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KH

Karman Holdings Inc. (KRMN)·Q2 2025 Earnings Summary

Executive Summary

  • Strong quarter with broad-based growth and a guidance raise: revenue $115.1M, +35% Y/Y; gross profit $47.0M; Adjusted EBITDA $35.3M; Adjusted EPS $0.10 . Funded backlog reached an all-time high $719M, providing >100% visibility to the midpoint of raised FY25 revenue guidance .
  • Beat on revenue and EPS vs S&P Global consensus; revenue $115.10M vs $104.70M consensus*, EPS $0.10 vs $0.07 consensus*. Company-reported Adjusted EBITDA $35.3M outpaced consensus $32.9M*, though S&P’s “actual” EBITDA prints lower at $29.8M due to definitional differences (see Estimates Context) .
  • Guidance raised and narrowed: FY25 revenue to $452–$458M (from $423–$433M) and Adjusted EBITDA to $138.5–$141.5M (from $132–$137M); capex outlook lifted to ~4.5% of revenue (from ~4%) .
  • Strategic/catalyst setup: record backlog, favorable U.S. defense spending (Golden Dome, hypersonics, munitions) and rising launch cadence; two tuck-in acquisitions (MTI, ISP) broaden capabilities; oversubscribed secondary increased float and completed transition to fully independent company .

What Went Well and What Went Wrong

  • What Went Well

    • Record revenue ($115.1M), gross profit ($47.0M), and Adjusted EBITDA ($35.3M) with growth across all three end markets; backlog hit $719M, up 36% Y/Y .
    • Guidance raised on strong 1H performance and acquisitions (MTI, ISP): “We now expect full year revenue of between $452,000,000 to $458,000,000 … and non GAAP adjusted EBITDA of $138,500,000 to $141,500,000” .
    • Management tone constructive on demand and capacity: “We feel quite good that we’ll stay ahead of [demand] and be ready” (capacity investments underway) .

  • What Went Wrong

    • EBITDA margin commentary implies only modest H2 expansion; public company costs and integration items remain offsets (prelim EBITDA margin 30.4–30.6%) .
    • Continued onetime/non-recurring costs (acquisition, integration, lender fees) affect GAAP-to-non-GAAP bridge .
    • Pricing power not a major lever; management prioritizes partnership over price in backlog monetization: “We would not anticipate that the strong backlog would lead directly to increased pricing strength” .

Financial Results

Headline P&L and Margins vs prior quarter and consensus

MetricQ1 2025Q2 2025 (Actual)Q2 2025 ConsensusNotes
Revenue ($M)100.1 115.1 104.7*Q/Q acceleration; Y/Y +35%
Gross Profit ($M)39.5 47.0 —
Gross Margin %39.4% “nearly 41%” —
Net Income ($M)—6.8 —
Adjusted EBITDA ($M)30.3 35.3 32.9*Company metric vs consensus; see context
Adjusted EBITDA Margin %30% 30.4–30.6% (prelim) —
Adjusted EPS ($)0.05 0.10 0.07*

Values with asterisks (*) retrieved from S&P Global.

Segments – Q2 2025

SegmentRevenue ($M)Y/Y GrowthMix
Hypersonics & Strategic Missile Defense35.0 +22% 30%
Space & Launch39.6 +39% 34%
Tactical Missiles & Integrated Defense Systems40.5 +46% 35%

KPIs and Balance Sheet

KPIQ1 2025Q2 2025
Funded Backlog ($M)636 719
Cash & Cash Equivalents ($M)113.7 (as of 3/31/25) 27.4
Term Loan B—Upsized to $375M
Revolver Availability—$20M available on $50M facility
Statutory Tax Rate24% (FY25 expectation) 24% (unchanged)
Capex (% of Revenue)~4% (FY25 plan) ~4.5% (FY25)

Non-GAAP note: Adjusted EBITDA excludes items including acquisition-related expenses ($3.8–$3.9M), integration/restructuring ($0.38M), and lender fees (~$0.2M) per Q2 preliminary reconciliation .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$423M–$433M $452M–$458M Raised
Adjusted EBITDAFY 2025$132M–$137M $138.5M–$141.5M Raised
CapexFY 2025~4% of revenue ~4.5% of revenue Raised
Statutory Tax RateFY 2025~24% ~24% Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’24, Q1’25)Current Period (Q2’25)Trend
Demand/Backlog VisibilityFY24-end backlog >$600M; book-to-bill ~1.4x; ~90%+ FY25 revenue visibility Backlog $719M; “more than 100% visibility” to midpoint of raised FY25 revenue Improving
Golden Dome & Defense FundingAnticipated multi-layer homeland defense; aligned with capabilities “Big bill” with $25B Golden Dome, $17B missiles/munitions; strategic fit reiterated Strengthening tailwind
Launch CadenceContent on “every” U.S. launch platform; increasing manifests Space & Launch +39% Y/Y to $39.6M; providers across SpaceX/ULA/Blue/Rocket Lab/Firefly cited Accelerating
Tariffs/Rare Earths ExposureMinimal impact; domestic supply chain; rare earth usage negligible Financial impact continues “immaterial” Stable/low risk
Capacity/AutomationInvestments in clean rooms, forming, EB weld (FY24); capex ~4% Advanced VTL (18-ft dia), 5-axis automation, 50% nozzle capacity expansion; capex ~4.5% Scaling up
M&A IntegrationMTI closed post-refi; capability expansion MTI and ISP integrations on schedule; accretive capabilities/customers Executing
Pricing/MarginsFY25 margin expansion tempered by public company costs Modest H2 EBITDA margin improvement; pricing collaborative with primes Gradual

