Good morning, everyone. My name is Sheila Kahyaoglu with the Jefferies Aerospace, Defense and Airlines Equity Research team, for those on the webcast. We have Chris Cage here, who's Executive VP and CFO of Leidos. Chris, thank you, and Stuart, of course, Stuart Davis, who runs the IR practice at Leidos. Chris, maybe just to start off, there's been a lot of news around IT services. The stock prices have been volatile. I think Leidos is successful in a lot of elements. What do you think makes Leidos successful, and how do you think the company succeeds from here? Yeah, definitely. Well, thanks, Sheila. It's always great to be here with you and the conference you guys put on, first-class job. Leidos, IT services is just one of the dimensions of what we do, and I think it's really our deep mission understanding with our customers. We're in the center of the action across so many different customers, and what we bring to bear is the expertise to ensure that their mission success is paramount. We've demonstrated that time and time again, which is why Leidos is positioned with some of the biggest programs on the digital side in the federal government domain, and then helping them manage their environments has led to how we can help them in other ways now, as we talk about software modernization, now branching into what we're doing in the defense side on the products, hardware arena. Leidos is touching so many aspects of making their mission outcome successful, and that's the key to our success. Maybe can you talk about the five growth pillars and what NorthStar 2030 means? Sure. Well, Tom Bell came on board a little over three years ago now, and one of the first things we did under his leadership was refresh the strategy. Out of that process came NorthStar 2030, and we've identified five key growth pillars that have actually morphed slightly as we've fast-forwarded and got into execution mode. Just quickly, those are defense tech. A lot of great things going on in our defense tech portfolio. The demand signal from the customer is very robust. Our energy infrastructure growth pillar, we did a major acquisition earlier this year to add to that capability. Very excited about the demand signals in that domain as well. Cyber, clearly both on the offense and the defensive side, cyber, it's not getting any safer out there. The risk posture is highly elevated. Customers are demanding more capabilities. Mission and digital, and again, we talked a little bit about that. Some of the IT digital services that we perform, mission software services we perform. Then finally, managed health services. So we've got these five growth pillars. We're seeing several of them that are really showing acceleration from growth and momentum perspective. Love to see that, and we've put our money where our mouth is on the investment side, as I mentioned, energy infrastructure. Before that, we added capabilities in the cyber domain. So that's the guiding Leidos' investment decisions is where we're going to put both our internal resources and inorganic plays to ensure that these five growth pillars achieve their full potential. As we think about your organic growth, I think you grew 4% organically in the second quarter, 5% in the first half. Your guidance implies, as you raised it, 8% in the second half. Can you walk us through some of the drivers of that ramp? Well, certainly, as I mentioned, in the defense tech arena, we're seeing some of those programs. We've been carefully curating these contract vehicles and demonstrating our capability, and the demand signal continues to grow. So some of the areas you'll see increased output would be in our integrated air defense arena. Think our IFPC program, our counter-UAS with some of our passive radar detection capabilities under the ABAD program. Hopefully, we'll see a successful outcome of our maritime autonomy testing. We're in the thick of that right now with our Navy customer, and that could lead to some acceleration here in the fourth quarter if we're one of the awardees there. So we have a lot going on in that part of the business that'll be catalyst for some second half growth. I mentioned earlier the energy business. We had acquired ENTRUST. That is continuing to be a growth catalyst for us in the energy infrastructure side. Then there's just any number of other programs. The FAA has been on a nice run this year. There's a demand signal to accelerate some of the programs that we had been operating on for them. They're looking to modernize the air traffic control experience. So in addition to some of the legacy programs that we're executing and accelerating, we're in the heat of the battle in a competitive process for a position on the Common Automation Platform of the future. Leidos feels like we're very well positioned to be a key player in that regard. So most of the things that are going to lead to second half acceleration are already in the bag in backlog and execution. But there are a few things from an award perspective that we believe will play out, and those could provide some additional momentum heading into 2027. I want to follow up on two items you mentioned. Sure. FAA was very contentious this time last year. Can you let us know what you do on FAA? How big of a revenue stream it is for you, and what the Common Automation Platform opportunity includes, and how it could expand the business? Well, we're a big player in the FAA, have been for decades. They look to us to run several components of the air traffic management system, certain software applications that support that. Our ERAM program, we have other programs, TFDM, et cetera. Through a variety of programs, we're a critical provider to them. Some of those are sustaining legacy systems, some of those