[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2025 report total revenues of **$302.6 million**, net income of **$4.5 million**, total assets of **$2.005 billion**, and negative operating cash flow of **$29.2 million** [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 30, 2025, total assets increased to **$2.005 billion**, driven by unbilled receivables and goodwill, while total liabilities reached **$617.3 million** and stockholders' equity grew to **$1.388 billion** Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 30, 2025 | December 29, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $263.7 | $329.3 | | Total current assets | $864.4 | $872.1 | | Goodwill | $597.4 | $568.9 | | **Total assets** | **$2,004.9** | **$1,950.9** | | **Liabilities & Equity** | | | | Total current liabilities | $304.9 | $296.7 | | Long-term debt, net | $172.2 | $174.6 | | **Total liabilities** | **$617.3** | **$597.7** | | **Total stockholders' equity** | **$1,387.6** | **$1,353.2** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q1 2025, total revenues increased **9.2%** to **$302.6 million**, resulting in **$6.6 million** in operating income and **$4.5 million** in net income attributable to Kratos Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total revenues | $302.6 | $277.2 | | Gross profit | $73.6 | $71.0 | | Operating income | $6.6 | $7.0 | | Net income attributable to Kratos | $4.5 | $1.3 | | Diluted EPS | $0.03 | $0.01 | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities for Q1 2025 was **$29.2 million**, a significant decrease from the prior year, primarily due to increased unbilled receivables, with **$22.6 million** used in investing activities Summary of Cash Flows (in millions) | Activity | Three Months Ended March 30, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(29.2) | $0.7 | | Net cash used in investing activities | $(22.6) | $(16.6) | | Net cash provided by (used in) financing activities | $(14.5) | $282.6 | | **Net (decrease) increase in cash** | **$(65.6)** | **$266.1** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes provide details on accounting policies, the **$37.0 million** Norden Millimeter acquisition, **$1.508 billion** in remaining performance obligations, and the U.S. Government as the largest customer, accounting for **68%** of total revenue - On February 4, 2025, the company completed an asset acquisition from Norden Millimeter, Inc. for a total consideration of **$37.0 million**, which included stock and potential future payments, adding **$28.5 million** in goodwill[35](index=35&type=chunk)[40](index=40&type=chunk)[42](index=42&type=chunk) - As of March 30, 2025, the company had approximately **$1.508 billion** in remaining performance obligations, with **48%** expected to be recognized as revenue in fiscal year 2025[47](index=47&type=chunk) - Sales to the U.S. Government, including foreign military sales, accounted for approximately **$205.5 million**, or **68%** of total revenue, for the three months ended March 30, 2025[97](index=97&type=chunk) - The company operates in two reportable segments: Kratos Government Solutions (KGS) and Unmanned Systems (US), with Q1 2025 revenues of **$239.5 million** for KGS and **$63.1 million** for US[82](index=82&type=chunk)[85](index=85&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses a **9.2%** revenue increase to **$302.6 million** for Q1 2025, a gross margin decline to **24.3%**, a record backlog of **$1.508 billion**, and ongoing macroeconomic challenges including supply chain disruptions and labor shortages [Overview and Industry Update](index=25&type=section&id=Overview%20and%20Industry%20Update) Kratos is making significant capital investments to expand manufacturing capacity for unmanned aircraft and hypersonic systems, while navigating political uncertainties and macroeconomic headwinds such as supply chain disruptions and labor shortages - Kratos is making significant capital investments to expand manufacturing capacity for unmanned