0002040127-26-000014
SEC filingRevenue grew 36.6% to $471.5M, gross margin expanded 200 bps, but operating margin fell 290 bps due to IPO-related G&A surge.
Karman Holdings Inc. specializes in the upfront design, testing, manufacturing, and sale of mission-critical systems for existing and emerging missile, defense, and space programs. The company organizes its highly engineered solutions into three key families: Payload Protection and Deployment Systems, Aerodynamic Interstage Systems, and Propulsion Systems. These solutions are supplied across three core end markets: Hypersonics & Strategic Missile Defense, Tactical Missiles and Integrated Defense Systems, and Space and Launch. Karman believes its engineering expertise, vertically integrated production capabilities, and track record with critical subcomponent and subsystem design position it to serve prime contractor customers effectively.
Karman reports its business through three end markets rather than formal reporting segments. For the fiscal year ended December 31, 2025, revenue was nearly equally distributed: 32% from Hypersonics & Strategic Missile Defense (defined by large diameter hypersonic and intercontinental missiles and interceptors), 36% from Tactical Missiles and Integrated Defense Systems (smaller diameter rocket, missile technologies, and launcher systems), and 32% from Space and Launch (applications across Payload Protection, Interstage, and Propulsion Systems to traditional and emerging launch providers).
Karman’s three key product families are: Payload Protection and Deployment Systems (full design and manufacturing of the top section of a booster, launch vehicle, payload, or missile system); Aerodynamic Interstage Systems (metallic and composite subsystems enhancing aerodynamics and enabling interstage separation); and Propulsion Systems (integrated solid rocket motors, critical subsystems for liquid fueled rocket motors, launch systems, and ablative composites).
Karman sells directly to prime contractor customers and government agencies. The company’s revenue base is diversified across more than 130 active programs and approximately 80 customers, with no single program accounting for more than 12% of revenue. Karman often occupies sole or single source positions on key strategic missile and space programs, providing long, recurring revenue streams. Customer relationships often span over 15 years.
The competitive landscape is characterized by a large, fragmented supplier base of piece part and subsystem providers, with few integrated system providers. Karman’s direct competitors include other vertically integrated design-to-production suppliers and prime contractors’ decisions to insource (make vs. buy). Karman competes on technical differentiation and the ability to deliver complex solutions for extreme environments.
Karman’s growth strategy has four pillars: (1) expanding content on existing programs by leveraging its track record of mission success; (2) leading with design capabilities to capture positions on next-generation programs (e.g., hypersonics); (3) providing increasingly integrated systems through development or acquisition of complementary capabilities; and (4) pursuing value-added acquisitions targeting highly engineered products with intellectual property and complementary capabilities.
As of December 31, 2025, Karman had approximately 1,400 full-time, part-time, and temporary employees, including 300 multi-discipline engineers. None of its employees are represented by labor unions. The company offers training and development programs and maintains recruiting relationships with universities and technical institutions to support early-career hiring.
For the year ended December 31, 2025, Karman reported revenue of $471.5M, a 36.6% increase from $345.3M in 2024. Growth was broad-based across all end markets, with Tactical Missiles and Integrated Defense Systems leading at +48.5%, followed by Hypersonics and Strategic Missile Defense (+30.9%) and Space and Launch (+30.2%). Gross profit rose 43.8% to $190.0M, driving gross margin expansion of 200 bps to 40.3%, attributed to operating leverage and improved efficiency. However, operating margin contracted 290 bps to 15.5% as total operating expenses surged 70.8%, primarily due to a 92.8% increase in general and administrative expenses. G&A ballooned to $85.7M, driven by $8.1M in share-based compensation from the full vesting of PIUs and Phantom Units at IPO, higher payroll, and increased professional fees for public company compliance and acquisition activities. Net income grew 36.7% to $17.4M, with net income margin flat at 3.7%.
