Leidos Holdings, Inc. (LDOS) Earnings Call Transcript & Summary

Good morning. I'm Stuart Davis, and I run Investor Relations for Leidos. And welcome to everybody here in the room and on the webcast to the 2021 Leidos Investor Day. Now today's discussion is going to contain some forward-looking statements based on the environment as we see it now. Obviously, there are some risks and uncertainties with that, and they're disclosed on this slide and in our SEC filings. In addition, we're going to be using some non-GAAP measures that we think provide the true understanding of what our operating performance is. A reconciliation of those items is in the appendix in the slides sitting in front of you. Now we've got a very full agenda today. We've got Roger and Chris acting as bookends for the presentations. In addition, we'll have our Chief Technology Officer and our 5 group presidents providing new insights into our technology differentiation and our business positioning. So without further ado, let me welcome our Chairman and CEO, Roger Krone.

Great. Thanks, Stuart.

You're certainly welcome.

Good morning. I want to extend my welcome and my appreciation to all of you to come in and do this face-to-face. It's really terrific just to be here, to be in Midtown, to be in New York. I was going to say, this is actually probably the 2020 Investor -- oh, is the early '21 investor and now it's the fall of '21. What I thought I would do with my time is talk a little bit about the journey that we're on, where we've been, how we got to where we are. Going to talk a little bit about what we told you in May of '19. So if you were at our last Investor Day, if you still have that purple book, I've got some charts I've reproduced out of that to remind you what we said 30 months ago and what we've done in the last 30 months. And then I'm going to talk a little bit about where we're going, what our strategy is, how we think about the company. And then I'm going to step away because you all hear from me on the earnings call and at investor conferences and analyst meetings and things like that, and then we're going to let you meet a lot of the leadership team that are sitting in the back. And the rest of the leadership team, those that don't have a speaking part, are also in the back. We're a 53-year-old company. I actually keep reminding people that because we changed our name. You all know we went public. In fact, Stuart was actually in the IR job at the company when we went public. We had 2 classes of stock. We went the A class, the preferred A, I think, went public in '06, and I think the B class went public in '09. And that kind of made us kind of a typical SEC registrant. We were off to the races. And then in '13 we had this change in the rules and the federal government contracting, where we had to separate our essentially government consulting business. So in September 2013, we split the company. We spun out our SETA business, which took the heritage name, the SAIC. And then, of course, we renamed, at least the CEO prior me, renamed the company Leidos. And that's where the name comes from. And that was to begin a journey. And when we split the company, the idea was this would be the market leader, we would be more agile, we would have more commercial, we'd have a balanced portfolio. The CEO after the split retired. They found another CEO who started in 2014, and that kind of started the journey that we're on. But I think kind of our story that we like to tell kind of begins now in '16, when we did the reverse Morris trust and we were able to add to the legacy SAIC, now Leidos business, the IS&G business from Lockheed Martin. And I like to think of it as building the company. And we were given the opportunity to combine these 2 great companies and to think about as a leadership team what did we want to be and how did we want to grow. And it started with, if you will, building a great foundation and taking the best from both companies, the best people, the best processes, the best tools, right, and then building the infrastructure, right, around that foundation to create a market leader. So we have something called the Leidos business framework that we use as a single process initiative. We ended up with a very, very lean cost structure, right, that allows us to be agile and to be competitive, and it's moving fast. And then we also got our organization right. And we sorted through what Lockheed had as an organization, what we wanted as an organization. We separated in a matrix the functional part of our company and the P&L part of our company. And then after we built this structure, we really focused on the BD engine, right? And we wanted to make sure that we had the right Washington office, right, that we did a branding, that we worked on customer relationships, that we built a strategic account executive team that would let us operate in this new structure, compete and win. And that's what we did after we built the company. We went out, if you -- and these are headlines from May of '19 to today. And we took this great company that we built, and we rinsed and repeat, and we competed in the marketplace. We invested in technology. We competed for programs. We won those programs. We executed the programs. We generated cash and earnings. We took the cash. We either invested in growth, in R&D and technology or in M&A or we returned it back to you in dividend increases or stock buybacks, and we were recognized by the marketplace, both in capital appreciation. But in those things that we also look for is a great place to work, great place for veterans. We're a 4-time winner of the Ethisphere award for most ethical companies. And so we're really proud of the performance that we put together over the last 30 months. I told you in May of '19 that we were the market leader. And I'm really excited to say not only are we still the market leader, but we've actually put some more distance between this company and the competition. Whenever I present, I kind of like to start at the beginning, which is the mission, vision and values of the company, to talk about why are we here and what are we all about. This slide, we created as a leadership team in 2016 when we brought in the Lockheed organization, and mission really is our corporate purpose, which is to use, right, technology to make the world safer, healthier and more efficient. The vision statement is really a statement about where we're going to go. And we want to invest in technology, the development and application of technology to create a competitive advantage to go solve important problems for customers in what is clearly a broad and diverse portfolio. And how do we do that? We do that through people, right? So people is really, really important to the company. You're going to hear a lot about people today, how we've done on acquisitions, how we do on people development. But it's our valued and appreciated people that really make the company run. And the history of our company was, as you know, for 40 of our 53 years, we're employee owned. So we have this unique culture of empowerment amongst the people, and we celebrate that, and we promulgate that as much as we can. And then that third sentence under vision is the responsibility of the company in the greater community. By the way, fairly easy for us because of the employee ownership. As I get e-mails all the time from employees telling me how we should be corporate citizens, what we can do better, where we should spend our charitable dollars. And so you'll see us out in the community. You'll see what we've done with our asset-light business model to be sustainable. And then we have added in the last 2 years the advancement of equality in our vision statement. We are a values-based company, okay? What does that mean? I've been, as you all know, in a lot of companies. I've seen corporate values. I've always wondered where those words come from and how they're selected. I can tell you here, it was the leadership team, discussion after discussion after discussion. We picked the top 5 values in 2016. And then 2 years ago, we added inclusion as a sixth value. And it really speaks to the leadership team's commitment to stand for something. And really, this topic that we're all now talking about as environmental, social and governance, or ESG, and the commitment of this company to be a great corporate citizen. So on this chart, which is really an evolution of the chart that I showed 30 months ago, where we talked about all the great stuff we're doing in the community, what we've done here is actually laid down some metrics, right, a commitment to be more inclusive and to put some numbers forward, a further commitment to Leidos in the environment and a huge commitment to make the world healthier, our employees and the communities in which we live and operate. I think you all know we've had a huge campaign against the opioid epidemic, and we have expanded that now because the more we learned about the opioid epidemic, the more we learned about a mental health crisis in the country. And so we do a lot with mental health providers. We've done a lot for our own employees relative to mental health. We made something called Headspace app available to all of our employees. And of course, we've been recognized for the work that we've done in the community. But with this commitment and the statement of goals and objectives, of course, it's a commitment to continued transparency as to how we're doing both from a diversity standpoint and environmental standpoint and making the lives of our employees and the communities better. And so you'll see that in our SEC disclosures. Okay. What did we say we would do in May of '19 and how have we done? So those are reproductions of the charts out of the book from the Investor Day on May 14, 2019. And we said, remember, prior to May, we were going to be 3%. For those of you who followed our story, and in May, we said, okay, we're going to up that to 5% organic growth, more than 10% adjusted EBITDA margin, and we're going to have cash generation better than 100%, okay? Now our intent would have been to do 3 years of performance and be able to compare the 3-year targets with 3 years of performance. We cut off our results in the second half of 2019. So we're still 6 months short of the comparison period. So where appropriate, we use trailing 12 months. Our organic growth has been 6.6%. So we beat our goal on organic growth without whatever is going to happen in third and fourth quarter. We're 12.1% overall, which includes mergers and acquisitions, which I know we'll talk a lot about today. We're at 10.7% EBITDA margin adjusted, right? And our cash generation, not counting what will happen in the next 6 months, but looking at trailing 12, is 108%. So our view is we made some strong commitments to you as our owners, and we met or we beat those numbers. And we always -- that really was great because I remember being down at the stock exchange and Jim Raitt and I were saying, okay, we're going to go from 3% to 5%. And how are we going to do this? And we said, well, we have to invest in technology. We've got to have great customer relationships. We've got the right great proposals. We've got to win, and we got to execute. And we talked then about there were some very, very large pivotal programs that we need to go win. And we talked about a list of those, and I'm kind of here to report on those programs that we identified at that time that we said, these are Leidos' shaping programs. I won't say we won all of them, but we certainly won the majority. And you can see these are the top 10 wins in the last 30 months. Some of these, the group presidents are going to talk about. Navy NextGen was new; GSM-O is a recompete; Hanford was a recompete; Singlelock is new business; NASA is new business; MFLC is new business. Future Flight Services, recompete; Reserve Health Readiness, new business; TPVS, new business; and Pathfinder is new business. This is $18.4 billion of new business that we won in the last 30 months. And what's not on here is $4 billion worth of programs that are currently either in protest at the Court of Federal Claims or in corrective action. So we're pretty proud of our track record in investing, differentiating and winning over the past 30 months. And so what has that resulted in? But wait, 14 consecutive quarters of book-to-bill greater than 1, right? And -- well, we're excited about our future, right? And this is 56% increase in our backlog, and I know you get tired of it, but I think every press release we put out, we use the word record backlog. So we're really, really excited about how the company is going. Let me talk a little bit about where we're going, and then I'll turn the mic over to Jim Carlini. But sort of the same strategic focus that we've had. We're not changing a lot in where we're going. At the road show on the RMT and certainly in '19, we talked about the importance of having size and scale and the advantages that, that gives your corporation. We talked about where we wanted to position the company is not be a pure defense player, but have a broad portfolio. And then we always talk about people. And I know you're probably kind of tired of us always coming back to people. But we are a people business. We do everything we do through our people, and our ability to attract, retain and develop people is really key to our story. So let me talk a little bit about scale. We had a chart like this in the book in May of '19, went kind of back and looked at it and said, "Well, we probably need to repeat that chart." And I have been focused and the team has been focused on that bar on the left, is what are we doing and how are we growing and what's our story. And I hadn't really looked at everything that was happening on the bars on the right, although we did watch the Perspecta-NGIT-Peraton. But we have put more distance between Leidos and the pack in the last 30 months, right? We have been more successful. We have won more programs. And we have, if you will, stretched our leadership position. And I think, okay, why do we do that? What is our success story? Yes, we've been great at business development. But I think our size and scale story that we talked about 30 months ago and, frankly, some of our peers when we bought the IS&GS business said, "Oh, we don't need to be big or we don't need scale." And we came out and said, no, we think there's some huge advantages in our business, right, to scale and size. And we talked about them in these 4 buckets. What size allows you to do is to invest in technical differentiation. So we have tripled the R&D budget at Leidos, right? It allows you to expand your customer relationships and spend the money necessary to have field offices, to have strategic account reps, to be at all the big trade shows, to have the right boost, right, to have the presence where you need to have the presence to build a relationship. So you know what's going on in customer space, so you can anticipate their needs, right, and you can shape procurements and you can win, right? Key personnel. Yes, it's so important in our business to be able to attract talent, to be able to staff a program, right? Gerry is going to talk about Navy NextGen. We are nearly 4,000 people on that program that we added to the program in this year. We've added 4,500 people through the first half of this year. We are likely to repeat that in the second half. That means 9,000 to 10,000 people that we have been able to attract to this company because of what this company is. And we ask people, "Why do you come to Leidos?" And they say, "I come for the work," right, "I come to be able to work with great people. I come for professional advancement, and I come because of workplace flexibility." And all the way through COVID, we were able to add people to the company, and we never stopped hiring. We never stopped our intern program. We never stopped our new employee orientation, and we have just continued to add great people to the company. And then -- and I talked about this in the past, is in our business, you have to have past performance. You have to have -- think of it as a reference account. Many of the programs that we bid on, you're not even invited to bid unless you have like work at scale that qualifies you to be a bidder on programs like Navy NextGen and GSM-O. And we have only expanded our library of past performance and successful execution to where today, if you will, we have the largest repository of lessons learned and past performance of anybody in our industry. Our portfolio. And we've talked to many of you about the company, and 4 years ago, when there was a Trump buildup, we had a lot of questions about. "So we love your defense segment," which is subsegmented here into defense, intel and now Dynetics. "But your health business and the civil business, I'm not really -- why are you there?" And wouldn't it make sense just to be a bigger defense contractor? And we said, yes, it probably feels that way today. But 4 years from now, we don't think it's going to feel that way. We think the federal government budget will continue to grow at a steady rate, but we think when the administration changes, priorities will change. And priorities will change away from maybe the defense and intel business into health care and civil infrastructure. And sure enough, Trump didn't win reelection. We're now having these great discussions about infrastructure bills. And the proof point, I think, really is in this chart. So this is -- and we will disaggregate our addressable market by each of the 5 business groups. But if we think the center CAGR for our addressable market is about 4.6%, you can now see that 2 of our markets are going to grow above that. And guess which markets those are, that's the health market and the civil market. So I think it really speaks to the robustness and, I think, the strategic vision that we had about balancing the portfolio. And we've sort of been excited to see some of the people in the market who never had an interest in civil and health care have now made moves into health care, moves that we made 2, 3, 4, 5 years ago. The other thing I like about this chart is depending upon what number you want to use for us in '21, we're about 4% penetrated into our addressable market. So one of the questions I get, given the success that we've had, is can you continue to win? Can you continue to add significant organic growth? When are you too big? And 4% market share is not too big. So we're excited about the white space. We're excited about areas that we are underpenetrated. And the group presidents are going to talk about what their future plans are and where they intend to go. This is the leadership team. They're in the back. I get to work with this great team every day. And I was really trying to think why -- why is this team different? And there are 2 things that I think are really, really important. We all have sort of gone through this kind of M&A, corporate restructuring, right, because of what happened in the history and bringing the IS&GS organization into Leidos. And so we've all lived merger integration. We've all had a role in defining the company and defining the future of the company, and we're kind of all in. And that's not true of every leadership team. I think many of you have heard my story about, I was at McDonnell Douglas, we were bought by Boeing, and [ Cai ] and I go way back, and we remember that. And I remember Boeing merger integration and how I felt as being purchased by Boeing and how I was treated and the discussions that I had with leadership and whether I had a job or not. And I have said and the IS&GS folks have said and -- we're never going to do that. We're going to get M&A right. We're going to do best athletes, and we're going to use that to create a great company. The other thing that just amazed me, and I really didn't think about it until we put this chart together. I'm the new person here, all right? So I have had the privilege of being on my job. I'm now in my eighth year, which is, frankly, a surprise to me. It might be a surprise to you, too. But Gerry Fasano has been in his role at this company or his heritage company for 37 years. Dave King was a 25-year NASA employee and has been at this company or a predecessor company, Dynetics, for 12 years. Jim Moos, 22 years; Liz Porter, 26 years; Roy Stevens, 25 years; Chris Cage, 23 years; Jim Carlini, 9 years. And Jim took some time off to go work at DARPA, now our CTO. Paul Engola, 20 years; Steve Hull, 23 years; Debbie Opiekun, 37 years; George Reiter, 21 years; Vicki Schmanske, 38 years. Working in this organization with these people, right? And you just can't repeat that. There is 310 years of experience working together in this organization on this org chart. And so if we end up kind of completing each other's sentences, it's because they've been doing it for a long, long time. And it really builds a cohesiveness on the management team that I don't think you'll find at any other company. So that's the leadership team. But are we attracting the people that we need to continue to win and grow? I mean it's one of the questions I get every time I'm with you. So first of all, we have grown the employee population by 35% since we were here last. We're now at -- we're actually north of 43,000 employees. Yes, and many, many of those have a security clearance. And are we getting people through the security clearance process? Yes, we are. Do we wish it was faster? I think everybody wishes it was faster. It does force us to hire more mid-career because they come with the clearance, and we've been successful at doing that. We're a diverse population. We want to be more diverse. We made a commitment to increase those numbers essentially by 10% across the board. And people come not because they view working at Leidos as a job, but they see it as a continuation of their professional journey. And I'm really, really excited with the caliber of the people that are attracted to the company. And we want to continue to attract the best talent in the industry and build the best team. Our investment thesis, really, why you're here and what we're going to talk about today. We think we've designed this, building the structure of this company, right, to continue to be the leader in the industry. And we can talk about our low-cost business model and how much cost we have taken out, and you all know we took out hundreds of millions of dollars of cost from 2016. That's allowed us to be cost competitive, to have what we call competitive wrap rates, which is our billing rate. It's also created room that we can invest, and we can invest in differentiated technology, and we can also invest in our people. And that has allowed us to win a whole new set of programs. And we always talk about the big ones, but we're also winning the smaller programs that maybe don't make the headline, that are the seed corn of the next $1 billion program. We had a question about the indirect fires program that we just won, which is a small couple hundred million dollar program. But if we do it right, it can grow into a $1 billion program. And that drives top line. And because we have more content and we have more technology in our offerings, it drives growth in margin as well, which is one of the stories I hope you'll take away from today. And because of our asset-light model and our ability to take EBITDA and convert it to cash, we will generate a lot of cash. And Chris will talk about what those numbers look like. But it is like the most amazing thing that I had to learn coming from a big OEM when I took over the job. In my prior job, many of you know, we had big steel and concrete monuments that you had to feed every year. And we spent hundreds of millions of dollars on capital, right, to just sustain our capability. Here, and we've continued to harvest the balance sheet to make sure that we are as lean as we possibly can in our balance sheet. And so we are this cash generation engine. And what do we do with that cash? What we have said from the beginning, we take the cash, we invest in growth, right? We invest in R&D. We add capability where we can, where that makes sense. We're a dividend payer. We're committed to paying a dividend. We increased our dividend twice since we talked to you last. And then with the money that's left over, right, we're going to find a tax-efficient way to return to you as the owners of the company. And so you'll hear this theme a lot as we go through the morning of how we rinse and repeat around the circle. We leverage our advantage to create even more advantage, and we grow top line, bottom line, generate cash, invest in the future and then give the excess cash back to the people who own the company, and that's all of you. All right. My next job is to introduce our CTO, Jim Carlini. Jim has a low employee number because he is a veteran SAI, SAIC employee. So I spent some time with DARPA, and then we kind of convinced him to come full time as our CTO. He's going to tell you a little bit more about himself. But he's on the Defense Science Board. And he has really renewed the culture of innovation, the excitement about investing and building the technologies that are relevant to the growth in the business and the needs of the customer. So with that, Jim, I'll hand you the mic. All right. Great.

