Leonardo DRS Announces Financial Results for Third Quarter 2024
-
Revenue:
$812 million , up 16% year-over-year -
Net Earnings:
$57 million , up 21% year-over-year -
Adjusted EBITDA:
$100 million , up 22% year-over-year -
Diluted EPS:
$0.21 , up 17% year-over-year -
Adjusted Diluted EPS:
$0.24 , up 20% year-over-year -
Bookings:
$1.1 billion (book-to-bill ratio of 1.3x) -
Backlog:
$8.3 billion , up 75% year-over-year - Raises 2024 guidance across all metrics
- Initiates preliminary 2025 guidance framework
CEO Commentary
“We delivered strong third quarter results, highlighted by robust bookings, mid-teens organic revenue growth, increases to all of our key profit metrics and healthy free cash flow generation. Our strategy, execution focus and steadfast commitment to our customers are driving outcomes that continue to exceed our expectations,” said
Summary Financial Results
(In millions, except per share amounts) |
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
|
2023 |
|
|
Change |
||
Revenues |
$ |
812 |
|
|
$ |
703 |
|
|
16 |
% |
|
$ |
2,253 |
|
|
$ |
1,900 |
|
|
19 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net Earnings |
$ |
57 |
|
|
$ |
47 |
|
|
21 |
% |
|
$ |
124 |
|
|
$ |
94 |
|
|
32 |
% |
Diluted weighted average number of shares outstanding (WASO) |
|
268.299 |
|
|
|
265.000 |
|
|
|
|
|
267.357 |
|
|
|
263.675 |
|
|
|
||
Diluted Earnings Per Share (EPS) |
$ |
0.21 |
|
|
$ |
0.18 |
|
|
17 |
% |
|
$ |
0.46 |
|
|
$ |
0.36 |
|
|
28 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Non-GAAP Financial Measures (1) |
|
|
|
|
|
||||||||||||||||
Adjusted EBITDA |
$ |
100 |
|
|
$ |
82 |
|
|
22 |
% |
|
$ |
252 |
|
|
$ |
193 |
|
|
31 |
% |
Adjusted EBITDA Margin |
|
12.3 |
% |
|
|
11.7 |
% |
|
60 bps |
|
|
11.2 |
% |
|
|
10.2 |
% |
|
100 bps |
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Adjusted Net Earnings |
$ |
64 |
|
|
$ |
53 |
|
|
21 |
% |
|
$ |
149 |
|
|
$ |
111 |
|
|
34 |
% |
Adjusted Diluted EPS |
$ |
0.24 |
|
|
$ |
0.20 |
|
|
20 |
% |
|
$ |
0.56 |
|
|
$ |
0.42 |
|
|
33 |
% |
(1) The company reports its financials in accordance with
Year-over-year revenue growth reflected strong continued momentum and was 16% for the third quarter 2024. In the quarter, our programs related to advanced infrared sensing, force protection and tactical radars were the primary catalysts for the solid revenue growth.
Higher volume was the primary driver for the year-over-year adjusted EBITDA growth and margin expansion in the quarter. Our volume expansion coupled with crisp operational performance translated to increases in our bottom-line metrics with quarterly net earnings, adjusted net earnings, diluted EPS and adjusted diluted EPS all higher compared to the prior year, despite a higher tax rate and expense.
