Leonardo DRS : Q1 Financial Results (96c55b)

Published: 2025-05-01 07:33:10 ET DRS

Published on 05/01/2025 at 07:33

Quarterly Earnings Presentation

Q1 | 2025

May 1, 2025

Solid start to 2025 with strong first quarter results ahead of company expectations

Organic revenue growth of 16% demonstrates attractive DRS market position and also reflects favorable material receipt timing

Adjusted EBITDA growth of 17% and margin expansion of 10 bps in the quarter

Improved free cash flow linearity on higher net profitability and improved working capital efficiency

Steadfast customer demand across the differentiated DRS technology and capability offering

Quarterly bookings of $1 billion, which translates to a 1.2x book-to-bill ratio

Broad-based customer demand remains evident throughout the portfolio with notable bookings strength for the company's advanced sensing, force protection and electric power and propulsion capabilities

No observable changes to date in customer behavior from operating under a full year continuing resolution

Executing in a more dynamic operating environment

Global threat environment remains elevated and continues to be a tailwind to US and allied defense spending

DRS remains well aligned to important customer priorities including layered air defense, counter UAS, improving shipbuilding throughput and technology modernization of combat platforms

Company's direct supply chain is primarily US-based but closely evaluating indirect impacts from potential tariffs and related policies

Full year 2025 outlook, that reflects an attractive organic growth profile and modest margin expansion, remains unchanged

Maintaining a strong focus on efficient program execution to deliver adjusted EBITDA growth and margin expansion

Executing on commitment to grow internal investments in research and development to expand rapid prototype approach

Commenced return of capital to shareholders via the cash dividend and stock repurchase program, while maintaining capacity for M&A

Revenue

(Dollars in millions)

Adjusted EBITDA *

(Dollars in millions)

Adjusted Net Earnings *

(Dollars in millions)

$688

▲ 16%

Healthy growth from ground and naval network computing, tactical radar, and electric power and propulsion programs

$799

Q1 '24 Q1 '25

$82

$70

▲ 17%

Adjusted EBITDA growth largely from higher volume

Q1 '24 Q1 '25

$54

$38

▲ 42%

Solid operational performance along with lower interest expense and a lower effective tax rate drove the growth

Q1 '24 Q1 '25

Total Backlog

(Dollars in millions)

Adjusted EBITDA Margin *

Adjusted Diluted EPS *

$7,845 ▲ 10%

Steady customer demand translated into another sizeable bookings quarter and pushed backlog to a new company record

$8,612

$0.20

$0.14

▲ 43%

10.2%

10.3%

▲ 10 bps

Improved adjusted EBITDA margin came from net favorable contract adjustments

and higher volume

Q1 '24 Q1 '25

* See slide 7 "Non-GAAP Financial Measures" for definitions and reconciliations of the non-GAAP financial measures to the most comparable financial measures calculated and presented in accordance with GAAP 4

Revenue

(Dollars in millions)

Adjusted EBITDA *

(Dollars in millions)

Adjusted EBITDA Margin *

$511

$433

▲ 18%

Tactical radar as well as ground and naval network computing programs drove growth in the quarter

$41

$42

▲ 2%

Higher volume was mostly offset by discrete infrared sensing programmatic cost growth from certain raw materials

9.5%

▼ 130 bps

8.2%

Q1 '24 Q1 '25

$261

▲ 11%

Broad-based segment growth across electric power and propulsion as well as force protection programs

$291

Q1 '24 Q1 '25

$40

$29

▲ 38%

Favorable contract adjustments, improved program execution and higher volume propelled adjusted EBITDA growth and margin expansion

Q1 '24 Q1 '25

13.7%

11.1%

▲ 260 bps

Q1 '24 Q1 '25

Confirms Strong 2025 Guidance

High visibility and backlog coverage for 2025

Variability in revenue output subject to the pace of material receipts and progress of labor inputs as well as the timing and level of customer orders

Revenue

Projected margin improvement driven by improved profitability on Columbia Class, continued transition from development to production on smaller sensing programs, favorable program mix and operational leverage from higher volume

Adjusted EBITDA

% Δ from 2024

Tax Rate

Diluted Shares Outstanding

% Δ from 2024

10% - 16%

$1.02 - $1.08

Adjusted Diluted EPS *

9% - 14%

19%

270

$435 - $455

Adjusted EBITDA *

6% - 9%

$3,425 - $3,525

Revenue

2025 Guidance

(In millions, except per share amounts)

Forecasting an effective tax rate of 19% for the year

Modest increase to diluted shares outstanding from 2024

Stock buyback program expected to be a slight tailwind to the adjusted diluted EPS range

Adjusted

Diluted EPS

Targeting approximately 80% free cash flow conversion of

adjusted net earnings

Q4 expected to contribute significantly to full year revenue, adjusted EBITDA, adjusted net earnings and free cash flow

Other Modeling Items

* 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 non-GAAP exclusions that are necessary for such reconciliation 6

without unreasonable effort. Material changes to any one of these items could have a significant effect on future GAAP results

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

Income tax provision

Amortization of intangibles

Interest expense

Deal related transaction costs

Amortization of intangibles

Restructuring costs

Depreciation

Other one-time non-operational events

Deal related transaction costs

Tax effect of adjustments (1)

(2)

(1)

Restructuring costs

Adjusted Net Earnings

$38

$54

Other one-time non-operational events

Adjusted EBITDA

$70

$82

Diluted WASO

266.443

268.775

Adjusted EBITDA Margin

10.2%

10.3%

Diluted earnings per share

$0.11

$0.19

(1) Calculation uses an estimated statutory tax rate on non-GAAP adjustments

Adjusted Diluted EPS

$0.14

$0.20

(Dollars in millions) (In millions, except per share amounts)

Three Months Ended

March 31,

2024

2025

Net earnings

$29

$50

Three Months Ended

March 31,

2024

2025

Net earnings

$29

$50

Disclaimer

Leonardo DRS Inc. published this content on May 01, 2025, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 01, 2025 at 11:32 UTC.