Leonardo DRS is enjoying strong growth and expects to remain above the market average, according to the company’s chief.
“This will be our fourth year of what I call above market growth,” which is being driven by organic sales gains, William “Bill” Lynn, CEO of Leonard DRS, said in an Aug. 3 interview in his office in Arlington, Va. Legacy business already built into the company’s backlog combined with recent new wins ensure the positive growth trajectory ahead, he said.
Through the first half of this year, Leonardo DRS has tallied $959 million in sales, 20 percent above first half results in 2017. Bookings so far this year are nearly $1.3 billion, well above sales and 34 percent higher than the same period a year ago. Sales in 2017 were up 9 percent to $1.9 billion.
Leonardo DRS is an operating division of Italy’s Leonardo. Leonardo’s U.S. operations also include portions of Leonardo Helicopter and Selex ES. Lynn is also CEO of Leonardo North America, providing a single face to the customer for Leonardo’s U.S. businesses even though Leonardo Helicopter and Selex ES have separate reporting chains for their operations.
Leonardo DRS is coming off several nice wins in the past two months that aided its strong order flow this year and will help pave the way for continued growth. In June the company won the U.S. Army’s potential $841 million mission command computing contract, called Mounted Family of Computer Systems, a $193 million award for the TROPHY active protection system for Abrams tanks, and a short-range air defense system (SHORAD) for Stryker wheeled fighting vehicles. The award for the Initial Maneuver SHORAD contract is still being finalized.
In addition to these programs, weapons sights, electro-optical/infrared (EO/IR) programs, infrared countermeasures for helicopters, Navy electronics, and the Army’s Joint Assault Bridge are all growing, Lynn said.
Leonardo DRS is one of three bidders for the U.S. Air Force’s $15 billion T-X aircraft trainer, a program that would be a “game changer” for the company and represent a “step level increase” in its growth trajectory over the next decade and more, Lynn said. The size of the program isn’t one that Leonardo DRS typically pursues, he said, noting that the company spent around $11 million toward the project in the first half of 2018.
Leonardo DRS is competing against teams led by Lockheed Martin [LMT] and Boeing [BA] for the T-X. A win on this program will open the door for additional trainer aircraft sales in the U.S. and internationally, he said.
Mergers and acquisitions are part of Leonardo DRS’s overall growth and market strategies in the U.S. In June 2017, the company spent $150 to acquire Daylight Solutions, Inc., a maker of quantum laser-based products, which is now one of its eight lines of business. Since that deal, Lynn disclosed a smaller acquisition of a company that adds additional manufacturing capacity in the area of EO/IR technology.
Lynn said the company’s acquisition targets align with the existing business lines and typically are less than $200 million, with the range likely between $100 million to $150 million. Smaller deals to acquire specific technology are also on the table, he said.
Leonardo is also pursuing a potential replacement to the U.S. Navy’s helicopter trainer program but Lynn said it hasn’t been decided which division of the company will be the prime for the effort. A Request for Proposals for the program is expected next year with an award in 2020.
About 15 percent of Leonardo DRS’s sales are to international customers. Lynn said this is “more than double” the total from several years ago and he would like to see more international growth. Lynn said opportunities in the Middle East, Asia and Australia are the potential drivers to grow the company’s international business.