1. A smaller Northrop Grumman, specializing in military drones and advanced defense electronics.

2. The military's go-to for drones and cutting-edge defense technology.

• Unmanned Systems: Kratos develops and manufactures unmanned aerial, ground, and seaborne vehicles for defense and commercial applications.
• Space and Satellite Communications: The company provides products and solutions for satellite ground systems, communications, and space domain awareness.
• C5ISR/Modular Systems: Kratos develops and supplies command, control, communications, computers, combat systems, intelligence, surveillance, and reconnaissance (C5ISR) systems and other modular defense solutions.
• Microwave Electronic Products: They offer various microwave electronic components and subsystems used in defense and space applications.
• Turbine Technologies: Kratos develops and produces advanced turbine components and systems, often for propulsion and power generation in defense platforms.
• Defense and Rocket Support Services: These services encompass a range of support functions for defense systems and rocket programs.
• Training and Cybersecurity/Warfare Services: Kratos provides specialized training programs and cybersecurity/electronic warfare solutions for national security agencies.

Kratos Defense & Security Solutions (KTOS) primarily serves government entities, with the U.S. Department of Defense being a major customer. Its major customers include:

• U.S. Department of Defense
• National security related agencies
• Intelligence agencies
• Classified agencies
• International government agencies
• Domestic and international commercial customers

As the company primarily sells to government agencies and, to a lesser extent, other commercial entities whose specific names are not disclosed in the provided information, no public company symbols for customer companies can be provided.

Eric DeMarco, President and Chief Executive Officer

Mr. DeMarco joined Kratos Defense & Security Solutions, Inc. (then Wireless Facilities, Inc.) in November 2003 as President and Chief Operating Officer, assuming the role of CEO in April 2004. He has been instrumental in transforming the company from a commercial communications business into a leading national security-focused technology, product, and systems provider through both organic growth and strategic acquisitions. Prior to his tenure at Kratos, Mr. DeMarco served as President and Chief Operating Officer of The Titan Corporation, where he significantly grew the company's revenue and backlog before its acquisition by L-3. He began his career in public accounting and has also served as Chairman of the Board of Wavestream Corporation.

Deanna Hom Lund, Executive Vice President and Chief Financial Officer

Ms. Lund has served as Chief Financial Officer of Kratos Defense & Security Solutions, Inc. since April 2004 and became a director in May 2021. Her background includes experience in public accounting and corporate finance leadership. She has overseen public-company financial reporting, including during a period involving a sale to L-3.

Phillip Carrai, President of Space, Training & Cybersecurity Division

Mr. Carrai is responsible for all aspects of business operations, business development, sales, and mergers and acquisitions for Kratos' Space, Training & Cybersecurity division. He joined Kratos in 2008. Previously, he was the CEO of Ai Metrix, a telecommunications software company that Kratos acquired in 2006. He also served as CEO of McCabe and Associates, a testing and analysis software company, which was later sold to a private equity firm.

Steven S. Fendley, Corporate Senior Vice President and President of Unmanned Systems Division

As President of the Unmanned Systems Division, Mr. Fendley leads the segment that provides unmanned aerial, ground, and seaborne systems, along with related command, control, and communications systems.

Marie Mendoza, General Counsel and Vice President

Ms. Mendoza serves as General Counsel and Vice President at Kratos Defense & Security Solutions, Inc.

The key risks for Kratos Defense & Security Solutions (KTOS) include its significant reliance on U.S. government contracts and spending, a high valuation coupled with potential stock volatility, and challenges with free cash flow and return on invested capital.

1. Dependence on Government Contracts and Spending: Kratos operates primarily as a government contractor for the U.S. Department of Defense and other national security agencies. This makes the company highly susceptible to fluctuations in government spending, budgetary constraints, and shifts in procurement policies, such as the move towards Lowest Price Technically Acceptable (LPTA) rather than best value contracts. Some of Kratos's contracts are classified, which can limit investor insight into certain parts of its business.
2. High Valuation and Stock Volatility: KTOS shares have recently traded at a substantial premium, with a valuation of 123.87x EV/aEBITDA in March 2026. This high valuation, combined with a history of significant stock price fluctuations, exposes investors to heightened volatility risk. The company's stock price can be influenced by various factors beyond its control, including general market conditions, failure to meet analyst expectations, and even rumors.
3. Challenges with Free Cash Flow and Return on Invested Capital (ROIC): Kratos has experienced a declining free cash flow margin, which was negative 7.3% for the trailing 12 months as of January 2026. Furthermore, its Return on Invested Capital (ROIC) has consistently decreased, suggesting that new investments may not be generating profitable returns efficiently and that growth opportunities might be limited. This indicates potential concerns regarding the company's capital efficiency and profitability from its growth initiatives.

Kratos Defense & Security Solutions (KTOS) operates in several addressable markets related to its Kratos Government Solutions and Unmanned Systems segments:

• Space and Satellite Communications (Defense): The global satellite communication market in the defense sector is expected to grow from USD 6.20 billion in 2025 to USD 8.86 billion by 2031, at a Compound Annual Growth Rate (CAGR) of 6.14%. North America was the largest revenue-generating market in 2025.

• Defense Cybersecurity: The global defense cybersecurity market was valued at USD 32.26 billion in 2025 and is estimated to grow from USD 36.02 billion in 2026 to reach USD 62.36 billion by 2031, with a CAGR of 11.65%. North America held the largest revenue share in the defense cybersecurity market, securing 37.55% in 2025.