Cash Flow and Balance Sheet
Net cash flow provided by operating activities was
Bookings and Backlog
(Dollars in millions) |
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
|
|
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Bookings |
$ |
1,051 |
|
$ |
1,055 |
|
$ |
2,807 |
|
$ |
2,502 |
Book-to-Bill |
1.3x |
|
1.5x |
|
1.2x |
|
1.3x |
||||
Backlog |
$ |
8,264 |
|
$ |
4,719 |
|
$ |
8,264 |
|
$ |
4,719 |
The company recorded
Segment Results
Advanced Sensing and Computing (“ASC”) Segment
(Dollars in millions) |
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
|
2023 |
|
|
Change |
||
Revenues |
$ |
533 |
|
|
$ |
431 |
|
|
24 |
% |
|
$ |
1,458 |
|
|
$ |
1,226 |
|
|
19 |
% |
Adjusted EBITDA |
$ |
64 |
|
|
$ |
48 |
|
|
33 |
% |
|
$ |
160 |
|
|
$ |
121 |
|
|
32 |
% |
Adjusted EBITDA Margin |
|
12.0 |
% |
|
|
11.1 |
% |
|
90 bps |
|
|
11.0 |
% |
|
|
9.9 |
% |
|
110 bps |
||
Bookings |
$ |
685 |
|
|
$ |
820 |
|
|
|
|
$ |
1,888 |
|
|
$ |
1,693 |
|
|
|
||
Book-to-Bill |
1.3x |
|
1.9x |
|
|
|
1.3x |
|
1.4x |
|
|
While ASC bookings for the third quarter were lower than the prior year, Q3 bookings continued to reflect solid customer demand for our naval network computing, advanced infrared sensing and tactical communications technologies. Revenue growth on advanced infrared sensing and tactical radar programs remained as 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.
(Dollars in millions) |
Three Months Ended |
|
|
|
Nine Months Ended |
|
|
||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
Change |
|
|
2024 |
|
|
|
2023 |
|
|
Change |
||
Revenues |
$ |
285 |
|
|
$ |
277 |
|
|
3 |
% |
|
$ |
812 |
|
|
$ |
692 |
|
|
17 |
% |
Adjusted EBITDA |
$ |
36 |
|
|
$ |
34 |
|
|
6 |
% |
|
$ |
92 |
|
|
$ |
72 |
|
|
28 |
% |
Adjusted EBITDA Margin |
|
12.6 |
% |
|
|
12.3 |
% |
|
30 bps |
|
|
11.3 |
% |
|
|
10.4 |
% |
|
90 bps |
||
Bookings |
$ |
366 |
|
|
$ |
235 |
|
|
|
|
$ |
919 |
|
|
$ |
809 |
|
|
|
||
Book-to-Bill |
1.3x |
|
0.8x |
|
|
|
1.1x |
|
1.2x |
|
|
Demand for our capabilities in electric power and propulsion and force protection drove quarterly bookings in the segment. The modest revenue growth in the segment reflects increases from our force protection programs. Adjusted EBITDA increased as a result of higher volume and slightly improved net program execution in Q3.
2024 Guidance
Leonardo DRS is increasing its 2024 guidance as specified in the table below:
Measure |
Current 2024 Guidance |
|
Prior 2024 Guidance |
Revenue |
|
|
|
Adjusted EBITDA |
|
|
|
Tax Rate |
19.0% |
|
20.5% |
Diluted WASO |
268.0 million |
|
268.0 million |
Adjusted Diluted EPS |
|
|
|
Preliminary 2025 Guidance Framework
The company is anticipating 5% to 8% revenue growth (off the current mid-point of the 2024 guidance range detailed above) at ~13% adjusted EBITDA margin. Consistent with past practice, Leonardo DRS expects to formalize its 2025 guidance in conjunction with the Q4 2024 earnings release in February.
