Washington Business Journal by James Bach 5/4/2017
Leidos Holdings Inc. (NYSE: LDOS) is the latest in a growing list of government contractors suffering from President Donald Trump’s slow pace of appointing lower-level members to his cabinet.
On a first-quarter earnings call Thursday, Roger Krone, CEO of the Reston-based government IT contractor, told analysts that since Trump took office in January, his company has seen “more slowness than expected in the acquisition organizations of our customers.”
This has had the effect of pushing back procurement deadlines and forcing agencies to extend contracts past their expiration, rather than recompeting the contracts. This has “resulted in extensions to our current work and these are generally shorter in duration and lower in magnitude than new awards and have decreased backlog from what we expected.”
This earnings release marked the second full quarter that Leidos reported earnings following its blockbuster merger with the government services division of Lockheed Martin Corp. (NYSE: LMT). On the quarter, Leidos reported revenue of $2.6 billion and adjusted earnings-per-share of $0.88.
But the number that was particularly worrying to Wall Street was the company’s weak book-to-bill of 0.7. When government services companies win contracts, they book future revenue in backlog and then bill against that backlog when they perform those services, which then appears as revenue in their financial reports. Government services companies typically want to keep that number above one because it means they’re winning new contracts as fast as they are drawing down the backlog.
Krone elaborated on the extent of Trump’s understaffing, telling analysts that there are more than 500 “confirmable” posts that have not been filled yet.
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