Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a
leading National Security Solutions provider, today reported its
fourth quarter and fiscal 2021 financial results. For the fourth
quarter of 2021, Kratos reported Revenues of $211.6 million,
Operating Income of $9.2 million, Net Loss of $2.6 million and
Adjusted EBITDA of $23.4 million. Included in Net Loss
is a tax provision of $4.5 million on Income before taxes of $3.0
million.
Kratos reported fourth quarter 2021 Net Loss of
$2.6 million, and GAAP loss per share of $0.02, compared to Net
Income of $78.1 million and GAAP EPS income of $0.62 for the fourth
quarter of 2020, which included a non-recurring non-cash tax
benefit of $75.3 million. Adjusted EPS was $0.11 for the fourth
quarter of 2021 compared to $0.08 for the fourth quarter of 2020.
The Company has approximately $235 million of net operating loss
carryforwards, which are expected to substantially shield Kratos
from paying future cash income taxes.
Fourth quarter 2021 Revenues of $211.6 million
increased $5.2 million, or 2.5 percent, from fourth quarter 2020
Revenues of $206.4 million, reflecting increases in the Company’s
Unmanned Systems, Space, Satellite and Cyber, Microwave Products
and Turbine Technologies businesses, offset partially by reductions
of approximately $9.4 million in our Training Solutions business
resulting primarily from a previously disclosed reduction of an
international training contract. On a pro forma basis, excluding
this reduction, Revenue grew organically 7.7 percent in the fourth
quarter of 2021, as compared to the fourth quarter of
2020. Additionally, fourth quarter 2021 revenues
continued to be negatively impacted by COVID-related employee
absenteeism, supply chain delays, increased lead times for delivery
of necessary components, customer delays and travel restrictions,
primarily in our Space, Satellite and Cyber, Microwave Products and
C5ISR businesses, resulting in expected revenues of approximately
$11.2 million being deferred into future periods.
Operating Income of $9.2 million in the fourth
quarter of 2021 increased from $9.0 million in the fourth quarter
of 2020, with fourth quarter 2021 Operating Income including
increases in Internally Funded Research & Development of $1.4
million over the fourth quarter of 2020. Fourth quarter 2021
Adjusted EBITDA of $23.4 million increased from $22.3 million in
the fourth quarter of 2020.
Fourth quarter 2021 Cash Flow Generated from
Operations was $0.7 million, and Free Cash Flow Used from
Operations was $12.4 million, after funding $13.1 million of
capital expenditures, including in our high growth Unmanned
Systems, Space, Satellite and Cyber and Turbine Technologies
business areas.
For the fourth quarter of 2021, Kratos’ Unmanned
Systems Segment (KUS) Revenues of $54.4 million increased 9.9
percent, as compared to $49.5 million in the fourth quarter of
2020. KUS Operating Income decreased from $3.5 million in the
fourth quarter of 2020 to $2.3 million in the fourth 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 of approximately
$1.3 million and an increase of R&D expenses of approximately
$0.3 million.
Fourth quarter 2021 KUS Adjusted EBITDA of $4.6
million decreased from fourth quarter 2020 Adjusted EBITDA of $5.5
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 fourth quarter of 2021 was 2.4 to 1.0 and 1.1 to 1.0
for the last twelve months ended December 26, 2021, with bookings
of $263.6 million for the twelve months ended December 26,
2021. Total backlog for KUS at the end of the fourth
quarter of 2021 was $269.6 million, up from $194.5 million at the
end of the third quarter of 2021, and up from $237.9 million at the
end of the fourth quarter of 2020.
For the fourth quarter of 2021, Kratos’
Government Solutions Segment (KGS) reported Revenues of $157.2
million, up from Revenues of $156.9 million in the fourth quarter
of 2020, reflecting organic growth in our Space, Satellite and
Cyber, Microwave Products and Turbine Technologies businesses,
offset by a reduction of $9.4 million in our Training Solutions
business resulting primarily from the loss of an international
training contract. KGS reported operating income of $14.7 million,
up from Operating Income of $12.5 million in the fourth quarter of
2020, primarily reflecting a more favorable revenue mix in the
Company’s Space, Satellite and Cyber, Microwave Products and
Turbine Technologies businesses.
Kratos’ Space, Satellite and Cyber business
generated Revenues of $78.4 million in the fourth quarter of 2021,
an organic increase of 9.0 percent over the fourth quarter of 2020
Revenues of $71.9 million.
Fourth quarter 2021 KGS Adjusted EBITDA of $18.8
million increased from fourth quarter 2020 Adjusted EBITDA of $16.8
million, including a more favorable mix of revenues, primarily in
the Space, Satellite and Cyber business generated from deliveries
of OpenSpace software and work performed on certain confidential
programs, and including a favorable mix and deliveries in our
Microwave Products and a favorable mix in our Turbine Technologies
businesses.
For the fourth quarter of 2021, KGS reported a
book-to-bill ratio of 1.2 to 1.0, and a book to bill ratio of 1.0
to 1 for the twelve months ended December 26, 2021.
Included in KGS is Kratos’ Space, Satellite and Cyber business,
which reported a book to bill ratio for the twelve months ended
December 26, 2021 of 1.1 to 1. KGS’s total backlog at the end of
the fourth quarter of 2021 was $684.3 million, up from $644.6
million at the end of the third quarter of 2021, and flat from
$684.2 million at the end of the fourth quarter of 2020.
