Third Quarter 2023 Revenues of $274.6 Million Reflect 20.1 Percent Organic Growth Over Third Quarter 2022 Revenues of $228.6 Million

Third Quarter 2023 Revenues Reflect 22.0 Percent Organic Revenue Growth in Kratos Government Solutions Segment and 13.4 Percent Organic Revenue Growth in Kratos Unmanned Systems Segment

Third Quarter 2023 Consolidated Book to Bill Ratio of 1.0 to 1 and Last Twelve Months Ended October 1, 2023 Consolidated Book to Bill Ratio of 1.1 to 1

SAN DIEGO, Nov. 02, 2023 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a Technology Company in the Defense, National Security and Global Markets, today reported its third quarter 2023 financial results, including Revenues of $274.6 million, Operating Income of $12.2 million, Net Loss of $1.6 million, Adjusted EBITDA of $27.7 million and a consolidated book to bill ratio of 1.0 to 1.0.

Included in third quarter 2023 Net Loss and Operating Income is non-cash stock compensation expense of $6.4 million and Company-funded Research and Development (R&D) expense of $10.3 million, including significant ongoing development efforts in our Space and Satellite Communications business to develop our virtual, software-based OpenSpace command & control (C2), telemetry tracking & control (TT&C) and other ground system solutions. The third quarter 2023 Net Loss includes $4.6 million attributable to a non-controlling interest, which includes a charge of $4.2 million adjustment recorded to reflect the estimated increase in the value of the redeemable non-controlling interest to the estimated redemption amount by Kratos.

Kratos reported third quarter 2023 GAAP Net Loss of $1.6 million and a GAAP Net Loss per share of $0.01, compared to a GAAP Net Loss of $8.0 million and a GAAP Net Loss per share of $0.06 for the third quarter of 2022. Adjusted earnings per share (EPS) was $0.12 for the third quarter of 2023, compared to $0.08 for the third quarter of 2022.

Third quarter 2023 Revenues of $274.6 million increased $46.0 million, reflecting 20.1 percent organic growth, from third quarter 2022 Revenues of $228.6 million. Third quarter 2023 Revenues include organic Revenue growth of 22.0 percent in our Government Solutions Segment (KGS) and 13.4 percent organic Revenue growth in our Unmanned Systems Segment (KUS), respectively.   

Third quarter 2023 Cash Flow Used from Operations was $0.1 million, reflecting the working capital requirements associated with the 6.9 percent sequential revenue growth of $17.7 million from the second quarter of 2023. Consolidated Days Sales Outstanding continued to improve from 120 in the second quarter of 2023 to 117 days in the third quarter of 2023. Free Cash Flow Used from Operations was $14.3 million after funding of $14.2 million of capital expenditures. Capital expenditures continue to remain elevated due primarily to the manufacture of the two production lots of Valkyries prior to contract award, to meet anticipated customer orders and requirements.

For the third quarter of 2023, KUS generated Revenues of $56.7 million, as compared to $50.0 million in the third quarter of 2022, primarily reflecting increased target drone related activity. KUS’s Operating Income was $2.6 million in the third quarter of 2023 compared to Operating Loss of $0.1 million in the third quarter of 2022.

KUS’s Adjusted EBITDA for the third quarter of 2023 was $5.4 million, compared to third quarter 2022 KUS Adjusted EBITDA of $2.1 million, reflecting a more favorable mix as well as the increased volume.

KUS’s book-to-bill ratio for the third quarter of 2023 was 0.5 to 1.0 and 1.1 to 1.0 for the last twelve months ended October 1, 2023, with bookings of $27.7 million for the three months ended October 1, 2023, and bookings of $244.8 million for the last twelve months ended October 1, 2023.    Total backlog for KUS at the end of the third quarter of 2023 was $227.8 million compared to $256.7 million at the end of the second quarter of 2023.

For the third quarter of 2023, KGS Revenues of $217.9 million increased organically 22.0 percent from Revenues of $178.6 million in the third quarter of 2022. The increased Revenues includes organic revenue growth in our Space, Satellite and Cyber, Turbine Technologies, C5ISR, Microwave Electronics Products and Training Solutions businesses.

