Leidos Holdings (LDOS) 10-K risk factor changes: FY2024 vs FY2023

[removed: *In] [added: In] your evaluation of our company and business, you should carefully consider the risks and uncertainties described below, together with information disclosed elsewhere in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and [removed: "Management's] [added: “Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations"] [added: Operations”] in Part II of this Annual Report, and other documents we file with the SEC.

In that event, the trading price of our stock could decline, and you could lose part or all of your [removed: investment*.][added: investment.]

[removed: - We] [added: uWe] depend on government agencies as our primary customers and if our reputation or relationships with these agencies were harmed, our future revenues and growth prospects could be adversely affected.

[removed: - A] [added: uA] decline in the U.S. government budget, changes in spending or budgetary priorities or delays in contract awards may significantly and adversely affect our future revenues and limit our growth prospects.

[removed: - Because] [added: uBecause] we depend on U.S. government contracts, a delay in the completion of the U.S. government’s budget and appropriations process could delay procurement of the products, services and solutions we provide and adversely affect our future revenues.

[removed: - Due] [added: uDue] to the competitive process to obtain contracts and the likelihood of bid protests, we may be unable to achieve or sustain revenue growth and profitability.

[removed: - The] [added: uThe] U.S. government may terminate, cancel, modify, renew on less favorable terms or curtail our contracts at any time prior to their completion and, if we do not replace them, this may adversely affect our future revenues and profitability.

[removed: - We] [added: uWe] face intense competition that can impact our ability to obtain contracts and therefore affect our future revenues and growth prospects.

[removed: - Deterioration] [added: uDeterioration] of economic conditions or weakening in credit or capital markets may have a material adverse effect on our business, results of operations and financial condition.

[removed: - We] [added: uWe] cannot predict the consequences of current or future geopolitical events, but they may adversely affect the markets in which we operate and our results of operations.

[removed: - Global] [added: uGlobal] supply chain issues and inflationary pressures have disrupted supply and increased the prices of goods and services, which could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and reduce customer buying power.

[removed: - Our] [added: uOur] failure to comply with various complex procurement rules and regulations could result in our being liable for penalties, including termination of our U.S. government contracts, disqualification from bidding on future U.S. government contracts and suspension or debarment from U.S. government contracting.

[removed: - The] [added: uThe] U.S. government may adopt new contract rules and regulations or revise its procurement practices in a manner adverse to us at any time.

[added: | 14 | | |] Leidos Holdings, Inc. Annual Report [removed: - 16][added: | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: *•*Efforts by] [added: uApplication of] the U.S. [removed: government to revise its] [added: government's] organizational conflict of interest [added: (OCI)] rules could limit our ability to successfully compete for new contracts or task orders, which would adversely affect our results of operations.

[removed: - As] [added: uAs] a U.S. government contractor, our partners and we are subject to reviews, audits and cost adjustments by the U.S. government, which could adversely affect our profitability, cash position or growth prospects if resolved unfavorably to us.

[removed: - Our] [added: uOur] business is subject to governmental review and investigation, which could adversely affect our financial position, operating results and growth prospects.

[removed: - Investigations,] [added: uInvestigations,] audits, claims, disputes, enforcement actions, litigation, arbitration or other legal proceedings could require us to pay potentially large damage awards or penalties and could be costly to defend, which would adversely affect our cash balances and profitability, and could damage our reputation.

[removed: - Our] [added: uOur] business and operations expose us to numerous legal and regulatory requirements, and any violation of these requirements could harm our business.

[removed: - Our] [added: Our] business is subject to complex and evolving laws and regulations regarding data privacy and [removed: security] [added: security,] which could subject us to investigations, [removed: claims] [added: claims,] or monetary penalties against us, require us to change our business [removed: practices] [added: practices,] or otherwise adversely affect our revenues and [removed: profitability.][added: profitability.]

[removed: - We] [added: uWe] utilize artificial intelligence, which could expose us to liability or adversely affect our business, especially if we are unable to compete effectively with others in adopting artificial intelligence.

[removed: - Misconduct] [added: Misconduct] of employees, subcontractors, agents, suppliers, business partners or joint ventures and others working on our behalf could cause us to lose existing contracts or customers and adversely affect our ability to obtain new contracts and [removed: customers and] could have a material adverse impact on our business, reputation and future [removed: results.][added: results.]

[removed: - A] [added: uA] failure to attract, [removed: train, retain] [added: retain,] and [removed: motivate skilled employees,] [added: develop talent with critical skills,] including our [removed: management] [added: leadership] team, would adversely affect our ability to execute our strategy and may disrupt our operations.

[removed: - We] [added: uWe] may not realize the full amounts reflected in our backlog as revenues, which could adversely affect our expected future revenues and growth prospects.

[removed: - Our] [added: uOur] earnings and profitability may vary based on the mix of our contracts and may be adversely affected by our failure to estimate and manage costs, time and resources accurately.

[removed: - We] [added: uWe] use estimates in recognizing revenues, and if we make changes to estimates used in recognizing revenues, our profitability may be adversely affected.

[removed: - Cybersecurity] [added: uCybersecurity] breaches and other information security incidents could negatively impact our business and financial results, impair our ability to effectively provide our services to our customers and cause harm to our reputation or competitive position.

[removed: - Internal] [added: uInternal] system or service failures, or failures in the systems or services of third parties on which we rely, could disrupt our business and impair our ability to effectively provide our services and products to our customers, which could damage our reputation and adversely affect our revenues and profitability.

[removed: - Customer] [added: uCustomer] systems failures could damage our reputation and adversely affect our revenues and profitability.

[removed: - Our] [added: uOur] success depends, in part, on our ability to work with complex and rapidly changing technologies to meet the needs of our customers.

[removed: - We] [added: uWe] have classified contracts with the U.S. government, which may limit investor insight into portions of our business.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 17][added: Report | | | 15 | | |]

[removed: - We] [added: uWe] have made and continue to make acquisitions, investments, joint ventures and divestitures that involve numerous risks and uncertainties.

[removed: - Goodwill and other intangible assets represent] [added: Goodwill represents a] significant [removed: assets] [added: asset] on our balance sheet and any impairment of [removed: these assets] [added: this asset] could negatively impact our results of operations, and [removed: shareholders' equity.][added: shareholders’ equity.]

[removed: - We] [added: uWe] depend on our teaming arrangements and relationships with other contractors and subcontractors.

[removed: - We] [added: uWe] could incur significant liabilities and suffer negative publicity if our inspection or detection systems fail to detect bombs, explosives, weapons, contraband or other threats.

[removed: - We] [added: uWe] face risks associated with our international business.

[removed: - Changes] [added: uChanges] in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.

[added: | 16 | | |] Leidos Holdings, Inc. Annual Report [removed: - 18][added: | | |]

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The U.S. government has adopted rules and practices that are designed to avoid or mitigate organizational conflicts of interest ("OCIs").

U.S. federal contacting rules require that government contracting officers identify, analyze and address potential OCIs for each acquisition they conduct.

The rules specify a number of methods contracting officers may use to address OCIs, and each contracting officer has significant discretion in deciding whether an OCI exists, and if so, how it should be addressed.

As a result, it may be difficult for us to predict whether a given contracting opportunity will be found to pose an actual or potential OCI, whether such an OCI will be determined to be disqualifying, and if not disqualifying what steps we would be required to take in order to be found eligible to compete for and perform the work.

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Legal Proceedings” along with “Note 21—Commitments and Contingencies” of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K.

We are in the process of evaluating our readiness against these new requirements and while we have confidence we will meet or

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Misconduct encompasses a wide range of improper activities that could pose risks to our business.

This includes fraud, falsifying time records or other documentation, and violations of laws such as the Anti-Kickback Act.

PART I

Organizational conflicts of interest arise when we engage in activities that may make us unable to render impartial assistance or advice to the U.S. government, impair our objectivity in performing contract work, or provide us with an unfair competitive advantage.

A conflict-of-interest issue that precludes our competition for or performance on a significant program or contract could harm our prospects.

However, to the extent insufficient funds have been appropriated by the U.S. Government to the program to cover our costs upon termination for convenience, the U.S. Government may assert that it is not required to appropriate additional funding.

Efforts by the U.S. government to reform its procurement practices have focused on, among other areas, the separation of certain types of work to facilitate objectivity and avoid or mitigate organizational conflicts of interest and the strengthening of regulations governing organizational conflicts of interest.

A focus on organizational conflicts of interest issues has resulted in legislation and a proposed regulation aimed at increasing organizational conflicts of interest requirements, including, among other things, separating sellers of products and providers of advisory services in major defense acquisition programs.

The passage of a new federal law in December 2022 requires the FAR council within eighteen months to provide and update definitions of each of the above types of conflicts of interest and provide illustrative examples of various relationships that contractors could have that would give rise to potential conflicts of interest.

The passage of this legislation comes as this topic continues to garner increased scrutiny of such alleged conflicts among federal contractors.

The resulting rule-making process, as well as continuing reform initiatives in procurement practices, may, however, result in future amendments to the FAR, increasing the restrictions in current organizational conflicts of interest regulations and rules.

For example, the spread of COVID-19 and mitigating measures caused unprecedented disruptions to the global economy and normal business operations across sectors and countries, including the sectors in which we, our customers and other third parties operate.

Further, new contract awards have been and may continue to be delayed and our ability to perform on our existing contracts has been and may continue to be delayed or impaired, which will negatively impact our revenues.

In addition, our program costs have increased as a result of COVID-19, and these cost increases may not be fully recoverable or adequately covered by insurance or equitable adjustments to contract prices.

Misconduct could include fraud or other improper activities such as falsifying time or other records and violations of laws, such as the Anti-Kickback Act, and the failure to comply with our policies and procedures or with federal, state, or local government procurement regulations, regulations regarding the use and safeguarding of classified or other protected information, legislation regarding the pricing of labor and other costs in government contracts, laws and regulations relating to environmental, health or safety matters, bribery of foreign government officials, import-export control, lobbying or similar activities and any other applicable laws or regulations.

Any data loss or information security lapses resulting in the compromise of personal information or the improper use or disclosure of sensitive or classified information could result in claims, remediation costs, regulatory investigations or sanctions against us, corruption or disruption of our systems or those of our customers, impairment of our ability to provide services to our customers, loss of current and future contracts, indemnity obligations, serious harm to our reputation and other potential liabilities.

In the ordinary course of our business, we form and are members of joint ventures (meaning joint efforts or business arrangements of any type).

Our failure to comply with applicable laws or regulations could damage our reputation and subject us to administrative, civil, or criminal investigations and enforcement actions, fines and penalties, restitution or other damages, loss of security clearance, loss of current and future customer contracts, loss of privileges and other sanctions, including suspension or debarment from contracting with federal, state or local government agencies, any of which would adversely affect our business, reputation and our future results.

In addition, certain personnel may be required to receive various security clearances to work on certain customer engagements or to perform certain tasks.

Necessary security clearances may be delayed or not obtained, which may negatively impact our ability to perform on such engagements in a timely matter or at all.

We maintain insurance coverage with third-party insurers as part of our overall risk management strategy and because some of our contracts require us to maintain specific insurance coverage limits.

- the ongoing Israel/Hamas conflict and its regional effects.

Leidos Holdings, Inc. Annual Report - 39

Leidos Holdings, Inc. Annual Report - 40

For example, beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years, which likely will materially decrease our cash from operations unless Congress defers, modifies or repeals this provision with retroactive effect.

Leidos Holdings, Inc. Annual Report - 41

Leidos Holdings, Inc. Annual Report - 42

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties, including those described under the heading “Forward-Looking [removed: Statements.” You] [added: Statements.*” *You] should also review the disclosure under Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.*

[removed: We] [added: Headquartered in Reston, Virginia, with 48,000, global employees, we] bring domain-specific [removed: capabilities] [added: capabilities, technologies] and [removed: innovations] [added: insights] to customers in each of these markets by leveraging [removed: five] [added: seven] technical core capabilities: [removed: digital modernization,] [added: trusted mission artificial intelligence,] cyber operations, [added: digital modernization,] mission software systems, integrated [removed: systems and] [added: systems,] mission [removed: operations.][added: operations, and rapid prototyping and manufacturing.]

Approximately [removed: 9%] [added: 8%] of our revenues are generated by entities located outside of the United States.

[removed: Additionally, we] [added: We also] separately present the [removed: unallocable] [added: unallocated] costs associated with corporate functions as Corporate.

[removed: - achieving] [added: uachieving] annual revenue growth through internal collaboration and better leveraging of key differentiators across our company and the deployment of resources and investments into profitable growth markets;

[removed: - continued] [added: ucontinued] improvement in our back-office infrastructure and related business processes for greater effectiveness and efficiency across all business functions; and

[removed: - disciplined] [added: udisciplined] deployment of our cash resources and use of our capital structure to enhance shareholder value while retaining an appropriate amount of financial leverage.

