OK, I think we are now live. I'm waiting for the there it is. OK, the clock has started. Ready, set, go. Good morning again. I'm Jason Gursky, the Citigroup's Aerospace and Defense Analyst. I'd like to welcome those in the room as well as those on the webcast to the next presentation slot, which includes the CEO and CFO of Leidos. Let's see here. Why don't we start with the recent goings-on for you, Tom, over the weekend? I understand you were over in Europe, kind of right in the center of the Munich conference. So why don't we start with your kind of general impressions of what you heard there and kind of what you're going to bring back to the way you think about the company, maybe?
Sure. Thank you, Jason. And thank you, Citi, for hosting this conference and having us for this fireside chat. As you suggest, I was at the Munich Security Conference this weekend. And it was a sobering affair, not sobering for what most people came into the conference thinking it would be sobering about. Frankly, I think most pre-conference conversation was about the presidential election in the United States. But that changed very quickly with the death of the Russian opposition leader, Navalny, and the very sobering spell that cast over the whole conference. You have in Europe 18 of the 32 NATO nations now spending at 2% of their GDP on national defense. And you have broad, not just verbiage commitments, but serious plans for the rest of the 32 to get to 2%.
And you have many countries, Finland, Estonia, that are already spending well ahead of the 2% goal. So you've got, unfortunately, an uptick in European spending on national defense, very much commitment to NATO. I mean, think about it. Sweden, independent for 200 years, suddenly, in a matter of days, joining NATO from that 200-year history of neutrality and appeasement. And you've got a very sobering view. I mentioned, Jason, that the theme of the conference, unfortunately, was lose-lose?
So the European mentality, as it looks to the future post-Ukraine, is very sobering, very much of a mind that Vladimir Putin won't be appeased no matter what happens in Ukraine, very much looking at the war footing that he's put his economy on and the spending that's going into defense in Russia, and projecting forward with analysis that says it's only a matter of two, three years before he's got his military capability not only rebuilt to pre-Ukrainian investment days, but surpassing pre-Ukrainian investment days. And what does he plan to do with that? He probably doesn't plan to go back to the garrisons and do exercises. So there's great anxiety, frankly, in Russia excuse me, in Europe about Russia, and obviously with Finland and Sweden joining, a big, long barrier with no buffer countries.
Yeah. So maybe bringing that back to Leidos.
Yes.
We talked a little bit about the company's exposure in Europe today and maybe some of the opportunities that you see. Obviously, the budget here is going to grow, but probably at a slower rate than what we have going on in Europe. So is there an opportunity here for the company to participate in some of that growth?
I think so. Yeah, we just resegmented the company. For those watching closely, one of our segments is Commercial and International . Heretofore at Leidos, we did internationally sprinkled in all the divisions. As a result, you had various levels of understanding of how to prosecute international. We've aggregated that into one business with two primary goals. One, we have a major footprint, obviously, in the United States, a major footprint in the U.K., and a major footprint in Australia. Let's get all that in one place and focus on Pillar 2 of AUKUS. For those that may not be watching closely, Pillar 2 of AUKUS is not the nuclear submarines. That's what they call Pillar 1.
Pillar 2 is all about digital, cyber, and information sharing, intelligence community type of stuff, lowering the threshold for collaboration between those countries in that area, and doing a better job of bringing these NATO allies along for that. So very focused on that. But with my trip to Munich and the conversations that I held with most Baltic states and the Nordic states around security, they, too, are not so much focused on tanks and airplanes. Frankly, NATO feels like they have enough tanks and airplanes. What they need more of is smarts, systems, interoperability, and logistics interoperability. So a lot of the conversations with those countries and with the NATO leadership that I held over the weekend was about how does NATO prepare itself better as a fighting force to prosecute any future mission as opposed to 32 or 33 individual fighting forces.
