Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a
Technology Company in the Defense, National Security and Global
Markets, today reported its second quarter 2023 financial results.
For the second quarter of 2023, Kratos reported Revenues of $256.9
million, Operating Income of $6.7 million, Net Loss of $2.7
million, Adjusted EBITDA of $21.6 million and a consolidated book
to bill ratio of 1.1 to 1.0.
Included in second quarter 2023 Net Loss and
Operating Income is non-cash stock compensation expense of $6.0
million and Company-funded Research and Development (R&D)
expense of $9.9 million, primarily reflecting significant ongoing
development efforts being made, including in our Space and
Satellite business to develop our virtual, software-based OpenSpace
command & control (C2), telemetry tracking & control
(TT&C) and other ground system solutions. The second quarter
2023 Net Loss includes a $2.3 million loss attributable to a
non-controlling interest, which includes a $2.0 million adjustment
recorded to reflect the estimated increase in the value of the
redeemable non-controlling interest to the estimated redemption
amount by Kratos based upon current forecasted financial
performance.
Kratos reported a second quarter 2023 GAAP Net
Loss of $2.7 million and a GAAP Net Loss per share of $0.02,
compared to a GAAP Net Loss of $4.7 million and a GAAP Net Loss per
share of $0.04 for the second quarter of 2022. Adjusted earnings
per share (EPS) was $0.09 for the second quarter of 2023, compared
to $0.07 for the second quarter of 2022.
Second quarter 2023 Revenues of $256.9 million
increased $32.7 million, or 14.6 percent, from second quarter 2022
Revenues of $224.2 million. Second quarter 2023
Revenues include contribution of $13.1 million of Revenue from the
acquisition of the Engineering Division of Southern Research
Institute (SRE), consolidated organic Revenue growth of 10.7
percent and organic Revenue growth of 17.1 percent in our KGS
Segment, reflecting organic growth in each of the KGS businesses,
with the most notable increases in our Space, Satellite and Cyber,
C5ISR, and Turbine Technologies businesses.
Second quarter 2023 Cash Flow Generated from
Operations was $23.6 million, reflecting the achievement of
favorable billing milestones on certain contracts, offset partially
by working capital requirements related to revenue growth and
continued advanced inventory purchases in an effort to mitigate
supply chain disruptions. Free Cash Flow Generated from Operations
was $20.7 million after funding of $11.2 million of capital
expenditures and receipt of $8.3 million of proceeds for sale of
Valkyries that were built as Kratos capital assets.
For the second quarter of 2023, Kratos’ Unmanned
Systems Segment (KUS) generated Revenues of $52.1 million, as
compared to $56.4 million in the second quarter of 2022, primarily
reflecting reduced tactical drone related activity as compared to
2022. KUS’s Operating Income was $1.2 million in the second quarter
of 2023 compared to Operating Loss of $5.0 million in the second
quarter of 2022, which included a litigation related settlement
charge of $5.5 million.
KUS’s Adjusted EBITDA for the second quarter of
2023 was $3.6 million, compared to second quarter 2022 KUS Adjusted
EBITDA of $2.9 million, reflecting a more favorable
mix.
KUS’s book-to-bill
ratio for the second quarter of 2023 was 1.2 to 1.0 and 1.3 to 1.0
for the last twelve months ended June 25, 2023, with bookings of
$64.7 million for the three months ended June 25, 2023, and
bookings of $266.2 million for the last twelve months ended June
25, 2023. Total backlog for KUS at the end of the
second quarter of 2023 was $256.7 million compared to $244.1
million at the end of the first quarter of 2023.
For the second quarter of 2023, Kratos’
Government Solutions Segment (KGS) Revenues of $204.8 million
increased 22.1 percent from Revenues of $167.8 million in the
second quarter of 2022. The increased Revenues includes the
contribution of approximately $13.1 million of Revenues from the
SRE acquisition, and organic revenue growth in our Space, Satellite
and Cyber, Turbine Technologies, C5ISR, Microwave Products and
Defense Rocket Systems businesses. Excluding the SRE
acquisition, KGS revenues grew organically 17.1 percent in the
second quarter of 2023 as compared to the second quarter of
2022.
KGS reported operating income of $11.6 million
in the second quarter of 2023 compared to $9.5 million in the
second quarter of 2022, primarily reflecting the increased revenue
volume. Second quarter 2023 KGS Adjusted EBITDA was $18.0 million,
compared to second quarter 2022 KGS Adjusted EBITDA of $14.8
million, primarily reflecting the increased revenue volume.
Kratos’ Space, Satellite and Cyber business
generated Revenues of $98.4 million in the second quarter of 2023
compared to $88.5 million in the second quarter of 2022, reflecting
a 11.2 percent organic growth rate.
