Leidos Holdings, Inc.

OVERVIEW OF LIQUIDITY

As of October 3, 2025, we had $974 million in cash and cash equivalents. We have a senior unsecured revolving credit facility which can provide up to $1 billion in additional borrowing, if required. As of October 3, 2025, and January 3, 2025, there were no borrowings outstanding under the revolving credit facility.

We had outstanding debt of $4.7 billion at both October 3, 2025, and January 3, 2025. In February 2025, we issued and sold $500 million 5.40% and $500 million 5.50% senior unsecured notes maturing in March 2032 and March 2035, respectively. The annual interest rate is payable on a semi-annual basis. The proceeds from the issuance of the notes were used to retire the $500 million senior unsecured notes due May 2025 and repurchase $500 million outstanding shares of common stock in an accelerated share repurchase agreement (“ASR”) as discussed below.

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 October 3, 2025, and January 3, 2025, we did not have any Commercial Paper Notes outstanding.

We made principal payments on our debt of $455 million and $1,014 million during the three and nine months ended October 3, 2025, respectively, and $5 million and $14 million for the three and nine months ended September 27, 2024, respectively. The activity for the three months ended October 3, 2025, included a prepayment on our senior unsecured term loan of $450 million and the activity for the nine months ended October 3, 2025, also included a $500 million payment to discharge the $500 million notes due May 2025.

Our senior unsecured term loan, senior unsecured notes and senior unsecured revolving facility contain financial covenants and customary restrictive covenants. We were in compliance with all financial covenants as of October 3, 2025.

We paid dividends of $51 million and $156 million during the three and nine months ended October 3, 2025, respectively, and $51 million and $155 million during the three and nine months ended September 27, 2024, respectively.

Stock repurchases of Leidos common stock may be made on the open market or in privately negotiated transactions with third parties including through ASR 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. Repurchases may be accelerated, suspended, delayed or discontinued at any time.

On February 20, 2025, we entered into an ASR agreement with a financial institution to repurchase shares of our outstanding common stock. We paid $500 million to the financial institution and received an initial delivery of 3 million shares at an average price of $131.50 per share. In May 2025, we received the final delivery of 0.6 million shares related to the ASR agreement. The total number of shares that we received under the ASR agreement was based on the volume-weighted-average-price of $138.44 per share, net of a discount, for the period February 20, 2025, to May 20, 2025.

The purchase was recorded to "Additional paid-in capital" in the condensed consolidated balance sheets (see "Note 8–Earnings Per Share"). All shares delivered were immediately retired.

We made open market repurchases of our common stock for an aggregate purchase price of $100 million during both the three and nine months ended October 3, 2025, and $200 million and $450 million during the three and nine months ended September 27, 2024, respectively.

On July 4, 2025, tax legislation was enacted as part of the OBBBA, implementing several corporate tax law changes as described above within Results of Operations. We anticipate our federal and state tax payments will decrease by approximately $150 million in fiscal 2025, as compared to our estimates prior to the OBBBA enactment, primarily due to the decrease in our estimated 2025 taxable income related to these changes. The actual decrease may be impacted by future guidance or interpretive rules issued by the U.S. Treasury, among other factors. We will continue to assess the effects on our liquidity as tax legislation evolves.

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:

(1) Net cash provided by operating activities for the three and nine months ended September 27, 2024, was recast to reflect a change in the accounting policy, see "Note 1–Basis of Presentation and Summary of Significant Accounting Policies."

Net cash provided by operating activities increased $64 million during the three months ended October 3, 2025, when compared to the prior year quarter. The increase was primarily due to an increase in tax benefits from the impacts of the OBBBA legislation and favorable changes in working capital, partially offset by the timing of payroll and employee benefit payments.

Net cash provided by operating activities increased $114 million during the nine months ended October 3, 2025, when compared to the prior year. The increase was primarily due to an increase in tax benefits from the impacts of the OBBBA legislation, partially offset by the timing of payroll and employee benefit payments.

Net cash used in investing activities increased $13 million for the three months ended October 3, 2025, when compared to the prior year quarter. The increase was primarily due to higher capital expenditures and a $7 million payment related to the acquisition of Kudu Dynamics.

Net cash used in investing activities increased $316 million for the nine months ended October 3, 2025, when compared to the prior year. The increase was primarily due to $292 million of net cash paid related to the acquisition of Kudu Dynamics and higher capital expenditures.

Net cash used in financing activities increased $338 million for the three months ended October 3, 2025, when compared to the prior year quarter. The increase was primarily due to a $450 million prepayment on our senior unsecured term loan, partially offset by a $100 million decrease in stock repurchases in the current year quarter.

Net cash used in financing activities increased $144 million for the nine months ended October 3, 2025, when compared to the prior year primarily due to a $150 million increase in stock repurchases, a $10 million increase in payments for debt activities, partially offset by a $11 million decrease in shares withheld for tax obligations.