Kratos Reports Fourth Quarter and Full Year 2024 Financial Results

           Full Year 2024 Revenues of $1.136 Billion Reflect 9.6 Percent Growth and 9.1 Percent Organic Growth, Respectively, Over Full Year 2023 Revenues of $1.037 Billion

Full Year 2024 Unmanned Systems Revenues of $270.5 Million Reflect 27.5 Percent Growth and 25.1 Percent Organic Growth Over Full Year 2023 Revenues of $212.2 Million

Full Year 2024 KGS Revenues of $865.8 Million Reflect 5.0 Percent Organic Growth of $40.9 Million Over Full Year 2023 Revenues of $824.9 Million

Full Year 2024 Net Income of $16.3 Million and GAAP EPS of $0.11 Per Share

Fourth Quarter 2024 Revenues of $283.1 Million Reflect 3.4 Percent Growth Over Fourth Quarter 2023 Revenues of $273.8 Million

Fourth Quarter 2024 Cash Flow Generated from Operations and Free Cash Flow of $45.6 million and $32.0 million, Respectively

Fourth Quarter 2024 Consolidated Book to Bill Ratio of 1.5 to 1 and Bookings of $434.2 Million

Last Twelve Months Ended December 29, 2024 Consolidated Book to Bill Ratio of 1.2 to 1 and Bookings of $1.354 Billion

2025 Financial Forecast Includes 10 Percent Organic Revenue Growth and 2026 Initial Revenue Growth Forecast of 13 to 15 Percent over 2025 Forecast Based on Recent Program Awards

SAN DIEGO, Feb. 26, 2025 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a Technology Company in the Defense, National Security and Commercial Markets, today reported its fourth quarter 2024 financial results, including Revenues of $283.1 million, Operating Income of $3.0 million, Net Income attributable to Kratos of $3.9 million, Adjusted EBITDA of $25.2 million and a consolidated book to bill ratio of 1.5 to 1.0.

Fourth quarter 2024 Net Income and Operating Income includes non-cash stock compensation expense of $6.8 million, Company-funded Research and Development (R&D) expense of $10.6 million, including efforts in our Space, Satellite, Unmanned Systems and Microwave Electronic businesses, and expense to accrue $3.2 million related to an employee benefit plan assumed by the Company in an acquisition completed in 2011.

Kratos reported fourth quarter 2024 GAAP Net Income attributable to Kratos of $3.9 million and GAAP Net Income per share of $0.03, compared to GAAP Net Income attributable to Kratos of $2.4 million and GAAP Net Income per share of $0.02, for the fourth quarter of 2023. Adjusted earnings per share (EPS) was $0.13 for the fourth quarter of 2024, compared to $0.12 for the fourth quarter of 2023.

Fourth quarter 2024 Revenues of $283.1 million increased $9.3 million, reflecting 3.4 percent organic growth from fourth quarter 2023 Revenues of $273.8 million. Organic revenue growth was reported in both our Unmanned Systems and KGS segments, with KGS growth including increased revenues in Kratos Turbine Technologies, Defense Rocket Systems, Microwave Products, and C5ISR, offset by the previously reported and expected decline of approximately $16.1 million in the Space and Satellite business, including the industry related impact from OEM delays in the manufacture and delivery of software defined satellites.

Fourth quarter 2024 Cash Flow Generated from Operations was $45.6 million, primarily reflecting the receipt of accelerated favorable customer milestone payments, and increases in deferred revenues or customer advanced payments to $76.3 million at the end of the fourth quarter of 2024, up from $61.9 million at the end of the third quarter of 2024. Free Cash Flow Generated from Operations for the Fourth Quarter of 2024 was $32.0 million after funding of $13.6 million of capital expenditures.

For the fourth quarter of 2024, Kratos’ Unmanned Systems (KUS) segment generated Revenues of $61.1 million and organic revenue growth of 10.3 percent, as compared to $55.4 million in the fourth quarter of 2023, primarily reflecting increased target drone sales. KUS’s Operating Loss was $0.7 million in the fourth quarter of 2024, compared to Operating Income of $1.0 million in the fourth quarter of 2023. KUS’s Adjusted EBITDA for the fourth quarter of 2024 was $2.6 million, compared to $4.0 million for the fourth quarter 2023, reflecting revenue mix, the impact of increased material and subcontractor costs on multi-year fixed price contracts and increased R&D costs.

KUS’s book-to-bill ratio for the fourth quarter of 2024 was 1.3 to 1.0 and 1.2 to 1.0 for the twelve months ended December 29, 2024, with bookings of $82.4 million for the three months ended December 29, 2024, and bookings of $326.8 million for the twelve months ended December 29, 2024. Total backlog for KUS at the end of the fourth quarter of 2024 was $295.2 million compared to $273.9 million at the end of the third quarter of 2024 and $239.0 million at the end of the fourth quarter of 2023.

