Patrick McCann, CFA, Research Analyst, Noble Capital Markets, Inc.
Michael Kupinski, Director of Research, Equity Research Analyst, Digital, Media & Technology , Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Q3 results. The company reported Q3 revenue of $22.2 million and an adj. EBITDA loss of $2.6 million. While the revenue was slightly below our estimate of $24.1 million, the adj. EBITDA loss was milder than our estimate of $3.4 million.
Gaining traction with Home Depot. Since announcing the partnership in July, the company’s presence in Home Depot locations has expanded to 100 stores. Additionally, SKYX products are available on Home Depot’s website. We anticipate more SKUs to become available both online and in stores soon, as a wide variety of SKYX products are expected to arrive from the company’s manufacturing partner, Ruee Appliances.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Mark Reichman, Managing Director, Equity Research Analyst, Natural Resources, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Third quarter financial results. FreightCar America generated third quarter adjusted net income to common stockholders of $2.455 million or $0.08 per share compared to $3.953 million or $0.13 per share during the prior year period. We had anticipated adjusted net income to common stockholders of $2.465 million or $0.07 per share. Average shares outstanding of 31.4 million were lower than our estimate of 34.5 million. Revenue and rail car deliveries increased to $113.3 million and 961, respectively, compared to $61.9 million and 503 during the third quarter of 2023. On a year-over-year basis, adjusted EBITDA increased to $10.9 million compared to $3.5 million during the prior year period and our estimate of $9.8 million. Free cash flow amounted to $5.7 million.
Full year 2024 corporate guidance. While guidance for revenue and rail car deliveries is unchanged, management narrowed its guidance range for EBITDA to $37.0 million to $39.0 million compared to previous expectations of $35.0 million to $39.0 million.
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*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Company delivers 83% year-over-year revenue growth with strong gross margin
Raises mid-point of full year Adjusted EBITDA guidance
CHICAGO, Nov. 12, 2024 (GLOBE NEWSWIRE) — FreightCar America, Inc. (NASDAQ: RAIL) (“FreightCar America” or the “Company”), a diversified manufacturer and supplier of railroad freight cars, railcar parts and components, today reported results for the third quarter ended September 30, 2024.
Third Quarter 2024 Highlights
Revenues of $113.3 million on 961 railcar deliveries, compared to revenues of $61.9 million on 503 railcar deliveries in the third quarter of 2023, up 83% and 91% respectively
Gross margin of 14.3% with gross profit of $16.2 million, compared to gross margin of 14.9% with gross profit of $9.2 million in the third quarter of 2023
Net loss of ($107.0) million, or ($3.57) per share and Adjusted net income of $7.3 million, or $0.08 per share, driven by a ($110.0) million non-cash loss on warrant liability due to a significant appreciation in share price
Adjusted EBITDA of $10.9 million, compared to Adjusted EBITDA of $3.5 million in the third quarter of 2023, up 211%
Ended the quarter with a backlog of 3,611 units valued at $372 million
“We again demonstrate the power of our disciplined approach to growth and operational excellence. Delivering another solid quarter, that continues the momentum for a record-setting year out of our operating facility. Our team has consistently followed through on our commitments, with robust product shipments and adaptable operating capabilities. This reinforces our ability to meet our customers’ needs while improving our gross margins, and further demonstrates the power of our value proposition. We continue to showcase our ability to secure business through innovative solutions, and our ease of doing business which has led to a consistent higher quality of earnings,” commented Nick Randall, President and Chief Executive Officer of FreightCar America.
Randall continued, “Our pipeline is invigorated, with consistent demand across a broad range of railcar types. As we head into the fourth quarter, we are well positioned to sustain this momentum through our differentiated offerings and unique market approach. Our commitment to innovation and operational flexibility sets us apart in the industry, ensuring that we deliver long-term value for our customers and shareholders.”
Fiscal Year 2024 Outlook
The Company has updated its outlook for fiscal year 2024 as follows:
Mike Riordan, Chief Financial Officer of FreightCar America, commented, “Given our strong order activity and delivery performance year to date, we are narrowing and raising the mid-point of our previously issued full-year EBITDA guidance to between $37 million and $39 million while reaffirming our previously stated revenue and delivery guidance. As we move forward, I am confident in our ability to achieve profitable growth and cash generation across the enterprise with an even stronger financial profile.”
Third Quarter 2024 Conference Call & Webcast Information
The Company will host a conference call and live webcast on Tuesday, November 12 at 11:00 a.m. (Eastern Time) to discuss its third quarter 2024 financial results. FreightCar America invites shareholders and other interested parties to listen to its financial results conference call via the following live and recorded methods:
Teleconference: Dial-in numbers for the live Conference Call are (877) 407-0789 or (201) 689-8562. Please call in at least 10 minutes prior to the start time of the call. An audio replay may be accessed at (844) 512-2921 or (412) 317-6671; Passcode: 13749627.
About FreightCar America
FreightCar America, headquartered in Chicago, Illinois, is a leading designer, producer and supplier of railroad freight cars, railcar parts and components. We also specialize in railcar repairs, complete railcar rebody services and railcar conversions that repurpose idled rail assets back into revenue service. Since 1901, our customers have trusted us to build quality railcars that are critical to economic growth and instrumental to the North American supply chain. To learn more about FreightCar America, visit www.freightcaramerica.com.
Forward-Looking Statements
This press release contains statements relating to our expected financial performance, financial condition, and/or future business prospects, events and/or plans that are “forward-looking statements” as defined under the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent our estimates and assumptions only as of the date of this press release. Our actual results may differ materially from the results described in or anticipated by our forward-looking statements due to certain risks and uncertainties. These risks and uncertainties relate to, among other things, the cyclical nature of our business; adverse geopolitical, economic and market conditions, including inflation; material disruption in the movement of rail traffic for deliveries; fluctuating costs of raw materials including steel and aluminum; future changes in U.S. tax laws and regulations or interpretations thereof; delays in the delivery of raw materials; our ability to maintain relationships with our suppliers of railcar components; our reliance upon a small number of customers that represent a large percentage of our sales; the variable purchase patterns of our customers and the timing of completion, delivery and customer acceptance of orders; the highly competitive nature of our industry; the risk of lack of acceptance of our new railcar offerings, and other competitive factors. The factors listed above are not exhaustive. New factors emerge from time to time that may cause our business not to develop as we expect, and it is not possible for us to predict all of them. We expressly disclaim any duty to provide updates to any forward-looking statements made in this press release, whether as a result of new information, future events or otherwise.