Thank you, Roger. As Roger said, I have about 9 years of service, and that actually started many years ago, more than I care to admit, but back in 1989, I joined the company. And I actually cut my teeth technically here at this company and working on very important national security problems back then. I left for a while. I went to DARPA, did a couple of other things, incubated small companies. And along the way, as Roger mentioned, I was on the DSB, the Air Force Scientific Advisory Board, the Army Science Board. So I've served in different capacities for the DoD and for the Intelligence Community in some roles. But the common theme across all of that was trying to take technology to solve nationally important problems my whole career. It's my passion. It's what I love to do. And that's why it's such a privilege to be here now at Leidos because we are so well positioned to answer the mail for our customers in what, I think, we are all seeing as a very tumultuous time today and going into the next few years. So I'm going to try to talk through a little bit of that strategy technically, what are we trying to do technically to answer the mail for our customers. How are we doing it? What are some of the core technologies? How do we actually differentiate at scale, not just individual technologies, but how do we drive it into the whole business? I'll give you a couple of examples in this brief time and perhaps we can talk about more of them later. And then I'm going to hand it over to our group presidents who are going to tell you more about the different lines of business. Here we go. Okay. So let me start first taking a step back to the strategy level. So we've been on a road map for a few years now of a technology road map that's driven by what I like to call strategic anticipation. So looking out ahead, looking at what the trends are, both technologically and the kind of challenges that our customers are going to face. What do we need in the way of technology to help them respond to those challenges? What are its attributes? And then how do we organize ourselves to go tackle those problems? So this chart shows some of the key trends that are pretty obvious to all of us these days. The new threats and mission needs, whether it's ports and borders, whether it's cyber events, seemingly everywhere these days, great power competition, which we now call strategic competition in the current administration. Those threats are coming fast. They're getting more sophisticated. They're happening in volume. And we're seeing that today, and that's going to continue, I believe, into the future. New technologies are driving a lot of that, and that's driving a lot of potential solutions as well, everything from AI to cyber to space systems to UASs, you name it. There's a lot of them coming down the pike. Commercial innovation as well, from commercial space to cloud. A lot of that is part of the formula for some of the challenges we face and some of the solutions. But all of that is driving an accelerated pace of change for us that our customers have to respond to. At the same time, as Roger pointed out, we have new mission needs, new administration priorities and spending. We've got critical infrastructure we have to fix. We've got health care stresses due to an aging population and the pandemic. There's a lot going on, and there are budget pressures as well. So what our customers need now and in the future, when we look at the technologies they need, are focused on 3 different attributes: they need to move fast; they need to modernize fast; they need to keep up with these threats that are coming at them. So speed is one of the attributes we're trying to bring to everything we do. The second one in our interconnected world is security. Everything is at risk. Everything can be touched, frankly, through cyber. So security is something we bake into everything we do, and I'll talk about that. And then as Roger said, scale. A lot of the problems that our customers are dealing with are at a national or global scale. And we have to bring our scale to solve some of those problems. And we have to bring our scale, through which we can bring together physical systems and digital systems to really solve major problems in an integrated way. Other parts of our technology strategy, we have those 3 attributes, but also a few things that we're doing that I'll touch on in subsequent parts, focusing on our core technologies, I'll describe what those are, and capabilities. Demonstrations at scale. Roger talked about tripling our investment. Well, in addition to tripling it, we're also focusing in it and making sure we're placing bets where we think those bets need to be placed. I'll talk about that. Leveraging external technology. We have great technology internally, but there's a large reservoir, and there's a world out there with a lot of technology. So leveraging the best and brightest out there is really important to us. And then lastly, a culture of innovation. We work very hard to ensure that the entire culture across the entire company innovates and innovates at speed. So I'll say a few words about that as well. So let me talk about our core capabilities and technologies. Roger went through our mission statement, of course, and we execute that through our 5 customer-facing organizations that you're going to hear from. And we do that by delivering differentiated capabilities. And it's here that we try to drive in that speed, security and scale. And the group presidents will talk about some of the specific things we do, but you know us for the digital modernization work we do; integrated systems, anything from security detection and automation products to hypersonic weapons that Dave King will talk about, a large portfolio there; to conducting mission operations end-to-end for a wide range of customers. So I'm going to dive a little deeper though into the next layer, our enabling technology because the way we get that speed, security and scale is trying to drive in some core basic fundamental technologies into all of those capabilities, which touch all of our markets. So secure, rapid software. Software is everywhere. And as I talked about earlier, delivering it fast, being agile is critical to our customers, and enabling speed for them, but also making sure it's secure. So oftentimes, that's a trade-off. We pride ourselves in doing both simultaneously, delivering secure software, in some cases, in hours if it's needed [indiscernible] operate. Trusted AI/ML, similar theme. We have been delivering AI solutions to lots of products and lots of customers for years. Our focus in recent years has been on the trusted aspect of that. What do I mean by that? It's AI solutions that are resilient, that are ethical, that are explainable. They engender trust in the users so that they're willing to do it, going to use the [indiscernible]. So I'll talk a little about that as well. Full-spectrum cyber. We do offense. We do defense, and we understand what we call cyber-physical systems, not just networks and data, but physical platforms and how do you protect those. So we bring all of that capability to each one of these capability areas as well. And then lastly, digital engineering. We have long experience with model-based system engineering. We have applied it in unique ways to large-scale networks. We're extending that to digital engineering with end-to-end digital thread for products from inception all the way through to operations and maintenance, helps us move with speed, helps us to deliver products at speed, again, [ same speed, ] security and scale. So I'm going to walk through a couple of those enabling technologies, AI/ML and cyber, in a moment. But first, I want to talk about differentiating at scale. How do you, for a company as large as we are, put the formula for doing that and making sure those state-of-the-art capabilities are getting into each [indiscernible] the company. So there's 4 parts to the formula that I've listed on this chart, I'll go through them pretty quickly. Number one, accelerators. We take our best and brightest and our resources and pool them together and to centralize organizations in critical technology areas, and we charter them to extend the state of the art, to drive it into reusable solutions and then propagate it out into the entire company across all the groups and all the capabilities. We have 4 of those accelerators, those listed here. And in fact, the next couple of charts will give you a feeling for how, in AI/ML and cyber, those accelerators and those investments are making their way into the different capabilities areas, markets and groups. And you'll see more of that when I [indiscernible]. Demos at scale. Again, Roger mentioned that 3x investment we also focus in. And we looked and place our bets on some of the areas that we think are critically important. These are just a few examples. The -- our Enduring Shield air defense launcher was an investment we made. Dave King at Dynetics, they won the Army's enduring IFPC program. That had a hand in that. Zero Trust, you may be familiar with that. It's a different way of architecting systems and networks to make them cyber secure and resilient. It's all the rage now. It was in the presidential executive order that came out earlier this year. We pivoted to that a while back. And we've developed ways to help our customers do what's really hard, which is to actually transition from your current infrastructure to a totally different resilient IT architecture. AIOps, applying artificial intelligence to the operation of IT systems, basically what that means. We've been doing that for years. We have also increased our investment in that area as well, developing some unique algorithms to apply to a lot of our very large programs. And lastly, modeling and simulation, that's part of our digital engineering [ process. ] That's sort of the front end of some of that digital engineering work that we do. Partners. The key point there in this formula for differentiating at scale is to get deep technical partnerships, not just transactional. So we work closely with large commercial firms all the way down to small startups and develop deep technical interactions, and we co-develop technologies, products, and we also invest together in that regard. The national labs, FFRDCs and universities, we continue to build our relationships with them as well, but there's a lot of technology obviously coming out of business [indiscernible]. Then lastly, Roger talked about talent, which is absolutely critical. And he had in his chart some of the upskilling we do across the critical technology areas that we have. Also listed here is something that we call our Innovation Council. It's the team in the back. We, the executive leadership team, we are the Innovation Council. It's important enough to the company that we meet periodically, that we figure out what can we charter as the leadership team to make sure we're driving innovation everywhere across the company. So this is part of the formula for how you differentiate at scale. And I want to show you a couple of charts that just point out how we're getting technology from the fundamental technology and the algorithms and the deep differentiation into our capabilities and into our group. So trusted AI/ML. This chart gives you a broad overview. And these are just samples of where we've taken different types of artificial intelligence, and you'll see them listed in each of the categories from anomaly detection to machine learning to natural language processing, right? These are just different subsets with artificial intelligence. But we have a single group we call our AI/ML accelerator that develops those technologies in those lanes and then gets it into our different capability areas and then our customers. So in digital modernization, we're applying AI there, again, to automate what happens through IT operations, both for efficiency but also for security. So we're looking for [indiscernible] as well. Cyber operations. We're applying machine learning, and this is an area where AI and cyber come together to try to detect really advanced threats that are -- that might be in your system. They might be -- they might not make much noise. They're difficult to find. They're difficult to contain. AI and cyber come together there, and we're doing a great deal of research in that area. Mission software systems. We embed in our mission software systems what we call AI/ML microservices, which just allows a large mission software system with a lot of data flowing through it to collect, discover and exploit that data routinely. So that's a structural thing we do into our mission software systems. Integrated systems. The example on the chart is a computer vision example that we apply to our -- actually to all of our ports and borders, critical infrastructure protection product to get better performance, lower false alarms, better detection capability. And then lastly, in mission operations, the example on the chart is applying NLP to our workflows in QTC to get better efficiencies and by being even more accurate, getting better outcomes as well. So a lot of other examples. But the last thing I'll leave you with here is that what we're doing in all of these cases and beyond is to drive this idea of trust through our AI algorithm so that the users are comfortable in using it. And in this case, there are 2 aspects of trust. You can develop technology that enables trust issue that explainability, things like that. And then there's the way you actually implement it. So we have dozens of years of implementing AI, through which we have developed a methodology that users embrace artificial intelligence in a structured way. At the same time, at the algorithm level, we've got a patent pipeline for algorithms that engender trust in our AI algorithm. So it's that combination that's really powerful, really drives trust in the community and helps places like the Department of Defense get more comfortable adopting AI. The second example I'll give here is full-spectrum cyber, an example, again, of how we coalesce our capabilities and we drive it into everything we do. In this case, we drive cyber into everything we do for our customers directly, but also into our product. So in digital modernization and cyber operations, we're helping our customers, of course, try to deal with, as I mentioned before, those more advanced threats. And this is again where the cyber and AI/ML come together and also modernizing their architectures in their networks to be able to move towards Zero Trust architecture. In mission software systems, from birth to death, from conception to O&M of that software, we build in security and integrity into that, from the development environments all the way through looking at how the software is behaving in real time to see if there's anything nefarious going on. Integrated systems, as I mentioned, this particularly comes with Dynetics, has a great deal of experience in cyber-physical systems. So we look at all of our physical platforms and hardware that we develop ourselves, and we looked at others, and we mitigate those risks for weapon systems, detection systems and industrial control systems. Then lastly, in mission operations, of course, we apply cyber to everything we do there, including things like secure supply chains. So again, with -- the real thrust here though in going into the future is to continue to do what we call going beyond compliance, to go after those really hard threats. And the way you do that is through this application of AI plus cyber together and also moving to more resilient architecture than have been designed in the past. So with that, I hope I gave you a feel -- I know it's a rapid fire of, "Here's our strategy. Here are some of the important technology. Here's how we differentiate at scale, both structurally and how we actually push specific technologies into the business." I hope I gave you a feel for all of that. And also, you're going to see not just from me, but throughout the day, this theme that I mentioned in the beginning that everything we're doing is aiming toward the outcomes that I listed on this chart and many more that are critically important to our customers. I think we're really well positioned to answer the mail for what we see as the big challenges for our customers across all of our markets now and well into the 2020s. So with that, I'm going to turn it over to Dave King, who is -- Roger mentioned has spent the last 12 years building Dynetics, which as you're going to find out, if you didn't already know, is a technology powerhouse [indiscernible] absolute jewel and a great innovation engine within Leidos. Dave?