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
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
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
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
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
Consolidated Statements of Earnings (Unaudited)
(Dollars in millions, except per share amounts) |
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Revenues: |
|
|
|
|
|
|
|
||||||||
Products |
$ |
762 |
|
|
$ |
651 |
|
|
$ |
2,116 |
|
|
$ |
1,761 |
|
Services |
|
50 |
|
|
|
52 |
|
|
|
137 |
|
|
|
139 |
|
Total revenues |
|
812 |
|
|
|
703 |
|
|
|
2,253 |
|
|
|
1,900 |
|
Cost of revenues: |
|
|
|
|
|
|
|
||||||||
Products |
|
(601 |
) |
|
|
(504 |
) |
|
|
(1,661 |
) |
|
|
(1,365 |
) |
Services |
|
(32 |
) |
|
|
(37 |
) |
|
|
(91 |
) |
|
|
(97 |
) |
Total cost of revenues |
|
(633 |
) |
|
|
(541 |
) |
|
|
(1,752 |
) |
|
|
(1,462 |
) |
Gross profit |
|
179 |
|
|
|
162 |
|
|
|
501 |
|
|
|
438 |
|
General and administrative expenses |
|
(98 |
) |
|
|
(96 |
) |
|
|
(306 |
) |
|
|
(286 |
) |
Amortization of intangibles |
|
(6 |
) |
|
|
(5 |
) |
|
|
(17 |
) |
|
|
(16 |
) |
Other operating expenses, net |
|
— |
|
|
|
(2 |
) |
|
|
(5 |
) |
|
|
(10 |
) |
Operating earnings |
|
75 |
|
|
|
59 |
|
|
|
173 |
|
|
|
126 |
|
Interest expense |
|
(5 |
) |
|
|
(10 |
) |
|
|
(17 |
) |
|
|
(27 |
) |
Other, net |
|
(1 |
) |
|
|
(1 |
) |
|
|
(3 |
) |
|
|
(2 |
) |
Earnings before taxes |
|
69 |
|
|
|
48 |
|
|
|
153 |
|
|
|
97 |
|
Income tax provision |
|
12 |
|
|
|
1 |
|
|
|
29 |
|
|
|
3 |
|
Net earnings |
$ |
57 |
|
|
$ |
47 |
|
|
$ |
124 |
|
|
$ |
94 |
|
|
|
|
|
|
|
|
|
||||||||
Net earnings per share from common stock: |
|
|
|
|
|
|
|
||||||||
Basic earnings per share |
$ |
0.22 |
|
|
$ |
0.18 |
|
|
$ |
0.47 |
|
|
$ |
0.36 |
|
Diluted earnings per share |
$ |
0.21 |
|
|
$ |
0.18 |
|
|
$ |
0.46 |
|
|
$ |
0.36 |
|
Consolidated Balance Sheets (Unaudited)
(Dollars in millions, except per share amounts) |
|
|
|
|
||||
|
|
|
2024 |
|
|
|
2023 |
|
ASSETS |
|
|
|
|
||||
Current assets: |
|
|
|
|
||||
Cash and cash equivalents |
|
$ |
198 |
|
|
$ |
467 |
|
Accounts receivable, net |
|
|
237 |
|
|
|
151 |
|
Contract assets |
|
|
997 |
|
|
|
908 |
|
Inventories |
|
|
363 |
|
|
|
329 |
|
Prepaid expenses |
|
|
29 |
|
|
|
21 |
|
Other current assets |
|
|
36 |
|
|
|
42 |
|
Total current assets |
|
|
1,860 |
|
|
|
1,918 |
|
Noncurrent assets: |
|
|
|
|
||||
Property, plant and equipment, net |
|
|
415 |
|
|
|
402 |
|
Intangible assets, net |
|
|
138 |
|
|
|
151 |
|
|
|
|
1,238 |
|
|
|
1,238 |
|
Deferred tax assets |
|
|
124 |
|
|
|
123 |
|
Other noncurrent assets |
|
|
86 |
|
|
|
89 |
|
Total noncurrent assets |
|
|
2,001 |
|
|
|
2,003 |
|
Total assets |
|
$ |
3,861 |
|
|
$ |
3,921 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
||||
Current liabilities: |
|
|
|
|
||||
