Leonardo DRS Announces Financial Results for Second Quarter 2024

Rhea-AI Summary

Leonardo DRS (Nasdaq: DRS) reported strong Q2 2024 financial results, with revenue up 20% year-over-year to $753 million. Net earnings increased 9% to $38 million, while adjusted EBITDA grew 32% to $82 million. The company saw significant growth in bookings and backlog, with a book-to-bill ratio of 1.2x and backlog up 82% year-over-year to $7.9 billion.

Key drivers of growth included advanced infrared sensing, electric power and propulsion, and tactical radar programs. Both the Advanced Sensing and Computing (ASC) and Integrated Mission Systems (IMS) segments showed strong performance. Based on these results, Leonardo DRS has increased its 2024 guidance, projecting revenue between $3,075 million and $3,175 million, and adjusted diluted EPS of $0.82 to $0.88.

Positive

• Revenue increased 20% year-over-year to $753 million
• Adjusted EBITDA grew 32% to $82 million
• Backlog up 82% year-over-year to $7.9 billion
• Book-to-bill ratio of 1.2x indicates strong future revenue potential
• Increased 2024 guidance across metrics
• ASC segment showed 22% revenue growth and 230 bps EBITDA margin expansion

Negative

• IMS segment experienced 130 bps EBITDA margin contraction due to unfavorable program mix
• Less efficient execution in a ground surveillance integration program affected IMS segment performance

Insights

Financial Analyst

Leonardo DRS's Q2 2024 results showcase robust financial performance across key metrics. The 20% year-over-year revenue growth to $753 million is particularly impressive, driven by advanced infrared sensing, electric power and propulsion and tactical radar programs. This growth outpaces many defense sector peers, indicating strong market positioning.

The company's profitability metrics are equally strong. Adjusted EBITDA grew 32% to $82 million, with margins expanding 100 basis points to 10.9%. This suggests improved operational efficiency and potentially favorable contract terms. The adjusted diluted EPS increase of 20% to $0.18 further underscores the company's ability to translate top-line growth into shareholder value.

Notably, the book-to-bill ratio of 1.2x and the 82% year-over-year increase in backlog to $7.9 billion are strong indicators of future revenue growth. This robust order intake suggests sustained demand for Leonardo DRS's technologies, particularly in advanced sensing and computing.

The company's decision to raise its 2024 guidance across all metrics is a bullish signal. The new revenue guidance of $3,075 million to $3,175 million represents a significant increase from the previous range, reflecting management's confidence in continued strong performance.

However, investors should note the slight margin contraction in the Integrated Mission Systems segment, which warrants monitoring in future quarters. Overall, Leonardo DRS's Q2 results and raised guidance paint a picture of a company with strong momentum and favorable industry tailwinds.

Defense Technology Expert

Leonardo DRS's Q2 results reflect the current robust demand for advanced defense technologies, particularly in key areas like infrared sensing and electric power and propulsion systems. The 22% revenue growth in the Advanced Sensing and Computing (ASC) segment underscores the increasing importance of these technologies in modern warfare and defense strategies.

The company's strong performance in advanced infrared sensing and tactical radar programs aligns with the broader trend of increased investment in intelligence, surveillance and reconnaissance (ISR) capabilities by military forces globally. This trend is likely to continue, given the evolving nature of warfare and the need for enhanced situational awareness.

The 18% growth in the Integrated Mission Systems (IMS) segment, driven by electric power and propulsion capabilities, points to the growing emphasis on energy efficiency and advanced propulsion systems in naval applications. The positive trend in the Columbia Class program is particularly noteworthy, as it represents a critical component of the U.S. Navy's future strategic deterrence capabilities.

However, the execution challenges mentioned in the ground surveillance integration program within the IMS segment highlight the complexities involved in developing and integrating advanced defense systems. This is an area that requires careful attention, as such challenges can impact profitability and potentially lead to program delays.

The substantial increase in backlog to $7.9 billion suggests that Leonardo DRS is well-positioned to capitalize on the ongoing modernization efforts across various military branches. This backlog provides a solid foundation for future growth and demonstrates the company's strong competitive position in key defense technology areas.

