drs-20250930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

Commission File Number 001-41565

Leonardo DRS, Inc.

(Exact name of registrant as specified in its charter)


Delaware			13-2632319
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

2345 Crystal Drive

Suite 1000

Arlington, Virginia 22202

(703) 416-8000

(Address of principal executive offices, including zip code, and registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	DRS	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 28, 2025, there were 266,026,725 shares of the registrant’s common stock, par value of $0.01 per share, outstanding.

TABLE OF CONTENTS


			Page
PART I. Financial Information			1
ITEM 1. Financial Statements (Unaudited)			1
Consolidated Statements of Earnings			1
Consolidated Statements of Comprehensive Income			2
Consolidated Balance Sheets			3
Consolidated Statements of Cash Flows			4
Consolidated Statements of Stockholders' Equity			5
Notes to Consolidated Financial Statements			6
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			19
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk			34
ITEM 4. Controls and Procedures			35
PART II. Other Information			36
ITEM 1. Legal Proceedings			36
ITEM 1A. Risk Factors			36
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds			36
ITEM 3. Defaults Upon Senior Securities			36
ITEM 4. Mine Safety Disclosures			36
ITEM 5. Other Information			36
ITEM 6. Exhibits			37
Signatures			38

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INFORMATION

In this quarterly report on Form 10-Q (this “Quarterly Report”), when using the terms the “Company,” “DRS,” “we,” “us” and “our,” unless otherwise indicated or the context otherwise requires, we are referring to Leonardo DRS, Inc. This Quarterly Report contains forward-looking statements and cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “strives,” “targets,” “projects,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this Quarterly Report and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial goals, financial position, results of operations, cash flows, prospects, strategies or expectations, and the impact of prevailing economic conditions.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes may differ materially from those made in or suggested by the forward-looking statements contained in this Quarterly Report. In addition, even if future performance and outcomes are consistent with the forward-looking statements contained in this Quarterly Report, those results or developments may not be indicative of results or developments in subsequent periods. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

•Disruptions or deteriorations in our relationship with the relevant agencies of the U.S. government, as well as any failure to pass routine audits or otherwise comply with governmental requirements including those related to security clearance or procurement rules, including the False Claims Act;

•Significant delays or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly;

•Any failure to comply with the proxy agreement with the U.S. Department of Defense (the “DoD”);

•Failure to properly contain a global pandemic in a timely manner could materially affect how we and our business partners operate;

•The effect of inflation on our supply chain and/or our labor costs;

•Our mix of fixed-price, cost-plus and time-and-materials type contracts and any resulting impact on our cash flows due to cost overruns;

•Failure to properly comply with various covenants of the agreements governing our debt could negatively impact our business;

•Our dependence on U.S. government contracts, which often are only partially funded and are subject to immediate termination, some of which are classified, and the concentration of our customer base in the U.S. defense industry;

•Our use of estimates in pricing and accounting for many of our programs that are inherently uncertain and which may not prove to be accurate;

•Our ability to realize the full value of our backlog;

•Our ability to predict future capital needs or to obtain additional financing if we need it;

•Our ability to respond to the rapid technological changes in the markets in which we compete;

•The effect of global and regional economic downturns and rising interest rates;

•Our ability to meet the requirements of being a public company;

•Our ability to maintain an effective system of internal control over financial reporting;

•Our inability to appropriately manage our inventory;

•Our inability to fully realize the value of our total estimated contract value or bookings;

•Our ability to compete efficiently, including due to U.S. government organizational conflict of interest rules which may limit new contract opportunities or require us to wind down existing contracts;

•Our relationships with other industry participants, including any contractual disputes or the inability of our key suppliers to timely deliver our components, parts or services;

•Preferences for set-asides for minority-owned, small and small disadvantaged businesses could impact our ability to be a prime contractor;

•Any failure to meet our contractual obligations including due to potential impacts to our business from supply chain risks, such as longer lead times and shortages of electronics and other components;

•Any security breach, including any cyber-attack, cyber intrusion, insider threat, or other significant disruption of our IT networks and related systems, as well as any act of terrorism or other threat to our physical security and personnel;