Non-GAAP Financial Measures
This press release includes measures not derived in accordance with generally accepted accounting principles (“GAAP”), such as EBITDA, Adjusted EBITDA, Adjusted net income (loss) and Adjusted EPS. These non-GAAP measures should not be considered in isolation or as a substitute for any measure derived in accordance with GAAP and may also be inconsistent with similar measures presented by other companies. Reconciliations of these measures to the applicable most closely comparable GAAP measures, and reasons for the Company’s use of these measures, are presented in the attached pages.
The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 103 facilities totaling approximately 83,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.
Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Below Expectations. The GEO Group reported third quarter 2024 results below management’s and our expectations. Results in the quarter were driven by lower-than-expected revenues in the Electronic Monitoring and Supervision Services segment, reflecting reduced participant count. ICE populations have remained relatively flat over the past three quarters, although they are up y-o-y.
3Q24. GEO reported total revenues for the third quarter 2024 of $603.1 million compared to $602.8 million last year. We forecasted $612 million. Adjusted EBITDA was $118.6 million, flat with 3Q23. We were at $128 million. Net income for 3Q24 totaled $26.3 million, or $0.19 per diluted share, compared to $24.5 million, or $0.16 per diluted share, for 3Q23. Adjusted EPS was $0.21 per diluted share compared to $0.19 per diluted share for 3Q23. We had projected $0.25 and $0.26, respectively.
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This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technologies for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training and combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.kratosdefense.com.
Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Environment. The ongoing generational recapitalization of strategic weapon systems, including strategic satellites, air defense radar, and missile systems, continues to be a catalyst for Kratos. Current world events are driving demand for Kratos products, including target drones, which are used to exercise and test air defense systems.
Strong Engine. Kratos’ turbine technologies and engine business is generating record results, including having a record opportunity pipeline with hypersonic supersonic cruise missiles, loitering munitions drones, and space systems, all being expected future growth areas.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Graham Corporation designs, manufactures and sells critical equipment for the energy, defense and chemical/petrochemical industries. The Company designs and manufactures custom-engineered ejectors, vacuum pumping systems, surface condensers and vacuum systems. It is a nuclear code accredited fabrication and specialty machining company. It supplies components used inside reactor vessels and outside containment vessels of nuclear power facilities. Its equipment is found in applications, such as metal refining, pulp and paper processing, water heating, refrigeration, desalination, food processing, pharmaceutical, heating, ventilating and air conditioning. For the defense industry, its equipment is used in nuclear propulsion power systems for the United States Navy. The Company’s products are used in a range of industrial process applications in energy markets, including petroleum refining, defense, chemical and petrochemical processing, power generation/alternative energy and other.
Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
2Q25 Results. Graham’s 2Q25 results exceeded expectations. The Company reported strong sales growth in its markets, along with exceptional execution throughout the business, which drove meaningful margin expansion. The balance sheet remained stellar with $32.3 million of cash and no debt. Graham raised full year gross margin and adjusted EBITDA estimates. GHM shares reacted favorably to the news, rising 17% to $39.07.
Financials. Record quarterly revenue of $53.6 million, up 19% y-o-y. Defense revenue was up 23%, Chemical/Petro sales were up 23%, and Space revenue was up 23%. Gross margin improved 790 basis points to 23.9%, fueled by sales growth and execution. Adjusted EBITDA rose 150% to $5.6 million. Adjusted net income up 353% to $3.4 million, or $0.31.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Key Points: – Shares of Geo Group and CoreCivic saw significant increases (over 7% and 8%, respectively) after the appointment of Tom Homan as “border czar,” – Homan’s appointment aligns with Trump’s strong stance on deportation and border security, so there is an anticipated increase in federal contracts for private detention companies – Renewed focus on immigration enforcement marks a a significant departure from the current adminstration’s stance
Private prison stocks surged Monday after President-elect Donald Trump appointed Tom Homan as “border czar,” sparking market optimism about a renewed focus on immigration enforcement. Shares of Geo Group and CoreCivic, both major players in the private detention sector, jumped over 7% and 8%, respectively, in response to the announcement. Homan, previously the head of Immigration and Customs Enforcement (ICE) under Trump’s first term, is known for his firm stance on deportation and border security. His appointment signals a potential increase in federal contracting for companies that provide detention services, specifically for ICE operations.
Trump’s announcement on Truth Social stated that Homan will be in charge of all deportation efforts, encompassing both land and maritime borders, with an emphasis on accelerating deportations. During a conservative conference in July, Homan declared he would lead the “biggest deportation force” in U.S. history if Trump was re-elected. This strong stance aligns with Trump’s previous immigration policies, which saw heightened demand for detention facilities, and is expected to bolster the private prison industry, including companies like Geo Group and CoreCivic, which have contracts with ICE and the U.S. Marshals Service.
The renewed focus on immigration enforcement under Trump is a significant shift from the current administration’s approach, which has limited federal use of private detention centers. This shift presents a potential growth opportunity for private prison companies, which struggled as President Biden worked to reduce private prison contracts. With Homan’s appointment, investors anticipate a resurgence of federal reliance on private detention services to meet increased demand for housing immigrant detainees.
Analysts have responded positively to this development, citing that Trump’s administration will likely “embrace” companies like Geo Group and CoreCivic. Isaac Boltansky, an analyst with BTIG, noted that private prison companies are positioned for growth under an immigration-focused administration, specifically due to likely contracting needs with the U.S. Marshals Service and ICE. Analysts expect Homan’s policies to generate consistent demand for private facilities, which could lead to stronger financial performance and increased market value for these companies.
