Leidos' Strategic Focus on North Star 2030 Growth Pillars
Leidos is aligning all efforts around its North Star 2030 strategy, which includes five growth pillars: space and maritime, energy infrastructure, digital modernization and cyber, mission software, and managed health services.
Management emphasizes ongoing validation of these pillars through multiyear funding, notably from the One Big Beautiful Bill, which supports programs in space, maritime, mission software, TSA airport security modernization, border security, and veteran health services.
The strategy aims to leverage government funding and priorities to drive long-term growth and innovation.
Adjusted EBITDA was $647 million, up 16% year-over-year, with a 170 basis point margin increase to 15.2%.
Closed Kudu Dynamics acquisition for $291 million net and completed $500 million accelerated share repurchase retiring 3.6 million shares.
Ended quarter with $5.1 billion debt (2.2x leverage) and $930 million cash.
Generated $486 million cash from operations and $457 million free cash flow, with 110% free cash flow conversion.
Leidos reported 4.8% year-to-date revenue growth and a record 15.2% EBITDA margin in Q2 2025, with operating cash flow up 28%.
Non-GAAP diluted EPS grew 22% to $3.21, surpassing the prior quarter's record of $2.97.
Q2 revenues were $4.25 billion, up 3% year-over-year and sequentially despite award delays and contract reviews.
Segment performance: National Security and Digital grew 3% with stable margins; Health and Civil grew 1% with 24.9% margin; Commercial International grew 1% with margin improvement of 780 basis points; Defense Systems grew 10% with margins down year-over-year but up sequentially.
Arlo announced a strategic partnership with ADT, the largest security company in North America, in June.
The partnership involves device and service revenue, with a unique structure that is not comparable to previous deals like Verisure or Nest.
Details of the partnership are expected to be announced closer to the end of 2025 or early 2026, with a significant impact on revenue starting in 2026.
Nima Ghamsari highlighted the leadership transition, thanking Amir Jafari for his contributions and emphasizing the company's refocus on a simplified platform strategy.
The transition aligns with the company's shift towards a software-first model that scales through partnerships and platform innovation.
Management views the leadership change as an opportunity to strengthen the company's strategic direction and operational focus.
Strategic Focus on Public Sector Software Post-Healthcare Divestiture
The company has divested two major businesses in the past 12 months, including healthcare RCM and merchant services, to concentrate on core public sector offerings.
This strategic realignment aims to enhance product development, customer service, and market penetration within government markets.
Management highlighted that all subverticals, including education, utilities, transportation, and justice tech, are firing on all cylinders, indicating a successful strategic refocus.
Dafinchi