Second Quarter Revenues of $205.1 Million, Increased 20.4 percent over Second Quarter 2020

Second Quarter Unmanned Systems Segment Revenues of $60.3 Million, Increased 43.6 percent over Second Quarter 2020

Second Quarter KGS Segment Revenues of $144.8 Million, Increased 12.8 percent over Second Quarter 2020

Second Quarter 2021 Book to Bill Ratio of 0.9 to 1
Last Twelve Months Ended June 27, 2021 Book to Bill Ratio of 1.2 to 1

SAN DIEGO, Aug. 03, 2021 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its second quarter 2021 financial results. For the second quarter of 2021, Kratos reported Revenues of $205.1 million, Operating Income of $3.3 million, Net Income of $1.1 million and Adjusted EBITDA of $17.6 million.   Included in Kratos’ second quarter 2021 Adjusted EBITDA is approximately $0.4 million of a negative foreign exchange impact resulting from an increased Shekel value against the U.S. Dollar in Kratos’ Israeli-based microwave business. Without this adverse transaction exchange impact, second quarter 2021 Adjusted EBITDA would have been $18.0 million. For the second quarter of 2021, internally funded Research and Development expense increased $4.2 million over the second quarter of 2020 and increased $2.2 million sequentially over the first quarter of 2021.

Second quarter 2021 Revenues of $205.1 million increased 20.4 percent, as compared to Revenues of $170.4 million in the second quarter of 2020, reflecting organic growth in Kratos’ Unmanned Systems, Space, Satellite and Cyber, Rocket Support Systems and Microwave Electronics businesses, offset partially by certain reductions, including in our Training Solutions business, resulting primarily from a previously disclosed reduction in scope of certain international contracts.  

Revenue grew organically 12.3 percent in the second quarter of 2021 as compared to the second quarter of 2020, excluding the impact of the ASC Signal, TDI and 5D acquisitions which contributed approximately $13.8 million. Revenue grew organically 15.9 percent in the second quarter of 2021 on a proforma basis, excluding the impact of the acquisitions and the reduction of the international training contracts of approximately $4.7 million.

Operating Income of $3.3 million in the second quarter of 2021 increased from $2.9 million in the second quarter of 2020, with second quarter 2021 Operating Income including increases in non-cash stock-based compensation expense of $1.8 million and R&D of $4.2 million over the second quarter of 2020. Second Quarter 2021 Adjusted EBITDA of $17.6 million increased 15.0 percent, as compared to $15.3 million in the second quarter of 2020, primarily reflecting the increase in revenues.  

Second quarter 2021 Cash Flow Used from Operations was $0.7 million, and Free Cash Flow Used from Operations was $11.6 million, after funding $10.9 million of capital expenditures, including in our high growth Unmanned Systems and Space and Satellite business areas. For the six months ended June 27, 2021, Cash Flow Generated from Operations was $22.0 million, and Free Cash Flow Generated from Operations was $1.5 million, after funding $20.5 million of capital expenditures. Cash on hand at June 27, 2021 was $369.3 million. Kratos reported second quarter 2021 Net Income of $1.1 million, and GAAP EPS income of $0.01, compared to Net Loss of $0.7 million and GAAP EPS loss of $0.01 for the second quarter of 2020. Adjusted EPS was $0.06 for the second quarter of 2021 compared to $0.05 for the second quarter of 2020. The Company has approximately $280 million of net operating loss carryforwards, which are expected to substantially shield Kratos from paying future cash income taxes.  

For the second quarter of 2021, Kratos’ Unmanned Systems Segment (KUS) Revenues of $60.3 million increased 43.6 percent, as compared to $42.0 million in the second quarter of 2020, and KUS operating income increased by 310.0 percent, to $4.1 million in the second quarter of 2021 from $1.0 million in the second quarter of 2020.