[removed: *Sales Trend.*] For fiscal 2023, revenues increased $1.0 billion, or 7%, compared to fiscal 2022, primarily due to program wins, a net increase in volumes on certain programs and a net increase in revenues attributable to our business acquisitions.

[added: | 46 | | |] Leidos Holdings, Inc. Annual Report [removed: - 52][added: | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: *Operating Expenses and Income Trend.*] For fiscal 2023, operating expenses increased by $1.5 billion, or 11%, compared to fiscal 2022.

The decrease was primarily attributable to [removed: a net increase in] impairment [added: and restructuring] charges of [removed: $647] [added: $689] million [removed: mainly in our] [added: at the] SES reporting unit [added: in fiscal 2023] (see [removed: "Note] [added: “Note] 8—Goodwill and Intangible [removed: Assets"] [added: Assets”] of the notes to the consolidated financial statements contained within this Annual Report on Form 10-K).

[removed: *U.S. Government Markets*][added: U.S. GOVERNMENT MARKETS]

We generated approximately 87% of our total revenues from contracts with the U.S. government in fiscal [removed: 2023,] [added: 2024 and 2023] as compared to 86% of our total revenues from contracts with the U.S. government in fiscal 2022, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.

Revenues under contracts with the DoD and U.S. Intelligence Community, including subcontracts under which the DoD or the U.S. Intelligence Community is the ultimate purchaser, represented approximately [added: 48%,] 49% and 44% of our total revenues for fiscal [added: 2024,] 2023 and 2022, respectively.

The [removed: CR] [added: continuing resolution] gives lawmakers [removed: extra] [added: additional] time to consider the [added: 12] appropriations bills for government fiscal year [removed: (“GFY”) 2024.][added: 2025.]

Failure to pass the appropriations bills or another [removed: CR] [added: continuing resolution] by March [removed: 1 and March 8, 2024,] [added: 14, 2025,] will result in a partial or complete federal government shutdown.

[removed: *International Markets*][added: INTERNATIONAL MARKETS]

Sales to customers in international markets represented approximately [removed: 9%] [added: 8%] of total revenues for fiscal [removed: 2023,] [added: 2024,] as compared to [added: 9% and] 8% of total revenues for fiscal [removed: 2022.][added: 2023 and 2022, respectively.]

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 53][added: Report | | | 47 | | |]

| | | | [added: Year Ended] | | | [removed: Year Ended] | | | | | | | | | | | | [removed: 2023] [added: | | | 2024] to [removed: 2022] [added: 2023] | | | | | | [added: 2023 to 2022] | | |

| [added: (dollars in millions)] | | | [added: January 3, 2025] | | | [removed: December] [added: | | | December] 29, [removed: 2023] [added: 2023] | | | | | | December 30, 2022 | | | | | | [removed: Dollar] [added: Percent] change | | | | | | Percent change | | |

| Revenues | | | [added: $] | [added: 16,662] | | [removed: $] | [removed: 15,438] | | [added: $] | [added: 15,438] | | [added: | | |] $ | 14,396 | | | | | [removed: $] [added: 8] | [removed: 1,042] | [added: %] | | | | 7 | | % |

| Cost of revenues | | | [added: 13,864] | | | [removed: 13,194] | | | [added: 13,194] | | | [added: | | |] 12,312 | | | | | | [removed: 882] [added: 5] | | [added: %] | | | | 7 | | % |

| Selling, general and administrative expenses | | | [added: 983] | | | [removed: 942] | | | [added: 942] | | | [added: | | |] 951 | | | | | | [removed: (9)] [added: 4] | | [added: %] | | | | (1) | | % |

| Acquisition, integration and restructuring costs | | | [added: 16] | | | [removed: 24] | | | [added: 24] | | | [added: | | |] 17 | | | | | | [removed: 7] [added: (33)] | | [added: %] | | | | 41 | | % |

| Goodwill impairment charges | | | [added: —] | | | [removed: 596] | | | [added: 596] | | | [added: | | |] — | | | | | | [removed: 596] [added: *NM*] | | | | | | *NM* | | |

| Asset impairment charges | | | [added: 11] | | | [removed: 91] | | | [added: 91] | | | [added: | | |] 40 | | | | | | [removed: 51] [added: (88)] | | [added: %] | | | | 128 | | % |

| Equity earnings of non-consolidated subsidiaries | | | [added: (39)] | | | [removed: (30)] | | | [added: (30)] | | | [added: | | |] (12) | | | | | | [removed: (18)] [added: (30)] | | [added: %] | | | | [removed: 150] [added: (150)] | | % |

| Operating income | | | [added: 1,827] | | | [removed: 621] | | | [added: 621] | | | [added: | | |] 1,088 | | | | | | [removed: (467)] [added: 194] | | [added: %] | | | | (43) | | % |

| Non-operating expense, net | | | [added: (188)] | | | [removed: (218)] | | | [added: (218)] | | | [added: | | |] (202) | | | | | | [removed: (16)] [added: (14)] | | [added: %] | | | | [removed: 8] [added: (8)] | | % |

| Income before income taxes | | | [added: 1,639] | | | [removed: 403] | | | [added: 403] | | | [added: | | |] 886 | | | | | | [removed: (483)] [added: *NM*] | | | | | | (55) | | % |

| Income tax expense | | | [added: (388)] | | | [removed: (195)] | | | [added: (195)] | | | [added: | | |] (193) | | | | | | [removed: (2)] [added: 99] | | [added: %] | | | | 1 | | % |

| Net income | | | [added: 1,251] | | | [removed: 208] | | | [added: 208] | | | [added: | | |] 693 | | | | | | [removed: (485)] [added: *NM*] | | | | | | (70) | | % |

| Less: net [added: (loss)] income attributable to non-controlling interest | | | [added: (3)] | | | [removed: 9] | | | [added: 9] | | | [added: | | |] 8 | | | | | | [removed: 1] [added: (133)] | | [added: %] | | | | 13 | | % |

| Net income attributable to Leidos common stockholders | | | [added: $] | [added: 1,254] | | [removed: $] | [removed: 199] | | [added: $] | [added: 199] | | [added: | | |] $ | 685 | | | | | [removed: $] [added: *NM*] | [removed: (486)] | | | | | (71) | | % |

| *Operating margin* | | | [added: 11.0] | | [added: %] | [removed: 4.0] | | [removed: %] | [added: *4.0*] | | [added: *%*] | [added: | | |] *7.6* | | *%* | | | | | | | | | | | | |

[removed: *Segment and Corporate Results*][added: SEGMENT AND CORPORATE RESULTS]

| Defense [removed: Solutions] [added: Systems (dollars in millions)] | | | [added: January 3, 2025] | | | [removed: December] [added: | | | December] 29, [removed: 2023] [added: 2023] | | | | | | December 30, 2022 | | | | | | [removed: Dollar] [added: Percent] change | | | | | | [added: | | | | | |] Percent change | | |

| Operating income | | | [added: 94] | | | [removed: 636] | | | [added: 65] | | | [removed: 541] | | | [added: 11] | | | [removed: 95] | | | [added: 45] | | [added: %] | [removed: 18] | | [added: | | | | | | | 491 | |] % |

Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations.

Beginning in fiscal 2024, we realigned our business and operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers.

As a result of this change, prior year segment results and disclosures have been recast to reflect the current reportable segment structure.

We now operate in the following reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems.

*Sales Trend*.

For fiscal 2024, revenues increased $1.2 billion, or 8%, compared to fiscal 2023, the increase was primarily due to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.

*Operating Expenses and Income Trend*.

For fiscal 2024, operating expenses increased by $27 million, or less than 1%, compared to fiscal 2023.

Operating margin for fiscal 2024 was 11% compared to 4% for fiscal 2023.

Operating income was $1,827 million, a $1,206 million increase compared to fiscal 2023.

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On December 21, 2024, the U.S. federal government avoided a shutdown by passing into law a continuing resolution that provides government funding through March 14, 2025.

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| | | | Year Ended | | | | | | | | | | | | | | | | | | 2024 to 2023 | | | | | | 2023 to 2022 | | |

| National Security & Digital (dollars in millions) | | | January 3, 2025 | | | | | | December 29, 2023 | | | | | | December 30, 2022 | | | | | | Percent change | | | | | | Percent change | | |

| Revenues | | | $ | 7,365 | | | | | $ | 7,196 | | | | | $ | 6,745 | | | | | 2 | | % | | | | 7 | | % |

| Operating income | | | 720 | | | | | | 672 | | | | | | 606 | | | | | | 7 | | % | | | | 11 | | % |

| *Operating margin* | | | 9.8 | | % | | | | *9.3* | | *%* | | | | *9.0* | | *%* | | | | | | | | | | | | |

The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes on certain programs, program wins and net write-ups, partially offset by the completion of certain contracts.

The increase in revenues for fiscal 2023 as compared to fiscal 2022, was primarily attributable to a net increase in volumes on certain programs and net write-ups, partially offset by the completion of certain contracts.

The increase in operating income for fiscal 2023 as compared to fiscal 2022, was primarily attributable to net write-ups on certain programs.

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| | | | Year Ended | | | | | | | | | | | | | | | | | | 2024 to 2023 | | | | | | 2023 to 2022 | | |

| Revenues | | | $ | 5,015 | | | | | $ | 4,238 | | | | | $ | 3,945 | | | | | 18 | | % | | | | 7 | | % |

| Operating income | | | 1,095 | | | | | | 574 | | | | | | 448 | | | | | | 91 | | % | | | | 28 | | % |

| *Operating margin* | | | 21.8 | | % | | | | *13.5* | | *%* | | | | *11.4* | | *%* | | | | | | | | | | | | |

The increase in revenues for fiscal 2024 as compared to fiscal 2023, was primarily attributable to a net increase in volumes and case complexity within the managed health services business, an increase in net write-ups on certain programs and program wins.

The increase in operating income for fiscal 2024 as compared to fiscal 2023, was primarily attributable to an increase in volumes and case complexity within the managed health services business.

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

*In this section, we discuss our financial condition, changes in financial condition and results of our operations for the year ended December 29, 2023, compared to the year ended December 30, 2022.

For a discussion and analysis comparing our results for the year ended December 30, 2022, to the year ended December 31, 2021, see our Annual Report on Form 10-K for the year ended December 30, 2022, filed with the SEC on February 14, 2023, under Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”*

Leidos, recognized as a member of the Fortune 500®, is a dynamic innovation company that is at the forefront of addressing the world’s most challenging issues in national security and health sectors.

With a global workforce of approximately 47,000, Leidos is committed to developing smarter technology solutions, particularly for customers in highly regulated industries.

Our business has been aligned in three reportable segments: Defense Solutions, Civil and Health.

On January 18, 2024, Congress passed a third continuing resolution (“CR”) to avoid a federal government shutdown.

The resolution is structured in two tiers with the first deadline being March 1, 2024, for Military Construction-VA, Agriculture, Energy-Water, and Transportation-HUD funding bills.

The eight remaining bills have a March 8, 2024, deadline.

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| | | | | | | (dollars in millions) | | | | | | | | | | | | | | | | | | | | |

| Revenues | | | | | | $ | 8,732 | | | | | $ | 8,244 | | | | | $ | 488 | | | | | 6 | | % |

| *Operating margin* | | | | | | 7.3 | | % | | | | *6.6* | | *%* | | | | | | | | | | | | |

| Revenues | | | | | | $ | 3,664 | | | | | $ | 3,464 | | | | | $ | 200 | | | | | 6 | | % |

| Operating (loss) income | | | | | | (413) | | | | | | 234 | | | | | | (647) | | | | | | (276) | | % |

| *Operating margin* | | | | | | (11.3) | | % | | | | *6.8* | | *%* | | | | | | | | | | | | |

The decrease was partially offset by $19 million in legal reserves and fees resulting from an adverse arbitration ruling in the prior year.

| Revenues | | | | | | $ | 3,042 | | | | | $ | 2,688 | | | | | $ | 354 | | | | | 13 | | % |

| Operating income | | | | | | 528 | | | | | | 421 | | | | | | 107 | | | | | | 25 | | % |

| *Operating margin* | | | | | | 17.4 | | % | | | | *15.7* | | *%* | | | | | | | | | | | | |

| Corporate | | | | | | December 29, 2023 | | | | | | December 30, 2022 | | | | | | Dollar change | | | | | | Percent change | | |

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 ("TCJA") eliminated the option to currently deduct certain research and development costs for tax purposes and requires taxpayers to capitalize and amortize research costs over five years.

The actual impact will depend on the amount of research and development costs the Company will incur, whether Congress modifies or repeals this provision and whether new guidance and interpretive rules are issued by the U.S. Treasury, among other factors.

