Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a
leading National Security Solutions provider, today reported its
first quarter 2021 financial results. For the first quarter of
2021, Kratos reported Revenues of $194.2 million, Operating Income
of $4.9 million, Net Income of $1.9 million and Adjusted EBITDA of
$18.1 million.
First Quarter 2021 Revenues of $194.2 million
increased 15.0 percent, as compared to Revenues of $168.9 million
in the first quarter of 2020, reflecting organic growth in Kratos’
Unmanned Systems, Space and Satellite, C5ISR, Microwave Products,
Rocket Support Systems and Turbine Technology businesses, offset
partially by certain reductions, including in our Training
Solutions business, primarily resulting from a previously disclosed
reduction in scope of certain international training contracts.
Excluding the impact of the ASC Signal, TDI and 5D acquisitions,
revenue grew organically 8.9 percent in the first quarter of 2021
as compared to the first quarter of 2020. Revenue grew organically
11.6 percent in the first quarter of 2021 on a proforma basis,
excluding the impact of the acquisitions and the reduction of the
international training contracts.
Operating Income of $4.9 million in the first
quarter of 2021 increased from $4.7 million in the first quarter of
2020, with first quarter 2021 Operating Income including increases
in non-cash stock-based compensation expense of $1.5 million and
R&D of $2.3 million over the first quarter of 2020. First
Quarter 2021 Adjusted EBITDA of $18.1 million increased 11.0
percent, as compared to $16.3 million in the first quarter of 2020,
primarily reflecting the increase in revenues.
First quarter 2021 Cash Flow generated from
Operations was $22.7 million, and Free Cash Flow Generated from
Operations was $13.1 million, after funding $9.6 million of capital
expenditures. Cash on hand at March 28, 2021 was $383.6 million.
Kratos reported first quarter 2021 Net income of $1.9 million, and
GAAP EPS of $0.02 for the first quarter of 2021, compared to Net
Loss of $0.2 million and GAAP EPS of $0.00 for the first quarter of
2020. Adjusted EPS was $0.06 for the first quarter of 2021 compared
to $0.06 for the first 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 first quarter of 2021, Kratos’ Unmanned
Systems Segment (KUS) Revenues of $55.9 million increased 33.1
percent, as compared to $42.0 million in the first quarter of 2020,
and KUS operating income increased by 740.0 percent, to $4.2
million in the first quarter of 2021 from $0.5 million in the first
quarter of 2020. First quarter 2021 KUS Adjusted EBITDA of $6.4
million increased 178.3 percent, as compared to first quarter 2020
Adjusted EBITDA of $2.3 million, primarily reflecting increases in
certain target drone programs and leverage achieved with the fixed
manufacturing, overhead and general and administrative structure,
offset by certain development programs, including tactical drone
development programs, which typically generate lower margins.
KUS’s book-to-bill ratio for the first quarter
of 2021 was 0.7 to 1.0 and 1.2 to 1.0 for the last twelve months
ended March 28, 2021, with bookings of $247.4 million for the
twelve months ended March 28, 2021. Total backlog for
KUS at the end of the first quarter of 2021 was $222.4 million,
down from $237.9 million at the end of the fourth quarter of 2020,
and up from $174.4 million at the end of the first quarter of
2020.
For the first quarter of 2021, Kratos’
Government Solutions Segment (KGS) reported Revenues of $138.3
million, an increase of 9.0 percent, as compared to revenues of
$126.9 million in the first quarter of 2020, and operating income
of $7.1 million, down from operating income of $9.3 million in the
first quarter of 2020, reflecting a less favorable revenue mix,
including an increase in development-type programs and
product-related revenues primarily resulting from the recent ASC
Signal acquisition. Revenues in the first quarter of
2021 include approximately $8.6 million from the ASC Signal
acquisition, offset by reductions of approximately $5.0 million in
our training solutions business resulting primarily from the
previously disclosed scope reductions in certain international
training programs. First quarter 2021 KGS Adjusted EBITDA of $11.7
million was down from first quarter 2020 Adjusted EBITDA of $14.0
million, primarily reflecting a less favorable mix of revenues and
increased investments in R&D expenses of approximately $2.3
million which were incurred in the space and satellite
business.
For the first quarter of 2021, KGS reported a
book-to-bill ratio of 0.9 to 1.0, including a book-to-bill ratio of
1.3 to 1.0 in Kratos’ Space, Satellite and Training business. For
the twelve months ended March 28, 2021, KGS reported a book to bill
ratio of 1.3 to 1.0, with bookings of $735.2 million for the twelve
months ended March 28, 2021. KGS total backlog at the end of the
first quarter of 2021 was $670.5 million, down from $684.2 million
at the end of the fourth quarter of 2020, and up from $472.5
million at the end of the first quarter of 2020.
For the first quarter of 2021, Kratos reported
consolidated bookings of $164.9 million and a book-to-bill ratio of
0.8 to 1.0, with consolidated bookings of $982.6 million and a
book-to-bill ratio of 1.3 to 1.0 for the last twelve months ended
March 28, 2021. Backlog at March 28, 2021 was $892.9 million, down
sequentially from $922.2 million at December 27, 2020 and up from
$646.8 million at March 29, 2020, and Kratos’ bid and proposal
pipeline was $9.0 billion at March 28, 2021. Backlog at
March 28, 2021 was comprised of funded backlog of $620.7 million
and unfunded backlog of $272.2 million.