aircraft (Valkyrie), hypersonic systems (Zeus, Erinyes), small turbojet engines, and microwave electronics[108](index=108&type=chunk) - The company identifies significant short and long-term risks from the U.S. political and budgetary environment, including potential impacts from Continuing Resolutions (CRAs), new tariffs, and changes to DoD procurement policies[110](index=110&type=chunk)[111](index=111&type=chunk) - Ongoing macroeconomic challenges include supply chain disruptions, inflation increasing business costs, and a significant industry-wide shortage of qualified labor, particularly in STEM and cleared personnel, which negatively impacts operating margins[113](index=113&type=chunk)[114](index=114&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Total revenues for Q1 2025 increased **9.2%** to **$302.6 million**, with KGS revenue growing **10.0%** to **$239.5 million** and US revenue growing **6.2%** to **$63.1 million**, though overall gross margin declined to **24.3%** Revenues by Segment (in millions) | Segment | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Kratos Government Solutions | $239.5 | $217.8 | $21.7 | 10.0% | | Unmanned Systems | $63.1 | $59.4 | $3.7 | 6.2% | | **Total revenues** | **$302.6** | **$277.2** | **$25.4** | **9.2%** | - The increase in KGS revenue was driven by growth across all business units, including C5ISR, Defense Rocket Support, and microwave products, plus a **$4.8 million** contribution from the Norden acquisition[120](index=120&type=chunk) - Gross margin in the US segment decreased to **15.8%** from **19.5%** in the prior year, primarily due to a less favorable product mix and the impact of increased labor and material costs on multi-year fixed-price contracts[123](index=123&type=chunk) [Backlog](index=29&type=section&id=Backlog) Total backlog increased to approximately **$1.508 billion** as of March 30, 2025, with **$1.174 billion** funded, driven by new contract awards across various segments, with **48%** expected to be recognized in fiscal year 2025 Backlog Comparison (in millions) | Backlog Type | March 30, 2025 | March 31, 2024 | | :--- | :--- | :--- | | Total Backlog | $1,508.1 | $1,272.8 | | Funded Backlog | $1,173.6 | $1,043.9 | - The company expects to convert approximately **48%** of its total backlog into revenue during fiscal year 2025, with an additional **25%** in fiscal year 2026[129](index=129&type=chunk) [Liquidity and Capital Resources](index=30&type=section&id=Liquidity%20and%20Capital%20Resources) Cash and cash equivalents decreased to **$263.7 million** due to **$29.2 million** used in operating activities and **$22.6 million** in capital expenditures, while total long-term debt was **$182.5 million** and a **$200 million** revolving credit facility remains undrawn - Cash and cash equivalents decreased by **$65.6 million** during the quarter to **$263.7 million** as of March 30, 2025[135](index=135&type=chunk)[20](index=20&type=chunk) - Net cash used in operating activities was **$29.2 million**, primarily due to increases in unbilled receivables and inventory, as the company makes advance purchases to mitigate supply chain disruptions[137](index=137&type=chunk)[138](index=138&type=chunk) - Capital expenditures for Q1 2025 were **$22.6 million**, with significant investments continuing in the Unmanned Systems business, and full-year 2025 capex is expected to be significant[139](index=139&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) There have been no material changes in the company's quantitative or qualitative market risk profile since December 29, 2024 - There have been no material changes in the company's market risk profile since December 29, 2024[150](index=150&type=chunk) [Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 30, 2025, with no material changes in internal control over financial reporting during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 30, 2025[154](index=154&type=chunk) - No changes occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[155](index=155&type=chunk) [PART