We are evaluating the potential impact of the rules but currently do not expect them to have a material impact.

| | | | | | | (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Defense Solutions | | | | | | $ | 4,541 | | | | | $ | 14,783 | | | | | $ | 19,324 | | | | | $ | 4,442 | | | | | $ | 14,155 | | | | | $ | 18,597 | |

| Civil | | | | | | 2,182 | | | | | | 9,475 | | | | | | 11,657 | | | | | | 1,876 | | | | | | 8,790 | | | | | | 10,666 | | |

| Health | | | | | | 2,073 | | | | | | 3,908 | | | | | | 5,981 | | | | | | 2,064 | | | | | | 4,455 | | | | | | 6,519 | | |

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This new credit facility replaced the previous senior unsecured revolving credit facility.

On May 26, 2023, we increased the size of the commercial paper program by $250 million, or not to exceed $1.0 billion.

Beginning in 2022, a provision in the TCJA which eliminated the option to currently deduct research and development costs for tax purposes, requiring taxpayers to capitalize and amortize the costs over five years became effective.

Our tax cash payments increased by approximately $260 million in fiscal 2023, primarily

to cover both the fiscal 2022 and 2023 tax obligations related to this provision and we anticipate an increase of approximately $60 million in the fiscal year ending January 3, 2025, ("fiscal 2024").

The actual impact will depend on the amount of research and development costs the Company incurs, whether Congress modifies or repeals this provision and whether new guidance and interpretive rules are issued by the U.S. Treasury, among other factors.

| | | | | | | (in millions) | | | | | | | | | | | | | | |

the issuance of debt in the current year, partially offset by an increase of $1.5 billion in payments of debt.

| | | | | | | December 29, 2023 | | |

| | | | | | | (in millions) | | |

[removed: *Debt and derivatives*][added: DEBT AND DERIVATIVES]

At [added: January 3, 2025, and] December 29, 2023, [removed: and December 30, 2022,] we had $4.7 billion [removed: and $4.9 billion, respectively,] of debt, which included $1.0 billion [removed: and $1.5 billion, respectively,] related to our senior unsecured term loans that have a variable stated interest rate that is determined based on the Secured Overnight Financing Rate [removed: ("SOFR")] [added: (“SOFR”)] plus a margin.

[removed: During fiscal 2023, we modified our] [added: Under the terms of the] interest rate swap [removed: agreements to] [added: agreements, we] receive monthly variable interest payments based on the one-month SOFR [removed: rate,] [added: rate] and [removed: we will continue to] pay interest at a fixed rate.

As of [removed: December 29, 2023,] [added: January 3, 2025,] the notional value of the interest rate swap agreements was $500 million.

The fair value of our interest rate swap agreements with respect to our Variable Rate Loan was an asset of [removed: $11] [added: $4] million and [removed: $20] [added: $11] million as of [added: January 3, 2025, and] December 29, 2023, [removed: and December 30, 2022,] respectively.

[removed: *Cash and Cash Equivalents*][added: CASH AND CASH EQUIVALENTS]

As of [added: January 3, 2025, and] December 29, 2023, [removed: and December 30, 2022,] our cash and cash equivalents included investments in several large institutional money market accounts.

For fiscal [removed: 2023] [added: 2024] and fiscal [removed: 2022,] [added: 2023,] a hypothetical 10% interest rate movement would not have a significant impact on the value of our holdings or on interest income.

Our foreign operations represented [added: 8%,] 9% [added: and 8%] of total revenues for fiscal [added: 2024,] 2023 and [removed: 8% for both fiscal 2022 and 2021.][added: 2022, respectively.]

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 63][added: Report | | | 57 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

| | | | | | |

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We applied the guidance of Accounting Standards Codification 848 which permits the continuation of hedge accounting for such modification.

Since our founding [removed: 55] [added: 56] years ago, we have applied our expertise in science, research and engineering in rapidly-evolving technologies and markets to solve complex problems of global concern.

[removed: We] [added: Headquartered in Reston, Virginia, with 48,000, global employees, we] bring domain-specific [removed: capabilities] [added: capabilities, technologies] and [removed: innovations] [added: insights] to customers in each of these markets by leveraging [removed: five] [added: seven] technical core capabilities: [removed: digital modernization,] [added: trusted mission artificial intelligence,] cyber operations, [added: digital modernization,] mission software systems, integrated [removed: systems and] [added: systems,] mission [removed: operations.][added: operations, and rapid prototyping and manufacturing.]

With a focus on delivering mission-critical solutions, Leidos generated 87% of revenues for the fiscal year ended [removed: December 29, 2023, ("fiscal 2023")] [added: January 3, 2025, (“fiscal 2024”)] from U.S. government contracts, either as a prime contractor or a subcontractor to other contractors engaged in work for the U.S. government.

[removed: Additionally, we] [added: We also] separately present the [removed: unallocable] [added: unallocated] costs associated with corporate functions as Corporate.

Approximately [removed: 9%] [added: 8%] of our revenues are generated by entities located outside of the United States.

[removed: Defense Solutions] [added: National Security & Digital] represented [removed: 56%] [added: 44%] of total revenues for fiscal [removed: 2023, 57%] [added: 2024, 47%] of total revenues for [added: both] the fiscal year ended December [removed: 30, 2022 ("fiscal 2022")] [added: 29, 2023 (“fiscal 2023”)] and [removed: 58% of total revenues for] the fiscal year ended December [removed: 31, 2021 ("fiscal 2021").][added: 30, 2022 (“fiscal 2022”).]

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 3][added: Report | | | 3 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: - *Digital] [added: uDigital] Modernization [removed: –* As an industry leader in cyber and enterprise IT, we] [added: – We] provide [removed: extensive] worldwide digital support for our [removed: nation's] [added: nation’s] largest and most critical infrastructure.

We apply an open architecture approach to digitally connect the joint force across air, land, sea, cyber and space domains in support of the DoD’s [removed: JADC2 imperative and support] [added: multi-domain operations] through innovative solutions, essential services and enriched data management tools facilitating critical decision making.

[removed: - *Maritime Solutions* *–*] [added: uMaritime Systems –] On and under the sea, we offer a wide range of capabilities.

We continue to enhance our surface and subsurface autonomous and unmanned technologies to help make maritime operations safer and more efficient for government and industry by providing [added: innovative platforms, software solutions for vessel control and autonomous behaviors,] leading sensor systems, signal processing, communications hardware and software to support these vital missions.

We are a market leader in submarine [added: data] collection technologies and anti-submarine warfare system installation and maintenance and are expanding our capabilities in these areas to meet market demand for this growing threat.

Our [removed: Marine Engineering] [added: marine engineering] involves a wide range of activities, beginning with concept and feasibility design and continues through [added: land-based test sites, cyber and shock hardening of key components,] detailed design, construction support, life-cycle support and into ship-alt design for service-life extensions.

[added: | 4 | | |] Leidos Holdings, Inc. Annual Report [removed: - 4][added: | | |]

In addition, we deliver tailored IT services and solutions to our [removed: customers across the globe.][added: customers.]

We offer product support and lifecycle sustainment services to our [removed: U.S. Army, Navy and Air Force] customers, including planning and managing the cost and performance across the product’s lifecycle.

[added: uCyber and Threat Systems -] We offer reverse engineering, classified manufacturing and design, and threat exploitation services to a wide breadth of U.S. Intelligence Community customers.

[removed: We also support autonomous systems in] [added: In] the [removed: areas] [added: realm] of [removed: unmanned aerial] [added: autonomous] systems, [removed: surface ships, undersea vehicles and ground vehicles as well as autonomy] [added: we develop innovative] software and hardware [added: solutions] for [removed: autonomous vehicles] [added: unmanned aerial systems] and [added: autonomous] platforms.

[added: uAerospace Systems –] We provide expertise in the design, manufacturing, and integration of [removed: satellite propulsion, structures, and] space-based [removed: EO/IR,] [added: electro-optic infrared system,] multi/hyperspectral, [removed: EW/SIGINT] [added: electronic warfare] and [added: signals intelligence, and] communications payloads.

[removed: Civil][added: HEALTH & CIVIL]

[removed: By applying leading science, innovative technologies and business acumen, our talented employees] [added: We] help customers achieve their missions and take on the connected world with data-driven insights, improved efficiencies and technological [removed: advantages in the areas of digital modernization, energy infrastructure, integrated missions, transportation applications and security detection.][added: advantages.]

[added: Health &] Civil represented [removed: 24%] [added: 30%] of total revenues for [removed: both] fiscal [removed: 2023 and 2022,] [added: 2024] and [removed: 23%] [added: 27%] of total revenues for [added: both] fiscal [removed: 2021.][added: 2023 and fiscal 2022.]

[removed: - *Transportation] [added: uTransportation] Solutions [removed: –*] [added: –] Leidos is a trusted systems developer, service provider and integrator serving Air Navigation Service Providers around the world, including the FAA.

Leidos received [removed: 10+] [added: 10 plus] year extensions to the ERAM and ATOP contracts for continued delivery of the evolving National Airspace System needs.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 5][added: Report | | | 5 | | |]

[removed: - *Security Enterprise Solutions ("SES") –*] [added: uGlobal Security Products and Services –] Leidos is [removed: an industry] [added: a global] leader [removed: of fully-integrated] [added: in fully integrated] security detection solutions, [removed: making security] [added: enhancing the safety of] screening and checkpoints [removed: safer] for aviation, [removed: ports and] [added: ports,] borders, and critical infrastructure [removed: customers around the world.][added: worldwide.]

Leidos is [added: also] the [removed: leading] [added: primary] supplier of [removed: mobile] [added: mobile,] non-intrusive inspection systems to [removed: U.S. Customs] [added: CBP] and [removed: Border Protection ("CBP").][added: other international customers.]

[removed: - *Digital Transformation*] [added: uDigital Transformation] – We deliver secure, user-centric IT solutions in cloud computing, mobility, application modernization, DevOps, data center and network modernization, asset management, help desk operations and digital workplace enablement.

Leidos is modernizing enterprise IT in classified and unclassified environments, including programs with the FAA, NASA, [added: U.S.] Department of Justice, [removed: IRS,] [added: Internal Revenue Service,] U.S. MINT, [added: U.S.] Department of Commerce, [removed: FTC,] [added: U.S. Federal Trade Commission,] and [removed: HUD.][added: U.S. Department of Housing and Urban Development.]

[removed: - *Climate,] [added: uClimate,] Energy and [removed: Environment*] [added: Environment] – We [added: believe that we] are trusted by government agencies [removed: and commercial customers] with substantial environmental and sustainability driven-missions.

[removed: Our] [added: We strive to ensure that our] reputation across climate science, environmental management and operations, nuclear security, [removed: power grid engineering, energy efficiency,] infrastructure management, mission support and IT modernization provides the applicable expertise needed to transform operations while modernizing aging infrastructure and maintaining environmental stewardship.

We support the critical missions of the Department of Energy [removed: ("DoE"),] [added: (“DoE”),] National Nuclear Security Administration, [added: and] National Science [removed: Foundation, utilities, energy investors and developers, energy efficiency administrators and commercial industrial customers.][added: Foundation.]

[removed: In addition, we help investor-owned] [added: We support] utilities and industrial customers [removed: modernize] [added: in modernizing] power delivery systems for [removed: improved] [added: enhanced] reliability, [removed: implement] [added: implementing] energy management strategies, [removed: support] [added: advancing] vehicle electrification, [removed: transform] [added: transforming] digital [removed: infrastructure] [added: infrastructure,] and [removed: gain] [added: optimizing] operational [removed: efficiencies] [added: efficiency] to meet evolving energy [removed: needs] [added: demands] and [removed: climate change goals.][added: market expectations.]

[removed: Our Health business has been focused on] [added: We are dedicated to] delivering effective and affordable solutions [removed: to federal and commercial customers] that are responsible for the health and well-being of [removed: people worldwide,] [added: people,] including service members and veterans.

[removed: The] [added: Our core] capabilities [removed: we provide predominantly fall in four major areas of activity:] [added: include] health information management services, managed health services, [removed: digital modernization] [added: systems] and [added: infrastructure modernization, and] life sciences research and development.

[removed: Health] [added: Commercial & International] represented [removed: 20%] [added: 14%] of total revenues for [added: both] fiscal [added: 2024 and] 2023, and [removed: 19%] [added: 13%] of total revenues for [removed: both] fiscal [removed: 2022 and 2021.][added: 2022.]

[added: | 6 | | |] Leidos Holdings, Inc. Annual Report [removed: - 6][added: | | |]

[removed: - *Health Information Management Services*] [added: u*Health Mission Software*] – Leidos employs holistic-systems [removed: thinking in] [added: used for] fielding applied technology solutions across the entire continuum of healthcare.

