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  "documentTitle": "Leidos Holdings, Inc. (LDOS)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
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  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2021-02-16 00:00:00",
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  "notes": "The slide uses a red box to highlight specific rows in the table and connects them to callout boxes explaining the alleged manipulation.",
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      "kind": "callout",
      "text": "Had Leidos accurately reported the $6m sales contribution in Q2'19 vs. the $12m inflated sales results, the story would look different! The actual vs. forecast would be 2.9% not 4.0% and actual vs. prior 13.1%, not 14.4%. Total sales for the quarter vs. forecast would fall from 3.4% to 3.2%",
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      "text": "Leidos operating earnings were under pressure in Q3'19, with Health the only segment beating JPM's forecast by just $2.0m. Leidos also sold the health augmentation business, which on the conference call, the CEO noted had lower margins.(1,2) It appears as if by inflating higher margin acquisition revenue, and divesting lower margin business, Leidos was capable of barely beating Health operating earnings estimates.",
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      "kind": "callout",
      "text": "Had Leidos accurately reported the $6m sales contribution in Q2'19 vs. the $12m inflated sales results, the story would look different!",
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      "kind": "disclaimer",
      "text": "1) CFO Reagan: “You’re thinking about the Health margins, we are now -- and we continue to believe that the Health margins, which were very strong in the quarter, continue to be sustainable.”\n2) CEO Krone: “We were able to sell part of the business that really wasn’t in our portfolio. Clearly, that would have been lower-margin for us.”",
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      "text": "Operating Earnings: 3.3%",
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      "kind": "paragraph",
      "text": "In a period where Leidos's Defense and Civil operating earnings were all under pressure, the lone segment that beat expectations of JPMorgan (also a large shareholder) was the Health segment. By divesting a lower margin business, and over-reporting revenue from IMX, we estimate it allowed Leidos to beat expectations for the quarter.",
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      "kind": "quote",
      "text": "CFO Reagan: “You're thinking about the Health margins, we are now -- and we continue to believe that the Health margins, which were very strong in the quarter, continue to be sustainable.”; CEO Krone: “We were able to sell part of the business that really wasn't in our portfolio. Clearly, that would have been lower-margin for us.” — JPMorgan, Leidos Earnings First Look, Oct 29, 2019",
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      "text": "Source: JPMorgan, Leidos Earnings First Look, Oct 29, 2019",
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      "text": "Table 1: LDOS Variance Analysis",
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      "kind": "title",
      "text": "A Closer Look At Q3'2019",
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