For the fourth quarter of 2024, Kratos’ Government Solutions (KGS) segment Revenues of $222.0 million increased from Revenues of $218.4 million in the fourth quarter of 2023, reflecting a 1.6 percent growth and organic growth rate. The increased Revenues includes organic revenue growth in our Turbine Technologies, C5ISR, Defense Rocket Support and Microwave Products businesses of $19.7 million, offset by the previously reported and expected decline of approximately $16.1 million in the Space and Satellite business.

KGS reported Operating Income of $11.0 million in the fourth quarter of 2024 compared to $17.5 million in the fourth quarter of 2023, primarily reflecting the mix in revenues and resources as well as the expense to accrue $3.2 million in the fourth quarter of 2024 related to a benefit plan assumed by the Company in a previous acquisition. Fourth quarter 2024 KGS Adjusted EBITDA was $22.6 million, compared to fourth quarter 2023 KGS Adjusted EBITDA of $25.1 million, primarily reflecting the mix in revenues and resources.

KGS reported a book-to-bill ratio of 1.6 to 1.0 for the fourth quarter of 2024, a book to bill ratio of 1.2 to 1.0 for the last twelve months ended December 29, 2024 and bookings of $351.8 million and $1.028 billion for the three and last twelve months ended December 29, 2024, respectively. KGS’s total backlog at the end of the fourth quarter of 2024 was $1.150 billion, as compared to $1.020 billion at the end of the third quarter of 2024, and $988.0 million at the end of the fourth quarter of 2023.

Kratos reported consolidated bookings of $434.2 million and a book-to-bill ratio of 1.5 to 1.0 for the fourth quarter of 2024, and consolidated bookings of $1.354 billion and a book-to-bill ratio of 1.2 to 1.0 for the last twelve months ended December 29, 2024. Consolidated backlog was $1.445 billion on December 29, 2024, as compared to $1.294 billion at September 29, 2024 and $1.227 billion on December 31, 2023. Kratos’ bid and proposal pipeline was $12.4 billion at December 29, 2024, as compared to $11.0 billion at December 31, 2023. Backlog at December 29, 2024 included funded backlog of $1.090 billion and unfunded backlog of $355.0 million.

Full Year 2024 Results

Kratos reported its full year 2024 financial results, including Revenues of $1.136 billion, Operating Income of $29.0 million, Net Income attributable to Kratos of $16.3 million, Adjusted EBITDA of $105.7 million and a consolidated book to bill ratio of 1.2 to 1.0.

Included in the full year 2024 Net Income and Operating Income is non-cash stock compensation expense of $29.8 million, Company-funded Research and Development (R&D) expense of $40.3 million, including ongoing development efforts in our Space and Satellite Communications business to develop our first to market, virtual, software-based OpenSpace command & control (C2), telemetry tracking & control (TT&C) and other ground system solutions and ongoing development efforts in our Unmanned Systems and Microwave Products businesses, and an expense to accrue $3.2 million related to an employee benefit plan assumed by the Company in an acquisition completed in 2011.

Kratos reported full year 2024 GAAP Net Income of $16.3 million and GAAP Net Income per share of $0.11, compared to a GAAP Net Loss attributable to Kratos of $8.9 million and a GAAP Net Loss per share of $0.07, for the full year 2023. Adjusted earnings per share (EPS) was $0.49 for the full year 2024, compared to $0.42 for the full year 2023.

Full year 2024 Revenues of $1.136 billion increased $99.2 million, reflecting 9.6 percent growth and 9.1 percent organic growth, including the impact of the Sierra Technical Services, Inc. (STS) acquisition on a pro forma basis as if acquired at the beginning of 2023, respectively, from full year 2023 Revenues of $1.037 billion. Full year 2024 Cash Flow Generated from Operations was $49.7 million, including the receipt of accelerated favorable customer milestone payments, offset partially by working capital uses including increases in inventories, prepaid assets and investments in other assets and reduction of deferred revenues or advanced customer payments. Free Cash Flow Used in Operations was $8.5 million after funding of $58.2 million of capital expenditures. Full year 2024 capital expenditures were elevated due primarily to the manufacture of the two production lots of Valkyries prior to contract award to meet anticipated customer orders and requirements and due to investments related to the expansion and addition of production facilities.

For full year 2024, KUS generated Revenues of $270.5 million, as compared to $212.2 million in the full year 2023, reflecting 27.5 percent growth and 25.1 percent organic growth, including the impact of the STS acquisition on a pro forma basis as if acquired at the beginning of 2023, primarily reflecting increased domestic and international drone activity. KUS’s Operating Income was $2.9 million in full year 2024 compared to $4.2 million in full year 2023. KUS’s Adjusted EBITDA for full year 2024 was $16.3 million, compared to full year 2023 Adjusted EBITDA of $14.8 million, reflecting the increased volume partially offset by increased material and subcontractor costs on multi-year fixed price contracts and increased R&D costs.