For the second quarter of 2023, KGS reported a
book-to-bill ratio of 1.1 to 1.0, a book to bill ratio of 1.1 to
1.0 for the last twelve months ended June 25, 2023 and bookings of
$217.1 million and $807.4 million for the three and last twelve
months ended June 25, 2023, respectively. KGS includes
Kratos’ Space, Training and Cyber business, which reported a book
to bill ratio of 0.9 to 1.0 for the second quarter of 2023 and a
book to bill ratio of 1.1 to 1.0 for the last twelve months ended
June 25, 2023. Bookings for Kratos’ Space, Training and Cyber
business for the three months and last twelve months ended June 25,
2023 were $95.6 million and $412.0 million, respectively. KGS’s
total backlog at the end of the second quarter of 2023 was $900.6
million, as compared to $888.3 million at the end of the first
quarter of 2023.
For the second quarter of 2023, Kratos reported
consolidated bookings of $281.9 million and a book-to-bill ratio of
1.1 to 1.0, with consolidated bookings of $1.07 billion and a
book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended
June 25, 2023. Consolidated backlog was $1.16 billion on June 25,
2023 and $1.13 billion on March 26, 2023. Kratos’ bid and proposal
pipeline was $10 billion at June 25, 2023 and March 26,
2023. Backlog at June 25, 2023 was comprised of funded
backlog of $863.9 million and unfunded backlog of $293.4
million.
Eric DeMarco, Kratos’ President and CEO, said,
“For Q2, Kratos generated consolidated organic revenue growth of
10.7%, Adjusted EBITDA of $21.6 million, cash flow from operations
of $23.6 million and free cash flow from operations of $20.7
million. Kratos’ Unmanned Systems book to bill ratio
for Q2 was 1.2 to 1.0 and Kratos’ overall book to bill ratio both
for the second quarter and year to date was 1.1 to 1.0.
Additionally, we have a record backlog and a bid and proposal
pipeline of approximately $10 billion, including hypersonic, space,
propulsion system, satellite communications and drone
opportunities, with several where multiple Kratos business units
are collaborating in a company-wide Kratos cross-divisional
pursuit.”
Mr. DeMarco continued, “Since our last quarterly
report, we have successfully launched a customer’s new hypersonic
system, ground tested Kratos’ new Zeus 1 solid rocket motor,
including as related to Kratos’ Erinyes and Dark Fury hypersonic
vehicles, received new space and satellite system program awards,
including Kratos’ OpenSpace virtualized software C2 and TT&C
System, reached customer agreement on a significant propulsion
system program award and received a $95 million target drone system
award. Kratos’ Tactical drone business also continues to progress,
with multiple initiatives and customers, including bringing
artificial intelligence driven combat drones to the
warfighter.”
Mr. DeMarco concluded, “Kratos is a product,
technology, system and software company. Kratos’ priorities include
winning new program awards where Kratos offerings are disruptive
differentiators, operational execution, organic growth and
continued year over year increased revenue, profitability and cash
flow. We will make certain, targeted investments, in areas where
Kratos can be disruptive and first to market, with no significant
acquisitions planned. A primary operational challenge remains
obtaining and retaining qualified personnel to execute existing and
expected program awards, including individuals willing and able to
obtain National Security Clearances, and the significantly
increased cost of these individuals, all of which every Kratos
business is collaborating and working closely together to
address.”
Financial Guidance
We are providing our initial 2023 third quarter
financial guidance and affirming our full year 2023 guidance today,
which includes our current forecasted business mix, and our
assumptions, including as related to: employee sourcing, hiring and
retention; manufacturing, production and supply chain disruptions;
parts shortages and related continued potential significant cost
and price increases, including for employees, materials and
components that are impacting the industry and Kratos. The range of
our expected third quarter 2023 revenues includes assumptions of
forecasted execution, including the number of qualified personnel
expected to be obtained and retained to successfully execute on our
programs and contracts, as well as expected contract awards.
Our third quarter and full year 2023 guidance
ranges are as follows:
Current Guidance Range |
$M |
Q323 |
FY23 |
Revenues |
$240 -
$260 |
$980 - $1,000 |
R&D |
$9 -
$10 |
$38 - $39 |
Operating
Income |
$3 -
$6 |
$24 - $28 |
Depreciation |
$7 -
$8 |
$27 - $28 |
Amortization |
$2 -
$3 |
$8 - $10 |
Stock Based
Compensation |
$6 -
$7 |
$24 - $26 |
Adjusted
EBITDA |
$18 -
$22 |
$85 - $89 |
Operating
Cash Flow |
|
$55 - $65 |
Capital
Expenditures |
|
$45 - $50 |
Free Cash
Flow Generation |
|
$10 - $20 |
|
|
|
Management will discuss the Company’s financial
results, on a conference call beginning at 2:00 p.m. Pacific (5:00
p.m. Eastern) today. The call will be available at
www.kratosdefense.com. Participants may register for the call using
this Online Form. Upon registration, all telephone participants
will receive the dial-in number along with a unique PIN that can be
used to access the call. For those who cannot access the live
broadcast, a replay will be available on Kratos’ website.
