Leonardo DRS, Inc.

Ladies and gentlemen, good day and welcome to the Leonardo Doctors' Second Quarter Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the company's prepared remarks, there will be an opportunity to ask questions and instructions will be given at that time. As a reminder, this event is being recorded. I would now like to turn the conference over to Steve Bathur, Senior Vice President of Investor Relations and Corporate Finance. Please go ahead.

Good morning and thanks for participating on today's quarterly earnings conference call. Joining me today are Bill Lin, our Chairman and CEO, and Mike DePauw, our CFO. We 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 presentation. 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 a reconciliation of the non-GAAP measures discussed on this call in our earnings release. At this time, I'll turn the

call over to Bill. Bill? Thanks, Steve. Good morning, and welcome, everyone, to the DRS Q2 earnings call. Our second quarter results reflect sustained momentum in capturing customer demand, driving revenue growth, and expanding both profitability and margin. In the quarter, we secured $853 million of bookings, which is a 1.0 -to-bill ratio for the quarter. We saw particular strength for electric power and propulsion, naval network computing, advanced sensing and ground systems technologies, all of which contributed meaningfully to Q2 bookings. Our total backlog stood at $8.6 billion, rising 9% year over year. Also noteworthy was that our funded backlog maintained a healthy double-digit growth rate in the quarter. We continue to expect a -to-bill ratio greater than 1.0 for the full year, thanks to strong performance in the first half and consistent customer demand across the portfolio. Diving deeper into our quarterly financial performance, we delivered double-digit organic revenue growth squarely in line with the framework shared on the last call. Furthermore, the foundation built in the -to-date is leading us to increase our full-year revenue growth expectations to 9% to 11%. Our profit metrics also showed strong performance. Adjusted EBITDA was up 17%, corresponding margin increase by 70 basis points, and adjusted diluted EPS was up 28%. In aggregate, our strong Q2 results positioned us well to meet our full-year outlook. That said, the team and I remain focused on disciplined program execution, investing for future growth, and navigating a complex operational environment. We continue to operate in a dynamic macro backdrop, one that remains largely favorable to DRS, though not without its complexities. Let me begin with the positives. Earlier this month, the One Big Beautiful Bill Act was enacted, a sweeping tax reconciliation package that includes $150 billion in defense funding with $113 billion frontloaded into FY26. This legislation represents significant opportunities and tailwinds for DRS. The funding emphasizes the following, shipbuilding and enhancing industrial-based resiliency, layered strategic air and missile defense, including initial funding for the Golden Dome Initiative, counter-UAS and unmanned systems, electronic warfare, missiles and munitions, and more broadly, greater investment in innovation to enhance asymmetric capabilities. Our portfolio is well aligned with these national priorities, and we expect to benefit across the company as this funding is obligated over the coming years. Additionally, the administration's FY26 defense budget request calls for $962 billion in total defense spending, including the reconciliation funding, which in total represents a 12% increase year over year. Beyond the U.S., global defense spending continues to rise amid ongoing geopolitical tensions. Notably, NATO members are now targeting 5% of GDP for national security, with .5% dedicated to defense, a sharp increase from the long-standing 2% benchmark. This trend is expected to support incremental international demand, particularly for our ready-now differentiated capabilities. The intensifying global threat landscape is especially acute for our operations and employees in Israel. We are grateful to report that all employees in the region are currently safe. We are closely monitoring the situation and are taking proactive steps to enhance employee safety and operational continuity. Shifting to supply chain, while our overall supply chain remains relatively healthy, Germanium availability and pricing remain a thorny issue. Export restrictions have constrained the available global supply of this raw material. Unfortunately, new mining and refining capacity has also been slower to ramp. We are currently relying on our safety stock, which provides sufficient runway through most of the year. However, in order to sustain timely product deliveries, material flow must improve in the second half. We are actively mitigating the Germanium availability challenge through a multi-pronged approach. We expect these mitigation efforts to offer more meaningful relief in 2026. On to tariffs. The temporary reprieve granted by the administration is set to expire later this week. As previously discussed, we expect to be largely insulated from direct impacts, particularly for inputs where cost increases can be clearly tied to tariffs. However, second order risks persist, including the potential for retaliatory trade restrictions on items such as critical minerals. Despite the complexities of the macro environment, DRS continues to innovate and deliver cutting edge technologies to meet the evolving needs of our customers. This quarter, we delivered advanced infrared sensing content for the next generation short-range interceptor or stinger replacement, as well as other future missile systems. These sensors provide a distinct operational advantage, offering higher resolution, improved countermeasure resilience, lower cost, and enhanced overall performance. We're also seeing growing opportunities to integrate our mobile power generation solutions into new missile systems. Overall, I am pleased with our ability to broaden the applicability of our infrared sensing expertise into this logical adjacency. Amid rising strategic and tactical threats, there is heightened focus on building resilient, multi-layered air defense architectures. Golden Dome is a critical part of this effort. Our portfolio, including our -the-horizon radar and tactical radar technologies, as well as counter-UAS capabilities, is highly relevant and well positioned to support this demand. Additionally, some of our increased internal research and development investment is being directed toward further demonstrating and maturing our space sensing capabilities. We believe we have a highly differentiated offering that can provide customers added capability and space-based missile tracking and intercept. We are committed to securing competitive successes in this domain. The persistent threat environment is driving escalation of customer interest and an expansion of existing contracts across each of the capability areas I noted earlier. Our tactical radar offering has maintained strong international demand as allied nations look to reinforce their short-range air defense posture. At the same time, we're seeing rapid expansion in counter-UAS opportunities across the company. DRS not only offers industry-leading tactical radars for these missions, but also a comprehensive technology suite, including infrared sensors, laser and RF systems, along with platform integration expertise to deliver -of-breed solutions. Customer focus on counter-UAS is here to stay, and its importance is only growing as evidenced by the recent launch of a joint interagency task force to tackle this ongoing threat. Beyond sensing and force protection, our network computing business plays a critical role in enabling next-generation shipboard computing, supporting both US and allied naval modernization initiatives. Our proprietary ice piercer cooling technology is starting to gain traction, especially as customers seek to increase computing density and system performance in constrained platforms. Lastly, to round up my operational updates, I want to briefly touch on our electric power and propulsion business. This part of DRS continues to perform exceptionally well, serving as a consistent financial tailwind, propelling both top-line growth and margin expansion. We are well positioned to capitalize on medium and long-term opportunities tied to next-generation platforms and to expand platform content in support of the priority to improve shipbuilding throughput. Our Q2 financial results reflect the strength of our portfolio and growing demand for our differentiated capabilities in a rapidly evolving threat environment. We have solid momentum in bookings and a remarkable backlog that provides ample runway visibility and to enhance revenue growth. That said, we remain rigorously focused on execution to continue delivering for our customers. Our success to date is a testament to the hard work of our team, and we are committed to building on this foundation in the second half of the year. Let me now turn the call over to Mike, who will review the second quarter and our revised 2025 guidance in greater detail.