Thank you, Jim. Well, good morning. As Jim said, I'm Dave King. I was at Dynetics for 12 years prior to the acquisition -- 10 years prior to the acquisition. 25-year career with NASA prior to that and in Marshall Space Flight Center for the last 6 years of my career there, worked on shuttle station, built a whole lot of spacecraft. So I had some great opportunities to work with some really unbelievable people and learn a whole lot. It's been a pleasure to join Leidos. Let me just say, I've got folks on my team who have been through acquisitions before, and every one of them until one says this is the best one that's ever they've ever been a part of. The way we've been treated, the way we have been handled, the way we are integrating at the right pace in the right time is outstanding. And we are very, very pleased to be a part of this greater group. We're able to do things now that we could not have done. We could not have bid a multitude of projects that you're going to see today and otherwise without being a part of this corporation. So I'm very excited to be here today and share with you some of the things that we do. We're sort of the applied research and technology accelerator for the company. We came with a lot of that capability, and then we also added some of the capability that came from Leidos under the Dynetics group umbrella. And we're focused on transitioning those innovative prototypes to fielded systems. 10, 12 years ago -- you heard Jim talk about the landscape changes, power of competition, now called strategic competition. The landscape is shaping the more modernization of military systems. The war changed, and we had to adapt. We saw that coming. We looked at the top 10 priorities every year that the DoD put in place. And we picked 4 or 5 of those that we were going to develop a new capability in. We try to be ready when they were ready to start developing those systems, and we've done that over the past 12 years. And we've put a number of those in place that are coming to fruition today. The modernization effort that's afoot in the DoD is right in our wheelhouse. We can move quickly. We're much more agile than the other guys. We don't have the legacy systems to hold on to. And so we're being very disruptive in that arena. And you'll see some of the programs that we're working through today. Our goal is to take those ideas and innovations and prototype systems that we're building for these customers and turn them into programs of record. We have a few examples of that today that are already there and a whole lot more in the mill that we are working on to get to that point of programs of record where they have budget year-over-year. This is our addressable market and our strategic focus. You can see along the bottom with all of the different areas and the markets that we are in. And here is where the market is going. Roger showed you this at the gross level. This is where we believe this market going. A little more flat than we had seen in the past few years, but we believe that we are positioned extremely well because of the modernization efforts that are going on. They're spending new money in a lot of new places, and we are right there, and we've invested in facilities and capabilities and people to be prepared for that. So as that -- as those modernization programs move forward, we're having a big influence on those. We also can move much more quickly. We're willing to invest. We've talked about the fact that the greater company invested in the IFPC program. We would not have won that had we not invested. We took some technologies to a whole new level before we had to bid the program to demonstrate that we could get this done and recently were selected. This is the enduring IFPC, which is a launcher that is all about force protection in theater. So our growth vectors are to be disruptive in a few areas. Air defense is the first one we talked about. Maritime autonomy, that came from legacy Leidos, the maritime group that came over from the defense group not too long ago. And then we merged that with the Gibbs & Cox operation that we bought. And now we have a powerhouse in the maritime business. Not only do we -- or the outstanding design agent that Gibbs & Cox is or the Navy, we also have the maritime piece that has ships operating at sea today with fleets that are totally autonomous, and we're learning every day how that's going to work with the Navy. Now some might say the Navy is not that interested in autonomous ships. Well, there are parts of the Navy that are very interested in autonomous ships, and we believe that, that has legs in the future. It's certainly changed the game in the air defense world and -- with UAVs, and we believe it's going to have a large effect on -- in the sea as well, not only surface but subsurface. We're doing a lot of things subsurface that are autonomous that, I think, will add a lot of capabilities. And then hypersonic systems. I'll talk a little more about that in detail in the next couple of charts. But the thing I want to leave you with on this chart is we have capabilities from the sea floor, where we have sensors all the way into space. We've built spacecraft. We're building new spacecraft, new pieces of launch vehicles that I'll talk about for just a couple of minutes. So what we do. Aerospace, civil and defense -- these are the 4 ways that we are organized. We do advanced engineering and disruptive integration and development in a number of these fields. We have several -- a number of key programs here. One of the ones that you might have heard about, we do a lot of DARPA work. We like the hard problems. Gremlins is an effort that we have been about for the last couple of years. Our guys actually left this past weekend to go back out to the range. We believe we're going to get a capture. Capturing a UAV in the back of a C-130 is really hard. And we've learned a lot about that over the last little bit, but we believe that we're going to be able to do that. This is another one of those technological areas that we've invested in, and we think that having an aircraft carrier in the sky is a huge advantage for forward force projection and, frankly, for ISR in a lot of those regions. A couple of our other key programs, Small Glide Munition. This is a program -- we saw a hole in the arsenal or void in the arsenal of the special ops command and the munitions that they were using in theater tactically. We raised our hand and said -- this was 5 years ago. We raised our hand and said, "We'd really like to fill that void with you. We have an idea of a way that we can fill that void." So we designed, built and operated the Small Glide Munition in a 3-year -- 30-month period from inception to the first test flight, which is unheard of. And now we're building a number of those every year for the special ops groups. We're also getting that munition on multiple platforms, not just the C-130 and other aircraft, but across the fleet of aircraft, and we think that will do very, very well in the coming years. Universal Stage Adapter is a 28.5 foot diameter adapter that is a part of the Space Launch System that NASA is developing to go do the lunar mission. We're one of the prime -- one of the 5 prime contractors on that launch vehicle today, and we're building some of the major components for that, one of the major stages. The other thing I'll mention, speaking of NASA, you probably heard that we bid for the lunar lander program that NASA is about. I spent a lot of my career working on those kinds of programs. We got beat out by SpaceX. We were hoping they would pick 2. Three people bid. They only picked one. We were disappointed in that, but they subsidized the program quite a bit. And so they had a financial advantage over us. We still believe that there are plenty of opportunities for us to help along that way. In the summer of next year, NASA will be putting out a contract called [ LEPS, ] and it's basically the logistics and equipment piece of the lunar mission. In other words, the logistics, the [ head ] modules and all of the associated things to be able to live on the moon for a period of time, and we're preparing for that even now. We also did get the largest award for risk reduction effort for this time period on the next lunar lander. We were kind of always focused on the sustainable lander anyway. This first mission was a bit of a race to the moon, boots on the moon, plant the flag again kind of mission. We were always focused on the more sustainable mission that can go and stay and live there longer and establish a presence. And so we've been awarded the largest amount of money of any of the other contractors to do risk reduction towards that end. So we're in that game in a big way and excited about that. Maritime systems. Deep, deep, deep engineering talent across all of naval architecture. The Navy sees Gibbs & Cox as their naval architecture design firm. And then I spoke about the maritime autonomy a bit earlier. We just won FFG Freedom-class, Constellation-class design services contract. That is one of those contracts that is not huge in the beginning, but over many, many years, they will make more and more changes, and we'll make good headway on that over the years in being able to do some more on contract growth. And then we do a lot of program office and engineering support for the Navy. I spoke about the autonomous systems that we have working. In front of you, you have a ship. That is the SS United States. That was a ship that was sailed in 1952. It was -- at the time, we didn't have very good passenger airplanes to go from transatlantic transit. And so a group of people got together and decided to build this. A big part of it was the Navy paid for half of it because they were looking to get troops back and forth very quickly. This thing was steam-engine generated, very high technology at the time. It was classified for a number of years, ended up turning into a passenger airliner, almost 40 knots, which is really, really fast and still holds the record for transatlantic ocean transit. So please receive that gift and either put it in your office or give it to your kids or however you see fit. There are a lot of interesting facts about that. That ship would actually go as fast backwards as the Titanic would, and it was 100 feet longer than the Titanic. So that helps you to get a little bit in your head there the advancement of that program. The next one is advanced science and technology center. This is where we really do the true research and development inside our group. We do some of that in the other groups, but this is where it's certainly concentrated. A lot of signal processing work, a lot of AI/ML, the data analytics, advanced RF systems, overhead persistence, we do sensors, which I'll talk about in a bit as well. One of the biggest programs we have there is the document and media exploitation data discovery platform. That's taking data and mining information from it for our customers, our intel customers. And then the wide area surveillance for the space defense initiative. It is -- I'll talk more detail about that one in just -- on the next chart. And then weapons technology and manufacturing. This is where we're doing most of the hardware build. Our manufacturing capability that we brought to Leidos were probably 80% of the manufacturing, 75% or 80% of the manufacturing that occurs in Leidos today. I'm going to show you a brief video that will help you to understand a bit of that. So if you could roll the video. [Presentation]

Thank you, [ Javier. ] So the majority of what you saw in the video fits within the weapons technology and manufacturing place. You saw the common hypersonic glide body program, and I'll talk in more detail about that. Jim mentioned the enduring IFPC capability. We went head-to-head with a prime on that, and we won. We've had a history of doing that over the last little bit. We've had a pretty good track record of beating them head-to-head. And these are the ones where we have to be agile, have to move quickly. And we've very excited about the possibilities there. We're doing a lot of other work in the indirect fire protection capability world. We have a High Power Microwave that will take UAVs out. We have a program that -- High Energy Laser for the Army that will sit on a big ground vehicle and take UAVs and other small threats out as well. So of all the programs and the layered defense that they're trying to put in place for their in-theater, we're in all of them. And we have a foothold in all of them. So a great area of growth for us as well. A couple of our key programs that I'll highlight. I wish I could tell you about them all. But the hypersonic glide body, a 350-ish million dollar program. You saw in the video that this is a threat that we are dealing with. It is real. And so the left-hand side of this is really the offensive side. And so we're trying to put a hypersonic -- we are putting a hypersonic capability in place. We have the facility up and running. We're actually building the first glide body out in Sandia. The Navy actually -- the Sandia lab actually built the first few, and we are now trying to make them manufacturable because there's a big difference in those things. So we'll start pumping those glide bodies out this year and start integrating the first at the end of this year. So we have the potential here for a very large follow-on program and low rate initial production, leading to a Program of Record down the road. On the defensive side, to see what the others are doing, you have to be able to see, detect and then track to be able to do anything about their hypersonic capabilities. We have an instrument that we're putting on a spacecraft bus. We're building 4 of to test out. This is the Tranche 0. So it's kind of the demonstration. We think this technology has huge advantages. It has a lot of onboard processing. It has a staring optical sensor that's quite unique, and we think this is the answer for that look-down capability that's necessary. And so we're positioning ourselves for Tranche 1 and beyond. And we're hopeful and we think they're going to need hundreds of these instruments. So this is another business that we're prepared to do quite well in over the coming months and years. So key takeaways. As innovation engine, we deliver those technology-enabled solutions for the highest priorities in our nation's -- needs for our nation. We excel at doing that quickly in an innovative fashion. And we believe that we don't own the big platforms. So we have nothing to lose. We are just trying to be disruptive and agnostic about how we help our customers do a better job of defending both the resources that they have in field and our country in general. And so we are kind of an integrator in many cases. We'll pick others -- we'll pick suppliers depending on who we think is best and who can provide us the best opportunities. And we are well positioned in our customers' most and new important priorities. So with that, I'm going to turn it over to Gerry Fasano. Gerry, as Roger said, has been with the company a very long time. He has been an incredible partner for me because there's so -- you talk about all the things that we have in common, the defense group, obviously, we have more in common with. We are collaborating on so many programs. Gerry has collaborated so well that I have 5 of his key staff on my staff now from the CFO to my Chief of Staff to the CTO and a couple of other key positions that are helping me integrate into Leidos in a better way, they're helping me to learn Leidos and then helping Leidos to understand us better as well. So we've had a lot of good folks going across the bow there, and I'm very appreciative of that. So with that, Gerry Fasano.

Hold on. All right. Thanks, partner. Good morning, everyone. I'm Gerry Fasano, and as Roger mentioned, I've been around for over 30 years, sounds better than 37. And I started as an electrical engineer at GE aerospace and then -- to running a $3.5 billion defense business for Lockheed. But one of the best career experiences I had is leading the IS&GS separation from LM and then the merger integration into Leidos. Post merger, Roger asked me to lead our strategy and business development function, which I did for the first couple of years, putting in many of the processes and tool sets that still exist today. And now I'm blessed to lead Leidos defense. At Leidos defense, we deliver differentiated and scaled solutions and services across the DoD and international customers. A good example of that differentiation is the Leidos special mission aircraft that you see in this picture. This is a long-range airborne ISR platform that the Army calls Artemis. And Artemis represents the next generation of aircraft integration and technology insertion. It comes with a contractor-owned, contractor-operated friendly business model. Now it did take scale to buy a business jet, but more impressively was the speed in which we fielded Artemis. We shaved years off the [ fueling ] cycle by leveraging our own investment and also employing an open architecture mission equipment package designed to allow for rapid sensor integration. It really is a marble. And we were able to remarkably -- to deliver Artemis into the Pacific theater, supporting the warfighter or live operations in only 16 months. As we look at our markets, they're large and growing over our strategic planning period. So is our new business pipeline, well balanced across these markets. If I had to cover -- I'd like to cover 2 themes that span these markets. First is a shift, shift away from counterinsurgency operations in the peer-to-peer fight with China and Russia. And this shift really place a much greater emphasis and the need for both speed and for integration. On the speed side, the Artemis investment we just talked about is a great example where we're providing capability that can operate above 40,000 feet with 10 hours of endurance for significant standoff distance. This is a robust ISR capability for the Army for this new flight that's provided today, not years from now. On the integration side, this is where Joint All-Domain Command and Control comes in. And simply put, this is the department's initiative to integrate the various systems and capabilities across the services, connect them at machine-to-machine speed to shorten the sensor-to-shooter time line so we can counter those advanced threats that Dave just talked about. So that basically is JADC2. And what we're excited about is we're trying to see real strategies emerge across the department. Deputy Sec Def, Dr. Hicks, recently announced a radar initiative. This is a rapid defense experimentation reserve. It's essentially a fund for the services to help them support and field joint capabilities like JADC2. The second key theme here is to drive to digital, everything digital. As Jim Carlini covered well, Leidos is a leader in digital. And we use it across these markets for disruption and transformation. So for example, in our digital modernization market, we invested in the 19 -- in 1901 Group to augment our already industry-leading position that we had to provide a disruptive IT managed services and cloud platform. And when you look at it in counter UAS, I guess, a second example, just picking off what Dave just talked about. Here, we're using our advanced knowledge of the threat, converting that into the digital world, running models and simulations against a threat and the counter defense is to identify the gaps. Again, a key area where we're partnered with Dave's team given their expertise with sensors and the effectors. We prosecute those markets with 4 capability-based operations and 1 country operation. In airborne operations, we fly, operate and support 100 government-owned or Leidos-owned, fixed wing, rotary wing and unmanned assets. One of our key wins last year was with our SOCOM customer. That was a $650 million takeaway win on their tactical aircraft ISR program called STAMP. We're performing on that today. We had a second win with our Army Geospatial Center customer that I'll talk about in a few charts. In our C4ISR domain, we operate across all the services and really leverage the Leidos software factories that Jim talked about to deliver secure agile software and do that across the DoD. We're doing this today for the Army, where we're modernizing millions of lines of legacy code and turning that into sustainable, secure, modern command and control capability for the Army field artillery. This is also the area that we're leading JADC2 initiatives for Leidos with a close partnership with Dave King's team. Digital modernization. We operate at scale. It's one of our higher growth operations because of the 2 hallmark wins that we had last year. First was the $6.5 billion, 10-year win with Defense Information Systems Agency on the GSM-O II program. Here, in partnership with DISA, we are operating the world's largest government-owned network, over [ 60,000 ] circuits, 3,500 locations and 3 million users. Now that's scale. And it took scale to win the second win, NGEN. NGEN is even larger than GSM-O at $7.7 billion and 9 years of period performance. I'll go deeper on NGEN in a chart. Logistics. Our largest program there is the logistics commodity and services transformation program to support the U.K. MOD. This is a GBP 7 billion program, very significant, 13-year period performance, taking us out through the decade. And here, this is a government-owned, contractor-operated business model where we are modernizing their supply chain and transforming their logistics operations. I just recently returned from the U.K., and I can attest, our team is performing, and the facilities that we designed, that we built and we operate are some of the most modern in the world for high-tech military logistic operations. We also do work for the DoD, of course. And we're working across all of our services. We do biometrics for the Army. For the Air Force's F-16 fleet, we provide the automated test equipment. And for the Navy, we are operating, repairing or sustaining all of their sonar arrays. And then when you look at in the U.K. business, we have over 1,000 employees, really is a microcosm of Leidos pulling through capabilities, not just from defense but from all of Leidos. And in this case, maritime solutions from Dave's team, for U.K. NATS customer. We leveraged Jim's air traffic management capabilities. We leveraged Roy's geospatial analysis expertise and Liz' software credentials, really is a mini Leidos in the U.K. That's a real quick spin through defense, but I promise to go deeper in 2 programs. And let me start with our NGEN program. So [ Javier, ] can you roll the video? [Presentation]

