Leonardo DRS, Inc.
For the period ended Sep 30, 2026. Filed Oct 29, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 29, 2026
DRS$34.04+3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-07-30.
0001833756-26-000040
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-29.
0001833756-26-000044
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 140 previous paragraphs and 145 current paragraphs.
93 unchanged; 43 reworded; 8 added; 3 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (8)
Current report
Russia’s ongoing war in Ukraine continues to affect European security and defense priorities. In the Middle East, the conflict involving Iran, the U.S. and Israel, continuing hostilities involving regional armed groups, and the risk of renewed or broader escalation remain sources of significant uncertainty. Threats to maritime security in the Persian Gulf, including the Strait of Hormuz, and other regional waterways can disrupt commercial shipping, energy supplies and global trade. In the Indo-Pacific, tensions involving China and Taiwan and competing territorial claims in the South China Sea continue to underscore the importance of regional deterrence and maritime security. These conflicts and tensions, together with other regional instability, present evolving security requirements for the U.S. and its allies.
Current report
We believe these conditions continue to underscore the need for strong deterrence, resilient defense industrial capacity and advanced capabilities, including integrated air and missile defense, C-UAS, intelligence, surveillance and reconnaissance, EW, cyber resilience, secure communications and naval capabilities. These priorities may create additional demand for our products and services; however, the timing and extent of any resulting orders depend on customer procurement decisions, appropriations, program priorities and applicable regulatory approvals.
Current report
At the same time, these conditions may increase operational and financial risks, including supply-chain and transportation disruptions, higher energy and material costs, cybersecurity threats, and changes in sanctions, export controls or other regulatory requirements. The duration, scope and ultimate effects of these developments remain uncertain. We continue to evaluate the opportunities and risks associated with the global security environment and their potential effects on our business.
Current report
For FY2027, which began on October 1, 2026, the President’s budget request released in April 2026 proposed approximately $1.15 trillion in discretionary funding for the national defense function and an additional $350 billion in mandatory funding through reconciliation, for approximately $1.5 trillion in proposed total national defense resources. Full-year FY2027 defense appropriations, the FY2027 NDAA and the proposed additional reconciliation funding has not been enacted to date. The proposed increases remain subject to congressional approval and do not represent enacted funding or committed orders for our products and services.
Current report
The Continuing Appropriations and Extensions Act, 2027, signed on September 2, 2026, provides temporary funding for federal agencies, including the DoW, through December 11, 2026, unless superseded by applicable appropriations legislation. Funding under the Continuing Appropriations and Extensions Act, 2027, generally continues at FY2026 rates, subject to statutory exceptions, and restrictions on new program starts, increased production rates and certain multi-year procurements may affect the timing of customer awards and program execution. The timing, amount and composition of final FY2027 funding remains uncertain. Additional continuing resolutions or a lapse in appropriations could delay awards or funding actions and affect the timing of our revenues and cash flows. We continue to monitor these developments and their potential effects on our business.
Current report
Other Operating Expenses, Net
Current report
There were no other operating expenses, net for the three and nine months ended September 30, 2026 compared to $1 million for the three and nine months ended September 30, 2025. The expenses in the prior year periods are attributed to restructuring efforts that were implemented in our ASC segment.
Current report
Cash provided by operating activities was $65 million for the nine months ended September 30, 2026 compared to cash used in operating activities of $59 million for the nine months ended September 30,
Removed paragraphs (3)
Previous report
The ongoing conflict in Ukraine, continued instability in parts of Latin America, and increasing risks across the Middle East and the Western Pacific have heightened global tensions and underscored evolving security requirements in Europe, the Middle East, Indo-Pacific, Latin America and within the U.S. In particular, the conflict involving Iran and associated regional escalation, including heightened maritime security risks and disruptions affecting commercial shipping and energy markets, has further amplified geopolitical uncertainty and the need for enhanced deterrence, integrated air and missile defense, cyber resilience, intelligence, surveillance, and reconnaissance, EW and secure communications. These developments have resulted in, and may continue to result in, increased demand for defense products and services.
Previous report
We believe the current global security environment continues to underscore the need for strong deterrence and robust defense capabilities. We are actively evaluating both opportunities and risks associated with these conditions.
