdings, Inc. ( “ Guarantor ” ) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc.
Annual Report 53 Table of Contents PART II GUARANTORS AND ISSUERS OF GUARANTEED SECURITIES Leidos Holdings, Inc. (“Guarantor”) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc. (“Issuer”), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”).
Annual Report - 62 Table of Contents PART II Commitments and Contingencies We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties and future obligations related to our business.
In fiscal 2024, we performed our annual test for impairment as of September 28, 2024, which resulted in no impairments being identified. COMMITMENTS AND CONTINGENCIES We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties and future obligations related to our business.
The effective tax rate for fiscal 2023 was unfavorably impacted primarily by non tax deductible goodwill impairments. The effective tax rate for fiscal 2022 was favorably impacted primarily by federal research tax credits and excess tax benefits related to employee stock-based payment transactions. Leidos Holdings, Inc.
The effective tax rate for fiscal 2024 was favorably impacted primarily by federal research tax credits and lower state income taxes, partially offset by an increase in unrecognized tax benefits. The effective tax rate for fiscal 2023 was unfavorably impacted primarily by non tax deductible goodwill impairments.
With a global workforce of approximately 47,000, Leidos is committed to developing smarter technology solutions, particularly for customers in highly regulated industries. We bring domain-specific capabilities and innovations to customers in each of these markets by leveraging five technical core capabilities: digital modernization, cyber operations, mission software systems, integrated systems and mission operations. Our customers include the U.S.
Headquartered in Reston, Virginia, with 48,000, global employees, we bring domain-specific capabilities, technologies and insights to customers in each of these markets by leveraging seven technical core capabilities: trusted mission artificial intelligence, cyber operations, digital modernization, mission software systems, integrated systems, mission operations, and rapid prototyping and manufacturing. Our customers include the U.S. Department of Defense (“DoD”), the U.S.
We have a commercial paper program in which we may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") that have maturities of up to 397 days from the date of issuance (see "Note 13—Debt"). On May 26, 2023, we increased the size of the commercial paper program by $250 million, or not to exceed $1.0 billion.
We have a commercial paper program in which we may issue short-term unsecured commercial paper notes (“Commercial Paper Notes”) that have maturities of up to 397 days from the date of issuance (see “Note 13—Debt” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).
The increase was partially offset by the completion of certain contracts and an unfavorable net impact from exchange rate movements.
The increase was partially offset by write-downs on certain programs and the completion of certain contracts.
Substantially all of our contracts do not contain a significant financing component, which would require an adjustment to the transaction price of the contract. Leidos Holdings, Inc.
For certain product sales, performance obligations may be allocated to a contract's transaction price based on prices observed in other standalone sales or the residual value method. Substantially all of our contracts do not contain a significant financing component, which would require an adjustment to the transaction price of the contract.
The estimated value of our total backlog for the periods presented was as follows: Year ended December 29, 2023 December 30, 2022 Segment Funded Unfunded Total Funded Unfunded Total (in millions) Defense Solutions $ 4,541 $ 14,783 $ 19,324 $ 4,442 $ 14,155 $ 18,597 Civil 2,182 9,475 11,657 1,876 8,790 10,666 Health 2,073 3,908 5,981 2,064 4,455 6,519 Total $ 8,796 $ 28,166 $ 36,962 $ 8,382 $ 27,400 $ 35,782 Bookings and backlog fluctuate from period to period depending on our success rate in winning contracts and the timing of contract awards, renewals, modifications and cancellations, as well as foreign currency movements.
The estimated value of our segment backlog for the periods presented was as follows: January 3, 2025 December 29, 2023 (in millions) Funded Unfunded Total Funded Unfunded Total National Security & Digital $ 2,881 $ 19,086 $ 21,967 $ 2,714 $ 15,113 $ 17,827 Health & Civil 1,456 10,568 12,024 2,334 9,044 11,378 Commercial & International 2,456 1,901 4,357 2,567 1,105 3,672 Defense Systems 1,616 3,590 5,206 1,181 2,904 4,085 Total $ 8,409 $ 35,145 $ 43,554 $ 8,796 $ 28,166 $ 36,962 Bookings and backlog fluctuate from period to period depending on our success rate in winning contracts and the timing of contract awards, renewals, modifications and cancellations, as well as foreign currency movements.
Net cash used in financing activities decreased $150 million for fiscal 2023 as compared to fiscal 2022.
The decrease was primarily due to lower capital expenditures of $58 million in the current year. Net cash used in investing activities decreased $102 million for fiscal 2023 as compared to fiscal 2022.
We are evaluating the potential impact of the rules but currently do not expect them to have a material impact. Bookings and Backlog We had net bookings of $16.5 billion and $15.4 billion during fiscal 2023 and 2022, respectively.
We will continue to evaluate the impact of the rules as additional legislation gets enacted; however, there is not a material impact from jurisdictions where Pillar Two rules are currently in effect. BOOKINGS AND BACKLOG We had net bookings of $23.4 billion and $16.5 billion during fiscal 2024 and 2023, respectively.
As a result, we recognized intangible asset impairment charges of $79 million for fiscal 2023 (see “Note 8—Goodwill and Intangible Assets” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K). Leidos Holdings, Inc.