[removed: In our work delivering a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide, our] [added: Our] responsibilities range from integrating software for the electronic healthcare record vendor and dental record vendors to integrating picture archiving and communications software and more.

Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations.

Beginning in fiscal 2024, we realigned our business and operate in four reportable segments that are focused on specific, defined capability sets we bring to our customers.

As a result of this change, prior year segment results and disclosures have been recast to reflect the current reportable segment structure.

We now operate in the following reportable segments: National Security & Digital, Health & Civil, Commercial & International and Defense Systems.

NATIONAL SECURITY & DIGITAL

Our National Security & Digital business provides leading-edge and technologically advanced services, solutions and products, as well as mission software capabilities for defense and intelligence customers in the areas of cyber, logistics, security operations and decision analytics.

We also deliver IT operations and digital transformation programs across all U.S. federal government customers.

Our advanced capabilities include the delivery of technology-enabled services, mission software capabilities and IT modernization services.

Our capabilities allow us to provide innovative technology solutions in software development, engineering & design, modeling & simulation, analytics, cyber security, intelligence analysis, linguistics and mission operations.

uMission Software – We deliver trusted national security software for defense, intelligence, and homeland security customers.

Our mission software aims to provide the decision advantage for protecting the homeland, securing critical infrastructure, enabling logistics and conducting multi-domain operations.

The core of this capability offering is our Secure Development Operations approach that is designed to ensure our code is secure and assured from the start, enabling our mission partners to focus on execution.

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uMulti-Domain Solutions – We provide services by using artificial intelligence and machine learning to coordinate sea, ground, air and space rapidly and securely, helping our warfighters have the right information at the right time to take action with decision advantage.

uCyber Operations – We offer full-spectrum cyber solutions to include offensive, defensive, and physical cyber operations.

We drive new advances for our customers in the areas of Zero Trust, Cognitive Cyber, Quantum Cryptography, Identity, Credential and Access Management.

We deliver global-scale cryptographic management solutions to protect our customers’ most critical information and assets.

uIntelligence Analysis, Mission Support, and Global Logistics Services – We provide intelligence analysis, operational support, logistics operations, security, linguistics, force production, biometrics, Chemical, Biological, Radiological, Nuclear, and Explosives, energetics, and training.

We offer reverse engineering, classified manufacturing and design, and threat exploitation services to U.S. Intelligence Community customers.

We use predictive analytics and AI to securely deliver transformational logistics to our customers.

We provide a wide range of integrated logistics systems, including rapid procurement, inventory and facility management, and distribution systems.

Our Health & Civil business provides services and solutions to federal and commercial customers in the areas of public health, care coordination, life and environmental sciences and transportation.

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

We deliver a single, common electronic health record to both DoD and VA hospitals and treatment facilities worldwide.

COMMERCIAL & INTERNATIONAL

Commercial & International delivers a portfolio of products, services, and solutions aimed at securing national assets, modernizing energy and critical infrastructure, and enhancing mission outcomes.

Our key customers include Investor-Owned Utilities, government agencies in the United Kingdom and Australia, the Transportation Security Administration, U.S. Customs & Border Protection ("CBP"), as well as airports and ports and borders authorities.

We offer a broad range of capabilities, including design and engineering services, security products and solutions, digital modernization, mission software, logistics, and airborne solutions.

uEnergy Infrastructure – Leidos partners with utilities seeking reliable energy modernization solutions, demonstrated by our strong relationships and collaboration with over 75 investor-owned utilities.

Our project portfolio spans large-scale energy initiatives across the United States, serving electric utilities, generation owners, and industrial clients.

Our expertise spans power grid engineering and design, grid modernization, utility planning and consulting, energy management and efficiency, technical and financial consulting, and technology-driven innovation, including software and application development.

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

With over 30,000 products deployed across more than 120 countries, we lead the aviation screening equipment sector, including people scanners, computed tomography carry-on baggage scanners, checked baggage scanners, and explosive trace detectors.

Our Ports & Borders solutions secure the flow of travel and trade by effectively detecting and mitigating threats across cargo, vehicles, and individuals.

Our digital solution features a secure and scalable open-architecture platform that transforms airport security by integrating disparate devices and technologies into a unified management system.

Leidos, recognized as a member of the Fortune 500®, is a dynamic innovation company that is at the forefront of addressing the world’s most challenging issues in national security and health sectors.

With a global workforce of approximately 47,000, Leidos is committed to developing smarter technology solutions, particularly for customers in highly regulated industries.

At December 29, 2023, our business has been aligned into three reportable segments (Defense Solutions, Civil and Health).

Our operations and reportable segments are organized around the customers and markets we serve.

Defense Solutions

Defense Solutions has provided leading-edge and technologically advanced services, solutions and products to a broad customer base.

Our ever-changing technologies and innovations cover a wide spectrum of markets with primary areas of concentration in digital modernization, mission systems and integration, Command, Control, Computers, Communications, Intelligence, Surveillance and Reconnaissance ("C4ISR") technologies and services, maritime solutions, transformative software, analytics, intelligence analysis, mission support and logistics services, weapons systems and space systems and solutions.

We are dedicated to delivering cost-effective solutions backed by innovation-generating research and development to meet the evolving missions of our customers.

We provide a diverse portfolio of national security solutions and systems for air, land, sea, space and cyberspace for the U.S. Intelligence Community, the DoD, the Space Development Agency, NASA, Defense Information Systems Agency ("DISA"), military services, government agencies of U.S. allies abroad and other federal and commercial customers in the national security industry.

Our solutions deliver innovative technology, large-scale systems, command and control platforms, data analytics, logistics and cybersecurity solutions, as well as intelligence analysis and operations support to critical missions around the world.

PART I

- *C4ISR Technologies and Services –* We offer a wide range of technologies and services in multiple domains that address the nation's most critical threats and deliver solutions to the U.S. Intelligence Community, DoD and military services.

Our market concentration is on airborne and ground intelligence, surveillance and reconnaissance ("ISR"), maritime systems, electronic warfare systems, distributed sensor systems, autonomous systems, sensors, Command and Control ("C2"), Joint All-Domain Command and Control ("JADC2") and Multi-Domain Operations.

We provide multi-spectral, airborne, ground, maritime and space-based ISR collection, algorithm development and processing systems, advanced sensor design, C2 solutions and training systems.

We also provide laser and radio frequency-based communications systems for airborne, ground, naval and space platforms.

We link our high-end solutions to other key services demanded by our customers.

In the air, we support a fleet of government and Leidos-owned fixed wing, rotary wing and unmanned aircraft.

We have developed and delivered full integrated small satellite systems.

Our Gibbs & Cox subsidiary is one of the largest independent naval architecture and marine engineering firm by headcount in the United States.

- *Transformative Software, Analytics –* We offer extensive software development capabilities for C2, intelligence and information systems and deliver mission and enterprise-level solutions to the U.S. and allied defense and intelligence organizations.

This includes encryption key management, the use of artificial intelligence to automate and streamline processes and the development of software to manage some of the worlds toughest data problems.

We offer innovative data analytics capabilities, and we design, develop, integrate, deploy and support information-centric software and enterprise IT systems for complex, data-driven national security challenges for the intelligence community, homeland security and defense customers.

Our capabilities are enhanced by our advanced software factories, providing the brainpower to deliver the optimum software solutions for our customer base.

Across the U.S. Army we perform complex software development projects, develop training simulators for Army vehicles, maintain and conduct soldier training for field C2 equipment, and we are installing our cloud-based Army base access control system throughout the U.S.

- *Intelligence Analysis, Mission Support and Logistics Services –* We deliver high-end services to the U.S. Intelligence Community, DoD and allied governments.

Operating throughout the world we provide intelligence analysis, operational support, logistics operations, security, linguistics and training.

- *Weapons Systems* – We offer tactical weapons components and systems for surface-launched missiles, cruise missiles, air-to-air, air-to-ground and anti-ship missiles and guided munitions and rockets across the DoD.

We also deliver offensive boost-glide, launcher and air-breathing systems, thermal protection systems and hypersonic defense systems.

We have capabilities in integrated force protection in both directed energy (such as high-energy lasers and microwave systems) and area defense (such as counter-unmanned aviation systems, radar systems, sensors and kinetic weapon launchers).

In addition, we provide cyber-physical systems in the development of offensive and defensive cyber command and control, toolkits and exploits, as well as offensive cyber operations.

Our unique autonomy algorithms provide decision support for the heavily-burdened warfighter and support coordinated man-autonomous machine operations.

- *Space Systems and Solutions* – We provide integrated design, manufacturing, integration of human-rated and exploration spacecraft for NASA and commercial customers.

We have the capability to design and manufacture space systems and key launch vehicle subsystems such as avionics/mission computing, guidance, navigation and control, boosters and structures.

Our Civil business has been focused on modernizing infrastructure, systems and security for government and commercial customers both domestically and internationally.

With more than 24,000 products deployed across over 120 countries, the SES business has the most widespread global footprint within the Civil Group portfolio.

We are a leader in aviation screening equipment, computed tomography carry-on baggage scanners, people scanners and explosive trace detectors, facilitating secure and efficient passenger movement in airports worldwide.

We also have cutting-edge screening technologies for checked baggage and cargo.

For CBP, and other global customers, we help to safeguard the flow of travel and trade through solutions that effectively detect and mitigate threats across all trade elements, including cargo, vehicles and people.

Leidos is also transforming security detection beyond aviation and ports of entry to help government agencies and the private sector secure public venues and critical infrastructures.

Health

[removed: ][added: ]

For the fiscal year ended [removed: December 29, 2023][added: January 3, 2025]

As of June [removed: 30, 2023,] [added: 28, 2024,] which was the last business day of the [removed: registrant's] [added: registrant’s] most recently completed second fiscal quarter, the aggregate market value of Leidos Holdings, Inc. common stock (based upon the closing price of the stock on the New York Stock Exchange) held by non-affiliates of the registrant was [removed: $12,035,539,574.][added: $19,549,744,128.]

The number of shares issued and outstanding of the registrant’s class of common stock as of February [removed: 6, 2024,] [added: 4, 2025,] was [removed: 135,779,301] [added: 131,167,372] shares ($.0001 par value per share).

Portions of Leidos Holdings, [removed: Inc.'s] [added: Inc.’s] definitive Proxy Statement for the [removed: 2023] [added: 2024] Annual Meeting of Stockholders [removed: ("2024] [added: (”2025] Proxy [removed: Statement")] [added: Statement”)] are incorporated by reference in Part III of this Annual Report on Form 10-K.

LEIDOS HOLDINGS, [removed: INC.][added: INC. FORM 10-K]

[removed: TABLE OF CONTENTS][added: Table of Contents]

[removed: | [Part I](#idfc2de3250d049889cff5bea351405b6_13) | | | | | | | | |][added: Part I]

| [removed: Item 1. | | | [Business](#idfc2de3250d049889cff5bea351405b6_16)] [added: [Item 1.](#ib4ad8d170a514e28987e6c98567efdc2_16) [](#ib4ad8d170a514e28987e6c98567efdc2_16)[Business](#ib4ad8d170a514e28987e6c98567efdc2_16)] | | | [removed: [3](#idfc2de3250d049889cff5bea351405b6_16)] [added: [3](#ib4ad8d170a514e28987e6c98567efdc2_16)] | | |

| [removed: Item] [added: [Item] 1A. [removed: | | | [Risk Factors](#idfc2de3250d049889cff5bea351405b6_19)] [added: Risk Factors](#ib4ad8d170a514e28987e6c98567efdc2_19)] | | | [removed: [16](#idfc2de3250d049889cff5bea351405b6_19)] [added: [14](#ib4ad8d170a514e28987e6c98567efdc2_19)] | | |

| [removed: Item] [added: [Item] 1B. [removed: | | | [Unresolved] [added: Unresolved] Staff [removed: Comments](#idfc2de3250d049889cff5bea351405b6_22)] [added: Comments](#ib4ad8d170a514e28987e6c98567efdc2_22)] | | | [removed: [43](#idfc2de3250d049889cff5bea351405b6_22)] [added: [37](#ib4ad8d170a514e28987e6c98567efdc2_22)] | | |

| [removed: Item] [added: [Item] 1C. [removed: | | | [Cybersecurity](#idfc2de3250d049889cff5bea351405b6_2191)] [added: Cybersecurity](#ib4ad8d170a514e28987e6c98567efdc2_25)] | | | [removed: [44](#idfc2de3250d049889cff5bea351405b6_2191)] [added: [37](#ib4ad8d170a514e28987e6c98567efdc2_25)] | | |

