Leidos Holdings 10-Q 2026-04-03

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended April 3, 2026

or

For the transition period from to

Commission file number 001-33072

(571) 526-6000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares issued and outstanding of each of the issuer’s classes of common stock as of April 28, 2026, was 125,785,466 shares of common stock ($.0001 par value per share).

LEIDOS HOLDINGS, INC. FORM 10-Q

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Part I—Financial Information

LEIDOS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to condensed consolidated financial statements.

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PART I—FINANCIAL INFORMATION

LEIDOS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to condensed consolidated financial statements.

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PART I—FINANCIAL INFORMATION

LEIDOS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

See accompanying notes to condensed consolidated financial statements.

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PART I—FINANCIAL INFORMATION

LEIDOS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

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The following discussion and analysis of Leidos Holdings, Inc.'s ("Leidos") financial condition, results of operations, and quantitative and qualitative discussion about business environment and trends should be read in conjunction with Leidos' condensed consolidated financial statements and related notes.

The following discussion contains forward-looking statements, including statements regarding our intent, belief or current expectations with respect to, among other things, trends affecting our financial condition or results of operations, backlog, our industry, the impact of our merger and acquisition activity, government budgets and spending, our business contingency plans, interest rates and uncertainties in tax due to new tax legislation or other regulatory developments. In some cases, forward-looking statements can be identified by words such as “will,” “expect,” “estimate,” “plan,” “potential,” “continue” or similar expressions. Such statements are not guarantees of future performance and involve risks and uncertainties and actual results may differ materially from those in the forward-looking statements as a result of various factors. Some of these factors include, but are not limited to, the risk factors set forth in our Annual Report on Form 10-K, as updated by the risk factor in this report under Part II, Item 1A. "Risk Factors" and as may be further updated in subsequent filings with the U.S. Securities and Exchange Commission. Due to such uncertainties and risks, you are cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date hereof. We do not undertake any obligation to update these factors or to publicly announce the results of any changes to our forward-looking statements due to future events or developments.

Unless indicated otherwise, references in this report to "we," "us" and "our" refer collectively to Leidos and its consolidated subsidiaries.

OVERVIEW

Leidos is an industry and technology leader serving government and commercial customers with smarter, more efficient digital and mission innovations. Headquartered in Reston, Virginia, with 50,000 global employees, we pursue strategic growth across five pillars: space and maritime; energy infrastructure; digital modernization and cyber; mission software; and managed health services. Our customers include the U.S. Department of War (“DoW”), the U.S. Intelligence Community, the U.S. Department of Homeland Security, the Federal Aviation Administration, the Department of Veterans Affairs, and many other U.S. civilian, state and local government agencies, foreign government agencies and commercial businesses.

Beginning in fiscal 2026, 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: Intelligence & Digital, Health, Homeland and Defense. We also separately present the unallocable costs associated with corporate functions as Corporate (see "Note 9–Business Segments").

BUSINESS ENVIRONMENT AND TRENDS

U.S. GOVERNMENT MARKETS

During the three months ended April 3, 2026, and April 4, 2025, we generated approximately 86% and 87% respectively, of total revenues from contracts with the U.S. government. Accordingly, our business performance is affected by the overall level of U.S. government spending, especially national security, homeland security and intelligence spending, and the alignment of our service and product offerings and capabilities with current and future budget priorities of the U.S. government.

On April 30, 2026, Congress passed legislation to fund all non-immigration agencies and offices within the Department of Homeland Security agencies ending the government shutdown.

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PART I—FINANCIAL INFORMATION

INTERNATIONAL MARKETS

Sales to customers in international markets represented approximately 8% of total revenues for both the three months ended April 3, 2026, and April 4, 2025. Our international customers include foreign governments and their agencies. Our international business increases our exposure to international markets and the associated international regulatory, foreign currency exchange rate and geopolitical risks.

Changes in international trade policies, including higher tariffs on imported goods and materials, may increase the cost of certain goods necessary to fulfill our contractual requirements and for internal purposes. We expect to recover certain portions of the increase to the cost of goods through contractual measures. While we continue to evaluate the tariff environment and potential impacts of higher tariffs, we currently do not expect them to have a significant effect on our business.

RESULTS OF OPERATIONS

The following table summarizes our condensed consolidated results of operations for the periods presented:

SEGMENT AND CORPORATE RESULTS

The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins and $22 million recognized from the acquisition of Kudu Dynamics, partially offset by the completion of programs and a net decrease in volumes.

The increase in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins and improved efficiencies, partially offset by a net decrease in volumes and the completion of programs.

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PART I—FINANCIAL INFORMATION

Revenues remained consistent while operating income slightly decreased for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025. This was primarily attributable to a net decrease in volumes, offset by net write-ups on certain programs within the managed health services business.

The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to a net increase in volumes, $23 million favorable impact from exchange rate movements, program wins and $11 million recognized from the acquisition of Entrust. The increase was partially offset by net write-downs on certain programs.