Management Commentary

  • “We posted record revenue of $115,000,000 … gross profit at $47,000,000 … Adjusted EBITDA reached $35,000,000 … funded backlog reached an all time high of $719,000,000 … we are now raising our guidance for 2025 revenue and adjusted EBITDA.” — CEO .
  • “Revenue of $115,100,000 … Gross profit grew 36% to $47,000,000 … Net income rose 48% to $6,800,000 … Adjusted EBITDA … $35,300,000 … Adjusted EPS … $0.10 … End market revenue mix … 34% Space & Launch, 30% Hypersonics & SMD, 35% Tactical Missiles & IDS.” — CFO .
  • “The Golden Dome program … will drive additional demand … and its space layer will require a considerable number of space launches … we supply to nearly all space launch vehicles.” — COO .
  • “We are leaning in where we see opportunities … raising and narrowing our full year guidance … revenue of $452–$458M … Adjusted EBITDA of $138.5–$141.5M.” — CEO .

Q&A Highlights

  • Backlog and 2026 pipeline: Backlog $719M extends into 2027–2028; management emphasized execution on FY25 +32% Y/Y growth target before quantifying next year .
  • Guidance drivers: Upside from higher production rates, extensions on existing contracts, development programs transitioning toward low-rate production; rate increases are principal driver .
  • Margin trajectory: Expect H2 EBITDA margins “stronger than the first half” via efficiencies and leverage; improvements “modest” and within range .
  • Drone/UAS exposure: Content across spectrum (e.g., Switchblade, Coyote); broad activity in unmanned and counter-UAS seen as a significant growth driver .
  • Launch providers for Golden Dome space layer: Expect “multiple providers” (SpaceX, ULA, Blue Origin, Rocket Lab, Firefly); Karman is provider-agnostic with content across platforms .

Estimates Context

  • Q2 2025 vs S&P Global consensus: Revenue $115.10M vs $104.70M consensus (beat); Primary EPS $0.10 vs $0.07 consensus (beat) .
  • EBITDA comparisons: Consensus $32.9M; S&P “actual” $29.8M* differs from company-reported Adjusted EBITDA $35.3M . The delta reflects methodology/definition—company’s Adjusted EBITDA excludes ~$4.4M of acquisition/integration/lender items per reconciliation (prelim) .
  • Implication: Street models likely need to reset higher for revenue/EPS given beat-and-raise quarter; EBITDA models should reconcile to company’s Adjusted EBITDA definition when benchmarking.

Values with asterisks (*) retrieved from S&P Global.

Q2 2025 Consensus vs Reported

MetricConsensusReported
Revenue ($M)104.7*115.1
Primary EPS ($)0.07*0.10
EBITDA ($M)32.9*35.3 (Adj.) / 29.8 (S&P “actual”)*

Values with asterisks (*) retrieved from S&P Global.

Additional Q2-Period Releases and Corporate Actions

  • Preliminary Q2 results and offering announcements (8-K with Exhibits 99.1 and 99.2): Revenue $114.5–$115.0M; Gross profit $46.7–$47.0M; Net income $6.17–$6.20M; Adjusted EBITDA $34.85–$35.15M; Backlog $712–$715M; plus a secondary offering of 20M shares by selling stockholders and related lock-up provisions .
  • Balance sheet/financing actions: Refinanced facilities (Term Loan B upsized to $375M, enhanced flexibility) and oversubscribed secondary increased float (no primary shares) .

Key Takeaways for Investors

  • Beat-and-raise with robust visibility: Revenue/EPS beats and raised FY25 guide supported by record backlog and broad program exposure; execution remains the swing factor .
  • Demand tailwinds durable: Golden Dome, hypersonics, munitions restocking, and higher launch cadence underpin multi-year growth across all end markets .
  • Margin path is up but measured: Expect modest H2 EBITDA margin expansion via efficiency/leverage; public company and integration costs remain near-term offsets .
  • Portfolio breadth reduces idiosyncratic risk: Minimal tariff/rare earth exposure; diversified across >100 programs and virtually all U.S. launch platforms .
  • M&A adds capabilities and customers: MTI and ISP are accretive to capability set and cross-selling; integrations on schedule .
  • Modeling notes: Normalize to Adjusted EBITDA for comp with guide; update capex to ~4.5% of revenue; maintain 24% tax; recognize revenue rate increases as key driver .
  • Trading setup: Narrative positive with beat/raise, backlog, and secular defense/space catalysts; watch H2 margin cadence and booking momentum as next catalysts .