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- **Revenue Growth**: Q3 revenue up 18% YoY to $960M, with full year guidance of 10%-11% growth.
- **Counter UAS Dominance**: 20% of revenue from counter UAS, with bookings up 32% sequentially.
- **Leadership Transition**: Bill Lynn retiring; John Baylouny to lead with focus on AI and unmanned systems.
- **Germanium Supply**: Recycling success and strategic agreements to ensure 2026 supply.
- **Free Cash Flow**: $77M in Q3, with 80% conversion of adjusted net earnings.
- **R&D Intensity**: Mid-3% of revenue for R&D, enabling long-term growth in missile sensing and network computing.
- **Columbia Class Expansion**: Shipset margins stabilizing in 2026+ with South Carolina facility.

**【CEO Summary Section】**
- **Strong Q3 Performance**: Bookings of $1.3B (1.4x book-to-bill ratio), total backlog $8.9B (8% YoY), and funded backlog up 20% YoY.
- **Revenue Growth Guidance**: Full year revenue expected to grow 10%-11% YoY, driven by counter UAS and electric power propulsion programs.
- **Leadership Transition**: Bill Lynn retiring as CEO; John Baylouny named new CEO, with Fran Townsend becoming Lead Independent Director.
- **Supply Chain Progress**: Germanium recycling and strategic agreements to ensure 2026 supply, reducing reliance on China.
- **Strategic Investments**: $15M in Hoverfly for unmanned systems, and $1.3B in R&D for AI, SAGEcore OS, and THOR computing solutions.

**【CFO Financial Commentary】**
- **Q3 Financials**: Revenue $960M (18% YoY), Adjusted EBITDA $117M (17% YoY), and Free Cash Flow $77M (up YoY).
- **Segment Growth**: IMS segment revenue up 34% YoY, driven by counter UAS and electric power programs.
- **Guidance Update**: Full year revenue $3.55B-$3.6B, Adjusted EBITDA $437M-$453M, and 80% free cash flow conversion.
- **R&D Intensity**: Mid-3% of revenue for R&D, impacting ASC margins but enabling long-term growth in counter UAS and missile sensing.

**【Q&A Highlights】**
- **Counter UAS Demand**: 20% of revenue tied to counter UAS, with Army bookings up 32% sequentially.
- **Germanium Supply**: Recycling success and strategic agreements to mitigate 2026 risks.
- **Government Shutdown Risks**: Potential delays in awards and payments if shutdown extends beyond November.
- **Foreign Military Sales**: Europe and Asia demand for network computing and propulsion systems.
- **Columbia Class Shipsets**: Stabilizing margins in 2026+ with South Carolina facility expansion.
- **AI and SAGEcore**: Integrating AI into platforms for multi-domain operations, with SAGEcore OS adoption across tactical systems.

Leonardo DRS, Inc. (DRS) Q3 2025 Earnings Call Transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

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Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

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Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

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Basic EPS from Discontinued Operations

Diluted EPS

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Diluted EPS from Discontinued Operations

DRS

DRS fundamentals

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