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Kratos’ Third-Quarter Revenue Reaches $201 Million

Kratos Defense & Security Solutions Inc. (Nasdaq: KTOS), the defense contractor based in Scripps Ranch, essentially broke even in its third quarter, reporting a net loss of 2 cents per share, or $2.4 million, on total revenue of $200.6 million. The business reported its financial results on Nov. 3.

In the same period one year ago, Kratos reported net income of 2 cents per share, or $2.4 million, on total revenue of $202 million.

“Though we expect COVID-related supply chain and customer issues [that] the industry and Kratos are experiencing to continue, there is no change in Kratos’ expected up and to the right long term organic growth profile with increasing profit margins,” CEO Eric DeMarco said in a statement.

“Kratos is the growth leader in space, satellite communications and unmanned drone systems as reflected in our results today and our C5ISR, Rocket System and Next Generation Engine businesses are also positioned to be future growth leaders. We continue to win new strategic program awards like OBSS, we believe the pending 2022 DoD budget is favorable for Kratos, we have a number of programs transitioning from development to production, with others expecting increased production and our bid pipeline now stands at approximately $9.1 billion.”

OBSS refers to an unmanned aircraft program: the U.S. Air Force’s Off-Board Sensing Station. Kratos has a one-year contract to develop the aircraft with possible follow-on work. C5ISR is an abbreviation for command, control, computers, communications, cyber, intelligence, surveillance and reconnaissance.

Focusing its Guidance

Kratos Defense decreased its full-year revenue guidance from a range of $810 million to $850 million to a range of $805 million to $815 million. The adjustments reflect continued and increased supply chain and customer delays, and COVID-related quarantine issues and restrictions, including the company’s inability to enter certain countries to execute on or deliver systems for customers. The adjustment primarily reflects over $31 million of under-contract revenue that has been deferred from the company’s 2021 third or fourth quarters to future periods, including revenue in its satellite, microwave electronics and C5ISR businesses.

Revenue in the Unmanned Systems Segment grew 14.6% over the year-ago quarter to $61.3 million. The corporation increased the number of employees in the segment; however, that weighed on selling, general and administrative expenses. Kratos also said it has a significant amount of unmanned programs in development. Programs at that stage typically generate lower margins.

Total backlog for Kratos Unmanned Systems at the end of the third quarter was $194.5 million, up from $185.4 million at the end of the second quarter and up from $189.5 million at the end of the third quarter of 2020.

Kratos added $230.5 million to its order book for the 12 months ending Sept. 26.


The corporation reported having $369.9 million in cash and cash equivalents at the end of the third quarter, down slightly from $380.8 million at the end of 2020.

Target Drone Orders Arrive

“Since our last report to you, we have received approximately $374 million in sole source, single award target drone related contracts, of which we expect to realize substantially the entire IDIQ amount in Kratos’ revenue over the period of performance,” DeMarco said. Under IDIQ contracts, the government commits to an indefinite number of purchases; the government has discretion to order goods and services up to a certain ceiling. DeMarco said he expected the government to order the entire amount or close to it.

Kratos Defense & Security Solutions Inc.

FOUNDED: 1994 as Wireless Facilities Inc.

CEO: Eric DeMarco


BUSINESS: Defense contractor

REVENUE: $747.7M in 2020; $717.5M in 2019

NET INCOME: $79.6M in 2020; $12.5M in 2019

STOCK: KTOS on Nasdaq

EMPLOYEES: 72 in San Diego

WEBSITE: www.kratosdefense.com

NOTABLE: Kratos builds unmanned aircraft and target drones in Northern California and Oklahoma

CONTACT: (858) 812-7300


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