Trump’s firm stance on deportation and his choice of Homan as border czar have energized investors. The expected rise in federal contracts signals a favorable outlook for private prison stocks. With immigration reform likely to be a focal point in Trump’s administration, CoreCivic and Geo Group could see sustained growth, especially as they support the expanded need for detention services. The private prison sector, long entangled with federal enforcement policies, now faces a potential resurgence as market trends align with anticipated shifts in government policy.
Revenue increased 19% to $53.6 million, driven by strength across its markets
Margin expansion fueled by sales growth and execution: Gross margin improved 790 basis points to 23.9% of sales, net margin increased 520 basis points to 6.1% of sales, and adjusted EBITDA1 margin expanded 550 basis points to 10.5% of sales
Net income per diluted share was $0.30 in the second quarter; adjusted net income per diluted share¹ was $0.31
Strong orders of $63.7 million, driven by demand from defense, space, and refining, resulted in a book-to-bill ratio of 1.2x and a record backlog of $407 million1
Strong balance sheet with no debt, $32.3 million in cash, and access to $43 million under its revolving credit facility at quarter end to support growth initiatives
Raised full year guidance for gross margin and adjusted EBITDA¹ to reflect improved profitability
BATAVIA, N.Y.–(BUSINESS WIRE)– Graham Corporation (NYSE: GHM) (“GHM” or the “Company”), a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy, and process industries, today reported financial results for its second quarter for the fiscal year ending March 31, 2025 (“fiscal 2025”). Results for the quarter include the P3 Technologies, LLC (“P3”) acquisition, which closed on November 9, 2023.
“Our team’s efforts to diversify and strengthen the business over the past few years are clearly yielding results, as shown by our record second-quarter performance,” commented Daniel J. Thoren, President and Chief Executive Officer. “Strong sales growth in our markets, along with exceptional execution throughout the business, have driven meaningful margin expansion. Our strategic emphasis on higher-margin opportunities and operational efficiencies has been a key driver of this success.”
Mr. Thoren added, “We are also focused on recruiting and retaining top talent, and have initiatives to enhance our supply chain, which helps us to improve performance and manage our risk. These initiatives, along with our strengthened balance sheet, robust orders2, and growing backlog2, we believe positions us well to sustain growth and profitability for the next several years. Importantly, we have raised our full-year adjusted EBITDA guidance, keeping us firmly on track to achieve our FY2027 target of low to mid-teen adjusted EBITDA margins.”
Second Quarter Fiscal 2025 Performance Review
(All comparisons are with the same prior-year period unless noted otherwise.)
*Graham believes that, when used in conjunction with measures prepared in accordance with U.S. generally accepted accounting principles, adjusted net income, adjusted net income per diluted share, adjusted EBITDA and adjusted EBITDA margin, which are non-GAAP measures, help in the understanding of its operating performance. See attached tables and other information on pages 10 and 11 for important disclosures regarding Graham’s use of these non-GAAP measures.
Record quarterly net sales of $53.6 million increased 19%, or $8.5 million, and included $0.9 million of incremental sales from P3. Sales to the defense market grew by $5.8 million, or 23%, driven by the expansion of new defense programs, the ramp-up of existing programs, and the timing of key project milestones. Additionally, higher refining and chemical/petrochemical sales contributed $2.2 million to the growth, largely reflecting the timing of capital improvement projects. Aftermarket sales to the refining, chemical/petrochemical, and defense markets of $9.8 million remained strong but were $1.5 million lower than the prior year record levels. See supplemental data for a further breakdown of sales by market and region.
Gross margin expanded 790 basis points to 23.9%, driven by the leverage on higher volume, a favorable mix toward higher margin projects, improved pricing, and better execution. Additionally, gross profit for the quarter benefited $0.4 million, or approximately 80 basis points, due to the $2.1 million grant from the BlueForge Alliance. This grant is reimbursing the Company for the cost of its defense welder training programs in Batavia and related equipment. Graham expects to realize similar gross profit benefits from the grant over the next two quarters, or for the remainder of fiscal 2025.
Selling, general and administrative expense (“SG&A”), including amortization, totaled $9.2 million, or 17.1% of sales, up $2.8 million compared with the prior year. This increase reflects the Company’s continued investments in its operations, employees, and technology. Notable contributors to the increase included $0.4 million of incremental costs related to P3, $0.3 million increase in the supplemental performance bonus for Barber-Nichols employees2, $0.2 million for enterprise resource planning (“ERP”) conversion costs at the Batavia facility, and $0.2 million of incremental research and development expenses. The remainder of the increase in SG&A was primarily related to increased costs associated with the Company’s growth and various other initiatives.
Included in other operating income for the second quarter of fiscal 2025 was a $0.6 million reversal of a previously accrued contingent earnout liability for P3. The reversal was not due to any lost orders, but rather a delayed project that extended beyond the earnout period.
Cash Management and Balance Sheet
Cash provided by operating activities totaled $22.6 million for the six month period ending September 30, 2024, nearly double the amount from the comparable period in fiscal 2024. As of September 30, 2024, cash and cash equivalents were $32.3 million, up from $16.9 million at the end of fiscal 2024.
Capital expenditures of $6.5 million for the first six months of fiscal 2025 were focused on capacity expansion and productivity improvements. The Company increased its expected fiscal 2025 capital expenditures to be in the range of $13.0 million to $18.0 million from its previous expectations of $10.0 million to $15.0 million due to a land purchase in Arvada, CO, and plans to build a liquid hydrogen and oxygen testing facility to support future growth and customer needs.
The Company had no debt outstanding at September 30, 2024 with $43 million available on its senior secured revolving credit facility after taking into account outstanding letters of credit.
