SAN DIEGO, March 06, 2025 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS), a Technology Company in the Defense, National Security and Global Markets, and industry-leading provider of high-performance, jet-powered unmanned aerial systems, announced today that Kratos has received $59,338,010 for an additional 70 BQM-177A Subsonic Aerial Target (SSAT) aircraft through the exercise of the contract option for Full Rate Production (FRP) Lot 6. When combined with the base award and exe ...

Kratos Defense & Security Solutions, Inc. (KTOS) recently delivered mixed fourth-quarter 2024 results. While the bottom line surpassed the Zacks Consensus Estimate, the top line missed the same. However, both metrics improved on a year-over-year basis. Stay up-to-date with all quarterly releases: See Zacks Earnings Calendar.The year-over-year improvement can be attributed to solid revenue growth from its Turbine Technologies, C5ISR, Defense Rocket Support and Microwave Products businesses, along with increa ...

Core Insights - Kratos Defense & Security Solutions, Inc. (KTOS) reported a fourth-quarter 2024 adjusted earnings of 13 cents per share, an increase of 8.3% from 12 cents in the prior-year quarter, and exceeded the Zacks Consensus Estimate by 44.4% [1][2] - The company achieved total revenues of $283.1 million in the fourth quarter, which was a 3.4% increase from $273.8 million in the previous year, although it fell short of the Zacks Consensus Estimate of $288 million by 1.8% [3] - For the full year 2024, total revenues reached $1.14 billion, up from $1.04 billion in 2023, aligning with the Zacks Consensus Estimate [4] Financial Performance - GAAP earnings for the fourth quarter were reported at three cents per share, compared to two cents in the fourth quarter of 2023 [2] - Selling, general and administrative expenses increased by 1.1% year over year, while research and development expenses surged by 32.5% [5] - Operating income for the fourth quarter was $3 million, a decline from $11.7 million in the same quarter last year [5] Segment Performance - Unmanned Systems segment net revenues improved by 10.3% year over year to $61.1 million [7] - Kratos Government Solutions segment net revenues increased by 1.6% to $222 million compared to the previous year [7] Operational Metrics - The consolidated book-to-bill ratio was reported at 1.5-1.0, with bookings totaling $434.2 million, and total backlog at the end of the fourth quarter was $1.45 billion, up from $1.29 billion at the end of the third quarter [6] Cash Flow and Debt - As of December 29, 2024, cash and cash equivalents totaled $329.3 million, a significant increase from $72.8 million as of December 31, 2023 [8] - Long-term debt decreased to $174.6 million from $219.3 million recorded at the end of 2023 [8] - Net cash flow from operating activities was $49.7 million in 2024, down from $65.2 million at the end of 2023 [8] Future Guidance - For the first quarter of 2025, KTOS projects revenues in the range of $285-$295 million, while the full-year 2025 revenue guidance is set between $1.26-$1.29 billion [9] - The Zacks Consensus Estimate for 2025 revenues is pegged at $1.28 billion, closely aligning with the company's mid-point guidance [9] - Operating cash flows for 2025 are expected to be between $50-$60 million, with free cash outflow projected at $75-$85 million [10]