Previous report
For FY2027, the Administration released topline details of the President’s budget request on April 3, 2026, proposing a significantly higher level of national defense resources, including approximately $1.15 trillion in base (discretionary) funding for the national defense function and an additional $350 billion in proposed reconciliation (mandatory) funding, subject to congressional action. The FY2027 budget is proceeding through the standard congressional authorization and appropriations process, though progress has been uneven and the outcome remains uncertain. Congress is not expected to complete all FY2027 appropriations before the fiscal year begins on October 1, 2026, making one or more continuing resolutions likely and leaving some risk of a government shutdown. The timing and outcome of FY2027 enactment will continue to depend on congressional negotiations, including the resolution of topline disputes and the potential use of continuing resolutions.
Reworded paragraphs (43)
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 DoW. The U.S. government, primarily with the DoW, is our largest customer and, for the six months ended June 30, 2026, 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 37% and 33%, 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 DoW. The U.S. government, primarily the DoW, is our largest customer and, for the nine months ended September 30, 2026, 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 37% and 34%, respectively, of our total revenues for such period, which is consistent with historic trends.
Previous wording
Within ASC, we are increasingly combining sensing, computing, and software to support applications such as counter-unmanned aircraft systems (“C-UAS”), electronic warfare, and networked sensing, where performance depends on the ability to detect, process, and act on data in real time. These integrated capabilities are designed to support evolving operational concepts that emphasize distributed operations, resilient communications, and decision advantage at the tactical edge.
Current wording
Within ASC, we are increasingly combining sensing, computing, and software to support applications such as counter-unmanned aircraft systems (“C-UAS”), EW, and networked sensing, where performance depends on the ability to detect, process, and act on data in real time. These integrated capabilities are designed to support evolving operational concepts that emphasize distributed operations, resilient communications, and decision advantage at the tactical edge.
Previous wording
The U.S. and its allies continue to face a global security environment marked by heightened tensions and instability, including threats from state and non-state actors—particularly major powers—as well as terrorist organizations, and diverse regional security challenges and political instability. Demand for defense products, services, and solutions worldwide is driven by these complex and evolving security conditions, considered in the broader context of political and socioeconomic circumstances and priorities. These events, including periods of global unrest, can affect our operations and financial performance and influence demand for our products and services.
Current wording
The U.S. and its allies continue to face a global security environment characterized by heightened geopolitical tensions, armed conflicts and instability, including threats from state and non-state actors, strategic competition among major powers, terrorism and regional security challenges. Demand for defense products, services and solutions is influenced by these complex and evolving conditions, as well as government policies, budgetary priorities and broader political and socioeconomic circumstances. Changes in these conditions can affect our operations and financial performance and influence the timing, scope and funding of customer requirements.
Previous wording
Revenues derived directly, as a prime contractor, or indirectly, as a subcontractor, from contracts with the U.S. government represented 82% and 80% of our total revenues for the six months ended June 30, 2026 and 2025, respectively. Our U.S. government sales are highly concentrated within our DoW customers, which made up the overwhelming majority of our U.S. government revenue for the periods presented and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 37% and 33%, respectively, of our total revenues for the six months ended June 30, 2026. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoW. The DoW budget is the largest defense budget in the world.
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 nine months ended September 30, 2026 and 2025, respectively. Our U.S. government sales are highly concentrated within our DoW customers, which made up the overwhelming majority of our U.S. government revenue for the periods presented and are principally derived directly or indirectly from contracts with the U.S. Navy and U.S. Army, which represented 37% and 34%, respectively, of our total revenues for the nine months ended September 30, 2026. Therefore, our revenue is highly correlated to changes in U.S. government spending levels, especially within the DoW. The DoW budget is the largest defense budget in the world.
Previous wording
For the six months ended June 30, 2026, 86% of our revenue was derived from fixed-price contracts. This was consistent with the six months ended June 30, 2025.
Current wording
For the nine months ended September 30, 2026 and September 30, 2025, 86% and 88%, respectively, of our revenue was derived from fixed-price contracts.
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 six months ended June 30, 2026 and 2025, flexibly priced contracts represented 14% of our total revenues.
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 nine months ended September 30, 2026 and 2025, flexibly priced contracts represented 14% and 12%, respectively, of our total revenues.
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 and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025. 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 nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025. 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 long-term in nature and involves various types of production contracts and varying delivery schedules. Accordingly, our operating results in a particular period may not be indicative of future operating results.
Previous wording
Our revenue generation of $913 million for the three months ended June 30, 2026 represents an increase of $84 million, or 10.1%, as compared to the three months ended June 30, 2025. The revenue increase is primarily attributed to the conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by increased output within our electric power and propulsion and force protection program activities.