And so that bodes well for Leidos because we do a lot of work in the digital modernization space. We do a lot in the command and control space. We do a lot in the ISR space, both terrain and undersea and sea understanding of ISR. And we do, obviously, a lot of work in the cyber, intel, artificial intelligence space. So frankly, it was very fulfilling to see these countries eager to talk to Leidos about what can we do for them and their industries to help them plug into NATO in a more effective way. So I think there's a there there for us that we're going to be exploring through the year.
Right. A couple of follow-up questions to that. So the segment is Commercial and International . Does that suggest, then, that most of the things that you would be doing internationally would be done on commercial terms and kind of direct sales as opposed to going through the FMS process? That'd be question number one. Second, is there anything that you think will need to be done from a, for lack of a better word, a regulatory perspective to enable you to better engage over there? And then third part, and I'll try to keep track of these. Do you need to do this through partnerships, or can you go over it as a prime and start doing some of this work?
Yeah. It's too early for a three-part question.
Sorry.
I would say on the terms, yes, but. So certainly, we're positioned today with contractual arrangements, again, with many countries, U.K., Australia, and others, on a commercial basis. Ultimately, as capabilities emerge through our defense system segments and I know we'll probably explore a little bit more of our new lines of business segments here today as well, we could see opportunities for FMS emerging. But that's not the primary intent as we see it today. There's a lot of opportunities to prosecute in a traditional commercial arrangement. You'll have to remind me on part two of that question already.
Regulatory changes.
Yeah, regulatory changes that need to happen, potentially.
Yeah. At this point in time, I mean, those things will continue to evolve. I don't see that there's significant hurdles. AUKUS is a big one to unlock the ability to share information more freely. We'll need some of those types of things to prepare to share more information freely in some of the European countries that aren't part of that. But I mean, AUKUS is a great opportunity for us to explore how that becomes more of a free trade zone space for us in the future.
I would just add, we do very little FMS business today. And that's really not. We don't have an F-35 line where selling FMS fighters is our jam, so to speak. So we'll probably do more commercially and locally. We sell into NATO now a lot of the things that help NATO be a cohesive fighting force. And so we have expertise and experience doing it. We're just going to have to expand that. Where do we do that from? Do we open up an office in we have one in Amsterdam now. That's probably close enough. And we'll see where the market takes us from there.
Yeah. And then the go-to-market strategies. Are you going to be kind of partnering? You come in as a sub, or are you trying to prime work over there?
One of the things that we are very proud of at Leidos is our unique partnering model. We think it is a differentiator for us in the ecosystem. We do not treat suppliers as suppliers. We treat them, honestly, as partners. Where, unlike the Munich Security Conference of lose-lose, we talk about win-win, really symbiotic relationships that help everybody win as a result of this relationship. So we feel as if that ports easily into Europe. We don't go to a Finland or a Sweden or an Estonia and say, we've got to be the prime. We say, how do we help? And if you've got a national champion that you want to be at the forefront of that, we're happy to plug in and help them be more effective.
So I just want to make sure I get this right. So as we think about Leidos and growth and budgets in Europe, we think digital modernization. We're thinking about managing and analyzing large data sets. But maybe space, we could talk a little bit about because you guys have a sub called Dynetics. Will there be an opportunity there for a company like Dynetics? I mean, we've obviously seen a lot of investment here in the United States into space. It's the ultimate high ground. It's where we can place sensors that will hopefully be relatively safe in an anti-access area denial environment, although the announcement that came out this last week about some of the capability sets that we may or may not have over in Russia, maybe it'll become contested sooner than we think. But I don't know.
Will there be an opportunity for you to participate in any investment that gets made in space?
I'll go first, then ask Chris to jump in. We do not want to become a satellite manufacturer. I don't want the capital intensity of that. I don't want to take on that crowded space. I'm very happy being a sensor and payload specialist in that space. In that regard, we do have some very unique capabilities about sensors. And yes, there's opportunity for us to, maybe with the U.S. government's help, sell that into that space. More importantly to me, though, is we're actually very adroit when it comes to ground stations and managing space-based assets. And so there might be an opportunity for us with NATO and those countries to work a little bit closer on how we track and how we manage the assets in space.