The increase in operating income was primarily attributable to the impairment and restructuring charges of $689 million at the SES reporting unit in fiscal 2023 as compared to $11 million of impairment charges for the facility rationalization effort in fiscal 2024 (see "Note 10—Leases" of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K) and a net increase in volumes on certain programs. 46 Leidos Holdings, Inc.
( “ Issuer ” ), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”). The following is a list of the Registered Notes guaranteed by Leidos Holdings, Inc.
The following is a list of the Registered Notes guaranteed by Leidos Holdings, Inc.
Year Ended 2023 to 2022 Health December 29, 2023 December 30, 2022 Dollar change Percent change (dollars in millions) Revenues $ 3,042 $ 2,688 $ 354 13 % Operating income 528 421 107 25 % Operating margin 17.4 % 15.7 % The increase in revenues for fiscal 2023 as compared to fiscal 2022 was primarily attributable to a net increase in volumes on certain programs, program wins and increased earnings from incentive awards.
Year Ended 2024 to 2023 2023 to 2022 Commercial & International (dollars in millions) January 3, 2025 December 29, 2023 December 30, 2022 Percent change Percent change Revenues $ 2,252 $ 2,126 $ 1,900 6 % 12 % Operating income (loss) 104 (560) 131 119 % NM Operating margin 4.6 % (26.3) % 6.9 % NM - Not meaningful The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to program wins and a net increase in volumes on certain programs, partially offset by the impact of write-downs on certain programs within our UK operations for which cost and schedule were rebaselined as well as the completion of certain programs.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs a result, we may experience fluctuations in interest expense. We have interest rate swap agreements to hedge the cash flows of a portion of our variable rate senior unsecured term loan ("Variable Rate Loan").
Biggest changeWe have interest rate swap agreements to hedge the cash flows of a portion of our variable rate senior unsecured term loan (“Variable Rate Loan”). Under the terms of the interest rate swap agreements, we receive monthly variable interest payments based on the one-month SOFR rate and pay interest at a fixed rate.
For additional information related to our interest rate swap agreements and debt, see "Note 12—Derivative Instruments" and "Note 13—Debt," respectively, of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
For additional information related to our interest rate swap agreements and debt, see “Note 12—Derivative Instruments” and “Note 13—Debt,” respectively, of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.
Cash and Cash Equivalents As of December 29, 2023, and December 30, 2022, our cash and cash equivalents included investments in several large institutional money market accounts. For fiscal 2023 and fiscal 2022, a hypothetical 10% interest rate movement would not have a significant impact on the value of our holdings or on interest income.
CASH AND CASH EQUIVALENTS As of January 3, 2025, and December 29, 2023, our cash and cash equivalents included investments in several large institutional money market accounts. For fiscal 2024 and fiscal 2023, a hypothetical 10% interest rate movement would not have a significant impact on the value of our holdings or on interest income.
The fair value of our interest rate swap agreements with respect to our Variable Rate Loan was an asset of $11 million and $20 million as of December 29, 2023, and December 30, 2022, respectively. The counterparties to these agreements are financial institutions. We do not hold or issue derivative financial instruments for trading or speculative purposes.
The fair value of our interest rate swap agreements with respect to our Variable Rate Loan was an asset of $4 million and $11 million as of January 3, 2025, and December 29, 2023, respectively. The counterparties to these agreements are financial institutions. We do not hold or issue derivative financial instruments for trading or speculative purposes.
Our foreign operations represented 9% of total revenues for fiscal 2023 and 8% for both fiscal 2022 and 2021. Leidos Holdings, Inc. Annual Report - 63 Table of Contents PART II
Our foreign operations represented 8%, 9% and 8% of total revenues for fiscal 2024, 2023 and 2022, respectively. Leidos Holdings, Inc. Annual Report 57 Table of Contents PART II
As of December 29, 2023, the notional value of the interest rate swap agreements was $500 million. The interest rate swap agreements effectively converted a portion of our variable rate borrowing to a fixed rate borrowing.
As of January 3, 2025, the notional value of the interest rate swap agreements was $500 million. The interest rate swap agreements effectively converted a portion of our variable rate borrowing to a fixed rate borrowing.
Debt and derivatives At December 29, 2023, and December 30, 2022, we had $4.7 billion and $4.9 billion, respectively, of debt, which included $1.0 billion and $1.5 billion, respectively, related to our senior unsecured term loans that have a variable stated interest rate that is determined based on the Secured Overnight Financing Rate ("SOFR") plus a margin.
DEBT AND DERIVATIVES At January 3, 2025, and December 29, 2023, we had $4.7 billion of debt, which included $1.0 billion related to our senior unsecured term loans that have a variable stated interest rate that is determined based on the Secured Overnight Financing Rate (“SOFR”) plus a margin. As a result, we may experience fluctuations in interest expense.
Removed
During fiscal 2023, we modified our interest rate swap agreements to receive monthly variable interest payments based on the one-month SOFR rate, and we will continue to pay interest at a fixed rate. We applied the guidance of Accounting Standards Codification 848 which permits the continuation of hedge accounting for such modification.

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