So that's a lot of purple, but it was a really good video, too. And let me give -- cover a couple of things that weren't captured in the video. And first is about the team. This team, in partnership with the Navy, laid out a pretty audacious goal to buy back some lost time during the many protests that we had during this capture, and they executed that plan flawlessly. And we're able to transition 3 months earlier on that program, which is a massive transition, the largest that I've ever been associated within in my career. This is a transition that we had to complete over 370 contract deliveries. We had to onboard nearly 4,000 people and higher. We had to transition 65 unique services across 80 locations, all during a global pandemic, and they pulled it off remarkably. So now that we're operating a network, right now, our focus is on reducing the technical debt. As the Department of Navy has stated, the network is aged, and it is poorly designed for today's warfighting needs. So in addition to our day-to-day operations, we have kicked off our network modernization activities. It starts with a big tech refresh for the end-of-life items for servers and devices and is rolling out a multiphase modernization plan. Really has 3 key objectives: first one is to improve the customer experience with a significant reduction in latency; second, to improve network security through network ops center consolidation and stronger cyber practices; and three, to reduce the total cost of ownership through automation, software-defined networks and AI operations. The team is really jazzed to be working with the Navy on this transformation. Second program I said I'll go deeper on is a program that we call Buckeye. And frankly, it's a lot easier than saying High-Resolution Three Dimensional, Geospatial Information program every time. So the Buckeye program, we won back in 2016. It was a $700 million program back then, a 5-year program. We won it again this year, another $600 million, where we'll be providing geospatial information to the Army for another 5 years, which is awesome. But what makes this program so unique and this company so unique is what happened back in 2017. That's when we brought Roger Krone a business case. We said, "Roger, we would like to purchase 7 King Air 350s." And we had a much older and less capable aircraft in the program at the time. The team felt we were underperforming for the customer. We weren't delivering operational availability that we were supposed to. And Roger said yes. He said they were best in this customer's mission. We went to an ISR as a service business model for Leidos. Results were phenomenal. Operational availability went to the roof, and that's a good thing. The maintenance costs were much more predictable with modern aircraft. And because we went to an ISR as a service business model, our returns were significantly increased. So it really was a win-win for the customer and for the shareholders. As for the willingness to invest in those type of business cases, it make me so proud to want to work here at Leidos. So as we wrap up, this group and this company is built to operate on the largest stages. But we don't do it alone as a group. Each -- all 5 of us are stitched together from very strong corporate horizontals. Those horizontals are delivering us repeatable solutions, the solutions that we get to build once and sell many times. As a result, we have many franchise programs. Our customers really appreciate that we're investing in their missions, whether it's buying airplanes, whether it's adding a disruptive managed services provider like 1901. We're creating our own differentiation through our IRAD and capital deployment that customers appreciate that we're putting skin in the game. These investments continue, especially as we go off and further position ourselves in multi-domain operations in partnership with Dave's team, for sure. And it's not just about the top line that we're growing. Through the many as-a-service offerings that we detailed this morning, we're improving the bottom line as well. So this was -- appreciate the opportunity for the quick spin around defense. We're going to take you now to our first break. But when you come back, you get to hear from Roy Stevens. And Roy and I worked together for a decade. He is a tremendous leader. He did an awesome job in his previous job in business development with a record number of consecutive periods of book-to-bills that Roger touched on. And I'm really excited for you to see him in his new role as Group President of our intelligence program. But thank you, and enjoy the break. [Break]

Okay. Good morning again. I'm going to walk you through the Intelligence Group. And it's a group we don't actually get a chance to talk about very much. And so I am excited to be able to at least peel it back a little bit. There's still customers that are obfuscated. There's things we can't talk about that are really cool from the engineering and technology side. But I will give you a pretty good idea of what we do and the customers we serve. Most of our customers have a legacy all the way back 50 years to where we started our company. We serve all 17 of the agencies within the intelligence community, so think three-letter agencies: CIA, NSA, DHS. In addition to that, much like Gerry talked about with the U.K., I home Australia business for the corporation. So about 7,000 people total, 1,400 of those are in Australia. That really spans all of our capabilities: civil, defense, intelligence. And you're going to hear a little bit about a program, where we're going to move into health actually in Australia, leveraging our digital transformation capabilities. Overall, the IC budget has been very flat over the last 5 years, national intelligence programs, military intelligence programs have seen about a 1% growth. We think that's going to be pretty similar over the next 5 years. Our addressable market though is growing modestly but still growing. And it's because of the areas that we have chosen to focus on. I believe that particularly the areas of cyber and soft software development are actually going to drive our growth as a corporation higher than this addressable market. This is really being driven by space and cyber increasing the size of their importance and the emphasis of the budgets being moved into those domains. For -- overall, for us, we're going to focus -- you heard Jim talk about full-spectrum cyber. And I'm going to take a second in a few slides to explain really what that means. Because it's really -- when people think about cyber, they think about defending a perimeter. You heard Jim also talk about Zero Trust. When we talk about full-spectrum cyber, what we're talking about is not only the defense but the offensive piece and then the cyber physical. Those pieces all work together. As you think about how you defend the network, you're informed on how you might go after a network offensively and vice versa. So our strengths in the IC really drives our capability to have a bigger cyber presence. And it also extends out to our enterprise IT network. And then on the digital modernization side, like you will hear throughout our portfolio, very strong capabilities driven across our customer sets. So what we do? We do intel tradecraft as a foundation. And that really provides the overall the overall credibility and mission understanding. So intel tradecraft is really understanding the signals, understanding what humans are doing on the ground, understanding the data, understanding the cyber piece of it. This is a portion of work, which tends to be cost-reimbursable. So it is not the most profitable portion of our portfolio, but it's the portion that drives our ability to compete in all the other zones. So I'm going to actually step back. Javier is going to show you the video. It will give you the broader overview and really kind of help you understand what intelligence tradecraft is and how it fits with the rest of the portfolio. Javier? [Presentation]

So hopefully, that at least gives you a foundational look of what we do. You should have seen geospatial intelligence. You should have seen cyber intelligence. You should see mission system software, I'll explain that a little bit. You didn't see a lot of logistics. I can't really talk much about the logistics, but think about the capabilities that Gerry talked about, leveraging those same capabilities across our customers. Anytime on my charts where you see a word, but you don't see a customer name, it's people that can't actually associate what we're doing in that particular area with the customer. So I'm not going to spend a lot of time on digital modernization because you are going to see it in 4 of our 5 portfolios very strongly. What I will tell you is this is a place where our biggest customers are in my portfolio are at NGA and in Australia. And I'm going to actually highlight one of the programs we have in Australia for you. What I do want to focus on is cyber and that full-spectrum piece and why it's different and why it gives us an advantage. Right now, if you think about Dave's business, Dave talked about missiles and capabilities. So think about cyber as a capability that you develop once. Most of our portfolio, you're going to hear us talking about developing once and using many times. When you do cyber, offensive cyber, you develop it once, you use it once and you develop it again because that signature has been given away. So in this way, it's a lot like a production kind of environment, much different than many other cyber kind of environment. It's also a place where we can do things more at a time and material or on a fixed price basis. So it's a place where we can take our margins, and I can move the portfolio upward as I increase the amount of cyber work that we do. Mission system software. You heard us talk about agile, safe and secure. This is actually a place where the pandemic interestingly enough helped us. This portfolio, you're going to hear Liz talk a little bit about the health portfolio. Our portfolios were the two that really felt the pandemic the worse. In 2020, we had a lot of blue-golds because a lot of my work has been in secured facilities. We had to work with our customers to drop the number of people in the facilities. So we were basically paying people to work for a week and then we were paying people to stay home for a week. But we weren't getting any profits on that, on when they stayed home. So that impacted some of the results that you will see in Chris' portion. When you look at the pandemic effects of 2020, it's a lot of my business and a lot of Liz' business. But what it did do is it drove our customer to think differently. And it allowed them to finally say, "Hey, I can do some work outside of those secure facilities," and software is the biggest place that benefits. We were able to help our customers move towards what we call low to high. And that is developing using data that is not classified, not tied to an actual mission objective but actually solves the complex problem that we're trying to solve. We develop it on the low side. They move it over into a classified side, apply the real data against it. And in this way, it allows us to not only staff in a different way because I can take people that would normally take 2 years to get a clearance. I can put them on the low side, have them develop on actual problems that they're going to be working while they're waiting for a clearance and then port them over to the high side of the business. It also expands our ability to do work, not right in the national capital region right next to the customers, staffing is the hardest. The pandemic has helped us really hopefully change the business model in a way that will help us serve our customers better and bring them capabilities faster. The other thing it did, as you well know, as many of you are still not in your offices, is it drove office availability down. For me, what that enabled us to do is acquire a facility right across the street from the global headquarters that Roger showed you right in his first slides. And I'm building an intel/DevOps center, where we can do software development in coordination with the capabilities that are sitting in our global headquarters. And we can get a real synergistic software factory that replicates some of what Gerry is doing in West Virginia, some of what's happening for us in Charlottesville and then some of the software factories that are in the U.K. and Australia. So it really allows us to take a capability and move it across the enterprise. So those two elements are things that are going to endure for my business and help us grow in a different way than we've been able to do so before. Now I want to take you down into two programs, one of which you've never heard of, but you actually interact with all the time. So TPVS is the software system and hardware. You have global entry and you come back into the country. We do all the software. We do all the hardware upgrades that interacts with that. It also does the same thing for airborne assets and for shipborne assets as we process people back into the country. So customs and border patrol, the thing that got us this program is that agile software development in a secure way. And what that positions us for, they have other secure travel initiatives that they have been trying to get their arms around for years to be able to bring -- understand where people are not only as you come in but as you leave and tracking you across the globe. So this will allow us to really scale. This was a large takeaway from a competitor that drove some of our growth over the last few years. The next one is a little more mature in its life cycle. This is a massive digital IT transformation for the Commonwealth of Australia for their Ministry of Defence. Their program, taking over 200 data centers, consolidating them down into 14 data -- bespoke hybrid data centers and driving them into the cloud, transforming all their applications. And as Gerry talked about, the GSM-O contract, running their defense network for the U.S. Department of Defense, we do that here for the Commonwealth of Australia. So we run their day-to-day operations of their IT network. We're in year 7 of that particular program. Right now, we're in discussions about extending that out for 5 more years. What that does, the credibility that, that gives us from on-time delivery of capability, high availability, it allows us to take that digital transformation and move it across into other domains. Liz is going to walk you through next, health and electronic health records and some of the big programs we have here. JP2060 is a large electronic health record program in Australia that we are positioned very well. I expect an outcome early next year on that one. So intel, you should think of us as somebody who has very deep customer intimacy. We're #1 at NSA. At ODNI, we're #3 at NSA; we're #3 at CIA; we're #5 at DHS. We have enduring relationships that allow us to differentiate and allow us to lead in our marketplace. We are a portfolio that is going to grow faster than the markets are growing. And we're going to do so in a way that allows us to move our margins up over time. And we're doing this by changing our portfolio mix, focusing on places like cyber and software development, where the enduring customer mission is. So that's a quick spin around intel. I get to introduce you to my friend, Liz Porter. Liz has 26 years with the company, as you heard with from Roger. And it really has spanned across the company. She's done work in defense, she's done work at civil. For the last 2 years, she's been leading health. And we're actually a little ahead. And if we stay ahead, I hear she'll sing for you at the end.

Thank you, Roy. And no, I will save you from hearing me sing. But as Roy mentioned, I have actually been in the industry for 28 years. And 26 of those years have been with the legacy Leidos company. And I don't want to say that I've been following Gerry Fasano around, but we did go to the same university. And in fact, I also started as an electrical engineer with GE Astro and satellite programs. And since then, I have worked across a diverse set of customers, both in -- or actually in intel, defense and civil, both domestically and internationally. And I've done that across a broad set of capabilities. Last year, I was selected to lead the Health Group. And the Health Group is a leading provider of secure whole health solutions. And we look at ways to deliver those at various sites of care and to do that in a way that improves the patient outcomes and system efficiencies. And certainly, we have an extensive group of capabilities that I will talk about. But before I do, I'm going to show you a brief video that shows you some of what we do. Javier, play the video. [Presentation]

When I think about revolutionizing health care, we start with our strategic focus. Obviously, as you can see from the video, it's a very personal mission in some of the ways that we touch some of our customers. When we think about the strategic focus, one of the areas we continue to look at is how the nonfederal space and those trends are impacting the federal space. And that includes a move away from traditional brick and mortar and to providing care anywhere. And what that will drive is a need for technology, technology that is secure so that you can reach the patient anywhere that they are and ensure that their data is protected. As the pandemic endures, and certainly with the Biden administration effects on the market, we look at the increase in supplemental services. It shouldn't be surprising that you're going to see an increase in behavioral health services. This is even impacting our military customers. And when you think about how can you address those, it's related to what data analytics can you use and what type of analysis and optimization can you do to the systems that surround the electronic health record that will allow this capability to be scaled and focused. And certainly, also with the implements of the Biden administration is the ever-increasing expansion of potential benefits related to Medicare and Medicaid. That is really going to drive a need for enterprise-wide technology and modernization and certainly looking at the security of that based on the data that is there for the Centers for Medicare & Medicaid. When I reflect on what the Health Group does, we support every federal customer that is focused on health care. And that is across a broad set of capabilities that are in these four areas. And that really helps to enable us to support those missions. It's the -- if I look at digital modernization, I think about what we do for the Centers for Medicare & Medicaid on their infrastructure hosting contract. There, we are leading in the migration and modernization of hosting services as they move from data centers into the hybrid cloud environment. And we're able to offer enterprise-wide development tools so that developers and teams can securely provide software for a pipeline in a continuous fashion. When I think about mission software systems, certainly you will hear a little bit more about DHMSM in the next chart. But I want to focus in on bioinformatics, an area where we're able to apply computer science to analyze and understand complex biological information. On our program, on the Scientific Computing and Bioinformatics Support Services for the CDC, we will support the CDC to actually analyze infectious pathogens and to help develop tools that, in the future, prevent pandemics. In the area of managed health services, Jim Carlini talked about natural language processing or NLP. Today, on our Military Disability Exams program, we ingest various forms of data in the form of a health record from the veterans, and we're able to run that through natural language processing to not only index it so that the provider can find the information that they need but put it in chronological order. This adds value both to the provider so that they can provide better outcomes. It also helps to drive the patient experience, when you think about the veteran being able to come in and have a more effective exam. When I look at life sciences, this is an area that's rather unique to Leidos. When we think about clinical management, clinical trials management as well as advanced research, we have a group called Leidos Biomedical Research. And that team at the beginning of the pandemic, on behalf of our customer at the National Cancer Institute, was the team that ran the remdesivir trials. And those remdesivir trials led to being published in the New England Journal of Medicine. And remdesivir became the first therapeutic that was approved by the FDA for COVID-19. And that team was critical to that support. And certainly, all of these capabilities are things that we can do because we can leverage the capabilities of the corporation as well as our deep understanding of mission and the health care capabilities that we bring to the table. So let me talk about two of our programs in particular. These programs really represent both a mature program that we have in our portfolio as well as one of our new key takeaways. On the left-hand side is DHMSM. Many of you are aware of DHMSM, we've been talking about for quite a while. I know we get asked a lot of questions about it. But DHMSM is our 10-year effort to modernize the Defense Department's electronic health record. And when we're complete, we will have -- providing records for more than 9.6 million service members and their families. And it will be providing support to more than 205,000 health care professionals. And certainly, that's just the beginning. As we are rolling out this electronic health record -- and today, we are more than 30% complete, we deliver to the 800 facilities and we're at more than 16 states. While we are doing that, we are continuing to look for ways to provide advanced capabilities. Some of those advanced capabilities that we've been able to deliver are in the areas of mass vaccination screening. We have an opioid detection clinical tool. And most recently, we've been able to deploy a telehealth capability that actually works both on the DHMSM product as well as on the legacy electronic health record system. DHMSM is -- gives us the positioning to be able to continue to work in the electronic health record area, specifically focused on modernizing and optimizing. And when we think about optimizing, think about data analytics. Once the data is in the record, there is so much more that you can do. And that includes helping to drive not just patient outcomes but to make the providers more effective and more efficient. On the right-hand side is MFLC, not Aflac but MFLC. So certainly, it's a contract that we want. We started this past year. We have great potential over the next 7 years. It's an area where we have -- when I think about the impact that this makes on the military, I can't overstate what it means to them. I'm a military spouse, and I am very aware of the unique situations that military service members and their families face, the challenges of deployments, of moving, of in some cases, they have financial troubles. Others have issues with finding housing. And some of our military service members, especially in the enlisted ranks, find challenges with even being able to have food security. And so our counselors, there are more than 880 of them across the globe, and these counselors meet these service members and their families where they are. They go to schools. They go to the coffee shops. They meet them in the commissary. They meet them in their home. And they're there to provide a level of support that enables the service members to focus on their mission and know that their families are being taken care of. Nearly 1 in 4 service members suffers from some form of mental health distress. And nearly 1 in 3 children of a deployed service member suffers from anxiety or depression. When you think about a service member who is deployed for a long period of time, and certainly during the pandemic, that has increased. MFLC is something that helps us position ourselves for more work within our Managed Health Services and certainly within our clinical managed services, areas like our Reserve Health Readiness Program. Now on that program, we will be providing wellness exams for our reservists to ensure that they are ready for deployment. And it's very exciting and very personal. So when I think about the Health Group, we really are the leading provider of data-driven and secure solutions. And that is across the entire ecosystem, and it certainly is across the areas of care as they evolve, when you think about our mobile clinics for QTC. They were able to go to Indian health reservations to provide disability exams in the Indian reservations, which is an amazing feat. Certainly, the scientists that we have that are focused on cancer, AIDS and infectious disease, they spend a lot of time pivoting to support COVID over the past year. But they continue to focus on finding cures for cancer, which will help with the world health. And as we move forward, we continue to look for ways to leverage those corporate capabilities. You heard Jim Carlini talk about some of the big bets, we look and continue to pull those through in the health arena so that we can advance and modernize and provide enterprise-wide transformation for our customers. And then last, the potential to expand our capabilities in the clinical managed services. As we see these sites of care evolve and as we see the ever-increase in managed health services, we are well positioned to bring those capabilities forward. It is our deep health mission capability along with the science and technology capabilities of Leidos that enable us to deliver this type of capability to our customers across the world. And so we're very excited about what we do, and we're looking forward to the next few years. So now I have the privilege of introducing Jim Moos. Jim is not only a colleague, but when I was talking about my bio, I forgot to mention that the job I had right before this was actually as an operations manager in our federal energy portfolio in the Civil Group. So Jim is not only a colleague and peer and friend, he is my former boss. So welcome, Jim.