Orders for the three-month period ended September 30, 2024, were $63.7 million, resulting in a book-to-bill ratio of 1.2x. Defense orders represented 48% of total orders and included a contract to supply the MK19 air turbine pump for the torpedo ejection system on the Columbia-class submarine. Space orders, which can fluctuate due to the timing of projects, saw a meaningful increase to $13.5 million, which included a contract for the cryogenic recirculation pump that provides thermal conditioning for upper stage engines on launch vehicles in space. Refining orders totaled $10.6 million and were driven by continued strength in aftermarket demand and the timing of new capital projects.
Backlog at quarter end reached a record $407.0 million, up 30% over the prior-year period and up 3% sequentially. Approximately 35% to 45% of orders currently in backlog are expected to be converted to sales in the next twelve months and another 30% to 40% is expected to convert to sales over the following year. The majority of orders expected to convert beyond twelve months are for the defense industry, specifically the U.S. Navy.
Fiscal 2025 Outlook
The Company’s outlook for 2025 was updated as follows:
Webcast and Conference Call
GHM’s management will host a conference call and live webcast on November 8, 2024 at 11:00 a.m. Eastern Time (“ET”) to review its financial results as well as its strategy and outlook. The review will be accompanied by a slide presentation, which will be made available immediately prior to the conference call on GHM’s investor relations website.
A question-and-answer session will follow the formal presentation. GHM’s conference call can be accessed by calling (201) 689-8560. Alternatively, the webcast can be monitored from the events section of GHM’s investor relations website.
A telephonic replay will be available from 3:00 p.m. ET today through Friday, November 15, 2024. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13749103 or access the webcast replay via the Company’s website at ir.grahamcorp.com, where a transcript will also be posted once available.
About Graham Corporation
Graham is a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy, and process industries. Graham Corporation and its family of global brands are built upon world-renowned engineering expertise in vacuum and heat transfer, cryogenic pumps, and turbomachinery technologies, as well as its responsive and flexible service and the unsurpassed quality customers have come to expect from the Company’s products and systems. Graham Corporation routinely posts news and other important information on its website, grahamcorp.com, where additional information on Graham Corporation and its businesses can be found.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “expects,” “future,” “outlook,” “anticipates,” “believes,” “could,” “guidance,” ”may”, “will,” “plan” and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, profitability of future projects and the business, its ability to deliver to plan, its ability to continue to strengthen relationships with customers in the defense industry, its ability to secure future projects and applications, expected expansion and growth opportunities, anticipated sales, revenues, adjusted EBITDA, adjusted EBITDA margins, capital expenditures and SG&A expenses, the timing of conversion of backlog to sales, orders, market presence, profit margins, tax rates, foreign sales operations, customer preferences, changes in market conditions in the industries in which it operates, changes in general economic conditions and customer behavior, forecasts regarding the timing and scope of the economic recovery in its markets, and its acquisition and growth strategy, are forward-looking statements. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation’s most recent Annual Report filed with the Securities and Exchange Commission (the “SEC”), included under the heading entitled “Risk Factors”, and in other reports filed with the SEC.
Should one or more of these risks or uncertainties materialize or should any of Graham Corporation’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation’s forward-looking statements. Except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this news release.
Non-GAAP Financial Measures
Adjusted EBITDA is defined as consolidated net income (loss) before net interest expense, income taxes, depreciation, amortization, other acquisition related expenses, and other unusual/nonrecurring expenses. Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of sales. Adjusted EBITDA and Adjusted EBITDA margin are not measures determined in accordance with generally accepted accounting principles in the United States, commonly known as GAAP. Nevertheless, Graham believes that providing non-GAAP information, such as Adjusted EBITDA and Adjusted EBITDA margin, is important for investors and other readers of Graham’s financial statements, as it is used as an analytical indicator by Graham’s management to better understand operating performance. Moreover, Graham’s credit facility also contains ratios based on Adjusted EBITDA. Because Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP measures and are thus susceptible to varying calculations, Adjusted EBITDA, and Adjusted EBITDA margin, as presented, may not be directly comparable to other similarly titled measures used by other companies.
Adjusted net income and adjusted net income per diluted share are defined as net income and net income per diluted share as reported, adjusted for certain items and at a normalized tax rate. Adjusted net income and adjusted net income per diluted share are not measures determined in accordance with GAAP, and may not be comparable to the measures as used by other companies. Nevertheless, Graham believes that providing non-GAAP information, such as adjusted net income and adjusted net income per diluted share, is important for investors and other readers of the Company’s financial statements and assists in understanding the comparison of the current quarter’s and current fiscal year’s net income and net income per diluted share to the historical periods’ net income and net income per diluted share. Graham also believes that adjusted net income per share, which adds back intangible amortization expense related to acquisitions, provides a better representation of the cash earnings of the Company.
Forward-Looking Non-GAAP Measures
Forward-looking adjusted EBITDA and adjusted EBITDA margin are non-GAAP measures. The Company is unable to present a quantitative reconciliation of these forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because such information is not available, and management cannot reliably predict the necessary components of such GAAP measures without unreasonable effort largely because forecasting or predicting our future operating results is subject to many factors out of our control or not readily predictable. In addition, the Company believes that such reconciliations would imply a degree of precision that would be confusing or misleading to investors. The unavailable information could have a significant impact on the Company’s fiscal 2025 financial results. These non-GAAP financial measures are preliminary estimates and are subject to risks and uncertainties, including, among others, changes in connection with purchase accounting, quarter-end, and year-end adjustments. Any variation between the Company’s actual results and preliminary financial estimates set forth above may be material.
Key Performance Indicators
In addition to the foregoing non-GAAP measures, management uses the following key performance metrics to analyze and measure the Company’s financial performance and results of operations: orders, backlog, and book-to-bill ratio. Management uses orders and backlog as measures of current and future business and financial performance, and these may not be comparable with measures provided by other companies. Orders represent written communications received from customers requesting the Company to provide products and/or services. Backlog is defined as the total dollar value of net orders received for which revenue has not yet been recognized. Management believes tracking orders and backlog are useful as they often times are leading indicators of future performance. In accordance with industry practice, contracts may include provisions for cancellation, termination, or suspension at the discretion of the customer.