• Revenue: $753 million, up 20% year-over-year
• Net Earnings: $38 million, up 9% year-over-year
• Adjusted EBITDA: $82 million, up 32% year-over-year
• Diluted EPS: $0.14, up 8% year-over-year
• Adjusted Diluted EPS: $0.18, up 20% year-over-year
• Bookings: $941 million (book-to-bill ratio of 1.2x)
• Backlog: $7.9 billion, up 82% year-over-year
• Increases 2024 guidance across metrics

ARLINGTON, Va.--(BUSINESS WIRE)-- Leonardo DRS, Inc. (Nasdaq: DRS), a leading provider of advanced defense technologies, today reported financial results for the second quarter 2024, which ended June 30, 2024.

CEO Commentary

“Our strong second quarter 2024 results reflect the solid momentum evident across the business. Healthy customer demand continues to propel our bookings and backlog growth. This demand along with an improving supply chain is unlocking revenue growth above our expectations. Overall, I am pleased with our year-to-date performance, however, we are maintaining a clear focus on execution to deliver on our commitments to customers and shareholders,” said Bill Lynn, Chairman and CEO of Leonardo DRS.

Summary Financial Results
(In millions, except per share amounts)	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2024				2023				Change			2024				2023				Change
Revenues	$	753			$	628			20	%		$	1,441			$	1,197			20	%
Net Earnings	$	38			$	35			9	%		$	67			$	47			43	%
Diluted WASO		267.457				263.675							266.906				263.126
Diluted Earnings Per Share (EPS)	$	0.14			$	0.13			8	%		$	0.25			$	0.18			39	%
Non-GAAP Financial Measures (1)
Adjusted EBITDA	$	82			$	62			32	%		$	152			$	111			37	%
Adjusted EBITDA Margin		10.9	%			9.9	%		100 bps				10.5	%			9.3	%		120 bps
Adjusted Net Earnings	$	47			$	39			21	%		$	85			$	58			47	%
Adjusted Diluted EPS	$	0.18			$	0.15			20	%		$	0.32			$	0.22			45	%
(1) The company reports its financials in accordance with U.S. generally accepted accounting principles (“GAAP”). Information about the company’s use of non-GAAP financial measures, including a reconciliation of the non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with U.S. GAAP, is provided under "Non-GAAP Financial Measures."

Leonardo DRS continued to deliver remarkable year-over-year revenue growth, which stood at 20% for the second quarter. Our programs related to advanced infrared sensing, electric power and propulsion and tactical radars were key drivers behind the robust revenue growth in the quarter.

Higher volume spurred the significant year-over-year adjusted EBITDA growth and margin expansion in the quarter. Quarterly net earnings, adjusted net earnings, diluted EPS and adjusted diluted EPS were all higher as a result of strong operational performance, which outweighed a higher tax rate and expense compared to the prior year.

Cash Flow and Balance Sheet

Net cash flow provided by operating activities was $34 million for the second quarter. The company's free cash flow generation was $1 million in the quarter. The operating and free cash flow trends were largely consistent with the historical patterns of the business but showed year-over-year improvement on both metrics due to increased profitability and better working capital efficiency.

At quarter end, the balance sheet had $149 million of cash and $208 million of outstanding borrowings under the company’s credit facility, which provides the company with sufficient financial capacity to deploy capital for growth, while maintaining a healthy balance sheet.

Bookings and Backlog
(Dollars in millions)	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023
Bookings	$	941		$	698		$	1,756		$	1,447
Book-to-Bill	1.2x			1.1x			1.2x			1.2x
Backlog	$	7,925		$	4,357		$	7,925		$	4,357

The company received $941 million in new funded awards during the quarter. The bookings strength came from healthy customer demand for our differentiated technologies and solutions in advanced infrared sensing, electric power and propulsion, ground network computing as well as ground systems integration. At quarter end, backlog stood at a record of $7.9 billion, representing an 82% increase year-over-year.

Segment Results
Advanced Sensing and Computing (“ASC”) Segment
(Dollars in millions)	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2024				2023				Change			2024				2023				Change
Revenues	$	492			$	404			22	%		$	925			$	795			16	%
Adjusted EBITDA	$	55			$	36			53	%		$	96			$	73			32	%
Adjusted EBITDA Margin		11.2	%			8.9	%		230 bps				10.4	%			9.2	%		120 bps
Bookings	$	616			$	469						$	1,203			$	873
Book-to-Bill	1.3x				1.2x							1.3x				1.1x

ASC bookings continued to exceed expectations with solid demand for our advanced infrared sensing as well as our naval and ground network computing technologies. Revenue growth on advanced infrared sensing and tactical radar programs were the major contributors for the year-over-year increase in the segment. Favorable program mix, improved program execution and higher volume drove the adjusted EBITDA growth and margin expansion for the quarter.