| [removed: Item 2. | | | [Properties](#idfc2de3250d049889cff5bea351405b6_25)] [added: [Item 2.](#ib4ad8d170a514e28987e6c98567efdc2_28) [](#ib4ad8d170a514e28987e6c98567efdc2_28)[Properties](#ib4ad8d170a514e28987e6c98567efdc2_28)] | | | [removed: [46](#idfc2de3250d049889cff5bea351405b6_25)] [added: [38](#ib4ad8d170a514e28987e6c98567efdc2_28)] | | |

| [removed: Item] [added: [Item] 3. [removed: | | | [Legal Proceedings](#idfc2de3250d049889cff5bea351405b6_28)] [added: Legal Proceedings](#ib4ad8d170a514e28987e6c98567efdc2_31)] | | | [removed: [46](#idfc2de3250d049889cff5bea351405b6_28)] [added: [39](#ib4ad8d170a514e28987e6c98567efdc2_31)] | | |

| [removed: Item 4. | | | [Mine] [added: [Item 4.](#ib4ad8d170a514e28987e6c98567efdc2_34) [](#ib4ad8d170a514e28987e6c98567efdc2_34)[Mine] Safety [removed: Disclosures](#idfc2de3250d049889cff5bea351405b6_31)] [added: Disclosures](#ib4ad8d170a514e28987e6c98567efdc2_34)] | | | [removed: [46](#idfc2de3250d049889cff5bea351405b6_31)] [added: [39](#ib4ad8d170a514e28987e6c98567efdc2_34)] | | |

| [Executive Officers of the [removed: Registrant](#idfc2de3250d049889cff5bea351405b6_34) | | |] [added: Registrant](#ib4ad8d170a514e28987e6c98567efdc2_37)] | | | [removed: [46](#idfc2de3250d049889cff5bea351405b6_34)] [added: [40](#ib4ad8d170a514e28987e6c98567efdc2_37)] | | |

| [removed: Item 5. | | | [Market] [added: [Item 5.](#ib4ad8d170a514e28987e6c98567efdc2_43) [](#ib4ad8d170a514e28987e6c98567efdc2_43)[Market] for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of [removed: Equity Securities](#idfc2de3250d049889cff5bea351405b6_40)] [added: Equity](#ib4ad8d170a514e28987e6c98567efdc2_43) [](#ib4ad8d170a514e28987e6c98567efdc2_43)[Securities](#ib4ad8d170a514e28987e6c98567efdc2_43)] | | | [removed: [49](#idfc2de3250d049889cff5bea351405b6_40)] [added: [43](#ib4ad8d170a514e28987e6c98567efdc2_43)] | | |

| [removed: Item 6. | | | [\[Reserved\]](#idfc2de3250d049889cff5bea351405b6_43)] [added: [Item 6.](#ib4ad8d170a514e28987e6c98567efdc2_46) [](#ib4ad8d170a514e28987e6c98567efdc2_46)[\[Reserved\]](#ib4ad8d170a514e28987e6c98567efdc2_46)] | | | [removed: [51](#idfc2de3250d049889cff5bea351405b6_43)] [added: [45](#ib4ad8d170a514e28987e6c98567efdc2_46)] | | |

| [removed: Item 7. | | | [Management’s] [added: [Item 7.](#ib4ad8d170a514e28987e6c98567efdc2_49) [](#ib4ad8d170a514e28987e6c98567efdc2_49)[Management’s] Discussion and Analysis of Financial Condition and Results of [removed: Operations](#idfc2de3250d049889cff5bea351405b6_46)] [added: Operations](#ib4ad8d170a514e28987e6c98567efdc2_49)] | | | [removed: [52](#idfc2de3250d049889cff5bea351405b6_46)] [added: [46](#ib4ad8d170a514e28987e6c98567efdc2_49)] | | |

| [removed: Item] [added: [Item] 7A. [removed: | | | [Quantitative] [added: Quantitative] and Qualitative Disclosures About Market [removed: Risk](#idfc2de3250d049889cff5bea351405b6_79)] [added: Risk](#ib4ad8d170a514e28987e6c98567efdc2_82)] | | | [removed: [63](#idfc2de3250d049889cff5bea351405b6_79)] [added: [57](#ib4ad8d170a514e28987e6c98567efdc2_82)] | | |

| [removed: Item 8. | | | [Financial] [added: [Item 8.](#ib4ad8d170a514e28987e6c98567efdc2_85) [](#ib4ad8d170a514e28987e6c98567efdc2_85)[Financial] Statements and [removed: Supplementary Data](#idfc2de3250d049889cff5bea351405b6_82)] [added: Supplementary](#ib4ad8d170a514e28987e6c98567efdc2_85) [](#ib4ad8d170a514e28987e6c98567efdc2_85)[Data](#ib4ad8d170a514e28987e6c98567efdc2_85)] | | | [removed: [64](#idfc2de3250d049889cff5bea351405b6_82)] [added: [58](#ib4ad8d170a514e28987e6c98567efdc2_85)] | | |

| [removed: Item 9. | | | [Changes] [added: [Item 9.](#ib4ad8d170a514e28987e6c98567efdc2_187) [](#ib4ad8d170a514e28987e6c98567efdc2_187)[Changes] in and Disagreements with Accountants on Accounting and [removed: Financial Disclosure](#idfc2de3250d049889cff5bea351405b6_181)] [added: Financial](#ib4ad8d170a514e28987e6c98567efdc2_187) [](#ib4ad8d170a514e28987e6c98567efdc2_187)[Disclosure](#ib4ad8d170a514e28987e6c98567efdc2_187)] | | | [removed: [117](#idfc2de3250d049889cff5bea351405b6_181)] [added: [104](#ib4ad8d170a514e28987e6c98567efdc2_187)] | | |

| [removed: Item] [added: [Item] 9A. [removed: | | | [Controls] [added: Controls] and [removed: Procedures](#idfc2de3250d049889cff5bea351405b6_184)] [added: Procedures](#ib4ad8d170a514e28987e6c98567efdc2_190)] | | | [removed: [117](#idfc2de3250d049889cff5bea351405b6_184)] [added: [104](#ib4ad8d170a514e28987e6c98567efdc2_190)] | | |

| [removed: Item] [added: [Item] 9B. [removed: | | | [Other Information](#idfc2de3250d049889cff5bea351405b6_190)] [added: Other Information](#ib4ad8d170a514e28987e6c98567efdc2_196)] | | | [removed: [119](#idfc2de3250d049889cff5bea351405b6_190)] [added: [106](#ib4ad8d170a514e28987e6c98567efdc2_196)] | | |

| [removed: Item] [added: [Item] 10. [removed: | | | [Directors,] [added: Directors,] Executive Officers and Corporate [removed: Governance](#idfc2de3250d049889cff5bea351405b6_196)] [added: Governance](#ib4ad8d170a514e28987e6c98567efdc2_202)] | | | [removed: [119](#idfc2de3250d049889cff5bea351405b6_196)] [added: [107](#ib4ad8d170a514e28987e6c98567efdc2_202)] | | |

| [removed: Item] [added: [Item] 11. [removed: | | | [Executive Compensation](#idfc2de3250d049889cff5bea351405b6_199)] [added: Executive Compensation](#ib4ad8d170a514e28987e6c98567efdc2_205)] | | | [removed: [119](#idfc2de3250d049889cff5bea351405b6_199)] [added: [107](#ib4ad8d170a514e28987e6c98567efdc2_205)] | | |

| [removed: Item] [added: [Item] 12. [removed: | | | [Security] [added: Security] Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#idfc2de3250d049889cff5bea351405b6_202)] [added: Matters](#ib4ad8d170a514e28987e6c98567efdc2_208)] | | | [removed: [120](#idfc2de3250d049889cff5bea351405b6_202)] [added: [108](#ib4ad8d170a514e28987e6c98567efdc2_208)] | | |

| [removed: Item] [added: [Item] 13. [removed: | | | [Certain] [added: Certain] Relationships and Related Transactions, and Director [removed: Independence](#idfc2de3250d049889cff5bea351405b6_205)] [added: Independence](#ib4ad8d170a514e28987e6c98567efdc2_211)] | | | [removed: [120](#idfc2de3250d049889cff5bea351405b6_205)] [added: [108](#ib4ad8d170a514e28987e6c98567efdc2_211)] | | |

| [removed: Item] [added: [Item] 14. [removed: | | | [Principal] [added: Principal] Accounting Fees and [removed: Services](#idfc2de3250d049889cff5bea351405b6_208)] [added: Services](#ib4ad8d170a514e28987e6c98567efdc2_214)] | | | [removed: [120](#idfc2de3250d049889cff5bea351405b6_208)] [added: [108](#ib4ad8d170a514e28987e6c98567efdc2_214)] | | |

| [removed: Item] [added: [Item] 15. [removed: | | | [Exhibits,] [added: Exhibits,] Financial Statement [removed: Schedules](#idfc2de3250d049889cff5bea351405b6_214)] [added: Schedules](#ib4ad8d170a514e28987e6c98567efdc2_220)] | | | [removed: [121](#idfc2de3250d049889cff5bea351405b6_214)] [added: [109](#ib4ad8d170a514e28987e6c98567efdc2_220)] | | |

| [removed: Item] [added: [Item] 16. [removed: | | | [Form] [added: Form] 10-K [removed: Summary](#idfc2de3250d049889cff5bea351405b6_217)] [added: Summary](#ib4ad8d170a514e28987e6c98567efdc2_223)] | | | [removed: [124](#idfc2de3250d049889cff5bea351405b6_217)] [added: [112](#ib4ad8d170a514e28987e6c98567efdc2_223)] | | |

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: Forward-Looking Statements][added: Forward-Looking Statements]

[removed: - developments] [added: udevelopments] in the U.S. government defense and non-defense budgets, including budget reductions, sequestration, implementation of spending limits or changes in budgetary priorities, delays in the U.S. government budget process or a government shutdown, or the U.S. government’s failure to raise the debt ceiling, which increases the possibility of a default by the U.S. government on its debt obligations, related credit-rating downgrades, or an economic recession;

[removed: - uncertainties] [added: uuncertainties] in tax due to new tax legislation or other regulatory developments;

[removed: - deterioration] [added: udeterioration] of economic conditions or weakening in credit or capital markets;

[removed: - uncertainty] [added: uuncertainty] in the consequences of current and future geopolitical events;

[removed: - inflationary] [added: uinflationary] pressures and fluctuations in interest rates;

[removed: - delays] [added: udelays] in the U.S. government contract procurement process or the award of contracts and delays or loss of contracts as a result of competitor protests;

[removed: - changes] [added: uchanges] in U.S. government procurement rules, regulations and practices, including its organizational conflict of interest rules;

| | | | | | |

| --- | --- | --- | --- | --- | --- |

| [Forward-Looking Statements](#ib4ad8d170a514e28987e6c98567efdc2_10) | | | [1](#ib4ad8d170a514e28987e6c98567efdc2_10) | | |

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| [Part II](#ib4ad8d170a514e28987e6c98567efdc2_40) | | | | | |

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| [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#ib4ad8d170a514e28987e6c98567efdc2_3245) | | | [106](#ib4ad8d170a514e28987e6c98567efdc2_3245) | | |

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| [Part III](#ib4ad8d170a514e28987e6c98567efdc2_199) | | | | | |

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| [Part IV](#ib4ad8d170a514e28987e6c98567efdc2_217) | | | | | |

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| [Signatures](#ib4ad8d170a514e28987e6c98567efdc2_226) | | | [113](#ib4ad8d170a514e28987e6c98567efdc2_226) | | |

LEIDOS HOLDINGS, INC. FORM 10-K

uchanges in global trade policies, tariffs and other measures that could restrict international trade;

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

LEIDOS HOLDINGS, INC. FORM 10-K

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

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FORM 10-K

| | | | | | | Page | | |

| [Part II](#idfc2de3250d049889cff5bea351405b6_37) | | | | | | | | |

| [Part III](#idfc2de3250d049889cff5bea351405b6_193) | | | | | | | | |

| [Part IV](#idfc2de3250d049889cff5bea351405b6_211) | | | | | | | | |

| [Signatures](#idfc2de3250d049889cff5bea351405b6_220) | | | | | | [125](#idfc2de3250d049889cff5bea351405b6_220) | | |

Leidos Holdings, Inc. Annual Report - 43

[Table of Contents](#idfc2de3250d049889cff5bea351405b6_7)

PART I

Our efforts include regular monitoring of Leidos-managed [removed: programs] [added: systems and networks] for internal and external cybersecurity threats, providing cybersecurity training to our employees during the onboarding process and annually, and continually reviewing and refining formal policies and procedures designed to deter, identify and remediate cybersecurity incidents.

