Kratos Reports Second Quarter 2025 Financial Results
Second Quarter 2025 Revenues of
Second Quarter 2025 Consolidated Book to
Last Twelve Months Ended
Increases 2025 Full Year Revenue and Adjusted EBITDA Guidance
Second quarter 2025 Net Income and Operating Income includes non-cash stock compensation expense of
Kratos reported second quarter 2025 GAAP Net Income of
Second quarter 2025 Revenues of
Second quarter 2025 Cash Flow Used in Operations was
For the second quarter of 2025, KUS generated Revenues of
KUS’s book-to-bill ratio for the second quarter of 2025 was 0.9 to 1.0 and 1.3 to 1.0 for the twelve months ended
For the second quarter of 2025, Kratos’ Government Solutions (KGS) segment Revenues of
KGS reported Operating Income of
KGS reported a book-to-bill ratio of 0.7 to 1.0 for the second quarter of 2025, a book to bill ratio of 1.2 to 1.0 for the last twelve months ended
Kratos reported consolidated bookings of
Financial Guidance
We are providing our initial 2025 third quarter guidance and increasing our full year 2025 Revenue and Adjusted EBITDA guidance range, which includes our assumptions, including as related to: current forecasted business mix, employee sourcing, hiring and retention; manufacturing, production and supply chain disruptions; parts shortages and related continued significant cost and price increases in each of these areas, that are impacting the industry and Kratos.
Kratos’ 2025 financial forecast and guidance includes elevated investments for capital expenditures for property, plant and equipment, including the expansion of our manufacturing and production facilities and related inventory builds in our Rocket Systems and Hypersonic businesses, primarily related to the recent MACH-TB 2.0 contract award, the continued manufacture of two production lots of Valkyries prior to contract award, to meet anticipated customer orders and requirements, the expansion and build-out of the Company’s Microwave Products production facilities, the expansion and build-out of our small jet engine production and test cell facilities, and the build-out of additional secure facilities for our federal secured space communications business, in accordance with contract and customer requirements. Kratos’ operating cash flow guidance also assumes consummation of certain investments in our rocket systems and unmanned systems businesses.
Our third quarter and full year 2025 guidance ranges are as follows:
| $M | Q325 | FY25 |
| Revenues | ||
| R&D | ||
| Operating Income | ||
| Depreciation | ||
| Amortization | ||
| Stock Based Compensation | ||
| Adjusted EBITDA | ||
| Operating Cash Flow | ||
| Capital Expenditures | ||
| Free Cash Flow Use | ( |
|
Management will discuss the Company’s financial results on a conference call beginning at
About
Notice Regarding Forward-Looking Statements
This 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 2025 revenues, R&D, operating income, depreciation, amortization, stock based compensation expense, and Adjusted EBITDA, and full year 2025 operating cash flow, capital expenditures, and free cash flow, forecasted business unit organic revenue growth, EBITDA margins in 2026 and thereafter, future initiation of higher margin programs and negotiation of lower margin contracts which are expected to be renewed in the future, expected future investments in property, plant, facilities, and equipment, 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, the impact of the Company’s restructuring efforts and cost reduction measures, the availability and timing of government funding for the Company’s offerings, availability of an experienced skilled workforce, inflation and increased costs, risks related to potential cybersecurity events or disruptions of our information technology systems, 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