Eric DeMarco, Kratos’ President and CEO, said, “Since our last
report to you, the Fiscal 2022 National Security Budget has been
submitted at $753 billion, better than we expected and we believe a
positive sign for our industry and Kratos. Importantly,
the Biden Administration has articulated its areas of focus
includes retiring legacy systems and driving rapid innovation,
affordability and technology into new and fielded systems, areas
where Kratos is a clear industry leader.” Mr. DeMarco continued,
“Representative of this change, affordability and technology focus,
Michael Brown, Director of the Defense Innovation Unit (DIU), a key
strategic partner and customer of Kratos, has been selected to
become the Pentagon’s Acquisition Chief, emphasizing Mr. Brown’s
success as a disruptive DIU change agent and his previous Silicon
Valley and commercial company experience.”
Mr. DeMarco concluded, “We believe Kratos’ focus
on the rapid development and fielding of affordable, disruptive
systems, products and solutions, including in unmanned drones,
space and satellites, microwave electronics, missile defense,
hypersonics, propulsion and lasers is uniquely aligned with today’s
National Security requirements and we remain confident in an
industry leading, up and to the right organic growth
trajectory.”
Financial Guidance
We are providing our second quarter 2021
guidance and reaffirming our previously provided full year 2021
Revenue, Adjusted EBITDA and Cash Flow guidance as follows:
|
|
|
$M |
Q221 |
FY21 |
Revenues |
$195 - $205 |
$810 - $850 |
R&D |
$8 - $9 |
$31 - $33 |
Operating
Income |
$0 - $3 |
$30 - $34 |
Depreciation |
$5 - $6 |
$20 - $21 |
Amortization |
$2 - $3 |
$8 |
Stock Based
Compensation |
$6 |
$23 - $24 |
Adjusted
EBITDA |
$14 - $18 |
$81 - $87 |
|
|
|
Operating
Cash Flow |
|
$20- $25 |
Capital
Expenditures |
|
$55 - $60 |
Free Cash
Flow Use |
|
($30 - $40) |
The second quarter and full year 2021 estimated
revenues and operating performance reflects the expected hardware,
product and software mix based on current shipment and execution
schedules. The second quarter and full year 2021 estimated revenues
also include the impact of the recent loss of a large international
training contract, which contributed approximately $34.5 million to
the Company’s full year 2020 revenues. Our full year 2021 guidance
range includes our current forecasted business mix, and our most
recent assumptions of the expected impact of COVID-19, of which
Kratos experienced increased employee cases at the end of 2020,
which continued into 2021, including in California and at certain
of our drone, space & satellite and C5ISR locations, and recent
supplier delays. In addition, estimated second quarter and full
year 2021 Operating Income and Adjusted EBITDA reflect the expected
mix of development-type contracts and expected investments,
primarily in our Space and Satellite, Unmanned, C5ISR and Engine
businesses, where we have received or are pursuing a number of
large opportunities, including Ground Based Strategic Deterrent
(“GBSD”), Over Head Persistent Infrared (OPIR) and Skyborg.
The full year 2021 estimated Operating Cash Flow
includes approximately $10 million of planned investments in our
rocket system and engine businesses for new products, including in
the Hypersonic area, and to increase Kratos’ market share, as well
as approximately $5 million of the required payback of the 2020
deferred employer related payroll taxes. The 2021 capital
expenditure forecast currently includes expected outlays of $20 to
$25 million associated with the continued production of Valkyrie
aircraft prior to receipt of expected customer award(s); therefore,
these aircraft are currently reflected as Company-owned assets
until receipt of the related customer award(s). Kratos will adjust
the forecasted capital expenditure outlays and the ultimate balance
sheet classification of these investments once expected customer
orders and the nature of the contract terms can be determined. In
addition, the capital expenditure forecast includes investments in
the Company’s space and satellite business secure facilities and
the Company-owned space domain awareness network, capital
investments related to the recent GBSD award, and investments
related to the Company’s turbine and rocket system businesses.
Management will discuss the Company’s first
quarter 2021 financial results, as well as its second quarter and
full year 2021 guidance on a conference call beginning at 2:00 p.m.
Pacific (5:00 p.m. Eastern) today. Analysts and institutional
investors may participate in the conference call by dialing (866)
393-0674, and referencing the call by ID number 5570066. The
general public may access the conference call by dialing (877)
344-3935 or on the day of the event by visiting
www.kratosdefense.com for a simultaneous webcast. A replay of the
webcast will be available on the Kratos web site approximately two
hours after the conclusion of the conference call.
About Kratos Defense & Security
SolutionsKratos Defense & Security Solutions,
Inc. (NASDAQ:KTOS) develops and fields transformative,
affordable technology, platforms, and systems for United States
National Security related customers, allies, and commercial
enterprises. Kratos is changing the way breakthrough
technologies for these industries are rapidly brought to market
through proven commercial and venture capital backed approaches,
including proactive research, and streamlined development
processes. At Kratos, affordability is a technology, and
we specialize in unmanned systems, satellite communications,
cyber security/warfare, microwave electronics, missile defense,
hypersonic systems, training and combat systems and next generation
turbo jet and turbo fan engine development. For more information go
to www.kratosdefense.com.