We employ multiple security and monitoring [removed: devices] [added: systems] and applications throughout the Company to identify, alert, report and log [removed: all] authorized and unauthorized access to the Leidos [removed: enterprise] [added: systems and] networks.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 44][added: Report | | | 37 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

We have a Technology and [removed: Innovation] [added: Information] Security Committee, comprised of six board members, with relevant backgrounds and experience, that oversees and advises the Board and management on matters involving the Company’s overall strategic direction and significant business risks and opportunities in the areas of technology and information security.

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PART I

Leidos Holdings, Inc. Annual Report - 45

As of [removed: December 29, 2023,] [added: January 3, 2025,] we conducted our operations in [removed: 427] [added: 412] locations in 44 states, the District of Columbia and various foreign countries.

We occupy approximately [removed: 8.5] [added: 8.4] million square feet of floor space.

Our major locations are in the Washington, D.C., metropolitan area, where we occupy a combination of leased and owned floor space of approximately [removed: 1.9] [added: 1.8] million square feet.

As of [removed: December 29, 2023,] [added: January 3, 2025,] we owned the following properties:

| [removed: Location | | |] [added: Location] | | | [removed: Number] [added: Number] of [removed: buildings | | | | | | Square footage] [added: buildings] | | | [added: Square footage] | | | [removed: Acreage] [added: Acreage] | | |

| Huntsville, Alabama | | | [removed: | | |] 7 | | | [removed: | | |] 801,000 | | | [removed: | | |] 90.7 | | |

| Columbia, Maryland | | | [removed: | | |] 1 | | | [removed: | | |] 95,000 | | | [removed: | | |] 7.3 | | |

| Orlando, Florida | | | [removed: | | |] 1 | | | [removed: | | |] 85,000 | | | [removed: | | |] 8.5 | | |

| Oak Ridge, Tennessee | | | [removed: | | |] 1 | | | [removed: | | |] 83,000 | | | [removed: | | |] 8.4 | | |

| Decatur, Alabama | | | [removed: | | |] 1 | | | [removed: | | |] 50,000 | | | [removed: | | |] 5.0 | | |

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| 38 | | | Leidos Holdings, Inc. Annual Report | | |

[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

PART I

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The following is a list of the names and ages (as of February [removed: 13, 2024)] [added: 11, 2025)] of our executive officers, indicating all positions and offices held by each such person and each such person’s business experience during at least the past five years.

| [removed: Name] [added: Name] of [removed: officer | | | | | | Age] [added: Officer] | | | [added: Age] | | | [removed: Position(s)] [added: Position(s)] with the company and prior business [removed: experience] [added: experience] | | |

| Thomas A. Bell | | | [removed: | | | 63 | | |] [added: 64] | | | Mr. Bell serves as the Chief Executive Officer of Leidos. He joined Leidos as CEO [removed: in] [added: on] May 3, 2023. Mr. Bell has held leadership roles as President – Defense Rolls-Royce plc; Chairman and CEO – Rolls-Royce North America (Rolls-Royce) since February 2018. Prior to that, Mr. Bell was Senior Vice President of global sales and marketing for defense, space and security at The Boeing Company (Boeing) from 2015. Before joining Boeing in 2015, Mr. Bell was President of Rolls-Royce Defense Aerospace, having joined as President, Customer Business, North America in mid-2012. | | |

| Christopher R. Cage | | | [removed: | | | 52 | | |] [added: 53] | | | Mr. Cage has served as Executive Vice President and Chief Financial Officer since July 2021. He has served in several capacities throughout his 25-year tenure with Leidos, including Senior Vice President, Chief Accounting Officer and Corporate Controller, Senior Vice President for Financial Planning and Analysis and Chief Financial Officer for the Health Group. | | |

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 46][added: Report | | | 39 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: PART I][added: Part II]

| Gerard A. Fasano | | | [removed: | | | 58 | | |] [added: 59] | | | Mr. Fasano has served as Executive Vice President, Chief Growth Officer since January 2024. Previously, he served as President for our Defense Group since October 2018. Mr. Fasano also served as the [removed: Company's] [added: Company’s] Chief of Business Development and Strategy Officer, and led the separation from the Lockheed Martin Corporation and the integration of the Information Systems & Global Solutions Business into Leidos. Prior to joining Leidos, Mr. Fasano served Lockheed Martin Corporation for over 30 years. | | |

| Elizabeth M. Porter | | | [removed: | | | 53 | | |] [added: 54] | | | Ms. Porter has served as President for the Health and Civil Sector since January 2024. Previously, she served as President for our Health Group since August 2020 and, before that, as Acting Group President for the Health Group since March 2020. Ms. Porter also served as Senior Vice President and Operation Manager for Leidos’ Federal Energy and Environment business. Prior to that role, Ms. Porter served as the Department of Defense Information Networks & Mission Partner Program Director. Prior to joining Leidos, Ms. Porter served Lockheed Martin Corporation [removed: for over 20 years] in several capacities, most recently as Director of [removed: Army IT, a portfolio of IT programs for the U.S. Army*.*] [added: Energy Initiatives, Corporate Engineering and Technology.] | | |

| Roy Stevens | | | [removed: | | | 55 | | |] [added: 56] | | | Mr. Stevens has served as President for the National Security Sector since January 2024. Previously, he served as President for our Intelligence Group since July 2021, and before that, as Chief of Business Development and Strategy. Prior to joining Leidos, Mr. Stevens served Lockheed Martin Corporation in a variety of executive level positions for over 20 years, most recently as Vice President of Global Solutions under the Information Systems & Global Solutions business, and has also been integral to the merger and acquisition of several companies during his career. He serves on the Board of Directors for [removed: Cornerstones.] [added: the Intelligence and National Security Alliance and Cornerstones as well as the Advisory Board for the Center for a New American Security.] | | |

[added: | 40 | | |] Leidos Holdings, Inc. Annual Report [removed: - 47][added: | | |]

| Thomas C. Sanglier | | | [removed: | | | 63 | | |] [added: 64] | | | Mr. Sanglier has served as Senior Vice President and Chief Audit Executive since July 2022. Prior to joining Leidos, Mr. Sanglier served as Senior Director, Internal Audit with Raytheon Technologies from November 2016 to June 2022 and as a Partner with Ernst & Young’s Advisory practice serving private and public organizations in the technology, manufacturing and professional services industries during June 2008 to December 2010. He previously served as Chair of the North American Board and a member of the Global Board of the Institute of Internal Auditors [removed: ("IIA")] [added: (“IIA”)] from April 2022 to March 2023. He has been involved as a volunteer leader with the IIA since becoming a member in 2011. Mr. Sanglier has also served as a member of The IIA’s Audit Committee, Guidance Development Committee, North American Publications Advisory Committee and multiple task forces. | | |

| James F. Carlini | | | [removed: | | |] 59 | | | [removed: | | |] Mr. Carlini has served as Chief Technology Officer of Leidos since June 2019. Prior to joining Leidos, Mr. Carlini founded and operated a national security consultancy from May 2006 to October 2018. Previously, Mr. Carlini served at Northrop Grumman Electronic Systems from July 2002 to May 2006, with his last position being Vice President of Advanced Development Programs. He also served at the Defense Advanced Research Projects Agency (DARPA) for six years, with his last position being Director of the Special Projects Office. Mr. Carlini is a former member of the United States Army Science Board and the United States Air Force Scientific Advisory Board. He is currently a member of the Department of Defense’s Defense Science Board. | | |

| M. Victoria Schmanske | | | [removed: | | | 61 | | |] [added: 62] | | | Ms. Schmanske has served as the President of the Commercial and International Sector since January 2024. Previously, she served as the Executive Vice President of Leidos Corporate Operations since July 2021, and before that, as President for the Intelligence Group. Ms. Schmanske has also served as the Leidos Chief Administrative Officer and Deputy President and Chief Operations Officer for the Health Group. Prior to joining Leidos, Ms. Schmanske served Lockheed Martin Corporation for over 30 years, most recently as Vice President for Operations IS&GS. She serves on multiple outside boards to include the University of Virginia School of Data Science Advisory Board, the Virginia Engineering Foundation Board of Directors, and The Women’s Center. | | |

| Cindy Gruensfelder | | | [removed: | | | 58 | | |] [added: 59] | | | Ms. Gruensfelder has served as the President of the Defense [removed: System] [added: Systems] Sector since January 2024. Ms. Gruensfelder has extensive Aerospace and Defense leadership expertise, serving for more than 30 years in a variety of leadership roles at Boeing, and its heritage company, McDonnell Douglas. She served as Vice President and General Manager of the Missile and Weapon Systems [removed: ("MWS"),] [added: (“MWS”),] division of Boeing Defense, Space & Security, from April 2021 to November 2022, and prior to that role, as Vice President of Weapons for the MWS division from October 2018 to April 2021. | | |

| Steve Hull | | | [removed: | | | 53 | | |] [added: 55] | | | Mr. Hull has served as the President for the Digital Modernization Sector since January 2024. Previously, he served as Executive Vice President and Operations Manager for Enterprise and Cyber Solutions at Leidos from March 2022 through December 2023, and Chief Information Officer [removed: ("CIO")] [added: (“CIO”)] at Leidos from August 2016 through March 2022. Prior to joining Leidos, Mr. Hull served as the CIO of the Lockheed Martin [removed: Corporation's] [added: Corporation’s] Information Systems & Global Solutions business area from January 2013 through August 2016, ensuring operations and security of IT systems for over 20,000 employees. Mr. Hull has over 30 years of experience in the IT field. | | |

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 48][added: Report | | | 41 | | |]

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Executive Officers of the Registrant

| | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Daniel Atkinson | | | 46 | | | Mr. Atkinson has served as the Senior Vice President, Chief Accounting Officer and Corporate Controller since 2024. Previously, he served as the Company's Assistant Corporate Controller since June 2021. Prior to joining Leidos, Mr. Atkinson was Director of Technical Accounting and Revenue Recognition at Booz Allen Hamilton from April 2018 until June 2021. He also held key leadership roles within the controller's organization at CSRA, Inc. from October 2016 to April 2018. | | |

| Daniel J. Antal | | | 53 | | | Mr. Antal has served as Executive Vice President and General Counsel since April 2024. He rejoined Leidos in April 2024 after serving as General Counsel for Rolls-Royce Defense and North America since January 2021. Prior to joining Leidos, Mr. Antal served as U.S. senior counsel for a Canadian based A&E firm, and previously spent 10 years with MWH Global. He held a variety of leadership roles at MWH, including as Associate General Counsel, Director of Risk Management for the Middle East, and completed a two-year assignment in the UK in operational capacity, where he led the integration of a strategic acquisition and assumed the role of International Managing Director. | | |

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[T](#ib4ad8d170a514e28987e6c98567efdc2_7)[able of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

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| Name of Officer | | | Age | | | Position(s) with the company and prior business experience | | |

| Leslie Fautsch | | | 52 | | | Ms. Fautsch has served as Chief Human Resources Officer of Leidos since October 2024. Ms. Fautsch has held several key leadership roles at Leidos, including Senior Vice President for Human Resources Operations and Total Rewards, Vice President of Human Resources Strategic Operations, and Vice President of Human Resources for corporate and enterprise functions. Prior to joining Leidos in 2011, she held senior leadership roles in Human Resources management, employee relations, and ethics at Northrop Grumman. | | |

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[T](#ib4ad8d170a514e28987e6c98567efdc2_7)[able of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

EXECUTIVE OFFICERS OF THE REGISTRANT

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| Name of Officer | | | Age | | | Position(s) with the company and prior business experience | | |

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| 42 | | | Leidos Holdings, Inc. Annual Report | | |

[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Carly E. Kimball | | | | | | 48 | | | | | | Ms. Kimball has served as the Executive Vice President, Chief Performance Officer since January 2024. In addition, she served as Senior Vice President, Chief Accounting Officer and Corporate Controller since July 2021. Ms. Kimball also served as the Company’s Assistant Corporate Controller. Ms. Kimball has over 25 years of experience leading large teams and has extensive proficiency in accounting, auditing, financial reporting, acquisitions and integrations, as well as business operations. Prior to joining Leidos, she served as Chief Financial Officer of CACI Products Company Inc. and Senior Manager in Ernst & Young’s Aerospace and Defense audit practice. | | |

| Jerald S. Howe, Jr. | | | | | | 68 | | | | | | Mr. Howe has served as Executive Vice President and General Counsel since July 2017 and as Corporate Secretary since September 2023. Prior to joining Leidos, Mr. Howe was a partner at Fried, Frank, Harris, Shriver & Jacobson LLP, where he served in the firm’s litigation, government contracts, mergers and acquisitions and aerospace and defense practices. Prior to joining Fried Frank, Mr. Howe held general counsel positions at TASC, a leading aerospace and defense company, and at Veridian Corporation, a publicly traded company that provided advanced technology services and solutions to the intelligence community, military and homeland defense agencies. | | |

| Steve Cook | | | | | | 56 | | | | | | Mr. Cook has served as President for Leidos Dynetics (formerly Dynetics Group) since April 2022. He previously served as Deputy Group President and Operations Manager of the Leidos Innovations Center from February 2020 to March 2022. Mr. Cook joined Dynetics in 2009 as the director of space technologies before leading the Dynetics Space Division and then later overseeing Dynetics’ corporate development efforts. Prior to joining Dynetics, he enjoyed a long and successful career at NASA, serving in such roles as the deputy manager of NASA’s Marshall Space Transportation Programs and Projects Office as well as the manager of the Ares Projects Office at the Marshall Space Flight Center in Huntsville. | | |

| Maureen Waterston | | | | | | 59 | | | | | | Ms. Waterston has served as Chief Human Resources Officer for Leidos since March 2022. Ms. Waterston has over 25 years of experience overseeing talent, recruitment, and development; employee and labor relations; compensation and benefits; and diversity and inclusion across a global workforce. Prior to joining Leidos, Ms. Waterston served as Chief Human Resources Officer for Pratt & Whitney from November 2015 to March 2022, Chief Human Resources Officer for United Technologies Building & Industrial Systems and Chief Human Resources Officer for Otis Elevator Company. | | |

PART II

As of February [removed: 6, 2024,] [added: 4, 2025,] there were approximately [removed: 19,005] [added: 16,202] holders of record of Leidos common stock.