Current wording
Our revenue of $1,066 million for the three months ended September 30, 2026 represents an increase of $106 million, or 11.0%, as compared to the three months ended September 30, 2025. The revenue increase is primarily attributed to the conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by increased output within our tactical radars, electric power and propulsion and space payload program activities.
Previous wording
Our revenue generation of $1,759 million for the six months ended June 30, 2026 represents an increase of $131 million, or 8.0%, as compared to the six months ended June 30, 2025. The revenue increase is primarily attributed to conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by our efforts within advanced sensing, electric power and propulsion and force protection activities. See“—Review of Operating Segments” below for more detail.
Current wording
Our revenue of $2,825 million for the nine months ended September 30, 2026 represents an increase of $237 million, or 9.2%, as compared to the nine months ended September 30, 2025. The revenue increase is primarily attributed to conversion of our funded backlog along with higher demand across each of our operating segments. This is highlighted by our efforts within advanced sensing, power and propulsion and force protection activities.
Previous wording
Cost of revenues increased by $44 million, or 7.0%, to $676 million for the three months ended June 30, 2026, as compared to $632 million for the three months ended June 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments.
Current wording
Cost of revenues increased by $65 million, or 8.8%, to $803 million for the three months ended September 30, 2026, as compared to $738 million for the three months ended September 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments.
Previous wording
Cost of revenues increased by $60 million, or 4.8%, to $1,310 million for the six months ended June 30, 2026, as compared to $1,250 million for the six months ended June 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments.
Current wording
Cost of revenues increased by $125 million, or 6.3%, to $2,113 million for the nine months ended September 30, 2026, as compared to $1,988 million for the nine months ended September 30, 2025. The cost of revenues increase was due to the increased revenue contribution realized during the period. This increase was offset in part by improved program performance and favorable program mix across both of our operating segments.
Previous wording
Gross profit increased by $40 million, or 20.3%, to $237 million for the three months ended June 30, 2026 and increased by $71 million, or 18.8%, to $449 million for the six months ended June 30, 2026, as compared to the same periods in the prior year, resulting from the revenue and cost of revenues trends noted above. The gross profit increases, favorable mix and overall program performance drove an expansion of 220 basis points and 230 basis points in our gross margin for the three and six months ended June 30, 2026, respectively.
Current wording
Gross profit increased by $41 million, or 18.5%, to $263 million for the three months ended September 30, 2026 and increased by $112 million, or 18.7%, to $712 million for the nine months ended September 30, 2026, as compared to the same periods in the prior year, resulting from the revenue and cost of revenues trends noted above. The gross profit increases, favorable mix and overall program performance drove an expansion of 160 basis points and 200 basis points in our gross margin for the three and nine months ended September 30, 2026, respectively.
Previous wording
G&A expenses increased by $21 million, or 8.8%, for the six months ended June 30, 2026, as compared to the six months ended June 30, 2025, primarily due to increased IR&D expenditures and costs related to bid and proposal efforts for new contractual pursuits.
Current wording
G&A expenses increased by $19 million, or 15.4%, for the three months ended September 30, 2026, as compared to the three months ended September 30, 2025, primarily due to increased IR&D expenditures, costs related to B&P efforts for new contractual pursuits and expenses incurred to support the proposed acquisition of Raft LLC (see Note 15: Business Acquisitions to the Consolidated Financial Statements for additional information).
Previous wording
G&A expenses increased by $8 million, or 6.6%, for the three months ended June 30, 2026, as compared to the three months ended June 30, 2025, primarily due to increased IR&D expenditures and costs related to bid and proposal efforts for new contractual pursuits.
Current wording
G&A expenses increased by $40 million, or 11.1%, for the nine months ended September 30, 2026, as compared to the nine months ended September 30, 2025, primarily due to increased IR&D expenditures, costs related to B&P efforts for new contractual pursuits and expenses incurred to support the proposed acquisition of Raft LLC.
Previous wording
Amortization of acquired intangible assets was consistent for the three and six months ended June 30, 2026, as compared to the three and six months ended June 30, 2025.
Current wording
Amortization of acquired intangible assets was consistent for the three and nine months ended September 30, 2026, as compared to the three and nine months ended September 30, 2025.