Notice
Regarding
Forward-Looking
StatementsThis
news release contains certain forward-looking statements that
involve risks and uncertainties, including, without limitation,
express or implied statements concerning the Company’s expectations
regarding its future financial performance, including the Company’s
expectations for its second quarter and full year 2021 revenue,
R&D, operating income, depreciation, amortization, stock based
compensation expense, and Adjusted EBITDA, and full year 2021
operating cash flow, capital expenditures and other investments,
and free cash flow, the Company’s future growth trajectory and
ability to achieve improved revenue mix and profit in certain of
its business segments and the expected timing of such profit, the
Company’s expectation of ramp on projects and that investments in
its business will result in an increase in the Company’s market
share and total addressable market and position the Company for
significant future organic growth, profitability, cash flow and
shareholder value, the Company’s bid and proposal pipeline, demand
for its products and services, including the Company’s alignment
with today’s National Security requirements, ability to
successfully compete in the tactical unmanned aerial system area
and expected new customer awards, including the magnitude and
timing of funding and expected contract awards related to the
Company’s Valkyrie program and other new tactical unmanned
programs, performance of key contracts and programs, including the
timing of production and demonstration related to certain of the
Company’s contracts and product offerings, the impact of the
Company’s restructuring efforts and cost reduction measures,
including its ability to improve profitability and cash flow in
certain business units as a result of these actions, benefits to be
realized from the Company’s net operating loss carry forwards, the
availability and timing of government funding for the Company’s
offerings, including the strength of the future funding
environment, the short-term delays that may occur as a result of
Continuing Resolutions or delays in DoD budget approvals, timing of
LRIP and full rate production related to the Company’s unmanned
aerial target system offerings, as well as the level of recurring
revenues expected to be generated by these programs once they
achieve full rate production, market and industry developments, and
the current estimated impact of COVID-19 on our financial
projections, industry, business and operations, including projected
growth. Such statements are only predictions, and the Company’s
actual results may differ materially from the results expressed or
implied by these statements. Investors are cautioned not to place
undue reliance on any such forward-looking statements. All such
forward-looking statements speak only as of the date they are made,
and the Company undertakes no obligation to update or revise these
statements, whether as a result of new information, future events
or otherwise. Factors that may cause the Company’s results to
differ include, but are not limited to: risks to our business and
financial results related to the reductions and other spending
constraints imposed on the U.S. Government and our other customers,
including as a result of sequestration and extended continuing
resolutions, the Federal budget deficit and Federal government
shut-downs; risks of adverse regulatory action or litigation; risks
associated with debt leverage and cost savings and cash flow
improvements expected as a result of the refinancing of our Senior
Notes; risks that our cost-cutting initiatives will not provide the
anticipated benefits; risks that changes, cutbacks or delays in
spending by the U.S. DoD may occur, which could cause delays or
cancellations of key government contracts; risks of delays to or
the cancellation of our projects as a result of protest actions
submitted by our competitors; risks that changes may occur in
Federal government (or other applicable) procurement laws,
regulations, policies and budgets; risks of the availability of
government funding for the Company's products and services due to
performance, cost growth, or other factors, changes in government
and customer priorities and requirements (including cost-cutting
initiatives, the potential deferral of awards, terminations or
reduction of expenditures to respond to the priorities of Congress
and the Administration, or budgetary cuts resulting from
Congressional committee recommendations or automatic sequestration
under the Budget Control Act of 2011, as amended); risks that the
UAS and UGS markets do not experience significant growth; risks
that we cannot expand our customer base or that our products do not
achieve broad acceptance which could impact our ability to achieve
our anticipated level of growth; risks of increases in the Federal
government initiatives related to in-sourcing; risks related to
security breaches, including cyber security attacks and threats or
other significant disruptions of our information systems,
facilities and infrastructures; risks related to our compliance
with applicable contracting and procurement laws, regulations and
standards; risks related to the new DoD Cybersecurity Maturity
Model Certification (CMMC); risks relating to contract performance;
risks related to failure of our products or services; risks
associated with our subcontractors’ or suppliers’ failure to
perform their contractual obligations, including the appearance of
counterfeit or corrupt parts in our products; changes in the
competitive environment (including as a result of bid protests);
failure to successfully integrate acquired operations and
competition in the marketplace, which could reduce revenues and
profit margins; risks that potential future goodwill impairments
will adversely affect our operating results; risks that anticipated
tax benefits will not be realized in accordance with our
expectations; risks that a change in ownership of our stock could
cause further limitation to the future utilization of our net
operating losses; risks that we may be required to record valuation
allowances on our net operating losses which could adversely impact
our profitability and financial condition; risks that the current
economic environment will adversely impact our business; currently
unforeseen risks associated with COVID-19 and risks related to
natural disasters or severe weather. These and other risk factors
are more fully discussed in the Company’s Annual Report on Form
10-K for the period ended December 27, 2020, and in our other
filings made with the Securities and Exchange Commission.
