Leonardo DRS, Inc.

Previous wording

This discussion and other parts of this Quarterly Report include forward-looking statements such as those relating to our plans, objectives, expectations and beliefs, which involve risks, uncertainties and assumptions. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties discussed under “Special Note Regarding Forward-Looking Statements and Information” in this Quarterly Report and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. Actual results may differ materially from those contained in any forward-looking statements.

Current wording

This discussion and other parts of this Quarterly Report include forward-looking statements such as those relating to our plans, objectives, expectations and beliefs, which involve risks, uncertainties and assumptions. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties discussed under “Special Note Regarding Forward-Looking Statements and Information” and “Risk Factors” in this Quarterly Report and under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024. Actual results may differ materially from those contained in any forward-looking statements.

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, 2025, accounted for approximately 78% 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 38% and 32%, 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, 2025, accounted for approximately 80% 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 33%, respectively, of our total revenues for such period, which is consistent with historic trends.

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 operations with approximately 5% of our workforce as of March 31, 2025 residing in Israel.

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 operations with approximately 6% of our workforce as of June 30, 2025 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 78% and 81% of our total revenues for the three months ended March 31, 2025 and 2024, 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, 2025, and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 38% and 32%, respectively, of our total revenues for the three months ended March 31, 2025. 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 80% and 82% of our total revenues for the six months ended June 30, 2025 and 2024, 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, 2025, and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 40% and 33%, respectively, of our total revenues for the six months ended June 30, 2025. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoD. The DoD budget is the largest defense budget in the world.

Previous wording

In March 2025, Congress passed a full-year Continuing Resolution (“CR”) to fund the government through the end of FY 2025. The CR authorizes slightly higher spending than FY 2024 levels for defense and allows significant flexibility in how the DoD funds its priorities. This full-year CR prevented a U.S. government shutdown in FY 2025. However, the extended CR and its flexibility has the potential to impact program funding and as a consequence, results of operations including, but not limited to, program cancellations, schedule delays, production halts and other disruptions. Additionally, the current U.S. administration has discussed various changes to defense spending levels ranging from across-the-board percentage cuts, to a change in spending allocations in favor of new priorities, and potential increases in the top-line spending profile. It remains unclear whether and to what extent the DoD’s budget may change and, if it does, to what extent our business, financial condition and results of operations may be affected.

Current wording

In March 2025, Congress passed a full-year Continuing Resolution (“CR”) to fund the government through the end of fiscal year (“FY”) 2025. The CR authorizes slightly higher spending than FY 2024 levels for defense and allows significant flexibility in how the DoD funds its priorities. This full-year CR prevented a U.S. government shutdown in FY 2025. However, the extended CR and its flexibility has the potential to impact program funding and as a consequence, results of operations including, but not limited to, program cancellations, schedule delays, production halts and other disruptions. Additionally, the current U.S. administration has discussed various changes to defense spending levels ranging from across-the-board percentage cuts, to a change in spending allocations in favor of new priorities, and potential increases in the top-line spending profile. It remains unclear whether and to what extent the DoD’s budget may change and, if it does, to what extent our business, financial condition and results of operations may be affected.

Previous wording

Revenue consists primarily of product related revenue, which represented 94% of our total revenues for the three months ended March 31, 2025. Our remaining revenue was generated from service related contracts. Additionally, 86% of our revenue was derived from firm-fixed price contracts for the three months ended March 31, 2025. This was consistent with the prior year comparable period which realized product related revenue of 91% and revenue from firm-fixed price contracts of 83% for the three months ended March 31, 2024.

Current wording

Revenue consists primarily of product related revenue, which represented 94% of our total revenues for the six months ended June 30, 2025. Our remaining revenue was generated from service related contracts. Additionally, 86% of our revenue was derived from firm-fixed price contracts for the six months ended June 30, 2025. This was consistent with the prior year comparable period which realized product related revenue of 94% and revenue from firm-fixed price contracts of 82% for the six months ended June 30, 2024.

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, 2025 and 2024, flexibly priced contracts represented 14% and 17% 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, 2025 and 2024, flexibly priced contracts represented 14% and 18% 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, 2025 as compared to the three months ended March 31, 2024. 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, 2025 as compared to the three and six months ended June 30, 2024. 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 $799 million for the three months ended March 31, 2025 represents an increase of $111 million, or 16.1%, as compared to the three months ended March 31, 2024. The revenue increase is primarily attributed to our continued backlog growth across each of our operating segments. This is highlighted by our efforts within network computing, electric power and propulsion and force protection activities.