Note Regarding Use of Non-GAAP Financial Measures and Other Performance Metrics
This news release contains non-GAAP financial measures, including organic revenue growth rates, Adjusted EPS (computed using income before income taxes, 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 excludes, among other things, 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
| Press Contact: claire.burghoff@kratosdefense.com Investor Information: 877-934-4687 investor@kratosdefense.com |
| Unaudited Condensed Consolidated Statements of Operations | |||||||||||||||
| (in millions, except per share data) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Service revenues | $ | 134.9 | $ | 106.5 | $ | 237.3 | $ | 213.0 | |||||||
| Product sales | 216.6 | 193.6 | 416.8 | 364.3 | |||||||||||
| Total revenues | 351.5 | 300.1 | 654.1 | 577.3 | |||||||||||
| Cost of service revenues | 107.2 | 77.0 | 182.9 | 156.2 | |||||||||||
| Cost of product sales | 170.5 | 145.9 | 323.8 | 272.9 | |||||||||||
| Total costs | 277.7 | 222.9 | 506.7 | 429.1 | |||||||||||
| Gross profit - service revenues | 27.7 | 29.5 | 54.4 | 56.8 | |||||||||||
| Gross profit - product sales | 46.1 | 47.7 | 93.0 | 91.4 | |||||||||||
| Total gross profit | 73.8 | 77.2 | 147.4 | 148.2 | |||||||||||
| Selling, general and administrative expenses | 54.1 | 49.6 | 106.4 | 100.0 | |||||||||||
| Research and development expenses | 10.2 | 10.2 | 20.2 | 19.8 | |||||||||||
| Depreciation | 3.0 | 2.7 | 5.6 | 4.6 | |||||||||||
| Amortization of intangible assets | 2.8 | 2.2 | 4.9 | 4.3 | |||||||||||
| Operating income | 3.7 | 12.5 | 10.3 | 19.5 | |||||||||||
| Interest income (expense), net | (1.2 | ) | 0.1 | (2.1 | ) | (2.7 | ) | ||||||||
| Other income (expense), net | 2.1 | 0.1 | 1.8 | (0.1 | ) | ||||||||||
| Income before income taxes | 4.6 | 12.7 | 10.0 | 16.7 | |||||||||||
| Provision for income taxes | 1.7 | 4.8 | 2.6 | 7.5 | |||||||||||
| Net Income | 2.9 | 7.9 | 7.4 | 9.2 | |||||||||||
| Basic income per common share | 0.02 | $ | 0.05 | $ | 0.05 | $ | 0.06 | ||||||||
| Diluted income per common share | $ | 0.02 | $ | 0.05 | $ | 0.05 | $ | 0.06 | |||||||
| Weighted average common shares outstanding: | |||||||||||||||
| Basic | 155.7 | 151.8 | 154.9 | 146.4 | |||||||||||
| Diluted | 157.4 | 153.5 | 156.9 | 147.5 | |||||||||||
| Adjusted EBITDA (1) | $ | 28.3 | $ | 29.9 | $ | 55.0 | $ | 55.9 | |||||||
| Unaudited Reconciliation of GAAP to Non-GAAP Measures | |||||||||||||||
| Note: (1) Adjusted EBITDA is a non-GAAP measure defined as GAAP net income adjusted for net interest income (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 (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 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. |
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| 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. |
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| 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. |
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| 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. |
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| 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, ballistic missile target and space and satellite businesses as related units are sold or over the estimated useful life, as applicable. |
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| 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. |
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| Foreign transaction (gain) loss. The Company incurs transaction gains and losses which are not hedged related to transactions with foreign customers in currencies other than the |
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| 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. |