Financial Data and Key Metrics Changes - Kratos achieved 2024 organic revenue growth of 9.1% and forecasts 2025 organic revenue growth of 10% over 2024 [9][10] - Fourth quarter cash flow from operations exceeded $45 million, with a book-to-bill ratio of 1.5 to 1 for Q4 and 1.2 to 1 for the full year [9][10] - Adjusted EBITDA for Q4 2024 was $25.2 million, reflecting a favorable mix of higher margin revenues [46] Business Line Data and Key Metrics Changes - Unmanned systems organic revenue growth was 10.3% for Q4, while KGS organic revenue growth was 1.6% [47] - Revenues for the fourth quarter were $283 million, with notable strength in unmanned systems, turbine technologies, and microwave products [46] - Tactical drone revenues are forecasted to be approximately $45 million to $50 million for 2025, up from approximately $36 million in 2024 [55] Market Data and Key Metrics Changes - Revenues generated from contracts with the U.S. federal government during Q4 were approximately 68% [50] - The company expects to see increased demands for target drones and hypersonic target franchises due to new defense initiatives [13][28] Company Strategy and Development Direction - Kratos is positioned for sustained growth, focusing on hypersonic systems, unmanned systems, and defense hardware manufacturing [12][14] - The company plans to invest in property, plant, and equipment to support program hardware and system delivery [16][21] - The establishment of the Prometheus Energetics Joint Venture aims to enhance capabilities in solid rocket motors and energetics [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the increasing demand for Kratos' products due to national security funding and defense recapitalization [9][12] - The geopolitical landscape is providing robust opportunities, with funding exceeding $2 trillion globally [31] - Management remains cautious about the 2025 financial guidance due to the current continuing resolution authorization impacting the defense budget [52][53] Other Important Information - Kratos acquired Project Phoenix, enhancing its microwave electronics capabilities [25] - The company is expanding its facilities to meet anticipated customer orders and requirements [48][57] Q&A Session Summary Question: Impact of becoming a merchant supplier on long-term margin profile - Management indicated that margins are expected to lift starting in 2026 due to the merchant supplier strategy and renewal of long-term contracts [62][64] Question: Evolution of the Mach-TB contract and its revenue/profitability drivers - Management clarified that the Mach-TB contract is primarily an aerial test contract, with significant revenue ramp-up expected starting in 2026 [71][73] Question: Objectives for the defense electronics business and recent acquisitions - Management emphasized the goal to become a leading merchant supplier of microwave electronics in the U.S. and highlighted the positive relationships with traditional primes [82][84] Question: Position in space and fixed-price contracts - Management expressed comfort with fixed-price production contracts and noted a significant increase in opportunities in the space sector [93][95]

Group 1 - Kratos Defense & Security Solutions, Inc. held its Fourth Quarter 2024 Earnings Conference Call on February 26, 2025, at 5:00 PM ET [1][2] - The call featured key company participants including Eric DeMarco, President and CEO, and Deanna Lund, Executive Vice President and CFO [3] - The conference call was recorded and included a question and answer session following the presentation [2] Group 2 - The company emphasized the importance of considering uncertainties and risks associated with forward-looking statements made during the call [4]

Core Insights - Kratos (KTOS) reported revenue of $283.1 million for the quarter ended December 2024, reflecting a 3.4% increase year-over-year, with EPS at $0.13 compared to $0.12 in the same quarter last year [1] - The revenue fell short of the Zacks Consensus Estimate of $288.31 million, resulting in a surprise of -1.81%, while the EPS exceeded expectations by 44.44% against a consensus estimate of $0.09 [1] Revenue Breakdown - Kratos Government Solutions generated $222 million in revenue, slightly below the average estimate of $223.42 million, marking a year-over-year increase of 1.7% [4] - Unmanned Systems revenue was reported at $61.10 million, lower than the estimated $66.54 million, but showed a 10.3% increase compared to the previous year [4] - Product sales reached $176.60 million, surpassing the average estimate of $170.05 million, with a year-over-year growth of 2.1% [4] - Service revenues totaled $106.50 million, below the estimated $117.06 million, but represented a 5.7% increase year-over-year [4] Profitability Metrics - Gross profit from service revenues was $29.40 million, compared to the average estimate of $31.72 million [4] - Gross profit from product sales was reported at $40.40 million, lower than the estimated $42.07 million [4] - Operating income for Unmanned Systems was -$0.70 million, significantly below the average estimate of $2.19 million [4] - Operating income for Kratos Government Solutions was $11 million, compared to the average estimate of $15.27 million [4] - Unallocated corporate expense, net, was -$7.30 million, worse than the average estimate of -$4.35 million [4] Stock Performance - Over the past month, Kratos shares have declined by 25%, contrasting with the Zacks S&P 500 composite's decrease of 2.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), suggesting potential outperformance against the broader market in the near term [3]