The book-to-bill ratio is an operational measure that management uses to track the growth prospects of the Company. The Company calculates the book-to-bill ratio for a given period as net orders divided by net sales.
Given that each of orders, backlog, and book-to-bill ratio are operational measures and that the Company’s methodology for calculating orders, backlog and book-to-bill ratio does not meet the definition of a non-GAAP measure, as that term is defined by the U.S. Securities and Exchange Commission, a quantitative reconciliation for each is not required or provided.
New facility will enable testing of liquid hydrogen (LH2), liquid oxygen (LOX) and liquid methane (LCH4)
BATAVIA, N.Y.–(BUSINESS WIRE)– Graham Corporation (NYSE: GHM) (“Graham” or “the Company”), a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy and process industries, announced today its plans to construct a state-of-the-art cryogenic propellant testing facility in Florida, near its P3 Technologies, LLC subsidiary. Leveraging Graham’s longstanding expertise in the cryogenic and space launch industries, this new facility will help to meet increasing demand for efficient, scalable testing solutions in key markets, including Space, Defense, New Energy, and potential applications in the medical field.
The facility will offer a cost-effective, timely alternative to existing testing centers, which often prioritize flagship programs and leave other critical programs with limited options. This new facility will enable liquid hydrogen (LH2), liquid oxygen (LOX), and liquid methane (LCH4) testing at pressurized, sub-cooled, or saturated conditions, and is ideally suited for testing pumps, components, fluid management systems, and combustion devices. By expanding Graham’s capabilities in cryogenic propellant testing, the Company aims to better support both current and future customer programs, adding agility and depth to its testing services in response to diverse and evolving program requirements.
“We believe this new testing facility will strengthen our position as a trusted partner by directly addressing customer needs for timely and cost-effective cryogenic propellant testing, complementing our existing capabilities and advancing the support we can offer current programs,” said Dan Thoren, Graham Corporation President and Chief Executive Officer. “This investment underscores our commitment to supporting both current and future customer programs through innovative and accessible testing solutions, while enhancing Graham’s role across the Space, Defense, and New Energy sectors.”
The project will be executed over the next year, with initial tests anticipated to begin by mid-2025. The facility is projected to achieve a cash payback period of approximately two to three years and deliver an internal rate of return exceeding 20%, representing a strategic investment in Graham’s future.
About Graham Corporation
Graham is a global leader in the design and manufacture of mission critical fluid, power, heat transfer and vacuum technologies for the defense, space, energy, and process industries. Graham Corporation and its family of global brands are built upon world-renowned engineering expertise in vacuum and heat transfer, cryogenic pumps, and turbomachinery technologies, as well as its responsive and flexible service and the unsurpassed quality customers have come to expect from the Company’s products and systems. Graham Corporation routinely posts news and other important information on its website, grahamcorp.com, where additional information on Graham Corporation and its businesses can be found.
Safe Harbor Regarding Forward Looking Statements
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to risks, uncertainties and assumptions and are identified by words such as “can,” “expects,” “potential,” “will,” “plans,” “aims,” “believe,” “projected,” and other similar words. All statements addressing operating performance, events, or developments that Graham Corporation expects or anticipates will occur in the future, including but not limited to, the completion of the testing facility within the projected timeline, the Company’s ability to capitalize on the potential benefits of the new facility and timing to realize expected returns on investment, the estimated total market opportunity and the Company’s ability to capitalize on such market opportunity. Because they are forward-looking, they should be evaluated in light of important risk factors and uncertainties. These risk factors and uncertainties are more fully described in Graham Corporation’s most recent Annual Report filed with the Securities and Exchange Commission, including under the heading entitled “Risk Factors,” its quarterly reports on Form 10-Q, and other filings it makes with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize or should any of Graham Corporation’s underlying assumptions prove incorrect, actual results may vary materially from those currently anticipated. In addition, undue reliance should not be placed on Graham Corporation’s forward-looking statements. Except as required by law, Graham Corporation disclaims any obligation to update or publicly announce any revisions to any of the forward-looking statements contained in this news release.
New Zeus Motors are in Production and Ready for Use
SAN DIEGO, Nov. 07, 2024 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq: KTOS), a technology company in Defense, National Security and Global Markets, today announced that its Zeus 1 and Zeus 2 Solid Rocket Motors (SRMs) completed their first successful flight on October 24, 2024, from the NASA Wallops Flight Facility in Virginia. This milestone launch provides the qualifications necessary to transition the Zeus SRMs to test programs supporting the U.S. Department of Defense, Foreign Allies, NASA, and commercial launch sponsors.
Kratos Zeus Solid Rocket Motors Complete Successful First Flight at Wallops
The flight test featured a Kratos two-stage Zeus 1 – Zeus 2 suborbital launch vehicle and provided substantial data to support rocket motor evaluation for use by future customers and sponsors who have baselined the Zeus rocket motors as part of their future test plans. Kratos expects to have production motors ready in the first quarter of 2025.
Kratos developed the Zeus family of SRMs in direct response to the need for affordable commercial launch vehicle stages for hypersonic test, ballistic missile targets, scientific research, sounding rocket and special customer missions. Kratos applied its significant rocket launch experience to establish the Zeus 1 and Zeus 2 motor specifications in close coordination with respective customer and user communities. Kratos internally funded development of the Zeus SRMs which are designed and manufactured to Kratos’ specifications by key merchant supplier and partner, L3Harris Technologies. L3Harris is on contract to begin delivering production motors to Kratos in the first quarter of 2025.
George Rumford, Director of the Department of Defense Test Resource Management Center, said, “Advancements in solid rocket motor development are critical to achieving rapid, affordable hypersonic testing.”
Dave Carter, President of Kratos’ Defense & Rocket Support Services Division, said, “I couldn’t be prouder of our whole team. They met the challenge to deliver these robust motors to market as fast as possible and meet the growing demand for rapid, reliable testing. The motors performed exceptionally well against predictions and are ready for immediate use by the broader test and research community.”
