On this page of StockholderLetter.com we present the latest annual shareholder letter from KRATOS DEFENSE & SECURITY SOLUTIONS, INC. — ticker symbol KTOS. Reading current and past KTOS letters to shareholders can bring important insights into the investment thesis.


10-K
Letter to the Stockholders
To Kratos Stakeholders,
In 2023, Kratos achieved each of the ambitious goals that we set at the beginning of the year, including organic revenue
growth of at least 10%, significantly increased EBITDA profitability and positive operating cash flow, by delivering
12.6% organic growth, adjusted EBITDA of $95.4 million and cash flow generated from operations of $65.2
million. Kratos achieved each of these financial objectives while also continuing to successfully execute our strategy
as a technology company addressing the defense, national security and global commercial markets, including by
making significant internally funded investments in potential transformational future growth areas. Additionally,
Kratos finished 2023 with a record backlog of $1.24 billion and an opportunity pipeline of $11 billion, positioning the
Company for expected 2024 revenue growth of at least 10% as reflected in our Base Case forecast.
We believe that there is currently a generational recapitalization of strategic weapon systems in process, directly related
to the global geopolitical, risk and threat environment. As a result, and irrespective of recurring U.S. Federal and
Department of Defense budget delays and continuing resolutions, we believe that Kratos is in the right place, at the
right time, with the right products at the right price points to address the U.S. and its allies    deterrence and defense
requirements with our affordable, leading technology products and software solutions. Kratos is an industry leader in
each our business areas, including: high performance jet drone systems; virtualized satellite command & control and
telemetry, tracking and control software systems; jet engines, rocket motors and propulsion systems for drones,
loitering munitions, hypersonic, supersonic and space systems; and C5ISR and microwave products for missile, radar,
air defense, counter-unmanned aircraft systems and other combat systems.
As a technology company, Kratos is in competition to obtain and retain the best talent available, including those willing
and able to obtain National Security clearances; and a critical element of Kratos    compensation and retention for top
technical, engineering, program and management personnel is our granting of performance and time-based restricted
stock units (RSUs). Kratos incentive RSUs for our key employees are and will continue to be an important part of our
internal development and organic growth-focused strategy, as is reflected by Kratos employees outstanding
performance and as our Company   s most important asset.
As we begin 2024, Kratos is recognized as the innovative disruptive change agent in the industry. At Kratos,
affordability is a technology and Kratos 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, as well as to our government and commercial customers. Kratos pursues program
and contract opportunities as the prime or lead contractor when we believe that our probability of win is high and any
investment required by Kratos is within our capital resource comfort level. We will partner or team with a large,
traditional system integrator, when our assessment of probability of win is greater working with a partner than if Kratos
were the prime, or when a required investment is beyond Kratos    comfort level. This has been a very successful
approach for our company, and one that we will continue.
I thank all of Kratos    stakeholders, and especially our employees for their commitment to our country   s security and
safety.
Sincerely,
Eric DeMarco
President & Chief Executive Officer
10-K
 • shareholder letter icon 5/7/2024 Letter Continued (Full PDF)
 • stockholder letter icon 4/14/2023 KTOS Stockholder Letter
 • stockholder letter icon More "Defense" Category Stockholder Letters
 • Benford's Law Stocks icon KTOS Benford's Law Stock Score = 84


KTOS Shareholder/Stockholder Letter Transcript:



10-K
Letter to the Stockholders

To Kratos Stakeholders,
In 2023, Kratos achieved each of the ambitious goals that we set at the beginning of the year, including organic revenue
growth of at least 10%, significantly increased EBITDA profitability and positive operating cash flow, by delivering
12.6% organic growth, adjusted EBITDA of $95.4 million and cash flow generated from operations of $65.2
million. Kratos achieved each of these financial objectives while also continuing to successfully execute our strategy
as a technology company addressing the defense, national security and global commercial markets, including by
making significant internally funded investments in potential transformational future growth areas. Additionally,
Kratos finished 2023 with a record backlog of $1.24 billion and an opportunity pipeline of $11 billion, positioning the
Company for expected 2024 revenue growth of at least 10% as reflected in our Base Case forecast.
We believe that there is currently a generational recapitalization of strategic weapon systems in process, directly related
to the global geopolitical, risk and threat environment. As a result, and irrespective of recurring U.S. Federal and
Department of Defense budget delays and continuing resolutions, we believe that Kratos is in the right place, at the
right time, with the right products at the right price points to address the U.S. and its allies    deterrence and defense
requirements with our affordable, leading technology products and software solutions. Kratos is an industry leader in
each our business areas, including: high performance jet drone systems; virtualized satellite command & control and
telemetry, tracking and control software systems; jet engines, rocket motors and propulsion systems for drones,
loitering munitions, hypersonic, supersonic and space systems; and C5ISR and microwave products for missile, radar,
air defense, counter-unmanned aircraft systems and other combat systems.
As a technology company, Kratos is in competition to obtain and retain the best talent available, including those willing
and able to obtain National Security clearances; and a critical element of Kratos    compensation and retention for top
technical, engineering, program and management personnel is our granting of performance and time-based restricted
stock units (RSUs). Kratos incentive RSUs for our key employees are and will continue to be an important part of our
internal development and organic growth-focused strategy, as is reflected by Kratos employees outstanding
performance and as our Company   s most important asset.
As we begin 2024, Kratos is recognized as the innovative disruptive change agent in the industry. At Kratos,
affordability is a technology and Kratos 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, as well as to our government and commercial customers. Kratos pursues program
and contract opportunities as the prime or lead contractor when we believe that our probability of win is high and any
investment required by Kratos is within our capital resource comfort level. We will partner or team with a large,
traditional system integrator, when our assessment of probability of win is greater working with a partner than if Kratos
were the prime, or when a required investment is beyond Kratos    comfort level. This has been a very successful
approach for our company, and one that we will continue.
I thank all of Kratos    stakeholders, and especially our employees for their commitment to our country   s security and
safety.
Sincerely,
Eric DeMarco
President & Chief Executive Officer

10-K



shareholder letter icon 5/7/2024 Letter Continued (Full PDF)
 

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