Kratos Defense & Security Solutions Earnings: Everything You Must Know Now

Kratos Defense & Security Solutions, Inc. (NASDAQ:KTOS) delivered a profit and beat Wall Street’s expectations, AND beat the revenue expectation. The revenue beat is a positive sign to shareholders seeking high growth out of the company.

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Kratos Defense & Security Solutions, Inc. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share increased to $0.06 in the quarter versus EPS of $-0.09 in the year-earlier quarter.

Revenue: Rose 17.58% to $252.8 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Kratos Defense & Security Solutions, Inc. reported adjusted EPS income of $0.06 per share. By that measure, the company beat the mean analyst estimate of $-0.09. It beat the average revenue estimate of $237.02 million.

Quoting Management: Eric DeMarco, Kratos’ President & CEO, said, “Kratos had a solid first quarter, with our Public Safety and Security business exceeding our revenue expectations, and we believe that we will see growth and EBITDA rate expansion in PSS throughout 2013, with strong demand for Kratos’ security and video surveillance system integration solutions as a result of heightened security awareness in the United States. Although the FY’13 Appropriations Bill and current Sequestration have resulted in certain Kratos work being either reduced in scope or delayed, other major Kratos supported programs, including LCS, P-8, EA-18G, Trident II D5, MALD, Patriot, THAAD, AEGIS, Iron Dome, AFSAT and Arrow, remain solidly funded. We also have a number of large DoD and international opportunities we are pursuing, including in the Cyber, Missile Defense, Electronic Warfare, Radar and ISR areas, where awards are currently expected to be made in the second half of 2013. Additionally, in the aerial drone area, we have accelerated our planned investment in certain new Kratos aircraft from our initial budget due to customer opportunities that have materialized faster than we originally anticipated, and demonstration flights will now be required in the second half of 2013. The planned IR&D, non-recurring engineering and capital spend for these aircraft of approximately $3.0 million, which was previously forecasted to be incurred throughout all of 2013, will now be substantially incurred by Kratos in our second quarter so that we can meet the required customer flight schedules in the second half of this year. Accordingly, even though we are off to a strong start for 2013, due to continued significant U.S. Federal Government Budget uncertainty, we are reaffirming our full fiscal year 2013 revenue, Adjusted EBITDA, Free Cash Flow and quarterly revenue guidance, with a slight shift between quarters in EBITDA margin rate as a result of the accelerated opportunities.”

Key Stats (on next page)…

Revenue decreased 4.1% from $263.6 million in the previous quarter. EPS increased to $0.06 in the quarter versus EPS of $-1.59 in the previous quarter.

Looking Forward: Analysts have a more negative outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has fallen from a loss of $0.04 to a loss $0.06. For the current year, the average estimate has moved down from a profit of $0.01 to a loss of $0.17 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at]