Okay. Good afternoon, everybody. I'm Noah Poponak. I am the Aerospace and Defense Equity Research Analyst here at Goldman. Very happy to have with us here for our next presentation, Leidos. And with me on the stage is the CFO, Chris Cage. Chris, thanks for being with us.
No, I'm happy to be here. Thanks for having us out.
Good, good to see you. Okay. So I think I'm basically obligated to start any government services discussion during this event with DOGE.
DOGE? I've never heard of that.
Never heard of that? Yeah. You know, I could see a scenario where it ends up not being what it sounds like and doesn't have a particularly large impact on your business. But, you know, the people in charge of it and the things they are saying sound pretty.
Sure.
Big in stature. So, as a management team, what are you guys talking about internally? How are you positioning the business? What kind of scenario planning are you doing, if any? How are you guys thinking about, is this good, bad? What does it mean for Leidos?
No, great. Thanks, Noah. I thought we might get this question. So, clearly, you know, these circumstances seem to change pretty quickly. The headline risk, when Elon and Vivek were announced as part of the Department of Government Efficiency, you know, causing people to take pause on what this is really gonna mean. And I would say, you know, Leidos, as we just completed a year of deep strategic thinking, you know, the good news is, as we look to our future and the priorities, those needs and those areas of emphasis are pervasive and they'll withstand, you know, any potential pressure from, you know, government efficiency initiatives. That being said, we do take this, you know, very seriously and we're not on the back foot. We're on the front foot.
We're clearly looking already around what are the ideas we have that can help our government be more efficient, and we're all about that. We're purpose-built for that. There's things that we're already doing. There's examples where that's already come to pass, but there's more immediate jumping-off points that we could go help them tomorrow, take the lead on. So that's how we're facing up against this. At the same time, we're also analyzing our portfolio and ensuring that, you know, everything is ready for this future state and, you know, where we can shaping ourselves to be even more well-positioned with our customers and looking at our pipeline and ensuring we're going after the things that are most important. But big picture, you know, the strategy that we're embarking on and the portfolio that we built is well-insulated to withstand this.
But at the same time, we're gonna ensure that we're in control of our destiny as much as possible here and help our customers find ways to be even more efficient.
Assuming this stands and action is taken, maybe not on the grandest possible scale, but that it's a very real thing with very real action, is it a net positive or a net negative to Leidos?
It's, I think it's too early to call. I mean, certainly there are scenarios I could paint where it's either one. I think, you know, if you think about where the immediate opportunities may be, if they were to mandate, for example, that federal employees need to come in the office five days a week and that perhaps cause some of the federal workforce to think about their future a little differently. I mean, that could create the needs to get mission accomplished are still there. That didn't change overnight. So there are opportunities like that. If they decided that they wanted to outsource more to the services industry, as an example, I think we can step in and fulfill those needs. You know, the rhetoric tends to have been early 'cause people just don't know that the federal civilian agency areas perhaps are more at risk.
And so you clearly look at those parts of the portfolio. And for us, you know, the good news is, while we have some work in that area, of course, it's work that, for example, the things we do for the VA, the veterans need to be served. The disability benefits they're entitled to need to be delivered. And so we don't see that changing in any scenario. The FAA, you know, you could imagine a future where that evolves, but air traffic management is critical. And we're in the middle of helping them to support that with modern software applications and helping them manage our air traffic. And, you know, ports and borders are gonna be a priority in this administration, clearly part of our work that we do for CBP and TSA fits right into some of those compelling needs.
So, you know, again, I see a scenario where we're gonna try to be opportunistic as possible to take advantage of the things that can help them accelerate this objective, but be thoughtful around parts of the portfolio where we need to think differently about the future.
Okay. When there's discussion of privatization of some of these agencies, is that realistic, and what does that mean for a company like Leidos?