For the fourth quarter of 2021, Kratos reported
consolidated bookings of $323.1 million and a book-to-bill ratio of
1.5 to 1.0, with consolidated bookings of $840.0 million and a
book-to-bill ratio of 1.0 to 1.0 for the last twelve months ended
December 26, 2021. Backlog on December 26, 2021 was $953.9 million,
up sequentially from $839.1 million at September 26, 2021 and up
from $922.2 million at December 27, 2020, and Kratos’ bid and
proposal pipeline was $9.4 billion at December 26, 2021, up from
$9.1 billion at September 26, 2021. Backlog at December
26, 2021 was comprised of funded backlog of $653.7 million and
unfunded backlog of $300.2 million.
Fiscal 2021 Revenues of $811.5 million increased
8.5 percent, as compared to Revenues of $747.7 million in fiscal
2020, reflecting organic growth in Kratos’ Unmanned Systems, Space,
Satellite and Cyber, Microwave Products, and Turbine Technologies
businesses, offset partially by certain reductions of approximately
$26.1 million in our Training Solutions business. Fiscal 2021
Revenues include approximately $41.4 million from the recent ASC
Signal acquisition, up from fiscal 2020 Revenues of $21.9 million,
reflecting a full year of contribution in 2021. On a proforma
basis, excluding the reduction in our Training Solutions business
and excluding the ASC acquisition, Consolidated Revenues increased
organically 10.7 percent.
In fiscal 2021, our Unmanned Systems business
generated revenue of $231.9 million, an increase of 24 percent over
2020 revenues of $187.0 million. In fiscal 2021 our KGS business
generated revenue of $579.6 million, an increase of 3.4 percent
over 2020 revenue of $560.7 million. On a proforma basis, excluding
the reduction in our Training Solutions business and excluding the
ASC acquisition, revenues in our KGS business grew 5.4 percent from
fiscal 2020 to fiscal 2021.
Consolidated Operating Income of $27.9 million
for fiscal 2021 decreased 4.8 percent, as compared to $29.3 million
in fiscal 2020. Fiscal 2021 Operating Income includes increases in
non-cash stock-based compensation expense of $4.8 million,
depreciation expense of $3.2 million and R&D expenses of $8.2
million, primarily reflecting investments in the Company’s Space,
Satellite and Cyber business. Kratos reported fiscal 2021 Net Loss
of $2.0 million and loss per share of $0.02, compared to 2020 Net
Income of $79.6 million and GAAP EPS of $0.67. Included in fiscal
2020 Net Income is a non-cash tax benefit of $73.5 million.
Adjusted EPS was $0.36 for fiscal 2021 compared to $0.33 for fiscal
2020.
Fiscal 2021 Adjusted EBITDA of $82.9 million
increased from 2020 Adjusted EBITDA of $78.5 million, primarily
reflecting the increase in Revenues, net of the impact of the mix
of revenues, including certain programs and products in more mature
lifecycles, offset by increased investments including in
R&D.
For fiscal year 2021, Cash Flow Generated from
Operations was $35.3 million, and Free Cash Flow Used from
Operations was $11.2 million, after funding $46.5 million of
capital expenditures. Cash on hand on December 26, 2021 was $349.4
million.
Eric DeMarco, Kratos’ President and CEO, said,
“For fiscal year 2021, our largest businesses, Unmanned Systems and
Space, Satellite and Cyber, reported revenue growth of
approximately 24% and 19%, respectively, with Kratos’ Unmanned
Systems and KGS reporting fourth quarter book to bill ratios of 2.4
to 1.0 and 1.2 to 1.0, respectively, or a consolidated book to bill
ratio of 1.5 to 1.0, positioning the Company for a continued future
up and to the right growth trajectory. As we begin 2022, we remain
laser focused on our disruptive, affordable, rapid development,
leading technology, customer aligned mission.”
Mr. DeMarco, continued, “The DoD has recently
communicated its continued commitment to and prioritization of
loyal wingman tactical drone and autonomous systems for the future
force structure, including additional new planned for program
opportunities and potential envisioned concepts of operations. With
the numerous tactical drone programs Kratos has successfully
competed for and been awarded, the family of affordable aircraft we
have flying today and additional systems Kratos Ghost Works has in
development with the customer, we believe that Kratos is uniquely
positioned to address this new, large market opportunity when the
customer calls.”
Mr. DeMarco concluded, “Similar to Kratos’
tactical drone business, we believe that our Space and Satellite
business has the opportunity, with our first to market, software
based virtualized products, to disrupt the ground infrastructure
market and provide Kratos a significant future growth opportunity.
Accordingly, in 2022 we will continue our internally funded
investments and remain focused on achieving “designed in” program
and constellation positions, increasing our market share, while
also forecasting increasing revenue, profitability and positive
cash flow for this business throughout the year.”
Financial GuidanceWe are providing our first
quarter and full year 2022 guidance as follows:
$M |
Q122 |
FY22 |
Revenues |
$190 - $200 |
$880 - $920 |
R&D |
$9 - $10 |
$38 - $42 |
Operating Income (loss) |
$(3) - $(1) |
$27 - $31 |
Depreciation |
$5 - $6 |
$24 - $25 |
Amortization |
$1 |
$5 - $6 |
Stock Based Compensation |
$7 - $8 |
$28 - $29 |
Adjusted EBITDA |
$10 - $13 |
$85 - $89 |
Operating Cash Flow |
|
$25 - $35 |
Capital Expenditures |
|
$55 - $65 |
Free Cash Flow Use |
|
($30 - $40) |
Our Fiscal year 2022 financial guidance we are
providing today includes our current forecasted business mix, and
our assumptions related to the expected impact of continued
employee absenteeism, manufacturing, production and supply chain
disruptions, parts shortages and related price increases in
materials and components, travel restrictions and other COVID-19
related items that have and continue to impact the industry and
Kratos.
