Leonardo DRS, Inc.

Hello, thank you for standing by. Welcome to Leonardo VRS Second Quarter 2024 Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask the question during this session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. I would now like to hand the call over to Steve Vather. Sir, you may begin.

Good morning and welcome, everyone. Thanks for participating on today's quarterly earnings conference call. With me today are Bill Lin, our chairman and CEO, and Mike DePold, our CFO. They will discuss our strategy, operational highlights, financial results, and forward outlook. Today's call is being webcast on the investor relations portion of the website, where you will also find the earnings release and supplemental presentations. Management may also make forward-looking statements during the call regarding future events, anticipated future trends, and the anticipated future performance of the company. We caution you that such statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Actual results may differ materially from those projected in the forward-looking statements due to a variety of factors. For a full discussion of these risk factors, please refer to our latest Form 10-K and our other SEC filings. We undertake no obligation to update any of the forward-looking statements made on this call. During this call, management will also discuss non-GAAP financial measures, which we believe provide useful information for investors. These non-GAAP measures should not be evaluated in isolation or as a substitute for GAAP performance measures. You can find the reconciliation of the non-GAAP measures discussed on this call in our earnings release. At this time, I will turn the call over to Bill.

Bill? Thanks, Steve, and thank you all for joining us. DRS continues to perform well as evidenced by the impressive quarterly results we are releasing this morning. We are experiencing steady customer demand across our diverse portfolio of differentiated technologies. As a result, we posted another consecutive quarter of 1.2 book to build. In Q2, there was particular strength for our capabilities in advanced infrared sensing, electric power and propulsion, network computing, and ground systems integration. Additionally, our total backlog ascended to new company records and now stands over $7.9 billion, which is up 82% year over year and also up sequentially. The robust demand we continue to experience, coupled with the easing of supply chain constraints, unlocked another quarter of 20% year over year organic revenue growth. We also grew our adjusted EBITDA by 32% and delivered margin expansion of 100 basis points in the quarter. Adjusted net earnings and adjusted diluted EPS increased by 21% and 20% compared to last year, thanks to solid operational execution. I want to take a moment to thank the broader DRS team for driving such marvelous results. The team's steadfast focus and our exceptional performance in the first half is prompting us to adjust our outlook for the full year. Mike will walk through the detail of our increased guidance a little bit later on the call. Here's some thoughts on the macro environment. Congress has made preliminary progress on FY25 appropriations. However, consistent with prior years, we expect to enter the fiscal year under a continuing resolution. Looking beyond the near term, we believe that the elevated global threat environment will remain as the single most important factor driving defense investment by the U.S. and its allies. Technology advancements are changing the nature of warfare, and our national security strategy remains consistently focused on deterring and, if necessary, contesting near peer adversaries. Both of these factors reinforce the imperative to modernize. DRS is well positioned to continue supporting our customers as they enhance their capabilities to address new mission complexities. Shifting to supply chain, I made brief mention that improvements on this front are partially responsible for unlocking incremental revenue growth. We have seen a steady and gradual recovery across most, but not all, of our supply chain in year-to-date 2024. are steadfast and proactive management of the supply chain, coupled with the broader improvement are resulting in better predictability and delivery timelines, increased component material availability, as well as improved consistency and quality. Overall, these positive developments are accelerating the pacing of revenue for the year. That said, the revenue step up from the supply chain recovery is expected to be contained to this year with future growth to be more in line with our previous projections in the mid single-digit growth range. We believe that we are close to a new steady state with respect to lead times and input pricing, which of course are both significantly higher than pre-2020. While inflation has been a lessening factor for us in 2024, there are still some stubborn pockets within our business where we are still absorbing higher input pricing. Shifting to our operations, let me highlight a couple of items this quarter. As I mentioned earlier, we are continuing to see strong demand across our broad and differentiated portfolio. In our sensing business, our technologies continue to be well recognized as the go-to standard. This is evident in our outstanding quarterly bookings, as well as the clear long-term opportunity set bolstered by our customers' modernization push for next-generation technologies. We are also advancing our leading market positions by partnering with commercial players to jointly develop cutting edge capabilities that meet emerging customer requirements. As an example, we are actively working to integrate edge AI processing into sensors. At the same time, our agility and commitment to excellence makes us a partner of choice across the defense ecosystem. We were recently recognized with a Partner to Win Award from our customer VAE Systems for best-in-class performance in delivering exceptional capability, quality, and on-time delivery. This award, among many others received over the years, embodies our culture and commitment to ensuring our customers have the very best technology to execute their missions. Our innovation continues to be matched with healthy customer interest. which validates the close alignment of our R&D strategy to future mission needs. You may recall that earlier this year, we unveiled a new family of lasers that cover a wider spectrum of light. These lasers were specifically designed for quantum information science applications. I am pleased to report that we have already secured several orders and continue to gather demand for our state-of-the-art capability in this domain. Additionally, we are seeing considerable domestic and international customer appetite for our multi-domain force protection solutions. Counter UAS and force protection capabilities remain critical to survivability and operating effectively in today's battlefield. Our tactical radars, advanced sensing, and active protection technologies, as well as our systems integration expertise, continue to be key enablers. I want to briefly mention that in this quarter we also secured a $417 million contract to provide critical electronic combat control and sonar systems across U.S. and allied Navy submarines. We are pleased that we will be continuing to support the Navy on this important network computing contract for many years to come. This win also provides us with increased visibility into the year as it clears our largest re-compete for 2024. Moving to a quick update on our facility expansion efforts in Charleston, South Carolina, we continue to make steady progress as demonstrated by the ramp up of CapEx in the quarter. As planned, CapEx will continue to tick up in the second half. Lastly, I want to commend our team in Danbury, Connecticut, for their superb commitment to industrial security. This year, DRS was one of 14 recipients of the Cogswell Award out of more than 12,500 eligible cleared facilities. This honor now marks our 22nd award, which demonstrates our continued and unwavering company-wide commitment to security. Overall, there was a lot to be proud of, and I am pleased with our outstanding year-to-date results. That said, I am most proud of the team's continued focus on delivering the very best technology to our warfighters. Our talented people, sound strategy, and leading market positions are generating spectacular outcomes for both customers and shareholders. We remain focused on driving sustainable growth, execution consistency, and prudent investment, all of which are critical components to our long-term value creation formula. Let me now turn the call over to Mike, who will walk you through our second quarter results and revised 2024 guidance in greater detail.