Executive Summary

Q4 revenue was $981 million (+6% YoY) and diluted EPS was $0.33; adjusted EBITDA was $148 million with 15.1% margin, reflecting improved program execution, favorable mix, and leverage on higher volume .
Backlog reached $8.5 billion (+10% YoY) and bookings were $1.27 billion (book-to-bill 1.3x), sustaining multi-year growth visibility .
2025 guidance formalized: revenue $3.425B–$3.525B, adjusted EBITDA $435M–$455M, adjusted EPS $1.02–$1.08, tax rate 19%, diluted WASO 270M; Q1 2025 guide of ~$725M revenue, mid-10% adjusted EBITDA margin .
Capital return introduced: dividend of $0.09 per share and authorization for up to $75M buybacks; Q4 free cash flow was $416M, FY FCF $190M, bolstering return capacity .

What Went Well and What Went Wrong

What Went Well

Record demand and backlog: “record bookings” and 1.3x book-to-bill for Q4 and FY, with backlog at $8.5B; management emphasized strong demand across advanced sensing, network computing, force protection, and electric power & propulsion .
Margin expansion drivers: IMS margin uplift from improved Columbia Class profitability, and broader program transitions from development to production aiding margins and growth .
Strategic positioning and investment: CEO highlighted DRS’s “agility and innovation” and investments in sensing modalities, directed energy, AI and quantum in sensing/processing; IRAD and CapEx stepped up ~25% YoY in 2024 and further in 2025 .

What Went Wrong

IMS quarterly revenue dip: Q4 IMS revenue declined 1% YoY due to program timing in force protection, despite strong full-year growth and margin gains .
Non-GAAP adjustments and FX: Q4 “other one-time non-operational events” increased (FX impacts on balance sheet items), requiring non-GAAP reconciliation and potentially complicating comparability .
Macro/budget uncertainty: New administration’s 8% reallocation focus and possible CR risks could affect 2026 appropriations; management noted 75% of 2025 revenue already in backlog, but cautioned on evolving priorities .

Financial Results

Quarterly Trend vs Prior Quarters (oldest → newest)

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$753	$812	$981
Diluted EPS ($)	$0.14	$0.21	$0.33
Adjusted EBITDA ($USD Millions)	$82	$100	$148
Adjusted EBITDA Margin (%)	10.9%	12.3%	15.1%
Adjusted Diluted EPS ($)	$0.18	$0.24	$0.38

Year-over-Year Comparison (Q4 2023 → Q4 2024)

Metric	Q4 2023	Q4 2024	YoY Change
Revenue ($USD Millions)	$926	$981	+6%
Diluted EPS ($)	$0.28	$0.33	+18%
Adjusted EBITDA ($USD Millions)	$131	$148	+13%
Adjusted EBITDA Margin (%)	14.1%	15.1%	+100 bps

Segment Breakdown (Q4 2024 vs Q4 2023)

Segment	Q4 2023 Revenue ($M)	Q4 2024 Revenue ($M)	Q4 2023 Adj. EBITDA ($M)	Q4 2024 Adj. EBITDA ($M)	Q4 2023 Adj. EBITDA Margin	Q4 2024 Adj. EBITDA Margin
Advanced Sensing & Computing (ASC)	$605	$660	$94	$102	15.5%	15.5%
Integrated Mission Systems (IMS)	$329	$326	$37	$46	11.2%	14.1%

KPIs

KPI	Q2 2024	Q3 2024	Q4 2024
Bookings ($USD Millions)	$941	$1,051	$1,270
Book-to-Bill (x)	1.2x	1.3x	1.3x
Backlog ($USD Millions)	$7,925	$8,264	$8,509
Free Cash Flow ($USD Millions)	$1	$48	$416
Operating Cash Flow ($USD Millions)	$34	$59	$443
Cash & Cash Equivalents ($USD Millions)	$149	$198	$598
Total Debt ($USD Millions)	$373 (22 current + 351 LT)	$367 (22 current + 345 LT)	$365 (25 current + 340 LT)
Dividend per Share ($)	—	—	$0.09 declared
Share Repurchase Authorization ($USD Millions)	—	—	$75 authorized

Estimates vs Actuals

S&P Global consensus estimates for Q4 were unavailable due to SPGI request limit; as a result, a comparison to consensus cannot be provided at this time. Values would be retrieved from S&P Global if available.*

Metric	Consensus (S&P Global)	Actual
Revenue ($USD Millions)	Unavailable*	$981
Primary EPS ($)	Unavailable*	$0.33
Adjusted EBITDA ($USD Millions)	Unavailable*	$148

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY 2025	5%–8% growth off 2024 mid-point (~prelim framework)	$3,425M–$3,525M	Raised vs prior framework (more specific range)
Adjusted EBITDA	FY 2025	~13% margin (framework)	$435M–$455M; +30–50 bps margin expansion vs 2024	Clarified range; implies margin uplift
Adjusted Diluted EPS	FY 2025	Not provided	$1.02–$1.08	New metric added
Tax Rate	FY 2025	19.0% (implied in frameworks)	19.0%	Maintained
Diluted WASO	FY 2025	268.0M (2024 guide)	270.0M (to be adjusted with buyback pace)	Slightly higher; subject to buyback
Q1 Revenue	Q1 2025	Not provided	~$725M	New quarterly color
Q1 Adj. EBITDA Margin	Q1 2025	Not provided	Mid-10%	New quarterly color
Dividend	Ongoing	None	$0.09 per share payable Mar 27, 2025; intent to pay quarterly (Board discretion)	Introduced
Share Repurchase	Mar 2025–Mar 2027	None	Up to $75M authorized	Introduced