In January and February of 2022, we experienced
a significant increase in the intensity and effects of COVID–19,
including the new Omicron variant, on our employees, consultants,
vendors, suppliers, customers, etc. We have assumed that these
COVID–19 related impacts to our business, which are significantly
impacting our fiscal first quarter 2022 forecast, will begin to
subside in our second fiscal quarter, and continue to improve
throughout our fiscal 2022. Our assumption of an improving COVID-19
related environment throughout the year, combined with the
expectation of a Fiscal 2022 DoD budget by the end of the first
quarter, directly relates to our 2022 quarter over quarter
financial forecast improvement, including Kratos’ expectation that
its financial performance in the second half of 2022 will be
substantially greater than the first half. The
estimated impact of these COVID-related issues, including the
availability of certain raw materials and lack of capacity at mills
supporting Kratos’ hardware programs, is currently estimated to
impact our first quarter Revenues and Adjusted EBITDA by $12 to $15
million and $2 to $4 million, respectively, and currently estimated
to impact our fiscal 2022 Revenues and Adjusted EBITDA by $20 to
$25 million and $5 to $8 million, respectively. We will provide
future updates as appropriate.
The forecasted financial trajectory in the
second half of 2022 reflects the expected mix of revenues,
including the expected timing of software product deliveries in our
Space, Satellite and Cyber business based upon the forecasted order
flow and roll out of our new OpenSpace solution. As we have
discussed previously, as this business is transitioning to a more
software-focused solution, financial performance is becoming more
cyclical, as we experienced in 2021, with increased revenue and
margins projected around the September 30 Government fiscal and
other customers’ calendar year-end, when increased order and
procurement decisions are typically made to fully expend or
obligate current fiscal year funding. This cyclicality also results
in our projection that we will experience reduced profit margins in
the first half of Kratos’ fiscal year, and in particular the first
quarter, with increased margins in the second half of the year, due
to increased financial leverage on our fixed overhead,
manufacturing, research, development and administrative
infrastructure, as forecasted revenues increase sequentially
throughout the year.
There is currently no Federal Fiscal Year 2022
(October 1, 2021 – September 30, 2022) defense budget in place and
the defense industry is operating under a Federal Budget Continuing
Resolution Authorization (CRA), which Kratos has been operating
under throughout our entire fourth quarter of fiscal 2021 (October
1, 2021 – December 26, 2021) and thus far during our first quarter
of fiscal 2022. Under a CRA, there are no new start program awards
or new programs of record, no increases in production on existing
programs, and no transition from existing development programs to
production, among other items, all which impact Kratos. The effects
of the current CRA adversely impacted Kratos’ fourth quarter of
2021 and are expected to adversely impact Kratos’ fiscal 2022, with
the most significant impact to financial performance currently
expected in our first and second quarters, including an expected
reduction in bookings, which estimated impact we have included in
our 2022 financial guidance provided today.
The existing CRA currently expires on March 11,
2022, at which time we have assumed that a Federal Fiscal Year 2022
defense budget will be approved and become law, which assumption is
included in our Fiscal 2022 financial guidance. However, the final
approved and authorized DoD budget for 2022 and its timing is
currently uncertain, and the longer a CRA continues beyond the
March 11, 2022 expiration date, the greater the potential adverse
impact on the defense industry and Kratos.
Forecasted Q122 and FY22 Operating Income and
Adjusted EBITDA reflect the expected mix of development-type
contracts and expected investments, including in our Space,
Satellite and Cyber, Unmanned Systems, C5ISR, Turbine Technologies
and Rocket System businesses, where we have received, are pursuing
or expect to receive a number of new contract awards.
Kratos’ FY22 forecasted revenues also include the final impact of
the 2021 loss of a large international training contract, which
contributed approximately $13.0 million to the Company’s FY21 first
and second quarter revenues and include the estimated contribution
from the recently closed CTT and Cosmic AES acquisitions.
The 2022 estimated Operating Cash Flow includes
approximately $10 to $12 million of continued planned engineering
costs in our Rocket System and Turbine Technologies businesses for
new products and investments, including the design and development
of an affordable hypersonic vehicle, Erinyes, and a complementary
propulsion system. 2022 Operating Cash Flow also includes an
approximate $5 million outflow, representing the final installment
of the required payback of the 2020 deferred employer-related
payroll taxes.
Total estimated capital expenditures for 2022
are $55 to $65 million, which includes approximately $25 to $30
million for expected capital expenditures related to normal annual
maintenance. In addition, the 2022 capital expenditure forecast
currently includes expected outlays of $18 to $20 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. Other
non-recurring, non-maintenance capital expenditures include
expected investments of approximately $12 to $14 million related to
the build out of secure facilities for the Company’s Unmanned
Systems business and the Company’s Space, Satellite and Cyber
business, and for approximately $5 - $6 million of expected capital
investments related to the GBSD program and investments related to
the Company’s Turbine Technologies and Rocket System businesses,
including for Erinyes. Approximately $9 -
$14 million of
capital expenditures and approximately $6 - $7 million of
engineering costs that were initially expected to be incurred in
2021 have carried forward into the Company’s 2022 capital and
operating budgets.
