Leonardo DRS, Inc. (NASDAQ:DRS) Q3 2023 Earnings Conference Call November 2, 2023 10:00 AM ET Company Participants Stephen Vather - Vice President, Investor Relations and Corporate Finance William Lynn - Chairman and CEO Michael Dippold - Chief Financial Officer Conference Call Participants Robert Stallard - Vertical Research Partners Michael Ciarmoli - Truist Securities Andre Madrid - Bank of America Jan-Frans Engelbrecht - Robert W. Baird Operator Ladies and gentlemen, good day, and welcome to the Leonar ...

[PART I. Financial Information](index=6&type=section&id=PART%20I.%20Financial%20Information) [Financial Statements (Unaudited)](index=6&type=section&id=ITEM%201.%20Financial%20Statements%20(Unaudited)) The company's unaudited financial statements for Q3 2023 show total revenues of $1.9 billion, a significant decrease in net earnings to $94 million due to prior-year asset sales, and increased cash used in operations Consolidated Statements of Earnings (Unaudited) | (Dollars in millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Total revenues** | **$1,900** | **$1,873** | | Gross profit | $438 | $391 | | Operating earnings | $126 | $474 | | Net earnings | $94 | $340 | | **Diluted earnings per share** | **$0.36** | **$1.62** | Consolidated Balance Sheets Highlights | (Dollars in millions) | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $47 | $306 | | Total current assets | $1,740 | $1,707 | | **Total assets** | **$3,713** | **$3,677** | | Total current liabilities | $951 | $1,042 | | Total long-term debt | $351 | $365 | | **Total liabilities** | **$1,471** | **$1,550** | | **Total shareholders' equity** | **$2,242** | **$2,127** | Consolidated Statements of Cash Flows (Unaudited) | (Dollars in millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | **Net cash used in operating activities** | **($310)** | **($246)** | | Net cash (used in) provided by investing activities | ($42) | $448 | | Net cash provided by (used in) financing activities | $93 | ($379) | | **Net decrease in cash and cash equivalents** | **($259)** | **($177)** | [Note 1: Summary of Significant Accounting Policies](index=12&type=section&id=Note%201.%20Summary%20of%20Significant%20Accounting%20Policies) Leonardo DRS, Inc. is a defense electronics supplier operating through two segments, with the U.S. DoD as its largest customer - The company operates through two reportable segments: Advanced Sensing and Computing (ASC) and Integrated Mission Systems (IMS)[34](index=34&type=chunk) - The U.S. DoD is the largest customer, representing about **80% of total revenues** for the nine months ended September 30, 2023[34](index=34&type=chunk) [Note 2: Business Acquisitions and Dispositions](index=14&type=section&id=Note%202.%20Business%20Acquisitions%20and%20Dispositions) The company completed an all-stock merger with RADA Electronic Industries, Ltd. and divested two major businesses in 2022 - Completed an all-stock merger with RADA Electronic Industries, Ltd. on November 28, 2022, with a total purchase consideration of **$511 million**[49](index=49&type=chunk)[50](index=50&type=chunk)[51](index=51&type=chunk) - Sold the Global Enterprise Solutions (GES) business on August 1, 2022, for **$450 million**, resulting in cash proceeds of **$427 million**[53](index=53&type=chunk) - Divested its share of equity investment in Advanced Acoustic Concepts (AAC) on July 8, 2022, for **$56 million**[54](index=54&type=chunk) [Note 3: Revenue from Contracts with Customers](index=14&type=section&id=Note%203.%20Revenue%20from%20Contracts%20with%20Customers) The company's revenue is primarily from fixed-price contracts, with total backlog at $4.719 billion, excluding a significant post-quarter Columbia Class submarine contract Total Backlog as of September 30, 2023 | (Dollars in millions) | Amount | | :--- | :--- | | Funded | $3,356 | | Unfunded | $1,363 | | **Total Backlog** | **$4,719** | - Subsequent to Q3, the company agreed to terms for a contract over **$3 billion** for the electric power and propulsion system on the remaining seven Columbia Class submarines, which is not included in the reported backlog[72](index=72&type=chunk) Impact of EAC Adjustments on Revenue | (Dollars in millions) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Revenue Impact | $(14) | $(22) | [Note 11: Debt](index=21&type=section&id=Note%2011.%20Debt) Total debt principal increased to $485 million as of September 30, 2023, including $217 million on Term Loan A and $110 million drawn on the revolving credit facility Debt Composition as of September 30, 2023 | (Dollars in millions) | Amount | | :--- | :--- | | Term loan A | $217 | | Outstanding revolver | $110 | | Finance lease and other | $157 | | Short-term borrowings | $1 | | **Total debt principal** | **$485** | - The 2022 Credit Agreement provides for a **$225 million** term loan and a **$275 million** revolving credit facility[98](index=98&type=chunk)[101](index=101&type=chunk) [Note 16: Segment Information](index=26&type=section&id=Note%2016.