are helping them modernize the experience, pre-flight, in air, en route, air traffic management, et cetera. So it's a sizable piece of the business for us today. I won't put specifics on that because I don't think we've called that out, but it's also an attractive margin profile. We do good work, and we're well-treated to do that good work for them. The Common Automation Platform, again, is the future of that in-flight air traffic management. There's multiple pieces of software that exist today that they're bringing together under this future program. It'll help them modernize and simplify how they manage air traffic and make it safer and better for everybody involved. Safety is a critical aspect of this. One of the reasons why we're one of the finalists in this process is because of our track record, understanding where they operate, the criticality of it, and our team with their expertise, it's second to none. We are going through this down-select phase process, wanting to see increased capability demonstrations along the way. Like I said, we had hoped that there would be a decision process that'd be happening sometime soon. It's a little bit unclear when the finish line is, but we do expect them wanting to move forward and get this thing going. When that happens, you've got a big development modernization effort over the next few years, and then a sustainment tail to that beyond. It will become the new standard, and some of the legacy programs that we support will go away, and others will still be part of that future ecosystem. Is this part of the $12 billion modernization program? It's part of that. There's a subset of that funding, multiple billion dollars associated with this effort in all likelihood t o modernize this software. You mentioned IFPC as one of the catalysts for growth drivers in the second half. Can you remind us where we are on that program in terms of delivery? Sure. We've been scaling up our production capability and today we're manufacturing about four units per month. By the end of the year, given the investments we've made in tooling and the demand signal, we expect to be at about double that rate of quantity. You'll see that program take a nice step function forward in 2027 over what it's contributing to Leidos in 2026. The team's just done great work under the leadership of our defense president and her team. Very pleased with that, and that's, whether it was defense of Guam or Korea, they're seeing more and more capabilities to field IFPC as a part of the integrated air defense solution. It's a very affordable system. Beyond that, we're looking at how do we look at the all-up-round magazine. There's more opportunities for Leidos to take some of that manufacturing in-house to further increase our competitiveness on the program and affordability, and then position ultimately for a potential second interceptor capability, which the government's looking at too. I think we've demonstrated that we're a critical part of this solution, and there was a $4 billion IDIQ vehicle put in place about over a year ago, and they've consistently now issued task orders against that. We're seeing that program ramp up nicely because of that. That's great to hear. Maybe switching to health for a little bit. It's been the most contentious program you have, which is VBA. Can you talk about sizing that business and just level set us on what the VBA medical disability exam looks like from a revenue and profit perspective? I don't think the RFP is out. I was refreshing the website every day since mid-June, and I got tired eventually. Just update us on where we are on that program. Well, it's interesting. Not to disagree with you characterize it as the most contentious program that we have. I'd characterize it as the most successful program that we have. And this is the fruits of our success. The team has done an outstanding job being a critical provider to the VA, done everything we've asked them to do, and the result of that has been a very well-run program that's delivered exceptional profitability. But like all things, there's the next iteration of what this program's going to become. And people are eagerly awaiting, as are we, on what that future looks like. Right? So what do we know today? The RFP for the future procurement is not yet out. The expectation is that we will see an RFP in the fall, maybe in October. We have seen a draft performance work statement that gave us an indication of where we think they're going with this. There's no big surprises in there. I think the one thing of note is their expectation to consolidate all six regions of performance into this new future contract. Our read on that is, hey, Leidos is one of the only two providers that operate in all six places today. So from a risk and credibility perspective of being able to execute and hit the ground running, I think we're well positioned in that regard to demonstrate that we're going to be an important partner, should be an important partner because of one of the best performing partners. But, there's other changes that have gone on that we talked about on our last call. In the near term, we did adjust some of our pricing on a few of the programs. They've paused the incentive part of the program for the next six months to the end of the year. So we expect that to come back in this future contract, but we'll have to wait and see the specificity of that. Our goal and our job is to resecure this franchise, and that's what we plan to do. Competitively, what do we need to do to make that so? That, we'll know more as we unpack the recompete. I have every expectation that when we get to the other side of that our health business will still be the most profitable segment in our portfolio. The variables