II. OTHER INFORMATION](index=34&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business, with details in Note 14, and does not anticipate a material adverse impact - Information regarding legal proceedings is detailed in Note 14 of the Notes to condensed consolidated financial statements[158](index=158&type=chunk) [Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since their previous disclosure in the Annual Report on Form 10-K - During the period covered by this report, there have been no material changes in the company's risk factors from those previously disclosed[159](index=159&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - None[160](index=160&type=chunk) [Other Information](index=34&type=section&id=Item%205.%20Other%20Information) Marie Mendoza, Senior Vice President and General Counsel, adopted a Rule 10b5-1 trading plan on March 17, 2025, covering a maximum of **24,473 shares** - Marie Mendoza, an officer of the company, adopted a Rule 10b5-1 trading plan on March 17, 2025[163](index=163&type=chunk) [Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files

[Kratos First Quarter 2025 Financial Performance](index=1&type=section&id=Kratos%20First%20Quarter%202025%20Financial%20Performance) [First Quarter 2025 Financial Highlights](index=1&type=section&id=First%20Quarter%202025%20Financial%20Highlights) Kratos reported strong revenue growth in the first quarter of 2025, with total revenues reaching \$302.6 million, a 9.2% increase year-over-year, driven by 7.4% organic growth. Net income attributable to Kratos more than tripled to \$4.5 million, and Adjusted EBITDA saw a modest increase to \$26.7 million. The company maintained a healthy order momentum with a consolidated book-to-bill ratio of 1.2 to 1. Q1 2025 Key Financial Metrics (vs. Q1 2024) | Metric | Q1 2025 (\$) | Q1 2024 (\$) | Change (%) | | :--- | :--- | :--- | :--- | | **Revenues** | \$302.6 million | \$277.2 million | +9.2% | | **Operating Income** | \$6.6 million | \$7.0 million | -5.7% | | **Net Income (attributable to Kratos)** | \$4.5 million | \$1.3 million | +246% | | **GAAP EPS (diluted)** | \$0.03 | \$0.01 | +200% | | **Adjusted EBITDA** | \$26.7 million | \$26.0 million | +2.7% | | **Adjusted EPS** | \$0.12 | \$0.11 | +9.1% | - Total revenue growth of **9.2% increase** was primarily driven by **7.4% organic growth**, with notable performance in the Unmanned Systems (**6.2% growth**) and KGS segments (**7.8% growth**)[2](index=2&type=chunk)[5](index=5&type=chunk) - Operating income was impacted by **\$8.7 million** in non-cash stock compensation and **\$10.0 million** in company-funded R&D expenses[3](index=3&type=chunk) [Segment Performance](index=2&type=section&id=Segment%20Performance) The Kratos Government Solutions (KGS) segment was the primary revenue driver with \$239.5 million, showing 7.8% organic growth. The Unmanned Systems (KUS) segment also grew, with revenues of \$63.1 million, but faced margin pressure from legacy fixed-price contracts, resulting in a higher operating loss and lower Adjusted EBITDA compared to the prior year. [Unmanned Systems (KUS)](index=2&type=section&id=Unmanned%20Systems%20(KUS)) The KUS segment achieved 6.2% revenue growth to \$63.1 million, driven by increased target drone sales. However, profitability declined, with an operating loss of \$1.7 million and Adjusted EBITDA of \$1.7 million, due to cost pressures on multi-year fixed-price contracts. The segment demonstrated strong demand with a book-to-bill ratio of 1.8 to 1.0 for the quarter. KUS Segment Q1 2025 Performance | Metric | Q1 2025 (\$) | Q1 2024 (\$) | | :--- | :--- | :--- | | **Revenues** | \$63.1 million | \$59.4 million | | **Operating Loss** | \$(1.7) million | \$(0.4) million | | **Adjusted EBITDA** | \$1.7 million | \$2.9 million | | **Book-to-Bill Ratio** | 1.8 to 1.0 | N/A | | **Backlog** | \$347.1 million | N/A | - Profitability was negatively impacted by increased material, subcontractor, and labor costs on