- Revenue: $628 million
- Net Earnings: $35 million
- Adjusted EBITDA: $62 million
- Diluted EPS: $0.13
- Adjusted Diluted EPS: $0.15
- Bookings: $698 million (book-to-bill ratio of 1.1x)
- Backlog: $4.4 billion
- Narrows 2023 guidance ranges across all metrics
Leonardo DRS, Inc. (Nasdaq and TASE: DRS), a leading provider of
advanced defense technologies, today reported financial results for
the second quarter 2023, which ended June 30, 2023.
CEO Commentary
“Leonardo DRS delivered strong second quarter results consistent
with our expectations. Organic revenue growth continued to
accelerate and resilient customer demand bolstered our bookings in
the quarter. While the operating environment remains complex, our
year to date performance gives us confidence in achieving our full
year outlook. We remain focused on execution excellence to meet
commitments to our customers and shareholders,” said Bill Lynn,
Chairman and CEO of Leonardo DRS.
Summary Financial Results
(In millions, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
Change
2023
2022
Change
Revenues
$628
$627
—
%
$1,197
$1,239
(3
%)
Net Earnings
$35
$25
40
%
$47
$61
(23
%)
Diluted WASO
263.675
210.445
263.126
210.445
Diluted Earnings Per Share (EPS)
$0.13
$0.12
12
%
$0.18
$0.29
(38
%)
Non-GAAP
Financial Measures (1)
Adjusted EBITDA
$62
$67
(8
%)
$111
$140
(21
%)
Adjusted EBITDA Margin
9.9
%
10.8
%
(90) bps
9.3
%
11.3
%
(200) bps
Adjusted Net Earnings
$39
$35
13
%
$58
$74
(21
%)
Adjusted Diluted EPS
$0.15
$0.16
(9
%)
$0.22
$0.35
(37
%)
(1) The company reports its financials in
accordance with U.S. generally accepted accounting principles
(“GAAP”). Information about the company’s use of non-GAAP financial
measures, including a reconciliation of the non-GAAP financial
measures to the most comparable financial measures calculated and
presented in accordance with U.S. GAAP, is provided under "Non-GAAP
Financial Measures."
Quarterly revenues were essentially flat compared to last year.
Q2 2023 revenues continued to face the “net divestiture impact”
(the difference in revenue contribution from our divested Global
Enterprise Solutions business versus our acquisition of RADA
Electronic Industries). Excluding the net divestiture impact,
revenues grew mid-single digits year-over-year.
Despite higher gross margin performance in the quarter,
increased public company costs and an uptick in internal research
and development investments drove operating expense growth, which
resulted in year-over-year Adjusted EBITDA and adjusted EBITDA
margin contraction.
Second quarter net earnings and diluted EPS were aided by two
discrete factors. First, the reversal of an aged legal liability
reserve related to an environmental matter for $10 million and
second, an approximately $8 million net benefit primarily related
to research and development credits. Given the one time nature of
the legal reserve reversal, it has been excluded from the company’s
non-GAAP metrics.
Both diluted EPS and adjusted diluted EPS continued to face an
incremental headwind from the increased share count resulting from
our all stock merger with RADA in the year-over-year compare.
Cash Flow and Balance Sheet
Net cash flow used by operating activities was $12 million for
the second quarter. The company's free cash flow use was $10
million in the quarter.
At quarter end, the balance sheet had $35 million of cash and
$329 million of outstanding borrowings under the company’s credit
facility, which still leaves the company with sufficient financial
capacity to deploy capital for growth, while maintaining a strong
balance sheet.
Bookings and Backlog
(Dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Bookings
$698
$683
$1,447
$1,430
Book-to-Bill
1.1x
1.1x
1.2x
1.2x
Backlog
$4,357
$3,051
$4,357
$3,051
The company received $698 million in new funded awards during
the quarter. Strong bookings were driven by the increased demand
for the company’s electric power and propulsion, network computing
and tactical radar solutions. At quarter end, backlog stood at a
record level of $4.4 billion, representing a 43% increase
year-over-year.
Segment Results
Advanced Sensing and Computing (“ASC”) Segment
(Dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
Change
2023
2022
Change
Revenues
$404
$444
(9
%)
$795
$840
(5
%)
Adjusted EBITDA
$36
$57
(37
%)
$73
$89
(18
%)
Adjusted EBITDA Margin
8.9
%
12.8
%
(390) bps
9.2
%
10.6
%
(140) bps
Bookings
$469
$485
$873
$873
Book-to-Bill
1.2
x
1.1
x
1.1
x
1.0
x
The majority of the year-over-year decline in quarterly ASC
revenues was attributable to the net divestiture impact. Adjusted
EBITDA and adjusted EBITDA margins decreased compared to last year.
The lower overall volume was offset by better mix however,
increased operating expenses related to investments in internal
research and development and incremental public company costs
weighed on both metrics. ASC bookings were ahead of expectations
with demand evident across advanced sensing and network computing
areas, specifically for the company’s naval network computing,
tactical radar and other sensing technologies.
Integrated Mission Systems (“IMS”) Segment
(Dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
Change
2023
2022
Change
Revenues
$226
$187
21
%
$415
$405
2
%
Adjusted EBITDA
$26
$10
168
%
$38
$51
(25
%)
Adjusted EBITDA Margin
11.5
%
5.2
%
630 bps
9.2
%
12.5
%
(330) bps
Bookings
$229
$197
$574
$556
Book-to-Bill
1.0
x
1.1
x
1.4
x
1.4
x
Strong momentum in our naval power and propulsion business drove
the year-over-year increase in both IMS segment revenues and
bookings. Additionally, the increases in adjusted EBITDA and
adjusted EBITDA margin were driven by better program execution and
higher volume coming particularly from our Columbia Class and other
naval power programs.
2023 Guidance
Leonardo DRS is updating its 2023 guidance as specified in the
table below:
Measure
Current
2023 Guidance
Prior
2023 Guidance
Revenue
$2,725 million - $2,800
million
$2,700 million - $2,800
million
Adjusted EBITDA
$318 million - $328 million
$315 million - $330 million
Tax Rate
19%
24%
Diluted Shares Outstanding
266.0 million
263.1 million
Adjusted Diluted EPS
$0.66 - $0.69
$0.64 - $0.69
The company does not provide a reconciliation of forward-looking
adjusted EBITDA and adjusted diluted EPS, due to inherent
difficulty in forecasting and quantifying the adjustments that are
necessary to calculate such non-GAAP measures without unreasonable
effort. Material changes to any one of these items could have a
significant effect on future GAAP results.
Conference Call
Leonardo DRS management will host a conference call beginning at
10:00 a.m. ET on August 2, 2023 to discuss the financial results
for its second quarter 2023.
A live audio broadcast of the conference call along with a
supplemental presentation will be available to the public through
links on the Leonardo DRS Investor Relations website
(https://investors.leonardodrs.com).
A replay of the conference call will be available on the
Leonardo DRS website approximately 2 hours after the conclusion of
the conference call.
About Leonardo DRS
Headquartered in Arlington, VA, Leonardo DRS, Inc. is an
innovative and agile provider of advanced defense technology to
U.S. national security customers and allies around the world. We
specialize in the design, development and manufacture of advanced
sensing, network computing, force protection, and electric power
and propulsion, and other leading mission-critical technologies.
Our innovative people are leading the way in developing disruptive
technologies for autonomous, dynamic, interconnected, and
multi-domain capabilities to defend against new and emerging
threats. For more information and to learn more about our full
range of capabilities, visit www.LeonardoDRS.com.
Forward-Looking Statements
In this press release, when using the terms the “company”,
“DRS”, “we”, “us” and “our,” unless otherwise indicated or the
context otherwise requires, we are referring to Leonardo DRS, Inc.
This press release contains forward-looking statements and
cautionary statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Some of the forward-looking
statements can be identified by the use of forward-looking terms
such as “believes,” “expects,” “may,” “will,” “shall,” “should,”
“would,” “could,” “seeks,” “aims,” “strives,” “targets,”
“projects,” “guidance,” “intends,” “plans,” “estimates,”
“anticipates” or other comparable terms. Forward-looking statements
include, without limitation, all matters that are not historical
facts. They appear in a number of places throughout this press
release and include, without limitation, statements regarding our
intentions, beliefs, assumptions or current expectations
concerning, among other things, financial goals, financial
position, results of operations, cash flows, prospects, strategies
or expectations, and the impact of prevailing economic
conditions.
Forward-looking statements are subject to known and unknown
risks and uncertainties, many of which may be beyond our control.
We caution you that forward-looking statements are not guarantees
of future performance or outcomes and that actual performance and
outcomes may differ materially from those made in or suggested by
the forward-looking statements contained in this press release. In
addition, even if future performance and outcomes are consistent
with the forward-looking statements contained in this press
release, those results or developments may not be indicative of
results or developments in subsequent periods. New factors emerge
from time to time that may cause our business not to develop as we
expect, and it is not possible for us to predict all of them.
Factors that could cause actual results and outcomes to differ from
those reflected in forward-looking statements include, without
limitation: disruptions or deteriorations in our relationship with
the relevant agencies of the U.S. government, as well as any
failure to pass routine audits or otherwise comply with
governmental requirements including those related to security
clearance or procurement rules, including the False Claims Act;
significant delays or reductions in appropriations for our programs
and changes in U.S. government priorities and spending levels more
broadly; any failure to comply with the proxy agreement with the
U.S. Department of Defense; failure to properly contain a global
pandemic in a timely manner could materially affect how we and our
business partners operate; the effect of inflation on our supply
chain and/or our labor costs; our mix of fixed-price, cost-plus and
time-and-material type contracts and any resulting impact on our
cash flows due to cost overruns; failure to properly comply with
various covenants of the agreements governing our debt could
negatively impact our business; our dependence on U.S. government
contracts, which often are only partially funded and are subject to
immediate termination, some of which are classified, and the
concentration of our customer base in the U.S. defense industry;
our use of estimates in pricing and accounting for many of our
programs that are inherently uncertain and which may not prove to
be accurate; our ability to realize the full value of our backlog;
our ability to predict future capital needs or to obtain additional
financing if we need it; our ability to respond to the rapid
technological changes in the markets in which we compete; the
effect of global and regional economic downturns and rising
interest rates; our ability to meet the requirements of being a
public company; our ability to maintain an effective system of
internal control over financial reporting; our inability to
appropriately manage our inventory; our inability to fully realize
the value of our total estimated contract value or bookings; our
ability to compete efficiently, including due to U.S. government
organizational conflict of interest rules which may limit new
contract opportunities or require us to wind down existing
contracts; our relationships with other industry participants,
including any contractual disputes or the inability of our key
suppliers to timely deliver our components, parts or services;
preferences for set-asides for minority-owned, small and small
disadvantaged businesses could impact our ability to be a prime
contractor; any failure to meet our contractual obligations
including due to potential impacts to our business from supply
chain risks, such as longer lead times and shortages of electronics
and other components; any security breach, including any
cyber-attack, cyber intrusion, insider threat, or other significant
disruption of our IT networks and related systems as well as any
act of terrorism or other threat to our physical security and
personnel; our ability to fully exploit or obtain patents or other
intellectual property protections necessary to secure our
proprietary technology, including our ability to avoid infringing
upon the intellectual property of third parties or prevent third
parties from infringing upon our own intellectual property; the
conduct of our employees, agents, affiliates, subcontractors,
suppliers, business partners or joint ventures in which we
participate which may impact our reputation and ability to do
business; our compliance with environmental laws and regulations,
and any environmental liabilities that may affect our reputation or
financial position; the outcome of litigation, arbitration,
investigations, claims, disputes, enforcement actions and other
legal proceedings in which we are involved; various geopolitical
and economic factors, laws and regulations including the Foreign
Corrupt Practices Act, the Export Control Act, the International
Traffic in Arms Regulations, the Export Administration Regulations,
and those that we are exposed to as a result of our international
business; our ability to obtain export licenses necessary to
conduct certain operations abroad, including any attempts by
Congress to prevent proposed sales to certain foreign governments;
our ability to attract and retain technical and other key
personnel; the occurrence of prolonged work stoppages; the
unavailability or inadequacy of our insurance coverage, customer
indemnifications or other liability protections to cover all of our
significant risks or to pay for material losses we incur; future
changes in U.S. tax laws and regulations or interpretations
thereof; certain limitations on our ability to use our net
operating losses to offset future taxable income; termination of
our leases or our inability to renew our leases on acceptable
terms; changes in estimates used in accounting for our pension
plans, including in respect of the funding status thereof; changes
in future business or other market conditions that could cause
business investments and/or recorded goodwill or other long-term
assets to become impaired; adverse consequences from any
acquisitions such as operating difficulties, dilution and other
harmful consequences or any modification, delay or prevention of
any future acquisition or investment activity by the Committee on
Foreign Investment in the United States; natural disasters or other
significant disruptions; or any conflict of interest that may arise
because Leonardo US Holding, LLC, our majority stockholder, or
Leonardo S.p.A., our ultimate majority stockholder, may have
interests that are different from, or conflict with, those of our
other stockholders, including as a result of any ongoing business
relationships Leonardo S.p.A. may have with us, and their
significant ownership in us may discourage change of control
transactions (our amended and restated certificate of incorporation
provides that we waive any interest or expectancy in corporate
opportunities presented to Leonardo S.p.A); or our obligations to
provide certain services to Leonardo S.p.A., which may divert human
and financial resources from our business.
You should read this press release completely and with the
understanding that actual future results may be materially
different from expectations. All forward-looking statements made in
this press release are qualified by these cautionary statements.
These forward-looking statements are made only as of the date of
this filing, and we do not undertake any obligation, other than as
may be required by law, to update or revise any forward-looking or
cautionary statements to reflect changes in assumptions, the
occurrence of events, unanticipated or otherwise, and changes in
future operating results over time or otherwise.
Other risks, uncertainties and factors, including those
discussed in our latest SEC filings under “Risk Factors” of our
latest Annual Report on Form 10-K and Quarterly Reports on Form
10-Q, all of which may be viewed or obtained through the investor
relations section of our website https://www.leonardodrs.com, could
cause our actual results to differ materially from those projected
in any forward-looking statements we make. Readers should read
carefully the discussion of these factors to better understand the
risks and uncertainties inherent in our business and underlying any
forward-looking statements.
Consolidated Statement of
Earnings (Unaudited)
(Dollars in millions, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues:
Products
$590
$549
$1,110
$1,090
Services
38
78
87
149
Total revenues
628
627
1,197
1,239
Cost of revenues:
Products
(458
)
(445
)
(861
)
(867
)
Services
(25
)
(55
)
(60
)
(111
)
Total cost of revenues
(483
)
(500
)
(921
)
(978
)
Gross profit
145
127
276
261
General and administrative expenses
(90
)
(84
)
(190
)
(160
)
Amortization of intangibles
(5
)
(2
)
(11
)
(4
)
Other operating expenses, net
(8
)
1
(8
)
1
Operating earnings
42
42
67
98
Interest expense
(9
)
(10
)
(17
)
(18
)
Other, net
—
—
(1
)
—
Earnings before taxes
33
32
49
80
Income tax provision (benefit)
(2
)
7
2
19
Net earnings
$35
$25
$47
$61
Net earnings per share from common
stock:
Basic earnings per share:
$0.14
$0.12
$0.18
$0.29
Diluted earnings per share:
$0.13
$0.12
$0.18
$0.29
Consolidated Balance Sheets
(Unaudited)
(Dollars in millions)
June 30,
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$35
$306
Accounts receivable, net
198
166
Contract assets
1,018
872
Inventories
378
319
Prepaid expenses
17
20
Other current assets
51
24
Total current assets
1,697
1,707
Noncurrent assets:
Property plant and equipment, net
402
404
Intangible assets, net
161
172
Goodwill
1,236
1,236
Deferred tax assets
68
66
Other noncurrent assets
98
92
Total noncurrent assets
1,965
1,970
Total assets
$3,662
$3,677
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Short-term borrowings and current portion
of long-term debt
$136
$29
Accounts payable
290
457
Contract liabilities
292
233
Other current liabilities
225
323
Total current liabilities
943
1,042
Noncurrent liabilities:
Long-term debt
357
365
Pension and other postretirement benefit
plan liabilities
41
45
Deferred tax liabilities
8
—
Other noncurrent liabilities
124
98
Total noncurrent liabilities
$530
$508
Shareholders' equity
Preferred stock, $0.01 par value:
10,000,000 shares authorized; none issued
$—
$—
Common stock, $0.01 par value: 350,000,000
shares authorized; 261,723,423 shares issued
3
3
Additional paid-in capital
5,160
5,147
Accumulated deficit
(2,927
)
(2,974
)
Accumulated other comprehensive loss
(47
)
(49
)
Total shareholders' equity
2,189
2,127
Total liabilities and shareholders'
equity
$3,662
$3,677
Consolidated Statement of Cash
Flows (Unaudited)
(Dollars in millions)
Six Months Ended
June 30,
2023
2022
Operating activities
Net earnings
$47
$61
Adjustments to reconcile net earnings to
net cash used in operating activities:
Depreciation and amortization
42
31
Deferred income taxes
6
14
Other
8
—
Changes in assets and liabilities:
Accounts receivable
(32
)
24
Contract assets
(146
)
(131
)
Inventories
(59
)
(47
)
Prepaid expenses
3
(3
)
Other current assets
(25
)
(7
)
Other noncurrent assets
6
22
Defined benefit obligations
(2
)
(3
)
Other current liabilities
(91
)
(9
)
Other noncurrent liabilities
5
(17
)
Accounts payable
(167
)
(165
)
Contract liabilities
59
(12
)
Net cash used in operating
activities
($346
)
($242
)
Investing activities
Capital expenditures
(27
)
(22
)
Proceeds from sales of assets
1
—
Net cash used in investing
activities
($26
)
($22
)
Financing activities
Net (decrease) increase in third party
borrowings (maturities of 90 days or less)
(4
)
(17
)
Repayment of third party debt
(291
)
—
Borrowings of third party debt
395
—
Repayment of related party debt
—
(335
)
Borrowings from related parties
—
445
Proceeds from stock issuance
6
—
Cash outlay to reacquire equity
instruments
(1
)
—
Other
(4
)
—
Net cash provided by financing
activities
$101
$93
Effect of exchange rate changes on cash
and cash equivalents
—
—
Net decrease in cash and cash
equivalents
($271
)
($171
)
Cash and cash equivalents at beginning of
year
306
240
Cash and cash equivalents at end of
period
35
69
Non-GAAP Financial Measures (Unaudited)
In addition to the results reported in accordance with U.S. GAAP
included throughout this document, the company has provided
information regarding “Adjusted EBITDA,” “Adjusted EBITDA Margin,”
“Adjusted Net Earnings,” “Adjusted Diluted Earnings Per Share,” and
“Free Cash Flow” (each, a non-GAAP financial measure).
