Leonardo DRS Inc

Previous wording

DRS is an innovative and agile provider of advanced defense technology to U.S. national security customers and allies around the world. We specialize in the design, development and manufacture of advanced sensing, network computing, force protection, as well as electric power and propulsion. The strength of our market positioning in these technology areas have created a foundational and diverse base of programs across the U.S. Department of Defense (“DoD”). We believe these technologies will not only support our customers in today’s mission but will also underpin their strategy to migrate towards more autonomous, dynamic, interconnected, and multi-domain capabilities needed to address evolving and emerging threats. We view more advanced capabilities in sensing, computing, self-protection and power as necessary to enable these strategic priorities.

Current wording

DRS is an innovative and agile provider of advanced defense technology to U.S. national security customers and allies around the world. We specialize in the design, development and manufacture of advanced sensing, network computing, force protection, as well as electric power and propulsion. The strength of our market positioning in these technology areas have created a foundational and diverse base of programs across the U.S. Department of Defense (the “DoD”). We believe these technologies will not only support our customers in today’s mission but will also underpin their strategy to migrate towards more autonomous, dynamic, interconnected, and multi-domain capabilities needed to address evolving and emerging threats. We view more advanced capabilities in sensing, computing, self-protection and power as necessary to enable these strategic priorities.

Previous wording

Our overall strategy is to be a balanced and diversified company, less vulnerable to any one budgetary platform or service decision with a specific focus on establishing strong technical and market positions in areas of priority for the DoD. The DoD is our largest customer and, for the three months ended March 31, 2024, accounted for approximately 81% of our business as an end-user, with revenues principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 40% and 26%, respectively, of our total revenues for such period, which is consistent with historic trends.

Current wording

Our overall strategy is to be a balanced and diversified company, less vulnerable to any one budgetary platform or service decision with a specific focus on establishing strong technical and market positions in areas of priority for the DoD. The DoD is our largest customer and, for the six months ended June 30, 2024, accounted for approximately 82% of our business as an end-user, with revenues principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 39% and 30%, respectively, of our total revenues for such period, which is consistent with historic trends.

Previous wording

In February 2022, Russia escalated its war with Ukraine by invading and occupying parts of that country. Since that time, western powers, including the U.S., have pledged support with humanitarian and military aid. Some of that military aid pledged by the U.S. will result in increased efforts to replace equipment and consumables. We have received orders from the U.S. and allies to both provide equipment in support of this effort, and to replace equipment pledged. We expect that these orders will continue until that support is no longer needed and certain transferred equipment is replaced.

Current wording

In February 2022, Russia escalated its war with Ukraine by invading and occupying parts of that country. Since that time, western powers, including the U.S., have pledged support with humanitarian and military aid. Some of that military aid pledged by the U.S. will result in increased efforts to replace equipment and consumables. We have received orders from the U.S. and allies to both provide equipment in support of this effort, and to replace equipment pledged.

Previous wording

The ongoing conflicts in Israel and the broader Middle East region have the potential to evolve quickly creating uncertainty, along with the potential for disruptions to our Israeli operations in the region, including, but not limited to, workforce calls for duty, transportation and other logistical impacts and reduced customer confidence. To date, the conflict has not had a material impact to our operations. The U.S. and other western powers have directed military and funding support to Israel. DRS has direct exposure to Israel principally through its RADA Technologies Ltd (“RADA”) operations with approximately 4% of our workforce as of March 31, 2024 residing in Israel. At this time, it is unclear whether supplemental funding for Israel will impact demand for DRS products.

Current wording

The ongoing conflicts in Israel and the broader Middle East region have the potential to evolve quickly creating uncertainty, along with the potential for disruptions to our Israeli operations in the region, including, but not limited to, workforce calls for duty, transportation and other logistical impacts and reduced customer confidence. To date, the conflict has not had a material impact to our operations. The U.S. and other western powers have directed military and funding support to Israel. DRS has direct exposure to Israel principally through its RADA Technologies Ltd (“RADA”) operations with approximately 4% of our workforce as of June 30, 2024 residing in Israel.

