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Stock-Based Compensation | 12 Months Ended
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Jan. 03, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note 17—Stock-Based Compensation PLAN SUMMARIES As of January 3, 2025, we had stock-based compensation awards outstanding under the following plans: the 2017 Omnibus Incentive Plan, the 2006 Equity Incentive Plan, as amended, and the 2006 Employee Stock Purchase Plan, as amended (“ESPP”). We issue new shares upon the vesting of stock units or exercising of stock options under these plans. The 2017 Omnibus Incentive Plan provides Leidos and its affiliates’ employees, directors and consultants the opportunity to receive various types of stock-based compensation awards, such as stock options, restricted stock units and performance-based awards, as well as cash awards. We grant service-based awards that generally vest or become exercisable 33% a year over three years, 25% a year over four years or cliff vest in three years. As of January 3, 2025, 2.9 million shares of Leidos’ stock were reserved for future issuance under the 2017 Omnibus Incentive Plan and the 2006 Equity Incentive Plan. We offer eligible employees the opportunity to defer restricted stock units into an equity-based deferred equity compensation plan, the Key Executive Stock Deferral Plan (“KESDP”). Prior to 2013, we offered an additional opportunity for deferrals into the Management Stock Compensation Plan (“MSCP”). Benefits from these plans are payable in shares of Leidos’ stock that are held in a trust for the purpose of funding shares to the plans’ participants. Restricted stock units deferred under the KESDP are counted against the total shares available for future issuance under the 2017 Omnibus Incentive Plan. All awards under the MSCP are fully vested and the plan does not provide for a maximum number of shares available for future issuance. Our ESPP allows eligible employees to purchase shares of Leidos’ stock at a discount of up to 15% of the fair market value on the date of purchase. During fiscal 2024, 2023 and 2022, the discount was 10% of the fair market value on the date of purchase. During fiscal 2024, 2023 and 2022, $52 million, $48 million and $45 million, respectively, was received from ESPP plan participants for the issuance of Leidos’ stock. A total of 1.9 million shares remain available for future issuance under the ESPP. Stock-based compensation and related tax benefits recognized under all plans were as follows:
|  | Year Ended
(in millions) |  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Total stock-based compensation expense |  | $ | 85 |  |  | $ | 77 |  |  | $ | 73 |
Tax benefits recognized from stock-based compensation |  | 17 |  |  | 17 |  |  | 16 |
STOCK OPTIONS Stock options are granted with exercise prices equal to the fair market value of Leidos’ common stock using the closing price on the business day prior to the grant date and for terms not greater than ten years. Stock options have a term of seven years and a vesting period of three or four years, except for stock options granted to our outside directors, which have a vesting period of the earlier of one year from grant date or the next annual meeting of stockholders following grant date. The fair value of the stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair value of the stock option awards to employees are expensed on a straight-line basis over the vesting period of three or four years, except for stock options granted to our outside directors, which is recognized over the vesting period of one year or less. During fiscal 2024, 2023 and 2022, we used a blended approach to measure expected volatility that is based on our weighted average historical and implied volatility. The risk-free rate is derived using the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the stock option on the grant date. To determine the expected term, we use the midpoint scenario with a one-year grant date filter assumption for outstanding options and we use historical data to estimate forfeitures. The weighted average grant-date fair value and assumptions used to determine fair value of stock options granted for the periods presented were as follows:
|  | Year Ended
|  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Weighted average grant-date fair value |  | $ | 35.45 |  |  | $ | 25.21 |  | $ | 24.67
Expected term (in years) |  | 4.5 |  | 4.7 |  | 4.7
Expected volatility |  | 28.7 | % |  | 28.6 | % |  | 29.5 | %
Risk-free interest rate |  | 4.1 | % |  | 4.0 | % |  | 1.6 | %
Dividend yield |  | 1.3 | % |  | 1.4 | % |  | 1.6 | %
Stock option activity for each of the periods presented was as follows:
|  | Shares of stock under stock options |  | Weighted average exercise price |  | Weighted average remaining contractual term |  | Aggregate intrinsic value
|  | (in millions) |  |  |  | (in years) |  | (in millions)
Outstanding at December 31, 2021 |  | 2.1 |  |  | $ | 65.18 |  |  | 3.5 |  | $ | 54 |
Options granted |  | 0.3 |  |  | 105.01 |  |  |  |  |
Options forfeited or expired |  | — |  |  | 92.10 |  |  |  |  |
Options exercised |  | (0.6) |  |  | 39.26 |  |  |  |  | 41 |
Outstanding at December 30, 2022 |  | 1.8 |  |  | $ | 81.45 |  |  | 3.9 |  | $ | 42 |
Options granted |  | 0.3 |  |  | 92.71 |  |  |  |  |
Options forfeited or expired |  | — |  |  | 95.05 |  |  |  |  |
Options exercised |  | (0.2) |  |  | 53.78 |  |  |  |  | 9 |
Outstanding at December 29, 2023 |  | 1.9 |  |  | $ | 86.22 |  |  | 3.7 |  | $ | 41 |