%20Segment%20Information) For the nine months ended September 30, 2023, ASC generated $1.226 billion in revenue and $121 million in Adjusted EBITDA, while IMS generated $692 million in revenue and $72 million in Adjusted EBITDA Segment Performance (Nine Months Ended Sep 30, 2023) | (Dollars in millions) | ASC | IMS | Total | | :--- | :--- | :--- | :--- | | **Revenues** | $1,226 | $692 | $1,900 | | **Adjusted EBITDA** | $121 | $72 | $193 | - The company uses Adjusted EBITDA, a non-GAAP measure, to manage the business and allocate resources, reconciled to net earnings by excluding items like amortization, depreciation, interest, and gains on business disposals[130](index=130&type=chunk)[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue for Q3 2023 increased, but net earnings declined significantly due to prior-year asset sales, while Adjusted EBITDA showed mixed results, and total backlog grew substantially to $4.7 billion Q3 2023 vs Q3 2022 Performance | (Dollars in millions) | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $703 | $634 | 10.9% | | Gross profit | $162 | $130 | 24.6% | | Operating earnings | $59 | $376 | (84.3)% | | Net earnings | $47 | $279 | (83.2)% | YTD 2023 vs YTD 2022 Performance | (Dollars in millions) | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | | Total revenues | $1,900 | $1,873 | 1.4% | | Gross profit | $438 | $391 | 12.0% | | Operating earnings | $126 | $474 | (73.4)% | | Net earnings | $94 | $340 | (72.4)% | - The significant decrease in operating and net earnings is primarily due to the prior year's inclusion of a **$350 million** gain on the sale of the GES business and AAC joint venture[179](index=179&type=chunk)[180](index=180&type=chunk) - Total backlog increased by **50.4%** to **$4.719 billion**, driven by a multi-boat contract for the Columbia Class submarine program[186](index=186&type=chunk) [Business Overview and Environment](index=28&type=section&id=Business%20Overview%20and%20Environment) DRS is a defense technology provider with the DoD as its largest customer, benefiting from budget growth but facing risks from government shutdowns and global conflicts - The DoD is the largest customer, accounting for approximately **80% of business**, with the U.S. Army and U.S. Navy representing **29%** and **40%** of total revenues, respectively, for the nine months ended September 30, 2023[138](index=138&type=chunk) - The President's fiscal year 2024 budget request includes **$842 billion** for national defense, a **3% increase**, which is seen as creating a favorable market environment for DRS[155](index=155&type=chunk) - The conflict in Israel poses potential disruptions to the company's RADA operations, which employ approximately **4%** of the DRS workforce[152](index=152&type=chunk) [Key Non-GAAP Operating Measures](index=37&type=section&id=Key%20Non-GAAP%20Operating%20Measures) Adjusted EBITDA for Q3 2023 increased to $82 million, while nine-month Adjusted EBITDA slightly decreased to $193 million, and free cash flow usage increased due to higher working capital needs Key Non-GAAP Measures | (Dollars in millions, except per share) | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $82 | $58 | $193 | $198 | | Adjusted EBITDA Margin | 11.7% | 9.2% | 10.2% | 10.6% | | Adjusted Diluted EPS | $0.20 | $0.12 | $0.42 | $0.47 | | Free Cash Flow | N/A | N/A | $(335) | $(262) | - Q3 Adjusted EBITDA increased due to improved program performance and operational leverage, offset by higher IR&D investments[198](index=198&type=chunk) - YTD Adjusted Diluted EPS decreased due to a higher number of outstanding shares following the RADA merger and increased G&A expenses[203](index=203&type=chunk) [Review of Operating Segments](index=43&type=section&id=Review%20of%20Operating%20Segments) In Q3 2023, ASC revenue grew 5.6% with Adjusted EBITDA up 33.3%, while IMS revenue surged 21.0% with Adjusted EBITDA jumping 54.5%, both segments showing strong booking increases Segment Performance (Q3 2023 vs Q3 2022) | (Dollars in millions) | ASC | IMS | | :--- | :--- | :--- | | **Revenues** | $431 (+5.6%) | $277 (+21.0%) | | **Adjusted EBITDA** | $48 (+33.3%) | $34 (+54.5%) | | **Bookings** | $820 (+17.1%) | $235 (+35.1%) | - ASC's YTD revenue decreased by **2%** due to the 'net divestiture impact,' where the disposed GES business had higher revenue contribution than the acquired RADA business for the period[234](index=234&type=chunk) - IMS's YTD Adjusted EBITDA decreased slightly by **1.4%** primarily due to a favorable, non-recurring contract modification on the Columbia program in Q1 2022[244](index=244&type=chunk) [Liquidity and Capital