Leonardo DRS(DRS) - 2024 Q4 - Annual Report

Revenue Sources - The U.S. government accounted for 79% of total revenues in 2024, with the Department of Defense (DoD) representing 37% of total revenues[33]. - Approximately 63% of revenue in 2024 was derived from subcontractor positions, indicating a reliance on partnerships for contract fulfillment[36]. - The company generated $2.710 billion from firm-fixed price contracts in 2024, an increase from$ 2.373 billion in 2023[38]. - The company’s total revenues for 2024 were significantly supported by long-term programs and incumbent supplier relationships[37]. Backlog and Contracts - Total backlog increased to $8.509 billion in 2024, up from$ 7.751 billion in 2023, with funded backlog at $4.177 billion and unfunded backlog at$ 4.332 billion[42]. - The DoD's fiscal year 2025 budget request includes $850 billion for national defense programs, remaining largely flat compared to prior year levels[32]. - The company has a diverse business mix, with no single contract representing more than 10% of revenues for 2024[37]. Research and Development - Company-funded R&D expenses rose to$ 92 million in 2024, compared to $82 million in 2023 and$ 58 million in 2022[46]. - Leonardo S.p.A., the company's indirect majority stockholder, reported preliminary consolidated revenues of €17.8 billion and invested €2.5 billion in R&D in 2024[69]. Workforce and Employee Relations - The workforce included approximately 7,000 employees as of December 31, 2024, with 7% represented by labor unions[49]. - The company maintains a strong commitment to employee development and community support, emphasizing ethical business practices and safety in the workplace[55]. Financial Performance and Risks - The company generated a significant portion of its revenue, profit, and cash flows in the fourth quarter of its fiscal year, influenced by the U.S. federal government's budget cycle[60]. - The company reported an outstanding balance of $203 million under its 2022 Term Loan A, with a potential annual interest expense fluctuation of approximately$ 1 million for a 0.5% change in interest rates[399]. - The company has limited foreign currency exposure, primarily with receivables of $27 million in Canadian dollars, where a 10% fluctuation in exchange rates would not materially impact financial statements[400]. - The company experienced inflationary pressures affecting supply chain costs, particularly in micro-electronics and commodities, which could negatively impact future financial results[401]. - The company is subject to various procurement regulations and legal requirements, which could increase costs and risks, potentially affecting profitability[62]. Mergers and Acquisitions - The company completed the merger with RADA Electronic Industries Ltd. on November 28, 2022, resulting in RADA becoming a wholly-owned subsidiary and providing a 10% interest in RadSee Technologies Ltd.[57]. - The divestiture of the Global Enterprise Solutions business to SES Government Solutions, Inc. was completed on August 1, 2022, generating net cash proceeds of$ 427 million after adjustments[58]. - The company divested its equity investment in Advanced Acoustic Concepts LLC to Thales Defense & Security, Inc., resulting in proceeds of $56 million[59].