The Zeus 1 and Zeus 2 are high-performance, 32.5-inch diameter SRMs providing substantial performance improvements over similar legacy rockets. They are purposely designed to be fully compatible with existing payloads and launch infrastructure to enable rapid integration of new technologies and advanced payloads, including those currently under development by Kratos. These and other key attributes will provide Kratos and our customers with opportunities to fly more often, faster and farther, using fewer stages, and at a substantially reduced cost.
The Zeus SRM family is designed with versatility and affordability in mind as a complement to Kratos’ other internally funded investments such as the Erinyes hypersonic test “flyer” that debuted in June of this year. Kratos’ investments in the hypersonic and other relevant areas create a versatile family of test and evaluation products that offer complete systems. With the Zeus SRMs, the Erinyes, and other Kratos front end systems, Kratos is one of the only companies boasting both launcher and flyer systems within one organization, providing unmatched innovation, disruptive capabilities, mission responsiveness and affordability to the customer.
Eric DeMarco, President & CEO of Kratos Defense & Security Solutions, Inc., said, “Kratos is laser focused on supporting the Department of Defense, U.S. National Security requirements and working with our government partners to reinvigorate our country’s defense industrial base. Zeus’ successful mission is representative of the value Kratos’ strategy delivers to our stakeholders, with Kratos’ internally funded investments allowing us to rapidly develop and be first to market with affordable relevant systems for our partners and customers.”
About Kratos Defense & Security Solutions Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) is a technology, products, system and software company addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements. At Kratos, affordability is a technology, and we seek to utilize proven, leading-edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ approach designed to reduce cost, schedule and risk, enabling us to be first to market with cost effective solutions. We believe that Kratos is known as an innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low-cost future manufacturing which is a value-add competitive differentiator for our large traditional prime system integrator partners and also to our government and commercial customers. Kratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe that our probability of win (PWin) is high and any investment required by Kratos is within our capital resource comfort level. We intend to partner and team with a large, traditional system integrator when our assessment of PWin is greater or required investment is beyond Kratos’ comfort level. Kratos’ primary business areas include virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, C5ISR and microwave electronic products for missile, radar, missile defense, space, satellite, counter UAS, directed energy, communication and other systems, and virtual & augmented reality training systems for the warfighter. For more information, visit www.KratosDefense.com.
Notice Regarding Forward-Looking Statements Certain statements in this press release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made on the basis of the current beliefs, expectations and assumptions of the management of Kratos and are subject to significant risks and uncertainty. 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 Kratos undertakes no obligation to update or revise these statements, whether as a result of new information, future events or otherwise. Although Kratos believes that the expectations reflected in these forward-looking statements are reasonable, these statements involve many risks and uncertainties that may cause actual results to differ materially from what may be expressed or implied in these forward-looking statements. For a further discussion of risks and uncertainties that could cause actual results to differ from those expressed in these forward-looking statements, as well as risks relating to the business of Kratos in general, see the risk disclosures in the Annual Report on Form 10-K of Kratos for the year ended December 31, 2023, and in subsequent reports on Forms 10-Q and 8-K and other filings made with the SEC by Kratos.
Third Quarter 2024 Revenues of $275.9 Million Compared with Third Quarter 2023 Revenues of $274.6 Million
Third Quarter 2024 Unmanned Systems Revenues of $64.2 Million Compared with Third Quarter 2023 Revenues of $56.7 Million
Third Quarter 2024 Consolidated Book to Bill Ratio of 1.0 to 1 and Last Twelve Months Ended September 29, 2024 Consolidated Book to Bill Ratio of 1.1 to 1
Third Quarter 2024 Consolidated Bookings of $267.2 Million and Last Twelve Months Ended September 29, 2024 Consolidated Bookings of $1.240 Billion
Affirms Full Year 2024 Financial Forecast
SAN DIEGO, Nov. 07, 2024 (GLOBE NEWSWIRE) — Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a Technology Company in the Defense, National Security and Global Markets, today reported its third quarter 2024 financial results, including Revenues of $275.9 million, Operating Income of $6.5 million, Net Income of $3.2 million, Adjusted EBITDA of $24.6 million and a consolidated book to bill ratio of 1.0 to 1.0.
Included in third quarter 2024 Net Income and Operating Income is non-cash stock compensation expense of $7.2 million and Company-funded Research and Development (R&D) expense of $9.9 million.
Kratos reported third quarter 2024 GAAP Net Income attributable to Kratos of $3.2 million and Earnings Per Share of $0.02 compared to a GAAP Net Loss attributable to Kratos of $1.6 million and a GAAP Net Loss per share of $0.01 for the third quarter of 2023. Adjusted EPS was $0.11 for the third quarter of 2024 compared to $0.12 for the third quarter of 2023.
Third quarter 2024 Revenues of $275.9 million increased $1.3 million, or 0.5 percent, from third quarter 2023 Revenues of $274.6 million. Including the impact of the Sierra Technical Services, Inc. (STS) acquisition on a pro forma basis as if acquired at the beginning of 2023, Unmanned Systems reported 8.7 percent organic revenue growth. Kratos Turbine Technologies, Microwave Products, C5ISR, Defense Rocket Support and Training Solutions businesses in KGS also all reported organic revenue growth, offset by the previously reported and expected decline of approximately $24.2 million in the Space and Satellite business, primarily resulting from the industry related impact from OEM delays in the manufacture and delivery of software defined satellites.
Third quarter 2024 Cash Flow Generated from Operations was $6.1 million, which includes working capital requirements for increases in prepaid assets, inventory balances, vendor required deposits and reduction in deferred revenue or customer prepayment balances. Free Cash Flow Used in Operations was $9.2 million after funding of $15.3 million of capital expenditures, including the continued manufacture of two production lots of Kratos Valkyrie unmanned tactical jet drone aircraft prior to contract award.
For the third quarter of 2024, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $64.2 million, compared to $56.7 million in the third quarter of 2023, with organic revenue growth of 8.7 percent, driven primarily by increased target drone production, and reflects the pro forma impact of the STS acquisition as if acquired at the beginning of 2023. KUS’s Operating Income was $0.4 million in the third quarter of 2024 compared to Operating Income of $2.6 million in the third quarter of 2023, primarily reflecting the mix of revenues and resources.