Integrated Mission Systems (“IMS”) Segment
(Dollars in millions)	Three Months Ended											Six Months Ended
	June 30,											June 30,
	2024				2023				Change				2024				2023			Change
Revenues	$	266			$	226			18	%		$	527			$	415			27	%
Adjusted EBITDA	$	27			$	26			4	%		$	56			$	38			47	%
Adjusted EBITDA Margin		10.2	%			11.5	%		(130) bps				10.6	%			9.2	%		140 bps
Bookings	$	325			$	229						$	553			$	574
Book-to-Bill	1.2x				1.0x							1.0x				1.4x

Strong IMS bookings were driven by healthy demand for our electric power and propulsion capabilities. Drivers for quarterly revenue growth were broad-based and came from increases in our electric power and propulsion, force protection and ground systems integration programs. While adjusted EBITDA increased as a result of higher volume, unfavorable program mix and less efficient execution related to a ground surveillance integration program led to margin contraction in Q2. Our Columbia Class program continued to trend positively with significantly improved year-over-year profitability.

2024 Guidance

Leonardo DRS is adjusting its 2024 guidance as specified in the table below:

Measure	Current 2024 Guidance		Prior 2024 Guidance
Revenue	$3,075 million - $3,175 million		$2,925 million - $3,025 million
Adjusted EBITDA	$375 million - $395 million		$365 million - $390 million
Tax Rate	20.5%		22.5%
Diluted Shares Outstanding	268.0 million		268.0 million
Adjusted Diluted EPS	$0.82 - $0.88		$0.74 - $0.82

The company does not provide a reconciliation of forward-looking adjusted EBITDA and adjusted diluted EPS, due to the inherent difficulty in forecasting and quantifying the adjustments that are necessary to calculate such non-GAAP measures without unreasonable effort. Material changes to any one of these items could have a significant effect on future GAAP results.

Conference Call

Leonardo DRS management will host a conference call beginning at 10:00 a.m. ET on July 30, 2024 to discuss the financial results for its second quarter 2024.

A live audio broadcast of the conference call along with a supplemental presentation will be available to the public through links on the Leonardo DRS Investor Relations website (https://investors.leonardodrs.com).

A replay of the conference call will be available on the Leonardo DRS website approximately 2 hours after the conclusion of the conference call.

About Leonardo DRS

Headquartered in Arlington, VA, Leonardo DRS, Inc. is an innovative and agile provider of advanced defense technology to U.S. national security customers and allies around the world. We specialize in the design, development and manufacture of advanced sensing, network computing, force protection, and electric power and propulsion, and other leading mission-critical technologies. Our innovative people are leading the way in developing disruptive technologies for autonomous, dynamic, interconnected, and multi-domain capabilities to defend against new and emerging threats. For more information and to learn more about our full range of capabilities, visit www.LeonardoDRS.com.