Great. Thank you, Liz. Yes, I had the pleasure or the honor of going last. And I would usually say batting cleanup. But with the results of the last night's game that I'm really disappointed in, I'm going to refrain from baseball references for today. So I think Roger mentioned I have 22 years. And I always like to say with SAIC lineage, that kind of came up with that rank along with Chris. I'm also very proud to be a veteran of the United States Navy. I love to follow Liz and the mission that she has. And I think that's really important for what we do as a company. I started my career in energy and environment, kind of moved to Homeland Security after 9/11, like a lot of us did, kind of expanded my reach to that. And for the last 10 years or so, I have led probably all aspects of energy and environment, homeland security and now CIV-IT at the company. I was part of the leadership team that helped stand up the Civil Group as we know it after the IS&GS merger. And I've been a group president for the last 2 years. So at the Civil Group, we're focused on modernizing global infrastructure systems and security for government agencies and commercial markets, and I'm going to get into what I mean by that. While we do have a very large federal footprint, we actually have a large international customer base with our security detection business and maybe a lesser-known but flourishing commercial practice reporting U.S. electric utilities. And I'm actually going to speak a little bit more about that as well as we go. From a strategic focus standpoint, we're principally aligned to 6 key submarkets. When combined, they really make a fairly large addressable market with a strong CAGR. But when I think about those 6 markets, the 3 that really stand out that will drive growth as we think about the drivers in the market and our ability to win, of course, will be digital modernization. You've heard that theme throughout the presentation today. But energy infrastructure, we believe, will actually drive our growth and security products. And I'll touch on each of those. Clearly, we see a continued demand in the civil agencies with IT consolidation, modernization and cybersecurity. When I go to speak with CIOs at large sets of agencies, they want all of their IT in one place, control it. They want to control the budget, they want to control the delivery. And they want to, of course, control cybersecurity. We expect that to continue. On the energy side, I think we all read about the pressures to harden and modernize the electric grid against climate impacts and cyber threats, and what better company to help them with their cyber threat than Leidos. That market, some of you follow that market probably, it's been very strong the last few years. And it's really -- we benefited from that. Our business that we have in that area has grown double digit each year for the last 3 years and we expect that to continue. And then security, it kind of approaches two vectors when we talk about the security business. The first vector is kind of the airport screening business. There is no doubt, it's been impacted by COVID in the reduction of air travel, especially internationally, where we do a lot of business. But for the long term, 3 to 5 years, there absolutely will be growth for us. If you think about it, most of the equipment that exists in those airports came in after 9/11. It's 15 to 20 years old. It's at its end of useful life. It will absolutely, as that market recovers, those clients will lean in, they'll start to replace that equipment again, not only with the existing technology but new technology. So we really do see that as a long-term growth prospect for us. But on the other vector is border security. It's been an emphasis of the last administration and it's still an emphasis of this administration. I'll speak a little more about that, the opportunities we have in that space as well. So moving to what we do. And let me just step back a bit. When we talk about what we do in civil, I'd like you to think about infrastructure focus. What do I mean by that? IT infrastructure with our digital modernization business. Energy and environment infrastructure, you start to think about some of our marquee programs, like Hanford that sits in our integrated mission operation. And then what I like to call transportation, safety and security infrastructure. Air traffic control safety work we do with the FAA and the security detection business that we have. So maybe let me just take that down another level. Digital modernization, a key theme for us. We absolutely leverage what we do at the corporation in this area and across all of the other groups, providing that full array of IT services from end user, devices, network, cloud migration, cyber, the whole gambit. We're doing that for customers like Department of Justice, Housing and Urban Development, NOAA and probably our premier or marquee contract that I'm going to talk about on the next slide a little bit more is our NASA end-user services contract. All told, we serve, provide IT services to about 350,000 IT users in the government today. Energy and environment. And when we talk federal environment, it sits under our integrated emissions contract. That's where you're aware of the environmental work we do with DOE at Hanford. We do a lot of climate change research support work for National Science Foundation with our Antarctic commission. And one that doesn't get a lot of press, but we're the prime contractor at the National Energy Technology Lab for DOE. And I mentioned we have a strong commercial practice. That commercial practice is supporting most of the major utilities in the U.S. with their grid modernization and energy efficiency efforts. We also have a select commercial plan or two, where we also support energy efficiency by General Motors. But back on the utility side, we're doing energy efficiency work for the likes of Ameren, Illinois, the state of Hawaii. And supporting most of major utilities all have a grid modernization program, being a marquee one that we support. And this is where I said, who better to help them with the grid security, cybersecurity concerns that they have than Leidos? And then moving to transportation, safety and security infrastructure, as I like to say, and that's the last two businesses. We enjoy a 50-year relationship with the FAA, providing mission software systems and advanced engineering solutions to keep the national air system safe. That customer intimacy and mission knowledge leads us to continue to [indiscernible]. One would be the award of the NISC or the National Airspace System Integration Support contract. And while there is protest activity ongoing with that, we are actually executing on that contract today. And then the one that's kind of a repeat of our last earnings call, we received an unprecedented 20-year sole-source extension of our En Route Automation program that comes with a $6.7 billion ceiling value. It's a big number, so it's hard for me to say. And then the security section, this is where we secure transportation infrastructure at land, air and seaports, think about it that way. And with the addition of the L3Harris assets, we are 1 of 3 full-service providers in that space. We have over 24,000 products in 120 countries worldwide. But I don't really want you to focus on the product. Of course, we have to design and manufacture product. But what's really important and where that is headed and what we need to be focused on is creating this intelligently integrated, cyber-secured, AI/ML-powered screening solution. Yes, that's a mouthful. But I'm actually going to take you through what I mean by that when we go through the non-intrusive inspection project on the next part. And I'll show you that here in a minute. So a couple of key programs. One, again I mentioned kind of our marquee IT or digital modernization program in the Civil Group, our NASA End-user Services & Technologies program. We just finished the second year of this 10-year contract, $2.9 billion ceiling value. But we're providing, think of the laptops, the phones, all personal compute for all of NASA's 66,000 users across 18 sites, all the way to the administrator himself. So that's really important. Dave gets on me all the time to make sure he's taking care of, make sure we take care of the NASA administrator. But what's been our key success factor there? And I just wanted to highlight that, and Jim talked about AI ops and IT. That's real. What we do here, the tools we brought to this contract, the capability brought to this contract gives NASA and us 100% asset visibility and control. This is something they never had before, believe it or not. So we can tell them every personal compute device and the status of it on their network. And that's really important, not only giving them interactive situational awareness but also helping them reduce their cyber vulnerability. And I think it did two other things. One, we moved almost all of them, 100% of them, to virtual at the onset of COVID in less than 2 weeks. We had complete asset control and visibility, and we were able to do that, including the administrator in his house. We helped him get set up in his house. And two, the thing I think it did for us is really position us with an understanding of their IT environment, connected with Dave's understanding of their mission. This is just to win the AEGIS contract. And maybe I have to spend a minute, say a word about that. I won't say anything different than what we said on the last earnings call. That award got protested. NASA chose to take corrective action. That's what they're doing, they are still doing. We're not -- it's not certain for us when they'll finish that. And even when we do expect that award to continue to be challenged, we don't really see it as a '21 resolution event anymore with more of a to be resolved in 2022 in our eyes. And then kind of moving over to the second program, where I told you I would explain that big, long, intelligently integrated idea. So this is our non-intrusive inspection program, Multi-Energy Portal. That's a picture of it you see on the slide. We call that MEP. And as you follow our press releases, you probably saw one last week that said that we won the Low-Energy Portal contract or what we call LEP. And MEP and LEP is what the CBP is going to use to achieve their goal of 100% screening at the border. You'll see that Congress has appropriated a significant amount of money for that. But I'll tell you, CBP will say, "We can't do 100% for that. We'll get about 72% cargo and about 40% POV." But I tell you that because I think there will be more task orders and we will win them. And there's a potential to be more funding. So we really see as an opportunity for us. But what's really important, and you think about it, CBP today screens something in the single-digit percentage of the cargo going through the borders today. They've got to get to 100%. So how are they going to go from less than 10%, single digits, to 100%? And it's really about their concept operations and how technology can help them. So that's where we stepped in. And we really helped in Brownsville, Texas, creating this concept of Port of the Future. And again, that's a picture. But I actually have a video. And I'll get Javier to roll the video to tell you a little bit more about what we mean. [Presentation]

So I hope that gives you an idea of what we mean when we say intelligently integrated, cyber-secured, AI/ML-powered. It's real. That went into operation this summer. And it really gets me excited every time I see it, not only that we're helping customs and border meet their mission, we have other customs and border customers that know what we're doing in Brownsville, have actually visited and are asking us for some of the similar solutions that we're doing there. So with that, I just wanted to conclude with a few takeaways that I want you to have or know from the Civil Group. Leveraging the rest of the company, we will continue to aggressively pursue those sets of IT opportunities to maintain and even extend our IT market leadership. And while we're going to invest across our entire portfolio, you can expect robust investment in bringing that intelligently integrated set of screening solutions to market. We believe we're pretty well positioned to take advantage of any tailwinds in the -- with this administration in the infrastructure area, especially cyber, grid security, resiliency and climate science. And finally, we will continue to diversify out of the federal space where it's attractive for us, commercial energy, global security products. You'll see that from us as well. So with that, I actually have the pleasure of introducing the last speaker today. Chris and I have worked together for my entire career, some might say through thick and thin, though we have some stories to tell later maybe. But it's really my pleasure to get to introduce to you, my friend and our CFO, Chris Cage.