About Kratos Defense & Security
SolutionsKratos Defense & Security Solutions, Inc.
(NASDAQ: KTOS) is a Technology Company that develops and fields
transformative, affordable systems, products and solutions for
United States National Security, our allies and global commercial
enterprises. At Kratos, Affordability is a Technology, and Kratos
is changing the way breakthrough technology is rapidly brought to
market – at a low cost – with actual products, systems, and
technologies rather than slide decks or renderings. Through proven
commercial and venture capital backed approaches, including
proactive, internally funded research and streamlined development
processes, Kratos is focused on being First to Market with our
solutions, well in advance of competition. Kratos is the recognized
Technology Disruptor in our core market areas, including Space and
Satellite Communications, Cyber Security and Warfare, Unmanned
Systems, Rocket and Hypersonic Systems, Next-Generation Jet Engines
and Propulsion Systems, Microwave Electronics, C5ISR and Virtual
and Augmented Reality Training Systems. For more information, visit
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 third quarter and full year 2023 revenues,
R&D, operating income (loss), depreciation, amortization, stock
based compensation expense, and Adjusted EBITDA, and full year 2023
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 improved
revenue mix and profit, including the Company’s ability to achieve
sustained year over year increasing revenues, profitability and
cash flow, the Company’s expectation of ramp on projects and that
investments in its business, including Company funded R&D
expenses and ongoing development efforts, 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 and backlog, including the
Company’s ability to timely execute on its backlog, demand for its
products and services, including the Company’s alignment with
today’s National Security requirements and the positioning of its
C5ISR and other businesses, ability to successfully compete and
expected new customer awards, including the magnitude and timing of
funding and the future opportunity associated with such awards,
including in the target and tactical drone and satellite
communication areas, 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, the
ability of the Company’s advanced purchases of inventory to
mitigate supply chain disruptions and the timing of converting
these investments to cash through the sales process, 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, availability of an experienced skilled
workforce, inflation and increased costs, and delays in 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. Department of Defense, or 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 unmanned aerial systems
and unmanned ground sensor markets do not experience significant
growth; risks that products we have developed or will develop will
become programs of record; 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;
risks relating to the ongoing conflict in Ukraine; 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 compete 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, including
with respect to our ability to recruit and retain sufficient
numbers of qualified personnel to execute on our programs and
contracts, as well as expected contract awards and risks related to
increasing interest rates and risks related to the interest rate
swap contract to hedge Term SOFR associated with the Company’s Term
Loan A; 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 25, 2022, and in
our other filings made with the Securities and Exchange
Commission.
Note Regarding Use of Non-GAAP Financial
Measures and Other Performance MetricsThis news release
contains non-GAAP financial measures, including Adjusted EPS
(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, non-recoverable rates and costs, and foreign