fixed-price contracts negotiated in 2020 and 2021[7](index=7&type=chunk) [Kratos Government Solutions (KGS)](index=2&type=section&id=Kratos%20Government%20Solutions%20(KGS)) The KGS segment reported revenues of \$239.5 million, an organic growth of 7.8% year-over-year, with strong performance in C5ISR, Defense Rocket Support, and Microwave Products. Operating income and Adjusted EBITDA both increased, reflecting favorable revenue volume and mix. The segment maintained a solid book-to-bill ratio of 1.0 to 1.0 for the quarter. KGS Segment Q1 2025 Performance | Metric | Q1 2025 (\$) | Q1 2024 (\$) | | :--- | :--- | :--- | | **Revenues** | \$239.5 million | \$217.8 million | | **Operating Income** | \$17.0 million | \$16.6 million | | **Adjusted EBITDA** | \$25.0 million | \$23.1 million | | **Book-to-Bill Ratio** | 1.0 to 1.0 | N/A | | **Backlog** | \$1.161 billion | N/A | - The most notable growth within KGS came from the C5ISR, Defense Rocket Support, and Microwave Products businesses, with organic growth rates ranging from **13.1% to 18.7%**[9](index=9&type=chunk) [Bookings, Backlog & Pipeline](index=1&type=section&id=Bookings,%20Backlog%20%26%20Pipeline) Kratos demonstrated strong business momentum with a consolidated book-to-bill ratio of 1.2 to 1.0 for both the first quarter and the last twelve months. Total backlog grew to \$1.508 billion, supported by a robust bid and proposal pipeline of \$12.6 billion. Consolidated Bookings & Backlog (as of March 30, 2025) | Metric | Q1 2025 (\$) | LTM (\$) | | :--- | :--- | :--- | | **Bookings** | \$365.6 million | \$1.401 billion | | **Book-to-Bill Ratio** | 1.2 to 1.0 | 1.2 to 1.0 | - Consolidated backlog increased to **\$1.508 billion** at the end of Q1 2025, up from **\$1.445 billion** at the end of Q4 2024[13](index=13&type=chunk) - The bid and proposal pipeline stood at **\$12.6 billion**, indicating a strong pipeline for future growth[13](index=13&type=chunk) [Cash Flow](index=2&type=section&id=Cash%20Flow) The company experienced a cash outflow during the quarter, with Cash Flow Used in Operations at \$29.2 million and Free Cash Flow Used in Operations at \$51.8 million. This was primarily due to working capital needs for revenue growth, inventory increases for future production, and investments in development initiatives. - Cash Flow Used in Operations was **\$29.2 million**, reflecting working capital requirements from revenue growth, increased inventories, and investments in the Unmanned Systems segment[6](index=6&type=chunk) - Free Cash Flow Used in Operations was **\$51.8 million** after funding **\$22.6 million** in capital expenditures[6](index=6&type=chunk) [Management Commentary and Outlook](index=3&type=section&id=Management%20Commentary%20and%20Outlook) [Management Commentary](index=3&type=section&id=Management%20Commentary) CEO Eric DeMarco expressed increased confidence in the company's 2025 and 2026 forecasts, citing a clearer defense funding environment and projecting organic revenue growth of approximately 10% in 2025 and 14% in 2026. Key growth areas identified include hypersonics, jet drones, propulsion systems, and C5ISR. The company is also expanding its Israel-based microwave electronics production facilities to support new program awards. - Management is confident in achieving **~10% organic revenue growth** in 2025 and **~14% in 2026**, bolstered by a clearer defense funding environment and a strong **book-to-bill ratio**[14](index=14&type=chunk) - Key future growth drivers include the hypersonic franchise, jet drones, jet engines, microwave electronics, and C5ISR systems[14](index=14&type=chunk)[15](index=15&type=chunk) - The company is expanding its Israel-based microwave electronics production facility, with a move scheduled for late June 2025 to support new large programs. A temporary impact on Q2 productivity is factored into guidance[14](index=14&type=chunk) - Kratos is focused on making strategic investments in its core business areas to increase market share, drive revenue