Kratos Defense & Security Solutions (NasdaqGS:KTOS) Q4 2025 Earnings call February 23, 2026 05:00 PM ET Speaker15Good day, everyone, and welcome to Kratos Defense & Security Solutions' fourth quarter and fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To ...

Core Viewpoint - Raytheon, a business unit of RTX, has been awarded a contract to develop domestic production capabilities for thin film lithium niobate (TFLN) wafers, which are critical for high-speed communications and advanced sensing systems, aiming to reduce reliance on foreign sources [1] Group 1: Contract and Production - The contract is awarded by the Air Force Research Laboratory to establish a domestic supply of TFLN wafers, essential for both defense and commercial applications [1] - Raytheon will collaborate with US-based company G&H to develop the manufacturing process for high-quality TFLN wafers, with production expected to transition to G&H in early 2026 [1] Group 2: Supply Chain and Market Impact - The initiative aims to create a secure, independent U.S. supplier of TFLN, addressing vulnerabilities in the supply chain due to foreign market dominance [1] - The establishment of G&H as a domestic supplier is seen as crucial for enhancing supply chain resilience for both defense and commercial sectors [1] Group 3: Company Background - Raytheon has over 100 years of experience in developing defense solutions, including advanced technologies in air and missile defense, smart weapons, and sensors [1] - RTX employs more than 180,000 people globally and reported sales exceeding $88 billion in 2025, focusing on advancing technology and integrated defense systems [1]

Summary of Voyager Technologies FY Conference Call Company Overview - **Company**: Voyager Technologies (NYSE: VOYG) - **Industry**: Aerospace and Defense, Space Solutions - **IPO Date**: June 2025 - **Key Management**: - Dylan Taylor (CEO) - Matt Kuta (President) - Wallace Lockery (Chief Strategy Officer) - **Funding**: Over $400 million in cash and $200 million in undrawn credit facilities for M&A and organic growth [16][19] Core Business Segments 1. **Starlab**: - A commercial space station to replace the ISS by 2030 - Joint venture with Airbus, Mitsubishi, Palantir, and MDA - Unique single-module design to reduce costs and execution risks - Expected to generate $4 billion in annual revenue and $1.5 billion in annual free cash flow over 30 years [31] - Launch planned for 2029, with capacity to monetize quickly [29][30] 2. **Defense and National Security**: - Focus on mission management and operations for ISS traffic - Development of technologies for lunar exploration and national security applications - Emphasis on solid rocket motor technologies for next-gen interceptors [23][25] 3. **Space Solutions**: - Providing core products like sensors, electronics, and processing for space infrastructure [25] Financial Guidance - Projected **25% organic CAGR** from IPO to 2030, augmented by M&A [18] - Starlab expected to own ±60% of its operations, with potential dilution from external capital [31] Competitive Landscape - Competing under NASA's Commercial LEO Development Program (CLD) with companies like Blue Origin, Northrop Grumman, and Axiom Space - Received $218 million in funding from NASA for CLD phase one [33] - Anticipates a down-select in the next phase, with NASA likely to choose two providers [34] Technology and Innovation - Voyager operates as a technology company with a low capital intensity model, investing about **20% of revenue in R&D** [17] - Development of throttleable solid rocket motors, enhancing maneuverability and efficiency for missile defense systems [57][68] - Engaging with various defense contractors for potential technology integration [70] International Expansion and Partnerships - Actively pursuing international partnerships, particularly in microgravity research and production capabilities [75] - Focus on reshoring critical chemical production for munitions, with plans to build the first U.S. black powder factory in 30 years [76] Key Takeaways - Voyager Technologies is positioned as a disruptive force in the aerospace and defense industry, focusing on innovative solutions and strategic partnerships - The company is on track for significant growth, particularly with the Starlab project, which is expected to meet increasing demand for commercial space operations - The emphasis on technology integration and international collaboration highlights Voyager's commitment to expanding its market presence and capabilities [18][19][31][75]

Group 1 - NRG Energy, Inc. has appointed Sanjay Kapoor to its Board of Directors, effective February 3, 2026, and he will also serve on the Board's Audit Committee [1][2] - Kapoor's appointment increases NRG's Board to 11 members, enhancing its expertise in industrial, financial, and operational leadership [2] - Kapoor has over 30 years of experience in senior financial and operational roles, particularly in regulated and complex industries [3] Group 2 - Kapoor is the retired Executive Vice President and CFO of Spirit AeroSystems and has held leadership positions at Raytheon and United Technologies, where he significantly increased revenue [4] - He has extensive board experience with companies such as Crane Company, SAAB, Inc., and Black & Veatch, contributing to governance in industrial and technology-driven markets [5] - NRG is a major provider of electricity, natural gas, and smart home solutions to eight million customers across North America, operating approximately 25 GW of power generation [6]

Raytheon's NGSRI design leverages more than 60 years of air defense experience to provide the world's most advanced shoulder-launched air defense missile for the U.S. Army and Marine Corps. The company's use of modular system design and automated manufacturing has enabled faster development and production. About Raytheon Raytheon advances NGSRI with company-funded testing TUCSON, Ariz., Feb. 2, 2026 /PRNewswire/ -- Raytheon, an RTX (NYSE: RTX) business, has successfully completed a ballistic test for the U. ...

