Hey, good afternoon, everyone. Thanks very much for joining us here in the room and online. I'm Seth Seifman, the U.S. Aerospace and Defense analyst here at JP Morgan. We're wrapping up the second day of the JP Morgan Industrials Conference, but our A&D companies are focused more on the second and third day. We're very happy to have Roger Krone here from Leidos to kick things off with us on the A&D track this year. Roger's the CEO of Leidos, and thanks very much for joining us.
Great. It's great to be here, and I feel sorry for the people who are not here because it's a unbelievable day in New York, and somebody's building this huge building right next door.
Yes.
Whoever that could be.
That's right.
Yeah.
you know, maybe three-ish years or so.
Yeah. Okay. There's the over-under on when you're gonna move in.
Exactly. Exactly. Cool. maybe we'll just do kind of a fireside chat. I'll ask some questions. You guys, I'm sure know I could sit here and ask questions forever. I would also like to go out to the room and, you know, see what questions people want to ask as well. Maybe just before we, you know, before we dive into anything specific, Roger, if you just want to give us a quick, you know, quick thought on, you know, where the business is, kind of how you're feeling about things, including since the release of the budget last week/early this week.
Yeah. You know, I think, there's always a lot of noise and there's, you know, noise around the budget and the debt ceiling and, you know, the presidential and the, you know, the right-wing, you know, budget hawks. We spend a lot of time on those kind of things. I've come to learn that I think they unfairly dominate the conversation. You know, we've got, you know, depending on how you read it, you know, $840 billion President's budget. It's the largest defense budget in the history of the country, by far, you know. Now we argue about, well, okay, it was only, you know, 3.8%. We were hoping it was 5%. It's $840 billion, you know. Civil is gonna move with it.
I think from a budget standpoint, you know, there's a lot. If you live in D.C., this is all we do. We debate the budget, we debate the civil spending, and, you know, we argue over priorities. The fact is, for a company like Leidos, which does primarily business with the federal government, all of our customers have more money to spend than they've ever had. With perhaps some uncertainty over debt limits and whether it'll be in a CR, and, you know, we now have customers that are motivated to spend. You know, they've got their 2023 numbers. They wanna get that spent. They wanna get those dollars committed before you go into, you know, the typical seasonal uncertainty that we've had in the industry.
What we have been doing at Leidos, and we've talked about this very consistently, is continue to try to shape our portfolio so we offer products and services where our customers have needs. I mean, it's, you know, we're trying to keep it simple. You know, we wanna develop differentiated capability that meets the need, the future needs of our customers and de-emphasize those areas where our customer is de-emphasizing. You know, low margin, you know, maintenance and operations business, we have some of that. We're gonna have less of it in the future. We want more products because we see shifting in the product portfolio to those products that are relevant in a big power competition, so we've done that.
In our, you know, IT transformation business, you know, there's still a lot of cloud transformation, but we now talk about things like multi-cloud and physical cyber and virtualization and Software as a Service. We've shifted in areas where we see the federal government shifting. We're very, very bullish. We think 2024 is gonna be particularly strong because we've now won a significant backlog of businesses that are ramping and will ramp even more next year, like our Defense Enclave Services and our Reserve Health Readiness Program. It just goes on and on. Navy Next Gen, there's just a lot of good news for Leidos. You know, 2023, we've got a guide out there.
You know, our confidence in that guide continues to grow, and we expect to see even a better year in 2024. Those of you who were at our Investor Day, down in Huntsville got to see early production of hardware and with our IFPC-HEL, some of the weapons programs that we've got, and those programs will be fully ramped next year. you know, I know we'll probably talk about, you know, the leadership change at Leidos, my retirement, but I feel really good in handing the business over to Tom Bell with the backlog and the management team that we've got. I think it's a great story. you know, we had a, I thought a very, very strong fourth quarter, which, you know, the only quarter I can really talk about.
