Leonardo DRS (DRS) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue reached $799 million, up 16% year-over-year, driven by strong demand in ground/naval network computing, tactical radars, and electric power and propulsion programs.

• Net earnings rose 72% year-over-year to $50 million; adjusted EBITDA increased 17% to $82 million, with margin expanding to 10.3%.

• Bookings totaled $991 million with a book-to-bill ratio of 1.2x; backlog reached a record $8.6 billion, up 10% year-over-year, marking the 13th consecutive quarter above 1.0.

• Free cash flow usage improved significantly year-over-year, supported by higher profitability and working capital efficiency.

• Operational execution included the first dividend payment, initial stock repurchases, and progress on key shipbuilding and propulsion initiatives.

Financial highlights

• Gross profit rose 18.3% to $181 million, with gross margin improving by 50 bps to 22.7%.

• Adjusted EBITDA was $82 million, up 17% year-over-year, with a margin of 10.3%, reflecting 10 basis points of margin expansion.

• Net earnings were $50 million and diluted EPS was $0.19, up 72% and 73% year-over-year, respectively; adjusted net earnings were $54 million and adjusted EPS $0.20, up 42% and 43%.

• Bookings for the quarter were $991 million, up 21.6% year-over-year.

• Interest expense declined to $1 million, reflecting higher cash balances and reduced borrowings.

Outlook and guidance

• 2025 guidance maintained: revenue of $3,425–$3,525 million (6–9% growth), adjusted EBITDA of $435–$455 million, and adjusted EPS of $1.02–$1.08.

• Q2 revenue expected around $825 million with adjusted EBITDA margin in the mid-11% range.

• Effective tax rate forecasted at 19%; diluted shares outstanding at 270 million for 2025 guidance.

• Targeting 80% free cash flow conversion of adjusted net earnings for the year, with Q4 expected to be a significant contributor.

• Closely monitoring potential indirect impacts from tariffs and related policies.