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.”
Mr. DeMarco concluded, “Kratos is a hardware,
software and system company, and we are vertically integrating in
critical areas to ensure our ability to deliver products that work,
at planned cost and on schedule, while also enhancing our physical
and cyber security posture. Kratos engineers and develops our
hardware up front, for reliability and rapid, low cost
manufacturing, in order to provide large quantities and affordable
mass to our customers and partners. Delivering reliable hardware
for National Security applications, on time and on budget is hard,
and a core competency and differentiator of Kratos. We are working
closely with our customers, traditional large system integrator
partners and new industry entrants to rebuild the U.S. Industrial
Base, deter our adversaries and deliver value to each of our
stakeholders.”
Financial GuidanceWe are providing our initial
2024 third quarter financial guidance and affirming our full year
2024 guidance today, which ranges include our current forecasted
business mix assumptions and expected contract execution and
delivery schedules. Our financial guidance also includes our
expectations and assumptions for our supply chains execution, and
for employee sourcing, hiring, retention and the related cost. We
have also taken into consideration in our affirmed fiscal 2024
guidance a Federal Fiscal Year 2025 Continuing Resolution
Authorization (CRA) commencing on October 1, 2024, and under such
expected CRA, no new program/contract awards, no increases in
existing production contract funding, and no transition from
program development to production.
Our third quarter and full year 2024 guidance
ranges are as follows:
Current Guidance Range |
$M |
Q324 |
FY24 |
|
|
|
Revenues |
$265 -
$280 |
$1,125 - $1,150 |
R&D |
$10 -
$12 |
$40 - $43 |
Operating Income |
$3 -
$5 |
$33 - $38 |
Depreciation |
$7 -
$8 |
$30 - $32 |
Amortization |
$2 -
$3 |
$8 - $10 |
Stock Based Compensation |
$6 -
$7 |
$29 - $30 |
Adjusted EBITDA |
$20 -
$23 |
$102 - $107 |
Operating Cash Flow |
|
$50 - $60 |
Capital Expenditures |
|
$70 - $80 |
Free Cash Flow Use |
|
($10 - $30) |
|
|
|
Management will discuss the Company’s financial results, on a
conference call beginning at 2:00 p.m. Pacific (5:00 p.m. Eastern)
today. The call will be available at www.kratosdefense.com.
Participants may register for the call using this Online
Form. Upon registration, all telephone participants will
receive the dial-in number along with a unique PIN that can be used
to access the call. For those who cannot access the live broadcast,
a replay will be available on Kratos’ website.
About Kratos Defense & Security
Solutions
Kratos Defense & Security Solutions,
Inc. (NASDAQ: KTOS) is a technology, products, system and
software company addressing the defense, national security, and
commercial markets. Kratos makes true internally funded
research, development, capital and other investments, to rapidly
develop, produce and field solutions that address our customers’
mission critical needs and requirements. At Kratos,
affordability is a technology, and we seek to utilize proven,
leading edge approaches and technology, not unproven bleeding edge
approaches or technology, with Kratos’ approach designed to reduce
cost, schedule and risk, enabling us to be first to market with
cost effective solutions. We believe that Kratos is known as
an innovative disruptive change agent in the industry, a company
that is an expert in designing products and systems up front for
successful rapid, large quantity, low cost future manufacturing
which is a value add competitive differentiator for our large
traditional prime system integrator partners and also to our
government and commercial customers. Kratos intends to pursue
program and contract opportunities as the prime or lead contractor
when we believe that our probability of win (PWin) is high and any
investment required by Kratos is within our capital resource
comfort level. We intend to partner and team with a large,
traditional system integrator when our assessment of PWin is
greater or required investment is beyond Kratos’ comfort level.