You know, great top line, really, solid margin and pretty good cash generation. You know, overall, I'm really pleased with what we have been able to do with the company and handing it over to Tom and seeing what he'll do with it when he gets it, so.
Yeah. I mean, you mentioned the transition, you know, in terms of thinking about You know, why this is a good time and what gives you confidence that this is a right time for a change? You know, what would you kind of reinforce on that, on that topic?
I'll be 67 when I, when I leave. You know, and I, of course, I tell you, I think I'm not gonna retire till I'm 80. You know, in corporate America, public companies, after you hit 65, the board, you know, starts to ask hard questions like, how healthy is he? You know, what's his tenure? How long is he gonna stay? When I hit 65, we then had COVID, and, you know, no CEOs gonna exit in COVID. Then we had one year of COVID, and then we had two years of COVID, and we still have a little bit of that. You know, my goal was to get the company through COVID, stabilize in the post-COVID world. A lot of things changed in the way you run a company in a post-COVID world.
You know, workforce mobility and flexibility, workforce attrition and, you know, you kinda wanna manage through that. Now as, you know, we've done that, stable. You know, we've got, I think, the largest backlog we've ever had. We're on track to meet our three-year goals. It's a good time to transition. Then the specifics of what day and what quarter, you know, really has to do with annual meetings and proxies and trying to get. we think it was much more elegant to have Tom elected to the board.
In order to do that, you've gotta make an announcement. Our proxy will come out, I think, tonight or tomorrow, today or tomorrow. We had to get in order to get Tom into the proxy, you know, you set back from that. They're just some corporate governance artifacts that have to happen so that Tom could be elected to the board. He will be elected to the board in April or May, whenever our annual meeting is, and then I'll stay on as CEO. I'll do the call for first quarter 'cause it's my quarter, and then we'll transition the CEO responsibilities after that. I'm around through the end of July, and I'll be associated with the company through probably March of next year.
You know, I have pages of bucket list things that I've been putting off for years. In fact, when you came by, I was talking to somebody who had gone through the transition and getting advice from what he had done. I'm looking forward to doing other things and spreading my time in different ways. I know Tom is really excited about coming in and, you know, being a CEO of a public company. You know, he's a business development person, he's a great person to work with. You know, I'm gonna sit back and see how he drives us to the next level. You know, our guide, I think, is center line 14-9, but call it 15.
You know, the conversation that we'll have with Tom is, how do you get it to 20? What new markets and growing international. Tom's got a really solid background internationally, so I suspect we'll do more there. There's white space that we haven't gone after. Frankly, for the 2023 and 2024, he needs to execute the backlog. He gets that while he gets to put his own spin on the strategy. I'm really excited about the future of the company. I think Tom will do a great job.
Yeah. No, that's a good point you made about 2024. Maybe if we dig in a little deeper on the topic of the CAGR that you put out, I think it was towards the end of 2021, looking at 2022 to 2024 having a three year CAGR in the 5%-6% range, and that kind of implies an inflection in 2024 from where we are now. It sounds like you still have, you know, the company still has a lot of confidence in that inflection coming.
Maybe if you could talk about the degree to which that comes from Dynetics and the programs there, including hypersonics, the degree to which it comes maybe from some other products on the civil side, including the scanners and the degree to which it comes from, you know, different pieces of the services portfolio.
Yeah. Well, actually, you've done a great job of answering the question, so, but I'll go back and review that. We'll start with Dynetics 'cause again, those people who are able to make the trip know that we're moving from development into production on a variety of programs, and that provides a really, really nice ramp. Wide Field of View, IFPC, Enduring Fires Protection program, enduring IFPC, high energy laser, a potential weapons program that we didn't spend much time on when we were down there. You know, not in our forecast would be if we want a human lander contract which is not in our forecast because it's just too hard to handicap. You know, across the portfolio, we've got programs that are growing.
