Third Quarter Revenues of $200.6 Million
Third Quarter Space, Satellite and Cyber Busines Revenues of $72.0 million Increased Organically 17.5 percent over the Third Quarter of 2020
Third Quarter Unmanned Systems Segment Revenues of $61.3 Million, Increased Organically 14.6 percent over Third Quarter 2020
Third Quarter 2021 Consolidated Book to Bill Ratio of 0.9 to 1
Last Twelve Months Ended September 26, 2021 Consolidated Book to Bill Ratio of 1.0 to 1
Third Quarter 2021 Unmanned Systems Book to Bill Ratio of 1.1 to 1
Last Twelve Months Ended September 26, 2021 Unmanned Systems Book to Bill Ratio of 1.0 to 1
SAN DIEGO, Nov. 03, 2021 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its third quarter 2021 financial results. For the third quarter of 2021, Kratos reported Revenues of $200.6 million, Operating Income of $10.5 million, Net Loss of $2.4 million and Adjusted EBITDA of $23.8 million. Included in Net Loss is a tax provision of $5.7 million on Income before taxes of $4.6 million, primarily reflecting the non-deductibility of certain non-cash stock compensation expense.
Kratos reported third quarter 2021 Net Loss of $2.4 million, and GAAP EPS loss of $0.02, compared to Net Income of $2.4 million and GAAP EPS income of $0.02 for the third quarter of 2020. Adjusted EPS was $0.09 for the third quarter of 2021 compared to $0.09 for the third 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.
Third quarter 2021 Revenues of $200.6 million decreased from third quarter 2020 Revenues of $202.0 million, reflecting a reduction of legacy government services revenues of $6.2 million, down from $17.4 million in the third quarter of 2020 to $11.2 million in the third quarter of 2021 and a $5.5 million year over year decrease resulting from a previously disclosed reduction of certain international contracts in our Training Solutions business, offset partially by increased revenues in our Space, Satellite and Cyber business. On a pro forma basis, excluding these reductions, Revenue grew organically 5.8 percent in the third quarter of 2021, as compared to the third quarter of 2020. Third quarter 2021 revenues were negatively impacted by supply chain delays, increased lead times for delivery of necessary components, and customer delays and travel restrictions primarily in our Space and Satellite and C5ISR businesses, resulting in expected revenues of approximately $8.3 million being deferred into future periods.
Operating Income of $10.5 million in the third quarter of 2021 decreased from $12.7 million in the third quarter of 2020, with third quarter 2021 Operating Income including increases in non-cash stock-based compensation expense of $1.4 million and R&D of $0.3 million over the third quarter of 2020. Third Quarter 2021 Adjusted EBITDA of $23.8 million decreased from $24.6 million in the third quarter of 2020, primarily reflecting increases in SG&A costs, including increased headcount in our Unmanned Systems business, offset partially by a more favorable mix of revenues.
Third quarter 2021 Cash Flow Generated from Operations was $12.6 million, and Free Cash Flow Used from Operations was $0.3 million, after funding $12.9 million of capital expenditures, including in our high growth Unmanned Systems, Space, Satellite and Cyber business and Turbine Engine business areas. For the nine months ended September 26, 2021, Cash Flow Generated from Operations was $34.6 million, and Free Cash Flow Generated from Operations was $1.2 million, after funding $33.4 million of capital expenditures. Cash on hand on September 26, 2021 was $369.9 million.
For the third quarter of 2021, Kratos’ Unmanned Systems Segment (KUS) Revenues of $61.3 million increased 14.6 percent, as compared to $53.5 million in the third quarter of 2020, and KUS operating income decreased from $3.7 million in the third quarter of 2020 to $2.6 million in the third quarter of 2021, primarily due to a less favorable mix of revenues including an increase in development programs, which typically generate lower margins, and due to an increase in SG&A costs, including costs related to increased headcount.
Third quarter 2021 KUS Adjusted EBITDA of $4.7 million decreased from third quarter 2020 Adjusted EBITDA of $5.6 million, primarily reflecting increases in certain development programs, including in the tactical drone area, which typically generate lower margins, and due to an increase in SG&A costs, including costs related to increased headcount.
