Leonardo DRS (DRS) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue grew 16% year-over-year to $812 million, driven by advanced infrared sensing, force protection, and tactical radars, with net earnings up 21% to $57 million and adjusted EBITDA up 22% to $100 million.

• Bookings reached $1.1 billion with a book-to-bill ratio of 1.3x; backlog hit a record $8.3 billion, up 75% year-over-year, driven by major Columbia Class submarine contracts.

• Free cash flow improved significantly due to higher profitability and efficient working capital, with Q3 free cash flow at $48 million.

• Continued innovation with rapid development of directed-energy counter-drone solutions, AI integration in sensing platforms, and expansion into over-the-horizon radar and small tactical drone applications.

• 2024 guidance was raised across all metrics, and preliminary 2025 framework anticipates 5–8% revenue growth and ~13% adjusted EBITDA margin.

Financial highlights

• Q3 2024 revenue was $812 million, up 16% from $703 million in Q3 2023; adjusted EBITDA rose to $100 million (12.3% margin), up 22% year-over-year.

• Adjusted diluted EPS was $0.24, up 20% from $0.20 in the prior year; net earnings were $57 million, up 21%.

• Gross profit for Q3 increased 10.5% to $179 million, though gross margin declined 100 bps to 22.0%.

• Adjusted net earnings for Q3 were $64 million, up 21% from $53 million in Q3 2023.

• Cash and cash equivalents stood at $198 million as of September 30, 2024.

Outlook and guidance

• 2024 revenue guidance raised to $3,150–$3,200 million (11%–13% growth); adjusted EBITDA guidance increased to $387–$397 million; adjusted diluted EPS guidance set at $0.88–$0.91.

• Effective tax rate for 2024 expected at 19%.

• Preliminary 2025 outlook projects 5%–8% revenue growth and ~13% adjusted EBITDA margin.

• Targeting 80% free cash flow conversion of adjusted net earnings for the year.

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