I talked about the Reserve Health Readiness Program. In health, we are finally gonna be doing exam events with reservists, starting, I think, later this month. Our Military Family Life Counseling Program, which is we have half of the mental health counselors for the active military and their families. That business continues to grow, unfortunately. I mean, fortunately for us and the company, but unfortunately, because the need for mental health counseling in the military continues to be high, you know, almost more than can be satisfied. We've been asked on a couple occasions to add increments of 100 counselors to a base that's about 1,000 counselors.
You know, that program has done well. We have talked in the past about the presumptive cases in the VA. We have referred to it as the PACT Act, the P stands for expanding the pre-presumptive cases that would be eligible for a benefit. You know, we're always asked, have we seen the ramp from the PACT Act, which adds a couple hundred thousand more backlog cases to our exam business, the answer is, we're just barely starting to see that. That means next year will be a full year, as where this year is probably only six months of PACT Act. That's gonna be growth. The security and detection business, we call it SCS now, we are starting to see the international volumes and air traffic increase.
There is a lag, you know, we're at Manchester, we're at Frankfurt. I think there's a procurement now in Hong Kong that has come back. The history there was there's a big procurement in Hong Kong. Because of COVID, it all got shut down. The expansion at the airport, you know, got delayed. Now they're back. We're starting to see the early indications of RFPs and bidding that would allow us to take the SCS business to the pre-COVID level, which will look like growth from 23 - 24. The businesses in, you know, Gerry Fasano's defense business. We talked about DES, the Defense Enclave Services, tremendous growth opportunity there. The Navy Next Gen program has potential to grow through what we call on-contract growth and special projects.
The airborne business has continued to be strong, and there's just a whole variety of other programs that have the opportunity to grow in 2024. It's, it's a, it's a balanced story across the portfolio. But, you know, you know, first of mine is, I think what everybody saw when they were in Huntsville is, you know, we've got this huge facility, what we call the Chase facility, where we did lunch, that we're gonna fill up with production, with production programs. You know, that's probably the most visible.
The Chase facility. We like that name here.
Yeah, that's good. Well, we named it after.
Right.
One of our most favorite banks.
I think you mentioned DES, and I think it was probably about a year ago when we were sitting here and just had the award. You know, kind of talked about, I think, wanted to sort of manage people's expectations about the way that was gonna ramp up because these things don't get, you know, turned on immediately. As you look back now over a year and you think about, you know, what that's contributed so far and the path forward, is it, you know, is it kind of what you imagined? Is it different? If it is different, how is it different?
I think the work is exactly what we thought it would be. The first thing we had to do under DES, and I'll explain the program a little bit for those who are not familiar with it. It's under DISA, it's called Defense Enclave Services. Our job is to define a common network architecture, which we call DoDNet. All right? We picked that over from a prior contractor. We've enhanced it. Then to move 22 non-combat government DoD agencies to DoDNet. We start small. We start with little agencies. We start with DISA itself. Then we move to a big, you know, tens of thousands, hundreds of thousands users like DLA, Defense Logistics Agency, DHA, the Defense Health Agency. Here, a year ago, we needed to take over DoDNet.
We needed to codify it, document it, get it ready for transformation. Here we are a year later, and we have been working on four transformations. Four organizations, relatively small, which is the way you wanna do this. Migrating, you know, users in the thousands, but not in the tens of thousands or the hundreds of thousands. That has gone really well. I was with the customer, the three-star general at DISA, General Skinner, and he's frustrated we're not going faster, and I'm frustrated we're not going faster because I know when we won, you know, the IDIQ value was, like, $11 billion, and it was a 10-year program, and so everybody wants to know when we're gonna get to a billion-dollar run rate.
We were very, very, I think, vocal that says, A, we may never hit ceiling on the program, and B, we won't get to a sizable run rate for years. It's a little bit like the DHMSM program, where we did a lot of upfront planning and a lot of configuration management, and then we did an IOC site, and then we did lessons learned from the IOC site. We didn't get to two deployments a quarter for probably four or five years on DHMSM. I think we'll be a little bit faster on DES, but, you know, we will double or triple the revenue from 2022 into 2023. Maybe still not get to three digits, and then 2024 will be three digits, and then we've got to ramp up from there.