Previous wording

Revenues derived directly, as a prime contractor, or indirectly, as a subcontractor, from contracts with the U.S. government represented 81% and 80% of our total revenues for the three months ended March 31, 2024 and March 31, 2023, respectively. Our U.S. government sales are highly concentrated within our DoD customers, which made up the overwhelming majority of our U.S. government revenue for the three months ended March 31, 2024, and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 40% and 26%, respectively, of our total revenues for the three months ended March 31, 2024. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoD.

Current wording

Revenues derived directly, as a prime contractor, or indirectly, as a subcontractor, from contracts with the U.S. government represented 82% and 81% of our total revenues for the six months ended June 30, 2024 and June 30, 2023, respectively. Our U.S. government sales are highly concentrated within our DoD customers, which made up the overwhelming majority of our U.S. government revenue for the six months ended June 30, 2024, and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 39% and 30%, respectively, of our total revenues for the six months ended June 30, 2024. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoD.

Previous wording

Revenue consists primarily of product related revenue, generating 91% of our total revenues for the three months ended March 31, 2024. Our remaining revenue is generated from service related contracts. Additionally, 83% of our revenue is derived from firm-fixed price contracts for the three months ended March 31, 2024. This is consistent with the prior year which realized product sales of 91% and firm-fixed price sales of 84% for the three months ended March 31, 2023.

Current wording

Revenue consists primarily of product related revenue, which represented 94% of our total revenues for the six months ended June 30, 2024. Our remaining revenue was generated from service related contracts. Additionally, 82% of our revenue was derived from firm-fixed price contracts for the six months ended June 30, 2024. This was consistent with the prior year comparable period which realized product related revenue of 93% and revenue from firm-fixed price contracts of 83% for the six months ended June 30, 2023.

Previous wording

Under flexibly priced contracts, we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, cost-effectiveness or other factors. For the three months ended March 31, 2024 and March 31, 2023, flexibly priced contracts represented 17% and 16% of our total revenues, respectively.

Current wording

Under flexibly priced contracts, we are reimbursed for allowable or otherwise defined total costs (defined as cost of revenues plus allowable general and administrative expenses) incurred, plus a fee. The contracts may also include incentives for various performance criteria, including quality, timeliness, cost-effectiveness or other factors. For the six months ended June 30, 2024 and June 30, 2023, flexibly priced contracts represented 18% and 17% of our total revenues, respectively.

Previous wording

The following discussion of operating results is intended to help the reader understand the results of operations and financial condition of the Company, for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023. Given the nature of our business, we believe revenue and operating earnings are most relevant to an understanding of our performance at an enterprise and segment level. Our operating cycle is longer term in nature and involves various types of production contracts and varying delivery schedules. Accordingly, operating results in a particular period may not be indicative of future operating results.

Current wording

The following discussion of operating results is intended to help the reader understand the results of operations and financial condition of the Company, for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023. Given the nature of our business, we believe revenue and operating earnings are most relevant to an understanding of our performance at an enterprise and segment level. Our operating cycle is longer term in nature and involves various types of production contracts and varying delivery schedules. Accordingly, operating results in a particular period may not be indicative of future operating results.

Previous wording

Our revenue generation of $688 million for the three months ended March 31, 2024 represents an increase of $119 million or 20.9% as compared to the three months ended March 31, 2023. The revenue increase is primarily attributed to continued performance on our electric power and propulsion programs with the U.S. Navy during the period.

Current wording

Our revenue generation of $753 million for the three months ended June 30, 2024 represents an increase of $125 million, or 19.9%, as compared to the three months ended June 30, 2023. The revenue increase is primarily attributed to our continued backlog growth across each of our operating segments. This is highlighted by our efforts in dismounted and ground vehicle sensing, tactical radars and electric power and propulsion.

Previous wording

Cost of revenues increased by $97 million or 22.1% from $438 million to $535 million for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. The cost of revenue increase was primarily due to the increased revenue contribution realized during the period.

Current wording

Cost of revenues increased by $101 million, or 20.9%, from $483 million to $584 million for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. The cost of revenues increase was primarily due to the increased revenue contribution realized during the period.

Previous wording

Gross profit increased by $22 million or 16.8% to $153 million for the three months ended March 31, 2024 as compared to $131 million for the three months ended March 31, 2023, resulting from the revenue and cost of revenue trends noted above.

