DRS - Earnings call 4 2022 | Leonardo DRS, Inc.

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Operator

Ladies and gentlemen, good day, and welcome to Leonardo DRS Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Steve Vather, Vice President of Investor Relations and Corporate Finance. Please go ahead.

Steve Vather

Good morning and welcome everyone. Thanks for participating on today's quarterly earnings conference call, on our first call since returning to the public markets. Bill CFO. Chairman are Mike CEO; today our Dippold, me Lynn, and our and With discuss strategy, will They our forward results outlook. and operational highlights, financial

portion during you and is the presentation. involve earnings guarantees We may future Management company. such you call and being of difficult future trends make are caution on anticipated regarding supplemental and Investor those Today's forward-looking future differ projected also statements anticipated webcast release and performance website results call not also will the of in statements statements to performance Relations of variety where may the that a find the factors. the risks from Actual future the that uncertainties of forward-looking are predict. to due materially events,

discussion forward-looking these our on filings. We please refer full XX-K our update a to statements the obligation factors, of any other to and risk of made undertake SEC Form latest call. For this no

management or non-GAAP These non-GAAP call, also GAAP investors. not evaluated be this discuss should a for which isolation substitute in financial we provide performance for information measures will During as believe useful measures. measures,

of find this in time, discussed earnings measures You a call the this pleasure the it to release. on At to my Bill? Bill. can our is turn reconciliation over non-GAAP call

William Lynn

listening And behalf you in to your for of of on Steve. all interest Thanks, DRS. our want X,XXX-plus I thank employees, Leonardo

like I context Before the provide I markets. for to talk reentry would background to recent public on about performing, is business our DRS some our in how

shape business differentiation the balance and markets. worked strength by decade I'm today, our over of position growth alignment the excited market and in Let about the me last to to where the that We increasing begin future aggressively prospects. portfolio, driving is by our saying building DRS

our of have earned course we XX-year first. reputation of our putting history, customers the a Over

translates to XX% the cultivated approximately the our and a base customer international is diverse Navy, that with we commercial customers. coming broad international coming other the the XX% DoD a set XX% XX% and result, Army, the customers remaining with and from relationships allies. from long-standing As DoD from across balanced with What and from Force a of have of Air revenue

a portfolio domains. war-fighting have We across rich than great no more cuts diversity that of with representing We program our program all program enjoy XX% revenue.

largest for the submarine. The program and this system DRS our priority Our aggregate of content the electric provides approaches program propulsion power important XX% for revenue. Columbia-class

great a business. to also stability from approach platform-agnostic our We enjoyed

upgrade platforms adept We them are to new platforms. best-of-breed using for equally legacy at technologies or providing our

key We the have sensing, around power focused and electric computing, business protection propulsion. four purposefully network technology force areas: advanced and

these positions We have technology market-leading built across areas.

Security sole XX% a of As and National business a the our result, of Customers source to is over important on basis, which criticality DRS missions. their underscores performed

evolved to as systems critical our X/X Additionally, which now supply integrator, but business of not only a over business. we defense technology our have also serve represents

us allows national Our schedules. execution affordable core agile meet can agility on on needs and expedited and We exceed security centered of deliver efficient and the this with to superior being philosophy technology customers. innovative. our Coupling operating remains innovations performance

by concepts And joint the strategic our divestitures business move of for dynamic value business me on and as accelerating year transformative for accomplishments venture. discuss strengths. services global included both was advanced shareholder in executed a we position the Let the and our of RADA. Acoustics in majority year. our XXXX actions to SatCom several monetization DRS GES, the to strategic long-term These the initiatives strategic finally, stake the technology our growth focusing acquisition unlock core called of

paving growing technology to we of strengthened radar and vision position advanced of capabilities. acquisition, RADA the in portfolio the the is of result These our through advance capabilities integrated protection sensing. addition a expanded As path our our the market force

an gives a action opportunity listing, technology invaluable Furthermore, listing our conjunction reinforce with the additions public with Dr. merger, Salzman, also welcome Brothers of to gained Board our appointment shareholder transaction and today's public U.S.-focused a Reggie DRS. Mr. are for mid-tier scarcity to we growing an value. in experience In public defense as to insights we both of wealth their the will investors company, and all-stock access markets. by RADA took Board This and Eric the be structuring expertise, a premier to

operations. Shifting to now

We strong year. we shipment first several motor throughout acceptance milestones. In XXXX, momentum of the achieved Propulsion for completed and the our main Columbia-class we submarine. Power In the business factory the demonstrate continue unit the across key testing propulsion business, production to Electric our and of