We're just trying to manage expectations, so that in the models that you all have, you don't put too much in. We'll see ramping, you know, in 2024. It's, you know, it's one of the programs that's gonna drive our growth. It probably won't be fully ramped until, you know, 2025, 2026. Some of that will be dependent upon the other agencies agreeing to being moved to DoDNet. There's a bit of, you know, inside the department selling that has to go on, and the easiest way for us to accelerate migrations is to prove to these non-combined agencies that it is faster, better, cheaper, and more secure from a cyber resiliency standpoint to transition to DoDNet. I think we'll be able to do that. It's, it's a crawl, walk, run type program, though.
Right. Okay. Okay. If we think about the defense solutions segment, and this maybe is kind of a, I don't know, you guys might not look at it this way, but if we think about it as kind of, you've got the Dynetics piece, which is a little bit more product oriented, or it is product oriented, and then you've got the.
Well, I.
Yeah.
I just pause. First of all, Dynetics started as a services company, and if you look at if the company that we bought. Right? 'Cause we've added some things to it, but it's still 40%. I hate the word services. Solutions, right? It's 40% of Dynetics is not selling hardware, right? We bought it for both. We like the services, the work that they do. They do a lot of analysis. They do, you know, well, they do analysis for undisclosed customers, and they investigate things. They do have a nice hardware component, and we're excited about growing the hardware side. I don't want people to think it is only a hardware business. Sorry.
Yeah, no.
Yeah, go ahead.
That's an important distinction.
Yeah.
I guess thinking then about the legacy defense solutions business, which has been kind of a, you know, 8-point something kind of even margin business over time. You know, maybe some year it might be 83 or 85 or something like that.
Right.
When you think over time let's put the product growth aside, 'cause I would assume that the product growth is gonna be accretive to the margin rate over time.
Right. Yep.
In that kind of legacy, services-oriented piece, when you think about the mix and you think about the competitive landscape, is that kind of a steady type of business? Is it, you know, is it a place where there's pressure over time? Is there opportunity to, kind of expand that margin rate?
Absolutely. When I sit down and talk to Steve Cook and Gerry Fasano and Roy Stevens, we talk about getting to double digits, right? Gerry clearly feels the need to grow margin in his business.
Right.
There are two ways. There are two kind of, two levers that he has to do that. He's got some early-stage programs, DES, even GSMO, Navy Next Gen, that the margin of those programs will grow over time as they mature, as we get expansion, we get special project work. The real kicker for Gerry will be as he evolves his portfolio.
Right.
We bought some airplanes. We, you know, bought 8 King Airs a couple years ago. We bought two CL650s. We bought a couple 6500s. He's gonna have to shift his mix to more as a service, more products and either exit low-margin service business or find a different business model to execute those programs. We've talked a little bit about that at some conferences and on the earnings call, is, you know, doing, you know, maintenance and operations of government facilities is inherently single-digit business. Our interest in adding to that portfolio in that business model is just not there. you know, one of our largest programs, which isn't in that segment, it's in the civil segment, is the Hanford.
Yeah.
F acility. Hanford will never be a 10% business.
Right.
Gerry has some of those in his logistics business. The fellow who runs it has a plan to exit and/or shift to more of an as a service business model. We actually had success. We built trainers for sonar operators, right? It's a kind of an esoteric part of that business. Our business model was, we build trainers, we give them to the Navy, the Navy trains people. The margin on that was kinda mid-single digits. We went to the Navy and said, what if we build the trainer, put the trainer in a trailer, and we charge by the student to go through the training?