Resources](index=47&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to $47 million, with net cash used in operating activities increasing to $310 million due to higher working capital needs and tax payments Cash Flow Summary (Nine Months Ended Sep 30) | (Dollars in millions) | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(310) | $(246) | | Net cash (used in) provided by investing activities | $(42) | $448 | | Net cash provided by (used in) financing activities | $93 | $(379) | | **Net decrease in cash and cash equivalents** | **$(259)** | **$(177)** | - The increase in cash used for operations was primarily due to funding working capital, including incremental tax payments for R&D capitalization and inventory investments to combat supply chain lead-times[248](index=248&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks primarily from interest rates on variable debt, limited foreign currency exposure mainly to the Canadian dollar, and manages inflation through contract pricing - The company is exposed to interest rate risk on **$327 million** of variable-rate debt (**$217M** Term Loan A and **$110M** revolver); a **0.5%** change in the weighted average interest rate would result in an approximate **$2 million** change in annual interest expense[253](index=253&type=chunk) - Foreign currency exposure is limited, with the primary risk related to receivables in Canadian dollars totaling **$39 million** as of September 30, 2023[254](index=254&type=chunk) - Inflation risk is managed by including cost escalation assumptions in bids for longer-term firm fixed-price contracts[255](index=255&type=chunk) [Controls and Procedures](index=49&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of September 30, 2023, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[256](index=256&type=chunk) - No material changes to the internal control over financial reporting occurred during the third quarter of 2023[258](index=258&type=chunk) [PART II. Other Information](index=50&type=section&id=PART%20II.%20Other%20Information) [Legal Proceedings](index=50&type=section&id=ITEM%201.%20Legal%20Proceedings) The company is subject to various legal proceedings, notably eliminating its reserve for the 'Orphan Mine' Superfund site after EPA's no-further-action determination, though the National Park Service may still seek damages - The company eliminated its reserve for the 'Orphan Mine' Superfund site after the EPA determined in June 2023 that no further federal action would be taken; however, the National Park Service (NPS) may still seek to recover damages[120](index=120&type=chunk)[121](index=121&type=chunk) [Risk Factors](index=51&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces updated risks including cybersecurity threats through its supply chain, geopolitical instability impacting international operations, and potential disruptions from foreign export controls on key materials - The company is at risk of cybersecurity incidents through its third-party suppliers and is currently responding to a cyber-attack that impacted one of its suppliers[263](index=263&type=chunk) - International business exposes the company to geopolitical risks, including the war between Israel and Hamas, which could disrupt its Israeli operations through workforce calls for duty, logistical impacts, and reduced customer confidence[272](index=272&type=chunk) - The company is subject to risks from dynamic geopolitical climates, including recently enacted export controls by foreign governments on rare elements which could materially impact the business[267](index=267&type=chunk) [Unregistered Sales of Equity Securities and Issuer Purchases](index=53&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities,%20Use%20of%20Proceeds,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company reported no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the period - None[274](index=274&type=chunk) [Other Information](index=53&type=section&id=ITEM%205.%20Other%20Information) No director or officer of the company adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the third quarter of 2023 - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement during the three months ended September 30, 2023[276](index=276&type=chunk) [Exhibits](index=54&type=section&id=ITEM%206.%20Exhibits) The report lists several exhibits filed with the Form 10-Q, including the company's Incentive-Based Compensation Recoupment Policy and certifications by the CEO and CFO - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and the company's new Incentive-Based Compensation Recoupment Policy (99.1)[278](index=278&type=chunk)

米 LEONARDO DRS Q2 | 2023 Disclaimers In this presentation, 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 presentation 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," ...