Yeah. I mean, I think that is. It's hard to imagine some of that actually happening in over, you know, what kind of period of time. You know, you talk about the VA, for example, and, you know, should veterans be able to go outside of the VA environment for healthcare? That in and of itself doesn't impact Leidos. And in fact, you think of the work that we do on the disability examination front. Previously, the VA did that work, and they found that it was a more efficient model to outsource some of that to industry and certain providers in industry. And I think it has proven to be very efficient. So, again, I think if there's an outsourced environment over time of certain capabilities, we could step in.
But pure, pure privatization of some of these things, I mean, that is a tough putt, a long-haul thing. I think that's grand thinking and unlikely to come to pass, but that's a scenario that we'll continue to monitor and evaluate.
Okay. You just referenced earlier sort of a year-end internal planning process and how you all as a team are thinking about the shape of the company for the future needs of the customer, and I can recall when we were down in your offices and met with you and Tom, and Tom talked about tasking the teams to go out to 2030 or 2035 and think about where the customer is and then solve backwards to what you have to do today to meet that, and I guess it's a big open-ended question, but just as we are approaching the end of the year here and since you referenced it, and I think of Leidos as an already fairly well-positioned company, so I'm curious to hear about those discussions and what types of changes you all are thinking you would need to make.
Absolutely. I mean, no, and I'll have to save some of that because that's what we're building towards is a big investor day in March, so hopefully everybody will look forward to joining us, in person or online, to participate in that. But it's been a year of deep strategic thinking, the most robust process I've been a part of in my 26 years at the company. You're right. It started with a future-back look. You know, how do we really anticipate what the environment looks like for our customers, for the world, for society, you know, 10 years into the future? That effort was led by our Chief Technology Officer, but supported by, you know, dozens and dozens of deep thinkers outside the company, in the industry, some inside the company to help shape those expectations.
And then from the, you know, work backwards five years and said, okay, if that's what 2033 looks like, what's 2028 look like? At the same time, our sector presidents and their strategy teams put their spin on what's my set of objectives and plans for my business over the next five years, and then where do those intersect or don't intersect? And so that identified areas of opportunity where maybe we were well-positioned for some of the emerging needs that we saw, or maybe there were some other areas that we needed to prioritize more. All of that helped shape the strategy outcomes at the enterprise level. And what we're gonna talk about, amongst other things, are the growth engines of the company that we're, we're most excited about.
And so there's, you know, half a dozen about of those that are very compelling that, again, withstand any government efficiency initiatives in our opinion and will be very intentional about the resources of the company being applied to those areas of growth to differentially drive those pieces forward. At the same time, we've got a portfolio and some things will get a little bit, a little bit less, and some things will be, you know, able to run and maintain because we've already watered those seeds. So I'm very excited about how we're positioned and seeing us through 2025. We're calling our pivot year because it's kind of the launching point to really make hay in that regard. And we see that generating excellent returns over the planning horizon. And we'll talk more about those financial aspirations as part of that investor day.
Okay. You've been teamed up with a new CEO, Tom. You just called it the, I think, sort of deepest strategic process you've been through at the company.
Mm-hmm.
The financial results recently have been, have been quite good. Maybe talk about working with Tom. How much, how well do you guys work together? How much change are you both affecting at the company?
Change, yeah.
Or is it, you know, just the timing of kind of certain contracts and milestones that's behind it?
Give us a little bit of credit, Noah, but,
I have to be honest.
No, no, I know. Listen, Tom's been great. Tom came in, Tom Bell, May of last year, 2023, and, you know, immediately dug under the covers. We weren't, we hadn't had our best quarter, right before he started. So there was some urgency around how do we shore up current year performance, get back to, you know, one of his mantras is a promise is made, promises kept philosophy and instilling that discipline and rigor throughout the company. And, you know, we've now put, you know, six or seven excellent quarters on the board since that point in time.