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| 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. |
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| 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. |
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| 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 | Six Months Ended | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net income | $ | 2.9 | $ | 7.9 | $ | 7.4 | $ | 9.2 | |||||||
| Interest expense, net | 1.2 | (0.1 | ) | 2.1 | 2.7 | ||||||||||
| Provision for income taxes | 1.7 | 4.8 | 2.6 | 7.5 | |||||||||||
| Depreciation (including cost of service revenues and product sales) | 9.0 | 8.2 | 17.3 | 15.4 | |||||||||||
| Stock-based compensation | 8.6 | 6.6 | 17.3 | 15.8 | |||||||||||
| Foreign transaction loss | 0.3 | - | 0.7 | 0.3 | |||||||||||
| Amortization of intangible assets | 2.8 | 2.2 | 4.9 | 4.3 | |||||||||||
| Amortization of capitalized contract and development costs | 0.9 | 0.3 | 1.8 | 0.7 | |||||||||||
| Resolution of previously recorded contingent liability | (1.1 | ) | - | (1.1 | ) | - | |||||||||
| Litigation fees and legal related items | 2.0 | - | 2.0 | - | |||||||||||
| Adjusted EBITDA | $ | 28.3 | $ | 29.9 | $ | 55.0 | $ | 55.9 | |||||||
| Unaudited Segment Data | |||||||||||||||
| (in millions) | |||||||||||||||
| Three Months Ended | Six Months Ended | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Revenues: | |||||||||||||||
| Unmanned Systems | $ | 73.2 | $ | 85.8 | $ | 136.3 | $ | 145.2 | |||||||
| Kratos Government Solutions | 278.3 | 214.3 | 517.8 | 432.1 | |||||||||||
| Total revenues | $ | 351.5 | $ | 300.1 | $ | 654.1 | $ | 577.3 | |||||||
| Operating income (loss) | |||||||||||||||
| Unmanned Systems | $ | (0.2 | ) | $ | 3.6 | $ | (1.9 | ) | $ | 3.2 | |||||
| Kratos Government Solutions | 12.5 | 15.5 | 29.5 | 32.1 | |||||||||||
| Unallocated corporate expense, net | (8.6 | ) | (6.6 | ) | (17.3 | ) | (15.8 | ) | |||||||
| Total operating income | $ | 3.7 | $ | 12.5 | $ | 10.3 | $ | 19.5 | |||||||
| Note: Unallocated corporate expense, net includes costs for certain stock-based compensation programs (including stock-based compensation costs for the 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 | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Unmanned Systems | |||||||||||||||
| Operating loss | $ | (0.2 | ) | $ | 3.6 | $ | (1.9 | ) | $ | 3.2 | |||||
| Other income | - | 0.1 | 0.1 | 0.1 | |||||||||||
| Depreciation | 2.7 | 2.5 | 5.0 | 4.7 | |||||||||||
| Amortization of intangible assets | 1.0 | 1.0 | 2.0 | 2.0 | |||||||||||
| Amortization of capitalized contract and development costs | - | - | - | 0.1 | |||||||||||
| Resolution of Previously Recorded Contingent Liability | (0.3 | ) | - | (0.3 | ) | - | |||||||||
| Litigation Fees and Legal Related Items | 0.5 | - | 0.5 | - | |||||||||||
| Adjusted EBITDA | $ | 3.7 | $ | 7.2 | $ | 5.4 | $ | 10.1 | |||||||
| % of revenue | 5.1 | % | 8.4 | % | 4.0 | % | 7.0 | % | |||||||
| Kratos Government Solutions | |||||||||||||||
| Operating income | $ | 12.5 | $ | 15.5 | $ | 29.5 | $ | 32.1 | |||||||
| Other income | 2.4 | - | 2.4 | 0.1 | |||||||||||
| Depreciation | 6.3 | 5.7 | 12.3 | 10.7 | |||||||||||
| Amortization of intangible assets | 1.8 | 1.2 | 2.9 | 2.3 | |||||||||||
| Amortization of capitalized contract and development costs | 0.9 | 0.3 | 1.8 | 0.6 | |||||||||||
| Resolution of Previously Recorded Contingent Liability | (0.8 | ) | - | (0.8 | ) | - | |||||||||
| Litigation Fees and Legal Related Items | 1.5 | - | 1.5 | - | |||||||||||
| Adjusted EBITDA | $ | 24.6 | $ | 22.7 | $ | 49.6 | $ | 45.8 | |||||||
| % of revenue | 8.8 | % | 10.6 | % | 9.6 | % | 10.6 | % | |||||||
| Total Adjusted EBITDA | $ | 28.3 | $ | 29.9 | $ | 55.0 | $ | 55.9 | |||||||
| % of revenue | 8.1 | % | 10.0 | % | 8.4 | % | 9.7 | % | |||||||