KUS’s Adjusted EBITDA for the third quarter of 2024 was $3.6 million, compared to third quarter 2023 KUS Adjusted EBITDA of $5.4 million, reflecting the mix of revenues and resources.
KUS’s book-to-bill ratio for the third quarter of 2024 was 0.5 to 1.0 and 1.1 to 1.0 for the last twelve months ended September 29, 2024, with bookings of $32.6 million for the three months ended September 29, 2024, and bookings of $295.1 million for the last twelve months ended September 29, 2024. Total backlog for KUS at the end of the third quarter of 2024 was $273.9 million compared to $305.5 million at the end of the second quarter of 2024.
For the third quarter of 2024, Kratos’ Government Solutions Segment (KGS) generated Revenues of $211.7 million compared to $217.9 million in the third quarter of 2023, reflecting aggregate organic revenue increases of $18.0 million generated by the Kratos’ Turbine Technologies, Microwave Products, C5ISR, Defense Rocket Support and Training Solutions businesses in KGS, offset by the previously reported and expected decline of $24.2 million in the Space and Satellite business, as noted above.
KGS reported operating income of $13.5 million in the third quarter of 2024 compared to $15.9 million in the third quarter of 2023, primarily reflecting the revenue volume and mix of revenues and resources. Third quarter 2024 KGS Adjusted EBITDA was $21.0 million, compared to third quarter 2023 KGS Adjusted EBITDA of $22.3 million, reflecting the mix in revenues, revenue volume and resources.
For the third quarter of 2024 and the last twelve months ended September 29, 2024, KGS reported a book-to-bill ratio of 1.1 to 1.0, and bookings of $234.6 million and $945.0 million for the three and last twelve months ended September 29, 2024, respectively. KGS’s total backlog at the end of the third quarter of 2024 was $1.02 billion, as compared to $997.2 million at the end of the second quarter of 2024.
For the third quarter of 2024, Kratos reported consolidated bookings of $267.2 million and a book-to-bill ratio of 1.0 to 1.0, with consolidated bookings of $1.24 billion and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended September 29, 2024. Consolidated backlog was $1.294 billion on September 29, 2024 and $1.303 billion on June 30, 2024. Kratos’ bid and proposal pipeline was $12.0 billion at September 29 and June 30, 2024. Backlog at September 29, 2024 was comprised of funded backlog of $1.098 billion and unfunded backlog of $195.4 million.
Eric DeMarco, Kratos’ President and CEO, said, “Kratos’ strategy of making internally funded investments, to be first to market with relevant hardware, software and systems, in coordination with our partners and customers is working, as reflected in our financial results and our $12 billion opportunity pipeline. A recent representative example of this success is the successful flight of Kratos’ Zeus 1 and Zeus 2 system solid rocket motor stack with our customer’s payload, positioning Kratos for potential growth above our current future revenue year over year 10% target beginning in 2026.”
Mr. DeMarco went on, “Consistent with the success of and opportunities from Kratos’ strategy, earlier this year we completed an equity raise to position the Company to ensure successful execution on programs we have received and expect to receive. As an update to the related investments we are making: Kratos is currently manufacturing ~ 165 jet drones a year and we are now positioned to increase to ~400 a year including Valkyrie. Kratos can now produce ~10,000 small jet engines annually for drones and missiles, Kratos Microwave Electronics’ expansion in Israel is on track for a Q2 2025 completion, including an additional new manufacturing facility, an expanded existing manufacturing facility and a space & satellite qualified capability; we have identified the site for our new rocket system production and integration facility including for Zeus, Oriole and Erinyes and plan to break ground by the end of this year; and we have now identified the site for our new turbofan engine facility. Importantly, each of these expansion initiatives have existing programs, customer funded backlog or opportunities, or are in conjunction with a partner.”
Mr. DeMarco continued, “We continue to make progress in Kratos’ tactical drone business, with Kratos’ Apollo drone program now in contract documentation and Kratos’ Athena drone program under contract. Additionally, we have had recent successful Valkyrie flights with the U.S. Marines, Navy and Office of the Secretary of Defense, and Kratos recently has been selected on a new tactical drone opportunity. Importantly, our Ghost Works is on track to fly both a Kratos tactical drone and Kratos target drone in 2025 with Kratos internally funded, developed and manufactured jet engines, which will provide increased performance and electrical power, at reduced cost. Kratos Ghost Works is also expecting to fly the newest version of Kratos Valkyrie in 2025, as we make internally funded investments and continue to expand the Valkyrie families’ capability set and further drive down its operating and overall cost, and our newest 5th Generation drone is also scheduled for first flight in 2025 in conjunction with our customer.”
Mr. DeMarco concluded, “We are in a generational recapitalization of strategic weapon systems, with Kratos being an industry leader in hardware, software and systems for mission critical National Security and Defense applications. Expected growth drivers for Kratos in 2025 include; Kratos Erinyes, Zeus, Dark Fury, Oriole and other relevant rocket systems; Kratos jet engine and propulsion systems for missiles, drones, supersonic and space systems; microwave electronics and C5ISR products for air defense, CUAS, missile and radar systems and jet target drone systems.”
Financial Guidance
We are providing our initial 2024 fourth quarter financial guidance and affirming our full year 2024 guidance today, which ranges include our current forecasted business mix assumptions and expected contract execution and delivery schedules. Our financial guidance also includes our expectations and assumptions for our supply chain’s execution, and for employee sourcing, hiring, retention and related costs. We have also taken into consideration in our affirmed fiscal 2024 guidance the Federal Fiscal Year 2025 Continuing Resolution Authorization (CRA) which began on October 1, 2024, and under such expected CRA, no new program or contract awards, no increases in existing production contract funding, and no transition from program development to production are expected.