Short-term borrowings and current portion of long-term debt |
|
$ |
22 |
|
|
$ |
57 |
|
Accounts payable |
|
|
292 |
|
|
|
398 |
|
Contract liabilities |
|
|
315 |
|
|
|
335 |
|
Other current liabilities |
|
|
251 |
|
|
|
288 |
|
Total current liabilities |
|
|
880 |
|
|
|
1,078 |
|
Noncurrent liabilities: |
|
|
|
|
||||
Long-term debt |
|
|
345 |
|
|
|
349 |
|
Pension and other postretirement benefit plan liabilities |
|
|
34 |
|
|
|
36 |
|
Deferred tax liabilities |
|
|
6 |
|
|
|
4 |
|
Other noncurrent liabilities |
|
|
122 |
|
|
|
129 |
|
Total noncurrent liabilities |
|
|
507 |
|
|
|
518 |
|
Shareholders' equity: |
|
|
|
|
||||
Preferred stock, |
|
|
— |
|
|
|
— |
|
Common stock, |
|
|
3 |
|
|
|
3 |
|
Additional paid-in capital |
|
|
5,200 |
|
|
|
5,175 |
|
Accumulated deficit |
|
|
(2,682 |
) |
|
|
(2,806 |
) |
Accumulated other comprehensive loss |
|
|
(47 |
) |
|
|
(47 |
) |
Total shareholders' equity |
|
|
2,474 |
|
|
|
2,325 |
|
Total liabilities and shareholders' equity |
|
$ |
3,861 |
|
|
$ |
3,921 |
|
Consolidated Statements of Cash Flows (Unaudited)
(Dollars in millions) |
|
Nine Months Ended |
||||
|
|
|
||||
|
|
2024 |
|
2023 |
||
Operating activities |
|
|
|
|
||
Net earnings |
|
|
|
|
|
|
Adjustments to reconcile net earnings to net cash used in operating activities: |
|
|
|
|
||
Depreciation and amortization |
|
68 |
|
|
63 |
|
Deferred income taxes |
|
1 |
|
|
(13 |
) |
Share-based compensation expense |
|
16 |
|
|
12 |
|
Other |
|
1 |
|
|
1 |
|
Changes in assets and liabilities: |
|
|
|
|
||
Accounts receivable |
|
(86 |
) |
|
(34 |
) |
Contract assets |
|
(89 |
) |
|
(189 |
) |
Inventories |
|
(34 |
) |
|
(64 |
) |
Prepaid expenses |
|
(8 |
) |
|
3 |
|
Other current assets |
|
6 |
|
|
(8 |
) |
Other noncurrent assets |
|
14 |
|
|
13 |
|
Defined benefit obligations |
|
(2 |
) |
|
(8 |
) |
Other current liabilities |
|
(36 |
) |
|
(82 |
) |
Other noncurrent liabilities |
|
(21 |
) |
|
6 |
|
Accounts payable |
|
(106 |
) |
|
(129 |
) |
Contract liabilities |
|
(20 |
) |
|
25 |
|
Net cash used in operating activities |
|
( |
) |
|
( |
) |
Investing activities |
|
|
|
|
||
Capital expenditures |
|
(56 |
) |
|
(42 |
) |
Proceeds from sales of assets |
|
1 |
|
|
— |
|
Net cash used in investing activities |
|
( |
) |
|
( |
) |
Financing activities |
|
|
|
|
||
Net decrease in third party borrowings (maturities of 90 days or less) |
|
(35 |
) |
|
(11 |
) |
Repayment of third party debt |
|
(238 |
) |
|
(454 |
) |
Borrowings of third party debt |
|
230 |
|
|
555 |
|
Proceeds from stock issuance |
|
13 |
|
|
8 |
|
Cash outlay to reacquire equity instruments |
|
(4 |
) |
|
(1 |
) |
Other |
|
(8 |
) |
|
(4 |
) |
Net cash (used in) provided by financing activities |
|
( |
) |
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
— |
|
|
— |
|
Net decrease in cash and cash equivalents |
|
( |
) |
|
( |
) |
Cash and cash equivalents at beginning of year |
|
467 |