Yeah. I mean, I would certainly say all those are possibilities. But there's plenty of opportunities we're focused on with our U.S. government customers in the space domain as kind of a primary objective for the Dynetics team and other parts of the portfolio. Clearly, we believe we've got some differentiators as it relates to the algorithms, the detection capabilities, and really honing that for various missions would probably be the primary objective of our strategy at this point in time. But clearly, those are expansion opportunities that could present themselves as we look ahead to the back half of the decade.
Right. Right. Shoot. There was a follow-up question I was going to ask, but it just slipped my mind. So I'm going to move on to the next question here. You mentioned the segmentation and the changes that you've made there. I mean, I know you've covered it well from exactly what you did. But anything you want to highlight there, particularly for generalists in the room, might be helpful. And then I think most importantly is kind of the motivation behind doing it and how are you going to be measuring the success of that decision?
Why don't you take the what we did, and I'll do the what?
Sure. So for the investors out there and people that follow Leidos, we have introduced four new segments. Historically, we had three segments that we reported on. And this year, we organize the business internally around capabilities and actually have five lines of business internally, which get reported out on a four-segment basis. And let me cover those briefly for you. So we've got, we talked already about our Commercial and International business. And it was important that we bring together the pieces of the business that didn't need to follow the FAR and government regulations on a consistent basis and unlock their full potential and have a center of excellence as it relates to how we do business internationally. So we're excited about that part of the portfolio coming together. Next, the Defense Systems. So we had platform businesses in our heritage Dynetics work.
But we also had a maritime and airborne ISR capability that we brought all together, similar engineering discipline and technology investments that are pervasive across those things. And then the two remaining pieces are kind of more of the core of Leidos. We've got our Health and Civil business that have been brought together. Our health business has been on an exceptional run, a lot of good prospects as we move forward. But there are some nice synergies that are emerging with the civil part of the portfolio on the science side that we believe will provide some additional unlock benefits to us.
Then finally, the two that were brought together were our national security business work we do with three-letter agencies, some parts of the DOD, software development, logistics, mission support, data processing, and brought that together with our Digital Modernization portfolio into the final segment that you'll see externally. We're really excited about the Digital Modernization piece of the portfolio because we've won a lot of franchise programs over the last three to four years. Those were sprinkled across the portfolio. There's a lot of synergies around bringing those pieces of business together and unlocking their full potential with repeatability, common skill sets. There's a next gear we believe we can find not only in growth but in margin improvement in those parts of the portfolio. So that's a little bit of what we brought together. And Tom can add some additional color on the why.
Yeah. And Chris used a couple key words there. He talked about capability-based. So through no fault of anybody, Leidos did several big acquisitions and several smaller bolt-on acquisitions during COVID. And during COVID, you just bolted things on and left them alone and figured you'd catch up and figure out how they really integrated later. As a result of that, when I arrived on the scene, I saw a company with tremendous capabilities. But the capabilities kind of scattered through the five operating businesses we had at the time and the three segments that we had at the time. And so this capability-based philosophy, there's multiple ways to organize any company. Pick one.
I assumed and asserted that at the time that we are at now, the best way to get more efficiency and more effectiveness in talking about how we're going to grow Leidos into the future was aligning around capabilities so that we didn't have four pieces of the business doing the same type of work but rather one business doing that work so that we could get better at thinking about how do we become most efficient at it and most effective at serving customers? What's the pipeline of growth for all customers in this capability space? It was a capability-based organization to align for efficiency internally and effectiveness externally, being better able to serve our customers. The exciting thing about all that was it unlocks a more efficient 2024 than we had in the old organizational construct.