Current wording

Gross profit increased by $24 million, or 16.6%, to $169 million for the three months ended June 30, 2024, as compared to $145 million for the three months ended June 30, 2023 and gross profit increased by $46 million, or 16.7%, to $322 million for the six months ended June 30, 2024 as compared to $276 million for the six months ended June 30, 2023, resulting from the revenue and cost of revenues trends noted above.

Previous wording

General and administrative (“G&A”) expenses increased by $1 million or 1.0% for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

Current wording

General and administrative (“G&A”) expenses increased by $17 million, or 18.9%, for the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and increased by $18 million, or 9.5%, for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. The increase was primarily due to the reversal of a legal liability accrual during the prior year period.

Previous wording

Amortization of intangibles of $5 million for the three months ended March 31, 2024 decreased $1 million as compared to the three months ended March 31, 2023.

Current wording

Amortization of intangibles of $6 million for the three months ended June 30, 2024 increased $1 million as compared to the three months ended June 30, 2023. Amortization of intangibles of $11 million remained consistent for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023.

Previous wording

Other operating expenses were $4 million for the three months ended March 31, 2024 compared to zero for the three months ended March 31, 2023. The expense in the current year is largely attributed to continuing restructuring efforts implemented in our ASC segment.

Current wording

Other operating expenses were $1 million for the three months ended June 30, 2024 compared to $8 million for the three months ended June 30, 2023. Other operating expenses were $5 million for the six months ended June 30, 2024 compared to $8 million for the six months ended June 30, 2023. The expense in both periods is attributed to restructuring efforts implemented in our ASC segment.

Previous wording

Operating earnings increased by $18 million to $43 million for the three months ended March 31, 2024. The increase was driven by the gross profit impacts noted above.

Current wording

Operating earnings increased by $13 million to $55 million for the three months ended June 30, 2024. Operating earnings increased by $31 million to $98 million for the six months ended June 30, 2024. The increase was driven by the gross profit impacts noted above.

Previous wording

Interest expense decreased by $3 million to $5 million for the three months ended March 31, 2024, as compared to $8 million for the three months ended March 31, 2023. The reduction in interest expenditures is attributed to reduced borrowings on our credit facilities during the period.

Current wording

Interest expense decreased by $2 million to $7 million for the three months ended June 30, 2024, as compared to $9 million for the three months ended June 30, 2023. Interest expense decreased by $5 million to $12 million for the six months ended June 30, 2024, as compared to $17 million for the six months ended June 30, 2023. The reduction in interest expenditures is attributed to reduced borrowings on our credit facilities during the current year periods.

Previous wording

Earnings before taxes increased by $21 million to $37 million for the three months ended March 31, 2024 from $16 million for the three months ended March 31, 2023. This was primarily due to the increases in operating earnings and decreased interest expense as noted above.

Current wording

Earnings before taxes increased by $14 million to $47 million for the three months ended June 30, 2024 from $33 million for the three months ended June 30, 2023 and increased by $35 million to $84 million for the six months ended June 30, 2024 from $49 million for the six months ended June 30, 2023. This was primarily due to the increases in operating earnings and decreased interest expense as noted above.

Previous wording

Income tax provision increased by $4 million to $8 million for the three months ended March 31, 2024, from $4 million for the three months ended March 31, 2023. This was primarily attributable to the increase in earnings before taxes. This was offset in part by an anticipated increase in the federal research and development credits recorded in the three months ended March 31, 2024. Our effective tax rate was 21.6% for the three months ended March 31, 2024 compared to 25.0% for the three months ended March 31, 2023.

Current wording

Income tax provision (benefit) increased by $11 million to $9 million (provision) for the three months ended June 30, 2024, from $2 million (benefit) for the three months ended June 30, 2023. Income tax provision increased by $15 million to $17 million for the six months ended June 30, 2024, from $2 million for the six months ended June 30, 2023. This was primarily attributable to the recognition of a discrete tax benefit associated with historic research and development credits recorded during the six months ended June 30, 2023. Our effective tax rate was 19.1% and 20.2% for the three and six months ended June 30, 2024, respectively, compared to (6.1)% and 4.1% for the three and six months ended June 30, 2023, respectively.