And so, you know, I think that's kudos to Tom to come right in, get focused on what's a priority, you know, cut out the noise and get people really to understand, you know, we're gonna deliver not just for our shareholders, but for our customers and for ourselves on a consistent basis. But Tom also brought this strategy, you know, process to life, right? I mean, he's been down that road before in his former career and he kind of had a vision for how this could come together. He's a very empowering leader. He gave people, gives people a lot of space to, you know, to drive their area of responsibility, be accountable for outcomes. I think, I embrace that. I think our leadership team does, no doubt.
It was a bit of an adjustment process to recalibrate to that, but I think it's allowing us to hit on all cylinders and it really is a force multiplier because, you know, we're not all bottleneck through a singular decision-making process, so that's been really exciting. And again, on the, Tom's been, you know, a great partner on the capital allocation front, very supportive of, of, what we wanted to do on some of the share repurchases this year. And that's been part of the plan, and, but we're clearly looking for areas where we can continue to drive organic growth and, you know, propel the company forward for the future, so, you know, I mean, really, really couldn't have asked for a better partner. I think he's got trust in me and we've got a great relationship. We talk, you know, basically every day.
So, it's working really well.
Great. Okay. So Health , top-line growth has been on a torrid pace. What's behind that? How sustainable is it?
Yeah. Health, our Health team led by Liz Porter has done a fantastic job. And, you know, there's a lot of ingredients to that recipe, but the primary, you know, factor that's driven that forward over the last 18 months or so has been what's going on in our disability examination work for the VBA, in part because of the things that we've intentionally been able to do to drive significant efficiencies into our processes and our back office and our systems. But quite honestly too, the, you know, the macro environmental factor of the PACT Act legislation that really significantly increased the amount of veterans that were eligible for disability benefits and needed examinations as part of that. So that's a sustaining tailwind behind the business.
You know, we're using that as a platform to scale that up substantially, which we have, and looking for other ways to leverage that capability and occupational h ealth and readiness examinations, things like that that we do for other agencies. You know, further extend that, we call it our managed h ealth services business. You can imagine that'll be one of the areas we're excited about for the future, of the growth factors that we see beyond what's happening with the VBA. That's been, you know, allowed us to drive our margins to the levels they're at today for that particular unit. It's north of 20%. It's been quite attractive.
Beyond that, you know, we're doing. We've done great work on the legacy DHMSM program and very pleased that the customer signaled that they intend to, have not yet done so, award us a sole source follow-on for that work next year. So it allows that as a major program in the company to continue and have a platform with the customer to help them modernize that capability into the future. And you know, we have a Reserve Health Readiness Program . We have other work for DHA, work that we've won and, you know, CDC, et cetera. So a lot of areas under the covers within Health and Civil , but the most noteworthy would be the work going on at VBA.
What's the change in size of those eligible to go through the VBA exam process from the PACT Act?
Oh, it's, I mean, it's step change. If you look at the prior data where we were on the backlog of cases of eligible veterans, it was in the low hundreds of thousands. And, you know, it's now peaked up to over a million at its peak and it's in the 800,000-900,000 range more recently. So it's orders of magnitude more veterans are gonna, and it's not just one time and done. I mean, they're coming through the system multiple times as their conditions change, right? So, it's unfortunate, but, and as they, as their disability situations evolve, they're potentially eligible for more benefits. And so that leads to multiple evaluations in the process. So.
And then I guess also if the potential benefits apply to more people from that chain, then that, you know, pool of people just stays at that number or, I mean, it could move around a little bit, but it's not like it goes back to the 100,000.
Yeah. Right. I mean, that's the thing. That's why with, with this in place, it's permanently elevated is how the customer sees it. And that's basically, at least for this recompete process, they said, you know, you can anticipate volumes at these levels that we're seeing.
Right.
So, you know, I mean, the most important thing is the veterans get to, and the benefits they're entitled to. And we're happy to help support that mission in a meaningful way.
Now many more are.
Many more are.
Yeah. What's the recompete process?