Core Viewpoint - Bel Fuse Inc. has appointed Tom Smelker as President of Connectivity Solutions, effective January 26, 2026, to drive growth and innovation in the aerospace and defense sectors [1][4]. Group 1: Appointment and Background - Tom Smelker brings over two decades of experience in the aerospace and defense sectors, previously serving as Senior Vice President and General Manager at Mercury Systems, managing a $400+ million P&L across ten sites [2]. - At Mercury Systems, he achieved a significant turnaround in profitability and repositioned key product lines into top-performing units [2]. - Prior to Mercury Systems, Smelker spent 19 years at Raytheon, where he advanced to Senior Fellow in Secure Processing and launched a secure systems business [2][3]. Group 2: Expertise and Strategic Fit - Smelker's expertise includes ruggedized computing, RF systems, secure microelectronics, and space technologies, aligning closely with Bel's strategic priorities [3]. - His leadership experience in P&L management and global operational oversight positions him well to lead Bel's Connectivity Solutions business unit [3]. Group 3: Leadership Comments - Farouq Tuweiq, CEO of Bel, expressed enthusiasm about Smelker's appointment, highlighting his leadership skills and industry knowledge as crucial for the company's growth [4]. - Smelker noted the opportunity to contribute to Bel's commitment to innovation and its strong position in the aerospace and defense markets [4]. Group 4: Company Overview - Bel Fuse Inc. designs, manufactures, and markets products that power, protect, and connect electronic circuits, serving various industries including defense, commercial aerospace, telecommunications, and automotive [5]. - The company's product groups include Power Solutions, Connectivity Solutions, and Magnetic Solutions, with operations in facilities worldwide [5].

Summary of Palladyne AI FY Conference Call Company Overview - **Company Name**: Palladyne AI (NasdaqGM: PDYN) - **Headquarters**: Salt Lake City, with offices in Kansas City, Tucson, Huntsville, and Boston - **Employee Count**: Approximately 140 as of the end of last year - **History**: Over 30 years in operation, initially focused on R&D with the Pentagon, acquired by Raytheon in 2007, and went public through a D-SPAC merger in 2021 [1][2][3][4] Core Business Segments Artificial Intelligence Products - **SwarmOS**: Drone swarming AI software enabling autonomous collaboration among drones without human intervention [5][6] - **Palladyne IQ**: AI for industrial robots allowing rapid task learning and multi-tasking capabilities [7][8] Defense Applications - **Robotic Applications**: AI systems used for tasks like corrosion and paint stripping on aircraft parts, traditionally labor-intensive [9] - **Partnerships**: Collaborations with companies like Red Cat and Draganfly for drone development [9][10] - **Manufacturing Capabilities**: Acquired companies producing precision parts for defense systems like the F-35 and Abrams tank, enabling vertical integration from design to production [10][18] Financial Performance and Projections - **Revenue Guidance for 2026**: Expected revenues between $24 million and $27 million, with a focus on modest market penetration of AI products [22][24] - **Cash Position**: $47 million cash on hand as of the end of last year, with a monthly R&D expenditure of approximately $2.1 million [22][23] Market Position and Competitive Advantage - **Embodied AI**: Distinction from cloud-based AI, with real-time processing capabilities and no reliance on cloud connectivity, reducing latency and costs [29][30] - **Cost-Effectiveness**: Development of low-cost, attritable munitions and UAVs, with a focus on economic attrition warfare [16][26] Industry Trends and Opportunities - **Defense Modernization**: Alignment with U.S. government initiatives to modernize the defense industrial base, creating favorable conditions for Palladyne AI's products [25][26] - **Market Expansion**: Potential for growth in both defense and commercial sectors, leveraging advancements in AI technology [24][25] Key Takeaways - **Innovative Development**: Rapid product development cycles, exemplified by the SwarmStrike and Banshee systems, which can go from concept to test flight in under six months [14][15] - **Market Readiness**: Products are in the early stages of market introduction, with ongoing trials and support from key defense customers [5][24] - **Long-Term Vision**: A strategic approach to growth with a focus on education and market penetration over the next three years [24]

