Leonardo DRS, Inc.DRS
Leonardo DRS, Inc. Stock Compensation Disclosure
Stock-based Compensation Plans
Stock Options
The Company’s 2022 Omnibus Equity Compensation Plan (the “2022 Equity Plan”) allows for grants of stock options, stock appreciation rights, restricted shares, restricted stock units (“RSUs”) and performance-based awards. In May 2024, the 2022 Equity Plan was amended and restated to increase the common stock available for issuance under the plan by 8,100,000 shares and to extend the terms of the plan to expire on the tenth anniversary of the amended and restated plan’s effective date. As of December 31, 2025, there were 9 million shares of the Company’s common stock reserved for future issuances under the 2022 Equity Plan.
In November 2022, in conjunction with the acquisition of RADA Electronic Industries Ltd (“RADA”), the Company assumed 5.4 million stock options. The outstanding stock options were exchanged into options to purchase the Company’s common stock. The assumed stock options are subject to the same terms and conditions as the original awards, including time-based vesting. The options are generally exercisable for 48 months following the date of vesting.
During 2023, the Company granted equity awards in the form of RSUs and performance-based restricted stock units (“PRSUs”) under the 2022 Equity Plan. The RSUs are subject to annual time-based vesting over a three-year period. The PRSUs are subject to both time and performance-based vesting based upon the achievement of three financial metrics over a three-year period: Relative Total Shareholder Return (“rTSR”), Revenue Growth, and Return on Invested Capital (“ROIC”).
During 2024 and 2025, the Company granted equity awards in the form of RSUs and PRSUs under the 2022 Equity Plan. The RSUs are subject to annual time-based vesting over a three-year period. The PRSUs are subject to both time and performance-based vesting based upon the achievement of three financial metrics over a three-year period: rTSR, Adjusted Diluted EPS, and ROIC.
The fair value of stock options is measured on the date of the acquisition of RADA using the Black-Scholes option pricing model. The fair value of market condition PRSUs is measured on the date of grant using the Monte Carlo Simulation Model. Expense for time-based awards is recognized on a straight-line basis over the requisite service period. Forfeitures are recognized as they occur.
In May 2024, the Company established the Employee Stock Purchase Plan (the “ESPP”). The ESPP allows eligible employees to purchase shares of the Company’s stock at 90% of the fair market value on
the date of purchase. As of December 31, 2025, there were 2 million shares of the Company’s common stock reserved for future issuances under the ESPP.
Stock-based compensation, which was recorded in the Consolidated Statements of Earnings within general and administrative expenses, and the related tax benefits recognized for the periods presented consists of the following:
| Year Ended December 31, | |||||||||||||||||
| (Dollars in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Total stock-based compensation expense | $ | 32 | $ | 22 | $ | 17 | |||||||||||
| Tax benefits recognized from stock-based compensation | 6 | 6 | 2 | ||||||||||||||
The following table shows a summary of all option activity under the 2022 Equity Plan for the year ended December 31, 2025:
Number of Shares (in millions) | Weighted Average Exercise Price Per Share | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (Dollars in millions) | ||||||||||||||||||||
| Outstanding as of January 1, 2025 | 1.57 | $ | 10.39 | 3 | $ | 34 | |||||||||||||||||
| Exercised | (0.36) | 10.28 | |||||||||||||||||||||
| Forfeited | (0.02) | 10.66 | |||||||||||||||||||||
| Outstanding as of December 31, 2025 | 1.19 | $ | 10.42 | 2 | $ | 28 | |||||||||||||||||
| Exercisable as of December 31, 2025 | 1.14 | $ | 10.43 | 2 | $ | 27 | |||||||||||||||||
| Vested and expected to vest as of December 31, 2025 | 1.19 | $ | 10.42 | 2 | $ | 28 | |||||||||||||||||
There were no stock options granted or assumed during 2025. As of December 31, 2025, total compensation expense not yet recognized related to unvested options was approximately $1 million, which is expected to be recognized over a weighted average period of less than one year. The total intrinsic value of stock options exercised during the year ended December 31, 2025, was $11 million.
RSUs
The following table shows a summary of all RSU activity under the 2022 Equity Plan for the year ended December 31, 2025:
Number of Shares (in millions) | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested as of January 1, 2025 | 1.31 | $ | 16.89 | ||||||||
| Granted | 0.46 | 33.23 | |||||||||
| Vested | (0.73) | 15.18 | |||||||||
| Forfeited | (0.03) | 24.91 | |||||||||
| Unvested as of December 31, 2025 | 1.01 | $ | 25.39 | ||||||||
As of December 31, 2025, total compensation expense not yet recognized related to unvested RSUs was approximately $12 million, which is expected to be recognized over a weighted average period of 2 years. The fair value of RSUs that vested in 2025 was $25 million.
PRSUs
The following table shows a summary of all PRSU activity under the 2022 Equity Plan for the year ended December 31, 2025:
Number of Shares (in millions) | Weighted Average Grant Date Fair Value | ||||||||||
| Unvested as of January 1, 2025 | 1.51 | $ | 16.19 | ||||||||
| Granted | 0.28 | 37.96 | |||||||||
| Vested | (0.99) | 10.25 | |||||||||
| Forfeited | (0.04) | 25.61 | |||||||||
| Performance adjustments | 0.39 | 10.68 | |||||||||
| Unvested as of December 31, 2025 | 1.15 | $ | 21.74 | ||||||||
The Monte Carlo Model assumptions used in valuing market condition PRSUs during the periods presented are set forth in the following table:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Grant date stock price | $ | 32.71 | $ | 21.51 | $ | 14.74 | |||||||||||
| Expected volatility | 37.4 | % | 36.0 | % | 51.2 | % | |||||||||||
| Risk-free interest rate | 3.7 | % | 4.9 | % | 4.0 | % | |||||||||||
| Expected dividend yield | — | % | — | % | — | % | |||||||||||
As of December 31, 2025, total compensation expense not yet recognized related to unvested PRSUs was approximately $12 million, which is expected to be recognized over a weighted average period of 2 years. The fair value of PRSUs that vested in 2025 was $19 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 28, 2023 | |
| 2021 | Mar 28, 2022 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.