Note Regarding Use of Non-GAAP Financial
Measures and Other Performance Metrics
This news release contains non-GAAP financial
measures, including Adjusted earnings per share (computed using
income from continuing operations before income taxes, excluding
income (loss) from discontinued operations, excluding income (loss)
attributable to non-controlling interest, excluding depreciation,
amortization of intangible assets, amortization of capitalized
contract and development costs, stock-based compensation expense,
acquisition and restructuring related items and other, which
includes but is not limited to legal related items and foreign
transaction gains and losses, less the estimated impact to income
taxes) and including Adjusted EBITDA (which includes net income
(loss) attributable to noncontrolling interest and excludes, among
other things, losses and gains from discontinued operations,
acquisition and restructuring related items, stock compensation
expense, foreign transaction gains and losses, and the associated
margin rates). Additional non-GAAP financial measures include Free
Cash Flow from Operations computed as Cash Flow from Operations
less Capital Expenditures and Adjusted EBITDA related to our KUS
and KGS businesses. Kratos believes this information is useful to
investors because it provides a basis for measuring the Company’s
available capital resources, the actual and forecasted operating
performance of the Company’s business and the Company’s cash flow,
excluding non-recurring items and non-cash items that would
normally be included in the most directly comparable measures
calculated and presented in accordance with GAAP. The Company’s
management uses these non-GAAP financial measures along with the
most directly comparable GAAP financial measures in evaluating the
Company’s actual and forecasted operating performance, capital
resources and cash flow. Non-GAAP financial measures should not be
considered in isolation from, or as a substitute for, financial
information presented in compliance with GAAP, and investors should
carefully evaluate the Company’s financial results calculated in
accordance with GAAP and reconciliations to those financial
statements. In addition, non-GAAP financial measures as reported by
the Company may not be comparable to similarly titled amounts
reported by other companies. As appropriate, the most directly
comparable GAAP financial measures and information reconciling
these non-GAAP financial measures to the Company’s financial
results prepared in accordance with GAAP are included in this news
release.
Another Performance Metric the Company believes
is a key performance indicator in our industry is our Book to Bill
Ratio as it provides investors with a measure of the amount of
bookings or contract awards as compared to the amount of revenues
that have been recorded during the period, and provides an
indicator of how much of the Company’s backlog is being burned or
utilized in a certain period. The Book to Bill Ratio is computed as
the number of bookings or contract awards in the period divided by
the revenues recorded for the same period. The Company believes
that the rolling or last twelve months Book to Bill Ratio is
meaningful since the timing of quarter to quarter bookings can
vary. Press Contact:Yolanda White858-812-7302
Direct
Investor
Information:877-934-4687investor@kratosdefense.com
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Condensed Consolidated Statements of Operations |
(in
millions, except per share data) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
Service
revenues |
|
$ |
57.3 |
|
|
$ |
63.6 |
|
Product
sales |
|
|
136.9 |
|
|
|
105.3 |
|
Total revenues |
|
|
194.2 |
|
|
|
168.9 |
|
Cost of
service revenues |
|
|
42.5 |
|
|
|
45.2 |
|
Cost of
product sales |
|
|
100.7 |
|
|
|
77.9 |
|
Total costs |
|
|
143.2 |
|
|
|
123.1 |
|
Gross profit
- service revenues |
|
|
14.8 |
|
|
|
18.4 |
|
Gross profit
- product sales |
|
|
36.2 |
|
|
|
27.4 |
|
|
|
|
|
|
Total gross profit |
|
|
51.0 |
|
|
|
45.8 |
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
|
35.3 |
|
|
|
31.5 |
|
Acquisition
and restructuring related items |
|
|
0.2 |
|
|
|
0.5 |
|
Research and
development expenses |
|
|
8.0 |
|
|
|
5.7 |
|
Depreciation |
|
|
1.2 |
|
|
|
1.5 |
|
Amortization
of intangible assets |
|
|
1.4 |
|
|
|
1.9 |
|
Operating income |
|
|
4.9 |
|
|
|
4.7 |
|
Interest
expense, net |
|
|
(5.9 |
) |
|
|
(5.4 |
) |
Other income
(expense), net |
|
|
0.2 |
|
|
|
(0.5 |
) |
Loss from continuing operations before income taxes |
|
|
(0.8 |
) |
|
|
(1.2 |
) |
Benefit for
income taxes from continuing operations |
|
|
(2.7 |
) |
|
|
(1.4 |
) |
Income from continuing operations |
|
|
1.9 |
|
|
|
0.2 |
|
Loss from
discontinued operations, net of income taxes |
|
|
- |
|
|
|
(0.4 |
) |
Net income (loss) |
|
|
1.9 |
|
|
|
(0.2 |
) |
Less: Net income attributable to