During fiscal [removed: 2023] [added: 2024] and [removed: 2022,] [added: 2023,] we declared and paid quarterly dividends totaling [removed: $1.46] [added: $1.54] and [removed: $1.44] [added: $1.46] per share, respectively, of Leidos common stock.

[removed: *This] [added: This] stock performance graph shall not be deemed [removed: "soliciting material"] [added: “soliciting material”] or to be [removed: "filed"] [added: “filed”] with the SEC for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of Leidos under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as [removed: amended.*][added: amended.]

The following graph compares the total cumulative five-year return on Leidos common stock through [removed: December 29, 2023,] [added: January 3, 2025,] to two indices: (i) the Standard & [removed: Poor's] [added: Poor’s] 500 Composite index and (ii) the Standard & [removed: Poor's] [added: Poor’s] 500 IT Services Industry index.

The graph assumes an initial investment of $100 on [removed: December 28, 2018,] [added: January 3, 2020,] and that dividends, if any, have been reinvested.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 49][added: Report | | | 43 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

[removed: Comparison of Cumulative Total Return][added: COMPARISON OF CUMULATIVE TOTAL RETURN]

[removed: ][added: ]

| Company/Market/Peer Group | | | [removed: | | | 12/28/2018 | | | | | |] 1/3/2020 | | | [removed: | | |] 1/1/2021 | | | [removed: | | |] 12/31/2021 | | | [removed: | | |] 12/30/2022 | | | [added: 12/29/2023] | | | [removed: 12/29/2023] [added: 1/3/2025] | | |

The following table presents information related to the repurchases of our common stock during the quarter ended [removed: December 29, 2023:][added: January 3, 2025:]

| [removed: Period] [added: Period] | | | | | | [removed: Total] [added: Total] Number of Shares [removed: Purchased(1)] [added: Purchased(1)] | | | | | | [removed: Average] [added: Average] Price Paid per [removed: Share] [added: Share] | | | | | | [removed: Total Number of] [added: Total Number of] Shares Purchased as Part of Publicly Announced Repurchase Plans or [removed: Programs] [added: Programs] | | | | | | [removed: Maximum] [added: Maximum] Number of Shares that May Yet Be Purchased Under the Plans or [removed: Programs(2)] [added: Programs(2)] | | |

[removed: (1) The] [added: (1)The] total number of shares purchased includes shares surrendered to satisfy statutory tax withholding obligations related to vesting of restricted stock units.

[added: | 44 | | |] Leidos Holdings, Inc. Annual Report [removed: - 50][added: | | |]

[removed: (2) In] [added: (2)In] February 2022, our Board of Directors authorized a share repurchase program of up to 20 million shares of our outstanding common stock.

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

|  | | | Leidos Holdings, Inc. | | |  | | | S&P 500 Composite Index | | |  | | | S&P 500 IT Services Index | | |

| | | | | | | | | | | | | | | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Leidos Inc. | | | $ | 100.00 | | $ | 107.22 | | $ | 91.99 | | $ | 110.43 | | $ | 115.41 | | $ | 158.58 | |

| S&P 500 Composite Index | | | $ | 100.00 | | $ | 116.11 | | $ | 147.34 | | $ | 118.69 | | $ | 147.45 | | $ | 183.70 | |

| S&P 500 IT Services Index | | | $ | 100.00 | | $ | 120.77 | | $ | 125.47 | | $ | 100.99 | | $ | 132.74 | | $ | 147.85 | |

| September 28, 2024 - September 30, 2024 | | | | | | 62.00 | | | | | | $ | 157.06 | | | | | — | | | | | | 9,819,502 | | |

| October 1, 2024 - October 31, 2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,819,502 | | |

| November 1, 2024 - November 30, 2024 | | | | | | 1,471,766 | | | | | | 169.86 | | | | | | 1,471,766 | | | | | | 8,347,736 | | |

| December 1, 2024 - December 31, 2024 | | | | | | 942,326 | | | | | | 159.18 | | | | | | 942,326 | | | | | | 7,405,410 | | |

| January 1, 2025 - January 3, 2025 | | | | | | — | | | | | | — | | | | | | — | | | | | | 7,405,410 | | |

| Total | | | | | | 2,414,154 | | | | | | $ | 165.69 | | | | | 2,414,092 | | | | | | | | |

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| --- | --- | --- | --- | --- | --- |

[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

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| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Leidos Inc. | | | | | | $ | 100.00 | | | | | $ | 193.07 | | | | | $ | 206.95 | | | | | $ | 177.59 | | | | | $ | 213.19 | | | | | $ | 222.79 | |

| S&P 500 Composite Index | | | | | | $ | 100.00 | | | | | $ | 132.82 | | | | | $ | 157.02 | | | | | $ | 202.09 | | | | | $ | 165.49 | | | | | $ | 205.59 | |

| S&P 500 IT Services Index | | | | | | $ | 100.00 | | | | | $ | 142.47 | | | | | $ | 173.97 | | | | | $ | 182.45 | | | | | $ | 148.63 | | | | | $ | 195.36 | |

| September 30, 2023 | | | | | | — | | | | | | $ | — | | | | | — | | | | | | 14,934,512 | | |

| October 1, 2023 - October 31, 2023 | | | | | | — | | | | | | — | | | | | | — | | | | | | 14,934,512 | | |

| November 1, 2023 - November 30, 2023 | | | | | | 1,669,887 | | | | | | 104.56 | | | | | | 1,669,887 | | | | | | 13,264,625 | | |

| December 1, 2023 - December 29, 2023 | | | | | | 233,306 | | | | | | 107.35 | | | | | | 233,306 | | | | | | 13,031,319 | | |

| Total | | | | | | 1,903,193 | | | | | | $ | 104.90 | | | | | 1,903,193 | | | | | | | | |

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 51][added: Report | | | 45 | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

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LEIDOS HOLDINGS, [removed: INC.][added: INC.]

| | | | [removed: | | |] Page | | |

| CONSOLIDATED FINANCIAL STATEMENTS | | | | | | [removed: | | |]

| [Report of Independent Registered Public Accounting [removed: Firm](#idfc2de3250d049889cff5bea351405b6_94)] [added: Firm](#ib4ad8d170a514e28987e6c98567efdc2_97)] (PCAOB ID No. 34) | | | [removed: | | | [65](#idfc2de3250d049889cff5bea351405b6_94)] [added: [59](#ib4ad8d170a514e28987e6c98567efdc2_97)] | | |

| [Consolidated Statements of Operations for the fiscal years [removed: ended December 29, 2023, December 30,] [added: ended](#ib4ad8d170a514e28987e6c98567efdc2_103) [](#ib4ad8d170a514e28987e6c98567efdc2_103)[January 3, 2025](#ib4ad8d170a514e28987e6c98567efdc2_103)[, December](#ib4ad8d170a514e28987e6c98567efdc2_103) [29, 2023](#ib4ad8d170a514e28987e6c98567efdc2_103)[,](#ib4ad8d170a514e28987e6c98567efdc2_103) [and December](#ib4ad8d170a514e28987e6c98567efdc2_103) [3](#ib4ad8d170a514e28987e6c98567efdc2_103)0,] 2022 [removed: and December 31, 2021](#idfc2de3250d049889cff5bea351405b6_100)] | | | [removed: | | | [69](#idfc2de3250d049889cff5bea351405b6_100)] [added: [63](#ib4ad8d170a514e28987e6c98567efdc2_103)] | | |

| [Consolidated Statements of Comprehensive Income for the fiscal years [removed: ended December 29, 2023, December 30,] [added: ended](#ib4ad8d170a514e28987e6c98567efdc2_106) [January 3, 2025](#ib4ad8d170a514e28987e6c98567efdc2_106)[, December](#ib4ad8d170a514e28987e6c98567efdc2_106) [29, 2023](#ib4ad8d170a514e28987e6c98567efdc2_106)[,](#ib4ad8d170a514e28987e6c98567efdc2_106) [and December](#ib4ad8d170a514e28987e6c98567efdc2_106) [3](#ib4ad8d170a514e28987e6c98567efdc2_106)0,] 2022 [removed: and December 31, 2021,](#idfc2de3250d049889cff5bea351405b6_103)] | | | [removed: | | | [70](#idfc2de3250d049889cff5bea351405b6_103)] [added: [64](#ib4ad8d170a514e28987e6c98567efdc2_106)] | | |

| [Consolidated Statements of Equity for the fiscal years [removed: ended December 29, 2023, December 30,] [added: ended](#ib4ad8d170a514e28987e6c98567efdc2_109) [January 3, 2025](#ib4ad8d170a514e28987e6c98567efdc2_109)[, December](#ib4ad8d170a514e28987e6c98567efdc2_109) [29, 2023](#ib4ad8d170a514e28987e6c98567efdc2_109)[,](#ib4ad8d170a514e28987e6c98567efdc2_109) [and December](#ib4ad8d170a514e28987e6c98567efdc2_109) [3](#ib4ad8d170a514e28987e6c98567efdc2_109)0,] 2022 [removed: and December 31, 2021](#idfc2de3250d049889cff5bea351405b6_106)] | | | [removed: | | | [71](#idfc2de3250d049889cff5bea351405b6_106)] [added: [65](#ib4ad8d170a514e28987e6c98567efdc2_109)] | | |

| [Consolidated Statements of Cash Flows for the fiscal years [removed: ended December 29, 2023, December 30,] [added: ended](#ib4ad8d170a514e28987e6c98567efdc2_112) [January](#ib4ad8d170a514e28987e6c98567efdc2_112) [3,](#ib4ad8d170a514e28987e6c98567efdc2_112) [2025](#ib4ad8d170a514e28987e6c98567efdc2_112)[, December](#ib4ad8d170a514e28987e6c98567efdc2_112) [29, 2023](#ib4ad8d170a514e28987e6c98567efdc2_112)[,](#ib4ad8d170a514e28987e6c98567efdc2_112) [and December](#ib4ad8d170a514e28987e6c98567efdc2_112) [3](#ib4ad8d170a514e28987e6c98567efdc2_112)0,] 2022 [removed: and December 31, 2021](#idfc2de3250d049889cff5bea351405b6_109)] | | | [removed: | | | [72](#idfc2de3250d049889cff5bea351405b6_109)] [added: [66](#ib4ad8d170a514e28987e6c98567efdc2_112)] | | |

[removed: | [Notes to Consolidated Financial Statements](#idfc2de3250d049889cff5bea351405b6_115) | | | | | | [74](#idfc2de3250d049889cff5bea351405b6_115) | | |][added: NOTES TO CONSOLIDATED FINANCIAL STATEMENTS]

[added: | 58 | | |] Leidos Holdings, Inc. Annual Report [removed: - 64][added: | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]

We have audited the accompanying consolidated balance sheets of Leidos Holdings, Inc. and subsidiaries (the [removed: "Company")] [added: “Company”)] as of [removed: December 29, 2023] [added: January 3, 2025] and December [removed: 30, 2022,] [added: 29, 2023,] the related consolidated statements of operations, comprehensive income, equity, and cash flows, for the fiscal years ended [added: January 3, 2025,] December 29, 2023, [added: and] December 30, 2022, and [removed: December 31, 2021, and] the related notes (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of [removed: December 29, 2023] [added: January 3, 2025] and December [removed: 30, 2022,] [added: 29, 2023,] and the results of its operations and its cash flows for the fiscal years ended [added: January 3, 2025,] December 29, 2023, [added: and] December 30, 2022, [removed: and December 31, 2021,] in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the [removed: Company's] [added: Company’s] internal control over financial reporting as of [removed: December 29, 2023,] [added: January 3, 2025,] based on criteria established in *Internal Control — Integrated Framework [removed: (2013*)] [added: (2013)*] issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February [removed: 13, 2024,] [added: 11, 2025,] expressed an unqualified opinion on the [removed: Company's] [added: Company’s] internal control over financial reporting.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 65][added: Report | | | 59 | | |]

Goodwill Valuation – Security Enterprise Solutions Reporting Unit - Refer to [removed: Note] [added: Notes] 3 and [removed: Note] 8 to the [removed: financial statements][added: Financial Statements]

[removed: *Critical] [added: Critical] Audit Matter [removed: Description*][added: Description]

The Company’s accounting policy is to test [removed: goodwill] for impairment on the first day of the fourth quarter of each [added: fiscal] year and more frequently if events or circumstances indicate that the carrying value may not be recoverable.