So, we're in the middle of it and it's imminent. You know, I think we, we did communicate most recently at our earnings call that the customer had awarded a one-year option, exercised the option period. And we bid on the recompete as have other providers. And there's been dialogue and we're expecting that to be decided here imminently. They had hoped to complete that in November. It's now stretched into December, but still expect to be something that gets completed this fiscal year. Either way, we're operating, you know, full, full go. We've got coverage into the future, but it'd be nice to get that one in the rearview mirror and then, you know, focus on what's next in the future.
The one-year extension starts when?
It's already, we're already on it. It started October 1st.
Okay.
So it was a government fiscal year period of time, October 1st to September 30th of 2025. So that's the current contractual arrangement for that portion of the work. You know, there's multiple contracts in this particular area. This is only a subset of them. But that's where we're operating under that arrangement today.
You expect a decision on a recompete, final decision this month?
I expected it last month and it didn't happen. I do expect it this month, based on our best educated guesses, but we're not in control of that process. But like I said, it's imminent. The VA has wanted to get this done, is our understanding. They've been in dialogue with us. So we're just waiting to, you know, make sure that we've met all the requirements and we stand ready to support them into the future.
Does the recompete apply to all of your work in VBA disability exam or is it broken up into pieces?
It's broken up into pieces and it doesn't apply to all of it. So it's a large portion of it or I wouldn't say a large, but it's a majority of the work.
More than half.
More than half.
Okay. And how many bidders are there on that one?
I don't, that's not something we're privy to.
Oh, really?
I mean, we understand who we think is bidding, but I mean, we don't have clarity. They didn't provide us that intel as far as how many bids were received. You'll get a debrief after the fact when everything's said and done. I'm expecting.
Is there a scenario where there's not another bidder?
I'd find that highly unlikely knowing the current providers of that capability. Look, the VA needs, I mean, there is a massive amount of unmet demand, so it behooves the VA and we're not shy of competition. In fact, you know, we stand ready to serve them as well as possible and our metrics have been excellent, but quite honestly, there's a lot of need, and so.
Does it make sense for them to just break it up then?
Well, they.
And move the work to multiple providers?
They, they have done that. They've got multiple providers in all the regions. So that was a move that they made a few years back.
Okay.
In anticipation of this elevated workload, but quite honestly, I mean, the VA still plays a role in all this, you know. So there's a portion of the workflow that they're responsible for, and, you know, we can only go so fast dependent upon their capacity too. So, as the situation evolves over time, you know, we look to support them as much as possible to make the process as efficient and effective for everybody as we can.
Who else does this?
It's not for me to say other competitors on, on this, but,
Okay.
I think it's publicly known.
Fair enough. And then the margins in the segment you alluded to have expanded a lot. You guys have referenced these, these recent levels being relatively sustainable.
Mm-hmm.
What is it about the work that you're doing in the segment that's expanded the margins that much?
It's kind of primarily two things. I mean, it's some of it's a volume game. You have a fixed amount of infrastructure that you've invested in over time and we've built this up, and now you're leveraging it, you know, to the maximum extent. That's excellent for everybody involved. Secondly, it's applying innovation and technology to take steps out of the process to make it as efficient as possible to drive maximum throughput in a clinic environment or to streamline the medical records such that, you know, you can really focus on the parts of hundreds of pages documents that are really relevant to the circumstance at hand. Our team, kudos to them. They've really looked for ways to apply AI and other automation techniques. We've invested in our fixed facilities.
We've partnered with a provider network that's highly efficient and incentivized to do excellent work. You know, we've been rewarded as such by the VA because the contracting structure they put in place does incentivize and has disincentives if you don't meet certain standards on quality, timeliness, throughput, customer satisfaction. We're more than happy to put some skin in the game on those objectives and then be rewarded for you know, great performance.
Okay. Moving off Health , your other largest segment, National Security and Digital, the top-line growth there has been relatively tepid.
Mm-hmm.
What's behind that and what's the opportunity to accelerate the growth there?