KUS’s book-to-bill ratio for the third quarter of 2021 was 1.1 to 1.0 and 1.0 to 1.0 for the last twelve months ended September 26, 2021, with bookings of $230.5 million for the twelve months ended September 26, 2021. Total backlog for KUS at the end of the third quarter of 2021 was $194.5 million, up from $185.4 million at the end of the second quarter of 2021, and up from $189.5 million at the end of the third quarter of 2020.
For the third quarter of 2021, Kratos’ Government Solutions Segment (KGS) reported Revenues of $139.3 million, down from revenues of $148.5 million in the third quarter of 2020, reflecting a reduction of legacy services revenues of $6.2 million and a reduction of $5.5 million from an international training contract. These reductions were partially offset by organic growth in our Space, Satellite and Cyber and Turbine Technologies businesses. KGS reported operating income of $14.6 million, up from operating income of $14.1 million in the third quarter of 2020, primarily reflecting a more favorable revenue mix in the Company’s Space, Satellite and Cyber and Turbine Technologies businesses.
Kratos’ Space, Satellite and Cyber business generated Revenues of $72.0 million in the third quarter of 2021, an organic increase of 17.5 percent over the third quarter of 2020 Revenues of $61.3 million.
Third quarter 2021 KGS Adjusted EBITDA of $19.1 million increased from third quarter 2020 Adjusted EBITDA of $19.0 million, reflecting a more favorable mix of revenues, primarily in the Space, Satellite and Cyber and Turbine Technologies businesses.
For the third quarter of 2021, KGS reported a book-to-bill ratio of 0.7 to 1.0, and a book to bill ratio of 0.9 to 1 for the twelve months ended September 26, 2021. Included in KGS is Kratos’ Space, Cyber and Training business, which reported a book to bill ratio for the twelve months ended September 26, 2021 was 1.1 to 1. KGS’s total backlog at the end of the third quarter of 2021 was $644.6 million, down from $680.2 million at the end of the second quarter of 2021, and down from $683.6 million at the end of the third quarter of 2020.
For the third quarter of 2021, Kratos reported consolidated bookings of $174.2 million and a book-to-bill ratio of 0.9 to 1.0, with consolidated bookings of $770.9 million and a book-to-bill ratio of 1.0 to 1.0 for the last twelve months ended September 26, 2021. Backlog on September 26, 2021 was $839.1 million, down sequentially from $865.6 million at June 27, 2021 and down from $873.1 million at September 27, 2020, and Kratos’ bid and proposal pipeline was $9.1 billion at September 26, 2021. Backlog at September 26, 2021 was comprised of funded backlog of $618.0 million and unfunded backlog of $221.1 million.
Eric DeMarco, Kratos’ President and CEO, said, “Since our last report to you, we have received approximately $374 million in sole source, single award target drone related contracts, of which we expect to realize substantially the entire IDIQ amount in Kratos’ revenue over the period of performance. We have successfully competed for and received a U.S. Air Force Off-Board Sensing Station affordable tactical jet drone program award, which we believe has potential future opportunity similar to Kratos’ Valkyrie, Gremlins, Air Wolf and Thanatos programs. Our tactical drone related programs continue to progress, including a recent successful series of customer flights for Kratos’ Air Wolf drone and Thanatos. And on August 16, the Air Force reiterated its commitment to be ready for a 2023 Skyborg Vanguard Program of Record, under which Kratos’ Valkyrie and Mako jet drones are recognized participants.”
Mr. DeMarco, concluded, “Though we expect COVID related, supply chain and customer issues the industry and Kratos are experiencing to continue, there is no change in Kratos’ expected up and to the right long term organic growth profile with increasing profit margins. Kratos is the growth leader in space, satellite communications and unmanned drone systems as reflected in our results today and our C5ISR, Rocket System and Next Generation Engine businesses are also positioned to be future growth leaders. We continue to win new strategic program awards like OBSS, we believe the pending 2022 DoD budget is favorable for Kratos, we have a number of programs transitioning from development to production, with others expecting increased production and our bid pipeline now stands at approximately $9.1 billion.”