Core Viewpoint - Kratos (KTOS) reported quarterly earnings of $0.13 per share, exceeding the Zacks Consensus Estimate of $0.09 per share, and showing an increase from $0.12 per share a year ago, indicating a 44.44% earnings surprise [1][2] Financial Performance - The company achieved revenues of $283.1 million for the quarter ended December 2024, which was 1.81% below the Zacks Consensus Estimate, but up from $273.8 million year-over-year [2] - Over the last four quarters, Kratos has surpassed consensus EPS estimates four times and topped revenue estimates twice [2] Stock Performance - Kratos shares have declined approximately 4.8% since the beginning of the year, contrasting with the S&P 500's gain of 1.3% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating expectations of outperforming the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.13 on revenues of $303.53 million, and for the current fiscal year, it is $0.59 on revenues of $1.28 billion [7] - The trend of estimate revisions for Kratos has been favorable leading up to the earnings release [6] Industry Context - The Aerospace - Defense Equipment industry, to which Kratos belongs, is currently ranked in the top 29% of over 250 Zacks industries, suggesting a positive outlook for stocks within this sector [8]

Core Viewpoint - Kratos Defense & Security Solutions, Inc. and RAFAEL Advanced Defense Systems Ltd. have formed a joint venture named Prometheus Energetics to establish a U.S.-based supplier of solid rocket motors and other energetics, with a capital commitment of up to $175 million [1][2][5] Company Overview - Kratos is a leader in advanced systems, including hypersonic technologies, ballistic missile targets, and solid rocket motors, serving the U.S. defense community for decades [4] - RAFAEL is a major Israeli defense contractor known for systems like the Iron Dome and TROPHY APS, with a focus on vertically integrated facilities for the development of solid rocket motors and warheads [3][6] Joint Venture Details - Prometheus Energetics will be headquartered on a 500-acre site in Crane, Indiana, and is projected to begin production of solid rocket motors in 2027 after technology transfer and certification [1][2] - The joint venture aims to strengthen the U.S. defense industrial base and provide tens of thousands of solid rocket motors and casted warheads to support U.S. national security and allies [5][8] Financial Implications - Kratos will account for approximately 50% of Prometheus' net income and free cash flow in its financial statements, reflecting the joint venture's impact on Kratos' overall financial performance [5]

Core Viewpoint - Kratos Defense & Security Solutions, Inc. and RAFAEL Advanced Defense Systems Ltd. have formed a joint venture named Prometheus Energetics to establish a U.S.-based supplier of solid rocket motors and other energetics, with a capital commitment of up to $175 million [1][2][5] Company Overview - Kratos is a leader in advanced systems, including hypersonic technologies, ballistic missile targets, and solid rocket motors, serving the U.S. defense community for decades [4] - RAFAEL is one of Israel's largest defense contractors, known for developing systems like the Iron Dome and TROPHY APS, with a focus on vertically integrated facilities for SRMs and warhead products [3][6] Joint Venture Details - Prometheus Energetics will be headquartered on a 500-acre site in Crane, Indiana, and is projected to begin production of solid rocket motors in 2027 after technology transfer and certification [1][2] - The joint venture aims to strengthen the U.S. defense industrial base and provide tens of thousands of solid rocket motors and casted warheads to support U.S. national security and allies [5][8] Financial Implications - Kratos will account for approximately 50% of Prometheus' net income and free cash flow in its financial statements, reflecting the joint venture's impact on Kratos' overall financial performance [5]

