Free cash flow remains highly volatile due to milestone-based contract cycles, evidenced by FCF margins that swung from a negative 40% in 2024Q1 to a peak of 53.7% in 2023Q4.
| Cash from Operations | 504M | 366M | 271M | 205M | 33M | 178M | 125M | 157M | 211.46M | 195.24M | 157.06M |
| Operating CF Margin % | - | 10.03% | 8.38% | 7.25% | 1.23% | 6.18% | 4.5% | 5.78% | 6.42% | 6.92% | 9.05% |
| Operating CF Growth % | -5.06% | 35.06% | 32.2% | 521.21% | -81.46% | 42.4% | -20.38% | -25.75% | 8.31% | 24.3% | - |
| Net Income | 290M | 278M | 213M | 168M | 405M | 154M | 85M | 75M | 165.77M | 127.06M | 81.49M |
| Depreciation & Amortization | 70M | 93M | 91M | 85M | 65M | 58M | 53M | 51M | 78.19M | 76.66M | 48.98M |
| Stock-Based Compensation | 24M | 32M | 22M | 17M | 5M | 0 | 0 | 0 | 0 | 0 | 0 |
| Deferred Taxes | 27M | 28M | 23M | -52M | -6M | 31M | 30M | 12M | 17.2M | 10.62M | 15.45M |
| Other Non-Cash Items | 156M | 0 | 1M | 1M | -354M | 0 | 3M | 3M | 254.98M | 255.86M | 122.08M |
| Working Capital Changes | -1M | -65M | -79M | -14M | -82M | -65M | -46M | 16M | -60.51M | -37.67M | 1.22M |
| Change in Receivables | -177M | -140M | -102M | 15M | -1M | -54M | -35M | 9M | -38.64M | -100.8M | -28.55M |
| Change in Inventory | 33M | 6M | -29M | -10M | -33M | 42M | -38M | -36M | -104.6M | -51.28M | -36.66M |
| Change in Payables | 47M | -79M | 15M | -59M | -14M | 1M | -58M | 156M | 55.44M | 68.11M | 51.01M |
| Cash from Investing | -122M | -154M | -84M | -59M | 436M | 39M | -70M | -151M | -76.84M | -69.92M | -1.47B |
| Capital Expenditures | -107M | -139M | -85M | -60M | -65M | -60M | -56M | -55M | -71.31M | -55.91M | -43.19M |
| CapEx % of Revenue | 2.9% | 3.81% | 2.63% | 2.12% | 2.41% | 2.08% | 2.02% | 2.03% | 2.16% | 1.98% | 2.49% |
| Acquisitions | 1M | 0 | 0 | 0 | 501M | -14M | 5M | -4M | -5.97M | -16.74M | -1.42B |
| Investments | - | - | - | - | - | - | - | - | - | - | - |
| Other Investing | -16M | 0 | 1M | 1M | 0 | 55M | -10M | -92M | 441K | 2.73M | 62K |
| Cash from Financing | -115M | -163M | -56M | 15M | -403M | -38M | -80M | -1M | -144.35M | -31M | 1B |
| Debt Issued (Net) | -200M | -10M | -43M | 8M | -2M | -38M | -76M | 1M | -155.46M | -44.27M | 1.02B |
| Equity Issued (Net) | -23M | -26M | -3M | 11M | 0 | 0 | 0 | 0 | 10.56M | 12.87M | -15.83M |
| Dividends Paid | -96M | -96M | 0 | 0 | -396M | 0 | 0 | 0 | -4.93M | -4.96M | -3.71M |
| Share Repurchases | -32M | -35M | -19M | -1M | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other Financing | 204M | -31M | -10M | -4M | -5M | 0 | -4M | -2M | 5.48M | 5.36M | 0 |
| Net Change in Cash | -52M | 49M | 131M | 161M | 66M | 179M | -24M | 6M | -9.58M | 94.32M | -306.11M |
| Free Cash Flow | 397M | 227M | 186M | 145M | -32M | 118M | 69M | 102M | 140.15M | 139.33M | 113.87M |
| FCF Margin % | 10.74% | 6.22% | 5.75% | 5.13% | -1.19% | 4.1% | 2.48% | 3.76% | 4.25% | 4.94% | 6.56% |
| FCF Growth % | 36.43% | 22.04% | 28.28% | 553.13% | -127.12% | 71.01% | -32.35% | -27.22% | 0.59% | 22.36% | - |
| FCF per Share | 1.48 | 0.84 | 0.69 | 0.55 | -0.15 | 0.81 | 0.46 | 0.70 | 1.69 | 6.83 | 22.34 |
| FCF Conversion (FCF/Net Income) | 1.37x | 1.32x | 1.27x | 1.22x | 0.08x | 1.16x | 1.47x | 2.09x | 1.28x | 1.54x | 1.93x |
| Interest Paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Taxes Paid | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Working capital volatility
Based on reported financial data, the relationship between net income and operating cash flow is highly erratic, with OCF/NI ratios swinging from a negative 9.14 in 2024Q1 to a positive 6.96 in 2023Q4, highlighting significant disconnects between accounting profit and actual cash generation.
The extreme variance in cash conversion suggests that net income is a poor proxy for the company's immediate liquidity. Investors should monitor whether these swings are driven by structural timing issues in defense contract milestones or underlying weaknesses in the cash collection process.
As reported in quarterly filings, free cash flow margins have demonstrated extreme instability, ranging from a negative 40% in 2024Q1 to a peak of 53.7% in 2023Q4, reflecting the inherent lumpiness of milestone-based revenue recognition within the company's long-term defense contract portfolio.
The lack of a consistent FCF trajectory complicates valuation efforts, as the company appears to alternate between periods of significant cash absorption and massive cash inflows. This pattern suggests that the business model is highly sensitive to the timing of government payments rather than steady-state operational efficiency.
According to the provided cash flow statements, working capital changes are the primary driver of liquidity volatility, with quarterly fluctuations reaching as high as $453 million in 2023Q4, which directly dictates the company's ability to convert accounting earnings into tangible cash reserves.
The massive swings in working capital indicate that the company's cash position is heavily dependent on the timing of contract advances and milestone payments. This reliance warrants further investigation into whether these fluctuations represent temporary timing mismatches or a more permanent structural requirement for high working capital intensity.
Based on recent financial statements, Leonardo DRS has maintained a disciplined approach to capital deployment, characterized by consistent dividend payments of $24 million per quarter throughout 2025, while keeping share repurchases relatively modest compared to the company's overall cash flow capacity.
The company's decision to prioritize steady dividends over aggressive buybacks suggests a management team focused on returning capital to shareholders while preserving liquidity for potential M&A or R&D. This conservative stance appears consistent with the company's low debt profile and the need to maintain flexibility for long-cycle defense programs.
Quick answers to the most common questions about buying DRS stock.
Leonardo DRS, Inc. (DRS) generated $366.0M in net cash from operating activities in 2025. This reflects the cash generated directly from core business operations.
Leonardo DRS, Inc. (DRS) generated $227.0M in free cash flow in 2025. Free cash flow is the cash left over after capital expenditures, which can be used to pay dividends, repurchase shares, or pay down debt.
Leonardo DRS, Inc. (DRS) spent $139.0M on capital expenditures in 2025. CapEx represents the cash invested in physical assets like property, plant, and equipment to maintain or grow the business.
In 2025, Leonardo DRS, Inc. (DRS) returned $96.0M to shareholders via cash dividends and spent $35.0M on share repurchases. This shows the company's commitment to returning capital to its equity investors.