Forward-Looking Statements

In this press release, when using the terms the “company”, “DRS”, “we”, “us” and “our,” unless otherwise indicated or the context otherwise requires, we are referring to Leonardo DRS, Inc. This press release contains forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “strives,” “targets,” “projects,” “guidance,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this press release and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial goals, financial position, results of operations, cash flows, prospects, strategies or expectations, and the impact of prevailing economic conditions.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if future performance and outcomes are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation: disruptions or deteriorations in our relationship with the relevant agencies of the U.S. government, as well as any failure to pass routine audits or otherwise comply with governmental requirements including those related to security clearance or procurement rules, including the False Claims Act; significant delays or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly; any failure to comply with the proxy agreement with the U.S. Department of Defense; our relationships with other industry participants, including any contractual disputes or the inability of our key suppliers to timely deliver our components, parts or services; failure to properly contain a global pandemic in a timely manner could materially affect how we and our business partners operate; the effect of inflation on our supply chain and/or our labor costs; our mix of fixed-price, cost-plus and time-and-material type contracts and any resulting impact on our cash flows due to cost overruns; failure to properly comply with various covenants of the agreements governing our debt could negatively impact our business; our dependence on U.S. government contracts, which often are only partially funded and are subject to immediate termination, some of which are classified, and the concentration of our customer base in the U.S. defense industry; our use of estimates in pricing and accounting for many of our programs that are inherently uncertain and which may not prove to be accurate; our ability to realize the full value of our backlog; our ability to predict future capital needs or to obtain additional financing if we need it; our ability to respond to the rapid technological changes in the markets in which we compete; the effect of global and regional economic downturns and rising interest rates; our ability to meet the requirements of being a public company; our ability to maintain an effective system of internal control over financial reporting; our inability to appropriately manage our inventory; our inability to fully realize the value of our total estimated contract value or bookings; our ability to compete efficiently, including due to U.S. government organizational conflict of interest rules which may limit new contract opportunities or require us to wind down existing contracts; our relationships with other industry participants, including any contractual disputes or the inability of our key suppliers to timely deliver our components, parts or services; preferences for set-asides for minority-owned, small and small disadvantaged businesses could impact our ability to be a prime contractor; any failure to meet our contractual obligations including due to potential impacts to our business from supply chain risks, such as longer lead times and shortages of electronics and other components; any security breach, including any cyber-attack, cyber intrusion, insider threat, or other significant disruption of our IT networks and related systems, or those of our customers, suppliers, vendors, subcontractors, partners, or other third parties, as well as any act of terrorism or other threat to our physical security and personnel; our ability to fully exploit or obtain patents or other intellectual property protections necessary to secure our proprietary technology, including our ability to avoid infringing upon the intellectual property of third parties or prevent third parties from infringing upon our own intellectual property; the conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate which may impact our reputation and ability to do business; our compliance with environmental laws and regulations, and any environmental liabilities that may affect our reputation or financial position; the outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved; various geopolitical and economic factors, laws and regulations including the Foreign Corrupt Practices Act, the Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations, and those that we are exposed to as a result of our international business, including their impact on our ability to access certain raw materials; geopolitical conflicts, including the war in Israel have the potential to evolve quickly creating uncertainty in the world and broader Middle East region specifically, along with the potential for disruptions to our Israeli operations including, but not limited to, workforce calls for duty, transportation and other logistical impacts and reduced customer confidence; our ability to obtain export licenses necessary to conduct certain operations abroad, including any attempts by Congress to prevent proposed sales to certain foreign governments; our ability to attract and retain technical and other key personnel; the occurrence of prolonged work stoppages; the unavailability or inadequacy of our insurance coverage, customer indemnifications or other liability protections to cover all of our significant risks or to pay for material losses we incur; future changes in U.S. tax laws and regulations or interpretations thereof; certain limitations on our ability to use our net operating losses to offset future taxable income; termination of our leases or our inability to renew our leases on acceptable terms; changes in estimates used in accounting for our pension plans, including in respect of the funding status thereof; changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired; adverse consequences from any acquisitions such as operating difficulties, dilution and other harmful consequences or any modification, delay or prevention of any future acquisition or investment activity by the Committee on Foreign Investment in the United States; natural disasters or other significant disruptions; or any conflict of interest that may arise because Leonardo US Holding, LLC, our majority stockholder, or Leonardo S.p.A., our ultimate majority stockholder, may have interests that are different from, or conflict with, those of our other stockholders, including as a result of any ongoing business relationships Leonardo S.p.A. may have with us, and their significant ownership in us may discourage change of control transactions (our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A); or our obligations to provide certain services to Leonardo S.p.A., which may divert human and financial resources from our business.

You should read this press release completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this press release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this filing, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

Other risks, uncertainties and factors, including those discussed in our latest SEC filings under “Risk Factors” of our latest Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, all of which may be viewed or obtained through the investor relations section of our website at www.LeonardoDRS.com, could cause our actual results to differ materially from those projected in any forward-looking statements we make. Readers should read the discussion of these factors carefully to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

Consolidated Statements of Earnings (Unaudited)
(Dollars in millions, except per share amounts)	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2024				2023				2024				2023
Revenues:
Products	$	731			$	590			$	1,354			$	1,110
Services		22				38				87				87
Total revenues		753				628				1,441				1,197
Cost of revenues:
Products		(572	)			(458	)			(1,060	)			(861	)
Services		(12	)			(25	)			(59	)			(60	)
Total cost of revenues		(584	)			(483	)			(1,119	)			(921	)
Gross profit		169				145				322				276
General and administrative expenses		(107	)			(90	)			(208	)			(190	)
Amortization of intangibles		(6	)			(5	)			(11	)			(11	)
Other operating expenses, net		(1	)			(8	)			(5	)			(8	)
Operating earnings		55				42				98				67
Interest expense		(7	)			(9	)			(12	)			(17	)
Other, net		(1	)			—				(2	)			(1	)
Earnings before taxes		47				33				84				49
Income tax provision (benefit)		9				(2	)			17				2
Net earnings	$	38			$	35			$	67			$	47
Net earnings per share from common stock:
Basic earnings per share	$	0.14			$	0.14			$	0.25			$	0.18
Diluted earnings per share	$	0.14			$	0.13			$	0.25			$	0.18

Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share amounts)					June 30,				December 31,
					2024				2023
ASSETS
Current assets:
Cash and cash equivalents					$	149			$	467
Accounts receivable, net						188				151
Contract assets						1,037				908
Inventories						367				329
Prepaid expenses						31				21
Other current assets						33				42
Total current assets						1,805				1,918
Noncurrent assets:
Property, plant and equipment, net						419				402
Intangible assets, net						144				151
Goodwill						1,238				1,238
Deferred tax assets						122				123
Other noncurrent assets						91				89
Total noncurrent assets						2,014				2,003
Total assets					$	3,819			$	3,921
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt					$	22			$	57
Accounts payable						263				398
Contract liabilities						348				335
Other current liabilities						263				288
Total current liabilities						896				1,078
Noncurrent liabilities:
Long-term debt						351				349
Pension and other postretirement benefit plan liabilities						36				36
Deferred tax liabilities						4				4
Other noncurrent liabilities						126				129
Total noncurrent liabilities						517				518
Shareholders' equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued						—				—
Common stock, $0.01 par value: 350,000,000 shares authorized; 263,660,716 and 262,525,390 issued and outstanding as of June 30, 2024 and December 31, 2023, respectively						3				3
Additional paid-in capital						5,189				5,175
Accumulated deficit						(2,739	)			(2,806	)
Accumulated other comprehensive loss						(47	)			(47	)
Total shareholders' equity						2,406				2,325
Total liabilities and shareholders' equity					$	3,819			$	3,921

Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions)					Six Months Ended
					June 30,
					2024		2023
Operating activities
Net earnings					$67		$47
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization					45		42
Deferred income taxes					1		6
Share-based compensation expense					11		8
Other					1		—
Changes in assets and liabilities:
Accounts receivable					(37)		(32)
Contract assets					(129)		(146)
Inventories					(38)		(59)
Prepaid expenses					(10)		3
Other current assets					9		(25)
Other noncurrent assets					14		6
Defined benefit obligations					—		(2)
Other current liabilities					(28)		(91)
Other noncurrent liabilities					(15)		5
Accounts payable					(135)		(167)
Contract liabilities					13		59
Net cash used in operating activities					($231)		($346)
Investing activities
Capital expenditures					(44)		(27)
Proceeds from sales of assets					—		1
Net cash used in investing activities					($44)		($26)
Financing activities
Net decrease in third party borrowings (maturities of 90 days or less)					(35)		(4)
Repayment of third party debt					(141)		(291)
Borrowings of third party debt					135		395
Proceeds from stock issuance					7		6
Cash outlay to reacquire equity instruments					(4)		(1)
Other					(5)		(4)
Net cash (used in) provided by financing activities					($43)		$101
Effect of exchange rate changes on cash and cash equivalents					—		—
Net decrease in cash and cash equivalents					($318)		($271)
Cash and cash equivalents at beginning of year					467		306
Cash and cash equivalents at end of period					$149		$35

Non-GAAP Financial Measures (Unaudited)

In addition to the results reported in accordance with U.S. GAAP included throughout this document, the company has provided information regarding “Adjusted EBITDA,” “Adjusted EBITDA Margin,” “Adjusted Net Earnings,” “Adjusted Diluted Earnings Per Share” and “Free Cash Flow” (each, a non-GAAP financial measure).

We believe the non-GAAP financial measures presented in this document will help investors understand our financial condition and operating results and assess our future prospects. We believe these non-GAAP financial measures, each of which is discussed in greater detail below, are important supplemental measures because they exclude unusual or non-recurring items as well as non-cash items that are unrelated to or may not be indicative of our ongoing operating results. Further, when read in conjunction with our GAAP results, these non-GAAP financial measures provide a baseline for analyzing trends in our underlying businesses and can be used by management as a tool to help make financial, operational and planning decisions. Finally, these measures are often used by analysts and other interested parties to evaluate companies in our industry by providing more comparable measures that are less affected by factors such as capital structure.

