Leonardo DRS (DRS) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenue grew 20% year-over-year to $753 million, driven by strong demand in advanced infrared sensing, electric power, propulsion, tactical radars, and network computing, with supply chain recovery supporting growth.

• Adjusted EBITDA increased 32% year-over-year to $82 million, with margin expansion of 100 basis points; adjusted net earnings and adjusted diluted EPS rose 21% and 20%, respectively.

• Bookings reached $941 million with a book-to-bill ratio of 1.2x; backlog hit a record $7.9 billion, up 82% year-over-year, primarily due to a major Columbia Class submarine contract.

• Free cash flow improved, with Q2 generation at $1 million and first half usage improving by $82 million over the prior year, reflecting higher profitability and working capital efficiency.

• 2024 guidance was raised across all key metrics, reflecting strong demand, operational momentum, and supply chain recovery.

Financial highlights

• Q2 2024 revenue was $753 million, up 20% from $628 million in Q2 2023; adjusted EBITDA was $82 million (10.9% margin), up 32% year-over-year.

• Adjusted net earnings reached $47 million, a 21% increase; adjusted diluted EPS was $0.18, up 20% year-over-year; GAAP diluted EPS was $0.14, up 8%.

• Gross profit for Q2 2024 was $169 million (16.6% increase), with a gross margin of 22.4%, down 70 bps year-over-year.

• Net cash provided by operating activities was $34 million; cash balance at quarter end was $149 million; outstanding borrowings were $208 million.

• Interest expense decreased to $7 million in Q2 2024, reflecting reduced borrowings.

Outlook and guidance

• 2024 revenue guidance raised to $3,075–$3,175 million, representing 9–12% organic growth.

• Adjusted EBITDA guidance increased to $375–$395 million; adjusted diluted EPS guidance raised to $0.82–$0.88.

• Tax rate guidance lowered to 20.5%; targeting 80% free cash flow conversion of adjusted net earnings.

• Approximately 19% of backlog expected to be recognized as revenue over the next six months; 46% relates to long-term Navy contracts.

• International sales accounted for 13% of revenue in the first half, with similar expectations going forward.