could be, does the VBA continue to award this to four different providers, or do they decide that now is the time to consolidate back to three or even two? I think those things are all in play. They've got to assess what do they want to accomplish, and we value our relationship. In the meantime, continuing to deliver excellent performance between now and that recompete decision is job number one. Is it fair to say the business is about $2 billion of revenue and represents 45% of your earnings? It's not 45% of Leidos' earnings. It's a meaningful share of Leidos' earnings. $2 billion's probably not out of the range when you consider all six of the contract vehicles in there, maybe a little bit less than that, because we do other things within that QTC business of Leidos, too. But yeah. It's certainly north of $1 billion worth of activity, and it's been a highly profitable program. You mentioned what does the VBA do in terms of consolidating, and Stuart has been super helpful in having me understand this and some of the channel checks, because I think most people don't understand, I think you have 40% share of the VBA program. I might be wrong there, but you have an all-encompassing coverage program, which I think differentiates Leidos more than the competitors. How would an RFP that consolidates from four vendors to two work in your view? Well, again, that's speculation whether that'll happen or not. Yeah. But we certainly. I think the customer had been there previously. They scaled up capacity, I believe, in their minds, because the demand signal was elevated and was going to continue to stay elevated. And that's our expectation, is the volume that we're operating at today is going to persist. Right? So it starts there. There's a lot of activity, a lot of veterans that need to be served. It's an important mission. The question is, are you more efficient if you have more vendors supplying capacity to the ecosystem, or do you look at fewer vendors and decide, boy, they had access to an ample provider network, they had unused appointment availability in all their clinics, and why would I need to manage four different providers when I can get the job done with three or two? I think that's all part of the evaluation trade space. We'll see what their receptivity is to keeping it status quo or rethinking what the ultimate need is to serve the mission. How do we think about exam volumes? I think you mentioned in the first half of the year they were at 2.8 million per quarter or annually. Annually. How do we think about normalized volumes post PACT Act here? Well, clearly the PACT Act created this elevated demand signal. There was an increase in age claims. We've worked through that now, industry has, and the VA, and they've done a good job because they prioritized getting that back down to a more normative level. I think that's actually what we're seeing is actually just in August, the claims volume increased 6%, and the total claims completed decreased 1%. There's still a heavy demand signal that's coming, and industry is generally able to meet that, but there are months where you're not able to meet this elevated demand. That's why we think the 2.8 is here to stay, right? That's indicative of where this should be, and we expect will be as we fast-forward here over the duration of this next program. The number of aged inventory of claims has come down to a level that's about where it was pre-PACT Act. I think we've hit this nice equilibrium where we can count on the sustained consistent volume demand signal that's been coming at us and we've been stepping up to. Maybe one more on health. Can you update us on MHS GENESIS, where you are on that program, and how we should think about it going forward? Yeah. Well, again, starting with really proud of the success of that program, delivering this electronic health record system to the Department of Defense on time and under budget program, highly successful. Since that time, we've been continuing to support that customer with enhancements and O&M capabilities, and now they're looking ahead to what the next support needs to look like in the future. As of today, we're negotiating a one-year extension with them to continue that support as it looks like today. But they want to give themselves the optionality, it's unclear whether they will do so, to perhaps pull out the software license that are this bundled offering, and perhaps go directly to, whether it's an Oracle or a Philips, whoever, to procure those software licenses direct. Like I said, that may happen, they may not happen. Structuring the arrangement such that if they do, we can just pull that work scope away and adjust the price accordingly. But we stand ready to support them in whatever capacity that they need. I would tell you that that's never been where we've made our returns. It's a very modest return reselling of a third-party software solution. We do it if they ask us to, but if they pull that scope away and buy that directly, it changes the top line on the program a little bit, but not meaningfully the bottom line contribution. So as we think about that program, is it fair to say it's a $350 million contributor today, and it'll transition in next year, and could be going to zero if no software and $50 million- $100 million if there's a software element? I don't see a scenario where it's zero. There's a need for sustainment and support, and they're looking for that, right? So there's absolutely work scope where they're going to need a key provider, supplier by their side to help them sustain it, modernize it, upgrade it, patch it, what have you. So that's a meaningful amount of activity in some future scenario. Now, whether that is something we have to compete competitively for or