Leonardo DRS, Inc.

Ladies and gentlemen, good day and welcome to the Leonardo DRS Second Quarter Fiscal Year 2026 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 provided at that time. As a reminder, this event is being recorded. I would now like to turn the conference over to Steve Vather, Senior Vice President, Corporate Development and Investor Relations. Please go ahead.

Good morning and welcome, everyone. Thank you for joining today's quarterly earnings conference call. With me today are John Baylouny, our president and CEO, and Mike Dippold, our CFO. They will discuss our strategy, operational highlights, financial results, and outlook. Today's call is being webcast on the investor relations section of the website, where you can find the earnings release and supplemental presentation. Management may also make forward-looking statements during the call regarding future events, 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. These statements, including those relating to the pending acquisition of wrapped LLC, including the expected timing of completion of the transaction, the satisfaction of closing conditions, the receipt of regulatory approvals and the anticipated benefits of the transaction and plans for the integration of the acquired business. For a full discussion of the risk factors, please refer to our latest Form 10-K and our other SEC filings. We undertake no obligation other than as may be required by law to update any of the forward-looking statements made on this call. During the 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. With that, I will turn the call over to John. John?

Thank you, Steve, and good morning, everyone. We appreciate you joining us for a review of our second quarter 2026 results. Q2 was another strong quarter that builds directly on the foundation that we've laid over the past several years. Organic revenue growth accelerated to 10% year-over-year. Bookings exceeded $1 billion, driving book-to-bill to 1.2 times for the quarter. Demand was apparent throughout the portfolio, and our Q2 book-to-bill extended our streak of 18 quarters with book-to-bill at or above 1.0. Furthermore, we exited the quarter with a record-funded backlog, and given our conservative bookings and backlog methodology, this provides meaningful visibility into future growth. The highlight of the quarter was the 33% year-over-year growth in adjusted EBITDA and 240 basis points of margin expansion. Execution, favorable program mix, and the retirement of program risk were the linchpins of our success. Mike will expand on the drivers later. These strong results once again demonstrate the benefits of DRS's diverse portfolio and platform agnostic approach. The top and bottom line, our performance further validates our strategy and is a direct result of the sound execution across the portfolio. Additionally, I'm pleased to highlight that we announced an agreement to acquire Raft. expanding our multi-domain AI, data fusion, and mission software capabilities. This $450 million all cash acquisition reflects a disciplined deployment of capital in line with our strategy and supportive of continued long-term growth. Overall, the solid first half trajectory reinforces our confidence in raising our full-year profit outlook. I want to thank the entire DRS team for the relentless effort and unwavering focus on execution to convert demand into these outstanding results. Let me offer some framing comments with respect to the macro and operating backdrop. The global threat environment remains elevated, and demand fundamentals remain supportive across our diverse portfolio. Customers are prioritizing modernization and the procurement of production-ready capabilities. and those demand signals are clearly evident in our book to bill. On the US budget, Congress is working through the fiscal 27 funding and we expect a continuing resolution to govern the calendar fourth quarter. I won't speculate on the timing or final level of fiscal 27 defense appropriations and we recognize the path may not be linear. What we are confident in is that the threat environment warrants continued and growing defense investment. Beyond the near term funding mechanics, and the record-based budget request and the reconciliation dollars flowing to priority programs reinforce a durable demand signal for exactly the capabilities that we provide. Top line and timing alone does not determine the opportunity set for DRS. What matters more are the underlying priorities and thematics where we remain closely aligned. Customer priorities are increasingly shaped by operational lessons from recent and ongoing conflicts in the Middle East and in Eastern Europe. These structural trends are the ones I discussed last quarter, and to refresh, they are, first, the necessity of layered and effective air defense and counter UAS. Second, the shift towards proliferated, resilient sensing across domains. Third, the depth and class symmetry of effectors to counter growing threats. We saw each of these trends further manifest in our business this quarter. With that, let me discuss how these trends as well as other customer priorities are materializing in our results. As you know, the DRS portfolio is diverse, platform agnostic, and benefits from a number of different defense thematics. Starting with air defense and counter UAS, The proliferation of unmanned threats keeps accelerating the adoption of counter UAS technologies and the customer pull is evident in our results. Our tactical radars are an essential enabling technology embedded in counter UAS systems fielded around the globe and order flow continues to run ahead of supply. So we are aggressively adding capacity. We also continue to see robust global appetite as international allies quickly work to fill air defense gaps highlighted by recent conflicts. We think we are in the early innings of tactical radar proliferation, not only for counter-EOS missions, but more broadly. Staying ahead of the sensing only matters if you can turn it into decisions. Our advantage is combining sensing, computing, and networking to act on that data across a connected force, not just deliver a standalone component. That is exactly the capability we're expanding on with our acquisition of Raft. A recent example of this is what we saw firsthand in Operation Jailbreak, and I want to spend a moment on it because I was there on the ground. Operation Jailbreak was the Army's first industry hackathon, a live effort to get its systems to talk to one another. It brought roughly 20 companies together to break down the barriers between systems that are not originally designed to connect. It is the first step in what the Army calls its right to integrate and the foundation for the next generation command and control system. I'm pleased to report that our team had a meaningful role in that exercise and that our technology has demonstrated interoperability seamlessly and quickly in a matter of a few hours. Modularity, open standards, platform agnostic approach, and scalability are designed into the entirety of our technology portfolio. And it's just one of the latest proof of that point. Next generation command and control is among the Army's top modernization priorities. Customers are managing growing volumes of data from distributed sensors and systems with fragmented architectures that slow decision making. As such, there's a need for a resilient network and a unified data layer that turns that data into decisions. This is also what's driving our customers towards integrated hardware and software capabilities. That's why we announced an agreement to acquire Raft earlier this week. RAPT is a provider of open architecture, mission software for multi-domain data diffusion and AI, supporting real-time situation awareness and faster decision-making for national security customers. Importantly, RAPT was selected by the Army's next-generation C2 software architecture, the very priority I just described. Additionally, the company expands our customer footprint within the Air Force, Space Force, Special Operations, and the Intelligence Community. We have long said that we apply the same open or modular philosophy to software as we do hardware, giving customers the flexibility to deploy the best of breed solutions without being locked into a single provider. Raft advances that approach and checks the boxes that matter to us most. Outstanding people, a mission-first culture, and a proven open architecture technology. Raft Software, AI, and Data Fusion are complementary to our core strengths in sensing, computing, and mission systems. Combining those franchises is expected to open growth avenues not available to either company on a standalone basis. It also accelerates our R&D emphasis on platform AI, autonomy, and extending our platform agnostic capabilities to new missions. Put simply, Raft helps us own the edge. putting sensing, computing, and integration where the decision gets made, reducing the cognitive burden on operators and improving decision speed. Coming back to counter UAS, we continue to see adversaries target high-value assets that degrade sensing and defensive capability. This only reinforces the need for proliferated and resilient sensing architectures. It also puts a premium on the open software and data layer that sits one level up from those sensors, and that is what Raft provides. It unifies fragmented data into a single common operating picture, so the force keeps a coherent view even when individual nodes are degraded or lost. Our carrier UAS work extends into systems and platform integration. As unmanned threats evolve, we expect the technologies and systems used to neutralize them to also evolve rapidly. Customers increasingly seek counter UAS solutions that are platform and vehicle agnostic. For example, the Army is iterating on its approach for the next tranche of ground-based air defense capabilities. To that end, we are maturing our palletized counter UAS offerings by incorporating different effectors and technologies that will broaden the flexibility of capability development. Given our enabling technologies are modular and integrated across vehicles, we are not tied to any single platform or procurement line, and we stay aligned as mission needs evolve across configurations. Last quarter, I mentioned that we received a $533 million production IDIQ contract for the Distributed Aperture Infrared Countermeasure System, or DAIRCM, for aircraft survivability. Demand for aircraft protection remains elevated across infrared countermeasure programs, and order flow is accelerating given how critical these systems are to airborne platform survivability. Recent conflicts have put these systems to the test, and they delivered, pushing the urgency to field more of these systems quickly. I am proud of our work to help ensure the safety of airmen. Beyond protecting our soldiers and platforms, we're also growing on the munitions side, equally important as sensing and countermeasure systems or effectors. While our footprint today in this area is modest, our involvement is expanding needfully. This is similar to how you saw DRS take the predominantly weather satellite position in space and leverage that pedigree to drive adjacent growth into missile tracking and warning via the SDA TRONS 3 contract. that same sensing pedigree positions us for homeland defense where investments in infrared space-based interception are directly poised to support missile defense mission. Our exposure to missiles and effectors spans tactical to strategic, balanced between existing platforms seeing urgent multifold increases in demand and next generation systems that will see growth for years to come. Today, we're providing essential components to platforms such as THAAD and Patriot and as a qualified supplier on those platforms, we're leaning in to add capacity and depth. As the prime scale of these programs under the multi-year munitions frameworks, we're leaning in right alongside them and investing in ramping capacity to support higher level production of our content. As I've mentioned before, we're also being designed in as the advanced sensing provider for future missile platforms. What is also exciting is that our infrared capabilities are starting to see notable traction in low-cost drone platforms. Our investments in size, weight, power, and cost, optimized, uncooled, long-wave infrared detection are paying off. As the Department of War prioritizes affordable drones, building at higher volume, the sensing payload is increasingly what differentiates one platform from the next, and our sensing and our infrared pedigree plays directly into that need. In the quarter, we secured a contract with a leading low-cost drone manufacturer for high-volume production of a camera course with an initial order of 50,000 units. We're seeing appetite and interest from additional drone OEMs given our quality, capability, and ability to deliver at a significant scale. Turning from sensing and effectors to the maritime domain and naval power, Expanding shipbuilding capacity to grow the nation's naval fleet of operational surface and subsurface platforms remains an important priority. I'm pleased to report that we saw steadfast demand materialize in the quarter, not only for our propulsion content, but also for our naval network computing capabilities. While many know DRS for its innovative full electric propulsion work on Columbia class, we offer naval propulsion capabilities that include traditional and hybrid electric approaches. In the quarter, we booked orders for content across power capabilities for a diversity of subsurface and surface platforms, including Columbia-class, Virginia-class, DDG 51, LPD. Additionally, existing naval platforms still require regular network computing modernization to enhance and scale processing at the edge. We're supporting these initiatives through a delivery of advanced platform-based processing solutions are critical to onboard sensing, combat weapons, communications, and other mission systems. While executing on this demand is driving near and mid-term growth, we continue to progress efforts to expand our involvement in steam turbines, as well as grow our sensing footprint and content more broadly on unmanned surface vessels. Stepping back from the individual mission areas, our results reinforce our strategy. Delivering differentiated capability to help our customers maintain overmatch is core to DRS. We are capturing growth through consistent delivery and disciplined investment. We have proactively and methodically stepped up organic investment over the past few years and are doing so year to date. Investment in internal research and development was up 16% year over year in the first half and approached 4% of revenue. Our increased investment is going towards innovation in initiatives such as infrared sensing technologies for space-based interception, further involving our platform agnostic and modular counter UAS solutions, enhancing our tactical radars, and expanding naval propulsion capabilities. Similarly, we are stepping up to capital investment to further expand capacity across the board. scaling tactical radar production, revitalizing our foundry to drive next-generation infrared sensors and detectors, and, of course, deepening our naval propulsion and shipbuilding presence in Charleston. These investments position us well to address the mission-critical needs of our customers, capture market share, and drive growth. Graft is the same strategy at work through M&A, adding to an already strong organic growth profile. To bring it together, we delivered a robust second quarter with growth, accelerating, margins expanding, and steady execution across the portfolio. That combination is what compounds over time and gives us confidence in the year ahead. These results rest on the trust of our customers placing us, trust to earn the same way every quarter by delivering mission-critical capabilities at speed, with quality, and at scale. With that, I'll turn it over to Mike to walk through the financials.