Current wording

Our revenue generation of $829 million for the three months ended June 30, 2025 represents an increase of $76 million, or 10.1%, as compared to the three months ended June 30, 2024. The revenue increase is primarily attributed to our continued backlog growth across each of our operating segments. This is highlighted by our efforts within electric power and propulsion and advanced sensing activities.

Previous wording

Cost of revenues increased by $83 million, or 15.5%, to $618 million for the three months ended March 31, 2025 as compared to $535 million for the three months ended March 31, 2024. The cost of revenues increase was primarily due to the increased revenue contribution realized during the period and efficient execution on Columbia Class programs. This was offset in part by the escalating cost of germanium for our infrared products.

Current wording

Cost of revenues increased by $131 million, or 11.7%, to $1,250 million for the six months ended June 30, 2025 as compared to $1,119 million for the six months ended June 30, 2024. The cost of revenues increase was primarily due to the increased revenue contribution realized during the period and increased cost of germanium on our infrared products, partially offset by efficient execution on Columbia Class programs.

Previous wording

Gross profit increased by $28 million, or 18.3%, to $181 million for the three months ended March 31, 2025 as compared to $153 million for the three months ended March 31, 2024, resulting from the revenue and cost of revenues trends noted above.

Current wording

Gross profit increased by $28 million, or 16.6%, to $197 million for the three months ended June 30, 2025 and increased by $56 million, or 17.4%, to $378 million for the six months ended June 30, 2025 as compared to the same periods in the prior year, resulting from the revenue and cost of revenues trends noted above. The gross profit increase and higher profitability on our electric power and propulsion programs drove an expansion of 140bps and 90bps in our gross margin for the three and six months ended June 30, 2025, respectively.

Previous wording

G&A expenses increased by $16 million, or 15.8%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, primarily due to increased internal research and development expenditures and costs related to bid and proposal efforts for new contractual pursuits.

Current wording

G&A expenses increased by $14 million, or 13.1%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024, primarily due to increased internal research and development expenditures and costs related to bid and proposal efforts for new contractual pursuits.

Previous wording

Amortization of intangibles was consistent for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Current wording

Amortization of intangibles was consistent for the three and six months ended June 30, 2025 as compared to the three and six months ended June 30, 2024.

Previous wording

Other operating expenses were zero for the three months ended March 31, 2025 compared to $4 million for the three months ended March 31, 2024. The expense in the prior year is attributed to restructuring efforts that were implemented in our ASC segment.

Current wording

Other operating expenses were zero for the three and six months ended June 30, 2025 compared to $1 million and $5 million for the three and six months ended June 30, 2024, respectively. The expenses in the prior year periods are attributed to restructuring efforts that were implemented in our ASC segment.

Previous wording

Operating earnings increased by $16 million to $59 million for the three months ended March 31, 2025. The increase was driven by the gross profit impacts noted above.

Current wording

Operating earnings increased by $15 million to $70 million for the three months ended June 30, 2025 and increased by $31 million to $129 million for the six months ended June 30, 2025 as compared to the same periods in the prior year. The increases were driven by the gross profit impacts noted above.

Previous wording

Net interest expense decreased by $4 million to $1 million for the three months ended March 31, 2025, as compared to $5 million for the three months ended March 31, 2024. The reduction in net interest expense is attributed to increased interest income as a result of higher cash balances and reduced borrowings on our credit facilities during the current year period.

Current wording

Net interest expense decreased by $5 million to $2 million for the three months ended June 30, 2025 and decreased by $9 million to $3 million for the six months ended June 30, 2025 as compared to the same periods in the prior year. The reduction in net interest expense is attributed to increased interest income as a result of higher cash balances and reduced borrowings on our credit facilities during the current year period.

Previous wording

Other, net remained relatively consistent for the three months ended March 31, 2025 and 2024.

Current wording

Other, net remained relatively consistent for the three and six months ended June 30, 2025 as compared to the same periods in the prior year.

Previous wording

Earnings before taxes increased by $21 million to $58 million for the three months ended March 31, 2025 from $37 million for the three months ended March 31, 2024. This was primarily due to the increases in operating earnings and decreased interest expense as noted above.