Second, a and system for billion. our boat over valued in propulsion electric XXXX late we secured contract multi at $X power

to we propulsion and of domestically platforms, both Lastly, internationally. continue for shape new long-term for growth opportunities this technology

sensors In advanced and through sensing, we domains. proliferating market through our into development new expanding are our next-generation leadership sensor

market across resolution and sensing significantly driving raising by the definition [spectral are the increase expanding to high We bar debt]. to are capability

more We smaller and capabilities evolve option to rigid with these platforms are demanding for pushing power a tremendous requirements, for weight also compelling making size, sensing sensing capabilities requirements. our sensors

emerge sensing position of we existing which customers. vehicle moving payload In sensor ground a third-generation a a secured sensing. on result program, we the As LEO source the uncooled are as sole part additional ground we sensing seeing across and innovation an strong capabilities satellite. signals XXXX, market, from successfully are position we our leadership deployed our demand Furthermore, on a our in of domains sensing cements as new into with

market, capabilities sensing applications expanding into Additionally, differentiated sea ELINT and warfare for unmanned technology new and the electronic land markets. air, we deploying receiver our are introducing systems, in mobile

several we ways. innovation In in network are computing, injecting

enable are inserting in our ability we into First, capabilities timing position, navigation GPS-denied assured platforms of environments. operate and systems the to

the are boost integrated the supply edge. capabilities strategy cyber also are assurance as our from resilience tactical more to as threats the autonomous two grow our of to compute we chain products and initiatives compute We cyber capabilities and sensing to network progressing empower continuously These sensing. risks continue the propelling

are we force pleased growth of our business. Lastly, with the multi-domain protection

to are UAS being capabilities protect are used globally that our actively today. counter We lives honored

our infrared-based enables rotary to countermeasures aircraft operating initial Additionally, capability. protect achieved that wing has technology

are well R&D protection These deep areas of integrated to force sensing and partnerships as as the next-generation resulting customers in with in develop solutions successes computing.

Our commitment our to to agility, steadfast to foundation and the security provide technologies of best-of-breed drive national are customers success.

not year we While XXXX, achievements strategic was and had its many challenges. in operational the without

these incredibly lining has is there an Our With supply the pre-pandemic stabilized. it last But constraints largely the ahead through battled labor and respect with norms. to chain, long to managed factors in that certainly elevated silver it a year team business and XXXX. contending is chain, with dealt same supply still before are road inflation challenging returns

companies, from many electronic and long exist we lead times heard until components, As XXXX. still not expect do occur for to you have recovery a other broader

we resilient on chain in supply more making working ways. As several been a focused with our closely result, by suppliers have

are and to the providing where driving efficiency. rooting orders increased we left possible. into enhance to are volume quality are We them with demand, greater program out And moving visibility earlier issues execution and we engineering

manufacturing for qualified The labor. remains constrained. talent and market to engineering Moving

delivering retaining manufacturing for talent on focus and and to who engineering our critical are base, to growing our continue customers. We

a of culture labor remains While in our we as that are differentiation in operating market, point a market. tough

And we the to Our Furthermore, DRS. investing mission such, most our offerings. drive embrace we innovation in are have. asset we agility and employees expanding recognize and valuable as enhancing focus, of to talent our are that benefit continues

to Moving inflation.