The decrease in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to an increase of $25 million in acquisition, integration and restructuring costs, driven by the Entrust transaction and net write-downs on certain programs. The decrease was partially offset by a net increase in volumes.

The increase in revenues for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to program wins, partially offset by completion of certain contracts.

The decrease in operating income for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to the completion of contracts and write-downs on certain programs in the current year, partially offset by program wins.

The decrease in operating loss for the three months ended April 3, 2026, as compared to the three months ended April 4, 2025, was primarily attributable to a $15 million insurance reimbursement for legal costs incurred prior to fiscal 2026, partially offset by an increase in acquisition and integration costs.

NON-OPERATING EXPENSE, NET

Non-operating expense, net for the three months ended April 3, 2026, was $79 million as compared to $52 million for the three months ended April 4, 2025. The increase was primarily driven by a $23 million settlement loss from the buy-out of our UK defined benefit pension plan and increased interest expense from the termination of our senior unsecured bridge loan facility and issuance of our $600 million and $800 million senior notes.

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PART I—FINANCIAL INFORMATION

PROVISION FOR INCOME TAXES

For the three months ended April 3, 2026, our effective tax rate was 21.9% compared to 23.6% for the three months ended April 4, 2025. The decrease to the effective tax rate was primarily due to an increase in net excess tax benefits related to employee stock-based payment transactions and a decrease in unrecognized tax benefits.

BOOKINGS AND BACKLOG

We recorded net bookings worth an estimated $3.3 billion during the three months ended April 3, 2026, as compared to $2.1 billion for the three months ended April 4, 2025.

The estimated value of our total backlog was as follows:

Backlog at April 3, 2026, includes $371 million acquired through the acquisition of Entrust within the Homeland reportable segment.

Backlog represents the revenues we expect to recognize under negotiated contracts and unissued task orders on sole source IDIQ contracts, to the extent we believe their execution and funding to be probable. Backlog does not include potential task orders expected to be awarded under multiple award IDIQ contracts.

Backlog estimates are subject to change and may be affected by factors including modifications of contracts and foreign currency movements.

LIQUIDITY AND CAPITAL RESOURCES

OVERVIEW OF LIQUIDITY

As of April 3, 2026, we had $457 million in cash and cash equivalents. We have a senior unsecured revolving credit facility which can provide up to $1.5 billion in additional borrowing, if required. As of April 3, 2026, and January 2, 2026, there were no borrowings outstanding under the revolving credit facility.

We had outstanding debt of $6.3 billion and $4.6 billion at April 3, 2026, and January 2, 2026 respectively. In March 2026, we issued and sold $600 million 4.10% and $800 million 5.00% senior unsecured notes maturing in March 2029 and March 2036, respectively. The annual interest rate is payable on a semi-annual basis. The proceeds from the notes were used to fund a portion of the consideration payable in connection with the acquisition of Entrust and for general corporate purposes.

We have a commercial paper program in which we may issue short-term unsecured commercial paper notes ("Commercial Paper Notes") and have maturities of up to 397 days from the date of issuance. As of April 3, 2026, we had $300 million of Commercial Paper Notes outstanding. As of January 2, 2026, we did not have any Commercial Paper Notes outstanding.

We made $5 million and $529 million principal payments on our long-term debt during the three months ended April 3, 2026 and April 4, 2025, respectively. The activity for the three months ended April 4, 2025, included a $500 million payment to discharge the $500 million notes due May 2025.

Our senior unsecured revolving credit facility, Commercial Paper Notes, senior unsecured term loan and notes outstanding as of April 3, 2026, contain financial covenants and customary restrictive covenants. We were in compliance with all financial covenants as of April 3, 2026.

We paid dividends of $55 million and $53 million during the three months ended April 3, 2026, and April 4, 2025, respectively.

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PART I—FINANCIAL INFORMATION

We may from time to time seek to retire or purchase our outstanding debt through cash purchases in the open market, privately negotiated transactions or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through accelerated share repurchase agreements. Whether repurchases are made and the timing and actual number of shares repurchased depends on a variety of factors including price, corporate capital requirements, other market conditions and regulatory requirements. The repurchase program may be accelerated, suspended, delayed or discontinued at any time.

We made open market repurchases of our common stock for an aggregate purchase price of $200 million during the three months ended April 3, 2026. During the three months ended April 4, 2025, we did not make any open market repurchases; however, we repurchased $500 million of shares under an accelerated share repurchase agreement.

During the three months ended April 3, 2026, we invested $6 million in an investment fund as a limited partner, In connection with this investment, we have committed to invest an additional $94 million over the next five years. We expect to fund this investment with cash on hand and cash generated through our operations.

For the next 12 months, we anticipate that we will be able to meet our liquidity needs, including servicing our debt, through cash generated from operations, available cash balances, borrowings from our commercial paper program and, if needed, sales of accounts receivable and borrowings from our revolving credit facility.

SUMMARY OF CASH FLOWS

The following table summarizes cash flow information for the periods presented:

Net cash provided by operating activities increased $243 million during the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due to favorable changes in working capital.

Net cash used in investing activities increased $2,337 million for the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due to $2,338 million of net cash paid in connection with the acquisition of Entrust.