Kratos is waiting for the previously mentioned
CRA to end, 2022 Defense Budget approval and for the 2023 DoD
Budget Request and Future Years’ Defense Program (FYDP) submission,
each of which program and related funding content may significantly
impact Kratos’ current 2022 and future internally funded investment
expectations.
Management will discuss the Company’s fourth
quarter and fiscal 2021 financial results, as well as its first
quarter and full year 2022 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
2121619. 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 first quarter and full year 2022 revenues,
R&D, operating income, depreciation, amortization, stock based
compensation expense, and Adjusted EBITDA, and full year 2022
operating cash flow, capital expenditures and other investments,
and free cash flow use, 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 improved
revenue mix and 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 an increase in 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 and expectation that the 2022 DoD budget will
be favorable for the Company, ability to successfully compete in
the tactical unmanned aerial system area and expected new customer
awards, including the magnitude and timing of funding and the
future opportunity associated with such awards, and expected
contract awards related to the Company’s Skyborg Vanguard 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 and to achieve financial leverage on fixed
administrative costs, 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 and employee absenteeism, supply chain disruptions and
delays 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 related 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 26, 2021, 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
results. 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 |
|
Twelve Months Ended |
|
|
|
|
|
December 26, |
|
December 27, |
|
December 26, |
|
December 27, |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues |
|
$ |
52.5 |
|
|
$ |
54.6 |
|
|
$ |
219.4 |
|
|
$ |
248.7 |
|
|
|
|
Product
sales |
|
|
159.1 |
|
|
|
151.8 |
|
|
|
592.1 |
|
|
|
499.0 |
|
|
|
|
Total revenues |
|
|
211.6 |
|
|
|
206.4 |
|
|
|
811.5 |
|
|
|
747.7 |
|
|
|
|
Cost of
service revenues |
|
|
36.9 |
|
|
|
40.6 |
|
|
|
156.2 |
|
|
|
182.5 |
|
|
|
|
Cost of
product sales |
|
|
113.2 |
|
|
|
111.5 |
|
|
|
430.2 |
|
|
|
362.0 |
|
|
|
|
Total costs |
|
|
150.1 |
|
|
|
152.1 |
|
|
|
586.4 |
|
|
|
544.5 |
|
|
|
|
Gross profit
- service revenues |
|
|
15.6 |
|
|
|
14.0 |
|
|
|
63.2 |
|
|
|
66.2 |
|
|
|
|
Gross profit
- product sales |
|
|
45.9 |
|
|
|
40.3 |
|
|
|
161.9 |
|
|
|
137.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross profit |
|
|
61.5 |
|
|
|
54.3 |
|
|
|
225.1 |
|
|
|
203.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
|
40.0 |
|
|
|
35.2 |
|
|
|
150.5 |
|
|
|
132.5 |
|
|
|
|
Acquisition
and restructuring related items |
|
|
1.0 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
2.4 |
|
|
|
|
Research and
development expenses |
|
|
9.0 |
|
|
|
7.6 |
|
|
|
35.2 |
|
|
|
27.0 |
|
|
|
|
Depreciation |
|
|
1.3 |
|
|
|
0.7 |
|
|
|
5.0 |
|
|
|
5.2 |
|
|
|
|
Amortization
of intangible assets |
|
|
1.0 |
|
|
|
1.4 |
|
|
|
4.7 |
|
|
|
6.8 |
|
|
|
|
Operating income |
|
|
9.2 |
|
|
|
9.0 |
|
|
|
27.9 |
|
|
|
29.3 |
|
|
|
|
Interest
expense, net |
|
|
(5.9 |
) |
|
|
(5.9 |
) |
|
|
(23.4 |
) |
|
|
(22.8 |
) |
|
|
|
Other income
(expense), net |
|
|
(0.3 |
) |
|
|
(0.3 |
) |
|
|
(0.1 |
) |
|
|
0.3 |
|
|
|
|
Income from continuing operations before income taxes |
|
|
3.0 |
|
|
|
2.8 |
|
|
|
4.4 |
|
|
|
6.8 |
|
|
|
|
Provision
(benefit) for income taxes from continuing operations |
|
|
4.5 |
|
|
|
(75.3 |
) |
|
|
3.9 |
|
|
|
(73.5 |
) |
|
|
|
Income (loss) from continuing operations |
|
|
(1.5 |
) |
|
|
78.1 |
|
|
|
0.5 |
|
|
|
80.3 |
|
|
|
|
Loss from
discontinued operations, net of income taxes |
|
|
(1.0 |
) |
|
|
(0.1 |
) |
|
|
(2.1 |
) |
|
|
(0.9 |
) |
|
|
|
Net income (loss) |
|
|
(2.5 |
) |
|
|
78.0 |
|
|
|
(1.6 |
) |
|
|
79.4 |
|
|
|
|
Less: Net income (loss) attributable to noncontrolling
interest |
|
|
0.1 |
|
- |
|
(0.1 |
) |
|
|
0.4 |
|
|
|
(0.2 |
) |
|
|
|
Net income (loss) attributable to Kratos |
|
$ |
(2.6 |
) |
|
$ |
78.1 |
|
|
$ |
(2.0 |
) |
|
$ |
79.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income
(loss) per common share attributable to Kratos: |
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations |
|
|
(0.01 |
) |
|
$ |
0.63 |
|
|
$ |
- |
|
|
$ |
0.70 |
|
|
|
|
Loss from
discontinued operations |
|
|
(0.01 |
) |
|
|
- |
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
Net income
(loss) |
|
|
(0.02 |
) |
|
$ |
0.63 |
|
|
$ |
(0.02 |
) |
|
$ |
0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
income (loss) per common share attributable to Kratos: |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations |
|
$ |
(0.01 |
) |
|
$ |
0.62 |
|
|
$ |
- |
|
|
$ |
0.68 |
|
|
|
|
Loss from discontinued operations |
|
|
(0.01 |
) |
|
|
- |
|
|
|
(0.02 |
) |
|
|
(0.01 |
) |
|
|
|
Net income (loss) |
|
$ |
(0.02 |
) |
|
$ |
0.62 |
|
|
$ |
(0.02 |
) |
|
$ |
0.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average common shares outstanding |
|
|
124.9 |
|
|
|
123.2 |
|
|
|
124.6 |
|
|
|
115.5 |
|
|
|
|
Diluted weighted average common shares outstanding |
|
|
124.9 |
|
|
|
127.0 |
|
|
|
128.0 |
|
|
|
118.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA (1) |
|
$ |
23.4 |
|
|
$ |
22.3 |
|
|
$ |
82.9 |
|
|
$ |
78.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Twelve Months Ended |
|
|
|
|
|
December 26, |
|
December 27, |
|
December 26, |
|
December 27, |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) attributable to Kratos |
|
$ |
(2.6 |
) |
|
$ |
78.1 |
|
|
$ |
(2.0 |
) |
|
$ |
79.6 |
|
|
|
|
Loss from
discontinued operations, net of income taxes |
|
|
1.0 |
|
|
|
0.1 |
|
|
|
2.1 |
|
|
|
0.9 |
|
|
|
|
Interest
expense, net |
|
|
5.9 |
|
|
|
5.9 |
|
|
|
23.4 |
|
|
|
22.8 |
|
|
|
|
Provision
(benefit) for income taxes from continuing operations |
|
|
4.5 |
|
|
|
(75.3 |
) |
|
|
3.9 |
|
|
|
(73.5 |
) |
|
|
|
Depreciation
(including cost of service revenues and product sales) |
|
|
5.3 |
|
|
|
4.7 |
|
|
|
21.0 |
|
|
|
17.8 |
|
|
|
|
Stock-based
compensation |
|
|
6.6 |
|
|
|
6.5 |
|
|
|
25.8 |
|
|
|
21.0 |
|
|
|
|
Foreign
transaction loss |
|
|
0.4 |
|
|
|
0.4 |
|
|
|
0.8 |
|
|
|
- |
|
|
|
|
Amortization
of intangible assets |
|
|
1.0 |
|
|
|
1.4 |
|
|
|
4.7 |
|
|
|
6.8 |
|
|
|
|
Amortization
of capitalized contract and development costs |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
|
Acquisition
and restructuring related items and other |
|
|
1.0 |
|
|
|
0.4 |
|
|
|
1.8 |
|
|
|
2.4 |
|
|
|
|
Plus: Net
income (loss) attributable to noncontrolling interest |
|
|
0.1 |
|
|
|
(0.1 |
) |
|
|
0.4 |
|
|
|
(0.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
23.4 |
|
|
$ |
22.3 |
|
|
$ |
82.9 |
|
|
$ |
78.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of acquisition and restructuring related items and
other included in Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
|
|
December 26, |
|
December 27, |
|
December 26, |
|
December 27, |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
Acquisition
and transaction related items |
|
$ |
1.2 |
|
|
$ |
0.2 |
|
|
$ |
1.8 |
|
|
$ |
1.7 |
|
|
|
|
Restructuring costs |
|
|
(0.2 |
) |
|
|
0.2 |
|
|
|
- |
|
|
|
0.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1.0 |
|
|
$ |
0.4 |
|
|
$ |
1.8 |
|
|
$ |
2.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
|
|
|
Unaudited
Segment Data |
|
|
|
(in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
|
|
December 26, |
|
December 27, |
|
December 26, |
|
December 27, |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
Unmanned Systems |
|
$ |
54.4 |
|
|
$ |
49.5 |
|
|
$ |
231.9 |
|
|
$ |
187.0 |
|
|
|
|
Kratos Government Solutions |
|
|
157.2 |
|
|
|
156.9 |
|
|
|
579.6 |
|
|
|
560.7 |
|
|
|
|
Total revenues |
|
$ |
211.6 |
|
|
$ |
206.4 |
|
|
$ |
811.5 |
|
|
$ |
747.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income |
|
|
|
|
|
|
|
|
|
|
|
Unmanned Systems |
|
$ |
2.3 |
|
|
$ |
3.5 |
|
|
$ |
13.2 |
|
|
$ |
8.7 |
|
|
|
|
Kratos Government Solutions |
|
|
14.7 |
|
|
|
12.5 |
|
|
|
42.3 |
|
|
|
43.6 |
|
|
|
|
Unallocated corporate expense, net |
|
|
(7.8 |
) |
|
|
(7.0 |
) |
|
|
(27.6 |
) |
|
|
(23.0 |
) |
|
|
|
Total operating income |
|
$ |
9.2 |
|
|
$ |
9.0 |
|
|
$ |
27.9 |
|
|
$ |
29.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Twelve Months Ended |
|
|