| Unaudited Condensed Consolidated Balance Sheets | |||||||||||||||
| (in millions) | |||||||||||||||
| 2025 | 2024 | ||||||||||||||
| Assets | |||||||||||||||
| Current assets: | |||||||||||||||
| Cash and cash equivalents | $ | 783.6 | $ | 329.3 | |||||||||||
| Accounts receivable, net | 142.2 | 117.5 | |||||||||||||
| Unbilled receivables, net | 256.6 | 206.3 | |||||||||||||
| Inventoried costs, net | 177.8 | 162.1 | |||||||||||||
| Prepaid expenses | 14.5 | 18.0 | |||||||||||||
| Other current assets | 54.2 | 38.9 | |||||||||||||
| Total current assets | 1,428.9 | 872.1 | |||||||||||||
| Property, plant and equipment, net | 311.8 | 288.2 | |||||||||||||
| Operating lease right-of-use assets | 40.6 | 37.6 | |||||||||||||
| 598.8 | 568.9 | ||||||||||||||
| Intangible assets, net | 58.9 | 53.8 | |||||||||||||
| Other assets | 146.7 | 130.3 | |||||||||||||
| Total assets | $ | 2,585.7 | $ | 1,950.9 | |||||||||||
| Liabilities and Stockholders’ Equity | |||||||||||||||
| Current liabilities: | |||||||||||||||
| Accounts payable | $ | 97.6 | $ | 82.0 | |||||||||||
| Accrued expenses | 48.4 | 38.8 | |||||||||||||
| Accrued compensation | 71.7 | 71.9 | |||||||||||||
| Billings in excess of costs and earnings on uncompleted contracts | 77.3 | 76.3 | |||||||||||||
| Current portion of operating lease liabilities | 11.9 | 11.3 | |||||||||||||
| Current portion of finance lease liabilities | 2.1 | 1.9 | |||||||||||||
| Other current liabilities | 13.4 | 14.5 | |||||||||||||
| Total current liabilities | 322.4 | 296.7 | |||||||||||||
| Long-term debt | 169.8 | 174.6 | |||||||||||||
| Operating lease liabilities, net of current portion | 32.2 | 29.8 | |||||||||||||
| Finance lease liabilities, net of current portion | 63.3 | 64.4 | |||||||||||||
| Other long-term liabilities | 38.0 | 32.2 | |||||||||||||
| Total liabilities | 625.7 | 597.7 | |||||||||||||
| Commitments and contingencies | |||||||||||||||
| Stockholders’ equity: | |||||||||||||||
| Common stock | 0.2 | 0.2 | |||||||||||||
| Additional paid-in capital | 2,613.5 | 2,017.4 | |||||||||||||
| Accumulated other comprehensive income (loss) | 2.8 | (0.5 | ) | ||||||||||||
| Accumulated deficit | (656.5 | ) | (663.9 | ) | |||||||||||
| Total Kratos stockholders’ equity | 1,960.0 | 1,353.2 | |||||||||||||
| Total liabilities and stockholders’ equity | $ | 2,585.7 | $ | 1,950.9 | |||||||||||
| Unaudited Condensed Consolidated Statements of Cash Flows | |||||||||||||||
| (in millions) | |||||||||||||||
| Six Months Ended | |||||||||||||||
| 2025 | 2024 | ||||||||||||||
| Operating activities: | |||||||||||||||
| Net income | $ | 7.4 | $ | 9.2 | |||||||||||
| Adjustments to reconcile net income to net cash used in operating activities: | |||||||||||||||
| Depreciation and amortization | 22.2 | 19.7 | |||||||||||||
| Amortization of lease right-of-use assets | 6.0 | 6.0 | |||||||||||||
| Deferred income taxes | - | 0.1 | |||||||||||||
| Stock-based compensation | 17.3 | 15.8 | |||||||||||||
| Amortization of deferred financing costs | 0.3 | 0.3 | |||||||||||||
| Changes in assets and liabilities, net of acquisitions: | |||||||||||||||
| Accounts receivable | (23.1 | ) | (3.0 | ) | |||||||||||
| Unbilled receivables | (49.9 | ) | (6.4 | ) | |||||||||||
| Inventoried costs | (7.3 | ) | 2.1 | ||||||||||||
| Prepaid expenses and other assets | (27.3 | ) | (18.8 | ) | |||||||||||
| Operating lease liabilities | (5.7 | ) | (6.1 | ) | |||||||||||
| Accounts payable | 17.5 | (3.6 | ) | ||||||||||||
| Accrued expenses | 9.1 | - | |||||||||||||
| Accrued compensation | - | (1.5 | ) | ||||||||||||
| Billings in excess of costs and earnings on uncompleted contracts | (5.1 | ) | (21.0 | ) | |||||||||||
| Income tax receivable and payable | (0.9 | ) | 4.4 | ||||||||||||
| Other liabilities | (1.4 | ) | 0.8 | ||||||||||||
| Net cash used in operating activities | (40.9 | ) | (2.0 | ) | |||||||||||