impacts labor experienced supply to inflation. increased incorporating forward addition by chain availability, In In labor working impacts we costs those of pricing. of the impact have higher XXXX, costs and are input into we and the delays and also offset the felt to our material

mentioned also earlier, helped of chain. the restore us to actions have I of we levers our manage several costs. As supply those have pulled Many health

for Additionally, our keen we opportunities with focus and on business efficiencies throughput are a routinely evaluating utilization. optimizing across

for both challenging and excelled environment, year. backlog We Despite record the and quarter year achieved XX% book-to-bill capturing the the X.X full $X.X solid at ratio by overall, to We for delivered backlog. grew and a we growing the billion. bookings a results

due the declined organically, supply For revenue, disruptions single was earlier. I digits continued chain that mostly to full we discussed year which low

continued for up to which EBITDA we adjusted margins, adjusted points were EBITDA year. basis XX.X% expand drive However, growth to the and XXX

expansion, profit for future well bottom and The fell diluted adjusted CapEx growth. stronger to results. investments net profitability as in EPS R&D as $XXX the the as invested with Even million earnings line we with solid

Lastly, free remain lighter cycles cash full for year due elongated supply than chain. was the challenging cash as flow our conversion the to expectations

strong request. Moving for business as evidenced FY healthy environment. Demand to the and 'XX 'XX enacted remain the by the appropriations FY and the budget market drivers

budget modernization countering for well-funded is We closely Furthermore, XX% presents visibility solid have overwhelming levels and near-peer our growth 'XX customers FY threats. Our support is and continued increase to in to to that believe aligned opportunities investment bipartisan across growing the and business. funding portfolio there the priorities.

spanning evolving are elevated threat environments global The threats, requirements. domains rapidly and, and frankly, remain vectors shaping quite customer the

the critical tailwind of Additionally, demand. security to DRS deliver technologies and every and platforms aspect touches and This to density well national propelling capabilities enduring digitization our is increasing is positioned of business. electronics meet continued and needs.

value on to we excellence a delivering operate continue for environment in customers investors we on and beyond. fronts, execution by focused and XXXX While operational in are and dynamic multiple on

Mike. turn to me now Let the over call

Michael Dippold

our shape business team we thanks dedication Thanks, the their and Bill. as growth. and for XXXX echo my incredible I want to for entire in the for future to efforts deliver customers

for results XXXX year largely down single on on basis decline which line the mid-single expectations fourth dynamic represented were organic for Revenue flat but basis, quarter, an with full given organically. $X.X the up Revenue was and in quarter year fourth was low digits. reported XXXX, a billion, million operating X% $XXX was Our our from environment. digits but full the a

the Two revenue factors annual drove decline.

of the the the acquisition, our to and of in differences refer a which GES timing contribution headwind. versus net I the RADA will divestiture business impact magnitude was as our First, divestiture

particularly to constrained availability the continuing of electronic with challenges, supply chain the growth. and components timing Second, respect

sensing computing, year XXXX, chain which Mission we IMS, compare in the due revenues to in our against and segment the On segment, full we the a saw strong our growth At and slight revenues somewhat capabilities throughout our tough due and to a reduction in to revenue trends. advanced sensing demand for force demand and our power impact net Quarterly Moving ASC segment disruptions Systems capabilities, year was a QX the RADA our programmatic from supply declined to segment, as our for December. segment. the the year. however, a divestiture greater the contribute financials in divestiture electric IMS impact drove Integrated due quarter of the Full and annual in elevated to as saw impact the ASC propulsion revenues bore in started to decline protection the month basis, increased timing. net

expansion of growth Adjusted EBITDA. million year-over-year $XXX for Resulting for was $XXX XX.X% XX% adjusted for an and X%, and expansion and the the million stronger EBITDA and drove adjusted respectively. to of and We outweighed the were quarter inflation. quarter and program year, of Now the to both EBITDA the year XX.X% XXX prior year, full margins basis for impact quarter volume for fourth as full the XXX and as the significantly respectively, representing points, the efficiencies growth year. lower margin compared

Moving volumes lower volume EBITDA IMS the execution. due slightly expanded Quarterly to lower better on the and program adjusted but ASC increased volume to the due impact, margins program and on quarter across expanded declined trends. margins EBITDA and segment to declined segment better largely margins segment due divestiture Full to adjusted the programmatic adjusted performance and year segment the EBITDA timing. net ASC strong segment. for the

