Kratos Defense & Sec Solutions Stock Price, News & Analysis

Kratos Defense & Security Solutions, Inc. (NASDAQ: KTOS) is a technology, products, system and software company focused on the defense, national security, and commercial markets. According to the company, it makes internally funded research, development, capital and other investments to rapidly develop, produce and field solutions that address mission critical needs and requirements. Kratos emphasizes affordability as a core technology principle, seeking to use proven, leading edge approaches rather than unproven bleeding edge technology to reduce cost, schedule and risk and to be first to market with cost-effective systems.

Kratos operates in the manufacturing sector, with an industry classification in search, detection, navigation, guidance, aeronautical, and nautical system and instrument manufacturing. The company states that it is known as a disruptive change agent in its industry, focusing on designing products and systems up front for rapid, large quantity, low-cost manufacturing. This design-for-production mindset is presented as a key differentiator for Kratos in working with large traditional prime system integrator partners and with government and commercial customers.

Business Segments and Operating Structure

Based on available information, Kratos reports two primary segments: the Kratos Government Solutions (KGS) segment and the Unmanned Systems segment. The KGS segment is described as an aggregation of operating segments that include microwave electronic products, space, training and cybersecurity, C5ISR/modular systems, turbine technologies, and defense and rocket support services. The Unmanned Systems segment consists of unmanned aerial, unmanned ground, unmanned seaborne and related command, control, and communications system businesses. The company has indicated that a majority of its revenue is derived from the Kratos Government Solutions segment.

Across these segments, Kratos’ primary business areas include:

• Virtualized ground systems for satellites and space vehicles, including software for command and control (C2) and telemetry, tracking and control (TT&C).
• Jet powered unmanned aerial drone systems, advanced vehicles and rocket systems.
• Propulsion systems for drones, missiles, loitering munitions, supersonic systems, spacecraft and launch systems.
• C5ISR and microwave electronic products for missile, radar, missile defense, space, satellite, counter-UAS, directed energy, communication and other systems.
• Virtual and augmented reality training systems for the warfighter.

Defense and National Security Focus

Kratos repeatedly describes itself as operating in defense, national security and global markets. The company highlights internally funded investments to develop and field military-grade hardware, software and systems, often ahead of formal customer funding. Kratos’ communications emphasize support for U.S. national security priorities, the U.S. defense industrial base, and readiness for the warfighter.

Recent company communications describe activities in areas such as hypersonic vehicles and rocket systems, air defense and C5ISR hardware, and uncrewed aerial systems. For example, Kratos has discussed its role in hypersonic test and launch operations and in jet powered unmanned aerial systems that can operate alongside crewed aircraft in high-threat environments. The company also reports contracts for military-grade custom hardware production for missile, radar, counter-UAS, hypersonic, directed energy and satellite communication systems, with work performed in secure Kratos manufacturing facilities.

Facilities, Manufacturing Footprint and Industrial Base

Kratos describes a strategy of making upfront commitments to infrastructure, facilities and equipment to support rapid development and production. Recent announcements reference new or expanded facilities supporting hypersonic systems, propulsion, microwave electronics and maintenance, repair and overhaul (MRO) activities.

• A hypersonic and other system manufacturing and payload integration facility in Princess Anne, Maryland, intended to support launch operations and hypersonic testing for programs such as the Multi-Service Advanced Capability Hypersonics Test Bed (MACH-TB) 2.0 and other customers from U.S. defense agencies.
• An expanded operations campus in Birmingham, Alabama, supporting products including HORUS, a high-altitude intelligence surveillance reconnaissance imaging system; CRADLE, a mobile bistatic radar communications platform; and UltraSpec, a non-destructive inspection technology for advanced composite materials. The Birmingham site is also described as hosting laboratory facilities for strategic deterrence systems, missiles, space and satellite communications, exotic material test and analysis, intelligence, surveillance and reconnaissance, hypersonic platforms, trusted and assured microelectronics, anti-tamper technology and other platforms and systems.
• A propulsion manufacturing facility in Auburn Hills, Michigan, focused on production of Spartan military-grade turbojet engines. The facility includes office, manufacturing, assembly and test areas configured for concurrent production and testing of multiple engine types.
• A microwave electronics facility in Jerusalem, with clean-room space dedicated to precision assembly, testing and production of microwave assemblies and subsystems for missiles, radars, satellites, electronic warfare and other missions.
• A 10,000 square foot facility in Vancouver, British Columbia for PT6A and PT6T engine overhaul, supporting maintenance, repair and overhaul operations for engine customers and strengthening related operations in Bristow, Oklahoma.

