First Quarter 2023 Revenues of $231.8 Million Increased 18.1 Percent over First Quarter 2022 Revenues of $196.2 Million, including 12.0 Percent Organic Growth
First Quarter 2023 and Last Twelve Months Ended March 26, 2023 Consolidated Book to Bill Ratio of 1.1 to 1
First Quarter 2023 Unmanned Systems Book to Bill Ratio of 1.9 to 1
Affirms Full Year 2023 Financial Forecast
SAN DIEGO, May 03, 2023 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a Technology Company in the Defense, National Security and Global Markets, today reported its first quarter 2023 financial results. For the first quarter of 2023, Kratos reported Revenues of $231.8 million, Operating Income of $0.5 million, Net Loss of $7.0 million, Adjusted EBITDA of $17.0 million and a consolidated book to bill ratio of 1.1 to 1.0.
Included in first quarter 2023 Net Loss 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 significant ongoing development efforts being made, including in our Space and Satellite business to develop our virtual, software-based OpenSpace command & control (C2), telemetry tracking & control (TT&C) and other ground system solutions.
Kratos reported a first quarter 2023 GAAP Net Loss of $7.0 million and a GAAP Net Loss per share of $0.05, compared to a Net Loss of $15.9 million and a GAAP Net Loss per share of $0.12 for the first quarter of 2022. Adjusted EPS was $0.06 for the first quarter of 2023, compared to $0.04 for the first quarter of 2022.
First quarter 2023 Revenues of $231.8 million increased $35.6 million, or 18.1 percent, from first quarter 2022 Revenues of $196.2 million. First quarter 2023 Revenues include contribution of $12.0 million of Revenue from the acquisition of the Engineering Division of Southern Research Institute (SRE), and consolidated organic Revenue growth of 12.0 percent, primarily in our Space, Satellite and Cyber, Turbine Technologies, C5ISR and Microwave Products businesses.
First quarter 2023 Cash Flow Used in Operations was $25.7 million, reflecting working capital requirements related to revenue growth and continued advanced inventory purchases in an effort to mitigate supply chain disruptions. Free Cash Flow Used in Operations was $33.4 million after funding of $7.7 million of capital expenditures.
For the first quarter of 2023, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $48.0 million, as compared to $52.6 million in the first quarter of 2022, primarily reflecting reduced tactical drone related activity as compared to 2022. KUS’s Operating Loss was $0.6 million in the first quarter of 2023 compared to Operating Income of $0.5 million in the first quarter of 2022, reflecting a less favorable mix of revenues and the impact of reduced volume.
KUS’s Adjusted EBITDA for the first quarter of 2023 was $1.8 million, compared to first quarter 2022 KUS Adjusted EBITDA of $3.0 million, reflecting increases in certain development programs which typically generate lower margins and increases in SG&A and supply chain related and employee costs and the impact of reduced volume.
KUS’s book-to-bill ratio for the first quarter of 2023 was 1.9 to 1.0 and 1.1 to 1.0 for the last twelve months ended March 26, 2023, with bookings of $90.5 million for the three months ended March 26, 2023, and bookings of $230.6 million for the last twelve months ended March 26, 2023. Total backlog for KUS at the end of the first quarter of 2023 was $244.1 million compared to $201.6 million at the end of the fourth quarter of 2022.
For the first quarter of 2023, Kratos’ Government Solutions Segment (KGS) Revenues of $183.8 million increased 28.0 percent from Revenues of $143.6 million in the first quarter of 2022. The increased Revenues includes the contribution of approximately $12.0 million of Revenues from the SRE acquisition, and organic revenue growth in our Space, Satellite and Cyber, Turbine Technologies, C5ISR and Microwave Products businesses, partially offset by a reduction of $2.2 million related to our legacy Training Solutions business. Excluding the SRE acquisition, KGS revenues grew organically 19.6 percent in the first quarter of 2023 as compared to the first quarter of 2022.
KGS reported operating income of $7.7 million in the first quarter of 2023 compared to $5.6 million in the first quarter of 2022, primarily reflecting a more favorable revenue mix and leverage on the fixed overhead and SG&A costs.
Kratos’ Space, Satellite and Cyber business generated Revenues of $88.8 million in the first quarter of 2023 compared to $72.5 million in the first quarter of 2022, reflecting a 22.5 percent organic growth rate. First quarter 2023 KGS Adjusted EBITDA was $15.2 million, compared to first quarter 2022 KGS Adjusted EBITDA of $10.8 million, reflecting a more favorable mix in revenues and the increased revenue volume.
For the first quarter of 2023, KGS reported a book-to-bill ratio of 0.9 to 1.0, a book to bill ratio of 1.1 to 1.0 for the last twelve months ended March 26, 2023 and bookings of $161.3 million and $822.1 million for the three and last twelve months ended March 26, 2023, respectively. KGS includes Kratos’ Space, Training and Cyber business, which reported a book to bill ratio of 1.2 to 1.0 for the first quarter of 2023 and a book to bill ratio of 1.3 to 1.0 for the last twelve months ended March 26, 2023. Bookings for Kratos’ Space, Training and Cyber business for the three months and last twelve months ended March 26, 2023 were $112.1 million and $472.7 million, respectively. KGS’s total backlog at the end of the first quarter of 2023 was $888.3 million, as compared to $910.8 million at the end of the fourth quarter of 2022.
For the first quarter of 2023, Kratos reported consolidated bookings of $251.8 million and a book-to-bill ratio of 1.1 to 1.0, with consolidated bookings of $1.1 billion and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended March 26, 2023. Consolidated backlog was $1.13 billion on March 26, 2023 and $1.11 billion on December 25, 2022. Kratos’ bid and proposal pipeline was $10 billion at March 26, 2023 and December 25, 2022. Backlog at March 26, 2023 was comprised of funded backlog of $789.0 million and unfunded backlog of $343.4 million.
Eric DeMarco, Kratos’ President and CEO, said, “Kratos’ expected 2023 transition to sustained year over year increasing revenues, profitability and operating cash flow, is on track with our first quarter results, including 12 percent organic growth and our affirmed full year 2023 financial forecast. Kratos continued to win additional program and contract awards, including as represented by our 1.9 to 1.0 Unmanned Systems and Kratos consolidated 1.1 to 1.0 first quarter book to bill ratios, providing confidence in our future forecast.”
Mr. DeMarco continued, “Recent highlights include Kratos’ Space and Satellite business being notified that we have been selected as part of a team for a new multi-billion dollar satellite constellation, which includes Kratos’ virtualized OpenSpace ground infrastructure system and our Turbine Technologies business receiving a large next generation engine development award, the value of which to Kratos could ultimately exceed $100 million. Additionally, Kratos’ C5ISR business is also well positioned, with key programs including Sentinel, IBCS, SHORAD, Patriot, HIMARS, SCAR and Enduring Shield.”
Mr. DeMarco, concluded, “In the drone area, we continue to progress, receiving additional customer funded contracts, including as related to Valkyrie, successfully missionizing, operationalizing and flying our systems and increasing our first to market leadership position in the tactical area. Kratos today is producing hundreds of affordable high performance jet drones in the United States, with established and performing partners and suppliers, at real, known cost points and we stand ready to support the U.S. industrial base, our Country’s and Allies security requirements and deterrence of threats today, with quantities and affordable mass.”