For and were particularly margins segment program on up Columbia adjusted due to profitability, full year, improved program. class the EBITDA IMS the

in XX% X% the the and year. earnings diluted increased earnings was of XXX% share line Net by $XX as all-stock benefited prior count and the Both X%, of XXX% result divestitures. for to diluted on earnings to EPS $XXX versus prior bottom as versus with dispositions The impacted diluted quarter fourth up to our with in expectations a from the significant year. net for on the EPS gain year for line $XX Now and result fourth and Both Adjusted growth the respectively, was were on up the adjusted full year net million year. million increase full were Full quarter of EPS $XXX our the million an basis, the net up and full gain year. was RADA. our for the represented adjusted combination metrics. and were a the XX% a it million

less as the full Moving resulted Free cash year to was flow cash conversion was supply free strong million the for reflecting collections flow. cash $XX efficiency. $XXX million fourth challenges for in chain but quarter,

said, when provides As flexibility. have earnings of free to flow we revert sheet moving XXX. That an excluding stabilize the forward, capital of we to net solid Section the balance for cash impact supply conversion should exiting which chain, adjusted attractive XX% XXXX, deployment we

Our capital deployment focused is growth. strategy on

with be and areas. technology pursuing our will our and delivering M&A integration our acquisition completing thesis. In focused enhances near further selective that We term, success X-core efforts will energy prudent RADA be on in positioning our of on focused against the the

guidance. to Now

organic execute on XXXX to billion expect and record we We deliver growth see our in steady backlog as $X.X for of demand our technologies.

market an guidance. into growth a to factors lighter anticipate and on total this up with global the of we level little into color timing. be on bit we the the previously the $X.X prior account, have between modeling year. stair-step Revenue X.X% to remains on execute with all we being and well flat million as revenues throughout for following discussed. between on the initiating low QX basis the the net we This To what business. persist implies revenues The the labor inflation is clear, building as However, billion $X.X organic on more billion. to chain, cadence Compared expecting these impact to with a quarterly divestiture comparable following a I supply [lighter] by To basis, tough consistent the driven and year we quarterly range and as recurring QX, XXXX are Taking to we is trends. but year, is will this assist provide in XXXX, X% intend trends. revenue with to programmatic X%, and a are don't provide a the mid $XXX granularity as basis constraints

Moving to adjusted EBITDA.

by between labor than expenses, and are be be and for that expecting expected development EBITDA million incremental inflation. material steeper are as increased $XXX class be input program well to cost stemming will costs contract and revenue. public efforts of million negotiations have $XX of related that in profitability to fixed profit for hampered We company internal XXXX. absorption. of and cadence will million XXXX. occurred driver our additionally, lower repeat The will The we 'XX. quarterly recognized not adjusted flat revenue that for a volume follow-on due completing increased QX related of And to We as $XXX EBITDA research QX relatively QX from stepped-up and margins program in result XXXX costs a adjusted Columbia slightly in as

Now such in $X.XX calling metric to tax calculation for adjusted to our and A to complex. The and results we we and year also XXXX, are to $X.XX mirror public comparisons of listing have we diluted the adjustments prospectively is are EPS. EBITDA, Please share for a tax both and and similar that make methodology a XXXX XX% rate adjusted is the nonoperational share. in count divestitures, effect to the for per to that made changed fully diluted the of prior embedded XXX.X adjustments. quite applying range to guidance, we shares. this We note recognize are million acquisitions assuming the

