Key Takeaways:
Leonardo DRS posted Q2 revenue of $913 million, up 10%, as backlog hit a record and guidance rose.
"The results reflect disciplined execution and sustained demand for DRS's differentiated technologies," Chief Executive Officer John Baylouny said. The company captured more than $1 billion in bookings during the quarter.
Net earnings rose 59% to $86 million, or 32 cents a share, from $54 million, or 20 cents, a year earlier. Adjusted diluted earnings per share came in at 35 cents, up 52%. The company did not disclose consensus estimates. Adjusted EBITDA climbed 33% to $128 million, with margin widening to 14% from 11.6%. Free cash flow was $6 million in the quarter, improving from negative $56 million a year earlier.
The Advanced Sensing and Computing segment posted revenue of $587 million, up 8%, driven by tactical radars and infrared sensing programs. Segment adjusted EBITDA rose 19% to $69 million, with margin expanding 110 basis points to 11.8%. The Integrated Mission Systems segment generated $333 million, up 15%, led by electric power and propulsion systems. IMS adjusted EBITDA jumped 55% to $59 million, with margin widening 460 basis points to 17.7%. Both segments reported book-to-bill ratios of 1.2 times.
Funded bookings totaled $1.1 billion in the quarter, pushing funded backlog to a record $5.1 billion. The company raised its 2026 adjusted EBITDA guidance to a range of $525 million to $540 million, from $515 million to $530 million, and lifted its adjusted diluted EPS forecast to $1.34 to $1.39, from $1.26 to $1.30. Revenue guidance was maintained at $3.9 billion to $3.975 billion.
Leonardo DRS also announced the $450 million all-cash acquisition of Raft LLC, a McLean, Virginia-based mission software company specializing in multi-domain data fusion and artificial intelligence. The deal is expected to close in the fourth quarter and be accretive to adjusted earnings in the first full year of ownership. DRS expects to fund the purchase through cash on hand and borrowings under its revolving credit facility.
The company declared a quarterly dividend of 9 cents a share, payable Aug. 27 to holders of record Aug. 13. It repurchased 261,526 shares for about $12 million in the quarter. At quarter end, DRS held $270 million in cash with no outstanding borrowings under its credit facility.
The guidance raise suggests management expects demand for the company's sensing, computing and propulsion technologies to remain strong. Investors will watch the Raft acquisition close in the fourth quarter for updates on the company's AI and software strategy.
This article is for informational purposes only and does not constitute investment advice.