|
|
|
December 26, |
|
December 27, |
|
December 26, |
|
December 27, |
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
Unmanned
Systems |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
2.3 |
|
|
$ |
3.5 |
|
|
$ |
13.2 |
|
|
$ |
8.7 |
|
|
|
|
Other income |
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
|
|
Depreciation |
|
|
1.8 |
|
|
|
1.6 |
|
|
|
7.2 |
|
|
|
6.1 |
|
|
|
|
Amortization of intangible assets |
|
|
0.3 |
|
|
|
0.2 |
|
|
|
1.1 |
|
|
|
0.6 |
|
|
|
|
Amortization of capitalized contract and development costs |
|
|
0.2 |
|
|
|
0.2 |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
|
Adjusted EBITDA |
|
$ |
4.6 |
|
|
$ |
5.5 |
|
|
$ |
22.6 |
|
|
$ |
16.4 |
|
|
|
|
% of
revenue |
|
|
8.5 |
% |
|
|
11.1 |
% |
|
|
9.7 |
% |
|
|
8.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Government Solutions |
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
14.7 |
|
|
$ |
12.5 |
|
|
$ |
42.3 |
|
|
$ |
43.6 |
|
|
|
|
Other income |
|
|
0.1 |
|
|
|
0.1 |
|
|
|
0.6 |
|
|
|
0.2 |
|
|
|
|
Depreciation |
|
|
3.5 |
|
|
|
3.1 |
|
|
|
13.8 |
|
|
|
11.7 |
|
|
|
|
Amortization of intangible assets |
|
|
0.7 |
|
|
|
1.2 |
|
|
|
3.6 |
|
|
|
6.2 |
|
|
|
|
Acquisition and restructuring related items and other |
|
|
(0.2 |
) |
|
|
(0.1 |
) |
|
|
- |
|
|
|
0.4 |
|
|
|
|
Adjusted EBITDA |
|
$ |
18.8 |
|
|
$ |
16.8 |
|
|
$ |
60.3 |
|
|
$ |
62.1 |
|
|
|
|
% of
revenue |
|
|
12.0 |
% |
|
|
10.7 |
% |
|
|
10.4 |
% |
|
|
11.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Adjusted EBITDA |
|
$ |
23.4 |
|
|
$ |
22.3 |
|
|
$ |
82.9 |
|
|
$ |
78.5 |
|
|
|
|
% of
revenue |
|
|
11.1 |
% |
|
|
10.8 |
% |
|
|
10.2 |
% |
|
|
10.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
|
|
|
Unaudited
Condensed Consolidated Balance Sheets |
|
|
|
(in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
26, |
|
December
27, |
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
$ |
349.4 |
|
|
$ |
380.8 |
|
|
|
|
Restricted cash |
|
|
|
|
|
|
- |
|
|
|
0.7 |
|
|
|
|
Accounts receivable, net |
|
|
|
|
|
|
284.7 |
|
|
|
272.3 |
|
|
|
|
Inventoried costs |
|
|
|
|
|
|
91.7 |
|
|
|
81.2 |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
9.8 |
|
|
|
12.0 |
|
|
|
|
Other current assets |
|
|
|
|
|
|
22.5 |
|
|
|
17.8 |
|
|
|
|
Total current assets |
|
|
|
|
|
|
758.1 |
|
|
|
764.8 |
|
|
|
|
Property, plant and equipment, net |
|
|
|
|
|
|
168.3 |
|
|
|
143.8 |
|
|
|
|
Operating lease right-of-use assets |
|
|
|
|
|
|
38.5 |
|
|
|
42.9 |
|
|
|
|
Goodwill |
|
|
|
|
|
|
493.9 |
|
|
|
483.9 |
|
|
|
|
Intangible assets, net |
|
|
|
|
|
|
43.2 |
|
|
|
43.0 |
|
|
|
|
Other assets |
|
|
|
|
|
|
87.5 |
|
|
|
84.4 |
|
|
|
|
Total assets |
|
|
|
|
|
$ |
1,589.5 |
|
|
$ |
1,562.8 |
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
|
$ |
50.4 |
|
|
$ |
55.4 |
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
27.2 |
|
|
|
34.7 |
|
|
|
|
Accrued compensation |
|
|
|
|
|
|
47.3 |
|
|
|
48.1 |
|
|
|
|
Accrued interest |
|
|
|
|
|
|
1.5 |
|
|
|
1.5 |
|
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
|
58.1 |
|
|
|
34.0 |
|
|
|
|
Current portion of operating lease liabilities |
|
|
|
|
|
|
10.1 |
|
|
|
8.9 |
|
|
|
|
Other current liabilities |
|
|
|
|
|
|
25.7 |
|
|
|
11.9 |
|
|
|
|
Other current liabilities of discontinued operations |
|
|
|
|
|
|
0.8 |
|
|
|
3.1 |
|
|
|
|
Total current liabilities |
|
|
|
|
|
|
221.1 |
|
|
|
197.6 |
|
|
|
|
Long-term debt |
|
|
|
|
|
|
296.7 |
|
|
|
301.0 |
|
|
|
|
Operating lease liabilities, net of current portion |
|
|
|
|
|
|
32.7 |
|
|
|
38.6 |
|
|
|
|
Other long-term liabilities |
|
|
|
|
|
|
76.2 |
|
|
|
83.0 |
|
|
|
|
Other long-term liabilities of discontinued operations |
|
|
|
|
|
|
2.5 |
|
|
|
2.5 |
|
|
|
|
Total liabilities |
|
|
|
|
|
|
629.2 |
|
|
|
622.7 |
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
|
|
|
|
15.2 |
|
|
|
14.8 |
|
|
|
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
|
1,578.9 |
|
|
|
1,556.3 |
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
0.6 |
|
|
|
1.4 |
|
|
|
|
Accumulated deficit |
|
|
|
|
|
|
(634.4 |
) |
|
|
(632.4 |
) |
|
|
|
Total Kratos stockholders’ equity |
|
|
|
|
|
|
945.1 |
|
|
|
925.3 |
|
|
|
|
Total liabilities and stockholders’ equity |
|
|
|
|
|
$ |
1,589.5 |
|
|
$ |
1,562.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
