Kratos Defense & Security Solutions Inc (KTOS) Q1 2026 Earnings Call Transcript
Bullish Other 18.27B USA
Next Earnings
2026-05-06
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Kratos delivered stronger-than-expected 2025 results, raised 2026/2027 growth targets, and highlighted a robust defense funding backdrop fueling hypersonics, space, and unmanned systems growth.
⭐ Key Highlights
Q4/Full Year 2025 performance
Kratos exceeded financial objectives for Q4 with 20% organic revenue growth and a 1.3:1 book-to-bill, leading to a record backlog of $1.573B and a record pipeline of $13.7B.
Growth catalysts and programs
Strength in hypersonics, space, microwave electronics, and unmanned systems forms the core growth engine, with planned ramp in Valkyrie production and multiple new contracts across KGS, space, and missile-related programs.
Hypersonics ramp and capacity expansion
Kratos expects hypersonic revenues to grow meaningfully in 2026 (up to ~$400M) and ~75% in 2027 (to ~$700M), supported by new facilities (Indiana, Birmingham) and multi-program wins (Zeus SRMs, Prometheus JV).
Strategic partnerships and acquisitions
Nomad Global Communication Solutions closed; Orbit Technologies acquisition expected to close by end of Q1 2026 and be included in forecasts afterward.
Space and open-space software leadership
OpenSpace and Epic C2 software milestones, including the Airbus OneSat acceptance test, underscore Kratos’ leadership in software-defined space assets and dual-use capabilities.
✔Positive Signals
- Q4 revenue outperformed with 20% organic growth and EBITDA above the high end of guidance
- Record backlog of $1.573B and record pipeline of $13.7B indicating strong demand
- Hypersonics program ramp expected to drive substantial growth in 2026-2027
- Nomad acquisition closed; Orbit Technologies acquisition expected to close soon, expanding addressable market
- OpenSpace C2 software and Airbus OneSat acceptance test demonstrate leadership in space software and dual-use capabilities
✖Negative Signals
- Federal government shutdown and related delays increased working capital and DSO to 121 days
- Higher subcontractor and material costs on fixed-price contracts, compressing margins in Unmanned Systems
- Guidance assumes continued material/subcontractor cost increases and requires aggressive cost management
- Deferred revenue recognition and timing risks tied to government funding and appropriations
- Investments and CapEx in hypersonics and Prometheus may pressure near-term free cash flow
📊Financial Results
- Fourth quarter revenue: $345.1M vs estimated $320–$330M
- Q4 Adjusted EBITDA: $34.1M, at the high end of guidance ($29–$34M)
- Full-year 2025 guidance: not explicitly stated in this summary, but 2026 guidance raised to $1.595–$1.675B with 12.7–18.5% organic growth
- First-quarter 2026 guidance: revenue $335–$345M; adjusted EBITDA $25–$30M
- 2026 capital expenditures guidance: $135–$145M
🔮Future Guidance
- Q1 2026 revenue guidance: $335–$345M (7.5–9.5% organic growth vs Q1 2025)
- Full-year 2026 revenue guidance: $1.595–$1.675B (organic growth 12.7–18.5% vs 2025)
- Capital expenditures in 2026: $135–$145M (roughly $30–$35M pushed from 2025)
- Prometheus JV funding: approximately $50M in 2026
- Orbit Technologies acquisition: not included in 2026 guidance until close
💡Interesting Insights
- Kratos positions itself as a merchant supplier to primes, enabling faster production and broader access to defense programs, potentially amplifying growth as primes scale production
Detailed Analysis
AI-generated summary of Kratos Defense & Security Solutions Inc earnings call transcript.
Kratos reported 2025 results ahead of plan, with 20% organic Q4 revenue growth, a 1.3:1 book-to-bill, record backlog of $1.573B and record pipeline of $13.7B. Management emphasized a strengthened defense funding environment, including NDAA and reconciliation activity, driving demand across hypersonics, space, and microwave electronics. The company outlined a multi-year growth trajectory, including a Hypersonics ramp to approximately $400M in 2026 and up to $700M in 2027, supported by new facilities, Prometheus JV, and a growing Valkyrie program with long-term production potential. Nomad closed; Orbit Technologies is expected to close by end of Q1 2026. Financial guidance for 2026 includes revenue of $1.595–$1.675B and organic growth of 12.7–18.5%, with Q1 2026 revenue of $335–$345M and adjusted EBITDA of $25–$30M, while capital expenditures are planned at $135–$145M. Kratos reiterates its strategy of investing in capabilities rather than returning capital, aiming to accelerate fielding of affordable, relevant national security systems.
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