Yeah. No doubt. No. And I appreciate that, you know, not where we wanted it to be, from a growth perspective last year. The team knows that. The good news is, you know, that's an area that we've seen a lot of recent success. We had a great third quarter as far as new bookings and new wins. And you could point to that particular segment as having a number of those that will be catalysts for growth into the future. So very excited about that. And also really when you look at our pipeline, that tends to be where we see the most significant opportunities. A lot of work in the, you know, the heritage intel customer space, but on the DoD side as well. And then our digital modernization team has a number of large opportunities.
I think there's more than 10, greater than $500 million next year alone that we'll, we anticipate bidding on. So, robust set of opportunities, some new wins, gas in the tank. You know, legacy-wise, it would, it probably had been, hey, we were a little underrepresented in some of the DoD customer spaces from a services. We had a nice position on the digital modernization front, but there were some other aspects that we weren't as penetrated as we should have been. And, and the team has, you know, really made a focus on that. We've brought in some depth as it relates to account management capabilities and, you know, expanded the pipeline there. So, expecting good returns from the team. And it's definitely, part of the business that I'm expecting the growth rate to accelerate going into 2025.
The backlog there has grown, pretty nicely. That converts in 2025. It doesn't have a longer lead to it.
Yeah. I mean, most of the programs that we've won more recently, I mean, you're talking about five-year programs and several of them are new start, new wins for us. There was a classified program in the intel side, Purple Fury, that'll be brand new work that'll ramp up, a couple new cyber programs, as well, Advanced Battle Management program for the Air Force. So these are all catalysts that, you know, they're not huge, huge programs, but several hundred million dollars a pop.
Yeah.
That, you know, can contribute nice chunks of new work heading into 2025. So.
Yeah.
Yeah. Pleased to see that backlog growing and, and not only growing, but, you know, high-quality work as well.
Okay. When I look at your two smaller segments, Commercial and International, Defense Systems , the margins in those segments have been somewhat surprisingly lumpy, volatile quarter to quarter.
Mm-hmm.
Is that just inherent in those businesses and will always be there? Or is there some version of the future where they're smoother and higher margin?
Yeah. No doubt, well, we aspire to that for sure, and in the leadership, we have excellent leaders over both those businesses. I know that that's the path that they're on. Let me take defense systems first. The good news is a couple quarters in a row with double-digit margins and strong growth, so 2024 has showed a lot of promise on that front. I think the key to the sustained success there is just its volume. We're transitioning now away from some early-stage development stage programs. We're migrating into lower-rate production. As we get to see more volume and throughput, we'll see, you know, more steady-state margin performance, and we don't have really much exposure to these development stage programs in that portfolio at this point in time, so I'm encouraged. We're on a nice upward trajectory there.
I think it's got momentum behind it. We've had some nice new wins announced even in that unit over the last month or so, in hypersonics and then in our Indirect Fire Protection program . So the demand signal is there. And so that, you know, should continue to accelerate and steady out. On commercial international, it's a little bit of a mixed portfolio, and, you know, you're right. This year has shown improvement, but we did have, you know, a blip in our second quarter there with a program in the U.K. But you stand back from that, I'd say, you know, the part of the portfolio I'm most excited about is our energy business. We do excellent work for utilities and, on transmission and distribution engineering, energy efficiency work. That has been a steady double-digit business for us.
We've made improvements in our aviation, security detection line of business. This year has been steady, but it's got more room to raise the margins further. And we expect that as we transition in the future. And then, you know, the other pieces of that portfolio are the international pieces of work. And I think, again, as we see the potential of how AUKUS Pillar Two could propel needs in Australia and the UK and those businesses could potentially ramp up more in the future, there's probably more margin uplift there. But in the near term, it's kind of just shoring up a couple of those trouble programs there. And I think we've got the elements to get those margins, you know, above double digits is really the target. And, you know, along the way, minimize the lumpiness is the goal.
How are you feeling right now about those handful of programs that need to be shored up?