Kratos’ primary business areas include virtualized ground systems
for satellites and space vehicles including software for command
& control (C2) and telemetry, tracking and control (TT&C),
jet powered unmanned aerial drone systems, hypersonic vehicles and
rocket systems, propulsion systems for drones, missiles, loitering
munitions, supersonic systems, space craft and launch systems,
C5ISR and microwave electronic products for missile, radar, missile
defense, space, satellite, counter UAS, directed energy,
communication and other systems, and virtual & augmented
reality training systems for the warfighter. For more
information, visit www.KratosDefense.com
Notice
Regarding
Forward-Looking
StatementsThis
news release contains certain forward-looking statements that
involve risks and uncertainties, including, without limitation,
express or implied statements concerning the Company’s expectations
regarding its future financial performance, including the Company’s
expectations for its third quarter and full year 2024 revenues,
organic revenue growth rates, R&D, operating income (loss),
depreciation, amortization, stock based compensation expense, and
Adjusted EBITDA, and full year 2024 operating cash flow, capital
expenditures and other investments, and free cash flow, the
Company’s future growth trajectory and ability to achieve improved
revenue mix and profit in certain of its business segments and the
expected timing of such improved revenue mix and profit, including
the Company’s ability to achieve sustained year over year
increasing revenues, profitability and cash flow, the Company’s
expectation of ramp on projects and that investments in its
business, including Company funded R&D expenses and ongoing
development efforts, will result in an increase in the Company’s
market share and total addressable market and position the Company
for significant future organic growth, profitability, cash flow and
an increase in shareholder value, the Company’s bid and proposal
pipeline and backlog, including the Company’s ability to timely
execute on its backlog, demand for its products and services,
including the Company’s alignment with today’s National Security
requirements and the positioning of its C5ISR and other businesses,
planned 2024 investments, including in the tactical drone and
satellite areas, and the related potential for additional growth in
2025 and beyond, ability to successfully compete and expected new
customer awards, including the magnitude and timing of funding and
the future opportunity associated with such awards, including in
the target and tactical drone and satellite communication areas,
performance of key contracts and programs, including the timing of
production and demonstration related to certain of the Company’s
contracts and control (TT&C) product offerings, the impact of
the Company’s restructuring efforts and cost reduction measures,
including its ability to improve profitability and cash flow in
certain business units as a result of these actions and to achieve
financial leverage on fixed administrative costs, the ability of
the Company’s advanced purchases of inventory to mitigate supply
chain disruptions and the timing of converting these investments to
cash through the sales process, benefits to be realized from the
Company’s net operating loss carry forwards, the availability and
timing of government funding for the Company’s offerings, including
the strength of the future funding environment, the short-term
delays that may occur as a result of Continuing Resolutions or
delays in U.S. Department of Defense (DoD) budget approvals, timing
of LRIP and full rate production related to the Company’s unmanned
aerial target system offerings, as well as the level of recurring
revenues expected to be generated by these programs once they
achieve full rate production, market and industry developments, and
the current estimated impact of COVID-19 and employee absenteeism,
supply chain disruptions, availability of an experienced skilled
workforce, inflation and increased costs, risks related to
potential cybersecurity events or disruptions of our information
technology systems, and delays in our financial projections,
industry, business and operations, including projected growth. Such
statements are only predictions, and the Company’s actual results
may differ materially from the results expressed or implied by
these statements. Investors are cautioned not to place undue
reliance on any such forward-looking statements. All such
forward-looking statements speak only as of the date they are made,
and the Company undertakes no obligation to update or revise these
statements, whether as a result of new information, future events
or otherwise. Factors that may cause the Company’s results to
differ include, but are not limited to: risks to our business and
financial results related to the reductions and other spending
constraints imposed on the U.S. Government and our other customers,
including as a result of sequestration and extended continuing
resolutions, the Federal budget deficit and Federal government
shut-downs; risks of adverse regulatory action or litigation; risks
associated with debt leverage; risks that our cost-cutting
initiatives will not provide the anticipated benefits; risks that
changes, cutbacks or delays in spending by the DoD may occur, which
could cause delays or cancellations of key government contracts;
risks of delays to or the cancellation of our projects as a result
of protest actions submitted by our competitors; risks that changes
may occur in Federal government (or other applicable) procurement
laws, regulations, policies and budgets; risks of the availability
of government funding for the Company's products and services due
to performance, cost growth, or other factors, changes in
government and customer priorities and requirements (including
cost-cutting initiatives, the potential deferral of awards,
terminations or reduction of expenditures to respond to the
priorities of Congress and the Administration, or budgetary cuts
resulting from Congressional committee recommendations or automatic
sequestration under the Budget Control Act of 2011, as amended);
risks that the unmanned aerial systems and unmanned ground sensor
markets do not experience significant growth; risks that products
we have developed or will develop will become programs of record;
risks that we cannot expand our customer base or that our products
do not achieve broad acceptance which could impact our ability to
achieve our anticipated level of growth; risks of increases in the
Federal government initiatives related to in-sourcing; risks
related to security breaches, including cyber security attacks and
threats or other significant disruptions of our information
systems, facilities and infrastructures; risks related to our
compliance with applicable contracting and procurement laws,
regulations and standards; risks related to the new DoD
Cybersecurity Maturity Model Certification; risks relating to the
ongoing conflict in Ukraine and the Israeli-Palestinian military
conflict; risks to our business in Israel; risks related to our
international operations; risks related to contract performance;
risks related to failure of our products or services; risks
associated with our subcontractors’ or suppliers’ failure to
perform their contractual obligations, including the appearance of
counterfeit or corrupt parts in our products; changes in the
competitive environment (including as a result of bid protests);
failure to successfully integrate acquired operations and compete
in the marketplace, which could reduce revenues and profit margins;
risks that potential future goodwill impairments will adversely
affect our operating results; risks that anticipated tax benefits
will not be realized in accordance with our expectations; risks
that a change in ownership of our stock could cause further
limitation to the future utilization of our net operating losses;
risks that we may be required to record valuation allowances on our
net operating losses which could adversely impact our profitability
and financial condition; risks that the current economic
environment will adversely impact our business, including with
respect to our ability to recruit and retain sufficient numbers of
qualified personnel to execute on our programs and contracts, as
well as expected contract awards and risks related to increasing
interest rates and risks related to the interest rate swap contract
to hedge Term SOFR associated with the Company’s Term Loan A;
currently unforeseen risks associated with COVID-19 and risks
related to natural disasters or severe weather. These and other
risk factors are more fully discussed in the Company’s Annual
Report on Form 10-K for the period ended December 31, 2023, and in
our other filings made with the Securities and Exchange
Commission.
