Kratos Reports Second Quarter 2024 Financial Results

Second Quarter 2024 Revenues of $300.1 Million Increased 16.8 Percent over Second Quarter 2023 Revenues of $256.9 Million, including 16.7 Percent Organic Growth

Second Quarter 2024 Unmanned Systems Revenues of $85.8 Million Increased 64.7 Percent over Second Quarter 2023 Revenues of $52.1 Million, including 61.8 Percent Organic Growth

Second Quarter 2024 KGS Revenues of $214.3 Million Reflect 4.6 Percent Organic Growth over Second Quarter 2023 Revenues of $204.8 Million

Second Quarter 2024 and Last Twelve Months Ended June 30, 2024 Consolidated Book to Bill Ratio of 1.1 to 1
Second Quarter 2024 Consolidated Bookings of $334.1 Million

Unmanned Systems Second Quarter 2024 Book to Bill Ratio of 1.5 to 1 and Last Twelve Months Ended June 30, 2024 Book to Bill Ratio of 1.1 to 1
Second Quarter 2024 Bookings of $129.6 Million and Last Twelve Months Ended June 30, 2024 Bookings of $290.2 Million

Affirms Full Year 2024 Financial Forecast

SAN DIEGO, Aug. 07, 2024 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a Technology Company in the Defense, National Security and Global Markets, today reported its second quarter 2024 financial results, including Revenues of $300.1 million, Operating Income of $12.5 million, Net Income of $7.9 million, Adjusted EBITDA of $29.9 million and a consolidated book to bill ratio of 1.1 to 1.0.

Included in second quarter 2024 Net Income and Operating Income is non-cash stock compensation expense of $6.6 million and Company-funded Research and Development (R&D) expense of $10.2 million, primarily reflecting ongoing development efforts, including in our Space and Satellite business to develop and expand our virtual, software-based OpenSpace command & control (C2), telemetry tracking & control (TT&C), Kratos owned and operated Global Space Domain Awareness (SDA) System and other solutions and development efforts in our Unmanned Systems business.

Kratos reported second quarter 2024 GAAP Net Income attributable to Kratos of $7.9 million and Earnings Per Share of $0.05 compared to a GAAP Net Loss attributable to Kratos of $2.7 million and a GAAP Net Loss per share of $0.02 for the second quarter of 2023. Adjusted EPS was $0.14 for the second quarter of 2024, compared to $0.09 for the second quarter of 2023.

Second quarter 2024 Revenues of $300.1 million increased $43.2 million, or 16.8 percent, from second quarter 2023 Revenues of $256.9 million. Including the impact of the Sierra Technical Services, Inc. (STS) acquisition on a pro forma basis as if acquired at the beginning of 2023, second quarter 2024 consolidated Revenues reflect organic growth of 16.7 percent, including 61.8 percent organic growth in Unmanned Systems and 4.6 percent organic revenue growth in KGS, with the most notable growth in our Turbine Technologies, Microwave Products and C5ISR businesses.

Second quarter 2024 Cash Flow Used in Operations was $2.7 million, reflecting working capital requirements related to our 16.7 percent organic revenue growth, including increases in receivables and prepaid assets related to vendor required deposits and reduction in deferred revenue or customer prepayment balances. Free Cash Flow Used in Operations was $15.4 million after funding of $12.7 million of capital expenditures, including the continued manufacture of two production lots of Kratos Valkyrie unmanned tactical jet drone aircraft prior to contract award.

For the second quarter of 2024, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $85.8 million, as compared to $52.1 million in the second quarter of 2023, with organic revenue growth of 61.8 percent driven primarily by increased domestic target drone production and a certain international target drone delivery which contributed $17.4 million, and reflects the pro forma impact of the STS acquisition as if acquired at the beginning of 2023. KUS’s Operating Income was $3.6 million in the second quarter of 2024 compared to Operating Income of $1.2 million in the second quarter of 2023, primarily reflecting the impact of the increased revenue volume.

KUS’s Adjusted EBITDA for the second quarter of 2024 was $7.2 million, compared to second quarter 2023 KUS Adjusted EBITDA of $3.6 million, reflecting the increased revenue volume and favorable revenue mix.
        
KUS’s book-to-bill ratio for the second quarter of 2024 was 1.5 to 1.0 and 1.1 to 1.0 for the last twelve months ended June 30, 2024, with bookings of $129.6 million for the three months ended June 30, 2024, and bookings of $290.2 million for the last twelve months ended June 30, 2024. Total backlog for KUS at the end of the second quarter of 2024 was $305.5 million compared to $261.8 million at the end of the first quarter of 2024.

For the second quarter of 2024, Kratos’ Government Solutions Segment (KGS) Revenues of $214.3 million increased 4.6 percent from Revenues of $204.8 million in the second quarter of 2023. The increased Revenues reflects notable organic revenue growth in our Turbine Technologies, Microwave Products, and C5ISR businesses.

KGS reported operating income of $15.5 million in the second quarter of 2024 compared to $11.6 million in the second quarter of 2023, primarily reflecting a more favorable revenue mix and leverage on the fixed overhead and SG&A costs. Second quarter 2024 KGS Adjusted EBITDA was $22.7 million, compared to second quarter 2023 KGS Adjusted EBITDA of $18.0 million, reflecting a more favorable mix in revenues and increased revenue volume.

For the second quarter of 2024 and the last twelve months ended June 30, 2024, KGS reported a book-to-bill ratio of 1.0 to 1.0 and 1.1 to 1.0, respectively, and bookings of $204.5 million and $965.0 million for the three and last twelve months ended June 30, 2024, respectively. KGS’s total backlog at the end of the second quarter of 2024 was $997.2 million, as compared to $1.007 billion at the end of the first quarter of 2024.

For the second quarter of 2024, Kratos reported consolidated bookings of $334.1 million and a book-to-bill ratio of 1.1 to 1.0, with consolidated bookings of $1.255 billion and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended June 30, 2024. Consolidated backlog was $1.303 billion on June 30, 2024 and $1.269 billion on March 31, 2024. Kratos’ bid and proposal pipeline was $12.0 billion at June 30, 2024, up from $11.0 billion at March 31, 2024. Backlog at June 30, 2024 was comprised of funded backlog of $1.071 billion and unfunded backlog of $232.1 million.

Eric DeMarco, Kratos’ President and CEO, said, “Kratos’ position as a leading defense technology company is reflected in our second quarter and six month year to date organic growth rates of 16.7% and 18.1%, respectively. We are growing the business, while also increasing our profitability, with second quarter and year to date EBITDA growth of approximately 38.4% and 44.8%, over Q2 and six months year to date 2023, respectively. Additionally, we are making significant investments in facilities, manufacturing capacity, infrastructure, research, development and more, to address growing U.S. National Security needs and certain large, new program and system opportunities for Kratos, including as reflected in our record opportunity pipeline of $12.0 billion.”

Mr. DeMarco continued, “Over the past several years, Kratos’ investments include developing and maturing a family of high performance jet drone systems, which today are flying with the U.S. Army, Navy, Air Force, Marines and numerous allied countries globally. Kratos’ Unmanned Systems business second quarter 2024 62% organic growth rate is representative of Kratos’ industry leading position as the affordable, high performance jet UAV system provider, for target, tactical and “other” applications. Kratos is also the industry leader in low cost, high performance jet engines, solid rocket motors, hypersonic systems, BMD targets, air defense systems, microwave electronics and virtualized OpenSpace software for satellite C2, TT&C and Space Domain Awareness.”

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