Leidos Holdings Inc

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 and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily attributable to a net increase in volumes on certain programs and program wins, partially offset by the completion of certain contracts.

The increase in operating income for the three months ended June 28, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to a net increase in volumes and efficiencies on certain programs, partially offset by the completion of certain contracts.

The increase in operating income for the six months ended June 28, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to a net increase in volumes and efficiencies on certain programs, and program wins, partially offset by the completion of certain contracts.

The increase in revenues for the three and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily attributable to higher volumes in the managed health services business, write-ups on certain programs and program wins.

The increase in operating income for the three and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily driven by a net increase in volumes and favorable business mix in the managed health services business and write-ups on certain programs.

The increase in revenues for the three and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily attributable to higher material volumes within our Australia business and program wins. The increase was partially offset by the impact of write-downs on certain programs within our UK operations for which cost and schedule were rebaselined.

The decrease in operating income for the three and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily driven by the impact of write-downs on certain programs within our UK operations for which cost and schedule were rebaselined, and the completion of certain contracts. The decrease was partially offset by higher material volumes and program wins.

The increase in revenues for the three and six months ended June 28, 2024, as compared to the three and six months ended June 30, 2023, was primarily attributable to program wins, partially offset by the completion of certain contracts.

The increase in operating income for the three months ended June 28, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to program wins and improved program execution on certain programs.

The increase in operating income for the six months ended June 28, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to program wins.

The increase in operating loss for the three months ended June 28, 2024, as compared to the three months ended June 30, 2023, was primarily attributable to increased general and administrative expenses.

The increase in operating loss for the six months ended June 28, 2024, as compared to the six months ended June 30, 2023, was primarily attributable to increased general and administrative expenses, partially offset by reduced legal fees.

Non-Operating Expense, net

Non-operating expense, net for the three months ended June 28, 2024, was $49 million as compared to $57 million for the three months ended June 30, 2023. The decrease was primarily driven by lower interest expense, as there were no commercial paper borrowings in the current year.

Non-operating expense, net for the six months ended June 28, 2024, was $96 million as compared to $115 million for the six months ended June 30, 2023. The decrease was primarily driven by lower interest expense, as there were no commercial paper borrowings in the current year, increased interest income on higher cash balances and favorable exchange rate movements.

Provision for Income Taxes

For the three months ended June 28, 2024, our effective tax rate was 23.9% compared to 23.4% for the three months ended June 30, 2023. The increase to the effective tax rate was primarily due to a reduced benefit in federal research tax credits, partially offset by a reduction of taxes related to foreign operations. In addition, our effective tax rate for the three months ended June 30, 2023, included a benefit from the release of an accrual for penalties.

For the six months ended June 28, 2024, our effective tax rate was 23.6% compared to 22.2% for the six months ended June 30, 2023. The increase to the effective tax rate was primarily due to a reduced benefit in federal research tax credits and an increase in unrecognized tax benefits, partially offset by an increase in excess tax benefits related to employee stock-based payment transactions.

In December 2021, the Organization for Economic Cooperation and Development enacted model rules for a new 15% global minimum tax framework (“Pillar Two”). Many governments around the world have enacted or are in the process of enacting Pillar Two legislation. The Pillar Two legislation became effective for certain jurisdictions beginning in fiscal 2024. We will continue to evaluate the impact of the rules as additional legislation gets enacted but currently do not expect them to have a material impact.