transaction gains and losses, less the estimated impact to income
taxes) and 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 plus proceeds from sale of assets 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 |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Service
revenues |
$ |
103.7 |
|
|
$ |
78.8 |
|
|
$ |
195.3 |
|
|
$ |
146.7 |
|
Product
sales |
|
153.2 |
|
|
|
145.4 |
|
|
|
293.4 |
|
|
|
273.7 |
|
Total revenues |
|
256.9 |
|
|
|
224.2 |
|
|
|
488.7 |
|
|
|
420.4 |
|
Cost of
service revenues |
|
80.0 |
|
|
|
56.2 |
|
|
|
148.2 |
|
|
|
106.1 |
|
Cost of
product sales |
|
113.0 |
|
|
|
110.2 |
|
|
|
217.2 |
|
|
|
204.6 |
|
Total costs |
|
193.0 |
|
|
|
166.4 |
|
|
|
365.4 |
|
|
|
310.7 |
|
Gross profit
- service revenues |
|
23.7 |
|
|
|
22.6 |
|
|
|
47.1 |
|
|
|
40.6 |
|
Gross profit
- product sales |
|
40.2 |
|
|
|
35.2 |
|
|
|
76.2 |
|
|
|
69.1 |
|
|
|
|
|
|
|
|
|
Total gross profit |
|
63.9 |
|
|
|
57.8 |
|
|
|
123.3 |
|
|
|
109.7 |
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses |
|
44.4 |
|
|
|
41.6 |
|
|
|
89.2 |
|
|
|
81.9 |
|
Acquisition
and restructuring related items and other |
|
- |
|
|
|
6.0 |
|
|
|
0.9 |
|
|
|
6.6 |
|
Research and
development expenses |
|
9.9 |
|
|
|
9.2 |
|
|
|
20.1 |
|
|
|
18.4 |
|
Depreciation |
|
1.5 |
|
|
|
1.3 |
|
|
|
2.9 |
|
|
|
2.6 |
|
Amortization
of intangible assets |
|
1.4 |
|
|
|
1.6 |
|
|
|
3.0 |
|
|
|
3.3 |
|
Operating income (loss) |
|
6.7 |
|
|
|
(1.9 |
) |
|
|
7.2 |
|
|
|
(3.1 |
) |
Interest
expense, net |
|
(5.1 |
) |
|
|
(2.9 |
) |
|
|
(10.4 |
) |
|
|
(8.8 |
) |
Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(13.0 |
) |
Other income
(expense), net |
|
0.2 |
|
|
|
- |
|
|
|
(0.1 |
) |
|
|
0.1 |
|
Income (loss) from continuing operations before income taxes |
|
1.8 |
|
|
|
(4.8 |
) |
|
|
(3.3 |
) |
|
|
(24.8 |
) |
Provision
(benefit) for income taxes from continuing operations |
|
2.4 |
|
|
|
0.5 |
|
|
|
3.1 |
|
|
|
(3.8 |
) |
Loss from continuing operations |
|
(0.6 |
) |
|
|
(5.3 |
) |
|
|
(6.4 |
) |
|
|
(21.0 |
) |
Income from
discontinued operations, net of income taxes |
|
0.2 |
|
|
|
0.9 |
|
|
|
0.2 |
|
|
|
0.7 |
|
Net loss |
|
(0.4 |
) |
|
|
(4.4 |
) |
|
|
(6.2 |
) |
|
|
(20.3 |
) |
Less: Net income attributable to noncontrolling interest |
|
2.3 |
|
- |
|
0.3 |
|
|
|
3.5 |
|
|
|
0.3 |
|
Net loss attributable to Kratos |
$ |
(2.7 |
) |
|
$ |
(4.7 |
) |
|
$ |
(9.7 |
) |
|
$ |
(20.6 |
) |
|
|
|
|
|
|
|
|
Basic and
diluted loss per common share attributable to Kratos: |
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.02 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.17 |
) |
Income from discontinued operations |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.01 |
|
Net loss |
|
(0.02 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.16 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average common shares outstanding |
|
129.1 |
|
|
|
126.4 |
|
|
|
128.9 |
|
|
|
126.2 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA (1) |
$ |
21.6 |
|
|
$ |
17.7 |
|
|
$ |
38.6 |
|
|
$ |
31.5 |
|
|
|
|
|
Unaudited
Reconciliation of GAAP to Non-GAAP Measures |
|
|
|
|
|
|
|
|
Note: (1) Adjusted
EBITDA is a non-GAAP measure defined as GAAP net loss attributable
to Kratos adjusted for net income attributable to
noncontrolling interest, income from discontinued operations, net
interest expense, provision (benefit) 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 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 (loss) 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 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 lease commitment costs for unused,
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. |
|
|
|
|
|
|
|
|
Non-recoverable rates
and costs. In fiscal 2022, the Company incurred non-recoverable
rates and costs as a result of its inability to hire the
required direct labor base to execute on its backlog due to a
challenging environment in hiring and retaining skilled personnel.