I mentioned last week that we had run the numbers preliminarily for 2024 in the old organizational structure and measured success for 2024 on, did that number go up or down? And it went up, happily. So that means already just on the expectation of the new organization, leaders were able to lean in and say, I can be more efficient and be more effective. But then really, the measure of success longer term is what's full growth for each of these segments and each of these sectors. I've tasked each member of my team to bring forward a today forward five-year view of their sector. Each now is set up to uniquely face a certain market with certain competitors and certain market dynamics and certain pipeline of opportunities. So I've said, look, you study your segment of this business.
And you tell me what best looks like over the next three to five years. Tell me what investment's necessary. Tell me where you're going to take this. And then Chris and I will start to adjudicate between them as the year goes on to say, we like that bet, that bet, and that bet. This bet we're going to hold for a little while. So success in 2024 is meeting our numbers and coming forward with a robust growth strategy. Success for this in the longer term is we're going to be able to talk about Leidos' growth trajectory, top line and bottom line, in 2025 that is more fulfilling than the growth trajectory we have between 2023 and 2024. That's what ultimate success looks like.
That adjudication process that you're going to go through with the teams, just maybe help me or help those in the room and on the webcast kind of understand the context that the two of you will bring to that, kind of some of the experts that you'll kind of pull on, kind of some of the assumptions that you are going to kind of bring into that construct as it relates to your customers here, your customers internationally.
Well, I mean, so I'll get started. Obviously, we've got processes by which we evaluate business cases. And it always comes down to risk and probability of success. So really trying to calibrate on those. And you mentioned experts. And that'll involve some external perspectives of the world, certainly. And we're taking those on board now. We'll take more of those on board as the year unfolds. Our board will be very involved in our strategy process. We've got a lot of expertise that the board brings to bear. And so they'll be engaged heavily in helping us understand those things. But really, it's Tom can talk about selecting people based on track records of success. So this comes down to betting on teams and who has proven that has the ability to deliver on a consistent basis. But calibrating that risk-reward profile appropriately is part of our job.
We'll be very involved in that.
Yeah. And I would just add, Jason, so the business cases will be pressure tested to say, do we believe them? But then two other lenses that will be put on them is and yes, this is consultant speak. Do we have a right to win in that market? Do I believe that credibly we can grow in that way in that market? Do we have a track record of doing those things that I can push the I believe button? And two, I'm not a FAR adjacency lover. We're not going to take Leidos off onto a tangent that doesn't make sense to people who watch Leidos and know what we're good at. I'm into core businesses, minding the core. I'm into slight adjacencies, a couple degrees off that expand the pie but not radical 90-degree turns or 180-degree turns.
Yeah. And speaking of kind of widening out and maybe looking at a bigger set of opportunities, maybe you could talk a little bit about the current pipeline, how that maybe compares on a year-over-year basis, and kind of what your track record on win rates have been over the trailing 12 months or so?
Yeah. I'll start and then ask Chris to jump in. So 2024 is a kind of funny year right now. We're still operating under a continuing resolution. Most people in Washington, D.C. have three dates in early March circled on their calendar. March 1 is the first penny to drop. March 8 is the second penny to drop. But in between is a State of the Union address. So I don't need to tell people about politics in Washington, D.C. But most people are looking at those three dates in early March and saying, well, we'll know what 2024 holds from a budget standpoint then. Are we continuing on a year-long continuing resolution? Does sequestration drop in? I say that, Jason, because it's actually got most of our customers in a little bit of a quandary. They're proceeding as if it's a normal year.
But those could be suppressed in the early part of March. As everybody knows who watches this business, if we are operating on a year-long continuing resolution, that means new starts can't happen. Now, that's fine. We've got a good book of business. And we've got good opportunities for on-contract growth. So we're not panicked if that happens. But that's, again, why we put out guidance for our revenue that said 2%-4% growth on 2023, three reasons for that. One, we had a very, very good 2023. So we overshot our expectations there. So that makes the comparator tougher. Two, we want to be conservative about the political and budgetary environment in Washington, D.C. and just be realist about it. And then three, as we refine Leidos for the future, we're giving our leaders headspace to say, hey, that's really not good business for Leidos.
I have this philosophy. Not all business is good business. It may be good business for somebody else in the ecosystem. But it's not business that's good for Leidos. And therefore, I want to give them the space to say, I'm not going to continue to do that work. I'm going to take my assets, my capabilities, my people, and my money and apply them to things that are more worthy of what Leidos does and how we bring value to our customers. So those are the kind of things that kind of talk to the year in front of us.
Yeah. I'd just add 1.1 book-to-bill last year, $37 billion in backlog. There's a lot of good things going on with the engine of winning new business and protecting our turf and our win rates, especially on recompetes, have been strong. But we believe there is another gear. Tom's talked a lot about reinvigorating that process, bringing back a leader and Gerry Fasano that's done that successfully for us in the past. He always brings energy to the job at hand. And so he is. For us, it's really making sure on the new business and takeaway front, we're continuing to punch above our weight class. We're used to winning more than our fair share in those areas. And we expect that we've got all the capabilities to continue to do that again. So I'm excited about where that's going.
The pipeline, despite what Tom talked about and people being a little bit more selective on the better reward opportunities for Leidos, is strong. There's been some pruning of that. It's still in a healthy spot. The submittal engine will be strong again this year, a lot of activity going through. We're looking to just make sure that we can continue that momentum and winning more than our fair share.
Right. OK, great. You mentioned so the changing in the segmentation. So maybe talk a little bit about the leadership team and any changes that have been made there. And I think while talking about that, just talk about change management with people because at the end of the day, it's people that are running this business. And I think we all know most humans are not all that enthusiastic about lots of change. So just kind of talk a little bit about how you're managing that.
Sure. Thank you. So I was very fortunate to learn when I arrived at Leidos that last year was our 10th anniversary as a separate company under the Leidos brand. Obviously, we have a 55-year heritage in SAIC. But it was 10 years this past fall that we were Leidos, purple company with a curious name. Well, I took advantage of that. And starting in the summer, we started talking about our heritage, celebrating the rich 55 years or 10 years that we had, but also talking about something that we called Leidos Next. Now, I've noticed XYZ Next is now very popular. I think I got there first. But in 2023, Leidos Next was the branding that we put the whole change management program underneath. Because you're absolutely right, Jason. People get scared if there's too much change. And they think any change means job cuts.
They always look for the boogeyman in any change. So I wanted to make it optimistic. And we involved our employees on, what do you think is next for Leidos? And frankly, that changed fear into energy. And at the same time, we, as an ELT huddled, talked about where we thought we needed to go with this company, the changes we could make incrementally that wouldn't scare, wouldn't spook the people, but would be a better Leidos organizational construct for 2024 and beyond. That's how we came up with the sectors that we have now and the segments that we have now. And also during 2024, I was watching and learning about the ELT.
I said on the call and it is factually correct, obviously, that 75% of my ELT is now new in new positions or have newly defined responsibilities on the ELT, which means only three people have the same job they had in 2023 as they're prosecuting today. Chris is one. Maureen, my HR lead, is a second. My head of Dynetics, Steve Cook, is the third. Those three are in the exact same job they had in 2023. The other eight, excuse me, nine , are new in new positions or with newly refined responsibilities. What that is bringing is energy and excitement. People are in the right place on the bus. They're excited about the recognition of the talents they have and the eagerness for me to let them lead. I'm very, very encouraged by the fact that people are talking about empowerment and entrepreneurialism and agility.
They're bringing these conversations up about, hey, we've got the opportunity to define what the future of DigMod is for Leidos. How cool is that? So it's been a journey. We've tried to turn that anxiety into energy. I think it has been largely successful.
Yeah, no, absolutely. I mean, the team was ready for a little bit of a twist as it relates to the organizational structure. We've been thinking about that for some time. And I love how people are bringing passion to the new roles. And we've always had a great team that was capable of delivering. And at the core, it's a lot of the same people but unlocked in a different way because they're highly motivated with the new responsibilities they're taking on. So I think we're off and running. We did a lot of work. A lot of planning work went into hitting the ground running on January 1 and not just building the plan but going through the portfolio, thinking about the optimal organizational structure a level below that.