We recognize that these non-GAAP financial measures have limitations, including that they may be calculated differently by other companies or may be used under different circumstances or for different purposes, thereby affecting their comparability from company to company. In order to compensate for these and the other limitations discussed below, management does not consider these measures in isolation from or as alternatives to the comparable financial measures determined in accordance with U.S. GAAP. Readers should review the reconciliations below and should not rely on any single financial measure to evaluate our business.

We define these non-GAAP financial measures as:

Adjusted EBITDA and Adjusted EBITDA Margin are defined as net earnings before income taxes, interest expense, amortization of acquired intangible assets, depreciation, deal-related transaction costs, restructuring costs and other one-time non-operational events (which include non-service pension expense, legal liability accrual reversals and foreign exchange impacts), then in the case of adjusted EBITDA margin dividing adjusted EBITDA by revenues.

(Dollars in millions)	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2024				2023				2024				2023
Net earnings	$	38			$	35			$	67			$	47
Income tax provision (benefit)		9				(2	)			17				2
Interest expense		7				9				12				17
Amortization of intangibles		6				5				11				11
Depreciation		17				15				34				31
Deal-related transaction costs		3				1				4				3
Restructuring costs		1				8				5				8
Other one-time non-operational events		1				(9	)			2				(8	)
Adjusted EBITDA	$	82			$	62			$	152			$	111
Adjusted EBITDA Margin		10.9	%			9.9	%			10.5	%			9.3	%

Adjusted Net Earnings and Adjusted Diluted EPS are defined as net earnings excluding amortization of acquired intangible assets, deal-related transaction costs, restructuring costs and other one-time non-operational events (which include non-service pension expense, legal liability accrual reversals and foreign exchange impacts), and the related tax impacts, then in the case of adjusted diluted EPS dividing adjusted net earnings by the diluted weighted average shares outstanding.

(In millions, except per share amounts)	Three Months Ended								Six Months Ended
	June 30,								June 30,
	2024				2023				2024				2023
Net earnings	$	38			$	35			$	67			$	47
Amortization of intangibles		6				5				11				11
Deal-related transaction costs		3				1				4				3
Restructuring costs		1				8				5				8
Other one-time non-operational events		1				(9	)			2				(8	)
Tax effect of adjustments (1)		(2	)			(1	)			(4	)			(3	)
Adjusted Net Earnings	$	47			$	39			$	85			$	58
Per share information
Diluted weighted average common shares		267.457				263.675				266.906				263.126
Diluted EPS	$	0.14			$	0.13			$	0.25			$	0.18
Adjusted Diluted EPS	$	0.18			$	0.15			$	0.32			$	0.22
(1) Calculation uses an estimated statutory tax rate on non-GAAP adjustments.

Free Cash Flow is defined as the sum of the cash flows provided by (used in) operating activities, transaction-related expenditures (net of tax), capital expenditures and proceeds from sale of assets.

(Dollars in millions)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2024		2023		2024		2023
Net cash provided by (used in) operating activities	$34		($12)		($231)		($346)
Transaction-related expenditures, net of tax	1		14		1		16
Capital expenditures	(34)		(12)		(44)		(27)
Proceeds from sales of assets	—		—		—		1
Free Cash Flow	$1		($10)		($274)		($356)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240730350422/en/

Investors

Steve Vather

SVP, Investor Relations & Corporate Finance

+1 703 409 2906

stephen.vather@drs.com

Media

Michael Mount

VP, Communications & Public Affairs

+1 571 447 4624

mmount@drs.com

Source: Leonardo DRS, Inc.

FAQ

What was Leonardo DRS's revenue for Q2 2024?

Leonardo DRS reported revenue of $753 million for Q2 2024, representing a 20% increase year-over-year.

How much did Leonardo DRS's backlog grow in Q2 2024?

Leonardo DRS's backlog grew to $7.9 billion, representing an 82% increase year-over-year.

What is Leonardo DRS's updated revenue guidance for 2024?

Leonardo DRS increased its 2024 revenue guidance to between $3,075 million and $3,175 million.

Which segments drove Leonardo DRS's growth in Q2 2024?

The Advanced Sensing and Computing (ASC) and Integrated Mission Systems (IMS) segments were key drivers of growth, with strong performance in advanced infrared sensing, electric power and propulsion, and tactical radar programs.