Because it's in a trailer, when your cruiser comes in and you're dockside, we'll put the trainer on the dock right next to the ship, so we'll bring the classroom to the ship, then we'll charge per student. Right. We've been successful in doing that. We built a couple trailers. We're dockside today. The margin that we're able, 'cause we take risk, we invest in capital, we made it easier and simpler for the Navy to do center crew training. So that's an example of where we've been able to reengineer the business model and capture some growth in margin. Jerry has plans pretty much across his portfolio to do more of that.
Yeah. This is not necessarily in training, but the recent, Commonwealth Australia deal, does that fit into the kind of as a service, mentality in the business?
Yeah. Well, it does. I mean, that's a little bit more complicated. It's not quite an as a service model like we have. We have two aircraft. They fly in the Ukraine theater of operations under the title, ARTEMIS. I think there are five programs called ARTEMIS. That is a pure as a service model.
Right.
The two programs we have in Australia, one where we do search and rescue, one that we do littoral water surveillance are in a more traditional model. There's, you know, potential maybe to convert those as a service. I think we're a bit of a way away from doing that. Right now we're in a, you know, you may get to a capital question. You know, our capital number in our guide is a little bit higher this year, and that's because the aircraft that we bought in Australia are in the middle of a retrofit.
We've got, you know, we wanna, you know, get that fully integrated, get them on our accounting system, on our HR system, get the aircraft upgraded, perform exceedingly well against the contracts that we have today, and then we can think about, can we evolve the business model there?
Okay.
We're not quite there yet, I think, on Australia. We're still in the. You know, we've only owned the business for four months.
Right. Okay. Okay. Maybe, I've got a bunch more questions, but maybe I'll just pause for a second and see if there's anybody in the room. We've got a microphone if anybody wants to ask a question. We can also keep going. I was gonna ask about upcoming pursuits, and I think, you know, this year in the civil business, companies pursuing the FENS program with the FAA. Just looking for an update there, and maybe, you know, you can explain to people the background, but also thinking about it, the FAA has been in the headlines a lot lately, and not always for great reasons. You know, there's been some challenges, I think, with regard to perceptions of flight management and flight safety and things like that.
Yeah.
Do you think about something like that, and you say, Okay, is the FAA, their attention is elsewhere, and so FENS slips out? Or is it, okay, they know that they really need to improve things, and therefore there's more focus on things like FENS?
Well, you know, probably the answer is probably yes to both. talk a little bit about the FAA. The FAA does not have a presidential appointed administrator.
Sure. Right.
Right? You know, that's not good for any agency. You know, they have an acting. I think he's doing a relatively good job. You know, Buttigieg often will step in front of the microphone, like on the NOTAMs issue. By the way, we don't do anything with NOTAMs. You know, the contracts that we have, our installed base is doing fine. We are part of the transformation, you know, moving to the new generation of air traffic management. You know, I will acknowledge the FAA had a safety standdown, which I think it might have actually been today, or maybe it's tomorrow.
Okay.
With their organization and with many members of industry, right? There have been, you know, I was on the treadmill this morning and I watched the news, and there was another near miss somewhere. I don't remember where it was. So I think they're trying to do both. They realize they need to modernize, and that means their network, and that's what the FENS program is. The FENS is to take essentially the IT and communications network in the FAA and to upgrade it to the latest standards. I mean, it is an antiquated network, and there's technical debt there that they need to resolve. L3, parts of L3Harris are the incumbent. We have a bid in.
We think we have a very competitive bid, we never know exactly, we think there were many bids. As excited we, as we are about our offering, you know, it is kind of in our space, we often get four or five bidders. I suspect on FENS, there are four or five bidders, probably three or four of which, you know, will be evaluated high. We expect to be evaluated high. Upgrading their network and their communications is a long multi-year program. I suspect coming out of the safety standdown and some of the prioritization by the administration, there will be other programs in additions to other programs that will address some of the near term safety issues.
