Profits at Leidos fell again, but by a smaller percentage than the previous quarter, as the Reston-based contracting firm continued to struggle with the effects of a slowdown in federal spending.
Profits dropped 54 percent during the first quarter to $37 million, or 48 cents per share, from $81 million, or 92 cents a share, during the same period a year ago, the company reported Wednesday. Revenue declined 17 percent to $1.32 billion compared with the previous year.
The contractor’s struggles have surprised industry analysts. When McLean-based Science Applications International Corp. split into two last year, the newly named Leidos walked away with a stronger leadership team as well as the company’s more-promising business units.
Since then, the company’s leadership has undergone several upheavals.
Leidos is still searching for a new chief executive, with the current CEO, former Air Force chief of staff John P. Jumper, set to retire as soon as a successor is named. Leidos’s chief operating officer, K. Stuart Shea, who was widely expected to take over for Jumper, stepped down in March. Three months earlier, Joe Craver, head of Leidos’s health and engineering division, left the company.
Both departures followed weak earnings reports, although Leidos did not provide a specific reason for Craver and Shea’s exits, saying each man’s decision to part ways was a mutual one.
In a conference call with analysts on Tuesday, Jumper said that the company had identified candidates for chief executive and that the board was conducting interviews. He did not provide a timeline, but said the process would “conclude in the near future.”
Leidos said its health and engineering division experienced the largest decline over the past quarter, with revenue dropping by 27 percent, to $380 million, compared with a year ago, because of lower sales. Revenue from the national security solutions unit declined 12 percent, to $944 million, a result of defense spending cuts and the drawdown of overseas military forces. Operating income was up by $13 million from the previous year to $89 million.
Though down, the latest financial results marked an improvement of sorts. In its last quarterly report, Leidos’s profits plunged by more than 75 percent from the previous quarter. Still, Leidos’s profits for continuing operations increased 15 percent during the first quarter to $46 million, or 59 cents per share, from $40 million, or 43 cents per share, during the same period a year ago.
“Our initiatives to improve profitability are gaining traction and starting to yield results,” Jumper said in a statement.
Leidos was taking small steps to build its international presence, Jumper said in the call with analysts. He predicted modest growth in the company’s health sector for the financial year and said he expected lower rates of decline in its national security business. Leidos is expected to bid on an upcoming contract to overhaul the Defense Department’s health records system. Jumper noted that Leidos had run the department’s current system for the past 25 years, placing the firm in a good position, he said.
The company’s share price closed up 5.5 percent at $40.04.
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