Note Regarding Use of Non-GAAP Financial
Measures and Other Performance MetricsThis news release
contains non-GAAP financial measures, including organic revenue
growth rates, Adjusted EPS (computed using income from continuing
operations before income taxes, excluding income (loss) from
discontinued operations, excluding income (loss) attributable to
non-controlling interest, excluding depreciation, amortization of
intangible assets, amortization of capitalized contract and
development costs, stock-based compensation expense, acquisition
and restructuring related items and other, which includes, but is
not limited to, legal related items, non-recoverable rates and
costs, and foreign transaction gains and losses, less the estimated
impact to income taxes) and Adjusted EBITDA (which includes net
income (loss) attributable to noncontrolling interest and excludes,
among other things, losses and gains from discontinued operations,
acquisition and restructuring related items, stock compensation
expense, foreign transaction gains and losses, and the associated
margin rates). Additional non-GAAP financial measures include Free
Cash Flow from Operations computed as Cash Flow from Operations
less Capital Expenditures plus proceeds from sale of assets and
Adjusted EBITDA related to our KUS and KGS businesses. Kratos
believes this information is useful to investors because it
provides a basis for measuring the Company’s available capital
resources, the actual and forecasted operating performance of the
Company’s business and the Company’s cash flow, excluding
non-recurring items and non-cash items that would normally be
included in the most directly comparable measures calculated and
presented in accordance with GAAP. The Company’s management uses
these non-GAAP financial measures, along with the most directly
comparable GAAP financial measures, in evaluating the Company’s
actual and forecasted operating performance, capital resources and
cash flow. Non-GAAP financial measures should not be considered in
isolation from, or as a substitute for, financial information
presented in compliance with GAAP, and investors should carefully
evaluate the Company’s financial results calculated in accordance
with GAAP and reconciliations to those financial results. In
addition, non-GAAP financial measures as reported by the Company
may not be comparable to similarly titled amounts reported by other
companies. As appropriate, the most directly comparable GAAP
financial measures and information reconciling these non-GAAP
financial measures to the Company’s financial results prepared in
accordance with GAAP are included in this news release.
Another Performance Metric the Company believes
is a key performance indicator in our industry is our Book to Bill
Ratio as it provides investors with a measure of the amount of
bookings or contract awards as compared to the amount of revenues
that have been recorded during the period and provides an indicator
of how much of the Company’s backlog is being burned or utilized in
a certain period. The Book to Bill Ratio is computed as the number
of bookings or contract awards in the period divided by the
revenues recorded for the same period. The Company believes that
the rolling or last twelve months’ Book to Bill Ratio is meaningful
since the timing of quarter-to-quarter bookings can vary.
|
|
|
|
Unaudited Condensed Consolidated Statements of
Operations |
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service revenues |
|
$ |
106.5 |
|
|
$ |
103.7 |
|
|
$ |
213.0 |
|
|
$ |
195.3 |
|
|
|
|
Product sales |
|
|
193.6 |
|
|
|
153.2 |
|
|
|
364.3 |
|
|
|
293.4 |
|
|
|
|
Total revenues |
|
|
300.1 |
|
|
|
256.9 |
|
|
|
577.3 |
|
|
|
488.7 |
|
|
|
|
Cost of service revenues |
|
|
77.0 |
|
|
|
80.0 |
|
|
|
156.2 |
|
|
|
148.2 |
|
|
|
|
Cost of product sales |
|
|
145.9 |
|
|
|
113.0 |
|
|
|
272.9 |
|
|
|
217.2 |
|
|
|
|
Total costs |
|
|
222.9 |
|
|
|
193.0 |
|
|
|
429.1 |
|
|
|
365.4 |
|
|
|
|
Gross profit - service revenues |
|
|
29.5 |
|
|
|
23.7 |
|
|
|
56.8 |
|
|
|
47.1 |
|
|
|
|
Gross profit - product sales |
|
|
47.7 |
|
|
|
40.2 |
|
|
|
91.4 |
|
|
|
76.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
|
77.2 |
|
|
|
63.9 |
|
|
|
148.2 |
|
|
|
123.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
49.6 |
|
|
|
44.4 |
|
|
|
100.0 |
|
|
|
89.2 |
|
|
|
|
Acquisition and restructuring related items and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
|
Research and development expenses |
|
|
10.2 |
|
|
|
9.9 |
|
|
|
19.8 |
|
|
|
20.1 |
|
|
|
|
Depreciation |
|
|
2.7 |
|
|
|
1.5 |
|
|
|
4.6 |
|
|
|
2.9 |
|
|
|
|
Amortization of intangible assets |
|
|
2.2 |
|
|
|
1.4 |
|
|
|
4.3 |
|
|
|
3.0 |
|
|
|
|
Operating income |
