Leidos [LDOS] Chairman and CEO Roger Krone on Monday said that lessons being learned about doing business during the ongoing pandemic are demonstrating areas where the company will be able to cut costs and enhance profits going forward.
Krone, like some other defense industry chiefs have been saying for the past six or seven months, told investors that Leidos’ employees are remaining productive despite the fact that a majority of them continue to telework. On top of that, the company is also finding the virtual formats for major defense industry trade shows have worked out well and have also been productive.
“We don’t need to go to all the trade shows we’ve been to, or at least not in person,” Krone said during the company’s third quarter financial results call. “Some of the virtual work we’ve done on AUSA and AFA have worked actually extremely well,” Krone said, referring to the Association of the U.S. Army and Air Force Association conferences and exhibits held in and around Washington, D.C., every fall.
“We’ve actually talked to more general officers because you can Zoom them and you can do one right after another and they don’t get caught in somebody else’s show booth, right,” he said, referring to one of the virtual platforms that conference organizers have been using to host their events during a period when large gatherings are prohibited and social distancing is in effect.
Defense contractors can spend millions of dollars annually on trade shows to market their wares and expertise and meet with customers.
Krone also highlighted that in the buildings and facilities used by Leidos employees, they are at 25 to 50 percent occupancy and “running just fine.” He said 65 percent of employees are telecommuting and “they’re doing reasonably well, I think, actually very well. And we start to look at 2021 and say, ‘we need less real estate.’”
Raytheon Technologies
[RTX] Chief Greg Hayes last week on his company’s earnings call said they are looking to reduce their footprint between 20 to 25 percent, up from a prior forecast of 10 percent. The smaller consolidation was pegged to overhead reductions related to the merger of United Technologies and Raytheon, but the increase is due to the need for less office space because the company’s employees are just as productive working from home.
Kathy Warden, chairman, president and CEO of Northrop Grumman [NOC], said earlier this year the COVID pandemic is showing that the company will need less real estate going forward and that even travel expenses could be curtailed.
Leidos is taking note of the changes it can make as a result of COVID.
“So, we are really taking a look at the lessons learned and we want to capture and internalize a significant portion of that reduction in our margin going forward and I think you’re seeing that across the board,” Krone said.