what have you, that's unknown. So there's always, there's a work, there's a role to play here supporting this customer and this mission, and we expect to be part of that. Yes, if they do pull some of the software into a direct procurement model, that puts some downside pressure on the number that you cited, which is not far off. Whether that is $100 million, $150 million, TBD, depending upon who they can negotiate with directly, right? Not everybody is going to want to play ball that way, and what terms and conditions they get and what time they pull that out. But I think the main thing to focus on is there is still a substantial role to play supporting the software application and being part of the modernization of it into the future, and that is Leidos' sweet spot. Great. Turning to your defense business, it represents 22% of sales, $3.6 billion of revenue. You grew 6% in the quarter, 2.2x book- to-b ill. How do we think about your defense? First of all, I guess, what helped drive that 2.2x book to bill outside of IFPC, and how do we think about this business going forward? Well, first of all, Sheila, you are just a wizard with the facts and figures there. Right. I am uber impressed by all of this, what you have got at your fingertips here. I have an iPad. I am cheating. Oh, okay. All right. Well, you have done your homework. So, yeah, the defense business, everything you cited there, we are proud of, right? You have a good IR guy, so. Well, he helps, too. Yeah, he's helpful. This is what we love about the business. It's been hitting on all cylinders, and whether it's a nice award that we secured in the space domain to continue that franchise of what we're doing with the Wide Field of View family of programs. You're right, IFPC and follow-on orders to expand that capability. ABAD, the customer's talking about, they gave us a nice award. They're already talking about increasing the scope and scale on that particular program. There's been any number of things. But the big activity in Q2, specifically for that book to bill, was tied to the IFPC volume, and so the integrated air defense demand signal continues to be robust. It does not yet include what we're expecting to see ultimately in our munitions franchise, right? The framework agreement that we've talked about for our low-cost containerized munitions, none of that's in a book-to-bill number yet. None of that's in backlog yet. That's potentially north of a billion dollars type of activity that we ultimately expect to realize. So the defense team has got a lot of great things going on. There's several areas of that that are continuing to accelerate and most near term that we're excited about and hopefully maybe have something to celebrate if we're successful in Q3 is on the maritime side. Can we secure a position on the maritime unmanned surface vessel opportunity that we're auditioning for as we speak? Do you mind if I ask you, fear of sounding ignorant, what is that program? It kind of came about from nowhere, so how do we think about that opportunity? Yeah. Well, we've talked about maritime clearly as an area where Leidos has robust capabilities. We've got a nice set of capabilities in the undersea domain. We obviously, many years ago, bought kind of the premier architecture engineering firm in Gibbs & Cox, so our ability to design the vessels, whether that's the Trump-class battleship, or what have you, second to none. Leidos has invested for decades in the autonomy arena, right? We knew that was where this was going. That's what we needed the position for. Leidos has been invited to this competition. The Navy is looking to procure, hopefully up to 30 medium-sized unmanned surface vessels. We were one of seven people invited to the competition, and those trials are ongoing as we speak. The expectation is the Navy's got money that they want to obligate here before the end of the government fiscal year. That's not to say it'll definitely happen, but they are up against the clock and stand to potentially lose a portion of that if they don't get that under contract. So there's an urgency to move. There's a competitive process going on right now to demonstrate that you've got the goods. We've partnered with a shipbuilder because that's not what we do, but we bring so much else to the table here. Like I said, we're hopeful. No guarantees that we will be one of the awardees. There'll be multiple awardees as part of this for this first set of vessels that they procure. But it really kind of paves the way for a future franchise position. Then you think about the O&M that goes around with this too. There's a real potential here for the long game to increase the scale of what we do in the maritime domain. So I think that's something that bears watching here, certainly at the end of the government fiscal year, worst case into the early part of our fourth quarter. Can you update us on the $869 million Army MACRO award that you won? What is that, and how does that drive the long-term profile of the segment? Yeah, that gives us an opportunity to compete in an area, probably more in the software domain than anything else, than we haven't in the past. So it creates new capacity for us, what that vehicle does. I wouldn't say it came with any immediate work that we're turning on day one, but I'd say it's a very important positioning with our customers to demonstrate Leidos' bona fides and what we can do in the command and control C5ISR domain, where we've got some real expertise. So, that's what I would view MACRO 2 as, is one more important vehicle that gives us access to a customer area for work that we should be able to scale up into 2027. I don't view it as a significant catalyst for us in the near term, but one of many areas that will