|
|
12.5 |
|
|
|
6.7 |
|
|
|
19.5 |
|
|
|
7.2 |
|
|
|
|
Interest income (expense), net |
|
|
0.1 |
|
|
|
(5.1 |
) |
|
|
(2.7 |
) |
|
|
(10.4 |
) |
|
|
|
Other income (expense), net |
|
|
0.1 |
|
|
|
0.2 |
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
|
Income (loss) before income taxes |
|
|
12.7 |
|
|
|
1.8 |
|
|
|
16.7 |
|
|
|
(3.3 |
) |
|
|
|
Provision for income taxes |
|
|
4.8 |
|
|
|
2.2 |
|
|
|
7.5 |
|
|
|
2.9 |
|
|
|
|
Net Income (loss) from consolidated operations |
|
|
7.9 |
|
|
|
(0.4 |
) |
|
|
9.2 |
|
|
|
(6.2 |
) |
|
|
|
Less: Net income attributable to noncontrolling interest |
|
|
- |
|
- |
|
2.3 |
|
|
|
- |
|
|
|
3.5 |
|
|
|
|
Net income (loss) attributable to Kratos |
|
$ |
7.9 |
|
|
$ |
(2.7 |
) |
|
$ |
9.2 |
|
|
$ |
(9.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per common share attributable to Kratos |
|
|
0.05 |
|
|
$ |
(0.02 |
) |
|
$ |
0.06 |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per common share attributable to Kratos |
|
$ |
0.05 |
|
|
$ |
(0.02 |
) |
|
$ |
0.06 |
|
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
151.8 |
|
|
|
129.1 |
|
|
|
146.4 |
|
|
|
128.9 |
|
|
|
|
Diluted |
|
|
153.5 |
|
|
|
129.1 |
|
|
|
147.5 |
|
|
|
128.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (1) |
|
$ |
29.9 |
|
|
$ |
21.6 |
|
|
$ |
55.9 |
|
|
$ |
38.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Reconciliation of GAAP to Non-GAAP
Measures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net
income (loss) attributable to Kratos adjusted for net
income attributable to noncontrolling interest, net interest
income (expense), provision for income taxes, depreciation and
amortization expense of intangible assets, amortization of
capitalized contract and development costs, stock-based
compensation, acquisition and restructuring related items and
other, and foreign transaction loss. |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA as calculated by us may be calculated differently
than Adjusted EBITDA for other companies. We have
provided Adjusted EBITDA because we believe it is a commonly
used measure of financial performance in comparable companies and
is provided to help investors evaluate companies on a
consistent basis, as well as to enhance understanding of our
operating results. Adjusted EBITDA should not be construed as
either an alternative to net income (loss) or as an indicator of
our operating performance or an alternative to cash flows as a
measure of liquidity. The adjustments to calculate this non-GAAP
financial measure and the basis for such adjustments are outlined
below. Please refer to the following table below that
reconciles GAAP net income (loss) to Adjusted
EBITDA. |
|
|
|
|
|
|
|
|
|
The adjustments to calculate this non-GAAP financial measure, and
the basis for such adjustments, are outlined
below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income and interest expense, net. The Company receives
interest income on investments and incurs interest expense on
loans, capital leases and other financing arrangements,
including the amortization of issue discounts and deferred
financing costs. These amounts may vary from period to
period due to changes in cash and debt balances. |
|
|
|
|
|
|
|
Income taxes. The Company's tax expense can fluctuate materially
from period to period due to tax adjustments that may not be
directly related to underlying operating performance or to the
current period of operations and may not necessarily reflect the
impact of utilization of our NOLs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation. The Company incurs depreciation expense (recorded in
cost of revenues and in operating expenses) related to capital
assets purchased, leased or constructed to support the ongoing
operations of the business. The assets are recorded at cost or fair
value and are depreciated over the estimated useful lives of
individual assets. |
|
|
|
|
|
|
|
Amortization of intangible assets. The Company incurs amortization
of intangible expense related to acquisitions it has made. These
intangible assets are valued at the time of acquisition and
are amortized over the estimated useful lives. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of capitalized contract and development costs. The
Company incurs amortization of previously capitalized software
development and non-recurring engineering costs related to certain
targets in its Unmanned Systems, ballistic missile target and space
and satellite businesses as related units are sold. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation expense. The Company incurs expense
related to stock-based compensation included in its GAAP
presentation of selling, general and administrative expense.
Although stock-based compensation is an expense of the Company and
viewed as a form of compensation, these expenses vary in
amount from period to period, and are affected by market forces
that are difficult to predict and are not within the control of
management, such as the market price and volatility of the
Company's shares, risk-free interest rates and the expected term
and forfeiture rates of the awards. Management believes that
exclusion of these expenses allows comparison of operating results
to those of other companies that disclose non-GAAP financial
measures that exclude stock-based compensation. |
|
|
|
|
|
|
|
|
|
Foreign transaction (gain) loss. The Company incurs transaction
gains and losses related to transactions with foreign customers in
currencies other than the U.S. dollar. In addition, certain
intercompany transactions can give rise to realized and unrealized
foreign currency gains and losses. |
|
|
|
|
|
|
|
|
|
Acquisition and transaction related items. The Company incurs
transaction related costs, such as legal and accounting fees and
other expenses, related to acquisitions and divestiture
activities. Management believes these items are outside the normal
operations of the Company's business and are not indicative of
ongoing operating results. |
|
|
|
|
|
|
|
|
|
Restructuring costs. The Company incurs restructuring costs for
cost reduction actions which include employee termination costs,
facility shut-down related costs and lease commitment costs
for unused, excess or exited facilities. Management believes that
these costs are not indicative of ongoing operating results as they
are either non-recurring and/or not expected when full capacity and
volumes are achieved. |
|
|
|
|
|
|
|
|
|
|
|
Legal related items. The Company incurs costs related to pending
legal settlements and other legal related matters. Management
believes these items are outside the normal operations of the
Company's business and are not indicative of ongoing operating
results. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA is a non-GAAP financial measure and should not be
considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The Company
expects to continue to incur expenses similar to the Adjusted
EBITDA financial adjustments described above, and investors should
not infer from the Company's presentation of this non-GAAP
financial measure that these costs are unusual, infrequent, or
non-recurring. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income (Loss) attributable to Kratos to
Adjusted EBITDA is as follows: |
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Kratos |
|
$ |
7.9 |
|
|
$ |
(2.7 |
) |
|
$ |
9.2 |
|
|
$ |
(9.7 |
) |
|
|
|
Interest (income) expense, net |
|
|
(0.1 |
) |
|
|
5.1 |
|
|
|
2.7 |
|
|
|
10.4 |
|
|
|
|
Provision for income taxes |
|
|
4.8 |
|
|
|
2.2 |
|
|
|
7.5 |
|
|
|
2.9 |
|
|
|
|
Depreciation (including cost of service revenues and product
sales) |
|
|
8.2 |
|
|
|
6.5 |
|
|
|
15.4 |
|
|
|
12.8 |
|
|
|
|
Stock-based compensation |
|
|
6.6 |
|
|
|
6.0 |
|
|
|
15.8 |
|
|
|
12.6 |
|
|
|
|
Foreign transaction loss |
|
|
- |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
1.0 |
|
|
|
|
Amortization of intangible assets |
|
|
2.2 |
|
|
|
1.4 |
|
|
|
4.3 |
|
|
|
3.0 |
|
|
|
|
Amortization of capitalized contract and development costs |
|
|
0.3 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.2 |
|
|
|
|
Acquisition and restructuring related items and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
|
Plus: Net income attributable to noncontrolling interest |
|
|
- |
|
|
|
2.3 |
|
|
|
- |
|
|
|
3.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
29.9 |
|
|
$ |
21.6 |
|
|
$ |
55.9 |
|
|
$ |
38.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of acquisition and restructuring related items and
other included in Adjusted EBITDA: |
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Legal related items |
|
|
- |
|
|
|
- |
|
|
$ |
- |
|
|
$ |
0.9 |
|
|
|
|
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
0.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
|
Unaudited Segment Data |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Unmanned Systems |
|
$ |
85.8 |
|
|
$ |
52.1 |
|
|
$ |
145.2 |
|
|
$ |
100.1 |
|
|
|
|
Kratos Government Solutions |
|
|
214.3 |
|
|
|
204.8 |
|
|
|
432.1 |
|
|
|
388.6 |
|
|
|
|
Total revenues |
|
$ |
300.1 |
|
|
$ |
256.9 |
|
|
$ |
577.3 |
|
|
$ |
488.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
Unmanned Systems |
|
$ |
3.6 |
|
|
$ |
1.2 |
|