Leonardo DRS, Inc. (NASDAQ:DRS) Q2 2023 Earnings Conference Call August 2, 2023 10:00 AM ET Company Participants Steve Vather - Vice President, Investor Relations and Corporate Finance Bill Lynn - Chairman and CEO Mike Dippold - Chief Financial Officer Conference Call Participants Robert Stallard - Vertical Research Peter Arment - Baird Jon Tanwanteng - CJS Securities Michael Ciarmoli - Truist Operator Ladies and gentlemen, good day. And welcome to the Leonardo DRS Second Quarter Fiscal Year 2023 Earnings C ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 333-253583 Leonardo DRS, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 13-2632319 (State or Other ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q Commission File Number 333-253583 Leonardo DRS, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 13-2632319 (State or Other Jurisdiction of Incorporation or Organization) 2345 Crystal Drive Suite 1000 Arlington, Virginia 22202 (703) 416-8000 (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 ☐ TRANSITION REPORT P ...

PART I [Business](index=7&type=section&id=Item%201.%20Business) Leonardo DRS provides advanced defense technology to the U.S. government and allies, operating through two segments and heavily reliant on U.S. government contracts under FOCI regulations - The company is organized into two primary operating segments: Advanced Sensing and Computing (ASC) and Integrated Mission Systems (IMS)[21](index=21&type=chunk) - The Advanced Sensing and Computing (ASC) segment focuses on technologies for situational awareness, including advanced sensors (EO/IR, SIGINT, EW, radar) and rugged network computing for battle management and command and control[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk) - The Integrated Mission Systems (IMS) segment specializes in power conversion, ship propulsion systems (notably for the Columbia Class submarine), force protection systems (like C-UAS), and transportation/logistics systems[25](index=25&type=chunk)[26](index=26&type=chunk)[29](index=29&type=chunk) Revenue by Customer (2022) | Customer Group | Percentage of Total Revenue (2022) | | :--- | :--- | | U.S. Government (Total) | 84% | | - U.S. Army | 37% | | - U.S. Navy | 32% | | - U.S. Air Force | 5% | | - Other DoD Agencies | 10% | | Foreign Governments & Commercial | 16% | Revenue by Contract Type | Contract Type | 2022 ($M) | 2021 ($M) | 2020 ($M) | | :--- | :--- | :--- | :--- | | Firm fixed price | $2,347 | $2,498 | $2,408 | | Flexibly priced | $346 | $381 | $370 | Backlog Summary | Backlog Type | 2022 ($M) | 2021 ($M) | 2020 ($M) | | :--- | :--- | :--- | :--- | | Funded | $2,783 | $2,510 | $2,847 | | Unfunded | $1,486 | $351 | $444 | | **Total Backlog** | **$4,269** | **$2,861** | **$3,291** | Company-Funded R&D Expenses | Year | Amount ($M) | | :--- | :--- | | 2022 | $58 | | 2021 | $48 | | 2020 | $41 | - Key strategic activities in 2022 include the merger with RADA Electronic Industries Ltd., the sale of the Global Enterprise Solutions (GES) business, and the divestiture of its interest in Advanced Acoustic Concepts LLC[58](index=58&type=chunk)[59](index=59&type=chunk)[60](index=60&type=chunk) - Due to its majority ownership by Leonardo S.p.A., the company operates under a proxy agreement with the DoD to mitigate Foreign Ownership, Control, or Influence (FOCI) and maintain security clearances for classified programs[68](index=68&type=chunk) [Risk Factors](index=15&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant risks from U.S. defense spending dependence, fixed-price contract exposure, stringent government regulations including FOCI, supply chain disruptions, and potential conflicts of interest with its majority stockholder - The company is heavily dependent on U.S. government contracts, which accounted for approximately **84%**, **86%**, and **84%** of total revenues in 2022, 2021, and 2020, respectively, where reductions in defense spending could materially impact the business[104](index=104&type=chunk)[105](index=105&type=chunk) - A significant portion of revenue (approximately **87%** for 2020-2022) comes from fixed-price contracts, which carry the risk of cost overruns and reduced profitability if costs are not accurately estimated or controlled[108](index=108&type=chunk) - As a company deemed to be under Foreign