Leonardo DRS(US:DRS)2024-10-30 20:07Revenue Sources - For the nine months ended September 30, 2024, approximately 81% of the company's business was derived from the U.S. Department of Defense (DoD), with revenues from the U.S. Navy and U.S. Army accounting for 37% and 32% of total revenues, respectively[84]. - The company's revenue for the nine months ended September 30, 2024, consisted of 94% product-related revenue, with 83% derived from firm-fixed price contracts[109]. - The company’s revenues from U.S. government contracts represented 81% and 80% of total revenues for the nine months ended September 30, 2024, and 2023, respectively[100]. - International revenue accounted for approximately 13% of total revenue for the nine months ended September 30, 2024, up from 9% in the same period in 2023, due to increased defense spending in Eastern Europe[166]. Financial Performance - Total revenues for the three months ended September 30, 2024, increased by $109 million, or 15.5%, to $812 million compared to $703 million for the same period in 2023[119]. - Gross profit for the three months ended September 30, 2024, increased by $17 million, or 10.5%, to $179 million compared to $162 million for the same period in 2023[123]. - Operating earnings for the three months ended September 30, 2024, increased by $16 million, or 27.1%, to $75 million compared to $59 million for the same period in 2023[127]. - Net earnings for the three months ended September 30, 2024, increased by $10 million, or 21.3%, to $57 million compared to $47 million for the same period in 2023[133]. - Adjusted EBITDA for the three months ended September 30, 2024, was $100 million, compared to $82 million for the same period in 2023[140]. - Adjusted diluted EPS for the three months ended September 30, 2024, was $0.24, compared to $0.20 for the same period in 2023[140]. - Adjusted net earnings for the three months ended September 30, 2024, were $64 million, compared to $53 million for the same period in 2023[149]. - For the nine months ended September 30, 2024, adjusted EBITDA increased by $59 million, or 30.6%, to $252 million from $193 million for the same period in 2023[146]. Backlog and Bookings - Backlog increased by $3,545 million to $8,264 million as of September 30, 2024, from $4,719 million as of September 30, 2023[136]. - Bookings for the three months ended September 30, 2024, decreased to $1,051 million compared to $1,055 million for the same period in 2023, while bookings for the nine months ended September 30, 2024, increased to $2,807 million compared to $2,502 million for the same period in 2023[138]. - Total bookings for the three months ended September 30, 2024, decreased by 0.4% to $1,051 million compared to $1,055 million for the same period in 2023[171]. - ASC segment bookings decreased by 16.5% to $685 million for the three months ended September 30, 2024, due to accelerated awards in the previous year[176]. - IMS segment bookings increased by 55.7% to $366 million for the three months ended September 30, 2024, driven by new awards in electric power and propulsion programs[182]. Operational Efficiency - The company has institutionalized a continuous improvement process through its APEX program, aimed at enhancing efficiency and customer satisfaction[95]. - The company recognizes revenue based on performance obligations in contracts, with the majority derived from fixed-price contracts[157]. - The company’s operational performance is influenced by the integration of goods and services in contracts, which are often complex and require significant coordination[157]. Cash Flow and Liquidity - As of September 30, 2024, the company's cash balance was $198 million, a decrease from $467 million as of December 31, 2023[184]. - Net cash used in operating activities decreased by $138 million, from $310 million for the nine months ended September 30, 2023, to $172 million for the same period in 2024[186]. - Free cash flow usage decreased by $109 million to $(226) million for the nine months ended September 30, 2024, from $(335) million for the same period in 2023, primarily due to lower cash used to fund working capital[153]. - Net cash used in investing activities increased by $13 million for the nine months ended September 30, 2024, primarily due to higher capital expenditures for a naval expansion project in South Carolina[187]. - Net cash used in financing activities was $42 million for the nine months ended September 30, 2024, compared to net cash provided of $93 million for the same period in 2023[188]. - The company believes its existing cash and access to credit facilities will be sufficient to meet short and long-term liquidity needs, although future cash flow generation is uncertain[184]. Risks and Challenges - Approximately 5% of the company's workforce is located in Israel, which poses potential operational risks due to ongoing regional conflicts[99]. - U.S. government spending and federal budget uncertainty may impact the company's business and results of operations, particularly in defense and technology sectors[154]. - Inflationary pressures have impacted supply chain costs, particularly in microelectronics and commodities, which could negatively affect future financial results[195]. - The company is exposed to interest rate risk on variable-rate borrowings, with a 0.5% change in the weighted average interest rate potentially impacting annual interest expense by approximately $1 million[192]. - The company has limited foreign currency exposure, primarily with receivables of $29 million in Canadian dollars as of September 30, 2024[194]. Segment Performance - The company's Advanced Sensing and Computing segment focuses on enhancing sensor capabilities for various military applications, including precision targeting and surveillance[86]. - The company's Integrated Mission Systems segment integrates power conversion and control systems for military applications, contributing to its diverse product offerings[89]. - ASC segment revenue rose by 23.7% to $533 million for the three months ended September 30, 2024, driven by advanced sensing and force protection programs[173]. - IMS segment revenue increased by 2.9% to $285 million for the three months ended September 30, 2024, attributed to short-range air defense programs[178]. - ASC's adjusted EBITDA margin improved by 90 basis points to 12.0% for the three months ended September 30, 2024[174]. - IMS's adjusted EBITDA margin increased by 30 basis points to 12.6% for the three months ended September 30, 2024[180].