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SEC filingQ1 delivered strong profitability growth with revenue up 5.9% to $846M and operating income rising 30.5% to $77M, driven by sustained demand across segments and operational efficiencies, despite seasonal cash usage.
Leonardo DRS reported solid Q1 results with revenue of $846 million, up 5.9% from $799 million in the prior year quarter. This increase is primarily attributed to continued demand across each of our operating segments, including contributions from international sales driven by global demand for tactical radars used in counter drone and short-range air defense applications. Gross profit expanded to $212 million, a 17.1% increase from $181 million, yielding a gross margin of 25.1%. This improvement reflects our continuous improvement efforts through the APEX program, which enhances efficiency, contributes to margin expansion, and supports competitiveness while enabling strategic investments and maintaining customer satisfaction.
Operating income reached $77 million, up 30.5% from $59 million, with an operating margin of 9.1%. The growth stems from higher gross profit and disciplined cost management under our mix of fixed-price and flexibly priced contracts, where we are reimbursed for allowable costs plus a fee. Net income rose 24% to $62 million, and diluted EPS increased 21.1% to $0.23. This performance was primarily due to the increase in operating earnings and decreased net interest expense, highlighting effective leverage from core operations.
Cash dynamics showed net cash used in operating activities of $66 million, an improvement from $138 million last year, driven by lower working capital needs. Capital expenditures were $30 million, resulting in free cash flow of -$96 million. These patterns align with our longer-term operating cycle involving various production contracts and delivery schedules, as well as strategic investments aligned with Department of Warfighting priorities in advanced sensing, networked systems, force protection, and naval power & propulsion. The decrease in new orders was driven within our ASC segment but offset in part by IMS bookings expansion, supporting ongoing demand visibility.
Overall, these results demonstrate resilience amid government spending uncertainties and federal budget dynamics. Management believes existing cash, credit access, and expected operational cash generation will meet short- and long-term liquidity needs, though future cash flows depend on sustained performance and market conditions.