Leonardo Drs, Inc. ((DRS)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Leonardo DRS, Inc. conveyed a predominantly positive sentiment, highlighting strong bookings, revenue, and profit growth. The company is also undergoing strategic leadership transitions. Despite these positive developments, challenges such as margin pressure, potential impacts from a government shutdown, and supply chain issues were acknowledged as areas of concern.
Strong Bookings and Backlog
The company reported impressive bookings of $1.3 billion in the third quarter, achieving a 1.4x book-to-bill ratio, with a year-to-date ratio of 1.2x. The total backlog increased to $8.9 billion, marking an 8% rise year-over-year, while the funded backlog grew by 20%, underscoring the company’s robust demand and future revenue potential.
Revenue and Profit Growth
Leonardo DRS experienced significant financial growth, with quarterly revenue increasing by 18% year-over-year to $960 million. The adjusted EBITDA rose by 17%, and adjusted diluted EPS saw a 21% increase, reflecting the company’s strong operational performance and profitability.
Key Program Wins
The company secured over $250 million in contracts for ground-based counter UAS and short-range air defense programs. The IMS segment particularly excelled, with revenue growth of 34%, showcasing Leonardo DRS’s competitive edge in defense solutions.
New CEO and Leadership Transition
In a strategic leadership move, John Baylouny has been appointed as the new CEO, effective January 1, 2026, while Fran Townsend has been elected as the new Chair of the Board. These transitions are expected to guide the company through its next phase of growth and innovation.
Margin Pressure
Despite the positive financial metrics, the company faced a slight contraction in adjusted EBITDA margin by 10 basis points. This was attributed to increased R&D investments, a less favorable program mix, and less efficient program execution.
Government Shutdown Concerns
The ongoing federal government shutdown poses potential risks, particularly concerning awards and payment schedules, if it continues for an extended period. This uncertainty could impact the company’s financial operations.
Supply Chain Challenges
Leonardo DRS continues to face challenges with its germanium supply chain. However, proactive measures are being implemented to secure future supply and mitigate potential disruptions.
Forward-Looking Guidance
During the earnings call, Leonardo DRS provided optimistic forward-looking guidance. The company expects full-year revenue growth between 10% and 11%, maintaining its adjusted EBITDA guidance between $437 million and $453 million. Additionally, the company reported a significant increase in free cash flow, surpassing prior year levels, and remains committed to navigating a dynamic market environment with ongoing R&D investments.
In summary, the earnings call of Leonardo DRS, Inc. highlighted a positive outlook with strong financial performance and strategic leadership changes. While challenges such as margin pressure, government shutdown concerns, and supply chain issues persist, the company’s robust bookings, revenue growth, and forward-looking guidance reflect its resilience and strategic direction.