Leonardo DRS (DRS) Q2 2026 earnings summary

Executive summary

• Q2 2026 delivered 10.1% organic revenue growth to $913 million, with net earnings up 59.3% to $86 million, driven by strong demand, backlog conversion, and disciplined execution across both IMS and ASC segments.

• Bookings reached $1.1 billion, with a book-to-bill ratio of 1.2x, extending an 18-quarter streak at or above 1.0, and funded backlog hit a record $5.1 billion, up 17% year-over-year.

• Adjusted EBITDA grew 33% year-over-year to $128 million, with margin expanding by 240 basis points to 14.0%, reflecting favorable program mix and risk retirement.

• Announced a $450 million all-cash acquisition of Raft to expand AI, data fusion, and mission software capabilities, expected to close in Q4 2026.

• Declared a $0.09 per share dividend, payable August 27, 2026, and continued share repurchases.

Financial highlights

• Q2 2026 revenue was $913 million (up 10% year-over-year); net earnings were $86 million (up 59%); adjusted EBITDA was $128 million (up 33%) with a 14.0% margin.

• Adjusted net earnings were $94 million (up 52%); adjusted diluted EPS was $0.35 (up 52%).

• Free cash flow for Q2 was $6 million, supported by higher profitability and improved working capital efficiency.

• Cash and cash equivalents at quarter-end were $270 million, with no outstanding borrowings under the credit facility.

• Paid $24 million in dividends and repurchased $12 million in stock during the quarter.

Outlook and guidance

• Full-year 2026 revenue guidance maintained at $3.9–$3.975 billion, implying 7–9% organic growth.

• Adjusted EBITDA guidance raised to $525–$540 million; adjusted diluted EPS guidance increased to $1.34–$1.39; tax rate assumption updated to 16.5%.

• Guidance excludes the pending Raft acquisition, which is expected to be accretive in its first full year.

• CapEx expected in the mid-4% range of revenue; R&D investment to approach 4% of sales.

• Targeting approximately 75% free cash flow conversion of adjusted net earnings.