KGS reported operating income of $15.9 million in the third quarter of 2023 compared to $3.3 million in the third quarter of 2022, primarily reflecting a more favorable mix and increased revenue volume. Third quarter 2023 KGS Adjusted EBITDA was $22.3 million, compared to third quarter 2022 KGS Adjusted EBITDA of $17.9 million, primarily reflecting the more favorable mix and increased revenue.

Kratos’ Space, Satellite and Cyber business generated Revenues of $105.5 million in the third quarter of 2023 compared to $85.8 million in the third quarter of 2022, reflecting a 23.0 percent organic growth rate.

KGS reported a book-to-bill ratio of 1.2 to 1.0 for the third quarter of 2023, a book to bill ratio of 1.1 to 1.0 for the last twelve months ended October 1, 2023 and bookings of $254.6 million and $863.9 million for the three and last twelve months ended October 1, 2023, respectively. KGS includes Kratos’ Space, Satellite, Cyber and Training Solutions business, which reported a book to bill ratio of 1.4 to 1.0 for the third quarter of 2023 and a book to bill ratio of 1.2 to 1.0 for the last twelve months ended October 1, 2023. Bookings for Kratos’ Space, Satellite, Cyber and Training business for the three months and last twelve months ended October 1, 2023 were $153.6 million and $472.8 million, respectively. KGS’s total backlog at the end of the third quarter of 2023 was $937.3 million, as compared to $900.6 million at the end of the second quarter of 2023.

Kratos reported consolidated bookings of $282.3 million and a book-to-bill ratio of 1.0 to 1.0 for the third quarter of 2023, and consolidated bookings of $1.11 billion and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended October 1, 2023. Consolidated backlog was $1.17 billion on October 1, 2023 and $1.16 billion on June 25, 2023. Kratos’ bid and proposal pipeline was $10.3 billion at October 1, 2023, up from $10.0 billion at June 25, 2023. Backlog at October 1, 2023 included funded backlog of $850.9 million and unfunded backlog of $314.1 million.

Kratos Thanatos Tactical UAV in Flight – Conceptual Rendition is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/e3429ec2-3495-4dba-95af-0cf2bb9f065e

Eric DeMarco, Kratos’ President and CEO, said, “Kratos continues to successfully execute our stated strategy of making targeted investments and being first to market, with relevant technology, products, systems and software, in mission critical, well-funded, high demand priority areas, which is reflected in our 20% third quarter organic growth rate. At Kratos, affordability is a technology, better is the enemy of good enough - ready to go today, and quantities have a quality all of its own, all of which are clearly being demonstrated geopolitically in multiple conflict areas.”

Mr. DeMarco continued, “Representative of the strength of Kratos’ strategy and our business, we have increased our full year 2023 revenue guidance and we are currently forecasting base case, which excludes potential tactical drone production orders, 2024 over 2023 revenue growth of 10%, with increased EBITDA. Additionally, based on recent large new program opportunities we are pursuing, we are now planning on certain additional investments in 2024, including in the tactical drone and satellite areas, in order to position the Company for potentially even greater growth in 2025 and beyond. Among the new opportunities we are pursuing, we are in discussions with a customer and hope to be under contract next year related to certain other Kratos tactical drone systems, including Thanatos and we are now in source selection on a significant new satellite opportunity with Kratos’ virtualized OpenSpace software system.”

Mr. DeMarco concluded, “Our primary operational challenge remains the obtaining, retaining, and related escalating cost of qualified individuals, including those willing and able to obtain a National Security clearance. As a result, though we expect continued future year over year profit margin expansion, including as noted with our Q3 results and affirmed Q4 EBITDA guidance, we will be cautious in our future EBITDA forecast. Also, as the industry and Kratos are currently operating under a Continuing Resolution Authorization, similar to previous years, we will wait to release our detailed fiscal 2024 business financial forecast in February 2024, when we report our fiscal 2023 results, as we should then have better budgetary and programmatic clarity.”