That said, move should become of numbers the apparent. clearer as XXXX, and the and become the through we business comparisons more strength

on focused performance expansion. We long-term goal the executing delivering foundation margin year financial for the the to of on accelerating in set exiting with are and XXXX growth

to let Now turn the over call Bill. me back

William Lynn

Mike. Thanks,

every close determination drives me people. is Let The by talented they passion, forward. ingenuity DRS and our thanking day what bring

critical national to We that entrusted our are us have security support honored customers missions. their

expansion. result to long-term and in customer technology, our profit positioned portfolio shareholder creation. margin execution sustainable deliver that will of is believe We strong strategy value rigorous growth and program Our well

we announce we're event conducting your learn later year. Day our in be will this hope questions. take I'm to vision. to pleased a will will strategic on November to Lastly, this This York. XX be of that, Investor this for our that us more year, and you our business With New about We join ready opportunity great

Operator

RW [Operator comes of line the Peter Our first question Arment Baird. Instructions] from with

Peter Arment

Yes. for time. Bill, Thanks your Mike, Steve.

you to for this organic. you've you of and the just budget environment. puts about behind seen X.X% So just talk how about off Bill, the and Maybe range X% revenues, guess, little think a takes bit kind of long-term what outlook on the I growth could in then

William Lynn

Sure, Peter. Sure.

points long-term be growth, that's obviously, revenue two that's On of budget, I think, of our defense made. think the to the is, One base. I it's the the engine growth, XX%

in building and XX% trends a 'XX strong that. strong underlying the think growth appropriation I think are I a proposal in President defense put on Biden's the forward

is Congress to to think I again add that. likely

think to described, we're our because than -- whole. we're we've a and move budget than base And is as grow X-core budget up. markets, the continues we're which our So position able as mid-tier, faster markets we target as of whole that all a that positioned those underlying stronger in to the a

we holding think we to simply overall, somewhat market. So the serve, to able than be grow faster be should [buy] able

Peter Arment

for we the regarding year. EBITDA at parts talk some the of for know just lot into can should we impacting the for longer-term XX.X% kind I of a the think if the implies get -- when teens. a see of there's Mike, and expansion? low you XX.X% expect you've about And maybe play I talked on to midpoint year, this margins kind chain, to Maybe moving supply Okay. adjusted finished but about know about How you that? the should

Michael Dippold

that. I'll Peter. take Sure,

XXXX, kind with inflation Really, price to fixed an looking you're program seeing our margins going as what is to portfolio. hit at the a the we're First, of that's XXXX flatter of impact

percentage from future more growth. that's the an a revenue to be looking invest perspective going little IRAD to we're maintain for a as to a So of Also, foundation headwind.

XXXX. the kind margins So of in flat that's a holding little

a change. XXXX couple of to out and beyond, things Looking

to are that pretty well environment mind. through cycle contracts, be those price in of the bidding of going macro kind new we the our our program refreshing and inflationary base and First is fixed with

to having And that's all also help. that of So is more going as then on to importantly units, -- the be tailwind forward we Columbia class from should production margins the a prospectively. to revenue production newly negotiated also, and nice maybe generated the move

on So the towards expansion peers. feel future we confident still margin

Peter Arment

you your continuing just just Obviously, And a your had on CRs years, just that impact factored Bill, into Okay. we've year-end. the how the at thoughts lot of lastly, over resolution guidance? but

William Lynn

Yes, sure, exceptional last It but to year a an the only fact they're be one Peter. Obviously, I not in aren't have CRs a life. would of great, CR, XX. think

So we've it -- towards does is that. year. targets us to it the But backload our our had what to adapt. the That end does volume of able tends we've been to with achieve to

I is going and going to going success this any to We're see so be different. don't backloaded. year And think it's be to

Operator

next Robert Our Stallard question comes Vertical Partners. with Research from

Robert Stallard

much. so Thanks

I think I'll first Mike. start of all with

regard wondering the would if with these question I to margins what like Peter's had cost on inflation. if to be year-on-year size margin. regard issues? the negative been Basically, up with what to you have possibly follow to impact we can Just expected was is

Michael Dippold

Sure.

to the the inflation we being inflation, see as So continue into a headwind us.

that Given XX point price is that to going our XX a kind portfolio, type on basis to see can range, we you that in of impact see that, of magnitude. headwind fixed be

Robert Stallard

in other there in then so expecting of And you expense portion that the are is R&D, what XXXX? on increase sort of that top of scale Okay.