Second quarter 2021 KUS Adjusted EBITDA of $6.9 million increased 130.0 percent, as compared to second quarter 2020 Adjusted EBITDA of $3.0 million, primarily reflecting increases in certain tactical and target drone programs and financial leverage achieved on the KUS fixed manufacturing, overhead, general and administrative cost structure as production increases, offset by certain development programs, including in the tactical drone area, which typically generate lower margins.

KUS’s book-to-bill ratio for the second quarter of 2021 was 0.4 to 1.0 and 1.0 to 1.0 for the last twelve months ended June 27, 2021, with bookings of $227.4 million for the twelve months ended June 27, 2021.   Total backlog for KUS at the end of the second quarter of 2021 was $185.4 million, down from $222.4 million at the end of the first quarter of 2021, and up from $175.7 million at the end of the second quarter of 2020.      

For the second quarter of 2021, Kratos’ Government Solutions Segment (KGS) reported Revenues of $144.8 million, an increase of 12.8 percent, as compared to revenues of $128.4 million in the second quarter of 2020, and operating income of $5.9 million, down from operating income of $7.7 million in the second quarter of 2020, primarily reflecting a less favorable revenue mix, including an increase in new development-type programs.   Revenues in the second quarter of 2021 included organic growth in our Space, Satellite and Cyber, Rocket Support Systems and Microwave Products businesses, and $11.8 million from the ASC Signal acquisition, partially offset by reductions of approximately $4.7 million in our Training Solutions business, resulting primarily from the previously disclosed scope reductions in certain international programs.

Kratos’ Space, Satellite and Cyber business generated Revenues of $67.4 million in the second quarter of 2021, an increase of 35.9 percent over the second quarter of 2020 Revenues of $49.6 million. Excluding ASC, our Space, Satellite and Cyber business Revenues grew 12.1 percent organically. Second quarter 2021 KGS Adjusted EBITDA of $10.7 million was down from second quarter 2020 Adjusted EBITDA of $12.3 million, primarily reflecting a less favorable mix of revenues and increased investments in R&D expenses of approximately $4.2 million, which were primarily incurred in the Space and Satellite business.

For the second quarter of 2021, KGS reported a book-to-bill ratio of 1.1 to 1.0, including a book-to-bill ratio of 1.3 to 1.0 in Kratos’ Space, Satellite, Cyber and Training Solutions businesses. For the twelve months ended June 27, 2021, KGS reported a book to bill ratio of 1.2 to 1.0, with bookings of $726.0 million for the twelve months ended June 27, 2021. KGS’s total backlog at the end of the second quarter of 2021 was $680.2 million, up from $670.5 million at the end of the first quarter of 2021, and up from $542.8 million at the end of the second quarter of 2020.

For the second quarter of 2021, Kratos reported consolidated bookings of $177.8 million and a book-to-bill ratio of 0.9 to 1.0, with consolidated bookings of $953.4 million and a book-to-bill ratio of 1.2 to 1.0 for the last twelve months ended June 27, 2021. Backlog at June 27, 2021 was $865.6 million, down sequentially from $892.9 million at March 28, 2021 and up from $683.4 million at June 26, 2020, and Kratos’ bid and proposal pipeline was $9.0 billion at June 27, 2021.   Backlog at June 27, 2021 was comprised of funded backlog of $630.6 million and unfunded backlog of $235.0 million.

Eric DeMarco, Kratos’ President and CEO, said, “Since our last report to you, Kratos’ UTAP-22 Mako jet drone successfully flew the Skyborg Autonomy Core System (ACS), which included Kratos’ Mako being the closest unmanned aircraft to fly with a manned fighter, an F-16 Falcon, in the history of aviation. Skyborg program related systems and payloads are now being integrated onto the first two Valkyries from our Oklahoma manufacturing line from the initial 12 Lot currently in production, with additional Skyborg and other program tactical drone flights, including Gremlins and Air Wolf, scheduled for the second half of this year. We believe that Kratos’ suite of Unmanned Systems, those flying today and new systems that are coming from our Ghost Works, will be transformational for our customers and our Company, as we continue to integrate various relevant payloads and systems, increasing our market leading position and progressing towards fielding and initial operating capability.”