|
|
|
Unaudited
Condensed Consolidated Statements of Cash Flows |
|
|
|
(in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
|
|
|
|
|
|
December 26, |
|
December 27, |
|
|
|
|
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
|
Operating
activities: |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
$ |
(1.6 |
) |
|
$ |
79.4 |
|
|
|
|
Less: loss from discontinued operations |
|
|
|
|
|
|
(2.1 |
) |
|
|
(0.9 |
) |
|
|
|
Income from continuing operations |
|
|
|
|
|
|
0.5 |
|
|
|
80.3 |
|
|
|
|
Adjustments to reconcile income from continuing operations to net
cash provided by operating activities from continuing
operations: |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
25.7 |
|
|
|
24.6 |
|
|
|
|
Amortization of lease right-of-use assets |
|
|
|
|
|
|
9.0 |
|
|
|
9.4 |
|
|
|
|
Deferred income taxes |
|
|
|
|
|
|
(0.4 |
) |
|
|
(78.2 |
) |
|
|
|
Stock-based compensation |
|
|
|
|
|
|
25.8 |
|
|
|
21.0 |
|
|
|
|
Amortization of deferred financing costs |
|
|
|
|
|
|
1.0 |
|
|
|
1.0 |
|
|
|
|
Provision for (recovery of) doubtful accounts |
|
|
|
|
|
|
(0.2 |
) |
|
|
- |
|
|
|
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
|
2.6 |
|
|
|
(3.7 |
) |
|
|
|
Unbilled receivables |
|
|
|
|
|
|
(15.7 |
) |
|
|
3.6 |
|
|
|
|
Inventoried costs |
|
|
|
|
|
|
(5.3 |
) |
|
|
(5.3 |
) |
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
|
(4.5 |
) |
|
|
(10.8 |
) |
|
|
|
Operating lease liabilities |
|
|
|
|
|
|
(9.3 |
) |
|
|
(10.2 |
) |
|
|
|
Accounts payable |
|
|
|
|
|
|
(5.3 |
) |
|
|
(2.4 |
) |
|
|
|
Accrued compensation |
|
|
|
|
|
|
(1.3 |
) |
|
|
8.5 |
|
|
|
|
Accrued expenses |
|
|
|
|
|
|
(7.4 |
) |
|
|
1.0 |
|
|
|
|
Accrued interest |
|
|
|
|
|
|
(0.1 |
) |
|
|
(0.1 |
) |
|
|
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
|
24.1 |
|
|
|
(5.0 |
) |
|
|
|
Income tax receivable and payable |
|
|
|
|
|
|
1.4 |
|
|
|
(1.1 |
) |
|
|
|
Other liabilities |
|
|
|
|
|
|
(5.3 |
) |
|
|
12.1 |
|
|
|
|
Net cash provided by operating activities from continuing
operations |
|
|
|
|
|
|
35.3 |
|
|
|
44.7 |
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
|
|
|
|
(12.3 |
) |
|
|
(51.5 |
) |
|
|
|
Capital expenditures |
|
|
|
|
|
|
(46.5 |
) |
|
|
(35.9 |
) |
|
|
|
Proceeds from insurance |
|
|
|
|
|
|
4.5 |
|
|
|
- |
|
|
|
|
Proceeds from sale of assets |
|
|
|
|
|
|
2.2 |
|
|
|
0.1 |
|
|
|
|
Net cash used in investing activities from continuing
operations |
|
|
|
|
|
|
(52.1 |
) |
|
|
(87.3 |
) |
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt |
|
|
|
|
|
|
- |
|
|
|
5.1 |
|
|
|
|
Payment of long-term debt |
|
|
|
|
|
|
(5.1 |
) |
|
|
(0.6 |
) |
|
|
|
Proceeds from the issuance of common stock, net of issuance
costs |
|
|
|
|
|
|
- |
|
|
|
240.4 |
|
|
|
|
Payment under finance leases |
|
|
|
|
|
|
(1.0 |
) |
|
|
(0.6 |
) |
|
|
|
Payments of employee taxes withheld from share-based awards |
|
|
|
|
|
|
(9.1 |
) |
|
|
(1.4 |
) |
|
|
|
Proceeds from shares issued under equity plans |
|
|
|
|
|
|
5.9 |
|
|
|
4.8 |
|
|
|
|
Net cash provided by (used in) financing activities from continuing
operations |
|
|
|
|
|
|
(9.3 |
) |
|
|
247.7 |
|
|
|
|
Net cash flows from continuing operations |
|
|
|
|
|
|
(26.1 |
) |
|
|
205.1 |
|
|
|
|
Net operating cash flows of discontinued operations |
|
|
|
|
|
|
(4.5 |
) |
|
|
1.9 |
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
|
(1.5 |
) |
|
|
1.9 |
|
|
|
|
Net increase (decrease) in cash, cash equivalents and restricted
cash |
|
|
|
|
|
|
(32.1 |
) |
|
|
208.9 |
|
|
|
|
Cash, cash equivalents and restricted cash at beginning of
period |
|
|
|
|
|
|
381.5 |
|
|
|
172.6 |
|
|
|
|
Cash, cash equivalents and restricted cash at end of period |
|
|
|
|
|
$ |
349.4 |
|
|
$ |
381.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
|
|
|
Unaudited
Non-GAAP Measures |
|
|
|
Computation
of Adjusted Earnings Per Share |
|
|
|
(in
millions, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Adjusted income from
continuing operations and adjusted income from continuing
operations per diluted common share (Adjusted EPS) are
non-GAAP |
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measures for reporting
financial performance and exclude the impact of certain items and,
therefore, have not been calculated in accordance with GAAP.