Michael Dippold

increase mid-X.X% kind the targeted sales at that. of R&D and to of slightly a range. coming we always the little percentage our higher in range of sales of even a where were to maybe north X.X% we've of kind as year So That's this than kind of

kind to expect the that X.X% up sales. of to X.X% of I So to move curve

Robert Stallard

demand defense Bill. either DRS military for then out this if change And allies. a its or see going through U.S. in starting I one caused the you're there has environment for Okay. to equipment. wondering Obviously, Ukraine was indirectly flow secondly, maybe directly into the or to

William Lynn

it Rob, directly Yes. We ways, indirectly. see both and both

have the the that gone then has been for into them inventory on, U.S. urgency sales They've some Ukraine. of our sent intended of we've that things the equipment to pulled and adds the all, been to the the be had of has backlog U.S. because impact sales -- getting on which our -- backlog. fight, from into have tended we relatively but more Ukraine, they'll of modest, backfilled to U.S. them later First

the At now defense. So revenue a it's to the I moving -- see more are on we're X% nations, for is a European punch same increased target achieve starting to GDP the of less side and the demand nations of NATO time, of backlog. think to that NATO of for punch more

home being a defense Leonardo, for of us. a as game are European part sales And

there. overall an we So probably most accelerant defense I finally, U.S. And Ukraine see think spending. been opportunity importantly, of has

defense I put under floor a think U.S. it's spending.

I And U.S. Department, on 'XX mentioning for 'XX. our was important revenue and think business. increases vast the continue. that's I going to impact Ukraine from think it's partially of Defense both And majority Peter the that's our responsible the most comes since I to of the in probably

Robert Stallard

Okay.

going added into through to system? this backlog, Is So flow revenue? XX take to to do expect is this the to the when months you but roughly convert

William Lynn

'XX You'll more, think in incrementally the 'XX coming in, see and in kind of but I 'XX. bubble 'XX it's hits is

Robert Stallard

just government. with in I potential the was the whether this on finally there. position changing from change have impact things? this potentially obviously sort new DRS, then could been some of And talk CEO could Italian wondering Europe you mentioned There's about me, Leonardo what Okay.

William Lynn

cycle. normal Board. operate actually This it's appointment The goes We mean, the called what's cycle. appointment independent appointment I a is Leonardo an now proxy cycle. it's normal public X-year the in and on a

we changes too that these have really don't kinds structure separate we in much a operate have us. of So impact on and

Operator

Moeller Next comes question Austin Genuity. Canaccord from with

Austin Moeller

sort components the fall are of at [biggest you're times nitrogen] that some electronic for now looking right you my the And particular lead components? chain, hardware? Just the quantify question on supply first can in of what

William Lynn

to And to mean, gone XX, said, of go lead let now here those see we've up, 'XX. threefold. I'm not stabilization time. going I things specifics, but or 'XX guidance going probably lead those in gone Mike to improvement have going to we've the that we're times, our but we're times assumption days some in in XX lead two as X-month into until from cases, see our

So giving and revenue is -- chain using taking into buys then that itself lock greater fixed increased supply Mike on to contracts basing think we're our our left, suppliers norms. let we're not little to going projection steps we backstop things our visibility return pre-pandemic let moving our volume projections We're the stabilize, me price more you to bit But give a detail. to in.

Michael Dippold

Yes, Austin.

So I think industry what times expense and lead we're the seeing and is we originally what in FPGAs. disrupting the circuit the kind saw longer really having was of on early higher XXXX components, the the cards

the, I bit expense And resistors, as call components. think less of connectors. bottleneck a now higher the we're tends type be of seeing cheaper, the parts, little less we right migration kind we're that tech, on stabilization of to seeing more of little expensive the the what saw some to higher in availability your them is a I now

have we're as stabilization. to what for, Bill So hoping to is mentioned, continue

the think we we've going that have allow that to suppliers. assets One going into is stabilization and predictable that's visibility the to we visibility that's procurement, is to allow us to And us do injected allow of to the that that advanced growth. give business to our for that backlog