growth, and improve margins[15](index=15&type=chunk) [Financial Guidance](index=4&type=section&id=Financial%20Guidance) Kratos reaffirmed its full-year 2025 guidance and provided initial guidance for the second quarter of 2025. The company anticipates full-year revenues between \$1,260 million and \$1,285 million and Adjusted EBITDA between \$112 million and \$118 million. Guidance includes significant investments in capital expenditures, primarily for expanding manufacturing and production facilities. Q2 2025 and Full Year 2025 Guidance | Metric ($ millions) | Q2 2025 Guidance ($ millions) | FY 2025 Guidance ($ millions) | | :--- | :--- | :--- | | **Revenues** | \$300 - \$310 | \$1,260 - \$1,285 | | **Operating Income** | \$3 - \$5 | \$34 - \$39 | | **Adjusted EBITDA** | \$21 - \$25 | \$112 - \$118 | | **Operating Cash Flow** | N/A | \$50 - \$60 | | **Capital Expenditures** | N/A | \$125 - \$135 | | **Free Cash Flow Use** | N/A | (\$75) - (\$85) | - The company is making elevated investments in capital expenditures to expand facilities for its Rocket Systems, Hypersonic, Microwave Products, and small jet engine businesses[17](index=17&type=chunk) [Financial Statements](index=10&type=section&id=Financial%20Statements) [Consolidated Statements of Operations](index=10&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2025, Kratos generated \$302.6 million in total revenues, up from \$277.2 million in Q1 2024. Gross profit increased to \$73.6 million. Despite higher revenues, operating income slightly decreased to \$6.6 million from \$7.0 million, primarily due to increased SG&A and R&D expenses. Net income attributable to Kratos significantly improved to \$4.5 million. Q1 2025 Income Statement Highlights | Line Item | Q1 2025 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | | **Total Revenues** | \$302.6 | \$277.2 | | **Total Gross Profit** | \$73.6 | \$71.0 | | **Operating Income** | \$6.6 | \$7.0 | | **Income Before Taxes** | \$5.4 | \$4.0 | | **Net Income Attributable to Kratos** | \$4.5 | \$1.3 | [Consolidated Balance Sheets](index=14&type=section&id=Consolidated%20Balance%20Sheets) As of March 30, 2025, Kratos reported total assets of \$2.005 billion, an increase from \$1.951 billion at the end of 2024. The increase was driven by growth in unbilled receivables, inventory, and property, plant, and equipment. Total liabilities rose to \$617.3 million, while total stockholders' equity increased to \$1.388 billion. Balance Sheet Highlights | Line Item | March 30, 2025 ($ millions) | Dec 29, 2024 ($ millions) | | :--- | :--- | :--- | | **Cash and cash equivalents** | \$263.7 | \$329.3 | | **Total Current Assets** | \$864.4 | \$872.1 | | **Total Assets** | \$2,004.9 | \$1,950.9 | | **Total Current Liabilities** | \$304.9 | \$296.7 | | **Total Liabilities** | \$617.3 | \$597.7 | | **Total Stockholders' Equity** | \$1,387.6 | \$1,353.2 | [Consolidated Statements of Cash Flows](index=15&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the three months ended March 30, 2025, net cash used in operating activities was \$29.2 million, a significant shift from the \$0.7 million provided by operations in the prior-year period. This was mainly due to increases in unbilled receivables and inventory. Investing activities used \$22.6 million for capital expenditures, while financing activities used \$14.5 million, resulting in a net decrease in cash of \$65.6 million. Cash Flow Highlights | Line Item | Q1 2025 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | | **Net Cash (Used in) Operating Activities** | \$(29.2) | \$0.7 | | **Net Cash Used in Investing Activities** | \$(22.6) | \$(16.6) | | **Net Cash (Used in) Provided by Financing Activities** | \$(14.5) | \$282.6 | | **Net (Decrease) Increase in Cash** | \$(65.6) | \$266.1 | | **Cash at End of Period** | \$263.7 | \$338.9 | [Non-GAAP Financial Measures](index=8&type=section&id=Non-GAAP%20Financial%20Measures) [Reconciliation of Net Income to Adjusted