Ownership, Control, or Influence (FOCI) due to its ownership by Italy's Leonardo S.p.A., DRS must operate under a proxy agreement with the DoD to maintain security clearances for classified contracts, where failure to comply could result in contract termination[111](index=111&type=chunk)[112](index=112&type=chunk)[222](index=222&type=chunk) - U.S. government contracts are often only partially funded and can be terminated for convenience, meaning the full value of backlog and bookings may not be realized[115](index=115&type=chunk)[132](index=132&type=chunk) - The business is susceptible to security breaches, including cyber-attacks and insider threats, which could disrupt operations, compromise sensitive government information, and result in significant financial and reputational damage[158](index=158&type=chunk)[159](index=159&type=chunk) - The ultimate majority stockholder, Leonardo S.p.A., may have interests that conflict with those of other stockholders, and this relationship may discourage change of control transactions and requires US Holding's approval for certain major corporate actions like material M&A or incurring significant debt[231](index=231&type=chunk)[233](index=233&type=chunk)[237](index=237&type=chunk) - As a 'foreign person' under CFIUS regulations, future acquisitions or investments by DRS in U.S. businesses may be subject to review, which could block, delay, or impose conditions on such transactions[228](index=228&type=chunk)[229](index=229&type=chunk) [Unresolved Staff Comments](index=51&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[242](index=242&type=chunk) [Properties](index=52&type=section&id=Item%202.%20Properties) Leonardo DRS is headquartered in a leased facility in Arlington, Virginia, operating a mix of owned and leased properties across 16 U.S. states, Canada, and Israel, considered adequate for current operational needs - The company's principal executive offices are leased in Arlington, Virginia[244](index=244&type=chunk) Significant Facilities | Location | Operating Segment | Approx. Sq. Footage | Owned/Leased | | :--- | :--- | :--- | :--- | | Milwaukee, WI | Integrated Mission Systems | 610,800 | Leased | | West Plains, MO | Integrated Mission Systems | 447,067 | Owned | | Menomonee Falls, WI | Integrated Mission Systems | 372,856 | Leased | | Melbourne, FL | Advanced Sensing and Computing | 336,287 | Leased | [Legal Proceedings](index=56&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in ordinary course legal proceedings, including a notable CERCLA matter where a subsidiary is a potentially responsible party for radioactive material at a national park site - A subsidiary received a Request for Information from the National Park Service under CERCLA regarding radioactive material at a site operated by an alleged predecessor over **50 years ago**, where the NPS may seek reimbursement for investigative and remedial efforts[252](index=252&type=chunk)[253](index=253&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[254](index=254&type=chunk) [Information about our Executive Officers](index=56&type=section&id=Supplementary%20Item%20-%20Information%20about%20our%20Executive%20Officers) This section provides biographical information for the company's key executive officers as of December 31, 2022, including the CEO, COO, CFO, General Counsel, and EVP of Business Operations Executive Officers (as of Dec 31, 2022) | Name | Age | Position | | :--- | :--- | :--- | | William J. Lynn III | 68 | Chief Executive Officer and Chairman | | John A. Baylouny | 61 | Executive Vice President, Chief Operating Officer | | Michael D. Dippold | 42 | Executive Vice President, Chief Financial Officer | | Mark A. Dorfman | 48 | Executive Vice President, General Counsel & Secretary | | Sally A. Wallace | 56 | Executive Vice President, Business Operations | PART II [Market for the Company's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=59&type=section&id=Item%205.%20Market%20for%20the%20Company%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters) The company's common stock is listed on the Nasdaq and the Tel Aviv Stock Exchange under the ticker symbol "DRS", and it does not currently pay cash dividends or have a share repurchase program - The company's stock is listed on the Nasdaq and the Tel Aviv Stock Exchange under the symbol "**DRS**"[270](index=270&type=chunk) - The company does not currently pay cash dividends and does not expect to in the future[271](index=271&type=chunk) - The company does not currently have a common stock share repurchase program[273](index=273&type=chunk) [Reserved](index=61&type=section&id=Item%206.