In addition, in 2022 the Company incurred non-recoverable rate
growth resulting from a smaller than planned direct labor base due
to delays in customer program execution and awards. |
|
|
|
|
|
|
|
|
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
Loss attributable to Kratos to Adjusted EBITDA is as follows: |
|
Three Months Ended |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
|
|
|
|
|
|
|
|
Net loss
attributable to Kratos |
$ |
(2.7 |
) |
|
$ |
(4.7 |
) |
|
$ |
(9.7 |
) |
|
$ |
(20.6 |
) |
Income from
discontinued operations, net of income taxes |
|
(0.2 |
) |
|
|
(0.9 |
) |
|
|
(0.2 |
) |
|
|
(0.7 |
) |
Interest
expense, net |
|
5.1 |
|
|
|
2.9 |
|
|
|
10.4 |
|
|
|
8.8 |
|
Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13.0 |
|
Provision
(benefit) for income taxes from continuing operations |
|
2.4 |
|
|
|
0.5 |
|
|
|
3.1 |
|
|
|
(3.8 |
) |
Depreciation
(including cost of service revenues and product sales) |
|
6.5 |
|
|
|
5.3 |
|
|
|
12.8 |
|
|
|
10.6 |
|
Stock-based
compensation |
|
6.0 |
|
|
|
6.3 |
|
|
|
12.6 |
|
|
|
13.3 |
|
Foreign
transaction loss |
|
0.2 |
|
|
|
0.1 |
|
|
|
1.0 |
|
|
|
0.1 |
|
Amortization
of intangible assets |
|
1.4 |
|
|
|
1.6 |
|
|
|
3.0 |
|
|
|
3.3 |
|
Amortization
of capitalized contract and development costs |
|
0.6 |
|
|
|
0.3 |
|
|
|
1.2 |
|
|
|
0.6 |
|
Acquisition
and restructuring related items and other |
|
- |
|
|
|
6.0 |
|
|
|
0.9 |
|
|
|
6.6 |
|
Plus: Net
income attributable to noncontrolling interest |
|
2.3 |
|
|
|
0.3 |
|
|
|
3.5 |
|
|
|
0.3 |
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
21.6 |
|
|
$ |
17.7 |
|
|
$ |
38.6 |
|
|
$ |
31.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
acquisition and restructuring related items and other included in
Adjusted EBITDA: |
|
Three Months Ended |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Acquisition
and transaction related items |
$ |
- |
|
|
$ |
0.1 |
|
|
$ |
- |
|
|
$ |
0.4 |
|
Restructuring costs |
|
- |
|
|
|
0.2 |
|
|
|
- |
|
|
|
0.3 |
|
Legal
related items |
|
- |
|
|
|
5.7 |
|
|
|
0.9 |
|
|
|
5.9 |
|
|
$ |
- |
|
|
$ |
6.0 |
|
|
$ |
0.9 |
|
|
$ |
6.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Segment Data |
(in
millions) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
Unmanned
Systems |
$ |
52.1 |
|
|
$ |
56.4 |
|
|
$ |
100.1 |
|
|
$ |
109.0 |
|
Kratos
Government Solutions |
|
204.8 |
|
|
|
167.8 |
|
|
|
388.6 |
|
|
|
311.4 |
|
Total
revenues |
$ |
256.9 |
|
|
$ |
224.2 |
|
|
$ |
488.7 |
|
|
$ |
420.4 |
|
|
|
|
|
|
|
|
|
Operating
income (loss) |
|
|
|
|
|
|
|
Unmanned
Systems |
$ |
1.2 |
|
|
$ |
(5.0 |
) |
|
$ |
0.6 |
|
|
$ |
(4.5 |
) |
Kratos
Government Solutions |
|
11.6 |
|
|
|
9.5 |
|
|
|
19.3 |
|
|
|
15.1 |
|
Unallocated
corporate expense, net |
|
(6.1 |
) |
|
|
(6.4 |
) |
|
|
(12.7 |
) |
|
|
(13.7 |
) |
Total
operating income (loss) |
$ |
6.7 |
|
|
$ |
(1.9 |
) |
|
$ |
7.2 |
|
|
$ |
(3.1 |
) |
|
|
|
|
|
|
|
|
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 (Loss) to Adjusted EBITDA is as
follows: |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Unmanned
Systems |
|
|
|
|
|
|
|
Operating income (loss) |
$ |
1.2 |
|
|
$ |
(5.0 |
) |
|
$ |
0.6 |
|
|
$ |
(4.5 |
) |
Other income |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.1 |
|
Depreciation |
|
1.9 |
|
|
|
1.7 |
|
|
|
3.8 |
|
|
|
3.3 |
|
Amortization of intangible assets |
|
0.1 |
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
0.5 |
|
Amortization of capitalized contract and development costs |
|
0.4 |
|
|
|
0.3 |
|
|
|
0.8 |
|