Previous wording
Operating earnings increased by $32 million to $102 million for the three months ended June 30, 2026 and increased by $50 million to $179 million for the six months ended June 30, 2026, as compared to the same periods in the prior year. The increases were driven by the higher gross profit offset in part by the G&A expense increases both noted above.
Current wording
Operating earnings increased by $23 million to $116 million for the three months ended September 30, 2026 and increased by $73 million to $295 million for the nine months ended September 30, 2026, as compared to the same periods in the prior year. The increases were driven by the higher gross profit offset in part by the G&A expense increases both noted above.
Previous wording
Net interest income was $2 million for the three and six months ended June 30, 2026, compared to net interest expense of $2 million and $3 million for the three and six months ended June 30, 2025, respectively. The change is attributed to increased interest income as a result of higher cash balances and reduced interest expense with the repayment and termination of the 2022 Term Loan A in January 2026.
Current wording
Net interest income was $1 million and $3 million for the three and nine months ended September 30, 2026, respectively, compared to net interest expense of $4 million and $7 million for the three and nine months ended September 30, 2025, respectively. The change is attributed to increased interest income and reduced interest expense with the repayment and termination of the 2022 Term Loan A in January 2026.
Previous wording
Other, net increased $3 million for the three and six months ended June 30, 2026, as compared to the same periods in the prior year primarily due to foreign exchange rate impacts.
Current wording
Other, net decreased $1 million and increased $2 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year primarily due to foreign exchange rate impacts.
Previous wording
Earnings before taxes increased by $33 million to $100 million for the three months ended June 30, 2026 and increased by $52 million to $177 million for the six months ended June 30, 2026, as compared to the same periods in the prior year. This was primarily due to the increase in operating earnings and change in net interest income (expense) as noted above.
Current wording
Earnings before taxes increased by $29 million to $116 million for the three months ended September 30, 2026 and increased by $81 million to $293 million for the nine months ended September 30, 2026, as compared to the same periods in the prior year. This was primarily due to the increase in operating earnings and change in net interest income (expense) as noted above.
Previous wording
Income tax provision increased by $1 million and $8 million for the three and six months ended June 30, 2026, respectively, as compared to the same periods in the prior year. This was primarily attributable to an increase in earnings before taxes and changes in our effective tax rate for the period. For the three month period ended June 30, 2026, the income tax provision increase was largely offset by a reduction in our overall effective tax rate for the period. For the six month period ended June 30, 2026 our effective tax rate was largely in line with prior year levels. Our effective tax rate was 14.0% and 16.4% for the three and six months ended June 30, 2026, respectively, compared to 19.4% and 16.8% for the three and six months ended June 30, 2025, respectively.
Current wording
Income tax provision decreased by $14 million and $6 million for the three and nine months ended September 30, 2026, respectively, as compared to the same periods in the prior year. This was primarily attributable to discrete tax benefits in connection with the reversal of unrecognized tax benefits, the purchase of tax credits at a discount to face value and excess tax benefits associated with the vesting of stock-based awards, partially offset by an increase in earnings before taxes. For the three months ended September 30, 2026, the income tax provision decrease was largely attributable to the reduction of unrecognized tax benefits. For the nine months ended September 30, 2026, our effective tax rate was lower due to the discrete items noted above. Our effective tax rate was 0.9% and 10.2% for the three and nine months ended September 30, 2026, respectively, compared to 17.2% and 17.0% for the three and nine months ended September 30, 2025, respectively.
Previous wording
Net earnings increased by $32 million to $86 million for the three months ended June 30, 2026 and increased by $44 million to $148 million for the six months ended June 30, 2026, 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.
Current wording
Net earnings increased by $43 million to $115 million for the three months ended September 30, 2026 and increased by $87 million to $263 million for the nine months ended September 30, 2026, 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
Backlog increased by $421 million to $8,787 million as of June 30, 2026, from $8,366 million as of June 30, 2025. The backlog increase was driven primarily by the receipt of new awards within our IMS segment which realized bookings in excess of revenue for the period.
Current wording
Backlog increased by $712 million to $9,381 million as of September 30, 2026, from $8,669 million as of September 30, 2025. The backlog increase was driven primarily by the receipt of new awards within our IMS segment which realized bookings in excess of revenue for the period.
Previous wording
Bookings for the three months ended June 30, 2026 increased to $1,085 million, as compared to $853 million for the three months ended June 30, 2025. Bookings for the six months ended June 30, 2026 increased to $1,970 million, as compared to $1,844 million for the six months ended June 30, 2025. The increase in new orders for the six months ended June 30, 2026 was driven within our IMS segment and offset in part by a reduction in new orders within our ASC segment. See“—Review of Operating Segments” below for more detail.