|
|
306 |
|
Cash and cash equivalents at end of period |
|
|
|
|
|
|
Non-GAAP Financial Measures (Unaudited)
In addition to the results reported in accordance with
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
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 |
|
Nine Months Ended |
||||||||||||
|
|
|
|
||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net earnings |
$ |
57 |
|
|
$ |
47 |
|
|
$ |
124 |
|
|
$ |
94 |
|
Income tax provision |
|
12 |
|
|
|
1 |
|
|
|
29 |
|
|
|
3 |
|
Interest expense |
|
5 |
|
|
|
10 |
|
|
|
17 |
|
|
|
27 |
|
Amortization of intangibles |
|
6 |
|
|
|
5 |
|
|
|
17 |
|
|
|
16 |
|
Depreciation |
|
17 |
|
|
|
16 |
|
|
|
51 |
|
|
|
47 |
|
Deal-related transaction costs |
|
1 |
|
|
|
1 |
|
|
|
5 |
|
|
|
4 |
|
Restructuring costs |
|
— |
|
|
|
2 |
|
|
|
5 |
|
|
|
10 |
|
Other one-time non-operational events |
|
2 |
|
|
|
— |
|
|
|
4 |
|
|
|
(8 |
) |
Adjusted EBITDA |
$ |
100 |
|
|
$ |
82 |
|
|
$ |
252 |
|
|
$ |
193 |
|
Adjusted EBITDA Margin |
|
12.3 |
% |
|
|
11.7 |
% |
|
|
11.2 |
% |
|
|
10.2 |
% |
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 number of shares outstanding (WASO).
(In millions, except per share amounts) |
Three Months Ended |
|
Nine Months Ended |
||||||||||||
|
|
|
|||||||||||||
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
Net earnings |
$ |
57 |
|
|
$ |
47 |
|
|
$ |
124 |
|
|
$ |
94 |
|
Amortization of intangibles |
|
6 |
|
|
|
5 |
|
|
|
17 |
|
|
|
16 |
|
Deal-related transaction costs |
|
1 |
|
|
|
1 |
|
|
|
5 |
|
|
|
4 |
|
Restructuring costs |
|
— |
|
|
|
2 |
|
|
|
5 |
|
|
|
10 |
|
Other one-time non-operational events |
|
2 |
|
|
|
— |
|
|
|
4 |
|
|
|
(8 |
) |
Tax effect of adjustments (1) |
|
(2 |
) |
|
|
(2 |
) |
|
|
(6 |
) |
|
|
(5 |
) |
Adjusted Net Earnings |
$ |
64 |
|
|
$ |
53 |
|
|
$ |
149 |
|
|
$ |
111 |
|
|
|
|
|
|
|
|
|
||||||||
Per share information |
|
|
|
|
|
|
|
||||||||
Diluted WASO |
|
268.299 |
|
|
|
265.000 |
|
|
|
267.357 |
|
|
|
263.675 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted EPS |
$ |
0.21 |
|
|
$ |
0.18 |
|
|
$ |
0.46 |
|
|
$ |
0.36 |
|
Adjusted Diluted EPS |
$ |
0.24 |
|
|
$ |
0.20 |
|
|
$ |
0.56 |
|
|
$ |
0.42 |
|
(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 |
|
Nine Months Ended |
||||||||
|
|
|
|
||||||||
|
2024 |
|
2023 |
|
2024 |
|
2023 |
||||
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
( |
) |
|
( |
) |
Transaction-related expenditures, net of tax |
— |
|
|
1 |
|
|
1 |
|
|
17 |
|
Capital expenditures |
(12 |
) |
|
(15 |
) |
|
(56 |
) |
|
(42 |
) |
Proceeds from sales of assets |
1 |
|
|
(1 |
) |
|
1 |
|
|
— |
|
Free Cash Flow |
|
|
|
|
|
|
( |
) |
|
( |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20241030657738/en/
Investors
SVP, Investor Relations & Corporate Finance
+1 703 409 2906
stephen.vather@drs.com
Media
VP, Communications & Public Affairs
+1 571 447 4624
mmount@drs.com
Source: