Leonardo Spa Ord

Ladies and gentlemen, good day and welcome to the Leonardo DRS Third Quarter Fiscal Year 2023 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 like to now turn the conference over to Steve Vather, Vice President of Investor Relations and Corporate Finance. Please go ahead.

Good morning and welcome, everyone. Thanks for participating on today's quarterly earnings conference call. With me today are Bill Lynn, 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 this call regarding future events, anticipated future trends, and 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, and thank you all for joining us this morning. Let me begin by sharing our heartfelt concern and deep support for the people of Israel. The horrific attacks that occurred last month demonstrate the dangerous and unpredictable nature of global threats that face us and our allies. We're thankful that our team and operations in Israel remain resilient, but we are closely monitoring the ongoing conflict with the priority on keeping our employees and their families safe. In the face of an elevated global threat environment, we are confident that there remains broad bipartisan support recognizing the critical need to maintain defense investment as well as the need to support our allies. The growing sophistication of our adversaries is driving increased customer demand for advanced technologies to deter and counter global threats effectively and efficiently. DRS's broad and relevant technology portfolio coupled with our agility and innovation, continue to be key assets in supporting our customers' most challenging missions. This is exemplified by our most recent $3 billion-plus contract award for the rest of Columbia-class electric power and propulsion systems. The contract award covers most of the components for the remaining seven Columbia-class submarines previously not under contract and is additive to our Q3 total backlog. In the near term, we look forward to seeing progress and clarity with respect to the timing of FY24 appropriations and supplemental funding. Moving to an update on the quarter, I'm pleased to report that we delivered another quarter of strong results, which were ahead of our expectations for the third quarter. In Q3, our revenue growth accelerated considerably to 10 percent organically. We secured $1.1 billion of bookings in the quarter, translating to a robust 1.5 book to bill ratio. Throughout the year, we have seen demand strength come from varying parts of our broad and diverse portfolio. This quarter, customer demand was most evident for our advanced solutions in ground and dismounted soldier sensing, force protection, tactical communications, and naval computing. The steady flow of bookings continues to push our backlog higher. Backlog now sits at $4.7 billion, which is up 50% year-over-year and is also up sequentially. Q3 bookings and revenue momentum was matched by excellent quarterly profit generation and growth across key metrics, including solid adjusted EBITDA margin expansion in the quarter. I want to sincerely thank the team for their steadfast focus and hard work in executing with excellence for our customers and shareholders. Their strong performance in the quarter and throughout the year has allowed us to drive incrementally, better linearity, and increase the line of sight to meeting our financial commitments for the full year. And while there is another stair to climb for the fourth quarter, we are clearly focused on driving the necessary acceleration to a strong finish for the year. Moving to an update on the operating environment, supply chain continues to be a key operational focus. The good news is that the aggregate impact to our business from supply chain complexities remains fairly stable. However, we are still seeing shifts of where specific issues reside. Throughout 2023, we have observed more stability in microelectronics, but as discussed on prior calls, castings continue to be a challenge, and now specialty alloys and raw materials are emerging as a new area of concern. That said, With every evolution on the supply chain front, our team has been proactive and aggressive in working to implement the appropriate mitigations to reduce and contain the operational impact as much as possible. Bottom line, the supply chain complexities that we have faced over the past few years and continue to face will keep our bookings to revenue conversion cycle elongated and our working capital above historical norms. Lastly, let me offer a quick comment with respect to labor availability and inflation. While both of these factors continue to linger, they are progressing on a slow but improving trajectory. Our expectations for both variables remain fairly static, and while they will continue to serve as slight headwinds as we close out the year, they show promise of flipping to potential tailwinds over the medium term. Now shifting to some business highlights from the quarter, Our strong results continue to reflect strong program execution across the business. The improving dynamics in our Columbia-class program remain evident in our overall financials. However, we are also seeing better execution from other smaller development programs as well. That said, we are maintaining steadfast focus on execution as we work to fully mitigate those programs, excuse me, fully migrate those programs to production over the coming year. Moving to growth, we are experiencing strong customer demand for our broader capabilities in advanced sensing, electric power and propulsion, network compute, and force protection, as evidenced by our robust quarterly and year-to-date bookings. Additionally, key growth opportunities remain clear across the business. We have several proposals in electric power and propulsion and advanced sensing that remain outstanding and under evaluation with expected adjudications over the next 12 months. We are also continuing to innovate and advance our capabilities. On prior calls, I have discussed our vision for an integrated sensing. I am pleased to report that we recently received a small but important contract award from the Army to further that initiative to enable the integration of AI-capable computing into sensors. On the force protection front, We are seeing domestic requirements emerge for active protection systems, and we are also experiencing steady global demand for our multi-mission tactical radar technologies. As we approach the one-year anniversary of acquiring RADA, our investment thesis has been validated by the macro environment. Furthermore, strong synergies and opportunities with the rest of our business are visible, and our teams are routinely working together to respond to customer requirements and propose integrated solutions. We are excited about the diversity of organic growth opportunities across our business. We are regularly evaluating how to best position DRS through thoughtful investments, whether these manifest as incremental R&D or capital expenditures. We look forward to sharing more detail on this and on our overall strategy at our Investor Day in New York City on March 14th. Overall, I am pleased with our performance to date, but we are maintaining a focus on operational execution to meet our commitments to both customers and shareholders. Now I'd like to turn the call over to Mike so that he can walk you through our financials in more detail.