•Our ability to fully exploit or obtain patents or other intellectual property protections necessary to secure our proprietary technology, including our ability to avoid infringing upon the intellectual property of third parties or prevent third parties from infringing upon our own intellectual property;

•The conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate which may impact our reputation and ability to do business;

•The outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved;

•Various geopolitical and economic factors, laws and regulations including the Foreign Corrupt Practices Act, the Export Control Act, the International Traffic in Arms Regulations, the Export Administration Regulations, recent U.S. tariffs imposed or threatened to be imposed on other countries and any related retaliatory actions taken by such countries and those that we are exposed to as a result of our international business;

•Our ability to obtain export licenses necessary to conduct certain operations abroad, including any attempts by Congress to prevent proposed sales to certain foreign governments;

•Our ability to attract and retain technical and other key personnel;

•The occurrence of prolonged work stoppages;

•The unavailability or inadequacy of our insurance coverage, customer indemnifications or other liability protections to cover all of our significant risks or to pay for material losses we incur;

•Future changes in U.S. tax laws and regulations or interpretations thereof;

•Future changes in the DoD’s budget;

iii

•Certain limitations on our ability to use our net operating losses to offset future taxable income;

•Termination of our leases or our inability to renew our leases on acceptable terms;

•Changes in estimates used in accounting for our pension plans, including with respect to the funding status thereof;

•Changes in future business or other market conditions that could cause business investments and/or recorded goodwill or other long-term assets to become impaired;

•Adverse consequences from any acquisitions such as operating difficulties, dilution and other harmful consequences or any modification, delay or prevention of any future acquisition or investment activity by the Committee on Foreign Investment in the United States;

•Natural disasters or other significant disruptions;

•Our compliance with environmental laws and regulations, and any environmental liabilities that may affect our reputation or financial position;

•Any conflict of interest that may arise because Leonardo US Holding, LLC, our majority stockholder, or Leonardo S.p.A., our indirect majority stockholder, may have interests that are different from, or conflict with, those of our other stockholders, including as a result of any ongoing business relationships Leonardo S.p.A. may have with us, and their significant ownership in us may discourage change of control transactions (our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A); or

•Our obligations to provide certain services to Leonardo S.p.A., which may divert human and financial resources from our business.

You should read this Quarterly Report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this Quarterly Report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this filing, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

Other risks, uncertainties and factors, including those discussed under “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024, and those discussed under “Risk Factors” in Part II, Item 1A of this Quarterly Report, could cause our actual results to differ materially from those projected in any forward-looking statements we make. Readers should read the discussion of these factors carefully to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)

LEONARDO DRS, INC.

Consolidated Statements of Earnings (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions, except per share amounts)	2025		2024		2025		2024



Revenues	$	960	$	812	$	2,588	$	2,253



Cost of revenues	(738)		(633)		(1,988)		(1,752)
Gross profit	222		179		600		501
General and administrative expenses	(123)		(98)		(361)		(306)
Amortization of intangibles	(5)		(6)		(16)		(17)
Other operating expenses, net	(1)		—		(1)		(5)
Operating earnings	93		75		222		173
Interest expense, net	(4)		(5)		(7)		(17)
Other, net	(2)		(1)		(3)		(3)
Earnings before taxes	87		69		212		153
Income tax provision	15		12		36		29
Net earnings	$	72	$	57	$	176	$	124

Net earnings per share from common stock:
Basic earnings per share	$	0.27	$	0.22	$	0.66	$	0.47
Diluted earnings per share	$	0.26	$	0.21	$	0.65	$	0.46

See accompanying Notes to Consolidated Financial Statements.

LEONARDO DRS, INC.

Consolidated Statements of Comprehensive Income (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2025		2024		2025		2024
Net earnings	$	72	$	57	$	176	$	124
Other comprehensive (loss) income, net of income taxes:
Foreign currency translation gain (loss)	—		—		—		(1)
Pension and other postretirement benefit plan adjustments	—		—		—		1
Net unrealized (loss) gain on derivative instruments	(1)		—		4		—
Other comprehensive (loss) income, net of income taxes	(1)		—		4		—
Total comprehensive income	$	71	$	57	$	180	$	124

See accompanying Notes to Consolidated Financial Statements.

LEONARDO DRS, INC.

Consolidated Balance Sheets


	(Unaudited)
(Dollars in millions, except per share amounts)	September 30, 2025		December 31, 2024
ASSETS
Current assets:
Cash and cash equivalents	$	309	$	598
Accounts receivable, net	327		253
Contract assets	1,054		872
Inventories	404		358

Prepaid expenses	32		27
Other current assets	40		55
Total current assets	2,166		2,163
Noncurrent assets:
Property, plant and equipment, net	477		440
Intangible assets, net	114		132
Goodwill	1,238		1,238
Deferred tax assets	118		120
Other noncurrent assets	132		91
Total noncurrent assets	2,079		2,021
Total assets	$	4,245	$	4,184
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings and current portion of long-term debt	$	24	$	25
Accounts payable	342		426
Contract liabilities	440		399
Other current liabilities	276		266
Total current liabilities	1,082		1,116
Noncurrent liabilities:
Long-term debt	326		340
Pension and other postretirement benefit plan liabilities	28		34
Deferred tax liabilities	5		7
Other noncurrent liabilities	156		130
Total noncurrent liabilities	515		511
Commitments and contingencies (Note 13)
Stockholders' equity:
Preferred stock, $0.01 par value: 10,000,000 shares authorized; none issued	—		—
Common stock, $0.01 par value: 350,000,000 shares authorized; 266,098,028 and 265,064,755 shares issued and outstanding as of September 30, 2025 and December 31, 2024, respectively	3		3
Additional paid-in capital	5,105		5,194
Accumulated deficit	(2,417)		(2,593)
Accumulated other comprehensive loss	(43)		(47)
Total stockholders' equity	2,648		2,557
Total liabilities and stockholders' equity	$	4,245	$	4,184

See accompanying Notes to Consolidated Financial Statements.

LEONARDO DRS, INC.

Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended September 30,
(Dollars in millions)	2025		2024
Operating activities
Net earnings	$	176	$	124
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization	69		68
Deferred income taxes	—		1

Share-based compensation expense	19		16
Other	—		1
Changes in assets and liabilities:
Accounts receivable	(74)		(86)
Contract assets	(182)		(89)
Inventories	(46)		(34)
Prepaid expenses	(5)		(8)
Other current assets	19		6
Other noncurrent assets	13		14
Defined benefit obligations	(6)		(2)
Accounts payable	(80)		(106)
Contract liabilities	41		(20)
Other current liabilities	9		(36)
Other noncurrent liabilities	(12)		(21)
Net cash used in operating activities	(59)		(172)
Investing activities
Capital expenditures	(90)		(56)


Proceeds from sales of assets	—		1
Purchases of investments	(15)		—

Net cash used in investing activities	(105)		(55)
Financing activities
Net decrease in third party borrowings (maturities of 90 days or less)	(1)		(35)
Repayment of third party debt	(9)		(238)
Borrowings of third party debt	—		230





Proceeds from stock issuance	9		13
Repurchases of common stock	(24)		—
Payments of employee taxes withheld from share-based awards	(21)		(4)
Dividends paid	(21)		—
Dividends paid to related party	(51)		—
Other	(7)		(8)
Net cash used in financing activities	(125)		(42)
Effect of exchange rate changes on cash and cash equivalents	—		—
Net decrease in cash and cash equivalents	(289)		(269)
Cash and cash equivalents at beginning of year	598		467
Cash and cash equivalents at end of period	$	309	$	198

See accompanying Notes to Consolidated Financial Statements.

LEONARDO DRS, INC.

Consolidated Statements of Stockholders’ Equity (Unaudited)


(Dollars in millions)	Common stock		Additional paid-in capital		Accumulated other comprehensive loss		Accumulated deficit		Total
Balance as of June 30, 2024	$	3	$	5,189	$	(47)	$	(2,739)	$	2,406
Total comprehensive income	—		—		—		57		57
Share-based compensation activity	—

SEC Form 10-Q filed by Leonardo DRS Inc.