EBITDA](index=12&type=section&id=Reconciliation%20of%20Net%20Income%20to%20Adjusted%20EBITDA) Kratos' Adjusted EBITDA for Q1 2025 was \$26.7 million, a slight increase from \$26.0 million in Q1 2024. The reconciliation from GAAP Net Income of \$4.5 million includes adjustments for interest, taxes, depreciation, amortization, and \$8.7 million in stock-based compensation. Reconciliation of Net Income to Adjusted EBITDA | Line Item | Q1 2025 ($ millions) | Q1 2024 ($ millions) | | :--- | :--- | :--- | | **Net income attributable to Kratos** | \$4.5 | \$1.3 | | Interest expense, net | \$0.9 | \$2.8 | | Provision for income taxes | \$0.9 | \$2.7 | | Depreciation | \$8.3 | \$7.2 | | Stock-based compensation | \$8.7 | \$9.2 | | Amortization of intangible assets | \$2.1 | \$2.1 | | Other adjustments | \$1.3 | \$0.7 | | **Adjusted EBITDA** | **\$26.7** | **\$26.0** | [Computation of Adjusted Earnings Per Share (EPS)](index=16&type=section&id=Computation%20of%20Adjusted%20Earnings%20Per%20Share%20(EPS)) Non-GAAP Adjusted EPS for Q1 2025 was \$0.12, compared to \$0.11 in the prior-year quarter. The calculation starts with GAAP net income and adds back non-cash and certain other expenses like amortization, depreciation, and stock-based compensation, resulting in a Non-GAAP Adjusted Net Income of \$18.9 million. Adjusted EPS Calculation | Line Item | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | **GAAP Net Income (\$ million)** | \$4.5 | \$1.3 | | Total Adjustments (\$ million) | \$21.3 | \$19.2 | | Income Taxes on Non-GAAP measure (\$ million) | \$(6.9) | \$(7.1) | | **Non-GAAP Adjusted Net Income (\$ million)** | **\$18.9** | **\$16.1** | | **Adjusted EPS** | **\$0.12** | **\$0.11** | | Diluted Shares Outstanding (millions) | 156.2 | 141.5 | [Company Information and Disclosures](index=5&type=section&id=Company%20Information%20and%20Disclosures) [About Kratos Defense & Security Solutions](index=5&type=section&id=About%20Kratos%20Defense%20%26%20Security%20Solutions) Kratos is a technology company focused on the defense, national security, and commercial markets. The company emphasizes affordability and rapid development of mission-critical solutions. Its primary business areas include satellite ground systems, unmanned aerial drones, hypersonic vehicles, propulsion systems, C5ISR, microwave electronics, and virtual training systems. - Kratos positions itself as an innovative and disruptive change agent, specializing in designing products for rapid, large-quantity, and low-cost manufacturing[19](index=19&type=chunk) - Key business areas include jet-powered unmanned aerial systems, hypersonic vehicles, rocket and propulsion systems, C5ISR, and satellite command and control systems[20](index=20&type=chunk) [Forward-Looking Statements and Risk Factors](index=6&type=section&id=Forward-Looking%20Statements%20and%20Risk%20Factors) This section contains standard legal disclaimers regarding forward-looking statements, which include the company's financial guidance and expectations for future performance. It cautions investors that actual results may differ materially and lists numerous risk factors, such as government spending constraints, contract cancellations, supply chain disruptions, and geopolitical conflicts. - The report includes forward-looking statements concerning future financial performance, including revenue growth expectations for 2025 and 2026, profitability, and cash flow[21](index=21&type=chunk) - Key risks identified include dependency on U.S. government spending, changes in procurement laws, competition, supply chain issues, cybersecurity threats, and geopolitical conflicts in Ukraine and Israel[22](index=22&type=chunk)[23](index=23&type=chunk)

