Summary
Leidos closed fiscal 2022 with fourth-quarter revenue of $3.70 billion, up 5.9% from the prior-year quarter. Full-year revenue reached $14.40 billion, up 4.8%. Operating income was $265 million in the quarter, down 1.9%, and $1.088 billion for the year, down 5.6%. Net income attributable to Leidos common stockholders was $177 million in the quarter, up 1.7%, but fell to $685 million for the year, down 9.0%. Diluted EPS for the year was $4.96, down $0.31 or 5.9%. Operating margin was 7.2% in the quarter, down 0.6 percentage points, and 7.6% for the year, down 0.8 percentage points. Non-GAAP results were stronger: non-GAAP diluted EPS was $1.83 for the quarter, up 17%, and $6.60 for the year, down $0.02. Adjusted EBITDA was $397 million in the quarter at a 10.7% margin, up 11%, and $1.49 billion for the year at a 10.4% margin, down 1%.
Cash generation slowed in the quarter. Operating cash flow was $105 million, down 50% from the prior-year quarter, while full-year operating cash flow was $986 million, down 4.4%. Capital expenditures were $53 million in the quarter, up 60.6%, and $129 million for the year, up 24%. Free cash flow, a non-GAAP measure, was $52 million in the quarter and $857 million for the year. Deferred revenue was $380 million, up 4.4%, and remaining performance obligations were $15.40 billion, down 1.3%. Backlog ended the year at $35.8 billion, including a record $8.4 billion of funded backlog. Net bookings were $3.7 billion in the quarter and $15.4 billion for the year, producing book-to-bill ratios of 1.0 and 1.1. Leidos completed the Cobham Special Mission acquisition for about $190 million, net of $6 million of cash acquired. The company returned $741 million to shareholders during fiscal 2022, including $199 million of dividends and $542 million of share repurchases. The board declared a quarterly dividend of $0.36 per share payable on March 31, 2023.
All three segments grew, led by Civil. Civil revenue rose 17% in the quarter and 10% for the year. Health revenue increased 10% in the quarter and 5% for the year. Defense Solutions revenue edged up 0.3% in the quarter and 3% for the year. On a non-GAAP basis, Civil operating margin improved to 11.2% in the quarter from 10.0%, while Health non-GAAP operating margin fell to 14.3% from 17.8%. Defense Solutions non-GAAP operating margin was 8.6% in the quarter, up from 8.2%. For the full year, non-GAAP operating margins were 8.3% for Defense Solutions, 9.2% for Civil, and 17.1% for Health. The quarter included notable awards: a $334 million, 51-month Mayhem hypersonics contract, two Social Security Administration task orders with a combined estimated value of $1.5 billion over about 67 months, and a subcontract for Space Development Agency hypersonic defense sensors.
Guidance for the full fiscal year 2023 calls for adjusted EBITDA margin of 10.3% to 10.5% and non-GAAP diluted EPS of $6.40 to $6.80. Operating cash flow is expected at or above $700 million. That cash flow outlook includes approximately $300 million of additional cash taxes compared with fiscal 2022, mostly from the Tax Cuts and Jobs Act of 2017 provision that requires capitalization and amortization of research and development costs. Leidos expects to pay both the 2022 and 2023 tax amounts in 2023. The actual impact will depend on the amount of research and development costs incurred, whether Congress modifies or repeals the provision, and whether new guidance and interpretive rules are issued by the U.S. Treasury.