For full year 2024, KGS Revenues of $865.8 million increased $40.9 million, reflecting 5.0 percent organic growth from Revenues of $824.9 million in full year 2023. The increased Revenues includes organic revenue growth in our Turbine Technologies, C5ISR, Microwave Products, Defense Rocket Support and Training Solutions businesses aggregating $88.7 million, offset by a reduction of $47.8 million in offset by the Space and Satellite business described previously.

KGS reported operating income of $56.6 million in full year 2024 compared to $52.7 million in full year 2023, primarily reflecting the increased revenue volume. Full year 2024 KGS Adjusted EBITDA was $89.4 million, compared to full year 2023 KGS Adjusted EBITDA of $80.6 million, primarily reflecting the increased revenue.

Eric DeMarco, Kratos’ President and CEO, said, “Kratos’ full year 2024 and fourth quarter demonstrated once again that we can significantly organically grow the business, and make sizable internally funded investments, positioning the Company for accelerating future growth, while also generating significant, positive operating cash flow. We have recently received several large new program and contract awards, including in the hypersonic, target drone, jet engine, rocket, and satellite system areas, enabling us to increase our expected revenue growth rate for 2026 to a range of 13 percent to 15 percent above our current 2025 financial forecast that we provided today, which includes 10 percent growth over 2024. Kratos’ fourth quarter 1.5 to 1.0 book to bill ratio and our $12.4 Billion opportunity pipeline also provides confidence in our expected accelerating future growth trajectory, with increased margins.”

Mr. DeMarco continued, “The Trump Administration has increased emphasis on reducing cost, rapidly fielding new technology and systems and getting more for less, all which are and have been pillars of Kratos’ Mission. At Kratos, “Affordability is a Technology” and “Better is the Enemy of Good Enough Ready to Field Today”, as represented in our Erinyes, Dark Fury and other hypersonic vehicles, our Zeus, Oriole and other rocket systems, and our jet drones, jet engines and propulsion systems. We believe Kratos’ alignment with the new Administration’s objectives will be recognized in increased bookings, increased expected future growth rates and increased future profitability, including as based on recent meetings and discussions with certain of our customers.”

Mr. DeMarco concluded, “After decades of focus on fighting terrorism and asymmetric warfare, the United States has begun a generational rebuild of its industrial base and the ability to deter and defeat Nation State adversaries. The Axis of Resistance and the threat to the U.S. and its Allies is real, and Kratos is a key element of the proven Peace through Overwhelming Strength approach to Global Security and stability. As a result, we expect a future, multiyear, up and to the right organic growth trajectory with increased margins and profitability, and Kratos making the necessary investments in, among other things, property, plant, and equipment, to successfully execute for our customers and country.”

Financial Guidance

We are providing our initial 2025 first quarter and full year 2025 financial guidance range, which includes our assumptions, including as related to: current forecasted business mix, employee sourcing, hiring and retention; manufacturing, production and supply chain disruptions; parts shortages and related continued significant cost and price increases in each of these areas, that are impacting the industry and Kratos. Additionally, a U.S. Government budget was not passed by October 1, 2024, the beginning of Federal Fiscal Year 2025, and as a result, Kratos and others in our industry are operating under a Continuing Resolution Authorization (CRA), which currently expires March 14, 2025, under which no new contracts and no increases in existing contracts production or funding, among other stipulations, is permitted. If the current CRA is not resolved by March 14, 2025, the industry and Kratos will have operated under CRAs, without a DoD Budget, for approximately 12 of the previous 18 months. Kratos has a number of new and existing programs and contracts which are directly being impacted by the current CRA. Kratos’ 2025 financial forecast and guidance provided today assumes that the current CRA will be resolved by March 14, 2025, and that a U.S. Federal and DoD budget which includes no unexpected funding cuts impacting our business occurs. If the current CRA goes substantially beyond the existing March 14, 2025 date, or if there are significant reductions or changes to programs, contracts or initiatives that Kratos is or expects to be involved with, we will evaluate Kratos’ 2025 and future financial forecasts at that time, based on the existing facts, circumstances and expectations and make any adjustments required.

Kratos’ 2025 financial forecast and guidance includes elevated investments for capital expenditures for property, plant and equipment, including the expansion of our manufacturing and production facilities and related inventory builds in our Rocket Systems and Hypersonic businesses, primarily related to the recent MACH-TB 2.0 contract award, the continued manufacture of two production lots of Valkyries prior to contract award, to meet anticipated customer orders and requirements, the expansion and build-out of the Company’s Microwave Products production facilities, the expansion and build-out of our small jet engine production and test cell facilities, and the build-out of additional secure facilities for our federal secured space communications business, in accordance with contract and customer requirements. Kratos’ operating cash flow guidance also assumes certain investments in our rocket systems and unmanned systems businesses.

Our first quarter and full year 2025 guidance ranges and a summary of the forecasted investments for new programs and opportunities are as follows: