SAN DIEGO, May 05, 2022 (GLOBE NEWSWIRE) -- Kratos Defense & Security Solutions, Inc. (Nasdaq:KTOS), a leading National Security Solutions provider, today reported its first quarter 2022 financial results. For the first quarter of 2022, Kratos reported Revenues of $196.2 million, Operating Loss of $1.2 million, Net Loss of $15.9 million and Adjusted EBITDA of $13.8 million.   Included in Net Loss is a $13.0 million loss for a debt extinguishment charge reflecting the premium paid to redeem the Company’s 6.5% Senior Notes and the write-off of related deferred financing costs.

First quarter 2022 Operating Loss includes non-cash stock compensation expense of $7.0 million, which increased $0.8 million from the first quarter of 2021, and Company-funded Research and Development expense of $9.2 million, reflecting significant ongoing development efforts being made, including in our space and satellite business to develop our virtual, software based OpenSpace ground station solution.

Kratos reported a first quarter 2022 GAAP loss per share of $0.12, which included the $13.0 million loss for debt extinguishment charge noted above, compared to Net Income of $1.9 million and GAAP EPS income of $0.01 for the first quarter of 2021. Adjusted EPS was $0.04 for the first quarter of 2022, compared to $0.06 for the first quarter of 2021. Kratos has approximately $235 million of net operating loss carryforwards, which are expected to substantially shield the Company from paying future cash income taxes.   

First quarter 2022 Revenues of $196.2 million, increased $2.0 million, or 1.0 percent, from first quarter 2021 Revenues of $194.2 million, were adversely impacted by the extended 6 month Continuing Resolution Authorization (CRA), which was not resolved until the end of March 2022. First quarter 2022 revenues were also adversely impacted by continuing and increased supply chain disruptions, and COVID-related employee absenteeism, which resulted in approximately $15.3 million of first quarter 2022 revenues being deferred into future periods. First quarter 2022 revenues include a contribution of $14.7 million from the recent acquisitions of Cosmic Advanced Engineered Solutions, Inc. (Cosmic AES) and CTT, Inc., (CTT) offset by the previously reported loss of an international training services contract of approximately $8.3 million.

First quarter 2022 Cash Flow Used in Operations was $7.9 million, including a use for the increase of inventory balances of $15.3 million during the quarter primarily in our satellite and microwave electronic businesses, in anticipation of the ramps in production in the second half of the year and, in part, to advance inventory levels, in an attempt to mitigate the impact of supply chain disruptions. Free Cash Flow Used in Operations was $18.7 million, after funding $10.8 million of capital expenditures, including in our high growth Unmanned Systems, Space, Satellite and Cyber and Turbine Technologies business areas.

For the first quarter of 2022, Kratos’ Unmanned Systems Segment (KUS) generated Revenues of $52.6 million, as compared to $55.9 million in the first quarter of 2021. KUS Operating Income was $0.5 million in the first quarter of 2022, compared to $4.2 million in the first quarter of 2021, reflecting a less favorable mix of revenues, including an increase in development programs which typically generate lower margins, an increase in SG&A costs of approximately $1.1 million, an increase of R&D expenses of approximately $1.2 million and increases in supply chain and employee related costs.

First quarter 2022 KUS Adjusted EBITDA was $3.0 million, compared to first quarter 2021 Adjusted EBITDA of $6.4 million, reflecting increases in certain development programs which typically generate lower margins and increases in SG&A, R&D, supply chain related and headcount costs.
        
KUS’s book-to-bill ratio for the first quarter of 2022 was 0.3 to 1.0 and 1.0 to 1.0 for the last twelve months ended March 27, 2022, with bookings of $236.7 million for the twelve months ended March 27, 2022.   Total backlog for KUS at the end of the first quarter of 2022 was $230.5 million compared to $269.6 million at the end of the fourth quarter of 2021.

