Kratos Defense & Security Solutions - Q4 2025
February 23, 2026
Transcript
Operator (participant)
Good day, everyone, and welcome to Kratos Defense & Security Solutions' Q4 and Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star one one again. Please note, this conference is being recorded. Now it's my pleasure to turn the call over to the Senior Vice President and General Counsel, Marie Mendoza. You may begin.
Marie Mendoza (Senior VP and General Counsel)
Thank you. Good afternoon, everyone. Thank you for joining us for the Kratos Defense & Security Solutions Q4 and Full Year 2025 Conference Call. With me today is Eric DeMarco, Kratos' President and Chief Executive Officer, and Deanna Lund, Kratos' Executive Vice President and Chief Financial Officer. Before we begin the substance of today's call, I'd like everyone to please take note of a safe harbor paragraph that is included at the end of today's press release.
This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements we will make this afternoon. Please keep these uncertainties and risks in mind as we discuss future strategic initiatives, potential market opportunities, operational outlook, financial guidance, and other forward-looking statements during today's call. Today's call will also include a discussion of non-GAAP financial measures, as that term is defined in Regulation G.
Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, we have provided a reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP.
Eric DeMarco (President and CEO)
Good afternoon, everyone. We finished 2025 exceeding our financial objectives for the Q4, generating approximately 20% Q4 year-over-year organic revenue growth, generating a 1.3 to 1 book-to-bill ratio on top of this 20% growth rate. Having a record backlog of $1.573 billion, a record opportunity pipeline of $13.7 billion, and with the opportunity set for Kratos having never been stronger and expected to continue to increase based on recent events. Of note, generating a 1.3 to 1 book-to-bill ratio on top of 20% organic growth, while also maintaining a record-high backlog and record-high opportunity pipeline, we believe is representative of the increasing demand for Kratos' affordable military-grade hardware and software, and that our growth trajectory is accelerating.
Kratos is positioned to achieve our previously communicated 2026 and 2027 financial targets, and similar to 2025, our Q1 will be the lowest, including as we come off another CRA and also this time a government shutdown, both of which are now resolved and we will ramp throughout the year. Since our last report, the global national security opportunity and funding environment for the industry and for Kratos has continued to improve, including, as I mentioned, both the CRA and U.S. federal government shutdown being resolved, the 2026 NDAA being signed, the fiscal 26 defense appropriations bill being signed, and the President, the Chairman of the SASC, the Chairman of the SASC, each proposing future defense budget increases of approximately 50%, up to $1.5 trillion.
Additionally, discussions have already begun on a second additional 2026 re-reconciliation bill, including a potential additional $450 billion for defense. There is a generational recapitalization of the defense industrial base underway, driven by geopolitical and related global threat environment, a recapitalization that we believe Kratos is uniquely qualified to address, with defense and national security-related budgets of the U.S. and its allies expected to increase for the foreseeable future. Crisply stated, we now have a $1 trillion annual defense spend that is expected to increase for the foreseeable future. As a result of the defense industry consolidation, which began with the infamous DoD Last Supper in 1993, there are few qualified companies with proven capabilities to address the required military-grade hardware, software, and weapon systems demand.
Kratos is one of the few non-large traditional prime contractors, which in my opinion, is qualified to adequately address this demand, with Kratos having the right products at the right time, at the right cost points now and today, and this is being reflected in our organic growth rate and our financial results. Also importantly, the Secretary of War has emphasized that he wants industry to bring to the department relevant systems now. Systems that can achieve 85% of what is needed today, not a PowerPoint of an exquisite system at maybe some days 100% potential threshold at a ridiculous high cost. As you know, pillars of Kratos' strategy since we founded our company include, "Better is the enemy of good enough and ready to field today," and, "Affordability is a technology.
both of which I believe are aligned with the Secretary's comments and clear differentiators of Kratos in today's environment. Another Kratos strategy pillar, also since our inception, is that Kratos makes true internally funded investments ahead of government funding, enabling Kratos to move fast, efficiently, and affordably for manufacturing capability and relevant products for the warfighter.