|
$ |
3.2 |
|
|
$ |
0.6 |
|
|
|
|
Kratos Government Solutions |
|
|
15.5 |
|
|
|
11.6 |
|
|
|
32.1 |
|
|
|
19.3 |
|
|
|
|
Unallocated corporate expense, net |
|
|
(6.6 |
) |
|
|
(6.1 |
) |
|
|
(15.8 |
) |
|
|
(12.7 |
) |
|
|
|
Total operating income |
|
$ |
12.5 |
|
|
$ |
6.7 |
|
|
$ |
19.5 |
|
|
$ |
7.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Unallocated corporate expense, net includes costs for certain
stock-based compensation programs (including stock-based
compensation costs for the employee stock purchase plan and
restricted stock units), the effects of items not considered part
of management’s evaluation of segment operating performance, and
acquisition and restructuring related items, corporate costs not
allocated to the segments, legal related items, and other
miscellaneous corporate activities. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Segment Operating Income to Adjusted EBITDA is as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Unmanned Systems |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
3.6 |
|
|
$ |
1.2 |
|
|
$ |
3.2 |
|
|
$ |
0.6 |
|
|
|
|
Other income |
|
|
0.1 |
|
|
|
- |
|
|
|
0.1 |
|
|
|
- |
|
|
|
|
Depreciation |
|
|
2.5 |
|
|
|
1.9 |
|
|
|
4.7 |
|
|
|
3.8 |
|
|
|
|
Amortization of intangible assets |
|
|
1.0 |
|
|
|
0.1 |
|
|
|
2.0 |
|
|
|
0.2 |
|
|
|
|
Amortization of capitalized contract and development costs |
|
|
- |
|
|
|
0.4 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
|
Adjusted EBITDA |
|
$ |
7.2 |
|
|
$ |
3.6 |
|
|
$ |
10.1 |
|
|
$ |
5.4 |
|
|
|
|
% of revenue |
|
|
8.4 |
% |
|
|
6.9 |
% |
|
|
7.0 |
% |
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Government Solutions |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
15.5 |
|
|
$ |
11.6 |
|
|
$ |
32.1 |
|
|
$ |
19.3 |
|
|
|
|
Other income |
|
|
- |
|
|
|
0.3 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
|
Depreciation |
|
|
5.7 |
|
|
|
4.6 |
|
|
|
10.7 |
|
|
|
9.0 |
|
|
|
|
Amortization of intangible assets |
|
|
1.2 |
|
|
|
1.3 |
|
|
|
2.3 |
|
|
|
2.8 |
|
|
|
|
Amortization of capitalized contract and development costs |
|
|
0.3 |
|
|
|
0.2 |
|
|
|
0.6 |
|
|
|
0.4 |
|
|
|
|
Acquisition and restructuring related items and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
|
Adjusted EBITDA |
|
$ |
22.7 |
|
|
$ |
18.0 |
|
|
$ |
45.8 |
|
|
$ |
33.2 |
|
|
|
|
% of revenue |
|
|
10.6 |
% |
|
|
8.8 |
% |
|
|
10.6 |
% |
|
|
8.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA |
|
$ |
29.9 |
|
|
$ |
21.6 |
|
|
$ |
55.9 |
|
|
$ |
38.6 |
|
|
|
|
% of revenue |
|
|
10.0 |
% |
|
|
8.4 |
% |
|
|
9.7 |
% |
|
|
7.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
|
Unaudited Condensed Consolidated Balance
Sheets |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
$ |
308.2 |
|
|
$ |
72.8 |
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
338.4 |
|
|
|
329.2 |
|
|
|
|
Inventoried costs |
|
|
|
|
|
|
154.8 |
|
|
|
156.2 |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
28.8 |
|
|
|
16.0 |
|
|
|
|
Other current assets |
|
|
|
|
|
|
21.0 |
|
|
|
20.0 |
|
|
|
|
Total current assets |
|
|
|
|
|
|
851.2 |
|
|
|
594.2 |
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
271.2 |
|
|
|
243.6 |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
|
|
41.8 |
|
|
|
45.7 |
|
|
|
|
Goodwill |
|
|
|
|
|
|
568.9 |
|
|
|
569.1 |
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
58.1 |
|
|
|
62.4 |
|
|
|
|
Other assets |
|
|
|
|
|
|
123.0 |
|
|
|
117.5 |
|
|
|
|
Total assets |
|
|
|
|
|
$ |
1,914.2 |
|
|
$ |
1,632.5 |
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
$ |
58.8 |
|
|
$ |
63.1 |
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
35.3 |
|
|
|
35.4 |
|
|
|
|
Accrued compensation |
|
|
|
|
|
|
63.3 |
|
|
|
64.7 |
|
|
|
|
Accrued interest |
|
|
|
|
|
|
1.1 |
|
|
|
1.7 |
|
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
|
80.9 |
|
|
|
101.8 |
|
|
|
|
Current portion of operating lease liabilities |
|
|
|
|
|
|
11.7 |
|
|
|
12.1 |
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
21.2 |
|
|
|
13.7 |
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
272.3 |
|
|
|
292.5 |
|
|
|
|
Long-term debt |
|
|
|
|
|
|
179.5 |
|
|
|
219.3 |
|
|
|
|
Operating lease liabilities, net of current portion |
|
|
|
|
|
|
34.1 |
|
|
|
37.8 |
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
99.0 |
|
|
|
84.4 |
|
|
|
|
Total liabilities |
|
|
|
|
|
|
584.9 |
|
|
|
634.0 |
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
|
|
|
|
- |
|
|
|
22.5 |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
|
|
|
|
0.2 |
|
|
|
- |
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
1,998.6 |
|
|
|
1,654.5 |
|
|
|
|
Accumulated other comprehensive income |
|
|
|
|
|
|
1.5 |
|
|
|
1.7 |
|
|
|
|
Accumulated deficit |
|
|
|
|
|
|
(671.0 |
) |
|
|
(680.2 |
) |
|
|
|
Total Kratos stockholders’ equity |
|
|
|
|
|
|
1,329.3 |
|
|
|
976.0 |
|
|
|
|
Total liabilities and stockholders’ equity |
|
|
|
|
|
$ |
1,914.2 |
|
|
$ |
1,632.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
|
Unaudited Condensed Consolidated Statements of Cash
Flows |
|
|
|
(in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
|
|
|
|
June 30, |
|
June 25, |
|
|
|
|
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
$ |
9.2 |
|
|
$ |
(6.2 |
) |
|
|
|
Adjustments to reconcile net income (loss) from consolidated
operations to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
19.7 |
|
|
|
15.8 |
|
|
|
|
Amortization of lease right-of-use assets |
|
|
|
|
|
|
6.0 |
|
|
|
5.5 |
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
Stock-based compensation |
|
|
|
|
|
|
15.8 |
|
|
|
12.6 |
|
|
|
|
Amortization of deferred financing costs |
|
|
|
|
|
|
0.3 |
|
|
|
0.3 |
|
|
|
|
Provision for doubtful accounts |
|
|
|
|
|
|
- |
|
|
|
0.9 |
|
|
|
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
(3.0 |
) |
|
|
(10.7 |
) |
|
|
|
Unbilled receivables |
|
|
|
|
|
|
(6.4 |
) |
|
|
(7.1 |
) |
|
|
|
Inventoried costs |
|
|
|
|
|
|
2.1 |
|
|
|
(20.0 |
) |
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
(18.8 |
) |
|
|
(9.7 |
) |
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
(6.1 |
) |
|
|
(5.2 |
) |
|
|
|
Accounts payable |
|
|
|
|
|
|
(3.6 |
) |
|
|
2.2 |
|
|
|
|
Accrued compensation |
|
|
|
|
|
|
(1.5 |
) |
|
|
2.0 |
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
- |
|
|
|
7.2 |
|
|
|
|
Accrued interest |
|
|
|
|
|
|
(0.6 |
) |
|
|
(0.1 |
) |
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
|
(21.0 |
) |
|
|
11.2 |
|
|
|
|
Income tax receivable and payable |
|
|
|
|
|
|
4.4 |
|
|
|
0.6 |
|
|
|
|
Other liabilities |
|
|
|
|
|
|
1.4 |
|
|
|
(1.6 |
) |
|
|
|
Net cash used in operating activities |
|
|
|
|
|
|
(2.0 |
) |
|
|
(2.2 |
) |
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
|
|
|
|
(11.5 |
) |
|
|
- |
|
|
|
|
Capital expenditures |
|
|
|
|
|
|
(29.3 |
) |
|
|
(18.9 |
) |
|
|
|
Proceeds from sale of assets |
|
|
|
|
|
|
- |
|
|
|
8.3 |
|
|
|
|
Net cash used in investing activities |
|
|
|
|
|
|
(40.8 |
) |
|
|
(10.6 |
) |
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Borrowing under credit facility |
|
|
|
|
|
|
10.0 |
|
|
|
34.0 |
|
|
|
|
Repayment under credit facility and term loan |
|
|
|
|
|
|
(47.5 |
) |
|
|
(53.5 |
) |
|
|
|
Proceeds from the issuance of common stock, net of issuance
costs |
|
|
|
|
|
|
330.7 |
|
|
|
- |
|
|
|
|
Payment under finance leases |
|
|
|
|
|
|
(0.7 |
) |
|
|
(0.8 |
) |
|
|
|
Payments of employee taxes withheld from share-based awards |
|
|
|
|
|
|
(17.1 |
) |
|
|
(3.4 |
) |
|
|
|
Proceeds from shares issued under equity plans |
|
|
|
|
|
|
3.6 |
|
|
|
2.9 |
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
279.0 |
|
|
|
(20.8 |
) |
|
|
|
Net cash flows |
|
|
|
|
|
|
236.2 |
|
|
|
(33.6 |
) |
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
(0.8 |
) |
|
|
0.5 |
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
235.4 |
|
|
|
(33.1 |
) |
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
72.8 |
|
|
|
81.3 |
|
|
|
|
Cash and cash equivalents at end of period |
|
|
|
|
|
$ |
308.2 |
|
|
$ |
48.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos Defense & Security Solutions, Inc. |
|
|
|
Unaudited Non-GAAP Measures |
|
|
|
Computation of Adjusted Earnings Per Share |
|
|
|
(in millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income from consolidated operations and adjusted income
from consolidated operations per diluted common share (Adjusted
EPS) are non-GAAP measures for reporting financial performance
and exclude the impact of certain items and, therefore, have not
been calculated in accordance with GAAP. Management believes
that exclusion of these items assists in providing a more complete
understanding of the Company's underlying consolidated operations
results and trends and allows for comparability with our peer
company index and industry. The Company uses these measures along
with the corresponding GAAP financial measures to manage the
Company's business and to evaluate its performance compared to
prior periods and the marketplace. The Company defines