For the first quarter of 2022, Kratos’ Government Solutions Segment (KGS) reported Revenues of $143.6 million, compared to Revenues of $138.3 million in the first quarter of 2021. The increased revenues include the contribution of approximately $14.7 million from the recently acquired Cosmic AES and CTT, offset by a reduction of $8.3 million in our Training Solutions business, resulting primarily from the loss of an international training contract, and continued and increased supply chain disruptions, which resulted in first quarter 2022 KGS revenues of approximately $14.6 million being deferred into future periods. KGS reported operating income of $5.6 million in the first quarter of 2022, compared to $7.1 million in the first quarter of 2021, primarily reflecting a less favorable revenue mix and increased costs related to the supply chain and employee base.  

Kratos’ Space, Satellite and Cyber business generated Revenues of $72.5 million in the first quarter of 2022, compared to $58.5 million in the first quarter of 2021. Included in the first quarter 2022 revenues is $12.7 million from the recent Cosmic AES acquisition, offset partially by approximately $7.1 million of supply chain related and other delays, including in the Company’s commercial and international satellite communications business.  

First quarter 2022 KGS Adjusted EBITDA was $10.8 million, compared to first quarter 2021 KGS Adjusted EBITDA of $11.7 million, reflecting a less favorable mix of revenues, the continued and increased impact of supply chain disruptions and increases in supply chain and employee related costs.

For the first quarter of 2022, KGS reported a book-to-bill ratio of 1.3 to 1.0, and a book to bill ratio of 1.1 to 1 for the twelve months ended March 27, 2022.   Included in KGS is Kratos’ Space, Satellite and Cyber business, which reported a book to bill ratio of 1.3 to 1.0 for the first quarter of 2022, and a book to bill ratio of 1.1 to 1.0 for the twelve months ended March 27, 2022. Bookings for the Space, Satellite and Cyber business for the last twelve months ended March 27, 2022 was $313.8 million. KGS’s total backlog at the end of the first quarter of 2022 was $751.6 million, as compared to $684.3 million at the end of the fourth quarter of 2021.

For the first quarter of 2022, Kratos reported consolidated bookings of $198.2 million and a book-to-bill ratio of 1.0 to 1.0, with consolidated bookings of $873.3 million and a book-to-bill ratio of 1.1 to 1.0 for the last twelve months ended March 27, 2022. Backlog on March 27, 2022 was $982.1 million, as compared to $953.9 million at December 26, 2021, and Kratos’ bid and proposal pipeline was $9.4 billion at March 27, 2022, as compared to $9.4 billion at December 26, 2021.   Backlog at March 27, 2022 was comprised of funded backlog of $685.7 million and unfunded backlog of $296.4 million.

Eric DeMarco, Kratos’ President and CEO, said, “Since our last report, the Fiscal 2022 Budget has been approved, including significant funding in space, satellite, cyber, unmanned systems, hypersonics, missile defense, strategic deterrence and microwave electronics, all core Kratos business areas.   The Fiscal 2023 budget request has also been released, also continuing these as priority national security funding areas. We have now received or have been informed that we will receive several large new contracts in our unmanned systems and our satellite business, including our new software based OpenSpace products. The awards will provide us additional visibility into our Q3 and Q4 forecasted revenue, with a significant increase in our forecasted profitability as we expect to achieve operating leverage on our cost infrastructure.”

Mr. DeMarco, continued, “Over the last few months, the Pentagon has continued to clarify its vision for low cost, force multiplying and loyal wingman unmanned aerial drone systems. We continue to be confident that Kratos’ affordable, made in America, high performance jet drones, which are flying today and not power-points, and which are designed to enable fielding of mass, large quantities and runway independence, providing challenges to adversaries and survivability to our forces, are critical differentiators.   We are currently producing approximately 150 jet drone aircraft of various types annually and are ready and able to immediately step up when the customer requires”.

Mr. DeMarco concluded, “We are focused internally, including continuing to win contract awards, expanding our market share, and on program execution and working with our customers contracting offices so that we receive funding as quickly as possible now that the 2022 budget is in place. We are also focused on managing industry wide challenges, including supply chain issues, inflation and increasing costs, COVID related impacts to our customers and employees and obtaining and retaining qualified personnel, all of which are expected to continue for the foreseeable future.”