I feel really good. I mean, it's been steady progress in the U.K. I mean, this has been actually a fantastic year for program execution for Leidos.
Yeah.
That aside, right, there's in a portfolio of thousands of programs there always could be a handful that can turn red and need to be, you know, brought back on track, but in the UK the team's been working exceptionally hard. We put our best foot forward. There's milestones that need to be completed. We've made steady progress towards those goals and looking forward to getting that to acceptance with the customer here in the relatively near term. But I feel like it's definitely on the right trajectory. I feel really good about the steady and improvements we've made on the Dynetics side and the defense systems, I should say, on some of the development programs. You know, great leadership additions there that have really brought good rigor and discipline, and we've seen, you know, substantial write-ups on program performance this year versus write-down.
So I think, you know, we're in a good spot. You're never done with that work though, Noah.
Yeah. The security program you referenced, the security products business there briefly and that had, you know, caused some consternation.
Mm-hmm.
A year and a half ago or so and then kind of just went away. I mean, it or I guess improved very quickly. What exactly happened?
Yeah. Well, I mean, so our security detection business, which has got two parts to it, you know, aviation, people and baggage screening and then ports and border screening. You know, we had some challenges in the supply chain and had a little bit of a blip on program performance, you know, 18 months ago, almost two years ago now. New leadership team really got after it. They've done a great job of getting into the portfolio and, you know, striving excellence in the program performance work that we're doing, helping, you know, get our supply chain on track and work with customers and, you know, just a lot of good fundamental blocking and tackling. That's been really well done. And now we're getting after innovation for the future. So.
Yeah.
I look at that part of the portfolio as got a lot of optionality. I mean, it hasn't been a huge growth engine for us, but we still believe the long-term demand signals are there. And we have capability and technology that can meet those demands for, you know, it's a dangerous world and we need to protect our borders. We need to protect air traffic. But at the same time, you know, then you've got a massive installed base of equipment that delivering your maintenance and predictive maintenance and everything much more efficiently can optimize the cost to sustain this deployed portfolio. And, you know, obviously that's an arrangement where, you know, you have long service and maintenance contracts that accompany these equipment sales. So that can be an attractive part of the business for us.
Okay. Coming up on five minutes left here, I'll take a pause and see if anybody in the room here has a question for Chris. Feel free to fire away.
You're covering all the bases adequately here, Noah, it looks like.
Maybe talk about balance sheet, cash flow, capital deployment. As the CFO, where do you want balance sheet to be?
Mm-hmm.
You've been buying back stock at a fairly healthy clip, but your buyback plus dividend are still less than your free cash flow. I assume you don't want to reduce leverage because it's not that high.
Mm-hmm.
How are you triangulating all the pieces of net debt, EBITDA, free cash flow, buyback, dividend, M&A?
Yeah. These are what you call high-class problems, Noah. I mean, we're in a great position on the balance sheet, and it wasn't always the case. You know, when I took over the role, we were above our leverage target, you know, had done some deals the year before and had to work our way out of that. We've done that very successfully, taken down leverage, grown our EBITDA, and now are, you know, below what our analysis says is kind of the optimal place to be, right, from a leverage perspective.
Okay.
Doesn't mean I'm going to rush out and go borrow money tomorrow. But, well, we've long said three times gross debt to EBITDA is a, so somewhere in the two and a half times to three times gross debt to EBITDA.
Yeah.
We're below that now, as you point out, and substantially below that when you look at a net basis with cash on the balance sheet. So that provides a lot of, a lot of optionality, a lot of flexibility. This year, as we've undertaken the year of deep strategic thinking, clearly the priorities were on, you know, higher dividend program, CapEx where it makes sense to propel organic growth, and then share repurchases, especially given the valuation that we felt was attractive all year long and continues to be attractive, quite honestly, in our opinion. So, and but that didn't tap out all of our capacity nearly. So we now, we look ahead to the future.
You know, with more clarity around the places that we want to grow, through our strategic plan, you know, you can imagine it won't be the priority, but you can imagine that, you know, M&A will come into the picture a little bit more as we go into the future if it passes, you know, stringent tests around, hey, how does that really accelerate that strategy area? It's not something that we can do organically to get to where we want to go, and then, of course, you know, financially it meets our return criteria and, you know, fits nicely, so we've got capacity to do all of that, and ultimately, you know, if that means more leverage over time to get back closer to our target, that could be part of the recipe.
But right now, I view this as just having a ton of flexibility.
Yeah.
Going into the year and allows us to be very, you know, intentional as those opportunities present themselves.
Okay. What's your process for determining that the stock price is at a level or the valuation of the equity is at a level where it makes sense to have higher share buyback?
We read your research report first and foremost now. No, in all honesty, we obviously, we do a robust, you know, plan, you know, multi-year, five-year plan, five-year model at least, and run our own DCF analysis on what we believe in the company. We stress test that with our Monte Carlo analysis around scenarios. So we've got a robust FP&A team that runs that process for us, a lot of inputs bottoms up from the sectors. So we're constantly evaluating where we think we're going and what we think we're worth based on delivering on that plan and that outcome. And that's certainly something that we step back and evaluate as we look at where the stock is trading at and where we think fair value lies.
How do you handle the VA when you do that?
Well, I mean, we've got.
Or I should say the VBA.
Yeah.
Example.
We've got the Health business writ large that we're looking at. We're looking at their opportunity set in their pipeline, their commitments over time of what they can deliver. And, you know, is there a downside scenario that you take into consideration? There is. You look at what we call our mitigation techniques. What are our break-glass techniques in a scenario like that that we could pull levers on to deliver more profitability to offset any risk like that? And it might not be just the VA. It could be any part of the portfolio that something goes differently than your expectation.
Yeah.
But anyway, all that gets factored into our thinking on the value of the company. And, you know, we're operating this thing and running this thing because we expect to grow earnings, expect to grow the company, expect to deliver value to our shareholders. And we're going to bet on ourselves in that regard too.
Okay. Yeah. I mean, I look at the valuation, the valuation of your stock is lower than most of your peers.
Mm-hmm.
Given the financial performance of the company, you can argue that doesn't make sense. I assume the market is considering VBA and having to recompete that and some probability-weighted average of some of that going away. Does that make sense for the market to do that? Or, you know, is that probability low enough or would it roll off slow enough and be replaced by other opportunities?
Yeah.
Or is it, it doesn't make sense?
I don't know that it makes sense. I mean, I get it. We live in an environment where you have to win the next contract. You don't get a lifetime, you know.
Yeah.
commitment from them to do this work. You've got to continually go earn it. But it's our job to be a valuable partner and provider to them such that, of course, it makes sense to continue that work for Leidos. So to me, you got to look at, is the mission there and is that pervasive need going to be there? And if that's the case, then why not Leidos? Because we already know the customer, we know the environment, we've proven ourselves, and we're not just harvesting this thing for our benefit. We're continually innovating for the future. So we want to be on the front lines shaping the next set of requirements in such a way that says, "Hey, VA, did you think about a way you could do it differently like this that's even more effective and affordable?" And so that's the game plan.
You know, so I can't speak to what other factors the market's bringing on board, but I would agree with you. Our multiple has been below where it ought to be. And I think we think our portfolio perhaps maybe at times there was a point where people felt like that was, maybe a little too complicated. I view it now as we've got a tremendous amount of optionality. We've got a lot of exciting things in the portfolio that fit together and that can be catalysts for growth. And, you know, at some point in time, parts of that don't fit for the future. There's, you know, flexibility we've got with those things as well. But right now, and with our strategy, I think there's a tremendous future ahead of us and we're really excited about it.
That's great. With that, we're out of time. So we'll wrap up there. Thanks so much for being with us, Chris.
Great.
Really appreciate it.
No, appreciate it.