Thank you, Jim. Great to see everybody. Thanks again for coming out, so many faces that we've only been able to see on Zoom over the last many months. Seeing even you guys in person again is fantastic. I'm pleased to be able to close this out and then we'll transition to Q&A. Just a little bit about me, joined the company originally in 1996 in California. I spent the first 10 years of my career in various corporate finance roles, treasury, accounting, M&A and then somehow made the brilliant decision to leave La Jolla, California for Tennessee. But it got me an opportunity to work in the business as a finance leader, partnering with gentlemen like Jim and others, really get to know what we do firsthand. And then I transitioned to Northern Virginia, first, to take over the finance integration lead for the IS&GS transaction. And we closed that deal in 2016 when I ran our financial planning and analysis organization for a couple of years before becoming the Corporate Controller, Chief Accounting Officer in 2019 and then took over for Jim Reagan as CFO here in July. So very pleased to be here, excited about the story we're telling you today and featuring some of the depth of our leadership team. A few key messages that we want to make sure resonate with you. We're proud of the performance track record that we've demonstrated over the last 2.5 years. And we really want to make sure we leave you with the fact that we're very serious about delivering on our commitments. And so we talked to you today about where we're going. It's really about those commitments that we're making to you and how we're going to go about it. Deploying capital. We think it's the strength of ours. We've done a lot of that, we'll talk about that. And we want you to take away the rigor that we place into those decisions each and every time, what goes through that process, how we think about it, so you can have confidence in those decisions that we're making. Growth. We've demonstrated real growth over the last 2.5 years. We're excited about the portfolio that we've displayed to you today and the opportunities, that has to continue that momentum into the future. And finally, that same portfolio is actually well positioned to continue our journey of raising our margins over time and generating a lot of additional cash for future deployment. So let's quickly step through a little bit of our performance before we talk about where we're going. First, on revenue growth. You can see here the trends from 2019 through the most recent second quarter. You step back from that, and Roger talked about this building the foundation when we closed the IS&GS transaction. And in 2017 and 2018, kind of following that, with Gerry Fasano first and Roy Stevens, they laid the groundwork in our business development processes to deliver on this. But we had to commonize that. We had to take cost out of the equation, get more competitive, and we increased the level of activity that we're putting to the funnel. So we put a lot of resources towards new business fund capture. And we saw the fruits of that bearing out beginning in 2019. Now of course, the pandemic caused a little bit of a setback in the later part of last year. And we're pleased to see that momentum picking up again as we are into 2021. So we're doing that through all the reasons you've heard today. Our scale gives us that competitive lever on the cost side, the talent not only on the technical solutions side but also the talent that we put into our BD organization, when we capture executives, BD executive leaders, things like that. And then the technical solutions, the differentiators that Jim Carlini has talked about, what we've been investing in. And I'll talk more about that. And so we feel really good about this performance in the past. And looking ahead, what we're more excited about is the diversity that we've added to the portfolio to take us forward, right? So we're going to continue to grow. We're going to do that through the lines of business that you just heard about from our leaders. On the margin side, so again, 2019, we got in front of you and we said 10% EBITDA margin floor is what our commitment is. And over this period of time, you can see we've substantially outperformed that. Actually, the cumulative result is 10.7% on the adjusted EBITDA margins. If you normalize out a few of the one-time things that have happened, largely led by our legal team, we've had a few nice settlements along the way, COVID, of course, happened, we would say 10.4% is probably a better indicator of what that normalized performance looks like. And that's what we delivered in our most recent Q2 results. And so that's kind of a reasonable point in time to build off of [indiscernible]. We've been able to achieve that while substantially increasing our investment in research and development. And Roger talked about that, about tripling it. It is a very large number. It's purposeful. It's something that we'll be stepping up again yet into 2022. But over the last 2 years, 50% increase, '19 to '20, another 50% increase going into '21. We've also invested in our talent. So whether that's big training initiatives, tuition reimbursement, technical training courses, leadership development programs, we're going to graduate our first class of finance leadership development program participants here in December. We're excited about that. The business development organization has also put in place a business development leadership program. So we're very serious about growing the talent of the organization that's coming behind us and taking more prominent roles. Margin drivers. Underlying this, what's the key to the success now and into the future. And people have asked me often, "What's the -- what are you noticing on how you spend your time after you've taken over the CFO position?" One thing I'd point to, obviously, we spend a lot of time on people. I spend a lot of time on my people. But the other area that's different is how much time we spend on growth and on business development initiatives at the leadership level. And so every Monday afternoon, it's -- our calendars are blocked at many other times throughout the week. If we're sitting in there, we're talking about major captures to make their way to the top of the corporation, and we focus on not only how we're going to win, with what discriminators and what the team has positioned us for. But how are we going to execute that? How are we going to make money on that? How is it accretive to the margin profile of the company? So there's a ton of time and energy and visibility put into that process. And again, I applaud Roger for setting up that structure. So all of us are engaged in that. We all understand what the common objective is. The cost structure we put in place, again, it allows us to differentiate. We've got areas of the company we can be more technical, more investment. We've got areas of the company that we can be lean and mean, and we've structured that largely, but it gives us flexibility across what Dave is doing. If he needs to make more R&D investments for other parts of the company, we can still protect parts of the business that need to be more cost competitive. And a key underpinning, and I can't stress this enough, is the structure we've put in place on program execution. So we've got program management teams, of course, that deliver and they report to our operational leaders, and they oversee that. And then we've got an independent program execution organization that kind of make sure that they're helping the teams deliver and stay on track and assess performance so nothing ever really gets too far afield. And so that gives us confidence to be able to take on more risk, more fixed price programs, which gives us opportunities to drive the margin performance higher over time. Cash. The business is also focused on cash over the years. I remember putting in place some of our first cash metrics back in 2003. So it's in our heritage. It's in our blood. We know how to manage it. We've delivered on it consistently. Now this again strips out some of the anomalies. We -- one of the things, I think, made our story harder to tell over the last year plus was the AR monetization program that we had, and that's something that we're probably moving away from now, and I'll talk more about that. But $228 million a quarter on average of operating cash flow generation. You can see from the pattern on the chart that, typically, Q3 is a strong quarter for us, back-half-weighted, low capital intensity. And that is something that, again, with the shaping of the portfolio that we've done, we're not indicating that there's a shift in the level of capital intensity that we need to execute everything you saw today, right? We can continue to run a really capital-light model, and we can continue to convert our adjusted net income into free cash flow at 100% -- over 100% over the last 3 years, 100% commitment approximately going forward. I'll talk more about that. Capital structure. So we're really pleased to stand here in front of you as an investment-grade company. And people ask me how important is that, and you need to be. I would tell you that it certainly gives us a ton of strategic flexibility. We actually spent time this summer doing a deep dive into our capital structure whether you work with many of the bankers in the room, your counterparts on the investment side to give us their thoughts and input about where we're positioned and where the right place to be is. And I would tell you that we came back and said, "Yes, there's maybe a modest amount of fine-tuning here in, but we're in the right spot. Where we are today, and with our 3x leverage target, investment-grade company, you're minimizing your weighted average cost of capital, you're giving yourself ready access to additional capital when and if needed at affordable prices." And you can see our debt maturity profile into the future. The things that are in the near term, we are obviously planning to repay the short-term financing we took out last year to acquire Gibbs & Cox. And once we do that, we'll be back to that 3x leverage target that we've been communicating. And again, we'll have flexibility from there to decide, do we need to lever up for any particular opportunity or not, but we'll be in a comfortable spot. Our debt, overall cost of 3.6%, almost all fixed rates. We've got that locked in. We feel really good about the profile going forward and again, have a lot of access to liquidity. We put in place a commercial paper program this summer, being investment grade allowed us to do that. It's at a lower cost of borrowing if and when we need it, than our AR monetization program was. And so that's a $750 million program. And that allows us to run the amount of cash that we carry on the balance sheet very little, right? It's suboptimal. We'll be carrying a lot of cash. We had $338 million at the end of the second quarter. But having that commercial paper program in place allows us to do some short-term borrowing, if and when needed, because we don't have to carry a lot of cash on hand. So we feel really good about the capital structure and the liquidity profile. Capital deployment. So looking back over the past 2.5 year time horizon, we actually substantially exceeded the amount of capital deployment that we were targeted. We did that, a combination of cash generation $2.6 billion and an incremental amount of debt of $2.3 billion. So $4.9 billion of total deployment over this time horizon, heavily weighted towards mergers and acquisitions, as you can see. And so we own several properties that really fit our strategy, our direction, gave us opportunities to strengthen parts of the business, enter new markets, for example, Gibbs & Cox and our Navy customer and really position the portfolio with businesses we felt gave us long-term margin uplift potential. We did make some modest investments in capital expenditures. Again, that's a relatively low level of investment that we see in the past and going forward. We've done a few strategic property investments or new headquarters building, a few anchor properties that are really the foundation of the portfolio going forward, and I'll talk about some reduction initiatives that will happen in our facility footprint from here. And then we've not allowed the fact that we levered up to prevent us from being in the market opportunistically on the share repurchases. So again, a question that we get sometimes. Obviously, as a company, we pay a lot of attention to our internal plans, our strategy, our long-term financial performance expectations. And from that, we develop a point of view on what we think a fair value for the company is. When we see opportunities in the market where that's not fully reflected in the stock price. It's a great opportunity for us to step in. And we've done that, again, over this period of time. We'll continue to look for opportunities to do that in the future. And so you see the share repurchase capital allocation over the last 2.5 years, 14%. And finally, our dividend program. So we've got a dividend. We pay attention to it. We'll continue to make sure it stays relevant. Roger talked about 2 increases over the past 2 years, most recently coming out of the second quarter with a $0.02 increase. So again, that's an important part of our capital allocation priority stack. 3x leverage is again the target. We're in a comfortable range right now. We've demonstrated the ability with our credit-rating agencies to lever up and to come back down aggressively. So we still have that tool available to us if and when we need it. Since I mentioned M&A, and you saw heavily weighted towards M&A and our capital deployment priorities in the last few years, I wanted to make sure we reiterated the process that we go through when we think about potential acquisition opportunities, really, of course, starts with our strategy. And I would tell you that we've got a very deliberate and robust strategy process. Every year, we go through an exercise. We've got the strategy team and the group presidents, and we come together at a corporate level and at the individual group level to look at the strategic priorities, building that out, pressure testing it, ultimately culminating in a session over the summer with our Board of Directors, so we really engage at the highest levels to make sure their expertise are weighing in on where we're going in the direction. And that informs why we're taking the strategic moves that we are and potentially where we need more capability, more access, accelerators of any kind because maybe the market is moving quickly in a certain area. And that's what informs this make-buy decision, right? So we know we have a need. How are we going to fill it? Is it going to be internal investment? Is it going to be M&A? That's stage 1 of the filter cost. And so obviously, the teams are looking a lot at potential properties in the marketplace, whether those are inbound or things that we're cultivating, but the second filter around culture becomes critically important. Roger mentioned our heritage of being employee owned, and that's very -- many of us that came up through that know how important that is and the entrepreneurial aspect especially. That heritage is what allowed us to attract companies like Dynetics and Gibbs & Cox to say we want to be part of that family. They understood that, that was deep within our culture and it was really meaningful for them. And because sometimes properties like that are difficult to get, right? And so not only that employee ownership heritage but also the values. We take those very seriously. And we look for value aligned with the companies that we're acquiring. So if it passes those 2 stage gates, of course, now you're talking about the deal economics, right? And I would tell you that we're extremely disciplined around that. We take a hard look at what we think the possibility, the financial performance projections could be. The sponsor on the internal side is engaged heavily in that due diligence. We're looking for, "Hey, what are we going to do with this in our ownership container? What's going to be different than what the prior owners that we're doing with that business? And how do we build confidence around our execution and also the synergy opportunities?" So that is a very rigorous filter that, again, many properties that you can't get comfortable with the multiple because of the growth aspirations are hard to come by or what have you. Perhaps don't fit well within what we're trying to do, but we'll give that a very rigorous scrub. We want to make sure next that it doesn't change the fundamentals of our business model, capital intensity. We're not looking to acquire something that really shifts us away from that. And then finally, how does that align with our objectives on growth, both top and bottom line. If you do all those things, then you'll have a subset of deals that make it all the way through the filter. And we've closed several of them now over the past few years. First and foremost, IS&GS kind of build the foundation of where we are today. It provided the scale. It provided a lot of the leadership that we talk about, and there's many others in the organization that we're very deep in that regard. Then the next grouping, this tailored integrated solutions. How do we get closer to the mission in particular areas? How do we get closer to where the priorities are shifting? How do we generate some capabilities that can leverage certain of what Leidos brings to the table on digital modernization, cyber other aspects, but they have capabilities that we don't and Gibbs & Cox, Dynetics and SD&A that mold, and you've heard us talk about those today. And then finally, a deal like 1901, which in and of itself, it provides some level of growth. But really, what we're finding is it's a different way to deliver IT modernization, cloud migration, IT-as-a-Service without all the people, an efficient process, and you look at that more as a margin opportunity over time because of the efficiency and the delivery model. The other thing I'll just say here is you do all these things, buying a deal sometimes becomes the easy part. Integrating the acquisitions and extracting the value they planned on them actually is where the hard work really begins. Those are muscles that we've built up over time. We've had teams, multiple teams right now working concurrently on integration activities around these transactions, right? And you can't appreciate enough how important that is to ultimately realize the strategic intent of those deals. And so we're very, very pleased with the progress we're making on all those fronts. We'll have two of those deals kind of fully integrated by the end of this year and a couple more that will stretch through the next year, especially as we build, invest in our manufacturing ecosystem to bring that to the state-of-the-art from the software technology side over the course of the next 12 months or so. So I just want to make sure you appreciate the fact that we've done it. We know how to do it. We have consistent processes around that. We think we've acquired a lot of the capability that we need in the near term through this filter process. But if and when we're in the M&A market again, that's the approach we would take to make sure there is a fit and how we would integrate. Okay. Let's talk about where we're going from here. So again, 2.5 years ago, we laid out a set of commitments, organic growth of 5%, EBITDA margins of 10% plus, 100%-plus cash conversion ratio on free cash flow. As we stand here today and we talk to you about the diversity of the business, the size, the scale of the business that we've added, we're increasing our organic growth CAGR over the next 3 years to this 5% to 6%. And you saw Roger point to a market outlook of approximately 4.5%. So clearly, to deliver on this, there's some market share takeaway that we have demonstrated that we can do. I hope you understand and appreciate that based on the presentation today, and we're continuing to commit to doing that going forward. With 10.5% margins, and I'll talk more on the next page about some of the levers there. That's roughly where we've been performing on a normalized basis. There's some uplift. And I think what's really important is we're going to pivot the portfolio a bit, right? We see, potentially, the health margins moderating down a bit over time, although that business has been running exceptionally well, but we want to prepare for that potential outcome by increasing the margin performance in the other lines of business. And many of those leaders talk today about some of those opportunities. I think most importantly is the ability to generate cash. And so the number on the page, $3.5 billion, again, over this time horizon is a substantial amount of cash generation, and we feel good about that number. You're not seeing a mix shift in the capital intensity of the portfolio. We know we've got the second half of the CARES Act taxes to pay back next year. So that modestly pushes us under this 100% ratio, but we're pretty much right there. $3.5 billion is the number that we want you to plan on us delivering over this time horizon. So let's talk just a little bit more about how we make that happen. Clearly, we spent some time talking to you today about the large major wins that have happened over the last year plus. Most of those or many of those will have room to grow, and maybe NextGen being the largest of those. So that will provide uplift into '22 and potentially beyond. Gerry and his team understand and are growing in their understanding every day about the Navy's needs from that customer, the Navy award of the vehicle with a lot of ceiling value. There's opportunities just to continue to help them modernize their environment. So Navy NextGen has talked about military family life counseling, Reserve Health Readiness Program and other win that we didn't talk about today very much, but those things will propel us with some near-term growth. And then this is, by no means, the extent of our full pipeline. This is just the pipeline, $49 billion of what's already been submitted awaiting decision, right? This is at the end of the second quarter. And so a lot of dollars out there on deals that we've aggressively pursued. Again, we have no expectation of winning them all, but we think our track record of winning and being aggressive on takeaways of new business will allow us to capture our fair share of those potential award decisions as they play out over the next 6, 9, 12 months. Deals and protests, there's a few different NASA deals. In fact, they're all in Jim Moos' portfolio. Those will go through the corrective action process. There will be a future determination. It's a little bit uncertain where that ends up. But I would tell you that given the fact that we won those originally, we do feel good about the offer and the solution that we're putting in front of the customers. And so we'll see how those play out, but look to those as potential growth catalyst for us as well. The market positioning that we spent today talking to you about, right, and how do we get into those faster-growing swim lanes. The civil and health businesses that we built over time, we're already there. Others are trying to get there. We have a leg up in some of those markets. Dave's business as it relates to the R&D portion of the DoD spend and where they're going with weapon system development and a faster growing market opportunity. Don't know what's going to happen with Congress, and there's going to be an infrastructure bill. We don't know what's going to happen with Build Back Better. But clearly, there's going to be some level of supplemental spending over this time horizon. And while a modest amount of that, 10%-ish or less is addressable market to us, it's all incremental opportunities. Jim talked about infrastructure, modernization, security, cyber. So those are things that we look to as vectors for growth in addition to just the things that we've laid the foundation for you today here with the people, processes, systems, investments. There are a couple of things that we'll have to potentially overcome. Our veterans exam, the nation business has been performing exceptionally well. And we told you that there was a level of increased demand coming out of COVID because there was a period of time we were unable to, and we've been executing well to work that backlog off. But our customers been exceptionally pleased with our performance. The team is working really hard, but there was always at a point in time where some of that backlog comes down and the run rate potentially comes down. Now I would say also that, again, Liz' team continues to look for opportunities with that customer to help them on what's next, and they're very well to the other demand signals that happen there. But for now, our plans are that business is going to moderate down over this time horizon. DHMSM great job on the execution side. We'll have that fully deployed in 2023. There will be a maintenance tail beyond that. But clearly, that is an area that's a large program for us. That being said, there's -- it's like with any new system, there's tons of additional capabilities that the customer is interested in. And we have senior people dedicated to help them identify what more can we do for you. So there's always an opportunity to make sure we're meeting all of their demands, helping them figure out ways to optimize the system for maximum performance, which could drive incremental growth. Dave talked about Human Lander System. Obviously, that's something that's come out of the portfolio, but then there's more potential with on the sustainability side and ultimately, what happens with living on the moon. But for now, again, those are programs that are out of the portfolio that we're not counting on from a growth perspective. And then we have a modest amount of business in defense and a little bit in Dynetics impacted by the drawdown in the Afghanistan I've told you about that over the course of the year. So those are just some of the headwinds. Modest headwinds on the revenue side, more than offset by where we see things going on the gross side. Margins, hopefully, you appreciate today that we have a lot more to offer than the traditional O&M business, the integration -- shift to the integrated solutions, higher-margin opportunities are clear. We're seeing that. We'll see more of that over time as a service, a more efficient delivery model. We're bidding the 1901 capability into more and more of our enterprise IT jobs. You see that all the time. Roy got up and talked about our real estate investment, and I would tell you that those are few and far between these days. Though Roy has got one of the few places that we're actually putting money into a new secure software factory. But for the most part, we're looking to optimize our facility footprint. Obviously, everybody's adapted coming out of COVID. The teams are working differently. Our workforce demands mobility and flexibility which we're happy to accommodate. And this is a real area led by Vicki Schmanske that over the next 2 to 3 years, there's a significant opportunity to reshape the portfolio and to take cost out. So we see that as a real opportunity for us. At our size and scale, I mean, the investments have already been made, right? So this next line, controlling indirect cost growth, overhead, general and administrative will clearly grow less than our revenue growth rate. We're not standing in front of you today and telling you about the incremental investments that we want to make and we need to create capacity to do that. We're already making. We're already making the R&D investments. We already have substantial budget allocated to new business funds in our cost structure today. So again, that's an area that we see opportunities to gain additional economies of scale with the growth profile that we're talking about. And finally, Jim talked about our airport screening business. And we spent a great day with the team earlier this week, and I was impressed by some of the new people we've added and their plans over the near term to continue to optimize their processes. But the market is not where we want it to be. I think we all understand that, but it will ultimately come back. So therefore, it's not something in the near term that's a growth catalyst for us. But as we look over this time horizon, as we exit '23 into '24, definitely, it's an area that we believe will continue to contribute to the margin performance of the company. So there's a lot of opportunity there. We're working hard at it. And again, part of the strategy here is to make sure we're prepared if our health business margins do come down a little bit with the VA exam business moderating. It hasn't happened yet. We're feeling really good about the performance, but our goal is to position the company to withstand that when that time comes and to achieve that 10%, 10.5% EBITDA margin goal and above as we exit '24. Okay, $3.5 billion of cash gets generated. Thinking about how do we deploy that over this time horizon. So what you see in the pie chart is we've got a few edges of things that we intend to have committed, first and foremost, capital expenditure. This is just a placeholder at the run rate of CapEx that we've consistently delivered over the last 3 years, that would be 13% of the budget and potentially, we would spend less than that, but we'll earmark some amount for capital expenditures to drive growth, debt pay down. This gets us to our 3x leverage target, right? It's not our intent to drop significantly below that. We certainly have shown the ability to go above that and to come back over time to [indiscernible] but a small amount of our capital will pay down that debt balance dividends. We'll keep the dividend program relevant. We visit our dividend rate payout ratio, et cetera, with the Board on an annual basis. And that leaves almost 2/3 of the cash that we generate that's unspoken, right? So whether it's M&A or share repurchases, that's kind of a decision that we make as we advance over time and see where those needs are of the business, following our consistent capital deployment strategy and philosophy, maintaining that investment-grade rating, maintain the appropriate leverage, talked about the dividend. We do want to continue to invest organically and inorganically. And then whatever we don't need to execute those strategies, that's what we return to our shareholders in a tax-efficient manner. So that just gives you a sense of how we're thinking about the $3.5 billion, how much capacity really exists there to help continue to drive shareholder value creation over this time horizon. So lastly, all in, where Roger ended. We believe we've got a compelling investment thesis. We're excited about the portfolio that we built, excited about the leadership team that I get to work with. They make my job easier. These guys are very -- and gals are very confident of what they do, and the portfolios are growing. They're resilient, they're diversified, they're differentiated. We'll leverage those portfolios to continue to grow in our markets to gain share and to continue to pivot towards higher margins over time with the capabilities that we've built. We're not going to take our off the ball on cash generation. We've demonstrated that we do that well. We're continuing to do that going forward. The business mix really isn't changing from that -- those fundamentals. We do focus on the return on invested capital, and we're -- we have targets that we've set internally that we manage and look at every month on that performance metric as we can guarantee that we'll continue to stay focused on that. And then leaving you with the fact that whatever we do generate, which will be substantial, the rigor that we put into evaluating those deployment decisions are thoughtful. We spend a lot of time on them as a leadership team. We have the right filters in place to make sure that we're focused on driving sustained value for stakeholders over time. So with that, we are at a quick break. We're going to set up here at the front of the room to position for Q&A. And so if you would be back in 10 minutes, we'll be ready to take your questions at that time. Thank you. [Break]

We're going to go ahead. Hey, Harry, are we live?