Current wording
Bookings for the three months ended September 30, 2026 increased to $1,639 million, as compared to $1,307 million for the three months ended September 30, 2025. Bookings for the nine months ended September 30, 2026 increased to $3,609 million, as compared to $3,151 million for the nine months ended September 30, 2025. The increase in new orders for the nine months ended September 30, 2026 was driven by bookings within our IMS segment. See“—Review of Operating Segments” below for more detail.
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 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, 2025, and Part I, Item 2,“Management’s Discussion and Analysis of Financial
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, including from government shutdowns, 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, 2025, 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 and current and potential impacts on our business.
Previous wording
International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 12% and 8% of our revenue for the six months ended June 30, 2026 and 2025, respectively. The increase in international sales is due in part to the global demand for our tactical radars used in counter drone and short-range air defense applications.
Current wording
International revenue, including foreign military sales, foreign military financing, and direct commercial sales, accounted for approximately 11% and 9% of our revenue for the nine months ended September 30, 2026 and 2025, respectively. The increase in international sales is due in part to the global demand for our tactical radars used in counter drone and short-range air defense applications.
Previous wording
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
Our sales 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 six months ended June 30, 2026.
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 nine months ended September 30, 2026.
Previous wording
The ASC segment reported revenue of $587 million for the three months ended June 30, 2026, an increase of 8.3%, or $45 million, from the three months ended June 30, 2025. The revenue increase is attributed to our advanced sensing and tactical radars used in space based, force protection and counter drone applications, reflecting execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment.
Current wording
The ASC segment reported revenue of $659 million for the three months ended September 30, 2026, an increase of 13.6%, or $79 million, from the three months ended September 30, 2025. The revenue increase is attributed to increased demand for our tactical radars, advanced sensing used in space-based applications and the overall execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment.
Previous wording
The ASC segment reported revenue of $1,146 million for the six months ended June 30, 2026, an increase of 8.8%, or $93 million, from the six months ended June 30, 2025. The revenue increase is attributed to our advanced sensing and tactical radars used in space based, force protection and counter drone applications, reflecting execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment.
Current wording
The ASC segment reported revenue of $1,805 million for the nine months ended September 30, 2026, an increase of 10.5%, or $172 million, from the nine months ended September 30, 2025. The revenue increase is attributed to our tactical radars, advanced sensing used in space-based applications and the overall execution of our backlog programs coupled with increased customer demand driven by the elevated global threat environment.
Previous wording
For the three months ended June 30, 2026, operating earnings increased by $12 million, or 32.4%, to $49 million for the three months ended June 30, 2026, from $37 million for the three months ended June 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 8.3% for the three months ended June 30, 2026, compared to the 6.8% realized during the three months ended June 30, 2025.
Current wording
Operating earnings increased by $12 million, or 26.7%, to $57 million for the three months ended September 30, 2026, from $45 million for the three months ended September 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 8.6% for the three months ended September 30, 2026, compared to the 7.8% realized during the three months ended September 30, 2025.
Previous wording
For the six months ended June 30, 2026, operating earnings increased by $27 million, or 43.5%, to $89 million for the six months ended June 30, 2026, from $62 million for the six months ended June 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 7.8% for the six months ended June 30, 2026, compared to the 5.9% realized during the six months ended June 30, 2025.
Current wording
Operating earnings increased by $39 million, or 36.4%, to $146 million for the nine months ended September 30, 2026, from $107 million for the nine months ended September 30, 2025. The increase was driven by increased revenue contribution, favorable program mix and better program execution. The net of these impacts drove operating margin to 8.1% for the nine months ended September 30, 2026, compared to the 6.6% realized during the nine months ended September 30, 2025.
Previous wording
For the three months ended June 30, 2026, bookings increased $132 million, or 23.6%, from the three months ended June 30, 2025 to $691 million. The increase in new awards is largely attributed to increased orders for our tactical radar and infrared sensing programs. This was offset in part by a reduction in naval computing awards realized during the period.
Current wording
For the three months ended September 30, 2026, bookings increased $260 million, or 34.3%, from the three months ended September 30, 2025 to $1,017 million. The increase in new awards is largely attributed to increased orders for our tactical radars and aircraft protection systems. This was offset in part by a reduction in infrared sensing awards realized during the period.