These facilities are described by the company as part of its contribution to the U.S. defense industrial base and, in some cases, to international defense and space programs.

Capital Allocation and Investment Approach

Kratos outlines a capital allocation philosophy centered on reinvestment rather than stock buybacks or dividends. The company has publicly stated that it does not have a practice of conducting stock buybacks or paying dividends, instead choosing to reinvest capital into development, production, facilities, inventory and other capabilities. Kratos characterizes this approach as enabling it to self-fund and be first to market with systems across unmanned, hypersonic, propulsion, space and defense electronics areas, sometimes taking on development and production risk ahead of customer funding or before programs become formal programs of record.

The company has also disclosed that it may raise capital through public offerings of common stock, with stated uses of proceeds including investments and capital expenditures to scale and execute on national security priorities, finance targeted acquisitions, and for general corporate purposes such as debt reduction and offering-related expenses.

Partnerships, Contracts and Acquisitions

Kratos’ disclosures describe a business strategy that includes both acting as a prime or lead contractor and partnering with larger traditional system integrators. The company intends to pursue program and contract opportunities as the prime contractor when it assesses its probability of win as high and required investment as within its capital resource comfort level. When the required investment is beyond that comfort level, or when it assesses that teaming improves its probability of win, Kratos intends to partner with large, traditional system integrators.

Examples from recent communications include:

• A collaboration with Northrop Grumman in which Kratos’ Valkyrie uncrewed aerial system is integrated with Northrop Grumman mission systems for a U.S. Marine Corps collaborative combat aircraft program.
• Contracts for air defense and C5ISR system hardware production, where Kratos is described as an industry leader in development, engineering, design and large-scale production of military-grade hardware and integrated systems.
• A letter of intent to L3Harris Technologies for Zeus 1 and Zeus 2 hypersonic solid rocket motors, which Kratos describes as part of its strategy to build inventory and capability ahead of customer need.
• An Agreement and Plan of Merger to acquire Orbit Technologies Ltd., an Israel-based company whose shares trade on the Tel Aviv Stock Exchange, under which Orbit would become an indirect wholly owned subsidiary of Kratos after completion of the merger, subject to customary conditions and regulatory approvals.
• The acquisition of Southern Research Engineering, now operating as part of Kratos’ Birmingham, Alabama operations, with a focus on strategic deterrence systems, missiles, space and satellite communications, hypersonic platforms and related technologies.

Space, Satellite and Ground Systems

Kratos highlights a long history in satellite command and control systems and ground infrastructure. The company’s EPOCH command and control (C2) software is used for satellite operations, and recent announcements describe successful factory acceptance testing with Airbus’ OneSat software-defined satellite platform. In that context, Kratos added capabilities to EPOCH C2 to support dynamic configurations, frequent updates and greater autonomy onboard software-defined spacecraft.

Beyond command and control, Kratos reports development of advanced ground capabilities for traffic planning, resource orchestration and performance monitoring to support software-defined satellites. The company states that it has been providing satellite command and control systems to customers for over 20 years and is advancing its ground systems to support new generations of satellites.

Unmanned Systems, Hypersonics and Propulsion

In unmanned systems, Kratos’ primary business areas include jet powered unmanned aerial drone systems and related command, control and communications systems. The Valkyrie uncrewed aerial system is specifically mentioned in connection with a U.S. Marine Corps program, where it is intended to work alongside crewed fighters in high-threat environments.

In hypersonics and propulsion, Kratos reports investments and activities such as:

• The MACH-TB 2.0 hypersonic test bed program, where Kratos supports launch operations and hypersonic testing and references a multi-year contract associated with that program.
• The Zeus family of solid rocket motors, designed for affordable, rapid, full-rate production and compatibility with existing payloads and launch infrastructure. Kratos describes Zeus motors as supporting hypersonic test, ballistic missile targets, scientific research, sounding rocket and special missions.
• The Erinyes hypersonic test "flyer," referenced as part of a family of test and evaluation products that, together with Zeus motors and other systems, provide launcher and flyer capabilities within one organization.
• The Spartan line of military-grade turbojet engines, produced in the Auburn Hills facility, intended to support affordable mass inventory levels of propulsion systems.