Current wording

Earnings before taxes increased by $20 million to $67 million for the three months ended June 30, 2025 and increased by $41 million to $125 million for the six months ended June 30, 2025, as compared to the same periods in the prior year. This was primarily due to the increases in operating earnings and decreased net interest expense as noted above.

Previous wording

Income tax provision was consistent for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024. This was attributed to an increase in earnings before taxes noted above, offset by the recognition of a discrete tax benefit associated with employee stock vesting that occurred during the three months ended March 31, 2025. Our effective tax rate was 13.8% for the three months ended March 31, 2025, compared to 21.6% for the three months ended March 31, 2024.

Current wording

Income tax provision increased by $4 million for the three and six months ended June 30, 2025 as compared to the same periods in the prior year. This was attributed to an increase in earnings before taxes noted above, offset by the recognition of discrete tax benefits associated with employee stock vesting that occurred during the six months ended June 30, 2024. Our effective tax rate was 19.4% and

Previous wording

Net earnings increased by $21 million to $50 million for the three months ended March 31, 2025, when compared to the three months ended March 31, 2024. This was driven by an increase in earnings before taxes coupled with the reduction in our effective tax rate as noted above.

Current wording

Net earnings increased by $16 million to $54 million for the three months ended June 30, 2025 and increased by $37 million to $104 million for the six months ended June 30, 2025, as compared to the same periods in the prior year. This was driven by an increase in earnings before taxes coupled with the changes in our effective tax rate as noted above.

Previous wording

The following table summarizes the value of our backlog as of March 31, 2025, incorporating both funded and unfunded components:

Current wording

The following table summarizes the value of our backlog, incorporating both funded and unfunded components:

Previous wording

Backlog increased by $767 million to $8,612 million as of March 31, 2025, from $7,845 million as of March 31, 2024. The backlog increase was driven primarily by the receipt of new awards within our ASC segment across various domains including dismounted soldier, naval, and airborne sensor programs. Additionally, backlog increased within our network computing programs driven by domestic and international demand.

Current wording

Backlog increased by $682 million to $8,607 million as of June 30, 2025, from $7,925 million as of June 30, 2024. The backlog increase was driven primarily by the receipt of new awards within our ASC and IMS segments.

Previous wording

Bookings for the three months ended March 31, 2025 increased to $991 million as compared to $815 million for the three months ended March 31, 2024. The increase in new orders was driven by both segments. See“—Review of Operating Segments” below for more detail.

Current wording

Bookings for the three months ended June 30, 2025 decreased to $853 million as compared to $941 million for the three months ended June 30, 2024. Bookings for the six months ended June 30, 2025 increased to $1,844 million as compared to $1,756 million for the six months ended June 30, 2024. The increase in new orders was driven by both segments. See“—Review of Operating Segments” below for more detail.

Previous wording

Changes in the volume and relative mix of U.S. government spending as well as areas of spending growth could impact our business and results of operations. In particular, our results can be affected by shifts in strategies and priorities on homeland security, intelligence, defense-related programs, infrastructure and urbanization and continued increased spending on technology and innovation, including cybersecurity with respect to our and third parties’ information networks and related systems, artificial intelligence, connected communities and physical infrastructure (for example, the potential impacts for the Russia / Ukraine conflict and the Israel-Hamas war). Cost-cutting and efficiency initiatives, current and future budget restrictions, spending cuts and other efforts to reduce government spending and shifts in overall priorities could cause our government customers to reduce or delay funding or invest appropriated funds on a less consistent basis or not at all, and demand for our solutions or services could diminish. Furthermore, any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to maintain access and schedules for government testing or deploy our staff to customer locations or facilities as a result of such disruptions.