Previous wording
For the six months ended June 30, 2026, bookings decreased $108 million, or 8.8%, from the six months ended June 30, 2025 to $1,120 million. The decrease in new awards is largely attributed to a large multi-year award received in the prior year for next generation ground vehicle sensing. This reduction was offset in part by demand for our tactical radar sensor programs.
Current wording
For the nine months ended September 30, 2026, bookings increased $152 million, or 7.7%, from the nine months ended September 30, 2025 to $2,137 million. The increase is driven by demand for our tactical radar programs offset in part by a large multi-year award received in the prior year for next generation ground vehicle sensing.
Previous wording
IMS segment revenue increased by $43 million, or 14.8%, to $333 million for the three months ended June 30, 2026, from $290 million for the three months ended June 30, 2025, which is attributed to increased revenue generated from our naval power and force protection related programs during the period.
Current wording
IMS segment revenue increased by $45 million, or 11.7%, to $428 million for the three months ended September 30, 2026, from $383 million for the three months ended September 30, 2025, which is attributed to increased revenue generated from our naval power related programs during the period.
Previous wording
IMS segment revenue increased by $47 million, or 8.1%, to $628 million for the six months ended June 30, 2026, from $581 million for the six months ended June 30, 2025, which is attributed to increased revenue generated from our naval power programs.
Current wording
IMS segment revenue increased by $92 million, or 9.5%, to $1,056 million for the nine months ended September 30, 2026, from $964 million for the nine months ended September 30, 2025, which is attributed to increased revenue generated from our naval power programs.
Previous wording
For the three months ended June 30, 2026, operating earnings increased by $20 million, or 60.6%, to $53 million for the three months ended June 30, 2026, from $33 million for the three months ended June 30, 2025. The increase for the period is attributed to continued program improvement within both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 15.9%, compared to the 11.4% realized during the three months ended June 30, 2025.
Current wording
Operating earnings increased by $16 million, or 33.3%, to $64 million for the three months ended September 30, 2026, from $48 million for the three months ended September 30, 2025. The increase for the period is attributed to continued program improvement within both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 15.0%, compared to the 12.5% realized during the three months ended September 30, 2025.
Previous wording
For the six months ended June 30, 2026, operating earnings increased by $23 million, or 34.3%, to $90 million for the six months ended June 30, 2026, from $67 million for the six months ended June 30, 2025. The increase for the period is attributed to improved performance on both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 14.3%, compared to the 11.5% realized during the six months ended June 30, 2025.
Current wording
Operating earnings increased by $39 million, or 33.9%, to $154 million for the nine months ended September 30, 2026, from $115 million for the nine months ended September 30, 2025. The increase for the period is attributed to improved performance on both land and naval programs coupled with the benefits of operational leverage generated from the increased volume noted above, resulting in a net operating margin increase to 14.6%, compared to the 11.9% realized during the nine months ended September 30, 2025.
Previous wording
For the three months ended June 30, 2026, bookings increased by $100 million, or 34.0%, from the three months ended June 30, 2025 to $394 million. The increase for the three months ended June 30, 2026 is largely attributed to increased demand for our force protection efforts as well as funding received for our naval power and propulsion efforts.
Current wording
For the three months ended September 30, 2026, bookings increased by $72 million, or 13.1%, from the three months ended September 30, 2025 to $622 million. The increase for the three months ended September 30, 2026 is largely attributed to funding received for our naval power and propulsion efforts.
Previous wording
For the six months ended June 30, 2026, bookings increased by $234 million, or 38.0%, from the six months ended June 30, 2025 to $850 million. The increase for the six months ended June 30, 2026 is largely attributed to funding received for our naval power and propulsion efforts as well as increased demand for our force protection efforts.
Current wording
For the nine months ended September 30, 2026, bookings increased by $306 million, or 26.2%, from the nine months ended September 30, 2025 to $1,472 million. The increase for the nine months ended September 30, 2026 is largely attributed to funding received for our naval power and propulsion efforts.
Previous wording
We endeavor to ensure the most efficient conversion of operating earnings 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, 2026, was $270 million compared to $647 million as of December 31, 2025.
Current wording
We endeavor to ensure the most efficient conversion of operating earnings 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 September 30, 2026, was $294 million compared to $647 million as of December 31, 2025.
Showing the first 40 of 43 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
See“—Review of Operating Segments” below for more detail.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.