Leonardo DRS (DRS) Q1 2026 earnings summary

Executive summary

• Q1 2026 revenue rose 6% year-over-year to $846 million, driven by tactical radars, advanced sensing, electric power, and propulsion programs.

• Adjusted EBITDA increased 28% to $105 million, with margin expanding 210 bps to 12.4% on strong execution and operating leverage.

• Net earnings rose 24% to $62 million; diluted EPS up 21% to $0.23, and adjusted diluted EPS up 30% to $0.26.

• Book-to-bill ratio at or above 1.0x for 17 consecutive quarters, with funded backlog reaching a record $4.7 billion, up 8% year-over-year.

• Raised full-year 2026 guidance for revenue, adjusted EBITDA, and EPS, reflecting robust demand, record backlog, and operational execution.

Financial highlights

• Gross margin expanded to 25.1% due to favorable mix and execution; adjusted EBITDA margin rose to 12.4%.

• Free cash outflow narrowed to $95 million from $170 million, with cash and equivalents at $328 million and no outstanding credit facility borrowings.

• Backlog reached $8.38 billion, with 32% expected to be recognized as revenue over the next nine months.

• Bookings for the quarter were $885 million, with ASC bookings down and IMS bookings up on strong naval demand.

• Quarterly dividend of $0.09 per share declared and paid; share repurchases continued.

Outlook and guidance

• 2026 revenue guidance raised to $3,900–$3,975 million, implying 7–9% organic growth.

• Adjusted EBITDA guidance increased to $515–$530 million, with margin expectations improved.

• Adjusted diluted EPS projected at $1.26–$1.30; free cash flow targeted at ~75% of adjusted net earnings.

• Q2 revenue expected around $900 million, with adjusted EBITDA margin in the mid-12% range.

• Approximately 45% of remaining performance obligations relate to long-term U.S. Navy contracts, to be recognized over up to 11 years.