Earnings Call Themes & Trends

Topic	Previous Mentions (Q-2: Q2 2024)	Previous Mentions (Q-1: Q3 2024)	Current Period (Q4 2024)	Trend
AI/Tech at tactical edge	Emphasized open standards/modularity; margin pressure in IMS from mix/execution	Continued growth in advanced IR sensing and tactical radar; strong bookings	“Enabling the application of AI and quantum in sensing and processing”; next-gen network computing leveraging AI at the tactical edge	Expanding AI integration; productization momentum
Supply chain	Improving; revenue growth above expectations aided by supply chain	Better working capital efficiency; backlog up; cash improved	More normalized/stable supply chain; lead times elongated vs pre-pandemic but predictable; material pricing volatility in [indiscernible] mitigated by safety stock	Stabilized; watch specific materials pricing
Program mix & margins	IMS margin contraction on ground surveillance mix; Columbia profitability improving	Broad margin expansion (ASC + IMS)	IMS margin +290 bps YoY; Columbia profitability key; dev→production transitions drive margin	Margin tailwinds strengthening
Electric power & propulsion	$417M Navy contract; IMS bookings strength [29:?, context via Q2]	Continued strong demand; bookings	$45M Navy SIB investment for Charleston facility expansion; supports steam turbine capacity and future platforms (DDG(X))	Capacity expansion and future platform opportunities
Over-the-horizon radar	—	Growth in advanced sensing; bookings	New wins in OTH radar prime contracts; potential role in broader missile defense architecture	Emerging growth vector
International revenue	—	Backlog growth; bookings (no specific % disclosed)	International revenue reached 13% in 2024; fourth straight year of increases	Rising international mix
Fixed-price environment	Mix issues in IMS; execution variable	—	DRS already ~85% fixed price; sees industry shift aligning to its strengths	Competitive positioning advantage
Macro/budget outlook	Guidance increased; investment focus	Preliminary 2025 guide; strong execution	New admin priorities (missile defense, Indo-Pacific); 75% of 2025 revenue in backlog; CR would be more of a 2026 risk	Visibility good; policy watch continues

Management Commentary

CEO: “DRS delivered record bookings, mid-teens organic revenue growth, healthy adjusted EBITDA margin expansion and solid free cash flow generation… We remain strategically focused on capitalizing on our momentum to drive continued growth.”
Technology/investment: “Expansion of our sensing modalities, directed energy capabilities, enabling the application of AI and quantum in sensing and processing… our new facility in Charleston, South Carolina.”
Fixed-price readiness: “We’re about 85% fixed price now… You need to understand what the development risk means for production cost… I think we’ve become quite good at that.”
Electric power & propulsion strategy: “Industrial-based funding… will strengthen… design, manufacture, integration and test of steam turbine systems… creating capacity for next-generation platforms.”
International momentum: “Percentage of revenue coming from international customers rose to 13% in 2024… clear international growth opportunities.”

Q&A Highlights

Non-GAAP adjustments: CFO clarified Q4 “other one-time non-operational events” were primarily FX impacts on certain balance sheet items in the adjusted EBITDA reconciliation .
Margin drivers beyond Columbia: Smaller sensing and force protection programs moving from development to production will contribute “1/4 or 1/3” of margin improvement alongside Columbia .
OTH radar opportunity: Transitioning from components to prime contracts; potential inclusion in broader missile defense architecture under new priorities .
DDG(X) and KDDX: Growing attention for electric propulsion on DDG(X) with design decisions in next couple of years; KDDX bid remains active but timing uncertain .
Supply chain/materials: Safety stock in [indiscernible] material; pricing volatility observed; otherwise supply chain predictable, availability strong .
Budget environment/CR risk: 8% reallocation focus toward missile defense; CR would more likely impact 2026; 75% of 2025 revenue in backlog provides near-term insulation .

Estimates Context

Attempted to retrieve S&P Global consensus for Q4 revenue, EPS, and EBITDA; data was unavailable due to SPGI request limit, so we cannot provide a beat/miss assessment at this time.*
Given strong actuals and management’s raised and formalized guidance for 2025, sell-side estimates may need to adjust upward for revenue and margins, particularly reflecting Columbia profitability and dev→prod transitions .

Key Takeaways for Investors

Backlog and bookings underpin multi-year growth; Q4 bookings of $1.27B and backlog of $8.5B support the 6%–9% organic growth outlook for 2025 .
Margin trajectory improving, led by Columbia and program transitions; IMS Q4 margin expanded 290 bps YoY, and company expects another 30–50 bps in 2025 .
New capital return program is a positive catalyst: $0.09 dividend and $75M buyback; diluted WASO guidance of 270M could be revised with buyback execution .
Free cash flow strength in Q4 ($416M) and net cash positioning enhance optionality for both M&A and returns; watch Q1 seasonality (expected FCF outflow similar to Q1 2024) .
Strategic exposure to missile defense, counter-UAS, advanced sensing, and naval electric propulsion aligns with new administration priorities; OTH radar and DDG(X) could be incremental drivers .
Risks to monitor: potential 2026 CR impact, supply chain pricing volatility in certain materials, and program timing within force protection affecting quarterly cadence .
Near-term trading: narrative supports positive sentiment on backlog/guide/dividend initiation; absence of consensus data tempers immediate “beat/miss” interpretation, but qualitative momentum is strong.*

Notes:
*Estimates data was unavailable due to S&P Global request limits at retrieval time; consensus comparisons cannot be provided here.

Leonardo DRS, Inc. (DRS)·Q4 2024 Earnings Summary