Net cash provided by financing activities increased $1,503 million for the three months ended April 3, 2026, when compared to the prior year quarter. The increase was primarily due a net increase of $1,216 million in cash inflows from debt activity, consisting of proceeds from debt issuances and payments for borrowings and debt issuance costs. The increase was also related to a $300 million net decrease in stock repurchases primarily attributable to the prior year accelerated share repurchase activities.

OFF-BALANCE SHEET ARRANGEMENTS

We have outstanding performance guarantees and cross-indemnity agreements in connection with certain aspects of our business and future commitments related to an investment fund. We also have letters of credit outstanding principally related to performance guarantees on contracts and surety bonds outstanding principally related to performance and subcontractor payment bonds as described in "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q. These arrangements have not had, and management does not believe it is likely that they will in the future have, a material effect on our liquidity, capital expenditures or capital resources, operations or financial condition.

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PART I—FINANCIAL INFORMATION

GUARANTOR AND ISSUER OF GUARANTEED SECURITIES

Leidos Holdings, Inc. (“Guarantor”) has fully and unconditionally guaranteed the debt securities of its subsidiary, Leidos, Inc. (“Issuer”), that were issued pursuant to transactions that were registered under the Securities Act of 1933, as amended (collectively, the “Registered Notes”). The following is a list of the Registered Notes guaranteed by Leidos Holdings, Inc.

Leidos Holdings, Inc. has also fully and unconditionally guaranteed debt securities of Leidos, Inc. that were issued pursuant to transactions that were not registered under the Securities Act of 1933, as amended. The following is a list of unregistered debt securities guaranteed by Leidos Holdings, Inc.

Additionally, Leidos, Inc. has fully and unconditionally guaranteed debt securities of Leidos Holding, Inc. that were issued pursuant to transactions that programs were not registered under the Securities Act of 1933, as amended. The following is a list of unregistered debt securities guaranteed by Leidos, Inc.

The following summarized financial information includes the assets, liabilities and results of operations for the Guarantor and Issuer of the Registered Notes described above. Intercompany balances and transactions between the Issuer and Guarantor have been eliminated from the financial information below. Investments in the consolidated subsidiaries of the Issuer and Guarantor that do not guarantee the senior unsecured notes have been excluded from the financial information. Intercompany payables represent amounts due to non-guarantor subsidiaries of the Issuer.

BALANCE SHEET INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES

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STATEMENT OF OPERATIONS INFORMATION FOR THE GUARANTOR AND ISSUER OF REGISTERED NOTES

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

We are subject to a number of reviews, investigations, claims, lawsuits, other uncertainties and future obligations related to our business. For a discussion of these items, see "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There were no material changes to our critical accounting policies, estimates or judgments that would have a significant impact on earnings during the period covered by this report from those discussed in our Annual Report on Form 10-K for the year ended January 2, 2026.

RECENTLY ADOPTED AND ISSUED ACCOUNTING STANDARDS

For a discussion of these items, see "Note 1–Basis of Presentation and Summary of Significant Accounting Policies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

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PART I—FINANCIAL INFORMATION

There were no material changes in our market risk exposure from those discussed in our Annual Report on Form 10-K for the year ended January 2, 2026.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

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 April 3, 2026. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

On May 23, 2025, and March 27, 2026, we completed the acquisitions of Kudu Dynamics and Entrust, respectively. We are in the process of integrating Entrust into our system of internal control over financial reporting. As of April 3, 2026, we completed the integration of Kudu Dynamics into our controls over financial reporting.

Other than the foregoing, there have been no changes in our internal control over financial reporting during the quarter ended April 3, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II—Other Information

Item 1. Legal Proceedings

We have furnished information relating to legal proceedings, and any investigations and reviews that we are involved with in "Note 10–Commitments and Contingencies" of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

There were no material changes to the risks described in Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended January 2, 2026.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

**(a)**None

**(b)**None

**(c)**Purchases of Equity Securities by the Issuer

The following table presents information related to the repurchases of our common stock during the quarter ended April 3, 2026.

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

(2)In February 2022, our Board of Directors authorized a share repurchase program of up to 20 million shares of our outstanding common stock. The shares may be repurchased from time to time in one or more open market repurchases or privately negotiated transactions, including accelerated share repurchase transactions. The actual timing, number and value of shares repurchased under the program will depend on a number of factors, including the market price of our common stock, general market and economic conditions, applicable legal requirements, compliance with the terms of our outstanding indebtedness and other considerations. There is no assurance as to the number of shares that will be repurchased, and the repurchase program may be suspended or discontinued at any time at our Board of Directors' discretion. This share repurchase authorization replaces the previous share repurchase authorization announced in February 2018.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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PART II—OTHER INFORMATION

RULE 10B5-1 TRADING ARRANGEMENT

During the three months ended April 3, 2026, no director or officer of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(c) of Regulation S-K.

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PART II—OTHER INFORMATION

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PART II—OTHER INFORMATION

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: May 5, 2026

Leidos Holdings, Inc.