• C5ISR/Modular Systems: The global C5ISR (Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance) market is projected to grow from USD 11.9 billion in 2025 to USD 38.3 billion by 2035, reflecting a CAGR of 12.4%. North America sustained 33.10% of the global C5ISR market share in 2025.

• Turbine Technologies (Military Aircraft Engines): The Global Military Aircraft Engine Market size is around USD 34.29 billion in 2025 and is projected to reach USD 67.19 billion by 2032, with a CAGR of approximately 10.09% from 2026-2032. The United States leads the aircraft micro turbine engines market.

• Defense and Rocket Support Services (Rockets and Missiles): The Global Rockets and Missiles Market is estimated to be valued at USD 65.67 billion in 2026 and is expected to reach USD 101.38 billion by 2033, exhibiting a CAGR of 6.4%. North America is estimated to lead this market with a share of 39.6% in 2026.

• Unmanned Aerial Systems (UAS): The global Unmanned Aerial Vehicle (UAV) market size was valued at USD 41.27 billion in 2025 and is projected to grow from USD 47.55 billion in 2026 to USD 160.44 billion by 2034, exhibiting a CAGR of 16.40%. North America dominated the unmanned aerial vehicle market with a market share of 34.12% in 2025.

• Unmanned Ground and Seaborne Systems (as part of the broader Unmanned Systems market): The global unmanned systems market size, which includes aerial, ground, and marine systems, was estimated at USD 26.55 billion in 2024 and is projected to reach USD 48.31 billion by 2030, growing at a CAGR of 10.5%. North America accounted for the largest global revenue share of over 45% in the unmanned systems industry in 2024.

• Counter Unmanned Aerial Systems (C-UAS): The Global Counter Unmanned Aerial System (UAS) Market was valued at approximately USD 5.12 billion in 2025 and is projected to grow from USD 8.5 billion in 2026 to approximately USD 27.98 billion by 2032, reflecting strong market expansion. North America dominates this market, accounting for nearly 52% of the total market share during the forecast period.

• Microwave Electronic Products: null

Kratos Defense & Security Solutions, Inc. (KTOS) is expected to drive future revenue growth over the next 2-3 years through several key initiatives and market trends:

1. Expanding Unmanned Systems Portfolio and Production: Kratos anticipates significant growth from its unmanned aerial systems (UAS) segment, encompassing high-performance jet drones like the XQ-58A Valkyrie, which has become a U.S. Marine Corps Program of Record, ensuring a predictable long-term revenue stream. The company plans to substantially increase Valkyrie production, aiming for approximately 40 aircraft annually by the end of 2027 to 2028. This growth is further supported by the development of next-generation tactical and target drones (e.g., Thanatos and Apollo) and strategic international partnerships, such as with Airbus to offer Valkyrie to the German Air Force.
2. Significant Growth in Hypersonic Systems: The company's hypersonic franchise, including rocket motors and systems, is identified as a primary driver of future revenue growth. Kratos expects revenues from this segment to approximately double in 2026 over 2025, reaching around $400 million, and potentially increase by over 75% again in 2027 to approximately $700 million. Key programs like the Multi-Mission Affordable Capacity Effector - Testbed (MACH-TB) are expected to ramp up, aligning with increased U.S. defense budget allocations for hypersonic development.
3. Advancements in Space and Satellite Communications and Virtualized Ground Systems: Kratos's Government Solutions segment is benefiting from its OpenSpace software for virtualized satellites, C2 (Command and Control), and TT&C (Telemetry, Tracking, and Command) systems. The company has secured an initial program award of approximately $500 million in its space and satellite business. Furthermore, strategic acquisitions, such as Nomad Global Communication Solutions and the pending addition of Orbit Technologies, are enhancing Kratos's capabilities in satellite, microwave, and command & control, strengthening its position within the defense community.
4. Strategic Investments in Next-Generation Propulsion Systems: To support the growth of its unmanned and hypersonic platforms, Kratos is investing in the development and production of next-generation jet engines for drones, missiles, and loitering munitions. This includes a partnership with GE Aerospace to establish a new engine factory, which will ensure a dedicated supply of propulsion systems and help scale production, thereby mitigating potential supply chain bottlenecks.

Share Repurchases

• Kratos Defense & Security Solutions does not have a practice of conducting stock buybacks.

Share Issuance

• In February 2026, Kratos announced the pricing of an underwritten public offering of 14,285,714 shares of its common stock at $84.00 per share, with net proceeds expected to be approximately $1.173 billion.
• The net proceeds from this offering are intended to fund important capital expenditures, invest in new product, system, and software development, strengthen the balance sheet, and finance recent and future strategic acquisitions.

Outbound Investments

• Kratos signed a definitive agreement in November 2025 to acquire 100 percent of Orbit Technologies Ltd for $356.3 million, expected to be funded via cash on Kratos' balance sheet and to close by the end of March 2026.
• The company completed a small tuck-in acquisition of Nomad Global Communication Solutions by February 2026.
• Kratos acquired certain assets of Norden Millimeter, Inc. in February 2025.

Capital Expenditures

• Capital expenditures for the full year 2025 were $71.1 million, with an operating cash flow use of $42.1 million and a free cash flow use of $125.4 million, driven by investments in inventory, facilities, and Valkyrie production.
• Kratos forecasts capital expenditures of $135-$145 million for fiscal year 2026 to fund hypersonics, Valkyrie, and other growth programs.
• The primary focus of capital expenditures includes expanding and building out manufacturing and production facilities for microwave products, rocket systems, hypersonics, and Unmanned Systems to meet existing and anticipated customer orders and requirements.