Core Insights - Kratos Defense & Security Solutions, Inc. reported first quarter 2025 revenues of $302.6 million, reflecting a 9.2% increase compared to $277.2 million in the first quarter of 2024, with 7.4% organic growth [1][4] - The company achieved a consolidated book-to-bill ratio of 1.2 to 1 for the first quarter of 2025, with bookings totaling $365.6 million [1][12] - The last twelve months ended March 30, 2025, also showed a book-to-bill ratio of 1.2 to 1, with total bookings reaching $1.401 billion [1][12] Financial Performance - First quarter 2025 operating income was reported at $6.6 million, while net income attributable to Kratos was $4.5 million, resulting in a GAAP net income per share of $0.03, up from $0.01 in the first quarter of 2024 [1][3] - Adjusted EBITDA for the first quarter of 2025 was $26.7 million, compared to $26.0 million in the same period of 2024 [1][26] - The company reported cash flow used in operations of $29.2 million, primarily due to working capital requirements related to revenue growth [5] Segment Performance - The Unmanned Systems (KUS) segment generated revenues of $63.1 million, reflecting a 6.2% organic growth, but reported an operating loss of $1.7 million [6][38] - The Government Solutions (KGS) segment saw revenues increase to $239.5 million, a 7.8% organic growth, with an operating income of $17.0 million [8][9] - KGS's adjusted EBITDA was $25.0 million, compared to $23.1 million in the first quarter of 2024 [10][39] Bookings and Backlog - KUS's book-to-bill ratio for the first quarter of 2025 was 1.8 to 1, with total backlog at $347.1 million, up from $295.2 million at the end of the fourth quarter of 2024 [7] - KGS reported a book-to-bill ratio of 1.0 to 1 for the first quarter of 2025, with total backlog increasing to $1.161 billion [11] - Consolidated backlog as of March 30, 2025, was $1.508 billion, compared to $1.445 billion on December 29, 2024 [12] Future Outlook - The company anticipates approximately 10% organic revenue growth for 2025 and 14% for 2026, supported by increased defense funding and clarity in government priorities [13] - Kratos is focused on expanding its capabilities in hypersonic technology, jet drones, and microwave electronics, with significant investments planned for manufacturing and production facilities [15][17] - The company provided financial guidance for the second quarter of 2025, projecting revenues between $300 million and $310 million, and reaffirmed its full-year guidance of $1.260 billion to $1.285 billion [16]

Core Viewpoint - Kratos Defense & Security Solutions, Inc. (KTOS) is expected to report strong first-quarter 2025 results, driven by solid revenue growth across its business segments despite challenges from higher costs [1][7]. Group 1: Revenue Performance - The Unmanned Systems business segment is anticipated to show solid revenue growth due to increased domestic and international target drone production, with quarterly revenues estimated at $65.6 million, reflecting a 10.4% increase year-over-year [2]. - The Government Solutions business segment is expected to benefit from revenue growth in C5ISR, microwave electronics, hypersonic and ballistic missile target businesses, and turbine technologies [3]. - However, the Space and Satellite business within the Government segment is projected to experience lower revenues due to OEM delays in software-defined satellite manufacturing, negatively impacting the deployment of commercial satellite ground equipment [4]. - The overall revenue estimate for the Government segment is $227 million, indicating a 4.2% rise from the previous year [5]. - The total revenue estimate for KTOS in the first quarter is $292.2 million, representing a 5.4% increase from the year-ago quarter [7]. Group 2: Earnings Expectations - The consensus estimate for KTOS' first-quarter earnings is nine cents per share, which indicates an 18.2% decline from the prior-year figure [8]. - Despite solid revenue projections, higher bid and proposal costs, along with increased subcontractor and material costs on certain contracts, are expected to adversely affect overall earnings [7]. Group 3: Market Position and Predictions - The Zacks model indicates that KTOS does not conclusively predict an earnings beat this time, with an Earnings ESP of 0.00% and a Zacks Rank of 3 (Hold) [9][10].