Previous wording

Net earnings increased by $17 million to $29 million for the three months ended March 31, 2024, when compared to the three months ended March 31, 2023. This was driven by an increase in earnings before taxes offset by the income tax provision increase as noted above.

Current wording

Net earnings increased by $3 million to $38 million for the three months ended June 30, 2024, when compared to the three months ended June 30, 2023. Net earnings increased by $20 million to $67 million for the six months ended June 30, 2024, when compared to the six months ended June 30, 2023. This was driven by an increase in earnings before taxes offset by the income tax provision increase as noted above.

Previous wording

Backlog- We define Backlog to include the following components:

Current wording

We define Backlog to include the following components:

Previous wording

Total backlog increased by $3,573 million to $7,845 million for the three months ended March 31, 2024, from $4,272 million for the three months ended March 31, 2023. The backlog increase was driven primarily by the receipt of a multi-boat contract to support the electric propulsion efforts on the Columbia Class submarine program with the U.S. Navy.

Current wording

Total backlog increased by $3,568 million to $7,925 million as of June 30, 2024, from $4,357 million as of June 30, 2023. The backlog increase was driven primarily by the receipt of a multi-boat contract to support the electric propulsion efforts on the Columbia Class submarine program with the U.S. Navy.

Previous wording

Bookings - We define bookings as the total value of contract awards received from the U.S. government for which it has appropriated funds and legally obligated such funds to the Company through a contract or purchase order, plus the value of contract awards and orders received from customers other than the U.S. government.

Current wording

We define bookings as the total value of contract awards received from the U.S. government for which it has appropriated funds and legally obligated such funds to the Company through a contract or purchase order, plus the value of contract awards and orders received from customers other than the U.S. government.

Previous wording

Adjusted EBITDA increased by $21 million or 42.9% to $70 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase in adjusted EBITDA for the quarter is primarily attributed to increased revenue volume and related gross profit contribution. This increase realized better absorption of our G&A expenditures driving an increase in adjusted EBITDA.

Current wording

Adjusted EBITDA increased by $20 million, or 32.3%, to $82 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase in adjusted EBITDA for the quarter is primarily attributed to increased revenue volume and related gross profit contribution. This increase realized better absorption of our G&A expenditures driving an increase in adjusted EBITDA. For the six months ended June 30, 2024, adjusted EBITDA increased by $41 million, or 36.9%, to $152 million from $111 million for the six months ended June 30, 2023.

Previous wording

Adjusted EBITDA margin was 10.2% for the three months ended March 31, 2024 and 8.6% for the three months ended March 31, 2023. The increase for the quarter was primarily due to operational leverage realized on the 20.9% increase in revenue during the three months ended March 31, 2024 as compared to the three month period ended March 31, 2023.

Current wording

Adjusted EBITDA margin was 10.9% and 10.5% for the three and six months ended June 30, 2024, respectively, and 9.9% and 9.3% for the three and six months ended June 30, 2023, respectively. The increase for the quarter was primarily due to operational leverage realized on the 19.9% increase in revenue during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023.

Previous wording

Diluted weighted average number of shares outstanding for the three months ended March 31, 2024 was 266 million, an increase of 4 million shares as compared to the three months ended March 31, 2023. The increased share count is attributed to stock option exercises and equity vesting. Adjusted diluted EPS of $0.14 for the three months ended March 31, 2024 increased $0.07 as compared with the same period in the prior year. The increase is a product of the increased adjusted net earnings as shown in the table above, partially offset by the increased share count.

Current wording

Diluted weighted average number of shares outstanding for the three and six months ended June 30, 2024 was 267 million and 267 million, respectively, an increase of 3 million and 4 million shares as compared to the three and six months ended June 30, 2023, respectively. The increased share count is attributed to stock option exercises and equity vesting. Adjusted diluted EPS of $0.18 and $0.32 for the three and six months ended June 30, 2024 increased $0.03 and $0.10, respectively, as compared with the same periods in the prior year. The increase is a product of the increased adjusted net earnings as shown in the table above, partially offset by the increased share count.

Previous wording

Free cash flow usage decreased by $71 million to $275 million for the three months ended March 31, 2024 from $346 million for the three months ended March 31, 2023. This was primarily due to lower cash used to fund working capital for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023.

Current wording

Free cash flow usage decreased by $82 million to $274 million for the six months ended June 30, 2024 from $356 million for the six months ended June 30, 2023. This was primarily due to lower cash used to fund working capital for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023.

Previous wording

There is also uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to address budgetary constraints, caps on the discretionary budget for defense and non-defense departments and agencies, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and agencies that are, and those that are not, subject to the caps. Additionally, budget deficits and the growing U.S. national debt, may increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide. A reduction in the amount of, or reductions, delays, or cancellations of funding for, services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations. See Part I, Item 1A, “Risk Factors—Risks Related to Our Business—Significant delays or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly may negatively impact our business and could have a material adverse impact on our business, financial condition and results of operations” and Part II, Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview and Considerations—Business Environment” in our Annual Report on Form 10-K for the year ended December 31, 2023, and Part I, Item 2,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview and Considerations—Business

Current wording

There is also uncertainty around the timing, extent, nature and effect of Congressional and other U.S. government actions to address budgetary constraints, caps on the discretionary budget for defense and non-defense departments and agencies, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund both U.S. government departments and agencies that are, and those that are not, subject to the caps. Additionally, budget deficits and the growing U.S. national debt, may increase pressure on the U.S. government to reduce federal spending across all federal agencies, with uncertainty about the size and timing of those reductions. Furthermore, delays in the completion of future U.S. government budgets could in the future delay procurement of the federal government services we provide. A reduction in the amount of, or reductions, delays, or cancellations of funding for, services that we are contracted to provide to the U.S. government as a result of any of these impacts or related initiatives, legislation or otherwise could have a material adverse effect on our business and results of operations. See Part I, Item 1A, “Risk Factors—Risks Related to Our Business—Significant delays or reductions in appropriations for our programs and changes in U.S. government priorities and spending levels more broadly may negatively impact our business and could have a material adverse impact on our business, financial condition and results of operations” and Part II, Item 7,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview and Considerations—Business Environment” in our Annual Report on Form 10-K for the year ended December 31, 2023, and Part I, Item 2,“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Business Overview and Considerations—Business Environment” in this Quarterly Report for further details on U.S. government spending’s impact on our business.

Previous wording

After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts. The following represents the impact that changes in our estimates, particularly those regarding our fixed-price development programs, have had on our revenues for the three months ended March 31, 2024 and 2023, respectively:

Current wording

After establishing the estimated total cost at completion, we follow a standard Estimate at Completion (“EAC”) process in which we review the progress and performance on our ongoing contracts. The following represents the net impact that changes in our estimates, particularly those regarding our fixed-price development programs, have had on our revenues for the three and six months ended June 30, 2024 and 2023, respectively:

Previous wording

International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 14% and 9% of our revenue for the three months ended March 31, 2024 and March 31, 2023, respectively. The increase is due in part to incremental demand resulting from higher defense spending within Eastern Europe, compounded by continued military aid programs in support of Ukraine in its conflict with Russia. These efforts are highlighted by demand for our battle management, tactical radars and C-UAS products. Since our focus is primarily with the DoD and our investments are focused as such, we anticipate that international sales will continue to account for a similar percentage of revenue in the future. We remain subject to the spending levels, pace and priorities of the U.S. government as well as international governments and commercial customers, and to general economic conditions that could adversely affect us, our customers and our suppliers.

Current wording

International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 13% and 10% of our revenue for the six months ended June 30, 2024 and June 30, 2023, respectively. The increase is due in part to incremental demand resulting from higher defense spending within Eastern Europe, compounded by continued military aid programs in support of Ukraine in its conflict with Russia. These efforts are highlighted by demand for our battle management, tactical radars and C-UAS products. Since our focus is primarily with the DoD and our investments are focused as such, we anticipate that international sales will continue to account for a similar percentage of revenue in the future. We remain subject to the spending levels, pace and priorities of the U.S. government as well as international governments and commercial customers, and to general economic conditions that could adversely affect us, our customers and our suppliers.

Previous wording

Additionally, some international sales may expose us to foreign exchange fluctuations and changing dynamics of foreign competitiveness based on variations in the value of the U.S. dollar relative to other currencies. The impact of those fluctuations is reflected throughout our Consolidated Financial Statements, but in the aggregate, did not have a material impact on our results of operations for three months ended March 31, 2024.

Current wording

Additionally, some international sales may expose us to foreign exchange fluctuations and changing dynamics of foreign competitiveness based on variations in the value of the U.S. dollar relative to other currencies. The impact of those fluctuations is reflected throughout our Consolidated Financial Statements, but in the aggregate, did not have a material impact on our results of operations for six months ended June 30, 2024.

Previous wording

The ASC segment reported revenue of $433 million for the three months ended March 31, 2024, an increase of 10.7% or $42 million from the three months ended March 31, 2023. The revenue increase is attributed to both our advanced sensing and network computing programs. Within our advanced sensing portfolio, revenue growth is highlighted by our ground vehicle, tactical radar and dismounted soldier sensing programs. This was offset in part by the timing of infrared counter measure program revenue realized in the period. Within our network computing programs, our revenue expansion was driven by strong performance from our naval computing solutions.

Current wording

The ASC segment reported revenue of $492 million and $925 million for the three and six months ended June 30, 2024, an increase of 21.8%, or $88 million, from the three months ended June 30, 2023 and 16.4%, or $130 million, from the six months ended June 30, 2023. The revenue increase is attributed to both our advanced sensing and network computing programs. Within our advanced sensing portfolio, revenue growth is highlighted by our ground vehicle, tactical radar and dismounted soldier sensing programs. This was offset in part by the timing of infrared counter measure program revenue realized in the period. Within our network computing programs, our revenue expansion was driven by strong performance from our naval computing solutions.

Previous wording

ASC’s adjusted EBITDA increased by $4 million or 10.8% to $41 million from $37 million for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023. The increase was driven by increased revenue contribution offset slightly by an increase in G&A expenditures.

Current wording

ASC’s adjusted EBITDA increased by $19 million, or 52.8%, from $36 million for the three months ended June 30, 2023 to $55 million for the three months ended June 30, 2024. The increase was driven by increased revenue contribution offset slightly by an increase in G&A expenditures. This drove adjusted EBITDA margin up 230 bps to 11.2% compared to the 8.9% realized during the three months ended June 30, 2023.

Previous wording

The ASC segment generated an $183 million or 45.3% increase in bookings for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023. The increase in new awards is driven by increased demand in both our advanced sensing and network computing products. Advanced sensing results were highlighted by international demand for our dismounted soldier solutions, coupled with continued demand for airborne and electronic warfare sensing programs. Our network computing award increase was driven by increased demand for our naval computing solutions. Bookings continue to exceed the revenue output driving an increase in backlog over the period.

Current wording

The ASC segment generated an $147 million, or 31.3%, increase in bookings for the three months ended June 30, 2024 when compared to the three months ended June 30, 2023. The increase in new awards is driven by increased demand in both our advanced sensing and force protection products.

Previous wording

IMS segment revenue increased by $72 million or 38.1% to $261 million for the three months ended March 31, 2024 from $189 million for the three months ended March 31, 2023, attributed to continued momentum in our naval power and propulsion submarine programs, highlighted by the Columbia Class efforts.

Current wording

IMS segment revenue increased by $40 million, or 17.7%, to $266 million for the three months ended June 30, 2024 from $226 million for the three months ended June 30, 2023, attributed to continued progress in our naval power and propulsion submarine programs as we execute our existing backlog, highlighted by the Columbia Class efforts.

Previous wording

IMS’s adjusted EBITDA increased by $17 million or 141.7% to $29 million for the three months ended March 31, 2024 from $12 million for the three months ended March 31, 2023. The increase for the quarter is attributed to operational leverage created by the increased revenue output as well as continued program improvement on our Columbia Class submarine program. This drove adjusted EBITDA margin up 480 bps to 11.1% compared to the 6.3% realized during the three month period ended March 31, 2023.