%20Selected%20Historical%20Consolidated%20Financial%20Data) This item is reserved [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=62&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In 2022, revenue decreased due to divestitures, but operating and net earnings surged from asset sales, while backlog grew significantly, and free cash flow declined due to supply chain investments [Results of Operations](index=65&type=section&id=Results%20of%20Operations) In 2022, total revenues decreased due to divestitures and supply chain issues, while gross profit and margins improved, and operating and net earnings significantly increased due to gains on business disposals Consolidated Results of Operations Summary | (In millions, except per share amounts) | 2022 | 2021 | 2020 | % Change (22 vs 21) | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $2,693 | $2,879 | $2,778 | (6.5)% | | Gross profit | $575 | $547 | $494 | 5.1% | | Gross margin | 21.4% | 19.0% | 17.8% | +2.4 p.p. | | Operating earnings | $561 | $236 | $181 | 137.7% | | Net earnings | $405 | $154 | $85 | 163.0% | | Diluted EPS | $1.88 | $0.73 | $0.40 | 157.5% | | Backlog | $4,269 | $2,861 | $3,291 | 49.2% | | Bookings | $3,156 | $2,595 | $3,055 | 21.6% | - The **6.5%** revenue decline in 2022 was primarily due to the disposal of the GES business (**$109 million** impact) and supply chain component availability issues in the ASC segment (over **$100 million** impact)[318](index=318&type=chunk) - Operating and net earnings growth was largely attributed to the pre-tax gain of **$354 million** realized on the GES and AAC disposals[314](index=314&type=chunk)[327](index=327&type=chunk) - General and administrative expenses increased by **$64 million** (**21.8%**) in 2022, driven by **$38 million** in transaction costs for the GES/AAC dispositions and RADA merger, and a **$10 million** increase in IR&D investment[325](index=325&type=chunk) - Backlog increased by **$1.4 billion** (**49.2%**) to **$4.3 billion**, primarily driven by a multi-submarine contract for the Columbia Class program which added **$1.083 billion** in unfunded backlog[348](index=348&type=chunk) [Key Non-GAAP Operating Measures](index=73&type=section&id=Key%20Non-GAAP%20Operating%20Measures) In 2022, Adjusted EBITDA and margin improved, Adjusted Diluted EPS remained flat, and free cash flow decreased due to increased investments in inventory and contract assets from supply chain delays Key Non-GAAP Operating Measures | (In millions, except per share amounts) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Adjusted EBITDA | $318 | $310 | $268 | | Adjusted EBITDA Margin | 11.8% | 10.8% | 9.6% | | Adjusted diluted EPS | $0.83 | $0.83 | $0.58 | | Free cash flow | $74 | $122 | $82 | Adjusted EBITDA Reconciliation | (In millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net earnings | $405 | $154 | $85 | | Income tax provision | $120 | $46 | $27 | | Amortization of intangibles | $10 | $9 | $9 | | Depreciation | $55 | $49 | $44 | | Restructuring costs | $3 | $5 | $12 | | Interest expense | $34 | $35 | $64 | | Deal related transaction costs | $43 | $5 | $9 | | Other non-operating expense | $2 | $7 | $18 | | Gain on sale of dispositions | ($354) | — | — | | **Adjusted EBITDA** | **$318** | **$310** | **$268** | - Free cash flow decreased by **$48 million** in 2022, attributed to supply chain delays that resulted in increased investment in inventory and contract assets[373](index=373&type=chunk) [Review of Operating Segments](index=82&type=section&id=Review%20of%20Operating%20Segments) In 2022, ASC revenue declined due to divestitures and supply chain issues, while IMS revenue and Adjusted EBITDA significantly grew, driven by key programs and strong execution, leading to a substantial increase in IMS backlog Segment Performance Summary (2022 vs 2021) | (In millions) | ASC | IMS | | :--- | :--- | :--- | | **Revenue** | | | | 2022 | $1,733 | $983 | | 2021 | $1,940 | $959 | | % Change | (10.7)% | 2.5% | | **Adjusted EBITDA** | | | | 2022 | $199 | $119 | | 2021 | $220 | $90 | | % Change | (9.5)% | 32.2% | | **Adj. EBITDA Margin** | | | | 2022 | 11.5% | 12.1% | | 2021 | 11.3% | 9.4% | | **Backlog** | | | | 2022 | $1,868 | $2,401 | | 2021 | $1,762 | $1,099 | | % Change | 6.0% | 118.5% | - ASC segment revenue decreased by **$207 million**, primarily due to the net negative impact of the GES divestiture and RADA acquisition (**$108 million**) and supply chain delays[407](index=407&type=chunk) - IMS segment revenue increased by **$24 million**, driven by growth in Counter UAS/Short range air defense (**$26 million**) and Columbia Class submarine propulsion (**$70 million**)[418](index=418&type=chunk) - IMS Adjusted EBITDA increased by **$29 million** (**32.2%**), with margin expanding to **12.1%**, attributed to improved performance on the Columbia Class program, including a **$15 million** positive impact from a contract modification[420](index=420&type=chunk) [Liquidity and Capital Resources](index=88&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2022, cash decreased due to lower operating cash flow impacted by tax payments and increased working capital, offset by proceeds from divestitures, while financing activities included a significant dividend payment Cash Flow Summary | (In millions) | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $33 | $178 | $125 | | Net cash provided by (used in) investing activities | $436 | $39 | ($70) | | Net cash used in financing activities | ($403) | ($38) | ($80) | | Net increase (decrease) in cash | $66 | $179 | ($24) | - The decrease in operating cash flow was attributed to tax payments from the GES and AAC dispositions (**$79 million**) and transaction-related outlays (**$29 million**)[432](index=432&type=chunk) - Financing activities included a **$396 million** dividend paid to US Holding following the asset divestitures[398](index=398&type=chunk)[437](index=437&type=chunk) [Critical Accounting Policies and Estimates](index=91&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's critical accounting policies involve significant management judgment and estimates in revenue recognition, goodwill impairment, pension assumptions, business combinations, and income taxes - Key critical accounting policies involve significant judgments and estimates in the areas of Revenue Recognition, Goodwill Impairment, Pension Assumptions, Business Combinations, and Income Taxes[448](index=448&type=chunk)[449](index=449&type=chunk) - Revenue on the majority of contracts is recognized over time using the cost-to-cost percentage of completion method, which requires significant estimation of total contract costs and is subject to cumulative catch-up adjustments[450](index=450&type=chunk)[451](index=451&type=chunk) [Quantitative and Qualitative Disclosure of Market Risks](index=94&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosure%20of%20Market%20Risks) The company's market risks include interest rate fluctuations on variable-rate debt, limited foreign currency exposure, and inflationary pressures on supply chain costs impacting fixed-price contracts - The company is exposed to interest rate risk on its variable-rate borrowings, where a **0.5%** increase or decrease in the weighted average interest rate would change annual interest expense by approximately **$1 million**[468](index=468&type=chunk) - Foreign currency risk is limited, with primary exposure to the Canadian dollar on receivables of **$46 million** as of year-end 2022[469](index=469&type=chunk) - The company has experienced inflationary pressures on supply chain costs, which could negatively impact profitability, particularly on longer-term firm fixed-price contracts[470](index=470&type=chunk)[471](index=471&type=chunk) [Financial Statements and Supplementary Data](index=96&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2020-2022, including the auditor's report and detailed notes - The financial statements were audited by Ernst & Young LLP for the year ended December 31, 2022, and by KPMG LLP for the two-year period ended December 31, 2021[475](index=475&type=chunk)[489](index=489&type=chunk) - Critical Audit Matters identified by the auditor for 2022 were: 1) Revenue recognition based on the percentage of completion method, due to the judgment involved in estimating costs at completion for long-term