Current wording

Changes in the volume and relative mix of U.S. and allied government spending as well as areas of spending growth, including due to the evolution of warfare, could impact our business and results of operations. In particular, our results can be affected by shifts in strategies and priorities on homeland security, intelligence, defense-related programs, infrastructure and urbanization and continued increased spending on technology and innovation, including cybersecurity with respect to our and third parties’ information networks and related systems, artificial intelligence, connected communities and physical infrastructure (for example, the potential impacts for the Russia / Ukraine conflict and the Israel-Hamas war). Cost-cutting and efficiency initiatives, increasing nationalization efforts, current and future budget restrictions, spending cuts and other efforts to reduce government spending and shifts in overall priorities could cause our government customers to reduce or delay funding or invest appropriated funds on a less consistent basis or not at all, and demand for our solutions or services could diminish. Existing contracts could also be canceled due to changes in need and prioritization. Furthermore, any disruption in the functioning of government agencies, including as a result of government closures and shutdowns, could have a negative impact on our operations and cause us to lose revenue or incur additional costs due to, among other things, our inability to maintain access and schedules for government testing or deploy our staff to customer locations or facilities as a result of such disruptions.

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, 2024, 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.

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 certain discretionary budgets, and the ability of Congress to determine how to allocate the available budget authority and pass appropriations bills to fund U.S. government departments and agencies. 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, 2024, 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 net impact that changes in our estimates, particularly those regarding our fixed-price programs, have had on our revenues for the three months ended March 31, 2025 and 2024:

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 programs, have had on our revenues for the three and six months ended June 30, 2025 and 2024:

Previous wording

International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 7% and 14% of our revenue for the three months ended March 31, 2025 and 2024, respectively. The decrease in international revenues is primarily attributed to the timing of certain dismounted soldier sensing program sales to Eastern European countries realized in the first quarter of the prior year. Despite the reduction of international sales for the quarter, given the trend of international defense investment and the continuing conflicts in both Ukraine and Israel, we anticipate that international sales will be relatively consistent as a percentage of sales that we realized in the full year 2024. However, 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 8% and 13% of our revenue for the six months ended June 30, 2025 and 2024, respectively. The decrease in international revenues is primarily attributed to the timing of certain dismounted soldier sensing program sales to Eastern European countries realized in the first quarter of the prior year. Despite the reduction of international sales for the current year period, given the trend of international defense investment and the continuing conflicts in both Ukraine and Israel, we anticipate that international sales will be relatively consistent as a percentage of sales that we realized in the full year 2024. However, 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 the three months ended March 31, 2025.

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 the six months ended June 30, 2025.

Previous wording

The ASC segment reported revenue of $511 million for the three months ended March 31, 2025, an increase of 18.0%, or $78 million, from the three months ended March 31, 2024. The revenue increase is attributed to both our advanced sensing and force protection programs. Within our advanced sensing portfolio, revenue growth is highlighted by increased revenue within our tactical computing programs and continued expansion of our C-UAS tactical radars.

Current wording

The ASC segment reported revenue of $542 million for the three months ended June 30, 2025, an increase of 10.2%, or $50 million, from the three months ended June 30, 2024. The revenue increase is attributed to both our advanced sensing and force protection programs. Within our advanced sensing portfolio, revenue growth is highlighted by increased revenue within our tactical computing programs and continued expansion of our C-UAS tactical radars.

Previous wording

For the three months ended March 31, 2025, operating earnings increased by $6 million, or 31.6%, to $25 million for the three months ended March 31, 2025 from $19 million for the three months ended March 31, 2024. The increase was driven by increased revenue contribution and a reduction in restructuring expenditures, offset by the increased cost of germanium on our infrared programs, and increased G&A and internal research and development expenditures. The net of these impacts drove operating margin to 4.9% for the three months ended March 31, 2025 compared to the 4.4% realized during the three month periods March 31, 2024.

Current wording

For the six months ended June 30, 2025, operating earnings increased by $6 million, or 10.7%, to $62 million for the six months ended June 30, 2025 from $56 million for the six months ended June 30, 2024. The increase was driven by increased revenue contribution and a reduction in restructuring expenditures, offset by the increased cost of germanium on our infrared programs, and increased G&A and internal research and development expenditures. The net of these impacts drove operating margin to 5.9% for the six months ended June 30, 2025 compared to the 6.1% realized during the six months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, bookings increased $82 million, or 14.0%, from the three months ended March 31, 2024 to $669 million. The increase in new awards is largely attributed to bookings received for ground vehicle and tactical radar programs. This was partially offset by a reduction in new awards received for naval computing programs.

Current wording

For the six months ended June 30, 2025, bookings increased $25 million, or 2.1%, from the six months ended June 30, 2024 to $1,228 million. The increase in new awards is largely attributed to bookings received for ground vehicle and tactical radar programs. This was partially offset by a reduction in new awards received for tactical computing programs.