|
|
0.6 |
|
Acquisition and restructuring related items and other |
|
- |
|
|
|
5.7 |
|
|
|
- |
|
|
|
5.9 |
|
Adjusted EBITDA |
$ |
3.6 |
|
|
$ |
2.9 |
|
|
$ |
5.4 |
|
|
$ |
5.9 |
|
%
of revenue |
|
6.9 |
% |
|
|
5.1 |
% |
|
|
5.4 |
% |
|
|
5.4 |
% |
|
|
|
|
|
|
|
|
Kratos
Government Solutions |
|
|
|
|
|
|
|
Operating income |
$ |
11.6 |
|
|
$ |
9.5 |
|
|
$ |
19.3 |
|
|
$ |
15.1 |
|
Other income |
|
0.3 |
|
|
|
0.1 |
|
|
|
0.8 |
|
|
|
0.1 |
|
Depreciation |
|
4.6 |
|
|
|
3.6 |
|
|
|
9.0 |
|
|
|
7.3 |
|
Amortization of intangible assets |
|
1.3 |
|
|
|
1.4 |
|
|
|
2.8 |
|
|
|
2.8 |
|
Amortization of capitalized contract and development costs |
|
0.2 |
|
|
|
- |
|
|
|
0.4 |
|
|
|
- |
|
Acquisition and restructuring related items and other |
|
- |
|
|
|
0.2 |
|
|
|
0.9 |
|
|
|
0.3 |
|
Adjusted EBITDA |
$ |
18.0 |
|
|
$ |
14.8 |
|
|
$ |
33.2 |
|
|
$ |
25.6 |
|
%
of revenue |
|
8.8 |
% |
|
|
8.8 |
% |
|
|
8.5 |
% |
|
|
8.2 |
% |
|
|
|
|
|
|
|
|
Total Adjusted EBITDA |
$ |
21.6 |
|
|
$ |
17.7 |
|
|
$ |
38.6 |
|
|
$ |
31.5 |
|
%
of revenue |
|
8.4 |
% |
|
|
7.9 |
% |
|
|
7.9 |
% |
|
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Condensed Consolidated Balance Sheets |
(in
millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June
25, |
|
December
25, |
|
|
|
|
|
|
2023 |
|
|
|
2022 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
$ |
48.2 |
|
|
$ |
81.3 |
|
Accounts receivable, net |
|
|
|
|
|
337.7 |
|
|
|
328.5 |
|
Inventoried costs |
|
|
|
|
|
145.9 |
|
|
|
125.5 |
|
Prepaid expenses |
|
|
|
|
|
12.8 |
|
|
|
11.9 |
|
Other current assets |
|
|
|
|
|
43.2 |
|
|
|
35.4 |
|
Total current assets |
|
|
|
|
|
587.8 |
|
|
|
582.6 |
|
Property, plant and equipment, net |
|
|
|
|
|
218.6 |
|
|
|
213.1 |
|
Operating lease right-of-use assets |
|
|
|
|
|
48.2 |
|
|
|
47.4 |
|
Goodwill |
|
|
|
|
|
558.2 |
|
|
|
558.2 |
|
Intangible assets, net |
|
|
|
|
|
52.2 |
|
|
|
55.2 |
|
Other assets |
|
|
|
|
|
97.8 |
|
|
|
95.0 |
|
Total assets |
|
|
|
|
$ |
1,562.8 |
|
|
$ |
1,551.5 |
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
|
|
|
|
$ |
58.4 |
|
|
$ |
57.3 |
|
Accrued expenses |
|
|
|
|
|
41.0 |
|
|
|
33.8 |
|
Accrued compensation |
|
|
|
|
|
54.0 |
|
|
|
52.2 |
|
Accrued interest |
|
|
|
|
|
1.5 |
|
|
|
1.5 |
|
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
73.1 |
|
|
|
62.1 |
|
Current portion of operating lease liabilities |
|
|
|
|
|
11.6 |
|
|
|
10.8 |
|
Other current liabilities |
|
|
|
|
|
10.4 |
|
|
|
15.6 |
|
Other current liabilities of discontinued operations |
|
|
|
|
|
0.9 |
|
|
|
0.9 |
|
Total current liabilities |
|
|
|
|
|
250.9 |
|
|
|
234.2 |
|
Long-term debt |
|
|
|
|
|
232.1 |
|
|
|
250.2 |
|
Operating lease liabilities, net of current portion |
|
|
|
|
|
41.0 |
|
|
|
40.8 |
|
Other long-term liabilities |
|
|
|
|
|
77.4 |
|
|
|
77.4 |
|
Other long-term liabilities of discontinued operations |
|
|
|
|
|
1.1 |
|
|
|
1.4 |
|
Total liabilities |
|
|
|
|
|
602.5 |
|
|
|
604.0 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Redeemable noncontrolling interest |
|
|
|
|
|
14.7 |
|
|
|
11.2 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
Additional paid-in capital |
|
|
|
|
|
1,623.7 |
|
|
|
1,608.4 |
|
Accumulated other comprehensive loss |
|
|
|
|
|
2.9 |
|
|
|
(0.8 |
) |
Accumulated deficit |
|
|
|
|
|
(681.0 |
) |
|
|
(671.3 |
) |
Total Kratos stockholders’ equity |
|
|
|
|
|
945.6 |
|
|
|
936.3 |
|
Total liabilities and stockholders’ equity |
|
|
|
|
$ |
1,562.8 |
|
|
$ |
1,551.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kratos