provide a modest tailwind into next year. Okay. Homeland represents an equal size, about 21% of sales to Defense. And you've actually grown quite a bit in that business. I think revenue growth of 32%, but organic at 15%. How do you think about, outside of ENTRUST, what the drivers of that growth were in Homeland? Well, some of it comes back to the conversation on the FAA side that we were having earlier. They have been looking to accelerate some programs that we had been executing on, and so they had some more funding. They were getting after it, and our team was stepping up and helping them accelerate mission outcomes. So, that's certainly been going on. We've had good success. Part of Homeland includes the Homeland Defense of some of our critical partners in Australia and the U.K., and the Australia team in particular has seen some acceleration on the work they're doing. We had won a nice position in the counter-UAS domain. We'd won an important contract in the health arena. So we're really expanding our presence beyond the legacy IT business in our Australian customer. Then there's the TSA, so that's an important customer for us, too, and we do a lot of logistics support for the TSA today, even outside of what we do on manufacturing some of the equipment that's ultimately going to move to a joint venture. But the logistics side of the work, it stays with Leidos. So we've just seen some acceleration across several of those areas. Very pleased to see the Homeland organization, not just show that strong growth, but improvement in profitability. So the margins are ticking up, and we think there's more room to go up from here. Can you talk about ENTRUST? What is going on with the business today? What have you learned since the acquisition, and what are revenue opportunities? Yeah. So ENTRUST, this was a big move. We had built a very nice, organically grown energy infrastructure, energy and transmission engineering distribution business. And it was performing exceptionally well. ENTRUST gave us an an opportunity to basically double the size of that business and significantly scale up our capability. We are about five months into that acquisition, right? So right now, the team is doing a great job on very detailed integration. And so by the end of the year, we will have completed the, kind of think of all the back office systems and put them on a common set of infrastructure, and that will help them gain some efficiencies in how they execute the business. Before that, in the nearer term, really getting the combined organization aligned. The leadership, the segments underneath that leadership, sales, go to market, those kinds of things. We have, rather than operating it as two complementary businesses, have that fully aligned and that work will be done here in short order. So great progress by the team on positioning that for future success. What we are pleased with is, first of all, their receptivity and uptake on us bringing technology and training their engineers on the tools that we had built out that had proven to be significant efficiency drivers for Leidos. So that has been very welcome and been well received. And then, our customers' acknowledgement. So getting invited to some larger opportunities. We had signaled an opportunity, their Canadian presence and some bigger, more meaty things with some of our existing utility clients. They were in the gas domain, which was not an area that we participated in the past. There are some opportunities there with some of our legacy utility customers that also operated in the gas arena, like for example, Duke Energy, that we were not participating in projects for them in that regard. And now we have an opportunity to bid on some of those. So I like what I am seeing. I think the teams are highly aligned and motivated. We have expanded our addressable market, collectively, probably by 3x from where it was, with just the business that we were executing before. So no shortage of opportunities to pursue, and I expect that growth momentum to continue as we pivot into 2027. How do we, I guess, think about what ENTRUST offers? Is it just a complete software solution? Is there a product set aligned with it? What is the growth rate of the business now that you have 3x the addressable market? Yeah, it is less about software or products. We are using our software proprietary tools to help our customers deliver engineering packages for major, whether it is a modest upgrade or a new transmission line, the engineering design drawings, et cetera, that we have to deliver. That is still highly people-dependent, but augmented by technology. That is the work that we do as a trusted provider to the utilities. The demand signal, as you can imagine, trying to bring more power online, the boom that AIs and data centers are providing is like, how do you get the power to where it needs to be? How do you help them as a trusted provider that has this capacity to scale up for these mega engineering projects? We have expanded our reach, too, into the front end of that process with new generation assets and how do we play inside the fence on some of the engineering. So that is where we touch and the value that we bring to the table. Where does it go for here? Again, I think that momentum, taking 30% roughly is where we benchmarked it of the manpower out of the equation, given technology deployment, allows us to operate more profitability and more competitively as we compete for tremendous demand signal coming from utilities directly or some of the data center developers that are looking to make sure that they have got power to meet their needs. Maybe one on margins before I forget. You have talked about second half margins, at least in Health, stepping down 200 basis