noncontrolling interest |
|
|
- |
|
|
|
- |
|
Net income (loss) attributable to
Kratos |
|
$ |
1.9 |
|
|
$ |
(0.2 |
) |
|
|
|
|
|
Basic income
per common share attributable to Kratos: |
|
|
|
|
Income from continuing
operations |
|
$ |
0.02 |
|
|
$ |
- |
|
Loss from discontinued
operations |
|
|
- |
|
|
|
- |
|
Net income |
|
$ |
0.02 |
|
|
$ |
- |
|
|
|
|
|
|
Diluted
income per common share attributable to Kratos: |
|
|
|
|
Income from continuing
operations |
|
$ |
0.01 |
|
|
$ |
- |
|
Loss from discontinued
operations |
|
|
- |
|
|
|
- |
|
Net income |
|
$ |
0.01 |
|
|
$ |
- |
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
Basic weighted average common shares
outstanding |
|
|
124.1 |
|
|
|
107.2 |
|
Diluted weighted average common
shares outstanding |
|
|
127.7 |
|
|
|
110.1 |
|
|
|
|
|
|
Adjusted
EBITDA (1) |
|
$ |
18.1 |
|
|
$ |
16.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Reconciliation of GAAP to Non-GAAP
Measures |
|
|
|
|
|
|
|
|
|
Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net
income (loss) attributable to Kratos adjusted for net income (loss)
attributable to noncontrolling interest, income (loss) from
discontinued operations, net interest expense, provision for income
taxes, depreciation and amortization expense of intangible
assets, amortization of capitalized contract and development costs,
stock-based compensation, acquisition and restructuring related
items and other, and foreign transaction gain
(loss). |
|
|
|
|
|
Adjusted EBITDA as calculated by us may be calculated differently
than Adjusted EBITDA for other companies. We have provided Adjusted
EBITDA because we believe it is a commonly used measure of
financial performance in comparable companies and is provided
to help investors evaluate companies on a consistent basis, as
well as to enhance understanding of our operating results. Adjusted
EBITDA should not be construed as either an alternative to net
income or as an indicator of our operating performance or an
alternative to cash flows as a measure of liquidity. The
adjustments to calculate this non-GAAP financial measure and the
basis for such adjustments are outlined below. Please refer to the
following table below that reconciles GAAP net income (loss) to
Adjusted EBITDA. |
|
|
|
|
|
The adjustments to calculate this non-GAAP financial measure, and
the basis for such adjustments, are outlined below: |
|
|
|
|
|
Interest income and interest expense, net. The Company receives
interest income on investments and incurs interest expense on
loans, capital leases and other financing arrangements,
including the amortization of issue discounts and deferred
financing costs. These amounts may vary from period to
period due to changes in cash and debt balances. |
|
|
|
|
|
Income taxes. The Company's tax expense can fluctuate materially
from period to period due to tax adjustments that may not be
directly related to underlying operating performance or to the
current period of operations and may not necessarily reflect the
impact of utilization of our NOLs. |
|
|
|
|
|
Depreciation. The Company incurs depreciation expense (recorded in
cost of revenues and in operating expenses) related to capital
assets purchased, leased or constructed to support the ongoing
operations of the business. The assets are recorded at cost or fair
value and are depreciated over the estimated useful lives of
individual assets. |
|
|
|
|
|
Amortization of intangible assets. The Company incurs amortization
of intangible expense related to acquisitions it has made. These
intangible assets are valued at the time of acquisition and
are amortized over the estimated useful lives. |
|
|
|
|
|
Amortization of capitalized contract and development costs. The
Company incurs amortization of previously capitalized software
development and non-recurring engineering costs related to certain
targets in its Unmanned Systems and ballistic missile target
businesses as these units are sold. |
|
|
|
|
|
Stock-based compensation expense. The Company incurs expense
related to stock-based compensation included in its GAAP
presentation of selling, general and administrative expense.
Although stock-based compensation is an expense of the Company and
viewed as a form of compensation, these expenses vary in
amount from period to period, and are affected by market forces
that are difficult to predict and are not within the control of
management, such as the market price and volatility of the
Company's shares, risk-free interest rates and the expected term
and forfeiture rates of the awards. Management believes that
exclusion of these expenses allows comparison of operating results
to those of other companies that disclose non-GAAP financial
measures that exclude stock-based compensation. |
|
|
|
|
|
Foreign transaction (gain) loss. The Company incurs transaction
gains and losses related to transactions with foreign customers in