Defense & Security Solutions, Inc. |
Unaudited
Condensed Consolidated Statements of Cash Flows |
(in
millions) |
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
|
|
|
|
|
June 25, |
|
June 26, |
|
|
|
|
|
|
2023 |
|
|
|
2022 |
|
Operating
activities: |
|
|
|
|
|
|
|
Net loss |
|
|
|
|
$ |
(6.2 |
) |
|
$ |
(20.3 |
) |
Less: income from discontinued operations |
|
|
|
|
|
0.2 |
|
|
|
0.7 |
|
Loss from continuing operations |
|
|
|
|
|
(6.4 |
) |
|
|
(21.0 |
) |
Adjustments to reconcile loss from continuing operations to net
cash used in operating activities from continuing operations: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
15.8 |
|
|
|
13.9 |
|
Amortization of lease right-of-use assets |
|
|
|
|
|
5.5 |
|
|
|
5.3 |
|
Deferred income taxes |
|
|
|
|
|
0.1 |
|
|
|
0.4 |
|
Stock-based compensation |
|
|
|
|
|
12.6 |
|
|
|
13.3 |
|
Litigation related charges |
|
|
|
|
|
- |
|
|
|
5.5 |
|
Amortization of deferred financing costs |
|
|
|
|
|
0.3 |
|
|
|
0.4 |
|
Loss on extinguishment of debt |
|
|
|
|
|
- |
|
|
|
13.0 |
|
Provision for doubtful accounts |
|
|
|
|
|
0.9 |
|
|
|
- |
|
Changes in assets and liabilities, net of acquisitions: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
|
|
|
(10.7 |
) |
|
|
0.3 |
|
Unbilled receivables |
|
|
|
|
|
(7.1 |
) |
|
|
(15.3 |
) |
Inventoried costs |
|
|
|
|
|
(20.0 |
) |
|
|
(25.8 |
) |
Prepaid expenses and other assets |
|
|
|
|
|
(9.7 |
) |
|
|
(13.2 |
) |
Operating lease liabilities |
|
|
|
|
|
(5.2 |
) |
|
|
(5.5 |
) |
Accounts payable |
|
|
|
|
|
2.2 |
|
|
|
5.6 |
|
Accrued compensation |
|
|
|
|
|
2.0 |
|
|
|
(1.3 |
) |
Accrued expenses |
|
|
|
|
|
7.2 |
|
|
|
7.7 |
|
Accrued interest |
|
|
|
|
|
(0.1 |
) |
|
|
(1.1 |
) |
Billings in excess of costs and earnings on uncompleted
contracts |
|
|
|
|
|
11.2 |
|
|
|
1.3 |
|
Income tax receivable and payable |
|
|
|
|
|
0.6 |
|
|
|
(6.2 |
) |
Other liabilities |
|
|
|
|
|
(1.3 |
) |
|
|
(6.8 |
) |
Net cash used in operating activities from continuing
operations |
|
|
|
|
|
(2.1 |
) |
|
|
(29.5 |
) |
Investing activities: |
|
|
|
|
|
|
|
Cash paid for acquisitions, net of cash acquired |
|
|
|
|
|
- |
|
|
|
(131.9 |
) |
Capital expenditures |
|
|
|
|
|
(18.9 |
) |
|
|
(21.9 |
) |
Proceeds from sale of assets |
|
|
|
|
|
8.3 |
|
|
|
0.1 |
|
Net cash used in investing activities from continuing
operations |
|
|
|
|
|
(10.6 |
) |
|
|
(153.7 |
) |
Financing activities: |
|
|
|
|
|
|
|
Proceeds from the issuance of long-term debt |
|
|
|
|
|
- |
|
|
|
200.0 |
|
Borrowing under credit facility |
|
|
|
|
|
34.0 |
|
|
|
100.0 |
|
Redemption of Senior Secured Notes |
|
|
|
|
|
- |
|
|
|
(309.8 |
) |
Repayment under credit facility, term loan and other debt |
|
|
|
|
|
(53.5 |
) |
|
|
- |
|
Debt issuance costs |
|
|
|
|
|
- |
|
|
|
(3.2 |
) |
Payment under finance leases |
|
|
|
|
|
(0.8 |
) |
|
|
(0.6 |
) |
Payments of employee taxes withheld from share-based awards |
|
|
|
|
|
(3.4 |
) |
|
|
(11.5 |
) |
Proceeds from shares issued under equity plans |
|
|
|
|
|
2.9 |
|
|
|
2.9 |
|
Net cash used in financing activities from continuing
operations |
|
|
|
|
|
(20.8 |
) |
|
|
(22.2 |
) |
Net cash flows from continuing operations |
|
|
|
|
|
(33.5 |
) |
|
|
(205.4 |
) |
Net operating cash flows of discontinued operations |
|
|
|
|
|
(0.1 |
) |
|
|
(0.4 |
) |
Effect of exchange rate changes on cash and cash equivalents |
|
|
|
|
|
0.5 |
|
|
|
(1.2 |
) |
Net decrease in cash, cash equivalents and restricted cash |
|
|
|
|
|
(33.1 |
) |
|
|
(207.0 |