Management |
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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 |
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for comparability with
our peer company index and industry. The Company uses these
measures along with the corresponding GAAP financial measures |
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to manage the
Company's business and to evaluate its performance compared to
prior periods and the marketplace. The Company defines
adjusted |
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income from continuing
operations before amortization of intangible assets, depreciation,
stock-based compensation, foreign transaction gain/loss, and |
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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 |
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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.* |
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Adjusted EPS reflects adjusted income on a per share basis using
weighted average diluted shares outstanding. |
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The following table reconciles the most directly comparable GAAP
financial measures to the non-GAAP financial measures. |
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Three Months Ended |
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Twelve Months Ended |
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December 26, |
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December 27, |
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December 26, |
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December 27, |
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2021 |
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2020 |
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2021 |
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2020 |
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Net
income (loss) attributable to Kratos |
|
$ |
(2.6 |
) |
|
$ |
78.1 |
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|
$ |
(2.0 |
) |
|
$ |
79.6 |
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Less: GAAP
provision (benefit) for income taxes |
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4.5 |
|
|
|
(75.3 |
) |
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3.9 |
|
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|
(73.5 |
) |
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Less: Net
income (loss) attributable to noncontrolling interest |
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0.1 |
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|
(0.1 |
) |
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0.4 |
|
|
|
(0.2 |
) |
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Less: Loss
from discontinued operations, net of income taxes |
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1.0 |
|
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|
0.1 |
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2.1 |
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0.9 |
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Income from continuing operations before
taxes |
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3.0 |
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2.8 |
|
$ |
- |
|
4.4 |
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6.8 |
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Add:
Amortization of intangible assets |
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1.0 |
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1.4 |
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- |
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4.7 |
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6.8 |
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Add:
Amortization of capitalized contract and development costs |
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0.2 |
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0.2 |
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|
1.0 |
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0.9 |
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Add:
Depreciation |
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5.3 |
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4.7 |
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21.0 |
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17.8 |
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Add:
Stock-based compensation |
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6.6 |
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6.5 |
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25.8 |
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21.0 |
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Add: Foreign
transaction loss |
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0.4 |
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0.4 |
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0.8 |
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- |
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Add:
Acquisition and restructuring related items and other |
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1.0 |
|
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0.4 |
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1.8 |
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2.4 |
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Non-GAAP Adjusted income from continuing
operations before income taxes |
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|
17.5 |
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|
16.4 |
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|
59.5 |
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55.7 |
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Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
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|
3.8 |
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6.5 |
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|
14.0 |
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17.1 |
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Non-GAAP Adjusted net
income |
|
$ |
13.7 |
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$ |
9.9 |
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$ |
45.5 |
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$ |
38.6 |
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Diluted earnings per common share |
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$ |
(0.02 |
) |
|
$ |
0.62 |
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|
$ |
(0.02 |
) |
|
$ |
0.67 |
|
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|
Less: GAAP
provision (benefit) for income taxes |
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|
0.04 |
|
|
|
(0.59 |
) |
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|
0.03 |
|
|
|
(0.62 |
) |
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Less: Net
income (loss) attributable to noncontrolling interest |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
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Less: Loss
from discontinued operations, net of income taxes |
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|
0.01 |
|
|
|
- |
|
|
|
0.02 |
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|
|
0.01 |
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Add:
Amortization of intangible assets |
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|
0.01 |
|
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|
0.01 |
|
|
|
0.04 |
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|
0.06 |
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Add:
Amortization of capitalized contract and development costs |
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- |
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- |
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|
0.01 |
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|
0.01 |
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Add:
Depreciation |
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0.04 |
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|
0.04 |
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|
0.17 |
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0.15 |
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Add:
Stock-based compensation |
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0.05 |
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|
0.05 |
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|
0.20 |
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0.17 |
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Add: Foreign
transaction loss |
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|
- |
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|
- |
|
|
|
0.01 |
|
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|
- |
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|
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Add:
Acquisition and restructuring related items and other |
|
|
0.01 |
|
|
|
- |
|
|
|
0.01 |
|
|
|
0.02 |
|
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|
Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
|
|
(0.03 |
) |
|
|
(0.05 |
) |
|
|
(0.11 |
) |
|
|
(0.14 |
) |
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|
Adjusted income from continuing operations per diluted
common share |
|
$ |
0.11 |
|
|
$ |
0.08 |
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$ |
0.36 |
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$ |
0.33 |
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|
Weighted average diluted common shares
outstanding |
|
|
124.9 |
|
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|
127.0 |
|
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|
128.0 |
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118.7 |
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*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. |
|
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Kratos Defense and Secur... (NASDAQ:KTOS)
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