points as you have suspension of incentive payments. I guess, how do we think about margins for the overall company as well in light of what happens with health? Well, we're very proud of the margins that we've been delivering over the last several years, but we have signaled that even this year, when we went into the year, they were a little bit elevated to where they were going to settle in for the long haul. And now with the changes that we've faced in health, we've signaled that those margins will moderate down, averaging about 20% for the health segment for the back half of the year. But you think about what's going on elsewhere in the portfolio, and I was very pleased to see, I mentioned Homeland earlier, doubling our energy presence. It's proving out that that's a margin-accretive line of business, and you'll continue to see that show up in Homeland's results. In the defense space, where we're maturing our product offerings in quantities, the throughput is elevated. You'll continue to see that show up in nice margin improvement over time. And I think both of those businesses have good runway ahead of them to continue to grow margins into 2027 and into 2028. In the other part, in digital and intel, the team's doing great work. I would say there's a little bit more range bound on the margin potential in those businesses. We're harvesting what we can. The area that has potential to help margins over time there is if the customer does continue to shift to more fixed price, outcome-based contracting. We've had some opportunities to have conversations with customers about converting programs from a cost-plus arrangement to fixed price. Nobody's pulled trigger on anything substantial yet, but as those conversations take shape and more opportunities present themselves, there could be longer term ways that we can drive margins higher on that part of the portfolio too. Too soon to put specificity around what 2027 looks like, given all the puts and takes. I think obviously with health moderating down a little bit, that will bring the enterprise margins down somewhat going into next year. We're going to work hard to get uplift in other parts of the portfolio, but that's going to take a little bit more time to fully offset the health piece. That makes sense. Maybe one on shifting gears to capital allocation. How do we think about, ENTRUST was a $2.4 billion acquisition, potentially higher CapEx needs, I think they're doubling year over year, what you're looking to spend your capital on and free cash flow conversion? Well, thanks for that. First of all, we're well-positioned. We did ENTRUST. We very quickly paid down some of the short-term borrowings that we took on as part of that. So, exited Q2 with a leverage ratio that's at the low end or even below our comfort zone and our target. We've got capacity. That being said, we're working hard to continue to be a great cash-generating business. Went into this year expecting that we would elevate our CapEx number. We signaled up to as much as $350 million. Last quarter, we pulled that back to $250 million, so it's still up from where it was last year, but more in the high end of a range that we've signaled that we're comfortable operating in. That gives us an opportunity to invest in a little bit more capacity to modernize some of our classified facility space because the demand signal that we're seeing with some of our intelligence customers and that business has grown nicely. It's a good return on investment to position that part of the business to grow and scale. Heading into the future, again, the good news is our facilities footprint is largely in a good spot. There might be some opportunities to selectively scale up in certain locations. I mentioned on the maritime side, there might be a bigger presence we need in our Long Beach, Mississippi facility, for example, to execute on a program like that. Or in Huntsville, it's a high class problem when you're potentially growing out of some of your production footprint. But we're in a good spot right now. It'll probably be at the margins, increased tooling, things like that to help ensure that we stay ahead of the game. I think cash flow conversion will continue to be a strength of the business. In the meanwhile, we're putting our energy into optimizing some of our back end processes. It's not glamorous, but our enterprise transformation office is helping us get after our billing cycle, as an example, and our payable cycle, deploying more technology and AI into the solution space. Ultimately, we'll see that take a day or so out of our DSO, which will be a nice cash conversion for us. Last one, just to end. I think as we head towards NorthStar 2030, what do you think investors underappreciate about Leidos here? I think the power of the portfolio, again, coming off of Q2, where you think about it, we signaled a couple headwinds in the health business that were outside of our control, pausing of incentives, etc. But we were able to raise guidance through all of that because of the strengths of other parts of the portfolio. I think we've got a very robust defense business, a defense technology business within that is underappreciated and accelerating. I think the beauty of the energy part of our portfolio, low capital intensity, low care and feeding, high return, are underappreciated. Then on top of all that, our digital backbone, where we're in the most impactful, most consequential missions that our customers have to execute on, and increasingly that cyber protectiveness, digital connectedness is going to be paramount to have them execute their mission successfully. Leidos is positioned across all of those domains. That's great to hear. Well, thank you so much, Chris, for being here. Thank you.