) |
Cash, cash equivalents and restricted cash at beginning of
period |
|
|
|
|
|
81.3 |
|
|
|
349.4 |
|
Cash, cash equivalents and restricted cash at end of period |
|
|
|
|
$ |
48.2 |
|
|
$ |
142.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
Six Months Ended |
|
June 25, |
|
June 26, |
|
June 25, |
|
June 26, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net
loss attributable to Kratos |
$ |
(2.7 |
) |
|
$ |
(4.7 |
) |
|
$ |
(9.7 |
) |
|
$ |
(20.6 |
) |
Less: GAAP
provision (benefit) for income taxes |
|
2.4 |
|
|
|
0.5 |
|
|
|
3.1 |
|
|
|
(3.8 |
) |
Less: Net
income attributable to noncontrolling interest |
|
2.3 |
|
|
|
0.3 |
|
|
|
3.5 |
|
|
|
0.3 |
|
Less: income
from discontinued operations, net of income taxes |
|
(0.2 |
) |
|
|
(0.9 |
) |
|
|
(0.2 |
) |
|
|
(0.7 |
) |
Income (loss) from continuing operations before
taxes |
|
1.8 |
|
|
|
(4.8 |
) |
|
|
|
(3.3 |
) |
|
|
(24.8 |
) |
Add:
Amortization of intangible assets |
|
1.4 |
|
|
|
1.6 |
|
|
|
|
3.0 |
|
|
|
3.3 |
|
Add:
Amortization of capitalized contract and development costs |
|
0.6 |
|
|
|
0.3 |
|
|
|
1.2 |
|
|
|
0.6 |
|
Add:
Depreciation |
|
6.5 |
|
|
|
5.3 |
|
|
|
12.8 |
|
|
|
10.6 |
|
Add:
Stock-based compensation |
|
6.0 |
|
|
|
6.3 |
|
|
|
12.6 |
|
|
|
13.3 |
|
Add: Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
13.0 |
|
Add: Foreign
transaction loss |
|
0.2 |
|
|
|
0.1 |
|
|
|
1.0 |
|
|
|
0.1 |
|
Add:
Acquisition and restructuring related items and other |
|
- |
|
|
|
6.0 |
|
|
|
0.9 |
|
|
|
6.6 |
|
Non-GAAP Adjusted income from continuing operations before
income taxes |
|
16.5 |
|
|
|
14.8 |
|
|
|
28.2 |
|
|
|
22.7 |
|
Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
|
5.1 |
|
|
|
5.4 |
|
|
|
8.6 |
|
|
|
8.2 |
|
Non-GAAP Adjusted net income |
$ |
11.4 |
|
|
$ |
9.4 |
|
|
$ |
19.6 |
|
|
$ |
14.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common share |
$ |
(0.02 |
) |
|
$ |
(0.04 |
) |
|
$ |
(0.08 |
) |
|
$ |
(0.16 |
) |
Less: GAAP
provision (benefit) for income taxes |
|
0.02 |
|
|
|
- |
|
|
|
0.02 |
|
|
|
(0.03 |
) |
Less: Net
income attributable to noncontrolling interest |
|
0.02 |
|
|
|
- |
|
|
|
0.03 |
|
|
|
- |
|
Less: income
from discontinued operations, net of income taxes |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(0.01 |
) |
Add:
Amortization of intangible assets |
|
0.01 |
|
|
|
0.01 |
|
|
|
0.02 |
|
|
|
0.03 |
|
Add:
Amortization of capitalized contract and development costs |
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
Add:
Depreciation |
|
0.05 |
|
|
|
0.04 |
|
|
|
0.10 |
|
|
|
0.08 |
|
Add:
Stock-based compensation |
|
0.05 |
|
|
|
0.05 |
|
|
|
0.10 |
|
|
|
0.11 |
|
Add: Loss on
extinguishment of debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
0.10 |
|
Add: Foreign
transaction loss |
|
- |
|
|
|
- |
|
|
|
0.01 |
|
|
|
- |
|
Add:
Acquisition and restructuring related items and other |
|
- |
|
|
|
0.05 |
|
|
|
0.01 |
|
|
|
0.05 |
|
Income taxes
on Non-GAAP measure Adjusted income from continuing
operations* |
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
(0.07 |
) |
|
|
(0.06 |
) |
Adjusted income from continuing operations per diluted
common share |
$ |
0.09 |
|
|
$ |
0.07 |
|
|
$ |
0.15 |
|
|
$ |
0.11 |
|
|
|
|
|
|
|
|
|
Weighted average diluted common shares
outstanding |
|
129.1 |
|
|
|
126.4 |
|
|
|
128.9 |
|
|
|
126.2 |
|
|
|
|
|
|
|
|
|
*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, 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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