Core Viewpoint - Wall Street analysts anticipate a decline in Kratos' quarterly earnings per share (EPS) by 18.2% year-over-year, with expected revenues showing a modest increase of 5.4% [1] Revenue Estimates - Total revenues for Kratos are projected to be $292.16 million, reflecting a 5.4% increase from the previous year [1] - Revenues from Kratos Government Solutions are expected to reach $226.95 million, indicating a year-over-year change of +4.2% [4] - Revenues from Unmanned Systems are estimated at $65.55 million, representing a +10.4% change from the year-ago quarter [4] - Product sales revenues are projected to be $176.11 million, with a year-over-year change of +3.2% [4] - Service revenues are expected to total $117.12 million, showing a +10% increase year-over-year [5] Profit Estimates - Gross profit from service revenues is estimated at $28.97 million, up from $27.30 million in the same quarter last year [5] - Gross profit from product sales is projected to reach $47.03 million, compared to $43.70 million in the same quarter last year [6] - Operating income for Kratos Government Solutions is estimated at $13.79 million, down from $16.60 million a year ago [5] Market Performance - Kratos shares have increased by 27.1% over the past month, outperforming the Zacks S&P 500 composite, which rose by 11.5% [7] - The company holds a Zacks Rank of 3 (Hold), suggesting it is expected to perform in line with the overall market in the near future [7]

Group 1 - Kratos Defense & Security (KTOS) is scheduled to release its Q1 2025 earnings report on May 7, 2025, amidst a challenging environment for the defense sector [1] - The defense sector is currently navigating complex dynamics, which may impact the performance of companies like Kratos [1] Group 2 - The article emphasizes the importance of breaking down complex problems into basic elements to identify overlooked investment opportunities in technology and sustainability [1] - The author has a strong background in investment, private equity, and venture capital, indicating a solid foundation for analyzing emerging technologies and sustainable investing [1]

Industry Overview - Drone technology has evolved from military applications to a disruptive force in various industries, including agriculture, logistics, and construction, providing real-time data collection and autonomous delivery solutions [1][3] - The global drone tech market is projected to grow at a CAGR of 14.3% from 2025 to 2030, while the commercial drone market is expected to grow at a CAGR of 20.8% from 2025 to 2032, driven by the adoption of small UAVs for commercial applications [5] Technological Advancements - The integration of AI and advanced technologies like 5G has enhanced the capabilities of modern drones, allowing for autonomous navigation and improved real-time data transmission [2] - Drones are being utilized in agriculture for crop monitoring and irrigation, in construction for site surveys and inspections, and in logistics for last-mile deliveries [3] Key Companies - Draganfly, Inc. (DPRO) is actively involved in various sectors, including agriculture and public safety, with a focus on commercial drone solutions [4] - Ondas Holdings Inc. (ONDS) designs and markets drone solutions for industrial and government applications [4] - Red Cat Holdings, Inc. (RCAT) specializes in robotic hardware-software integration for military and commercial uses, with recent acquisitions enhancing its product portfolio [7] - Kratos Defense & Security Solutions, Inc. (KTOS) provides high-performance unmanned aerial target drone systems and has secured significant contracts with the U.S. Navy and Air Force [10][12] Recent Developments - Draganfly launched the APEX Drone, designed for portability and dual payload capabilities, positioning the company for growth in both commercial and military markets [13] - Kratos secured a $59.3 million contract for the production of BQM-177A Subsonic Aerial Target aircraft, part of a larger $227.6 million contract, indicating strong demand for its products [12] - Red Cat is collaborating with Palantir to enhance its drone capabilities for military applications, integrating advanced navigation software into its systems [8]

Core Insights - Kratos Defense & Security Solutions, Inc. will release its financial results for Q1 2025 on May 7th after market close, followed by a conference call at 2:00 p.m. Pacific Time [1] - The company focuses on technology and solutions for defense, national security, and commercial markets, emphasizing affordability and rapid development [3] Company Overview - Kratos is a technology company that invests in research and development to create solutions for mission-critical needs in defense and security [3] - The company aims to be a leader in cost-effective solutions by utilizing proven technologies and reducing costs, schedules, and risks [3] - Key business areas include virtualized ground systems, unmanned aerial drone systems, hypersonic vehicles, propulsion systems, and various electronic products for defense applications [3]

SAN DIEGO, April 22, 2025 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), a Technology Company in the Defense, National Security and Global Markets, today announced the continued expansion and operational deployment of its automated truck platooning systems in Ohio and Indiana. Building upon the company's March 2024 announcement of a contract to deploy its self-driving platooning technology between Ohio and Indiana along a major trucking corridor, this new milestone marks the su ...

SAN DIEGO, April 17, 2025 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS), a technology company in the defense, national security and global markets, announced today that it has received an approximate $30 million Sole Source Air Defense System Hardware Production award.  Kratos is an industry leading designer, engineer and manufacturer of military grade hardware, at quantity, in support of United States air defense, hypersonic, propulsion, high-performance jet drones and other m ...