currencies other than the U.S. dollar. In addition, certain
intercompany transactions can give rise to realized and unrealized
foreign currency gains and losses. |
|
|
|
|
|
Acquisition and transaction related items. The Company incurs
transaction related costs, such as legal and accounting fees and
other expenses, related to acquisitions and divestiture
activities. Management believes these items are outside the normal
operations of the Company's business and are not indicative of
ongoing operating results. |
|
|
|
|
|
Restructuring costs. The Company incurs restructuring costs for
cost reduction actions which include employee termination
costs, facility shut-down related costs and remaining lease
commitment costs for excess or exited facilities. Management
believes that these costs are not indicative of ongoing
operating results as they are either non-recurring and/or not
expected when full capacity and volumes are
achieved. |
|
|
|
|
|
Legal related items. The Company incurs costs related to pending
legal settlements and other legal related matters. Management
believes these items are outside the normal operations of the
Company's business and are not indicative of ongoing operating
results. |
|
|
|
|
|
Adjusted EBITDA is a non-GAAP financial measure and should not be
considered in isolation or as a substitute for financial
information provided in accordance with GAAP. This non-GAAP
financial measure may not be computed in the same manner as
similarly titled measures used by other companies. The Company
expects to continue to incur expenses similar to the Adjusted
EBITDA financial adjustments described above, and investors should
not infer from the Company's presentation of this non-GAAP
financial measure that these costs are unusual, infrequent, or
non-recurring. |
|
|
|
|
|
Reconciliation of Net income attributable to Kratos to Adjusted
EBITDA is as follows: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
Net income
(loss) attributable to Kratos |
|
$ |
1.9 |
|
|
$ |
(0.2 |
) |
Loss from
discontinued operations, net of income taxes |
|
|
- |
|
|
|
0.4 |
|
Interest
expense, net |
|
|
5.9 |
|
|
|
5.4 |
|
Benefit for
income taxes from continuing operations |
|
|
(2.7 |
) |
|
|
(1.4 |
) |
Depreciation
(including cost of service revenues and product sales) |
|
|
4.9 |
|
|
|
4.4 |
|
Stock-based
compensation |
|
|
6.2 |
|
|
|
4.7 |
|
Foreign
transaction loss |
|
|
0.1 |
|
|
|
0.4 |
|
Amortization
of intangible assets |
|
|
1.4 |
|
|
|
1.9 |
|
Amortization
of capitalized contract and development costs |
|
|
0.2 |
|
|
|
0.2 |
|
Acquisition
and restructuring related items and other |
|
|
0.2 |
|
|
|
0.5 |
|
Plus: Net
income attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
18.1 |
|
|
$ |
16.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of acquisition and restructuring related items and
other included in Adjusted EBITDA: |
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
Acquisition
and transaction related items |
|
$ |
0.2 |
|
|
$ |
0.4 |
|
Restructuring costs |
|
|
- |
|
|
|
0.1 |
|
|
|
|
|
|
|
|
$ |
0.2 |
|
|
$ |
0.5 |
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Segment Data |
(in
millions) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
Revenues: |
|
|
|
|
Unmanned Systems |
|
$ |
55.9 |
|
|
$ |
42.0 |
|
Kratos Government Solutions |
|
|
138.3 |
|
|
|
126.9 |
|
Total revenues |
|
$ |
194.2 |
|
|
$ |
168.9 |
|
|
|
|
|
|
Operating
income |
|
|
|
|
Unmanned Systems |
|
$ |
4.2 |
|
|
$ |
0.5 |
|
Kratos Government Solutions |
|
|
7.1 |
|
|
|
9.3 |
|
Unallocated corporate expense, net |
|
|
(6.4 |
) |
|
|
(5.1 |
) |
Total operating income |
|
$ |
4.9 |
|
|
$ |
4.7 |
|
|
|
|
|
|
Note: Unallocated corporate expense, net includes costs for certain
stock-based compensation programs (including stock-based
compensation costs for stock options, employee stock purchase plan
and restricted stock units), the effects of items not considered
part of management’s evaluation of segment operating performance,
and acquisition and restructuring related items, corporate costs
not allocated to the segments, legal related items, and other
miscellaneous corporate activities. |
|
|
|
|
|
Reconciliation of Segment Operating Income to Adjusted EBITDA is as
follows: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
Unmanned
Systems |
|
|
|
|
Operating income |
|
$ |
4.2 |
|
|
$ |
0.5 |
|
Other income |
|
|
0.1 |
|
|
|
- |
|
Depreciation |
|
|
1.6 |
|
|
|
1.6 |
|
Amortization of intangible assets |
|
|
0.3 |
|
|
|
- |
|
Amortization of capitalized contract and
development costs |
|
|
0.2 |
|
|
|
0.2 |
|
Acquisition and restructuring related items and
other |
|
|
- |
|
|
|
- |
|
Adjusted EBITDA |
|
$ |
6.4 |
|
|
$ |
2.3 |
|
% of revenue |
|
|
11.4% |
|
|
|
5.5% |
|
|
|
|
|
|
Kratos
Government Solutions |
|
|
|
|
Operating income |
|
$ |
7.1 |
|
|
$ |
9.3 |
|
Other income (expense) |
|
|
0.2 |
|
|
|