Not yet.

Not yet? You can go ahead.

Now that we're all here.

Great. Okay. Thank. Thanks, Jean. That was really great. You all do a terrific job. Made my job really, really easy. So we'll just open it up. Just raise your hand. Maybe if you can identify yourself. Sheila? I'm Sheila. Okay.

Sheila Kahyaoglu at Jefferies. Maybe I'm going to go for Chris, if that's okay.

That's really good. We're good with that.

Works for us.

Chris, you have a few conservative targets out there, free cash flow conversion versus prior targets, but also margins, you kind of have flattish 10.5% versus 10.4% on an adjusted basis. Why is that, given health and civil are your highest margin businesses? Even normalized health is up 14%, and they're your fastest-growing segments.

So thank you, Sheila. Again, one of the things we want to make sure we come out of this with our targets that we're going to be able to achieve. So on a cash conversion perspective, obviously, the business is getting bigger. We told you about the capital intensity. We don't really see that changing significantly. We do have a modest headwind next year from the return of the CARES Act portfolio. But 100% conversion as kind of the floor is how we're looking at that, give ourselves capacity for potential upside, but also give us a little bit of strategic flexibility. The only thing I'd say is if we're not delivering greater than that, right, it's because we've looked hard at the things we're going to invest in and ensuring that those drive incremental returns for the business. So that's the expectation you should have of us. On the margin side, again, 10.5%, we kind of looked at it as 2 years ago, 2.5 years ago, we told you 10. We're getting nervous. Now we're telling you 10.5%. But we've proven that we can deliver that. And we've -- we like the portfolio that we've got. There's a little bit of uncertainty around the recovery timing of SD&A. You're right. I do expect Jim's Civil portfolio will come up over time. The truth of the matter is I think you've seen the health business, it's not at 14% today. It has been at 14%, 15%. It's much higher than that today, right? For the last few quarters, we've been really overdelivering on the VA medical exam side and some other great programs. So it's well run. So seeing how that plays out, a little bit of uncertainty there over time, plus there are some new start-up programs. We've talked to you about this in the past, too, right? We're going after major programs. And major programs tend to have a life cycle on margin performance. And our expectation is, oftentimes in that first or second year of a major program capture, you're going to be under your margin targets for the long haul. But the teams work really aggressively. I know they focus on this of how do they bring them up over time. So just keeping that perspective because there are some substantial contracts that we are bidding on that we have the opportunity to win during this time horizon, too. So all those things are factors, Sheila. And I think, hopefully, we give ourselves more of an opportunity to achieve that or exceed that over time then fall below.

It's Seth Seifman from JPMorgan.

Hey, Seth.

[indiscernible] Apologies...

There's a lot of other people up here, Seth.

Sorry.

We're all going to break.

Apologies if this is not the most sophisticated question. But Chris, if you could talk maybe a little bit about the trajectory of the growth over the period. I think people have -- they know some of the near-term growth drivers and then there's a tendency to assume that, okay, over the period, some things have kind of normalized a bit, underlying market growth rate, which is below your growth rate. Is that the right way to think about it? Or is it more of an even kind of pace across the period.

Yes. I mean, obviously, we're not giving you '22 guidance today, and we'll do that in February when we have our fourth quarter earnings call. Yes, there are opportunities for us to start strong given some of the programs that we're talking about. But we also painted a picture of some areas that could moderate down in the near term. And so clearly, the Afghan withdrawal that's happening. It's happened. So that will be a modest headwind to VA. I hate to keep coming back to that, but that's a little bit less certain on how much or if that comes down. So there is certainly a pattern that could start higher, but there's also a pattern that could be relatively even over that period of time. We feel good about the cumulative commitment. That's what we're making to you. And again, I would just encourage you to stay tuned for our third quarter call and, of course, our fourth quarter call when we talk about 2020.

Yes. So talk about negative impact to margins of DHMSM -- I'm Cai von Rumohr from Cowen. Can you talk of the negative impact to margins of DHMSM and the medical exams coming down. And then in your last slide, you talked about steady state health margins. So I guess my question is, which is it? What are you assuming in that 10.5% that the margins come down or that for whatever reason, they're steady-state margins?

No, if we said steady state that we don't want to leave you to that impression. Right now, so again, if you look at our Q1, Q2 reported health margins for this year, we don't view those as long-term steady-state margins, right? Those are -- we'd love for them to be, and we're working hard to make that a reality potentially. But I would tell you that's not our base planning assumptions. So we do expect that there will be some modest downdraft in those margins over time, and that's why the rest of the business is working exceptionally hard to position for hitting 10.5%-plus even if that were to happen. But right now, Cai, the base assumption is they won't stay at the levels that they've been at this year, which is significantly higher than the numbers that Sheila just talked about.

Andre Madrid from Bank of America. So you guys talked about growing headcount 9,000, 10,000 in the year. That's good and all, but there's been a lot of talk, especially among services peers about labor inflation, wage inflation. What are you guys looking to do with that? How will it impact the business, especially given the number of fixed price contracts you guys have in your portfolio right now?

Yes. I'll talk and then David or anyone else can -- we'll talk a lot about labor [indiscernible]. We bid in category and category funds [indiscernible] There is not a problem for us. Is there demand for that? Do we see inflation? We always get the question [indiscernible] Amazon [indiscernible] resources. There's always potential. [indiscernible] but we also [indiscernible] the opportunity to replace the [indiscernible] someone who is less experienced but equally qualified. So we call it green so we can see someone maybe [indiscernible] an hour. We can fill that job with $80 an hour or maybe [indiscernible]. Some ways to combat that, but it's not been a problem yet. What we will say and we'll attract [indiscernible] Yes, I understand the initiative of our market, but they don't work and what we do and the vision of our customers and we do. And so will they come to work because what we do [indiscernible] and the sort of the greater purpose and I know everybody company, but there were 12% veterans, and they really do care about what we do and how we provide -- those people often don't know -- those people often don't go to those kind of like we'll call it, headline big box kind of IT firms. I don't know if you want to say anything else?

I was going to add on to that. I mean, certainly, I think as we have seen our customers adjust to the pandemic and move work outside of the facilities, we've also found them to be open to having employees in other locations. So when Roger talks about the Washington Metropolitan area, there's the ability now to hire in other locations. And so that certainly will help with the labor market and the inflation that we might see. And we do also have mixes of cost reimbursable as well as for fixed-price contracts. So between the greening and the cost reimbursable, it's certainly something we can manage.

But also don't forget where Jim started us, right? It's not just about the people. People are critically important, but it's about the technology. And that's partly why you see more efficient right up in the top of our mission statement. So it's the investments we're making now delivers across all of our businesses in using automation, AI, ML to do things in a much better way. So it's not all about who can get Johnny for $2 less an hour than Sally. It's about how do you deliver an outcome to your customer better.

You guys talked about kind of like between M&A, share repurchases, 3 years toward 4%. Can you guys give a little bit of color on what makes [indiscernible]? And if so...

We probably can't for the same reason that if you'd asked me this 3 years ago, and you said, "Well, how much M&A will you do?" When I see you again in October of '21, what will you have spent on share repurchase and M&A? We're always looking at technology add-ons. And so that pipeline is pretty robust. I would say beyond that, there's not anything major, a big number out there. But I would have said the same thing in May of '19. And then going through our strategy filter, we had some really what we thought were unique opportunities to bring capability into the company. We were heavier into M&A than I would have thought. Tell you my gut tells me probably will be less in M&A over the next 3 years, but walking down the street, there are rumors of companies [indiscernible] And we saw Northrop business [indiscernible] sell the business. So you can't make that commitment. And what we try to say is we have the process and value of companies in [indiscernible], and we'll continue to roll that process. And we're not going to [indiscernible] right? We're going to create such [indiscernible] on our balance sheet a bit.

I think it's spot on, right? Hopefully, you were left with the impression that there's nothing we need to do, right? We've built a portfolio that we're proud of and we think is well equipped to grow. It will only be -- as Roger talked about it, there are some things that we find along the way that could really help accelerate the strategy, we'd be compelled to look hard at those. But as of right now, I think that is unallocated for a reason, and we would expect to make those decisions each year along the way, basically with the cash we have.

Gavin Parsons with Goldman Sachs. A question for Dave on Dynetics. The slide deck says 4% growth over the next few years. I would have thought Dynetics would be pretty significantly outgrowing that. Is that the target for Dynetics? And if not, what is the Dynetics target? And what are you assuming for capture of some of those pretty significant programs?

That is a great question. I'm not going to be [indiscernible] people have said, what I showed is [indiscernible], okay? It's not what we're planning at. We believe we can outpace that. We have grown a lot over the last few years, and we're kind of growing into what we have attained now, and we've got some big things on the horizon that I think we'll do really well. A lot of these programs, you start -- you get them to win them and you get the production going and then you change contract type, and you change a lot of things. And frankly, the numbers get a lot bigger as you go. So what we're trying to do is capture these programs of record so that we can grow into higher margins, okay, and higher growth rates. And we have to capture multiple programs to be able to do that, and we're beginning to do that. So I'm optimistic about our growth rates. Before we came, we were 20%, 30% a year for several years in a row, Certainly, the investment that the company is making is healthy. But in a more modest growth market, we're going to moderate what we can do as well. So -- but I'm still very optimistic about being able to grow several of those programs at a higher pace 2 or 3 years out and increase the margin as well. Is that helpful?

Matt Akers from Wells Fargo. So your outlook goes out to 2024. For a lot of us, it seems like there's a lot of budget uncertainty over that period. So could you just talk about some of these opportunities that you guys have laid out for us? To what extent do you need for Congress to cooperate for that? And if the budget is not growing, can you [indiscernible]?

Well, I'll start then maybe [indiscernible] $25 billion-plus on the defense side. We [indiscernible] in investment in December for many of us has been business as usual in their federal planning process and sometimes in the portfolio, we actually like the shifting that we've seen. And then Chris mentioned the supplemental maybe the -- and that plus for us, there'll be some infrastructure work producing inside our work in there. The -- and we talked about this in the past, the -- I think the uncertainty is not the budget, but what will they eventually have to do to pay. And we're not here to predict tax rates or what they're going to do, do inheritance taxes or things like that. But if you read the details in the $3.5 trillion infrastructure, there is "tax reform" in that. And there is an R&D tax credit deferral, which we won't get into here, but many of the companies in our space have talked about, we need that to continue to defer. So really, I think let them talk a little bit. We're probably okay with the budget and the top line. We think the allocation is going to advantage us, and we are -- our tax counsel and frankly, our Washington office, we're now talking to ways and means about tax policy. We have done that in the past. Do you have anything more on budget?

Sure. I would just say that we start every strategic planning cycle modeling what the budget is going to be, And we use a lot of outside consultants as well to test our own thoughts. And we are on the high end of what folks have modeled, so I concur exactly with what Roger have said that we feel good about the budget. We tend to have a multiyear view on where it's going for our recent shift. We like where we're aligned. We talked about the -- we all talked about the defense side to shift to kind of the strategic power competition and that really advantages where some of our portfolios on.

Yes. What I would say to that is, from a civil standpoint, we believe we're in growth markets that will endure no matter who's in the White House. We're going to do something about the grid and the grid stability and security. We know that we need to recapitalize the grid equipment, and there's money already appropriated at the border, and that will carry us through. And IT modernization is a big emphasis across all of them. It doesn't feel to us. We're very pleased with what the budgets at. We're very pleased with what maybe we can see as uplift there. But I also think it commensurate [indiscernible].

Byron Callan, Capital Alpha Partners. You talked about your experiences and the integration with McDonnell Douglas and Boeing. And a lot of you on the panel also come from big, large heritage contractor backgrounds. I'm just curious, could you reflect on what you learned from those experiences that you're trying to do differently. There are obviously some attributes that are positive for working a very large company, but there are also some experiences that you at Leidos would like to change or maybe do differently. If there's anything you could reflect up on, that would be great.

Yes, coming -- so several of us came from Lockheed Martin, completely different culture and pretty trepidatious coming in. We knew we had to be in a different space to compete. The structure financially just didn't match up with our competitors. But the structure of the company also is quite a bit different. It is what we sell people on now because it is our strategic advantage. The power of entrepreneurialism that existed in the heritage Leidos business and the strength of big, disciplined programs that you got on the Lockheed side. Those 2 things, both metering each other and coming to the middle and providing an agility is a really powerful thing. And after you got through the first 18 months of trying to get everybody in the right place. It really has made it a powerful enabler. And I think the key is getting leadership teams intertwined, and I think that really helped us create a [indiscernible].

And I'll just pile on that. It's rare that a company gets a chance to start over and emerge. And the approach that Roger and the Board [indiscernible] was a chance to where we make something special. And the team was very thoughtful for that whole integration and trying to come up with the value prop for the customers and the shareholders that had the right level bounce. And I can't agree more with Roy. The agility this company have is just unmatched. I talked about many of the business case investments that Roger have made in some other companies that may take months to have gone through. These were literally days that a decision was made and capital was deployed. It really is unheard of. And you comp with that with a very strategic cost structure that we have that allows us to go off, invest in fires, protection and hypersonics but also be very competitive in the services world as well. It really is a strategic strength, and it really was how this company was we architected back in '16.

Yes, I would echo the same statements. And when you think about kind of pulling through the threat of both of those thoughts, it's also about the people. And I will always remember our first leadership meeting after the merger, and Roger told us that we are the day, and empowering all of us to know that we could do what we needed to do as a corporation and then instilling that in the rest of the people that you need. And that was very different. I was fortunate enough to work within GE, [indiscernible], Lockheed Martin structure on the platform side, and that was a different look and feel. And then moving into the services side was definitely a different look and feel. And so it was very much felt like a great culture embracement when we came together and then having that empowerment for our people has been very, very helpful.