Microwave Electronics, C5ISR and Training

Kratos’ microwave electronics and C5ISR activities include products for missile, radar, missile defense, space, satellite, counter-UAS, directed energy and communication systems. The company’s microwave electronics division, including its Jerusalem facility, is positioned to support high-performance microwave and RF technologies and to provide assemblies and subsystems for defense and commercial space programs.

In addition, Kratos develops virtual and augmented reality training systems for the warfighter, which are part of its broader focus on training and cybersecurity within the Kratos Government Solutions segment.

Stock Information and Regulatory Filings

Kratos Defense & Security Solutions, Inc. is incorporated in Delaware and its common stock trades on the NASDAQ under the ticker symbol KTOS. The company files periodic and current reports with the U.S. Securities and Exchange Commission (SEC), including Forms 10-K, 10-Q and 8-K. Recent 8-K filings have covered topics such as an underwriting agreement for a public offering of common stock, financial results, and the entry into a merger agreement with Orbit Technologies Ltd.

FAQs about Kratos Defense & Security Solutions, Inc. (KTOS)

• What does Kratos Defense & Security Solutions, Inc. do?
  Kratos is a technology, products, system and software company addressing defense, national security and commercial markets. Its primary business areas include virtualized ground systems for satellites and space vehicles, jet powered unmanned aerial drone systems, advanced vehicles and rocket systems, propulsion systems for various defense and space applications, C5ISR and microwave electronic products, and virtual and augmented reality training systems for the warfighter.
• How is Kratos organized from a business segment perspective?
  Kratos reports two main segments: the Kratos Government Solutions (KGS) segment and the Unmanned Systems segment. KGS includes microwave electronic products, space, training and cybersecurity, C5ISR/modular systems, turbine technologies, and defense and rocket support services, while the Unmanned Systems segment focuses on unmanned aerial, ground and seaborne systems and related command, control and communications.
• In which markets does Kratos primarily operate?
  Kratos states that it operates in defense, national security and commercial markets. Its products and systems are used in areas such as missile and radar systems, missile defense, space and satellite communications, counter-UAS, directed energy, hypersonic test and launch, and training for the warfighter.
• How does Kratos describe its approach to technology and affordability?
  Kratos characterizes affordability as a technology in itself. The company seeks to use proven, leading edge approaches and technology rather than unproven bleeding edge approaches, with the goal of reducing cost, schedule and risk and enabling first-to-market, cost-effective solutions. It emphasizes designing products and systems up front for rapid, large quantity, low-cost manufacturing.
• What is Kratos’ capital allocation philosophy?
  Kratos has publicly stated that it does not have a practice of conducting stock buybacks or paying dividends. Instead, it reinvests capital into internally funded research and development, production, facilities, inventory and other capabilities, with the aim of rapidly developing and fielding affordable, mission-ready technologies.
• What types of facilities does Kratos operate?
  Kratos operates manufacturing, integration, laboratory and overhaul facilities supporting hypersonic systems, propulsion, microwave electronics, and engine MRO, among other areas. Recent announcements describe facilities in locations including Princess Anne, Maryland; Birmingham, Alabama; Auburn Hills, Michigan; Vancouver, British Columbia; and Jerusalem, each tailored to specific programs, products and systems.
• How does Kratos work with other defense companies?
  Kratos’ strategy includes both pursuing contracts as a prime or lead contractor and partnering with large traditional system integrators. It intends to act as prime when its assessed probability of win and required investment are within its comfort level, and to partner with larger integrators when teaming is expected to improve win probability or when investment requirements are higher.
• What is the significance of Kratos’ unmanned and hypersonic activities?
  Kratos highlights unmanned systems and hypersonics as core mission areas. Examples include the Valkyrie uncrewed aerial system, participation in collaborative combat aircraft programs, support for the MACH-TB 2.0 hypersonic test bed, development of Zeus solid rocket motors, and the Erinyes hypersonic test flyer. These activities are presented as part of Kratos’ role in providing affordable, scalable capabilities for national security customers.
• What recent acquisition activity has Kratos disclosed?
  Kratos has disclosed an Agreement and Plan of Merger under which an indirect wholly owned subsidiary would merge with Orbit Technologies Ltd., making Orbit an indirect wholly owned subsidiary of Kratos upon completion. The company has also referenced its acquisition of Southern Research Engineering, which now operates within Kratos’ Birmingham, Alabama campus.
• Where can investors find Kratos’ official financial and corporate information?
  Investors can review Kratos’ official financial and corporate information in its filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. These documents provide details on the company’s operations, risk factors, financial condition and material events.