Financial Data and Key Metrics Changes - Sales for Q3 were reported at $17.333 million, with a gross profit of $5.903 million and a gross margin of 34.1% [4] - Adjusted EBITDA for Q3 was $4.228 million, resulting in an adjusted EBITDA margin of 24.4% [4] - Q3 sales estimates were between $16.5 million and $17.5 million, with actual results falling within this range [5] - Adjusted EBITDA estimates were between $3.7 million and $4.1 million, with actual results slightly above this range [5] Business Line Data and Key Metrics Changes - The company had zero sales of C2B fabric in Q3, but over $1 million in sales of materials manufactured with C2B product [9] - Total missed shipments in Q3 were approximately 740,000, primarily due to international freight supply chain issues and customer specifications [10][11] - The company noted that the timing of fabric sales can distort quarterly results, impacting margins [10] Market Data and Key Metrics Changes - The A320neo aircraft family has a significant backlog of 7,900 aircraft as of September, with a total of over 12,000 airplanes when considering deliveries [22] - The CFM LEAP-1A engine has a market share of 64.5% for the A320 program, which is beneficial for the company as it is involved in this program [24] - The company is observing a ramp-up in production deliveries of LEAP engines, which is crucial for the A320neo program [25] Company Strategy and Development Direction - The company is planning to build a new composite materials manufacturing plant to double its current manufacturing capacity, with an estimated capital budget of approximately $50 million [54][56] - The new plant is expected to be operational in the second half of calendar 2028, supporting long-term business and sales outlooks [54][56] - The company is actively participating in missile systems production, particularly for the Patriot missile system, in response to increased demand due to geopolitical tensions [41][47] Management's Comments on Operating Environment and Future Outlook - Management indicated that the industry is recovering, but supply chain challenges are reemerging as programs accelerate [11] - The company expects significant revenue opportunities from various missile programs, although some details remain confidential [52] - Management expressed confidence in the long-term growth potential, emphasizing the need for increased manufacturing capacity to meet future demands [56] Other Important Information - The company has zero long-term debt and $63.6 million in cash at the end of Q3, with a history of uninterrupted cash dividends for 41 consecutive years [37] - A recent S-3 registration statement was filed with the SEC, indicating potential future capital-raising activities [3] Q&A Session Summary Question: What is the outlook for the A320neo program? - The A320neo program is expected to ramp up deliveries significantly, targeting a delivery rate of 75 airplanes per month by 2027, which would translate into substantial engine orders for the company [22][24] Question: How is the company addressing supply chain challenges? - Management noted that while supply chain issues are reemerging, they are actively managing these challenges and expect to continue supporting increased production demands [11][12]

Investment Rating - The report indicates a positive outlook for the European defense sector, particularly highlighting Rheinmetall as a core investment target with a target price of €2,200, suggesting potential upside despite capacity expansion risks [6]. Core Insights - The report emphasizes the long-term growth trend in global defense spending, driven by geopolitical tensions and increased U.S. defense budgets, which are expected to benefit companies like BAE Systems, Leonardo, and Rheinmetall [4][3]. - Geopolitical events, such as the Greenland issue and Ukraine negotiations, are identified as short-term catalysts for the defense sector, with a focus on the communication dynamics between companies and governments [8][2]. - The civil aviation sector presents investment opportunities that can benefit from increased defense spending, particularly in logistics and space sectors as Europe seeks strategic autonomy [7]. Summary by Sections U.S. Defense Spending Impact - The proposed increase in the U.S. defense budget from approximately $900 billion to $1.5 trillion signals a significant focus on national security, impacting European defense dynamics [3]. - The report notes that this increase is equivalent to the total annual defense spending of European countries, indicating a shift in investment strategies among hedge funds and institutional investors towards German companies with high growth expectations [3][10]. German Defense Sector Focus - Rheinmetall is highlighted as a key player in the German defense sector, with a notable recovery in interest due to its political stability and financial capacity [5]. - The market is currently focusing on long-term prospects for Rheinmetall, with investors looking beyond short-term valuation multiples [6]. Civil Aviation and Defense Synergy - The report discusses how strong defense business performance can positively influence civil aviation stocks, particularly through increased utilization of fighter jets and transport aircraft orders [7]. - The potential for European strategic autonomy and reduced U.S. military presence could enhance the importance of logistics and space sectors, where some civil aviation companies have significant advantages [7]. Catalysts and Market Sentiment - Key geopolitical events are identified as critical drivers for the defense sector, with ongoing discussions about Greenland and Ukraine serving as immediate catalysts [8]. - Recent market sentiment has shifted, with increased interest in German defense stocks and a cautious approach towards French counterparts, reflecting a broader trend of reallocating investments in response to geopolitical developments [10][11]. Investment Strategies - The report suggests that investors are increasingly looking at a basket of stocks rather than individual companies to mitigate risks and capture opportunities in the defense sector [15]. - Options trading strategies are recommended for those looking to take long positions in the European defense sector, particularly focusing on Rheinmetall and Rolls-Royce as attractive targets [13][12].

Core Insights - Defense contractors' shares surged following President Trump's proposal to significantly increase the military budget to $1.5 trillion for 2027, up from $1 trillion [1][6] Group 1: Stock Performance - Shares of Lockheed Martin (LMT), Huntington Ingalls (HII), and L3 Harris (LHX) rose over 7%, leading gains in the S&P 500 index [2] - General Dynamics (GD) and Northrop Grumman (NOC) saw increases of more than 4%, while RTX Corp. (RTX) gained 2% [2] Group 2: Budget Details - The Department of Defense had a budget of $850 billion in fiscal 2025, which was an increase of $34 billion from the previous year [3] - The White House proposed an increase of over $113 billion for the fiscal 2026 defense budget [3] - Trump's proposed budget represents a roughly 50% increase from the current budget levels [3] Group 3: Market Reactions - The gains in defense stocks on Thursday reversed losses from the previous day, when Trump criticized companies for spending on stock buybacks and dividends instead of enhancing manufacturing processes [4]