You know, we, and I'm sure other contractors, have come forward and said, like on the Notice to Air Missions issue that shut down the air traffic control system for a couple hours, couple months ago or a month ago, we could do some of that work on other contract vehicles that are already in place. You know, that was a legacy system on a very, very old database, and the database got refreshed and, you know, there was a, you know, some contamination of a database and, you know, in an overwhelming move to safety, Buttigieg says, if we're not sure that the NOTAM database is accurate, we ought to shut down the air traffic control network until we do. We can provide that service through our Automated Flight Services System if they decide to go that way.
We've had conferences with the FAA and I know in other areas, you know, ourselves and other contractors have said, hey, the issue around, you know, taxiing and, you know, who's on the runway or not, there's programs in place that could be enhanced to address that. I think there will be some near-term opportunity not associated with FENS to grow the FAA business, and then FENS will address some long-needed infrastructure investment that the FAA needs to do.
Right. Okay. Maybe we'll talk about about the health business for a second. I think, you know, me remember over the course of my career, some of the different solutions-oriented businesses in defense looking to make the leap into health, and I think you.
Yeah.
This business as being the one that's actually done it the most successfully. You know, what do you think has made that business successful, and what are the next steps for the health segment?
Yeah. Well, I, you know, I would first say, like, when I took the job in summer of 2014, you know, one of the skill sets that I didn't bring with me was knowledge of the government healthcare market, you know? You know, I'm not sure I can take a lot of credit for what happened, but what has been really fun for me is learning about, you know, what drives the DHA, the Defense Health Agency, what drives the VA. You know, we adjusted the portfolio. We were in commercial electronic healthcare records implementation, you know, Epic and Cerner and MEDITECH, and we actually got out of that business.
I think the overall success, first of all, you know, John Shull ran the business for years. Liz Porter runs it now. The exciting thing about Liz is Liz is a military spouse.
She is in the government healthcare ecosystem every day, and she is. Adam, her husband, is in the Navy. She is unbelievably passionate about the business, about taking care of active military, taking care of our veterans, and she understands the system. She brings, from a leadership standpoint, a perspective that has helped us to continue to drive growth. When she meets with customers, you know, she's a user, right? Her husband is in DHMSM, right? Will soon be in the VA system. She gets her health, she has TRICARE and TRICARE Advantage. She really, really, really gets it. She has attracted a terrific team underneath her that is, by the way, the most diverse organization in the company. We are, I think, over 50% women in that organization.
Our diversity, our ethnic diversity in that organization is the highest in the company. Then, we have done well because we've executed in our commitments. You know, the DHMSM program, and Seth, I don't wanna bore you, we've talked about this in the past, was sort of the first big win that happened after I joined the company. We were $5 billion then, and it was a very, very important program. Everyone participated in the proposal. I wrote sections in the proposal. Frank Kendall was in acquisition at the time, and I had known Frank because of Army things and acquisition things. You know, I went to Frank and I said, you know, if you award it to us, we're gonna meet our commitments on the program. You know, I do.
I used to get a weekly up until about a year ago on DHMSM. I still do a monthly review on the program. You know, Frank, things evolved. He joined our board. We're still on cost and on schedule on the DHMSM program eight years into the program. You know, that doesn't always happen in our industry. Our growth is attributed to our ability to execute and provide value to our customers. Our exam business, we are measured on a service level agreement. From the time a veteran calls, says, I think I have a disability, to the time we submit a report to the VA to be adjudicated, that's a timeframe. It's kind of, like, around 21 days. We make money if we do it in less than 21 days.
If we do it in less than 21 days, our share of the casework goes up. In that business, we have used, you know, Natural Language Processing, AIML. We have used chatbots in the call centers, and our ability to drive technology into the exam business has been amazing. So we're now performing better than our service level agreements, and we're getting, you know, in general, more than our allocated share of cases. That's driven top line. You know, that is a business because think of the exam business as sort of being a factory. If you can run it with more volume, the gross margin on the incremental cases, drives up margin. So we've been able to do that. You know, the DHMSM program is ramping down. I think everybody knows that.
