# Leonardo DRS Inc. (DRS) — Financial Analysis

**Exchange:** NASDAQ  
**Coverage as of:** 2026-Q2  
**Updated:** 2026-05-29  
**Tier:** Free primer (step 2 of 19)  
**Sibling pages:** /stocks/DRS/thesis · /stocks/DRS/memo

## Financial Snapshot

---
source: coverage-next-full
ticker: DRS
step: "04"
title: Financial Snapshot — 3-Year P&L Summary
created: 2026-05-29
---

### Step 04: Financial Snapshot

#### Income Statement Summary (FY2021–FY2023)

| Metric | FY2021 | FY2022 | FY2023 |
|--------|--------|--------|--------|
| **Revenue** | $2,574M | $2,624M | $2,768M |
| YoY Revenue Growth | — | +1.9% | +5.5% |
| **Gross Profit** | $394M | $421M | $452M |
| Gross Margin | 15.3% | 16.1% | 16.3% |
| **Operating Expenses (ex-D&A)** | $185M | $190M | $200M |
| **EBITDA (adjusted)** | $298M | $322M | $344M |
| Adjusted EBITDA Margin | 11.6% | 12.3% | 12.4% |
| **EBIT (adjusted)** | $241M | $262M | $271M |
| Adjusted EBIT Margin | 9.4% | 10.0% | 9.8% |
| **Interest Expense** | $(85)M | $(82)M | $(78)M |
| **Pre-tax Income (adjusted)** | $156M | $180M | $193M |
| **Net Income (adjusted)** | $118M | $137M | $149M |
| Adjusted Net Margin | 4.6% | 5.2% | 5.4% |
| **Diluted EPS (adjusted)** | ~$0.54 | ~$0.63 | ~$0.69 |
| **Diluted Shares** | ~217M | ~217M | ~217M |

*Note: FY2021/2022 based on S-1 historical financials and Leonardo S.p.A. segment data. "Adjusted" excludes amortization of acquired intangibles, IPO-related costs, restructuring, and other non-recurring items.*

#### GAAP vs. Adjusted Reconciliation (FY2023)

| Item | Amount | Note |
|------|--------|------|
| GAAP EBIT | ~$189M | Includes amortization, one-time items |
| + Amortization of acquired intangibles | ~$60M | Non-cash; from historical M&A |
| + IPO-related transaction costs | ~$12M | One-time; not recurring |
| + Restructuring charges | ~$10M | Integration/facility costs |
| **= Adjusted EBIT** | ~$271M | Management's core profit metric |
| GAAP net income | ~$79M | After interest, taxes, one-time items |
| **Adjusted net income** | ~$149M | Street's comparison basis |

#### Gross Profit by Segment (FY2023 Estimate)

| Segment | Revenue | Gross Profit | Gross Margin |
|---------|---------|-------------|-------------|
| ASC | ~$1,330M | ~$210M | ~15.8% |
| IMS | ~$1,438M | ~$242M | ~16.8% |
| **Total** | ~$2,768M | ~$452M | ~16.3% |

**IMS enjoys a slightly higher gross margin** due to the higher proportion of sole-source, cost-plus contracts in naval programs where DRS can negotiate better fee structures.

#### Key P&L Metrics Trend

##### Revenue Growth
- FY2021→FY2022: +1.9% (constrained by supply chain disruptions, CR delays)
- FY2022→FY2023: +5.5% (recovery + new program ramp)
- FY2024 Guidance: ~+8% (~$3.0B target)
- FY2025 Consensus: ~+10% (~$3.3B)

##### Margin Trajectory
- **Gross margin** has expanded ~100 bps over 3 years (16.3% vs. 15.3%): driven by improved fixed-price program execution, favorable mix shift toward higher-margin naval programs
- **Adjusted EBIT margin** relatively stable at ~9.5–10%: incremental improvement offset by R&D investment and new program development costs
- **Path to 12% EBIT margin** (management target): mix shift toward higher-margin programs, operating leverage on fixed cost base, reduced development program losses

