KTOS · Kratos Defense & Security Solutions, Inc.

Kratos reported strong Q1 2026 results with revenues of $371.0 million, reflecting 22.6% year-over-year growth and 15.8% organic growth driven by robust performance in Unmanned Systems (KUS) at 30.9% organic growth to $82.6 million, primarily from Valkyrie-related activity, and Government Solutions (KGS) at 11.8% organic growth to $288.4 million, led by Defense Rocket Systems (45.8%), Turbine Technologies (20.3%), and Microwave Products (12.3%). GAAP operating income was $4.7 million, impacted by $15.0 million non-cash stock compensation and $10.7 million company-funded R&D in key areas like Space, Satellite, Unmanned Systems, and Microwave Electronics. Adjusted EBITDA reached $38.7 million, with KUS at $5.2 million (up from $1.7 million) and KGS at $33.5 million (up from $25.0 million), benefiting from volume, mix, and scale. Book-to-bill was a healthy 1.6:1 with $605.2 million bookings, lifting backlog to $2.010 billion (funded $1.457 billion, unfunded $553.5 million) from $1.573 billion prior quarter; bid pipeline grew to $14.3 billion. Cash use was $27.4 million in operations and $43.1 million free cash flow, tied to working capital for revenue growth, inventory ramps, and KUS developments, offset partially by $4.2 million Valkyrie sales proceeds. CEO Eric DeMarco highlighted alignment with DoW priorities amid $156 billion FY2026 funding and projected $1.5 trillion FY2027 spend, emphasizing multi-year production frameworks and investments in hypersonics, Valkyries, engines, and facilities. Raised FY2026 guidance incorporates Nomad and Orbit acquisitions, forecasting higher H2 revenues from long-lead items, expanded margins (100 bps over 2025), and significant capex ($155-165 million) plus other investments ($248-270 million total) in production capacity for programs like Valkyrie (40 annually by 2027 end), Prometheus JV, hypersonics, and microwave facilities, positioning for sustained growth and defense recapitalization.