So the teams have found a lot of energy in the first 45 days of this year, kicking it off with the big leadership conference and some sub-conferences. So we're really feeling the momentum building.
Great. And I think along with some of these changes to the organizational structure, you made some tweaks on the incentive structure for the team as well. So maybe talk a little bit about how all of that change aligns and what exactly you did?
Sure. So again, I'm very much a fan of empowerment. I'm also very much a fan of very clear expectations and communications of clear expectations and then accountability. And so the incentive compensation scheme that we've revised for Leidos very much tracks what our investors would think we should be caring about, revenue, profit, cash. It puts very specific individual contributions for those things into individual buckets. So it's not about, I can fail, but I'll still get a great IC because Leidos wins. No, you promised me you'd deliver this. That's your accountability with an overlay then of whether Leidos succeeds on the whole. But the primary focus is revenue, profit, and cash at the individual level with an overarching, does Leidos meet its goals also? On top of that, that's the what. I have what I call the how. So the what is, do you deliver your numbers?
And that's going to generate your bonus. And it's, again, very specific, very mathematical, very precise. And then there's the how you did it. I don't reward bullies. I like collaboration and cooperation. So there's an aspect that is a kicker, positive or negative, around behaviors. And that's simple, the what and the how.
What's the reaction been of the team thus far?
So I think positive. Some people, this is where you really get people that say, I'm going to suspend my disbelief. We've run the numbers and helped them understand that if we had this new model in 2023, what their bonus would have been. So everybody's very happy with the bonus that we're giving because we had a great 2023 for all of our shareholders. So the management team is also being recognized appropriately. But we've helped defang the new system by showing them what their numbers would have been in the new system. And most people are looking at that and saying, oh, OK, good. Now I feel better. And I'm talking about, it's all in your control. You make your numbers. You deliver what you told me. Promises made, promises kept. You're going to be just great. In fact, you can calculate it yourself. You don't need me.
It's all in your hands.
I think importantly to add to that, Jason, I mean, for our long-term comp, we'll still have TSR as a healthy, probably industry-leading component of that. So we do make sure our interests are aligned with our shareholder interests in that regard and just making sure the other elements of that are focused on growth and profitability as well in the future.
Right. OK, good. This will be maybe another. Maybe it's a single-part question. But it is, well, no, it's going to be a couple of parts. Capital deployment, prospects potentially here for some excess cash. And then in the context of capital deployment, you've also talked about some contract pruning as well. So just kind of help us understand how you're thinking about organic, inorganic growth and how that all kind of ties into your capital deployment decisions.
Yeah, so on the capital deployment side, we're obviously pleased that we closed the year last year, beat our cash number by more than $400 million from the original guidance. So a huge year on cash, great performance by the team, allowed us to accomplish a couple of different things. It was a successful year to delever, actually below our target ratio, where we do a study every summer to make sure we're comfortable at the leverage target that we set and got there. So check that one off, the box. Repurchased some shares in the fourth quarter. We talked about that. It was good to be able to step into the market and bet on ourselves because we certainly saw a value opportunity there. And then we raised our dividend for the first time in a couple of years, a modest additional capital deployment.
But making sure that stays relevant and interesting for our shareholders is also important to us. Puts us in a good position coming into this year. We've got more cash on the balance sheet than we had anticipated. And so usually our cash flow profile, and it will continue to be, is a little bit more back-end weighted. Our customers tend to pay heavily around their government fiscal year-end. But we enter the year with cash to deploy. And we've communicated for the first time an intention to repurchase $500 million of stock in 2024. So we're excited about being able to execute on that. But that leaves us a lot of capacity in the back half of the year. And I think what Tom and I have talked about is we want to continue to invest in the business organically as a priority.