Options granted |  | 0.2 |  |  | 130.81 |  |  |  |  |
Options forfeited or expired |  | (0.1) |  |  | 106.09 |  |  |  |  |
Options exercised |  | (0.8) |  |  | 80.93 |  |  |  |  | 43 |
Outstanding at January 3, 2025 |  | 1.2 |  |  | $ | 97.53 |  |  | 3.9 |  | $ | 58 |
Exercisable at January 3, 2025 |  | 0.6 |  |  | $ | 86.05 |  |  | 2.7 |  | $ | 36 |
Vested and expected to vest in the future as of January 3, 2025 |  | 1.2 |  |  | $ | 97.34 |  |  | 3.9 |  | $ | 58 |
As of January 3, 2025, there was $6 million of unrecognized compensation cost, net of estimated forfeitures, related to stock options, which is expected to be recognized over a weighted-average period of 1.6 years. Tax benefits from stock options exercised for fiscal 2024, 2023 and 2022 were $7 million, $2 million and $9 million, respectively. RESTRICTED STOCK UNITS AND AWARDS Compensation expense is measured at the grant date fair value and generally recognized over the vesting period of three or four years based upon required service conditions and in some cases revenue or EPS-based performance conditions. Restricted stock units and awards activity for each of the periods presented was as follows:
(in millions) |  | Shares of stock under stock awards |  | Weighted average grant- date fair value
Unvested stock awards at December 31, 2021 |  | 1.4 |  |  | $ | 88.89 |
Awards granted |  | 0.5 |  |  | 104.78 |
Awards forfeited |  | (0.1) |  |  | 99.38 |
Awards vested |  | (0.5) |  |  | 74.20 |
Unvested stock awards at December 30, 2022 |  | 1.3 |  |  | $ | 98.52 |
Awards granted |  | 0.6 |  |  | 95.82 |
Awards forfeited |  | (0.1) |  |  | 97.18 |
Awards vested |  | (0.4) |  |  | 97.65 |
Unvested stock awards at December 29, 2023 |  | 1.4 |  |  | $ | 97.71 |
Awards granted |  | 0.5 |  |  | 133.06 |
Awards forfeited |  | (0.1) |  |  | 107.67 |
Awards vested |  | (0.6) |  |  | 94.94 |
Unvested stock awards at January 3, 2025 |  | 1.2 |  |  | $ | 111.43 |
As of January 3, 2025, there was $56 million of unrecognized compensation cost, net of estimated forfeitures, related to restricted stock units, which is expected to be recognized over a weighted average period of 1.7 years. The fair value of restricted stock units that vested in fiscal 2024, 2023 and 2022 was $74 million, $40 million and $52 million, respectively. PERFORMANCE-BASED STOCK AWARDS Performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded, if any, ranging up to 200% of the specified target awards. If performance is below the threshold level of performance, no shares will be issued. For awards granted during fiscal 2024, 2023 and 2022, the target number of shares of stock granted under the awards will vest and the stock will be issued at the end of a three-year period based on a three-year cycle performance period and the actual number of shares to be issued will be based upon the achievement of the three-year cycle’s performance criteria. Also, during fiscal 2024, 2023 and 2022, we granted performance-based awards with market conditions. These market conditions grants represent the target number of shares and the actual number of shares to be awarded upon vesting may be higher or lower depending upon the achievement of the relevant market conditions. The target number of shares granted under the market conditions grants will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures and the employee’s continued service through the vest date. Performance-based stock award activity for each of the periods presented was as follows:
(in millions) |  | Expected number of shares of stock to be issued under performance-based stock awards |  | Weighted average grant- date fair value
Unvested at December 31, 2021 |  | 0.5 |  |  | $ | 88.72 |
Awards granted |  | 0.2 |  |  | 114.98 |
Awards forfeited |  | — |  |  | 103.06 |
Awards vested |  | (0.2) |  |  | 67.79 |
Unvested at December 30, 2022 |  | 0.5 |  |  | $ | 106.70 |
Awards granted |  | 0.2 |  |  | 99.34 |
Awards forfeited |  | — |  |  | 104.90 |
Awards vested |  | (0.1) |  |  | 116.37 |
Unvested at December 29, 2023 |  | 0.6 |  |  | $ | 102.22 |
Awards granted |  | 0.1 |  |  | 176.69 |
Awards forfeited |  | (0.1) |  |  | 117.15 |
Awards vested |  | (0.2) |  |  | 88.81 |
Unvested at January 3, 2025 |  | 0.4 |  |  | $ | 123.89 |
The weighted average grant date fair value for performance-based stock, excluding those with a market condition, during fiscal 2024, 2023 and 2022 was $130.15, $93.90 and $105.07, respectively. The weighted average grant date fair value for performance-based stock with market conditions that were granted during fiscal 2024, 2023 and 2022 was $186.81, $108.38 and $129.42, respectively, and was calculated using the Monte Carlo simulation. The Monte Carlo simulation assumptions used for the periods presented were as follows:
|  | Year Ended
|  | January 3, 2025 |  | December 29, 2023 |  | December 30, 2022
Expected volatility |  | 24.86 | % |  | 26.35 | % |  | 33.18 | %
Risk free rate of return |  | 4.20 | % |  | 4.33 | % |  | 1.61 | %
Weighted average grant date stock price |  | $ | 130.15 |  |  | $ | 93.90 |  |  | $ | 107.67 |
As of January 3, 2025, there was $24 million of unrecognized compensation cost, net of estimated forfeitures, which is expected to be recognized over a weighted average period of 1.8 years. The fair value of performance-based stock awards that vested in fiscal 2024, 2023 and 2022 was $16 million, $12 million, and $17 million, respectively.

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