Segment performance reflected strong momentum across the portfolio. Hypersonics and Strategic Missile Defense revenue reached $150.0M, up 30.9%, supported by expanded strategic missile programs, NGI qualification phases, and hypersonic test beds. Space and Launch revenue grew 30.2% to $149.8M, benefiting from orders for legacy and emerging launch providers and liquid rocket engine content. Tactical Missiles and Integrated Defense Systems posted the fastest growth at 48.5% to $171.7M, driven by demand from advanced drone and loitering munitions and higher GMLRS production rates. Management noted that no single program accounted for more than 12% of sales, reflecting a diversified program base.
Management highlighted several tailwinds, including incremental defense funding from the One Big Beautiful Bill Act ($150B through FY2029) and a strong backlog of $801.1M, up 38.2% year-over-year. The company completed three acquisitions in 2025 (MTI, ISP, Five Axis) and one in early 2026 (Seemann Composite), expanding capabilities in advanced materials, solid propulsion, and maritime defense. The company expects these investments to drive future growth, though integration costs may persist. Operationally, management emphasized proactive cash flow management to mitigate working capital volatility, noting that negative operating cash flow of -$22.1M in 2025 was largely due to contractual asset buildup. No specific numeric guidance was provided, but the robust backlog and acquisition pipeline suggest sustained revenue momentum.
As of December 31, 2025, Karman held $33.96M in cash and cash equivalents, down from $22.4M net increase during the year driven by investing and financing activities. Total debt, including notes payable (net of issuance costs) of $499.15M and finance lease liabilities of $81.40M, stood at $580.54M. The company had no outstanding balance on its $50M revolving credit facility. Shareholders' equity was $382.69M, reflecting a significant increase from $195.996M at year-end 2024 due to the IPO and acquisitions.
Karman reported $550.6M in remaining performance obligations (backlog) as of December 31, 2025. Expected recognition: 73.5% in 2026 ($404.7M), 17.0% in 2027 ($93.6M), and 9.5% thereafter ($52.3M). The company also has $146.9M in undiscounted lease payments ($138.3M for finance leases, $8.6M for operating leases). There are no material purchase commitments or inventory/capacity obligations disclosed beyond performance obligations.
No share buybacks or dividends were declared or paid during the year. The company's capital allocation focused on debt-funded acquisitions: $505M in new notes payable proceeds (net $165.7M after repayments) used primarily to acquire MTI, ISP, and Five Axis for aggregate cash consideration of ~$225M plus stock. Capital expenditures were $20.3M (4.3% of sales), directed toward machinery and leasehold improvements. Interest expense, net of capitalized interest, was $44.6M.
The company operates as a single reportable segment (space and defense) but discloses revenue by three markets. In 2025, Tactical Missiles & Integrated Defense Systems contributed the largest share at $171.7M (36.4% of revenue), followed by Hypersonics & Strategic Missile Defense at $150.0M (31.8%) and Space & Launch at $149.8M (31.8%). Growth was strongest in Tactical Missiles (+48.5% YoY), driven by acquisitions. All revenue is domestic, with three customers representing 51.5% of total revenue.
Karman Holdings is heavily dependent on U.S. government contracts, which are subject to termination for convenience, budget appropriations, and evolving regulations. The CMMC requirement (by 2026) poses a near-term risk to contract eligibility. The company also faces risks from organizational conflict of interest rules and potential debarment for non-compliance with procurement laws.
Revenue is concentrated: top three customers = 51.5%. One supplier accounts for 23.8% of accounts payable. Loss of either could severely impact operations. The company relies on sole-source suppliers for critical components, and semiconductor shortages persist.
Material weaknesses in internal controls were identified. Expected loss of EGC status in 2026 will trigger Section 404(b) auditor attestation. Total debt of $499.1M (variable rate) could strain cash flows if rates rise. Goodwill ($353.5M) and intangibles ($285.9M) are at risk of impairment if growth falters.
Tariffs on imports, especially after the Supreme Court invalidated prior IEEPA tariffs, create uncertainty. Inflation and rising interest rates could increase costs under fixed-price contracts. Geopolitical tensions may disrupt supply chains or restrict exports.
AI advancements may disrupt product lines. The company must invest in IT and cybersecurity to remain competitive. Failure to adapt could lead to loss of market share.
Routine litigation, environmental liabilities, and FCPA exposure are noted. The company has not experienced material cybersecurity incidents to date.
No cash flow data available.