contracts, and 2) Valuation of acquired intangible assets from the RADA merger, due to significant estimation in determining fair value[481](index=481&type=chunk)[486](index=486&type=chunk) [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=155&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[788](index=788&type=chunk) [Controls and Procedures](index=155&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, excluding the recently acquired RADA business from the latter assessment - Management concluded that disclosure controls and procedures were effective as of December 31, 2022[789](index=789&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022[790](index=790&type=chunk) - The assessment of internal control over financial reporting excluded the operations of RADA, which was acquired on November 28, 2022[792](index=792&type=chunk) [Other Information](index=156&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[795](index=795&type=chunk) [Disclosure Regarding Foreign Jurisdictions and Prevents Inspections](index=156&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20and%20Prevents%20Inspections) This item is not applicable to the company - Not applicable[796](index=796&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=156&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 definitive proxy statement - The information required by this item is incorporated by reference from the company's 2023 definitive proxy statement[797](index=797&type=chunk) [Executive Compensation](index=159&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2023 definitive proxy statement - The information required by this item is incorporated by reference from the company's 2023 definitive proxy statement[801](index=801&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=160&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2023 definitive proxy statement - The information required by this item is incorporated by reference from the company's 2023 definitive proxy statement[803](index=803&type=chunk) [Certain Relationships and Related Party Transactions and Director Independence](index=161&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Party%20Transactions%20and%20Director%20Independence) Information regarding related party transactions and director independence is incorporated by reference from the company's 2023 definitive proxy statement - The information required by this item is incorporated by reference from the company's 2023 definitive proxy statement[804](index=804&type=chunk) [Principal Accountant Fees and Services](index=161&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 definitive proxy statement - The information required by this item is incorporated by reference from the company's 2023 definitive proxy statement[804](index=804&type=chunk) PART IV [Exhibits and Financial Statement Schedule](index=162&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedule) This section lists the consolidated financial statements and provides an index of all exhibits filed with the Form 10-K, including key agreements - This item lists the financial statements and schedules filed as part of the annual report[805](index=805&type=chunk) - An index of exhibits is provided, incorporating by reference key agreements such as the RADA merger agreement, the new Credit Agreement, and the Tax Allocation Agreement[807](index=807&type=chunk)[809](index=809&type=chunk)

` UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 333-266494 Leonardo DRS, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 13-2632319 (State o ...

RADA Electronic Industries Ltd. (RADA) Q2 2022 Earnings Conference Call August 17, 2022 9:00 AM ET Company Participants Dov Sella - Chief Executive Officer Avi Israel - Chief Financial Officer Ehud Helft - EK Global Investor Relations Conference Call Participants Ellen Page - Jefferies Jeff Bernstein - Cowen Austin Moeller - Canaccord Scott Huntington - Brighton Securities Operator Ladies and gentlemen, thank you for standing by. Welcome to the RADA Electronics Industries second quarter 2022 results confere ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2022 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ Commission File Number 333-253583 Leonardo DRS, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 13-2632319 (State or Other ...