#### Cash P&L Items

##### Depreciation & Amortization

| Item | FY2021 | FY2022 | FY2023 |
|------|--------|--------|--------|
| Depreciation | ~$35M | ~$36M | ~$37M |
| Amortization (acquired intangibles) | ~$60M | ~$60M | ~$60M |
| Total D&A | ~$95M | ~$96M | ~$97M |
| D&A as % of Revenue | 3.7% | 3.7% | 3.5% |

##### R&D / Independent Research & Development (IRAD)

| Item | FY2021 | FY2022 | FY2023 |
|------|--------|--------|--------|
| IRAD Expense | ~$75M | ~$80M | ~$85M |
| IRAD as % of Revenue | 2.9% | 3.1% | 3.1% |

*Note: Defense companies typically report R&D as either direct program charges (customer-funded) or IRAD (company-funded). DRS's IRAD run-rate of ~3% of revenue is below the L3Harris/NOC range of 3.5–4.5%, reflecting its subsystem (vs. platform) focus.*

#### Tax Rate

| Metric | FY2021 | FY2022 | FY2023 |
|--------|--------|--------|--------|
| Effective Tax Rate (GAAP) | ~23% | ~22% | ~21% |
| Cash Tax Rate | ~18% | ~19% | ~18% |

DRS benefits from the R&D tax credit and Section 199A deductions applicable to domestic manufacturing — keeping cash taxes below the 21% statutory rate.

#### Key Observations

1. **Low gross margin business**: At 16%, DRS's gross margins reflect the defense electronics cost structure where materials, direct labor, and program management dominate COGS. Higher-value IP-intensive defense companies (L3Harris sensors division) can achieve 20–25%.

2. **EBIT margin upside**: Management's 10–12% EBIT margin target (vs. ~9.8% in FY2023) is achievable as:
   - Fixed-price program execution improves on newer programs
   - Mix shifts from development (lower margin) to production (higher margin)
   - Operating leverage on ~$200M fixed overhead base as revenue scales

3. **Intangible amortization drag**: ~$60M/year in amortization from historical acquisitions creates a GAAP vs. adjusted gap of ~$0.28/share. As legacy intangibles age off (5–10 year life), GAAP margins will converge toward adjusted.

4. **Revenue growth accelerating**: The 1.9%→5.5%→8%+ trajectory reflects program maturation and defense spending tailwinds. DRS's management team has consistently guided to mid-to-high single digit organic growth.

#### FY2024 Outlook (Management Guidance & Consensus)

| Metric | FY2024 Guidance | Consensus |
|--------|----------------|---------|
| Revenue | ~$3.0B | $2.98B |
| Adjusted EBITDA | ~$380M | $375M |
| Adjusted EBIT | ~$305M | $300M |
| Adjusted EBIT Margin | ~10.2% | ~10.1% |
| Adjusted EPS | ~$0.80–$0.84 | ~$0.81 |
| Free Cash Flow | ~$150–170M | ~$155M |

## Deeper Financial Analysis

The fundamental tier ($1.00) adds 8 dimensions not included here:

- Revenue Breakdown — segment revenue, geographic mix, product-line margins
- Financial Trends — QoQ momentum, leading indicators, inflection points
- Balance Sheet — debt structure, dilution risk, working capital dynamics
- Capital Allocation — ROIC, buyback cadence, reinvestment efficiency
- Earnings Analysis — beats/misses, guidance vs actuals, transcript highlights
- Competitive Positioning — market share, pricing power, peer benchmarks
- Industry Context — TAM, sector tailwinds/headwinds, regulatory backdrop

**API endpoint:** GET /api/v1/research/DRS/fundamental

## Navigation

- Overview: /stocks/DRS
- Financials (this page): /stocks/DRS/financials
- Thesis: /stocks/DRS/thesis
- Investment Memo: /stocks/DRS/memo
- Coverage universe: /stocks