Contracts and Revenue - Kratos reported a diverse base of key contracts with no single contract representing more than 6% of 2024 revenue, with fixed-price contracts accounting for approximately 69% of total revenue[50]. - The company secured the largest contract in its history, the MACH-TB 2.0 hypersonic system contract, valued at an estimated $1.45 billion if all options are exercised over five years[43]. - Approximately 25% of Kratos' revenue comes from cost-plus-fee contracts, while time and materials contracts represent about 6%[50]. - Revenue from U.S. Government customers accounted for approximately 67% of total revenues in 2024, consistent with 69% in 2023 and 2022[65]. - Total backlog as of December 29, 2024, was approximately $1,445.1 million, an increase from $1,243.9 million as of December 31, 2023, with $1,090.1 million funded in 2024 and $944.6 million funded in 2023[66]. - The company expects to recognize approximately 57.0% of the remaining total backlog as revenue in 2025, with an additional 17.0% in 2026[66]. - As of December 29, 2024, the funded backlog was approximately $1,090.1 million, indicating strong future revenue visibility[66]. Strategic Focus and Innovation - Kratos has a strong focus on affordability and rapid innovation, positioning itself as a technology leader in the defense sector, particularly in unmanned systems and hypersonic technologies[33][37]. - The company is focused on expanding its customer base into areas with significant growth opportunities, leveraging its technology and past performance qualifications[59]. - The strategy includes being first to market with internally funded and developed offerings, aiming to reduce technical, schedule, and financial risk[54]. - Significant investments of over $260 million in UAS business since 2013 and approximately $252 million in Space, Satellite, and Cyber business since 2019[61]. - Kratos' investments in research and development are aimed at maintaining a competitive edge in high-growth markets such as hypersonic systems and satellite communications[48]. - Research and development expenses were $40.3 million in 2024, up from $38.4 million in 2023 and $38.6 million in 2022, indicating a focus on growth through innovation[84]. Customer Relationships and Market Position - The company has established long-term relationships with key defense customers, including the U.S. Air Force, Navy, and Army, enhancing its understanding of customer missions and requirements[39]. - The competitive landscape includes major U.S. defense contractors and newer technology companies, with the company focusing on affordability and rapid product development as key competitive factors[80][82]. - The company plans to focus its resources on core competencies and internally funded investments, moving away from low-price technically acceptable (LPTA) services due to changing market dynamics[83]. Workforce and Diversity - The workforce consisted of approximately 4,000 employees across 14 countries as of December 29, 2024, highlighting the company's commitment to human capital management[76]. - The company is committed to diversity and inclusion within its workforce, aiming to reflect the communities in which it operates[79]. - The company has established relationships with local job networks and educational institutions to attract a diverse talent pool, enhancing its recruitment strategy[77]. Financial Position and Risks - As of December 29, 2024, the company's cash and cash equivalents were $329.3 million, primarily invested in money market interest-bearing accounts[357]. - A 1% change in the SOFR would not materially impact the company's financial position and results of operations[354]. - A 10% appreciation or depreciation of the USD from its cross-functional rates is not expected to have a material effect on the company's financial position, results of operations, and cash flows in the near term[356]. - Inflation has increased during the reporting period and is expected to continue to rise, potentially affecting operating results due to increased costs of materials and supplies[358]. - The company does not hedge commodity price fluctuations as they are deemed immaterial[359]. - The company is exposed to interest rate risk primarily through its borrowing activities under the Credit Agreement[354]. - The phase-out of LIBOR and its replacement with alternative reference rates may adversely affect the company's borrowing costs[356]. - The company manages foreign currency exchange rate risk through limited foreign currency forward contracts[356]. - The company has not experienced a material impact from inflation on its financial position or results of operations to date, but future inflation could result in material losses[358]. - The company is exposed to market risks related to interest rates and foreign currency exchange rates[353]. Cybersecurity and Compliance - The company emphasizes the importance of cybersecurity, maintaining various protections and insurance to safeguard sensitive information, although it acknowledges that no system can guarantee absolute security[73][75]. - The company is subject to various government regulations, including those related to environmental compliance and national security, which may impact operational flexibility[88][90]. Supply Chain Management - Supply chain risks are mitigated by working closely with suppliers and stocking reserve materials to ensure future availability, particularly in light of semiconductor shortages[93][94]. Patents and Intellectual Property - The company holds numerous U.S. and foreign patents, indicating a strong emphasis on protecting proprietary technology and fostering innovation[86].