Risks remain tied to the U.S. government budget cycle. Leidos generated about 86% of fiscal 2022 revenue from U.S. government contracts, with about 44% from the Department of Defense and Intelligence Community and about 8% from international customers. Budget reductions, continuing resolutions, a government shutdown, or a failure to raise the debt ceiling could delay awards and spending. The company also faces procurement delays, competitor protests, inflation, rising interest rates, and legal and regulatory compliance costs. The Security Enterprise Solutions reporting unit, which relies on security and detection product sales, was at risk of future impairment after its fair value exceeded carrying value by approximately 13%. COVID-19 continues to weigh on global passenger air travel and that unit's operations. The LIBOR transition and the TCJA research and development tax provision add further uncertainty to interest expense and cash taxes.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2022 | Q3 FY2022 | QoQ | Q4 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $3.66B | $3.58B | +2.3% | $2.04B | +79.6% |
| Gross profit | $487.0M | $484.0M | +0.6% | $220.0M | +121.4% |
| Gross margin | 13.3% | 13.5% | -0.2 pp | 10.8% | +2.5 pp |
| Research & development | $116.0M | — | — | $73.0M | +58.9% |
| Sales & marketing | $223.0M | $233.0M | -4.3% | $145.0M | +53.8% |
| Operating income (loss) | $265.0M | $281.0M | -5.7% | $116.0M | +128.4% |
| Operating margin | 7.2% | 7.8% | -0.6 pp | 5.7% | +1.5 pp |
| Net income (loss) | $177.0M | $162.0M | +9.3% | $49.0M | +261.2% |
| Net margin | 4.8% | 4.5% | +0.3 pp | 2.4% | +2.4 pp |
| Diluted EPS | $1.28 | $1.17 | +$0.11 | $0.34 | +$0.94 |
Risks
Approximately 86% of fiscal 2022 total revenues came from U.S. government contracts, with DoD and U.S. Intelligence Community work representing 44%, making Leidos highly dependent on government budgets, agency relationships, and procurement decisions.
Delays in the U.S. government budget and appropriations process, including continuing resolutions or shutdowns, can delay procurement and payments, and the likelihood, extent, and duration of current defense and homeland security spending levels remains unclear.
Leidos faces government audits, investigations, and litigation; DCAA indirect cost audits remain open for fiscal 2021 and subsequent years, and fiscal 2022 included a $19 million increase in legal fees and settlement costs in the Civil segment from an adverse arbitration related to the 2016 IS&GS acquisition.
Goodwill and intangible assets were 59% of total assets at December 30, 2022, and the Security Enterprise Solutions reporting unit, with $899 million of goodwill, was at risk of future impairment because fair value exceeded carrying value by only about 13%, pressured by COVID-19 air travel effects and rising interest rates.
Beginning in 2022, the TCJA eliminated current deduction of research and development costs for tax purposes, resulting in a $130 million increase to income taxes payable and net deferred tax assets and a $91 million increase in unrecognized tax benefits; Leidos expects tax cash payments to increase by $300 million in 2023.
A shift toward multiple-award IDIQ and GSA contracts has increased competition and pricing pressure, and bid protests can delay or block awards; management expects a majority of future business to be awarded through competitive bidding.
The U.S. government may terminate, cancel, modify, or curtail contracts at any time for convenience, and the company may not realize the full $35.8 billion total backlog at December 30, 2022, particularly the $27.4 billion unfunded portion.
Leidos is exposed to cyber attacks and must meet evolving DoD Cybersecurity Maturity Model Certification requirements; failure to obtain CMMC certification could prevent bidding on certain DoD contract awards, and the Russia-Ukraine conflict has raised concerns about increased cyber-attacks.
Competition for skilled technical personnel and employees with security clearances is intense amid low unemployment, and failure to attract, train, retain, and motivate them could impair contract performance and growth.
Firm-fixed-price contracts represented 38% of fiscal 2022 total revenues; inaccurate estimates of costs, inflation, interest rate fluctuations, or subcontractor performance could make contracts less profitable or unprofitable.
International sales were approximately 8% of fiscal 2022 total revenues and are exposed to geopolitical conflict, including the Russia-Ukraine conflict and related sanctions, foreign exchange movements, tariffs, and FCPA compliance risks.
Leidos had $4.9 billion of outstanding debt at December 30, 2022, and non-operating expense increased $17 million in fiscal 2022 primarily due to higher interest expense; the LIBOR transition could increase borrowing costs.
SaaS KPIs
All quarters →Net bookings
Adjusted EBITDA margin
Book-to-bill ratio
Free Cash Flow
Operating cash flow conversion ratio
Free Cash Flow Conversion Ratio
Summary, forecast, risks and KPIs are extracted from Leidos Holdings, Inc.'s SEC filings for Q4 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.