We believe the non-GAAP financial measures presented in this
document will help investors understand our financial condition and
operating results and assess our future prospects. We believe these
non-GAAP financial measures, each of which is discussed in greater
detail below, are important supplemental measures because they
exclude unusual or non-recurring items as well as non-cash items
that are unrelated to or may not be indicative of our ongoing
operating results. Further, when read in conjunction with our GAAP
results, these non-GAAP financial measures provide a baseline for
analyzing trends in our underlying businesses and can be used by
management as a tool to help make financial, operational and
planning decisions. Finally, these measures are often used by
analysts and other interested parties to evaluate companies in our
industry by providing more comparable measures that are less
affected by factors such as capital structure.
We recognize that these non-GAAP financial measures have
limitations, including that they may be calculated differently by
other companies or may be used under different circumstances or for
different purposes, thereby affecting their comparability from
company to company. In order to compensate for these and the other
limitations discussed below, management does not consider these
measures in isolation from or as alternatives to the comparable
financial measures determined in accordance with U.S. GAAP. Readers
should review the reconciliations below and should not rely on any
single financial measure to evaluate our business.
We define these non-GAAP financial measures as:
Adjusted EBITDA and Adjusted EBITDA Margin are
defined as net earnings before income taxes, interest expense,
amortization of acquired intangible assets, depreciation, deal
related transaction costs, restructuring costs and other one-time
non-operational events (which include non-service pension expense,
legal liability accrual reversals, COVID-19 response costs and
foreign exchange impacts), then in the case of adjusted EBITDA
margin dividing adjusted EBITDA by revenues.
(Dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net earnings
$35
$25
$47
$61
Income tax provision (benefit)
(2
)
7
2
19
Interest expense
9
10
17
18
Amortization of intangibles
5
2
11
4
Depreciation
15
14
31
27
Deal related transaction costs
1
8
3
10
Restructuring costs
8
—
8
—
Other one-time non-operational events
(9
)
1
(8
)
1
Adjusted EBITDA
$62
$67
$111
$140
Adjusted EBITDA Margin
9.9
%
10.8
%
9.3
%
11.3
%
Adjusted Net Earnings and Adjusted Diluted EPS are
defined as net earnings excluding amortization of acquired
intangible assets, deal related transaction costs, restructuring
costs, other one-time non-operational events (which include
non-service pension expense, legal liability accrual reversals,
COVID-19 response costs, foreign exchange impacts) and the related
tax impact from net earnings, then in the case of adjusted diluted
EPS dividing adjusted net earnings by the diluted weighted average
shares outstanding.
(In millions, except per share
amounts)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net earnings
$35
$25
$47
$61
Amortization of intangibles
5
2
11
4
Deal related transaction costs
1
8
3
10
Restructuring costs
8
—
8
—
Other one-time non-operational events
(9
)
1
(8
)
1
Tax effect of adjustments (1)
(1
)
(2
)
(3
)
(3
)
Adjusted Net Earnings
$39
$35
$58
$74
Per share
information
Diluted weighted average common shares
263.675
210.445
263.126
210.445
Diluted earnings per share
$0.13
$0.12
$0.18
$0.29
Adjusted Diluted EPS
$0.15
$0.16
$0.22
$0.35
(1) Calculation uses an estimated
statutory tax rate on non-GAAP adjustments.
Free Cash Flow is defined as the sum of the cash flows
provided by (used in) operating activities, transaction related
expenditures (net of tax), capital expenditures, proceeds from sale
of assets and dividends from investments.
(Dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net cash provided by (used in) operating
activities
($12
)
$13
($346
)
($242
)
Transaction related expenditures, net of
tax
14
8
16
10
Capital expenditures
(12
)
(9
)
(27
)
(22
)
Proceeds from sales of assets
—
—
1
—
Free Cash Flow
($10
)
$12
($356
)
($254
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230802389112/en/
Investors Steve Vather VP,
Investor Relations & Corporate Finance +1 703 409 2906
stephen.vather@drs.com
Media Michael Mount VP,
Communications & Public Affairs +1 571 447 4624
mmount@drs.com
Leonardo DRS (NASDAQ:DRS)
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Leonardo DRS (NASDAQ:DRS)
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부터 5월(5) 2023 으로 5월(5) 2024