| Investing activities: | |||||||||||||||
| Cash paid for acquisitions, net of cash acquired | - | (11.5 | ) | ||||||||||||
| Capital expenditures | (43.1 | ) | (29.3 | ) | |||||||||||
| Net cash used in investing activities | (43.1 | ) | (40.8 | ) | |||||||||||
| Financing activities: | |||||||||||||||
| Borrowing under credit facility | - | 10.0 | |||||||||||||
| Repayment under credit facility and term loan | (5.0 | ) | (47.5 | ) | |||||||||||
| Proceeds from the issuance of common stock, net of issuance costs | 555.9 | 330.7 | |||||||||||||
| Payment under finance leases | (0.9 | ) | (0.7 | ) | |||||||||||
| Payments of employee taxes withheld from share-based awards | (18.3 | ) | (17.1 | ) | |||||||||||
| Proceeds from shares issued under equity plans | 4.6 | 3.6 | |||||||||||||
| Net cash provided by financing activities | 536.3 | 279.0 | |||||||||||||
| Net cash flows | 452.3 | 236.2 | |||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | 2.0 | (0.8 | ) | ||||||||||||
| Net increase in cash and cash equivalents | 454.3 | 235.4 | |||||||||||||
| Cash and cash equivalents at beginning of period | 329.3 | 72.8 | |||||||||||||
| Cash and cash equivalents at end of period | $ | 783.6 | $ | 308.2 | |||||||||||
| Unaudited Non-GAAP Measures | |||||||||||||||
| Computation of Adjusted Earnings Per Share | |||||||||||||||
| (in millions, except per share data) | |||||||||||||||
| Adjusted income and adjusted income 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 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 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 | ||||||||||||||
| 2025 | 2024 | 2025 | 2024 | ||||||||||||
| Net income | $ | 2.9 | $ | 7.9 | $ | 7.4 | $ | 9.2 | |||||||
| Less: GAAP provision for income taxes | 1.7 | 4.8 | 2.6 | 7.5 | |||||||||||
| Income before taxes | 4.6 | 12.7 | 10.0 | 16.7 | |||||||||||
| Add: Amortization of intangible assets | 2.8 | 2.2 | 4.9 | 4.3 | |||||||||||
| Add: Amortization of capitalized contract and development costs | 0.9 | 0.3 | 1.8 | 0.7 | |||||||||||
| Add: Depreciation | 9.0 | 8.2 | 17.3 | 15.4 | |||||||||||
| Add: Stock-based compensation | 8.6 | 6.6 | 17.3 | 15.8 | |||||||||||
| Add: Foreign transaction loss | 0.3 | - | 0.7 | 0.3 | |||||||||||
| Non-GAAP Adjusted income from consolidated operations before income taxes | 26.2 | 30.0 | 52.0 | 53.2 | |||||||||||
| Income taxes on Non-GAAP measure Adjusted income* | 9.1 | 9.2 | 16.0 | 16.3 | |||||||||||
| Non-GAAP Adjusted net income | $ | 17.1 | $ | 20.8 | $ | 36.0 | $ | 36.9 | |||||||
| Diluted earnings per common share | $ | 0.02 | $ | 0.05 | $ | 0.05 | $ | 0.06 | |||||||
| Less: GAAP provision for income taxes | 0.01 | 0.03 | 0.02 | 0.05 | |||||||||||
| Add: Amortization of intangible assets | 0.02 | 0.02 | 0.03 | 0.03 | |||||||||||
| Add: Amortization of capitalized contract and development costs | 0.01 | - | 0.01 | 0.01 | |||||||||||
| Add: Depreciation | 0.06 | 0.06 | 0.11 | 0.10 | |||||||||||
| Add: Stock-based compensation | 0.05 | 0.04 | 0.11 | 0.11 | |||||||||||
| Add: Foreign transaction loss | - | - | - | - | |||||||||||
| Income taxes on Non-GAAP measure Adjusted income* | (0.06 | ) | (0.06 | ) | (0.10 | ) | (0.11 | ) | |||||||
| Adjusted income per diluted common share | $ | 0.11 | $ | 0.14 | $ | 0.23 | $ | 0.25 | |||||||
| Weighted average diluted common shares outstanding | 157.4 | 153.5 | 156.9 | 147.5 | |||||||||||
| *The impact to income taxes is calculated by recasting income before income taxes to include the add-backs involved in determining Adjusted income before income taxes and recalculating the income tax provision, including current and deferred income taxes, using the Adjusted income 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. | |||||||||||||||
Source: Kratos Defense & Security Solutions, Inc.