I'd like to weigh in, too. I didn't come from a large company. But, I will say this, often in our ELTs or our functional reviews, one of these guys will ask me personally, are we going too fast? Are we doing things that are going to hurt your business model and it's a dialogue every time. We have a conversation about it, whether it makes sense or not. And we made decisions based on what's in the best interest of the business. And I don't think I would have seen that in many other places that we would have gone. So I think this team learned from things that had happened in the past that I think has been very, very helpful for integrating Dynetics into the company.

Tobey Sommer, Truist. I was wondering if you could talk about trends you're seeing in contract size, contract consolidation. I think I recall in 2019 when we were together, you talking about how your customers were putting things out that was bigger and you were seeing a narrower set of competition as a result. How do you see that now and over the next forecasted period?

Yes. Tobey, I'll start. But I think we always say, yes, we always see both just about the time we think they're going to go big and aggregate like in Roy's area, they disaggregate, right, because -- or we've seen that there's a program that Roy has, which is the other is user-defined services for NGA, which is the consolidation, which is one of our at-risk -- one of our bid unawarded, the Defense Enclave Services, really your favorite program, I think, is an aggregation out of the -- this organization. But at the same time, we see other organizations that say, "No, no, no. We want to reenergize the industrial base." The theme that we talked about in May of '19 was given a choice, we'd rather go after the bigger program, and it's more value. There are less competitors at that level. They tend to be longer like the 5-year with 5-year -- 5 1-year options, which means you don't have to rebid it every 5 years, which is more true of the smaller programs. And the chart I showed our top 10 wins short of the protest, those were also conscious decisions that we made to move up. We still like the smaller contracts. We love the customer intimacy there, what have you. But when we are starting to rationalize our new business spend and where we spend our time, it just makes sense for us to go after larger programs where they're less competitive. Liz, anything else you want to add?

I would just add that certainly, in my space, we need to look at a mix because a lot of times in the health area, there aren't a lot of the large long-term programs. And certainly, we'll go after those. But in order to continue to grow, we've got to look at the medium and small, too. And in some cases, some of our customers tend to leverage smaller contracts, sometimes with smaller businesses. But often, it will be a mix.

I have 2 for Jim Carlini actually. Thank you all, first of all, for the presentation. First, on the R&D budgeting process as we get to this time of the year, I'm sure you have more ideas than Chris has capital. And so I'm curious how you prioritize ideas that have more immediate commercial application versus more longer-term mean shot ideas that might have more lifetime value for the company, but aren't kind of making money immediately.

Well, to start with, we do have a lot of ideas. . There's a big appetite for R&D in the company, which is great. It's a healthy technology culture that we have. We have a lot of filters that we use to assist through all that. And these folks sitting here are the primary filters. Whatever they need to run the business, whatever they need to win as the primary filter. We do try to balance far, mid, near term. So we do look at -- we make sure we're placing some smaller bets on some of the far-term technologies, quantum, things like that. We do work in those fields, but some get less investment than others. So we have a number of different filters we apply to, triage, the very large ask for R&D money and get it down to make sure we're really impacting the business, number one, in the near and midterm and then setting the table for the far term.

And then on the accelerators, something I was a little unclear about. Are these groups of people that are experts in and championing AI/ML versus cybersecurity? And how exactly do they interact with Gerry and Roy and abilities into the business today?

A lot of those people, yes, they are experts in those fields. They actually live in the groups. So when AI/ML, a lot of those folks are -- actually live in Dave's group and they've reported up to the accelerator, which creates this body of experts that frankly creates a great community. It's a talent pool who loves to work together. They love working on hard problems, and they love working on everybody's problem on this stage. So it really energizes that team, but they live in the groups, so they can go back and forth seamlessly. And it helps do what we're trying to do, which is get the technology into the group.

And I would say it happens in this -- I mean there's not a problem I can bring, Hey, Dave, I need help with image analysis on that provision. When you put your hands above your head in the airport with our label on it, immediately got these people, immediately attack that problem, immediately we had it solved. It wasn't -- there wasn't a road platform. It really works that concept, that culture.

I referenced is a key component of our repeatable solutions, all grown up in different places where you seem to invest in 5 different places on the same thing. We don't do that now because of a very strong office of technology with those strong corporate horizons really gets us efficient. And it's a great resource. These folks are also in the front of our customers and we use them a lot on our new business capture.

I mean not to put it too hard. But piling back on to what Chris said and what you said earlier, it's driven out of our strategy, which is really -- I mean, hopefully, that should come through to you really strongly today. We've prioritized markets that are markets that we think are kind of hold to markets that are important for us to have, but maybe aren't going to grow as much. And we've prioritized others that we think are really important. We might not have a big segment in that, but they're attractive, and we've got a good position to grow it. So Jim forces us to really -- rather than I generate 20%, and I get 20% investment, we really need to look at how that sits across that spectrum and we invest in that kind of way. And the strong office of technology helps us with that.

Eric Ruden with Baird. Roger, a question for you. So you've got a lot of new wins. There's an impressive chart on the pipeline. But -- so just maybe just talk a little bit about the bid or no-bid kind of process that you go through on some of those key hurdles when you've had a loss, what has -- is there a common thread? Was it technology solution? Or was it an intimacy with the customer? Maybe just highlights some of that.

Yes. So the team really, Gerry and then Roy, we have a gated business development process. Many companies do, as we talked about, trying to pull the best from some of the big companies. And so we have a pursue, pursue bid, no-bid kind of a process. And we still have a lot more opportunity to bid than we can afford to bid frankly, from a new business standpoint and funds. And so we kind of run it through the filters. So you can imagine, does it fit with our core competencies? Are we competitive? The #1 question and they'll all say is when they come in, it's like, how are we going to differentiate ourselves? If I'm sitting in a competitor's room, what are they saying? How are we going to be better? How are we going to be different? How we're going to be compelling? If it's just LPTA and a race to the bottom, I mean, that's an easy decision not to go after. And then the lessons learned by where we have what we call the gating process, and we have what we call the final gate. And the final gate is win or lose, after the protest and after we get our debrief and after that's set a while and sometimes we get to go back and talk to a customer. After the debrief and after the protest period is over, a jury and a major program about 2 years ago went back to the customer and said, "Okay, you know we're not going to protest, blah, blah, blah, we read the debrief, now tell us why we really lost." And we probably lose some on price. But usually, when we lose, it's not the quality of our technical offering, it's the alignment of our solution with what the customer really wanted to buy. And we think we win more than our fair share. But when we lose, it's because we had a great widget, the best widget in the world, but the customer really didn't want that widget. And we thought we understood what the customer wanted. We had numerous meetings. We have the rule of 5. You have to bid your concept to the customer. I have to brief the concept of the customer 5 times before you're allowed to bid. And even after that, there are times when in the debrief, we go, they just didn't want that widget. They really wanted this other widget. And it's frustrating. We've had a couple in the last year or so where we walked in and we thought we were there. And in the debrief, it was no, it's not what they wanted. And so that's why DD is so important to the customer, intimacy is so important. But frankly, it's really important for us to not only celebrate the wins, but have this final gate on the losses to say, "Okay, are we mapping the customer, how they make their decision, who is the decision-maker, how is that influenced and what they're really looking for in a differentiated solution." Anything else?

I'd just add, I mean, we showed you the top 10 win chart. Yesterday, we had an ELT review, and we reviewed our top 10 loss chart that Debbie prepared. So I mean, we do take it seriously. And on the bid/no bid, it really most often comes down to you know the customer and what they want and can you make money off of it. And that throws away the majority of our no bid because we failed to answer that question. And we start very early. I mean the NGEN team get a full team 4 years before the RFP. So it really is one of the things that comes with our scale is that we can afford to invest in these things to really make sure we have robust answer because you are not easy to give reviews with the boss.

Yes. If we don't think we have a winning solution with we've done some modeling and simulation, we've maybe done some demos by the time the draft RFP comes out, then we shouldn't bid, right? We're -- you cannot -- maybe you all know this from the other -- from the industry, you cannot just be an RFP writer, right? You can't just respond. You really have to be in literally years ahead.

Yes. So you've talked a lot about your business development. Clearly, you've done very well, great takeaway effort, more big programs. Tell us a little bit about your recompete risk, like roughly what percent over the next 2 years of your revenues are up from recompete and maybe the 1 or 2 big ones that you really feel you got to win.

Maybe Chris can talk about a number. We usually say about 20% [indiscernible] and then maybe we'll just go down the row each of the group presidents can talk about a major recompete if indeed there is one.

I'd start. Roger mentioned UDS, the items bid. That's really our biggest thing out there from a recompete perspective right now that we're tracking. And it's not all recompete. There is some new growth in there, if we win it, which would be great. I would tell you that the profile -- the good news is, a few years ago, we took several of our largest programs off the table from a risk perspective GSM-O Hanford. Now you look at our largest programs, DHMSM's got several years to run. Navy NextGen is just getting started, right? So everything Roger showed you on that chart, many of those are now in our top program portfolio. So we think the risk is kind of below average the next couple of years. We'll put a finer point on that for you as we work through our detailed plan for 2022. But as of right now, there's nothing that I see that gives us an undue amount of risk, and maybe the team can comment on anything particular that it would feature.

Well, I'd say in civil, we have gone through a stretch for the last few years, and we did very well. Recompete win rate was well over what we would expect, Hanford, Future Flight systems, Department of Justice, NISC IV, which we talked about today, feel very well. We don't really have any near term. The other area I mentioned in FAA sole source extension. Why do you get that? You get that because you're bringing continuous innovation. You have customer entity, so they don't need to go to the market to recompete it. So that's kind of how we think about it.

Yes, I would just say for Health, as I mentioned, we do have a mix of small, medium and large. And so you'll often see in a given near some of the smaller ones that don't have as much runway. It's not a big volume. And certainly, I've got my eye on the DHMSM contract, even though it's got a few more years. So it'll be something I'll focus on.

Yes. And for me, the NGA contract, we've talked about a couple of times, which is really kind of half ours and half GDITs and they're bringing the two together into a 10-year program. That is in the next 3 to 6 months, we'll have an outcome of that. But for the most part, the other parts of the portfolio that are recompeting actually stepped away from kind of some low-end work that is not very attractive, which again, you should be able to hear a theme. We're really trying to move in a place that the margins are more attractive, but we can't differentiate who else can do that work.

In Defense, you heard about many of our top programs, NGEN, 9-year pop to go, GSM-O, 10 years ago. Our LCST program goes out through the end of the decade. Buckeye program, we just rewon for 5 years. So we're down to #5, which is an Air Force intel program that we should be hearing in the next 60 days, we think. And that's -- but to give you a magnitude, you're talking about 1% of the Defense segment revenue, so it's pretty modest.

I'll probably have more turnover than the rest because their development programs and we're getting new development programs. But what I'll say is a reasonable part of our business is still really good, hard R&D. It's -- and we just won a big recompete of our missile defensive systems a couple of years ago, a 10-year contract. So a lot of our base is solidified, which we feel very good about. But we find ourselves in a very competitive position on a number of things, and we have won a number of new programs that we discussed today that I think will bode very well for us. And it's just more about the new opportunities for us, than about holding on to existing contracts. We're -- we just have a quicker turn in our business because it's more developmental and hardware related. I will also say this, though, as we continue to produce more hardware, those have a tendency to have a very long tail on them. So I think we'll become less risky as time goes on as we move through there. And clearly, you have a better opportunity for margin there as well. The tail end of these programs seems to be where you can do really well from a margin perspective.

It's [indiscernible] with Capital One now. I kind of want to touch on something that Chris said and Gerry just said, and everyone has sort of talked about a little bit, and it's you want to bid on things where you know you can make money. How often are you seeing other people bid on things where you like how do are they making money on this. And so you talk about discipline, and you're talking about space. So just any kind of, I don't know, reports from front, so to speak, on how that dynamic is going? Is it something new or just like this is how this is, and it's been that way forever?

Well, I'll start off. A, we have really moved away for something called lowest price, technically acceptable, which is a race to the bottom, costs you out. So yes, I suspect it's less than 5% of the portfolio, maybe even less than that. And we just run away from that. It's not what we do well. It's just the same reason we don't do what DynCorp does. We don't do infrastructure work. We don't -- there are words for that. There's also in other words about staffing programs and things that we run away from. There's always going to be some of that. There are going to be people who say, and we talked to the break about one of the big programs and gosh, if one of our competitors doesn't win one of those programs eventually, then they can't maintain their revenue and their direct labor base. And we've -- what's great about us is that we don't have to win those programs. We can afford to lose one. There was a large program in Jim's portfolio around maintenance of TSA checkpoints. And I don't think we've talked about this a lot. We lost the program to a competitor, and I'll make up the numbers. Say, we bid 1 and they bid 0.65. And we actually ended up protesting because what we want to do in the protest is to tell the customer, you came in by the material for that price, right? And we said -- and then we were through our protest. We made our statement. We said, "We're here. We're a trusted partner with you. We will be here until the last day of the contract, supporting maintenance at the checkpoint." On the last day of the contract, they terminated the winner. And we literally had given notice to our employees, like at 3:00 and they were going home for the last time, and maybe you can finish this story.

Well, no, that's exactly. I think it really speaks to our commitment to that customer and on the very last day with the termination, we turned around and rehired everybody back. And I mean, that's a nation -- that's a mission-critical thing for the nation to keep the airport checkpoints up. And it's really a testament to the team to just be professional all the way through, even when they were losing their job. And it's just a testament. And I used that story all the time when I talk about customer relationship and how do you manage customers. It's a great example.

But I would say, I'm sorry. I don't see any more of it today than I did. I mean it comes in waves, and there's different players in the market who are motivated by different things. But I wouldn't say it's spiked recently or not. I'm sorry, go ahead, Jim.

I was just going to add, every once a while somebody who'll go after work for various reasons. We see it a little more in PE-backed companies that not public, right? So you get a little more chance to do that. We see some pretty rational behavior coming out of those kind of companies. And I'll just kind of leave it there.

Anybody have one last question?

One more since you asked. Byron Callan, Capital Alpha Partners. You talked about strategic competition. Obviously, that drives a portion of the portfolio. Does the change in rule in Afghanistan accelerate any change in intelligence, border security, Homeland security missions? I mean are there any early signs of thinking among your customers about what kind of an ungoverned space or a very different government space now for Afghanistan, I mean, for your business?

Yes. The CT mission does not go away at all. It means less people visibly on the ground in the short term. and probably more use of overhead assets and other analysis support. So we probably see a little bit more short-term pivoting to -- especially China, Russia [indiscernible]. But CT is here and will stay here.

Byron, before 9/11, it was an incubate, right? And I think we stayed in for so long because we didn't want to allow groups to be able to form their end train and use that as a launching pad. We've been out 1.5 months, and now they've had their first big terrorism, the bomb that went off, right? And so I think the world continues to be a very complicated and dangerous place. And I don't think this adds to the security of the world. I think it makes things more complicated and -- which says is it -- now we can't be there. So the counterterrorism mission has got to be done more remote. And I hate to call that a business opportunity, but there are customers who are going to need more capabilities than they have today, and that can be an uplift to us. We wish that wasn't true. We would actually prefer to have made our money on maintaining the Afghan Air Force Mi-17 helicopters and their PC-12s, but we're now on the other side of that coin.

I would just say that I don't know that we're much in that region about what goes in the country, comes out of the country, but we are in the business of what comes in your country. And I think that has the opportunity to maybe accelerate where I think that market is going, where they want advanced screening technology at the borders. They want to be able to see what's going on. It's not just in the U.S.

Great. Thank you all for coming, and we're actually right about on time. We were early for a while. It was great. It was great to get to talk and let you hear our story and meet the leadership team here. Don't forget to take your SS United States, but with the PS on that. The ship is still around. I don't know if anybody is from Philadelphia, but the ship still sits on the Delaware River up in Philadelphia. And there is a conservancy trying to restore it, make it into museum, but it's a really, really cool ship and it still owns the Blue Ribbon trophy for the fastest transit from New York to London. Again, thanks for joining with us today, and we'll see on the earnings call next.

Thank you, everybody.

We have lunch, which you can grab and box and take with you or some of us will be able to sit in the room. And if you didn't get your question answered then, perhaps we can deal with it there.