(0.1 |
) |
Depreciation |
|
|
3.3 |
|
|
|
2.8 |
|
Amortization of intangible assets |
|
|
1.1 |
|
|
|
1.9 |
|
Amortization of capitalized contract and
development costs |
|
|
- |
|
|
|
- |
|
Acquisition and restructuring related items and
other |
|
|
- |
|
|
|
0.1 |
|
Adjusted EBITDA |
|
$ |
11.7 |
|
|
$ |
14.0 |
|
% of revenue |
|
|
8.5% |
|
|
|
11.0% |
|
|
|
|
|
|
Total Adjusted EBITDA |
|
$ |
18.1 |
|
|
$ |
16.3 |
|
% of revenue |
|
|
9.3% |
|
|
|
9.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Condensed Consolidated Balance Sheets |
(in
millions) |
|
|
|
|
|
|
|
|
|
|
March
28, |
|
December
27, |
|
|
|
2021 |
|
|
|
2020 |
|
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
383.6 |
|
|
$ |
380.8 |
|
Restricted cash |
|
|
- |
|
|
|
0.7 |
|
Accounts receivable, net |
|
|
264.6 |
|
|
|
272.3 |
|
Inventoried costs |
|
|
85.7 |
|
|
|
81.2 |
|
Prepaid expenses |
|
|
13.5 |
|
|
|
12.0 |
|
Other current assets |
|
|
21.2 |
|
|
|
17.8 |
|
Total current assets |
|
|
768.6 |
|
|
|
764.8 |
|
Property, plant and equipment, net |
|
|
146.9 |
|
|
|
143.8 |
|
Operating lease right-of-use assets |
|
|
40.8 |
|
|
|
42.9 |
|
Goodwill |
|
|
483.7 |
|
|
|
483.9 |
|
Intangible assets, net |
|
|
41.6 |
|
|
|
43.0 |
|
Other assets |
|
|
83.6 |
|
|
|
84.4 |
|
Total assets |
|
$ |
1,565.2 |
|
|
$ |
1,562.8 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
51.9 |
|
|
$ |
55.4 |
|
Accrued expenses |
|
|
32.0 |
|
|
|
34.7 |
|
Accrued compensation |
|
|
54.2 |
|
|
|
48.1 |
|
Accrued interest |
|
|
6.4 |
|
|
|
1.5 |
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
41.1 |
|
|
|
34.0 |
|
Current portion of operating lease liabilities |
|
|
8.9 |
|
|
|
8.9 |
|
Other current liabilities |
|
|
13.0 |
|
|
|
11.9 |
|
Other current liabilities of discontinued operations |
|
|
2.7 |
|
|
|
3.1 |
|
Total current liabilities |
|
|
210.2 |
|
|
|
197.6 |
|
Long-term debt |
|
|
300.3 |
|
|
|
301.0 |
|
Operating lease liabilities, net of current portion |
|
|
36.4 |
|
|
|
38.6 |
|
Other long-term liabilities |
|
|
72.0 |
|
|
|
83.0 |
|
Other long-term liabilities of discontinued operations |
|
|
2.5 |
|
|
|
2.5 |
|
Total liabilities |
|
|
621.4 |
|
|
|
622.7 |
|
Commitments and contingencies |
|
|
|
|
Redeemable noncontrolling interest |
|
|
14.8 |
|
|
|
14.8 |
|
Stockholders’ equity: |
|
|
|
|
Additional paid-in capital |
|
|
1,557.9 |
|
|
|
1,556.3 |
|
Accumulated other comprehensive loss |
|
|
1.6 |
|
|
|
1.4 |
|
Accumulated deficit |
|
|
(630.5 |
) |
|
|
(632.4 |
) |
Total Kratos stockholders’ equity |
|
|
929.0 |
|
|
|
925.3 |
|
Total liabilities and stockholders’ equity |
|
$ |
1,565.2 |
|
|
$ |
1,562.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Condensed Consolidated Statements of Cash Flows |
(in
millions) |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
Operating
activities: |
|
|
|
|
Net income (loss) |
|
$ |
1.9 |
|
|
$ |
(0.2 |
) |
Less: loss from discontinued operations |
|
|
- |
|
|
|
(0.4 |
) |
Income from continuing operations |
|
|
1.9 |
|
|
|
0.2 |
|
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities from continuing
operations: |
|
|
|
|
Depreciation and amortization |
|
|
6.3 |
|
|
|
6.3 |
|
Amortization of lease right-of-use assets |
|
|
2.2 |
|
|
|
2.9 |
|
Deferred income taxes |
|
|
0.1 |
|
|
|
(1.0 |
) |
Stock-based compensation |
|
|
6.2 |
|
|
|
4.7 |
|
Amortization of deferred financing costs |
|
|
0.2 |
|
|
|
0.2 |
|
Provision for doubtful accounts |
|
|
(0.1 |
) |
|
|
0.3 |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
Accounts receivable |
|
|
9.8 |
|
|
|
6.6 |
|
Unbilled receivables |
|
|
(1.8 |
) |
|
|
(1.5 |
) |
Inventoried costs |
|
|
(4.2 |
) |
|
|
(1.5 |
) |
Prepaid expenses and other assets |
|
|
(2.0 |
) |
|
|
(6.8 |
) |
Operating lease liabilities |
|
|
(2.2 |
) |
|
|
(3.4 |
) |
Accounts payable |
|
|
(2.0 |
) |
|
|
(9.6 |
) |
Accrued compensation |
|
|
6.2 |
|
|
|
3.7 |
|
Accrued expenses |
|
|
(2.7 |
) |
|
|
(4.4 |
) |
Accrued interest |
|
|
4.9 |
|
|
|
4.9 |
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
7.1 |
|
|
|
3.4 |
|
Income tax receivable and payable |
|
|
(2.2 |
) |
|
|
(0.9 |
) |
Other liabilities |
|
|
(5.0 |
) |
|
|
(0.1 |
) |
Net cash provided by operating activities from continuing
operations |
|
|
22.7 |
|
|
|
4.0 |
|
Investing activities: |
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
(5.1 |
) |
|
|
(14.2 |
) |
Capital expenditures |
|
|
(9.6 |
) |
|
|
(6.4 |
) |
Net cash used in investing activities from continuing
operations |
|
|
(14.7 |
) |
|
|
(20.6 |
) |
Financing activities: |
|
|
|
|
Payment under finance leases |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
Payments of employee taxes withheld from share-based awards |
|
|
(7.1 |
) |
|
|
(1.2 |
) |
Proceeds from shares issued under equity plans |
|
|
2.5 |
|
|
|
2.6 |
|
Net cash provided by (used in) financing activities from continuing
operations |
|
|
(4.8 |
) |
|
|