We've got a capital expenditure program on the order of $200 million a year marked towards growth areas, whether it's key locations or certain capabilities on the product and manufacturing front. That leaves capacity. As the teams go through their strategy work and identify early opportunities to make moves in that regard, we're happy to entertain those prospects. Absent that, again, whether it's delevering, whether it's additional share repurchases, or just evaluating prospects into the future, we're happy to have those choices to be made in the back half of the year.
Yeah, we are in the very envious position where we have lots of choice of how we prosecute this year. One thing we won't be doing is surprising people. We've got headroom in our budget to make important organic bets. If, as the strategy work we're undertaking uncovers great opportunities that won't wait until 2025, great. We've got levers we can pull there to invest in that. And if things go well, there's possible other things we can do with that capital that are shareholder-friendly. And so it's a great problem to have. Again, what we won't be doing is making any knee-jerk surprises. I'm a firm believer that we owe ourselves and our investors a coherent strategy for where we're taking Leidos. And then all of our organic and inorganic plays from that point forward should tie in very carefully and clearly to that strategy.
As we do this strategy work, that'll set out the roadmap for both inorganic and organic plays in the future.
On the second part of your question, I'll come back to that, just a little bit more selectivity. Don't overread it. There's some things that have crept into the portfolio over time. As we have realigned a little bit and prioritized where we want to place bigger bets, where we're truly differentiated and command better returns, we want to be selective with the resources that we've got to throw at those opportunities, especially on the capture and technology side. It's just that. I mean, there's a few things that we'll say will probably, as they end, we might choose not to recompete them. There's been some other choices we've already made as it relates to looking at the pipeline and saying, let's de-emphasize a couple of these areas. In the short- term, it's a modest impact on growth.
We think in the long- term, it'll be an accelerator for us because we'll be really more focused in the areas that we can grow more rapidly and generate better returns.
It's all focused on building quality backlog over time. If you're spending all your time and your resources chasing not great work, you're not chasing quality backlog over time that's going to be top and bottom line accretive. That's what we want to kind of re-guide ourselves to.
You've got confidence that there's enough of that quality opportunity out there?
Even some of the things that we were going after historically can be quality opportunities. It depends upon how you approach it, recognizing what value you bring. That might mean that your probability of winning goes down slightly. In the grand scheme of things, you'll win enough to generate higher returns. There's a little bit of that element too: what's an acceptable level of return even for the work that we're going after? Yes, I believe the team has line of sight on a pipeline that can support our growth objectives of quality.
Yeah, and not to put too fine a point on it, but as we went through the postmortem of some losses we had in the last 18-24 months, we realized that was great work. And we didn't have the A team and enough of the A team on it. And that's letting quality backlog not accrue. And why were those people not available? They were distracted by business.
It also comes back to Gerry. Chris mentioned Gerry Fasano. He was our sales and marketing lead in the late 2010s when we kicked butt in the marketplace. So we're very much looking forward to getting our mojo back in that area.
Right. I see we're running out of time. I do want to ask just one last question because you mentioned the word investment a couple of times in the response to this. Just any particular areas or cadence or anything that you want to highlight to investors as you think about investments going forward?
Well, I mean, so again, to Tom's point, we'll communicate more clearly the areas that we believe will make bigger investments in. We've had a robust amount of spending on internal research and development. And that actually has grown year-over-year as a percentage of revenue. And our CTO team is very thoughtful on how they're deploying that in near-term deployable capabilities. And a little bit of that goes towards the little bit of the longer-term deployable capabilities where we think things are going, not to mention investment in new business funds as it prosecutes captures and building the pipeline and our account management capability. So you'll see our investments concentrated there for organic growth plays. But up to the solution architect, technical people to really make sure those are targeted in areas that have a big impact on our customers.
Software, cyber, AI, autonomy.
Noted. And with that, I see the clock ticking up, which is never a good sign. I want to thank you very much for joining us today. Appreciate you coming and spending the time with us.
Thank you, Jason.