Our fourth quarter and full year 2024 guidance ranges are as follows:
For Kratos’ Fiscal year 2025, we are currently forecasting base case Revenue growth of approximately 10%, and Adjusted EBITDA growth. Our industry is currently operating under a Federal Fiscal Year 2025 CRA, which began October 1, 2024 and which is currently expected to continue into Kratos’ Fiscal 2025. There was also an approximate 6-month Federal Fiscal 2024 CRA, which was previously resolved in March 2024, Kratos’ current 2024 fiscal year. Additionally, the recent election will impact the Administration, House and Senate. Accordingly, we will be providing our detailed 2025 Revenue, Adjusted EBITDA, Cash Flow and other financial forecast information and guidance when we report our Fiscal 2024 results, currently expected to be in late February 2025. This will provide Kratos additional time to assess the impacts of these ongoing and recent events, if any, on National Security priorities, our 2025 business mix, contractual and program funding and timing assumptions and potential fiscal year 2025 fiscal quarter to quarter impacts. Kratos’ base case financial forecast does not assume or include any potential tactical drone program production.
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 Solutions
Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) is a technology, products, system and software company addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements. At Kratos, affordability is a technology, and we seek to utilize proven, leading edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ approach designed to reduce cost, schedule and risk, enabling us to be first to market with cost effective solutions. We believe that Kratos is known as an innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low cost future manufacturing which is a value add competitive differentiator for our large traditional prime system integrator partners and also to our government and commercial customers. Kratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe that our probability of win (PWin) is high and any investment required by Kratos is within our capital resource comfort level. We intend to partner and team with a large, traditional system integrator when our assessment of PWin is greater or required investment is beyond Kratos’ comfort level. Kratos’ primary business areas include virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, C5ISR and microwave electronic products for missile, radar, missile defense, space, satellite, counter UAS, directed energy, communication and other systems, and virtual & augmented reality training systems for the warfighter. For more information, visit www.KratosDefense.com
Notice RegardingForward–LookingStatements 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 fourth quarter and full year 2024 and fiscal year 2025 revenues, revenue growth, Adjusted EBITDA growth, organic revenue growth rates, R&D, operating income (loss), depreciation, amortization, stock based compensation expense, and Adjusted EBITDA, and full year 2024 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, planned 2024 investments, including in the tactical drone and satellite areas, and the related potential for additional growth in 2025 and beyond, 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 control (TT&C) 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 U.S. Department of Defense (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 the national election, supply chain disruptions, 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 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; risks that our cost-cutting initiatives will not provide the anticipated benefits; risks that changes, cutbacks or delays in spending by the 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 and the Israeli-Palestinian military conflict; risks to our business in Israel; risks related to our international operations; 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; 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 31, 2023, and in our other filings made with the Securities and Exchange Commission.
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 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.
Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) develops and fields transformative, affordable technology, platforms, and systems for United States National Security related customers, allies, and commercial enterprises. Kratos is changing the way breakthrough technologies for these industries are rapidly brought to market through proven commercial and venture capital backed approaches, including proactive research, and streamlined development processes. At Kratos, affordability is a technology, and we specialize in unmanned systems, satellite communications, cyber security/warfare, microwave electronics, missile defense, hypersonic systems, training and combat systems and next generation turbo jet and turbo fan engine development. For more information go to www.kratosdefense.com.
Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Solid Quarter. Kratos reported a solid quarter, with Unmanned Systems reporting 8.7% organic revenue growth. Turbine Technologies, Microwave Products, C5ISR, Defense Rocket Support, and Training Solutions businesses also all reported organic revenue growth. This was offset by the previously reported and expected decline of approximately $24.2 million in the Space and Satellite business, primarily resulting from the industry related impact from OEM delays.
3Q24 Results. Kratos reported revenue of $275.9 million, flat with the same period last year. We had estimated $280 million. Adjusted EBITDA was $24.6 million, compared to $27.7 million last year and our $21 million estimate. Reported net income was $3.2 million, or $0.02/sh, up from a $1.6 million loss, or a loss of $0.01/sh in 3Q23. Adjusted EPS was $0.11 compared to $0.12 last year. We were at $0.01 and $0.06, respectively.
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This Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
Kelly (Nasdaq: KELYA, KELYB) connects talented people to companies in need of their skills in areas including Science, Engineering, Education, Office, Contact Center, Light Industrial, and more. We’re always thinking about what’s next in the evolving world of work, and we help people ditch the script on old ways of thinking and embrace the value of all workstyles in the workplace. We directly employ nearly 350,000 people around the world and connect thousands more with work through our global network of talent suppliers and partners in our outsourcing and consulting practice. Revenue in 2021 was $4.9 billion. Visit kellyservices.com and let us help with what’s next for you.
Joe Gomes, CFA, Managing Director, Equity Research Analyst, Generalist , Noble Capital Markets, Inc.
Joshua Zoepfel, Research Associate, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
Challenges. In the third quarter, Kelly remained focused on what it could control, but the uncertain economic environment persisted, impacting consolidated results. On an organic basis, revenue rose in two of the business units, while gross profit rate fell in three of the four units. Integration costs related to the MRP acquisition of $6.1 million also impacted results. Investors reacted negatively to the results, sending the shares down 18% to $18.14.
3Q24 Results. Revenue of $1.038 billion, down 7.1% y-o-y, but essentially flat on an organic basis. We were at $1.075 billion, the same as the consensus. Adjusted EBITDA of $26.2 million, up 2.7% y-o-y, but below our $34 million estimate and consensus $33 million. Net income of $0.8 million, or $0.02/sh and adjusted EPS of $0.21, compared to $0.18 and $0.50 in 3Q23.
Equity Research is available at no cost to Registered users of Channelchek. Not a Member? Click ‘Join’ to join the Channelchek Community. There is no cost to register, and we never collect credit card information.
This Company Sponsored Research is provided by Noble Capital Markets, Inc., a FINRA and S.E.C. registered broker-dealer (B/D).
*Analyst certification and important disclosures included in the full report. NOTE: investment decisions should not be based upon the content of this research summary. Proper due diligence is required before making any investment decision.