1.3 |
|
Net cash flows from continuing operations |
|
|
3.2 |
|
|
|
(15.3 |
) |
Net operating cash flows of discontinued
operations |
|
|
(0.5 |
) |
|
|
1.3 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(0.6 |
) |
|
|
- |
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
|
2.1 |
|
|
|
(14.0 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
|
381.5 |
|
|
|
172.6 |
|
Cash, cash equivalents and restricted cash at end of period |
|
$ |
383.6 |
|
|
$ |
158.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Non-GAAP Measures |
Computation
of Adjusted Earnings Per Share |
(in
millions, except per share data) |
|
|
|
|
|
Adjusted income from continuing operations and adjusted income from
continuing operations per diluted common share (Adjusted EPS) are
non-GAAP measures for reporting financial performance and exclude
the impact of certain items and, therefore, have not been
calculated in accordance with GAAP. Management believes that
exclusion of these items assists in providing a more complete
understanding of the Company's underlying continuing operations
results and trends and allows for comparability with our peer
company index and industry. The Company uses these measures along
with the corresponding GAAP financial measures to manage the
Company's business and to evaluate its performance compared to
prior periods and the marketplace. The Company defines adjusted
income from continuing operations before amortization of intangible
assets, depreciation, stock-based compensation, foreign transaction
gain/loss, and acquisition and restructuring related items and
other. The estimated impact to income taxes includes the impact to
the effective tax rate, current tax provision and deferred tax
provision, and excludes the impact of discrete items, including
transaction related expenses and release of valuation allowance, or
benefit related to the add-backs.* Adjusted EPS reflects adjusted
income on a per share basis using weighted average diluted shares
outstanding. |
|
|
|
|
|
The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures. |
|
|
|
|
|
|
|
Three Months Ended |
|
|
March 28, |
|
March 29, |
|
|
|
2021 |
|
|
|
2020 |
|
Net
income (loss) attributable to Kratos |
|
$ |
1.9 |
|
|
$ |
(0.2 |
) |
Less: GAAP
benefit for income taxes |
|
|
(2.7 |
) |
|
|
(1.4 |
) |
Less: Net
income attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
Less: Loss
from discontinued operations, net of income taxes |
|
|
- |
|
|
|
0.4 |
|
Loss
from continuing operations before taxes |
|
|
(0.8 |
) |
|
|
(1.2 |
) |
Add:
Amortization of intangible assets |
|
|
1.4 |
|
|
|
1.9 |
|
Add:
Amortization of capitalized contract and development costs |
|
|
0.2 |
|
|
|
0.2 |
|
Add:
Depreciation |
|
|
4.9 |
|
|
|
4.4 |
|
Add:
Stock-based compensation |
|
|
6.2 |
|
|
|
4.7 |
|
Add: Foreign
transaction loss |
|
|
0.1 |
|
|
|
0.4 |
|
Add:
Acquisition and restructuring related items and other |
|
|
0.2 |
|
|
|
0.5 |
|
Non-GAAP Adjusted income from continuing
operations before income taxes |
|
|
12.2 |
|
|
|
10.9 |
|
Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
|
|
4.5 |
|
|
|
4.3 |
|
Non-GAAP Adjusted net
income |
|
$ |
7.7 |
|
|
$ |
6.6 |
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
|
$ |
0.01 |
|
|
$ |
- |
|
Less: GAAP
benefit for income taxes |
|
|
(0.02 |
) |
|
|
(0.01 |
) |
Less: Net
income attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
Less: Loss
from discontinued operations, net of income taxes |
|
|
- |
|
|
|
- |
|
Add:
Amortization of intangible assets |
|
|
0.01 |
|
|
|
0.02 |
|
Add:
Amortization of capitalized contract and development costs |
|
|
- |
|
|
|
- |
|
Add:
Depreciation |
|
|
0.04 |
|
|
|
0.04 |
|
Add:
Stock-based compensation |
|
|
0.05 |
|
|
|
0.04 |
|
Add: Foreign
transaction loss |
|
|
- |
|
|
|
- |
|
Add:
Acquisition and restructuring related items and other |
|
|
- |
|
|
|
0.01 |
|
Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
|
|
(0.03 |
) |
|
|
(0.04 |
) |
Adjusted income from continuing operations per diluted
common share |
|
$ |
0.06 |
|
|
$ |
0.06 |
|
|
|
|
|
|
Weighted average diluted common shares
outstanding |
|
|
127.7 |
|
|
|
110.1 |
|
|
|
|
|
|
*The impact to income taxes is calculated by recasting income
before income taxes to include the add-backs involved in
determining Adjusted income from continuing operations before
income taxes and recalculating the income tax provision (benefit),
including current and deferred income taxes, using the Adjusted
income from continuing operations before income taxes. The
recalculation also adjusts for any discrete tax expense, including
transaction related expenses and the release of valuation
allowance, or benefit related to the add-backs. |
Kratos Defense and Secur... (NASDAQ:KTOS)
Historical Stock Chart
From Jun 2024 to Jul 2024
Kratos Defense and Secur... (NASDAQ:KTOS)
Historical Stock Chart
From Jul 2023 to Jul 2024