adjusted income from consolidated operations before
amortization of intangible assets, depreciation, stock-based
compensation, foreign transaction gain/loss, and acquisition
and restructuring related items and other. The estimated impact to
income taxes includes the impact to the effective tax rate, current
tax provision and deferred tax provision, and excludes the
impact of discrete items, including transaction related expenses
and release of valuation allowance, or benefit related to the
add-backs.* |
|
|
|
Adjusted EPS reflects adjusted income on a per share basis using
weighted average diluted shares outstanding. |
|
|
|
|
|
|
The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial
measures. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
|
|
June 30, |
|
June 25, |
|
June 30, |
|
June 25, |
|
|
|
|
|
|
2024 |
|
|
|
2023 |
|
|
|
2024 |
|
|
|
2023 |
|
|
|
|
Net income (loss) attributable to Kratos |
|
$ |
7.9 |
|
|
$ |
(2.7 |
) |
|
$ |
9.2 |
|
|
$ |
(9.7 |
) |
|
|
|
Less: GAAP provision for income taxes |
|
|
4.8 |
|
|
|
2.2 |
|
|
|
7.5 |
|
|
|
2.9 |
|
|
|
|
Less: Net income attributable to noncontrolling interest |
|
|
- |
|
|
|
2.3 |
|
|
|
- |
|
|
|
3.5 |
|
|
|
|
Income (loss) from consolidated operations before
taxes |
|
|
12.7 |
|
|
|
1.8 |
|
$ |
- |
|
16.7 |
|
|
|
(3.3 |
) |
|
|
|
Add: Amortization of intangible assets |
|
|
2.2 |
|
|
|
1.4 |
|
|
- |
|
4.3 |
|
|
|
3.0 |
|
|
|
|
Add: Amortization of capitalized contract and development
costs |
|
|
0.3 |
|
|
|
0.6 |
|
|
|
0.7 |
|
|
|
1.2 |
|
|
|
|
Add: Depreciation |
|
|
8.2 |
|
|
|
6.5 |
|
|
|
15.4 |
|
|
|
12.8 |
|
|
|
|
Add: Stock-based compensation |
|
|
6.6 |
|
|
|
6.0 |
|
|
|
15.8 |
|
|
|
12.6 |
|
|
|
|
Add: Foreign transaction loss |
|
|
- |
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
1.0 |
|
|
|
|
Add: Acquisition and restructuring related items and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.9 |
|
|
|
|
Non-GAAP Adjusted income from
consolidated operations before income taxes |
|
|
30.0 |
|
|
|
16.5 |
|
|
|
53.2 |
|
|
|
28.2 |
|
|
|
|
Income taxes on Non-GAAP measure Adjusted income from consolidated
operations* |
|
|
9.2 |
|
|
|
5.1 |
|
|
|
16.3 |
|
|
|
8.6 |
|
|
|
|
Non-GAAP Adjusted net
income |
|
$ |
20.8 |
|
|
$ |
11.4 |
|
|
$ |
36.9 |
|
|
$ |
19.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
|
$ |
0.05 |
|
|
$ |
(0.02 |
) |
|
$ |
0.06 |
|
|
$ |
(0.08 |
) |
|
|
|
Less: GAAP provision for income taxes |
|
|
0.03 |
|
|
|
0.02 |
|
|
|
0.05 |
|
|
|
0.02 |
|
|
|
|
Less: Net income attributable to noncontrolling interest |
|
|
- |
|
|
|
0.02 |
|
|
|
- |
|
|
|
0.03 |
|
|
|
|
Add: Amortization of intangible assets |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.03 |
|
|
|
0.02 |
|
|
|
|
Add: Amortization of capitalized contract and development
costs |
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
0.01 |
|
|
|
|
Add: Depreciation |
|
|
0.06 |
|
|
|
0.05 |
|
|
|
0.10 |
|
|
|
0.10 |
|
|
|
|
Add: Stock-based compensation |
|
|
0.04 |
|
|
|
0.05 |
|
|
|
0.11 |
|
|
|
0.10 |
|
|
|
|
Add: Foreign transaction loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
|
Add: Acquisition and restructuring related items and other |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
|
Income taxes on Non-GAAP measure Adjusted income from consolidated
operations* |
|
|
(0.06 |
) |
|
|
(0.04 |
) |
|
|
(0.11 |
) |
|
|
(0.07 |
) |
|
|
|
Adjusted income from consolidated operations per diluted
common share |
|
$ |
0.14 |
|
|
$ |
0.09 |
|
|
$ |
0.25 |
|
|
$ |
0.15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares
outstanding |
|
|
153.5 |
|
|
|
129.1 |
|
|
|
147.5 |
|
|
|
128.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*The impact to income taxes is calculated by recasting income
before income taxes to include the add-backs involved in
determining Adjusted income from consolidated operations
before income taxes and recalculating the income tax provision,
including current and deferred income taxes, using the Adjusted
income from consolidated operations before income taxes. The
recalculation also adjusts for any discrete tax expense, including
transaction related expenses and the release of valuation
allowance, or benefit related to the add-backs. |
|
|
Press Contact:Claire
BurghoffClaire.burghoff@kratosdefense.comInvestor
Information:877-934-4687investor@kratosdefense.com
Kratos Defense and Secur... (NASDAQ:KTOS)
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From Jul 2024 to Aug 2024
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