Current wording

IMS’s adjusted EBITDA increased by $1 million, or 3.8%, to $27 million for the three months ended June 30, 2024 from $26 million for the three months ended June 30, 2023. The increase for the quarter is attributed to operational leverage created by the increased revenue output as well as continued program improvement on our Columbia Class submarine program. Adjusted EBITDA margin decreased 130 bps to 10.2% compared to the 11.5% realized during the three months ended June 30, 2023 primarily due to program delays and related costs realized within our land systems integration business on a foreign surveillance integration program.

Previous wording

We endeavor to ensure the most efficient conversion of operating income into cash for deployment in our business and to maximize stockholder value through cash deployment activities. In addition to our cash position, we use various financial measures to assist in capital deployment decision-making, including cash provided by (used in) operating activities and free cash flow, a non-GAAP measure described in more detail below. We believe that the combination of our existing cash, access to credit facilities, as described in Note 10: Debt to the Consolidated Financial Statements, and future cash that we expect to generate from our operations will be sufficient to meet our short and long-term liquidity needs. There can be no assurance, however, that our business will continue to generate cash flow at current levels or that anticipated operational improvements will be achieved. We may also pursue acquisitions or other strategic priorities that will require additional liquidity beyond the liquidity we generate through our operations. Our cash balance as of March 31, 2024, was $160 million compared to $467 million as of December 31, 2023.

Current wording

We endeavor to ensure the most efficient conversion of operating income into cash for deployment in our business and to maximize stockholder value through cash deployment activities. In addition to our cash position, we use various financial measures to assist in capital deployment decision-making, including cash provided by (used in) operating activities and free cash flow, a non-GAAP measure described in more detail below. We believe that the combination of our existing cash, access to credit facilities as described in Note 10: Debt to the Consolidated Financial Statements, and future cash that we expect to generate from our operations will be sufficient to meet our short and long-term liquidity needs. There can be no assurance, however, that our business will continue to generate cash flow at current levels or that anticipated operational improvements will be achieved. We may also pursue acquisitions or other strategic priorities that will require additional liquidity beyond the liquidity we generate through our operations. Our cash balance as of June 30, 2024, was $149 million compared to $467 million as of December 31, 2023.

Previous wording

Cash usage related to operating activities decreased by $69 million from $334 million for the three months ended March 31, 2023 to $265 million for the three months ended March 31, 2024. This was primarily due to lower cash used to fund working capital for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023. The increased working capital for the period was driven by a reduction of our accounts payable balance and investments made in contract assets during the period.

Current wording

Cash usage related to operating activities decreased by $115 million from $346 million for the six months ended June 30, 2023 to $231 million for the six months ended June 30, 2024. This was primarily due to lower cash used to fund working capital for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. The increased working capital for the period was driven by a reduction of our accounts payable balance and investments made in contract assets during the period.

Previous wording

Net cash used in investing activities decreased by $4 million for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023, primarily due to lower capital expenditures.

Current wording

Net cash used in investing activities increased by $18 million for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023, primarily due to higher capital expenditures attributed to our naval expansion project in South Carolina.

Previous wording

Net cash used in financing activities for the three months ended March 31, 2024 was $32 million compared to net cash provided by financing activities of $216 million for the three months ended March 31, 2023. The change was primarily due to the outstanding revolver balance of $215 million at March 31, 2023 compared to no outstanding revolver balance at March 31, 2024 and a net decrease in third party borrowings (maturities of 90 days or less) in the current period.

Current wording

Net cash used in financing activities for the six months ended June 30, 2024 was $43 million compared to net cash provided by financing activities of $101 million for the six months ended June 30, 2023. The change was primarily due to the reduction of revolver borrowing, reducing the outstanding balance from $110 million at June 30, 2023 compared to no outstanding revolver balance at June 30, 2024. Additionally, we realized a net decrease in third party borrowings (maturities of 90 days or less) in the current period when compared to the same period in the prior year.

Previous wording

Free cash flow usage decreased by $71 million to $275 million for the three months ended March 31, 2024 from $346 million for the three months ended March 31, 2023. This was primarily due to lower cash used in operating activities noted above for the three months ended March 31, 2024 when compared to the three months ended March 31, 2023.

Current wording

Free cash flow usage decreased by $82 million to $274 million for the six months ended June 30, 2024 from $356 million for the six months ended June 30, 2023. This was primarily due to lower cash used in operating activities noted above for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023.