Previous wording

IMS segment revenue increased by $30 million, or 11.5%, to $291 million for the three months ended March 31, 2025 from $261 million for the three months ended March 31, 2024, which is attributed to increased revenue generated from our naval power programs for both submarine and surface ships. On the land side, short-range air defense programs contributed to the year over year increase.

Current wording

IMS segment revenue increased by $54 million, or 10.2%, to $581 million for the six months ended June 30, 2025 from $527 million for the six months ended June 30, 2024, which is attributed to increased revenue generated from our naval power programs for both submarine and surface ships. On the land side, short-range air defense programs also contributed to the year over year increase.

Previous wording

For the three months ended March 31, 2025, operating earnings increased by $9 million, or 36.0%, to $34 million for the three months ended March 31, 2025 from $25 million for the three months ended March 31, 2024. The increase for the period is attributed to operational leverage created by the increased revenue output as well as continued program improvement on our Columbia Class submarine program, offset in part by the program delays on our foreign surveillance program, resulting in a net operating margin increase to 11.7% compared to the 9.6% realized during the three months ended March 31, 2024.

Current wording

For the three months ended June 30, 2025, operating earnings increased by $12 million, or 57.1%, to $33 million for the three months ended June 30, 2025 from $21 million for the three months ended June 30, 2024. The increase for the period is attributed to operational leverage created by the increased revenue as well as continued program improvement on our Columbia Class submarine program, offset in part by program delays on our foreign surveillance program, resulting in a net operating margin increase to 11.4% compared to the 7.9% realized during the three months ended June 30, 2024.

Previous wording

For the three months ended March 31, 2025, bookings increased by $94 million, or 41.2%, from the three months ended March 31, 2024 to $322 million. The increase for the three months ended is largely attributed to funding received for the next tranche of the Columbia Class program along with the awards of additional short-range air defense program vehicles. The increased awards were offset in part by a reduction in fire system support programs.

Current wording

For the three months ended June 30, 2025, bookings decreased by $31 million, or 9.5%, from the three months ended June 30, 2024 to $294 million. The decrease for the three months ended is largely attributed to accelerated funding received for the next tranche of the Columbia Class program in the first quarter of 2025.

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. 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, 2025, was $380 million compared to $598 million as of December 31, 2024.

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. 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, 2025, was $278 million compared to $598 million as of December 31, 2024.

Previous wording

Cash usage related to operating activities decreased by $127 million to $138 million for the three months ended March 31, 2025, from $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, 2025 when compared to the three months ended March 31, 2024. The decrease in cash used to fund working capital for the period was driven by customer advances received on our electric propulsion programs within our IMS segment and on tactical radars within our ASC segment. Additionally, we saw less cash outflow from our accounts payable.

Current wording

Cash usage related to operating activities decreased by $65 million to $166 million for the six months ended June 30, 2025, from $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, 2025 when compared to the six months ended June 30, 2024. The decrease in cash used to fund working capital for the period was driven by customer advances received on our electric propulsion programs within our IMS segment and on tactical radars within our ASC segment.

Previous wording

Net cash used in investing activities increased by $22 million for the three months ended March 31, 2025 when compared to the three months ended March 31, 2024, primarily due to higher capital expenditures attributed to our naval expansion project in South Carolina.

Current wording

Net cash used in investing activities increased by $16 million for the six months ended June 30, 2025 when compared to the six months ended June 30, 2024, 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, 2025 was $48 million compared to $32 million for the three months ended March 31, 2024. The change was primarily due to cash outlays related to dividends paid in the current period, higher payments of employee taxes withheld from share-based awards, and share buy backs under the share repurchase program announced in the current period. Offsetting this was the net change in third party borrowings (maturities of 90 days or less) in the current period when compared to the same period in the prior year.

Current wording

Net cash used in financing activities for the six months ended June 30, 2025 was $94 million compared to $43 million for the six months ended June 30, 2024. The change was primarily due to cash outlays related to dividends paid in the current period, higher payments of employee taxes withheld from share-based awards, and share buy backs under the share repurchase program announced in the first quarter of 2025. This was partially offset by the net change in third party borrowings (maturities of 90 days or less) in the current period when compared to the same period in the prior year.