Austin Moeller

the specific program program either KDDX think SSNX next you do have year? updates on next-generation Korean or about then sub the any And as the attack Great. you

William Lynn

have we're in propulsion Columbia-class propose further the little really to on stages that. submarine that. the for but is don't And We the that of to used decision-making update technology systems phase. steps taking SSNX, on technology, out, competition bit the in our in the any we're early is the be SSNX electric KDDX a The

Operator

Partners. follow-up with Vertical And I Robert Stallard have Research a with

Robert Stallard

I if of you wondering couple give the Bill, update us could that's a integration Just on how an from going. more and was me. RADA

William Lynn

Great The going question. integration Rob. is well. Thanks,

well. to at I It's say, year. the at midsummer of through completed, expect November, closed it -- midway or I going would started the when -- we'll have by think end we the so we we

clean really see basically And had other think that an perimeter. an pleased sensing future, we or that really -- a lines our of by with line It all our was fairly so We it X having picture sensors are the it single and of Radar adding Israeli we Radar as strengthens sensor computing bringing. that And missing. taking them that and our business, protection it we us technology bringing That's our our positions of offerings. as And subsidiary one which into in of think will an adding term, the as DRS. with the business we're Xth We the very structure. we're feel is RADA longer force that really and were we capabilities, inside of we their operators and inputs the inputs, individual into for platform commanders. as vehicle a a go integrating integration operate well

Robert Stallard

industry defense risk your supply on of chain to getting the here? on by the largest entire you appears But be this it. track. is affected Columbia it That's the and would and And from say forward Columbia-class, is like appears then all being great. labor Okay. rest going program, delayed of What one

William Lynn

Rob. is the One budgets change. do change, think parts question, that I are priorities government the two of Well, there

of I low. that the is risk extraordinarily think

I think is the our of this It submarine-based is the the budget. deterrent program the core in nuclear premier is deterrent.

I no priority think government. there's higher the for

imagine would cause this can't I a way in budget shift would So in program. delays priorities any that

execution be issues there technology would issues. be, would or other The

completing I think the where we're those first program. development on delivered challenges few we've now a ago, of had our years set, we where the the program, part

the to portion past. -- of that retired our kinds program likelihood is of completely delays going haven't the most it risk those in the is it's we're the So now of you see all not in --

Michael Dippold

out said we commitment received showing point sure in on just this and contract, that's increasing to making we what's time. this like can the execute program the I'd Rob, is And this why to Bill backlog. That's is multi-boat and addition to that what

Robert Stallard

more And detail Yes. And in for final idea expense if be XXXX? on expectation. the great. you. a an you you're cash That just the then, could worn cover us flow on what would of was any give also, give expecting interest Mike, us I you can

Michael Dippold

Yes.

new went So interest of we did we up kind when set from capital a standpoint, expense structure an public.

So million standpoint, allows pretty revolver. a XXX that $XXX at loan a it points. term basis A sales and From pricing for us favorable a plus to and comprises of a rate have million pricing $XXX kind XXX of to

our saw the year, Given reduction. slight about be to yield similar I linearity, cash interest the we a would what maybe think this

flow. of we supply because Moving in balance be cash On you kind remind on the XXX capitalization, saw is million to excluding second will do But able the headwind the sheet made conversion of chain expect Rob. that we what over that the earnings. We of to million number. net the the the tax to of for R&D $XX Section return your investments $XX to impact stabilization conversion terms XX% of that the neighborhood that, in be question, adjusted that of to to I'll and and

Operator

to the you Thank I call back now turn like Steve questions. for to your for would remarks. over closing Vather

Steve Vather

for morning Thank this you interest your your and in DRS. all time

forward don't soon. or have great if Have a you follow-up questions, all course, e-mail hesitate me. call speaking with to look to day. please Of you We of

Operator

This concludes call. conference today's

Thank disconnect. you wonderful now Everyone, a for have day. You your may participation.

Leonardo DRS (DRS) 28 Mar 232022 Q4 Earnings call transcript