Jacqueline Taylor

Jacqueline Taylor asked about the reason for the slightly lower organic growth outlook for the year compared to the initial 15%-20% laid out last quarter. She also inquired about the timeline for Kratos to become more neutral or positive on free cash flow, given the current investment pipeline.

Answer

Deanna Lund, EVP and CFO, clarified that the lower organic growth outlook is a mathematical effect, as Kratos exceeded its 2025 organic growth estimate (20% vs. 14%-15% forecasted). Eric DeMarco, President and CEO, stated that operating cash flow is starting to increase and is expected to ramp in 2027 and 2028. He emphasized that Kratos prioritizes investing capital in rebuilding the defense industrial base and pursuing significant long-term opportunities, which may impact the immediate timeline for consistent positive free cash flow, but will build a stronger company.