During [removed: the third quarter of] fiscal [removed: year] 2023, the [removed: Security Enterprise Solutions (“SES”)] [added: SES] reporting unit refined its [removed: business] portfolio and made strategic business decisions to exit certain product offerings, [removed: as well as] [added: and] cease operations in certain countries in order to align the operations of the reporting unit with its strategic business plan.

[removed: As a result, the] [added: The] Company performed [removed: an interim] [added: a] quantitative impairment [removed: analysis] [added: evaluation] of [added: the] goodwill for the [removed: SES] [added: Security Enterprise Solutions] reporting unit by comparing the estimated fair value of the reporting unit to its carrying value.

Estimating the fair value of a reporting unit requires the exercise of significant judgment and assumptions including judgments about expected future cash flows, weighted-average cost of capital, [removed: and] [added: discount rates, expected long-term] growth rates [removed: in revenue] and [removed: margins.][added: operating margins as well as changes in the business environment.]

As a result of the quantitative assessment, the Company concluded that the [removed: carrying] [added: fair] value of the [added: Security Enterprise Solutions] reporting unit exceeded the [removed: fair value and recognized a goodwill] [added: carrying value, which resulted in no] impairment [removed: charge of $596 million] for the [added: fiscal] year ended [removed: December 29, 2023.][added: January 3, 2025.]

We identified goodwill for the [removed: SES] [added: Security Enterprise Solutions] reporting unit as a critical audit matter due to the significant judgments made by management to estimate the fair value of the reporting unit and the [removed: sensitivity of the] [added: difference between its] fair value [removed: to changes in these estimates.][added: and carrying value.]

Performing audit procedures to evaluate [removed: the reasonableness of] management’s estimate [added: of the Security Enterprise Solutions reporting unit fair value] required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists.

[removed: *How] [added: How] the Critical Audit Matter Was Addressed in the [removed: Audit*][added: Audit]

[removed: - We] [added: uWe] tested the effectiveness of controls over management’s goodwill impairment evaluation, including those over the selection of the [removed: discount, and] [added: discount rate,] terminal growth [removed: rates] [added: rate] and management’s development of forecasted [removed: revenues] [added: revenues, operating margins] and cash [removed: flows, including the completeness, accuracy and reasonableness of the forecasted amounts.][added: flows.]

[removed: - We] [added: uWe] evaluated management’s ability to accurately forecast future [removed: SES] [added: Security Enterprise Solutions] reporting unit revenue and operating [removed: income,] [added: margins] comparing actual results to management’s historical forecasts.

[added: | 60 | | |] Leidos Holdings, Inc. Annual Report [removed: - 66][added: | | |]

Revenues [removed: —] [added: –] Refer to [removed: Note] [added: Notes] 3 and [removed: Note] 4 to the [removed: financial statements][added: Financial Statements]

The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total [added: revenues and] costs for the performance obligation.

Given the judgments necessary to determine whether multiple promises within a single contract represent a single performance obligation, whether or not the Company is acting as principal in the fulfillment of the identified performance obligations on certain contracts, and estimates of total [added: revenues and] costs for the performance obligations that recognize revenue using the cost-to-cost method, auditing such accounting conclusions and estimates required extensive audit effort due to the volume and complexity of these contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.

[removed: - We] [added: uWe] tested the effectiveness of controls over contract revenue, including management’s controls over [added: evaluating] the [added: revenue recognition methodology,] initial setup of new contract [removed: arrangements] [added: arrangements,] and [removed: the] estimates of total costs and revenues for identified performance obligations.

[removed: - We] [added: uWe] developed an expectation of revenue [added: based on the Company’s historical performance] and compared it to the recorded balance.

[removed: ◦Evaluated] [added: uEvaluated] the terms and conditions of [removed: each contract] [added: selected contracts] and the appropriateness of the accounting treatment in accordance with accounting principles generally accepted in the United States of America, by:

[removed: ▪Inspecting] [added: uInspection of] the executed contract to [removed: verify] [added: assess] that the facts on which management’s conclusions were reached were consistent with the actual terms and conditions of the contract.

[removed: ▪Evaluating] [added: uEvaluation of] the contract within the context of the [removed: five-step] [added: revenue recognition] model and that management’s conclusions were appropriate by evaluating the nature of the promises within the contract, the interrelationship of the promised services and/or products provided, the pattern by which obligations are fulfilled, the number of performance obligations identified, and which party is acting as principal in the fulfillment of the identified performance obligations.

[removed: ▪Evaluating] [added: uEvaluation of] the appropriateness and consistency of the methods and assumptions used by management to develop estimates of future revenues that will be recognized and costs that will be incurred.

[removed: ▪Tested] [added: uEvaluate] the mathematical accuracy of management’s calculation of revenue for the performance obligation.

[removed: - We] [added: uWe] analyzed [removed: cumulative adjustments] [added: impacts to income before income tax] recorded during the year [added: as a result of changes in estimates on contracts] and tested those with characteristics of audit interest to determine that the adjustments were the result of changes in facts and circumstances and not estimates that were previously inaccurate.

[removed: Leidos] [added: | Leidos] Holdings, Inc. Annual [removed: Report - 67][added: Report | | | 61 | | |]

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| [Consolidated Balance Sheets as of](#ib4ad8d170a514e28987e6c98567efdc2_100) [January 3, 2025](#ib4ad8d170a514e28987e6c98567efdc2_100)[,](#ib4ad8d170a514e28987e6c98567efdc2_100) [and](#ib4ad8d170a514e28987e6c98567efdc2_100) [D](#ib4ad8d170a514e28987e6c98567efdc2_100)ecember 29, 2023 | | | [62](#ib4ad8d170a514e28987e6c98567efdc2_100) | | |

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| [Notes to Consolidated Financial Statements](#ib4ad8d170a514e28987e6c98567efdc2_118) | | | [68](#ib4ad8d170a514e28987e6c98567efdc2_118) | | |

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

PART II

uWe developed an independent estimate of the Security Enterprise Solutions reporting unit fair value using the income approach.

We utilized the historical results of the reporting unit and inspected third-party industry reports for the global aviation, maritime, and border security products and related services markets to develop projections.

Additionally, we developed the discount rate and terminal year growth rate with the assistance of our fair value specialists

uWe developed an independent estimate of the Security Enterprise Solutions reporting unit fair value using the market approach.

We selected guideline peer companies and developed enterprise value multiples of revenues and earnings before interest, taxes, depreciation and amortization with the assistance of our fair value specialists.

uWe calculated our independent expectation of the fair value of the reporting unit by weighting the results of the market and income approaches and compared the resulting fair value to the carrying value of the Security Enterprise Solutions reporting unit.

Critical Audit Matter Description

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

PART II

How the Critical Audit Matter Was Addressed in the Audit

uFor a selection of contracts, we performed audit procedures based on certain characteristics of audit interest, which included some of the following:

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[Table of Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)

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| [Consolidated Balance Sheets as of December 29, 2023 and December 30, 2022](#idfc2de3250d049889cff5bea351405b6_97) | | | | | | [68](#idfc2de3250d049889cff5bea351405b6_97) | | |

These decisions, along with the continued delays in airline travel infrastructure projects and higher than anticipated servicing costs, contributed to a significant reduction in the reporting unit’s forecasted revenue and cash flows.

The Company’s determination of the estimated fair value of the reporting unit was based on a blended approach, including discounted cash flow-models and market earnings multiple.

- We performed a sensitivity analysis of the forecasts of future revenue, earnings before interest, taxes, depreciation and amortization (“EBITDA”) and capital expenditures, which included their impact on the fair value of the SES reporting unit.

- We evaluated the reasonableness of management’s SES reporting unit revenue growth rates, EBITDA projections and timing of future cash flows by comparing the forecasts to:

◦Historical results and current performance.

◦Internal communications to management and the Board of Directors.

◦Forecasted information included in industry reports considering macroeconomic factors.

- With the assistance of our fair value specialists, we evaluated (1) the valuation methodology utilized, including testing mathematical accuracy of calculations and (2) the projections of future revenue growth rates, the discount rate and the determination of market multiples by either testing the underlying source information, or by developing a range of independent estimates and comparing those to the rate selected by management.

- For a selection of contracts, we performed the following for each contract:

February 13, 2024

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| Balance at January 1, 2021 | | | | | | 142 | | | | | | $ | 2,580 | | | | | $ | 1,328 | | | | | $ | (46) | | | | | $ | 3,862 | | | | | $ | 9 | | | | | $ | 3,871 | |

| Net income | | | | | | — | | | | | | — | | | | | | 753 | | | | | | — | | | | | | 753 | | | | | | 6 | | | | | | 759 | | |

Leidos Holdings, Inc. ("Leidos"), a Delaware corporation, is a holding company whose direct 100%-owned subsidiary and principal operating company is Leidos, Inc. Leidos, recognized as a member of the Fortune 500®, is a dynamic innovation company that is at the forefront of addressing the world’s most challenging issues in national security and health sectors.

With a global workforce of approximately 47,000, Leidos is committed to developing smarter technology solutions, particularly for customers in highly regulated industries.

Our business has been aligned into three reportable segments: Defense Solutions, Civil and Health.

We combined "Credit losses (recoveries), net" into "Selling, general and administrative expenses" on the consolidated statements of operations.

We have certain entities where the functional currency is not the U.S. dollar and have separately presented the effect of exchange rate changes on cash, cash equivalents and restricted cash held in foreign currencies as a separate line in the consolidated statements of cash flows.

Accounting Standards Updates ("ASU") 2020-04, ASU 2021-01, and ASU 2022-06 Reference Rate Reform

In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU 2020-04, which provides companies with optional expedients and exceptions to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued.

This update provides optional expedients for applying accounting guidance to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate ("LIBOR") or another reference rate expected to be discontinued because of the reference rate reform.

The amendments in this update are effective for all entities as of March 2020 and can be adopted using a prospective approach no later than December 31, 2022.

In January 2021, the FASB issued ASU 2021-01 which amends the scope of ASU 2020-04.

The amendments in this

update are elective and provide optional relief for entities with hedge accounting and contract modifications affected

by the transition from LIBOR through December 31, 2022.

In December 2022, the FASB issued ASU 2022-06 which extend the deadline for application of ASU 2021-01 through December 31, 2024.

Under this relief, entities may continue to account for contract modifications as a continuation of the existing contract and the continuation of the hedge accounting arrangement.

In the first half of fiscal 2023, we adopted certain practical expedients available under Accounting Standards Codification ("ASC") 848.

Our term loans are based on a Secured Overnight Financing Rate (“SOFR”) rate (see "Note 13—Debt").

In fiscal 2023, we modified our interest rate swap agreements to reference SOFR (see "Note 12—Derivative Instruments") in conformity with the relief available under ASC 848.

Our management, with the participation of our principal executive officer (our Chief Executive Officer) and principal financial officer (our Executive Vice President and Chief Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of [removed: December 29, 2023.][added: January 3, 2025.]

[removed: Other than the foregoing, there] [added: There] have been no changes in our internal control over financial reporting that occurred in the fourth quarter of the period ended [removed: December 29, 2023,] [added: January 3, 2025,] covered by this Annual Report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of [removed: December 29, 2023,] [added: January 3, 2025,] based on criteria established in *Internal Control—Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Our management has assessed the effectiveness of our internal control over financial reporting as of [removed: December 29, 2023,] [added: January 3, 2025,] and has concluded that our internal control over financial reporting as of that date was effective.

[added: | 104 | | |] Leidos Holdings, Inc. Annual Report [removed: - 117][added: | | |]

[Table of [removed: Contents](#idfc2de3250d049889cff5bea351405b6_7)][added: Contents](#ib4ad8d170a514e28987e6c98567efdc2_7)]