You have that in your model. We have all these other programs that are ramping up. We're still very bullish about the healthcare business. There was a COVID catch up, which increased the margin in the healthcare business, and we have guided and said we expect to be to more normative levels, but the normative levels will be very accretive to the corporate average on margin.
Is that kind of 15-ish.
Yeah.
Type of percent?
Yeah.
Yeah. Okay. We've got about two minutes left. So one thing I wanted to make sure to ask you, if you don't mind maybe stepping back a little bit from the company and thinking about, you know, you, started working in Fort Worth, I think, at the beginning of your.
I did.
Career, it was.
Yeah.
At that time, it was General Dynamics, but that's where they built the F-16 and the F-35.
Worked on the F-111, if you wanna go that far back.
Oh, okay. Yep. Excellent, excellent. When you look at the industry now and you think about, you know, the important, I guess, you know, the important ways that the industry is gonna evolve in the future, you saw it consolidate down into a small number of key companies as the threat environment changed, and now the threat environment is changing again. In 90 seconds here, you can.
Right. Okay.
But, uh.
Okay. My 90-second answer. We saw a lot of consolidation both at the big A&D prime and even in our industry, The Last Supper, the meeting with Secretary Perry, because we were building, heavy platforms, big machines, tanks and ships, and the cost of maintaining the infrastructure to have three competitors in the tank business was bankrupting the Department. There was this dinner called The Last Supper, and he said, I don't wanna pay for, you know, two tank plants and five shipyards and six jet fighter plants when I only need two. That spurned a lot of consolidation, to where, you know, there's only 1 tank manufacturer. There are really only two people who can build jet fighters. We would kind of be done if the next war was gonna be fought with tanks, right?
You know, big aircraft carriers and, you know, trucks and things like that. It's, you know. I look at the analogy in auto. You know, we saw all this consolidation down to really, you know, two or three major players in the U.S. in auto. Then what happened is the world changed, the need changed, what we buy changed, and you saw somebody with a complete disruptor mentality come into the auto end. You know, Tesla's gonna sell 400,000 vehicles, right? I mean, they, you know. We all thought, well, it's never gonna happen. There couldn't be a disruptor, right? Tesla's, they're here. They're not gonna go anywhere. They're gonna be part of. They were able to come in and be more fast and more agile and address this new emerging need.
In the defense market, you know, I see that the big primes, if I'm gonna buy an aerial refueling tanker, there's only a couple companies I'm gonna go to. If I'm gonna buy a hypersonic weapon or a Wide Field of View payload, or I'm gonna do cyber or physical cyber or some electronic warfare, that opens up room for companies like Leidos, who can be disruptors. In our own industry, you know, we have been a consolidator. You know, we're now up to, you know, $15 billion. I think there could be another move in our industry where, you know, number two and number five get together, or number three and number eight, you know, because scale works up to a point.
We now see at Leidos the opportunity to win major programs of records that in the past might have only been available to the top four or the top five. If you talk to Chris Kubasik at L3, I know Chris feels that way. You know, he's a little bit more vocal about it than we are, but he's had great success in winning major new systems contracts against the majors, and we feel the same way. We don't feel constrained. Now, we're not gonna build an aircraft carrier, but we'll build a Sea Hunter. You know, I was down in Australia two weeks ago. A lot of interest in autonomy to do littoral protection in Australia because it's so much cheaper to do some of these missions without a human involved.
I don't expect a big consolidation, but I expect kind of scrappy, agile companies like ourselves, you know, and what SpaceX did to ULA, right? I mean, we've seen this happen, that there is a room for these agile, kind of disruptive companies, to win major programs of records and to provide new needed capabilities to the Department. And I'm really excited about being connected with one of those.
Cool. Excellent. That was a great answer, and thanks for the insight. Thanks very much for joining us.
Great. Thank you.
We'll wrap up here.
Seth, thank you. Thanks so much. Thanks, everyone.