Additionally, Kratos' practice of not paying dividends or buying back our stock, but of investing our capital in the defense industrial base, is also aligned with the vision of the current administration and also the related opportunity environment, which Kratos is realizing the benefit from. Kratos' strategy of being first to market with actual relevant products is clearly a differentiator to our customers and partners, as we are seeing firsthand with the demands for Kratos' jet drones, hypersonic systems, jet engines, satellite-defined software systems, and solid rocket motors.
Having products and not PowerPoints is clearly important now more than ever, and I believe that this trend is accelerating. Engineering, manufacturing, and delivering affordable, relevant, military-grade hardware at scale that must work every time is hard, and having this capability does not occur overnight. We have been at this for a long time, and Kratos' customers and partners recognize this. The time for PowerPoints, podcasts, and science projects is over. We are out of time.
The country is moving towards wartime footing, and Kratos is ready now. For our operational update, we now have 120 Kratos Zeus and Oriole solid rocket motors on order, with deliveries of the SRMs to Kratos for system integration expected to begin in Q3 of this year, which SRMs are directly related to either under program, contract, or expected hypersonic and other launches that we plan to perform.
Related to these solid rocket motor orders, Kratos' hypersonic franchise is expected to ramp rapidly, beginning now, this year. Kratos' Zeus solid rocket motors were specifically designed by Kratos for affordable, rapid, full-rate production to enable national security customers to fly more often, faster and farther, using fewer rocket motor stages at a substantially reduced cost, and demand for Kratos' Zeus SRMs is significant.
Our newly opened Maryland hypersonic facility, our soon-to-open Indiana hypersonic system integration facility, and the expansion of our Birmingham advanced manufacturing facility for hypersonic systems, along with the solid rocket motor deliveries, are key elements of Kratos' expected near-term and future revenue growth trajectory and EBITDA increase. These new Kratos facilities are specifically designed and built for identified programs and systems and the related security requirements, with specific capabilities identified with our customers and optimized for large-scale integration and production speed, efficiency, and cost.
It was recently reported that Kratos has been selected by The Pentagon to develop highly maneuverable Mach 5-plus hypersonic missiles, including advancing in-flight steering and propulsion systems under the Joint Hypersonics Transition Office, another new hypersonic program win for Kratos. Separately, we are now hoping to receive an additional approximate $1 billion-plus hypersonic program-related opportunity by the end of this year, which we believe will be sole sourced to Kratos as prime on an existing national security initiative. We are expecting to approximately double Kratos' hypersonic franchise revenues in 2026 over 2025, up to approximately $400 million, and then potentially increase over 75% again in 2027, up to approximately $700 million.
Last week, we announced the groundbreaking for the Prometheus facility, our solid rocket motor and energetics partnership with our outstanding partner and defense technology company, Rafael, and we remain on track with the business plan I have previously briefed you on. Kratos and I personally have deep, long-term relationships with the Rafael Israel executives, including the chairman and CEO, and we are all committed to Prometheus' success and certain other initiatives we are partnering on.
Reflecting the Prometheus initiatives coordination with the Department of War, the department last week also announced the groundbreaking of a new munitions campus where Prometheus is located, and Prometheus will be the primary business presence. Kratos' space and satellite business, our company's largest, recently achieved an important milestone with the successful completion of a factory acceptance testing between Kratos' Epic command and control software system and Airbus OneSat Next generation software-defined satellite platform.
The Airbus OneSat software-defined satellite platform offers dynamic in-orbit reconfiguration capabilities, significantly increasing satellite mission capabilities and flexibility, which drive new levels of complexity for the ground command and control systems that manage them. The significance of this successful acceptance test with Airbus is that Kratos' EPIC C2 software is expected to unlock the agility of Airbus' OneSat platform, enabling operators to instantly reshape coverage and reconfigure the missions in orbit.
Kratos' OpenSpace software, C2 and TT&C system, with Airbus OneSat software-defined satellites, is representative of Kratos' technology and industry-leading position in the space and satellite domain. Kratos' space and satellite business is also representative of the dual national security and commercial use of certain Kratos products, systems, and softwares. These are not PowerPoints or convenient talking points. We actually do it.
In my opinion, Kratos' suite of internally funded and developed software-defined command and control and telemetry, tracking, and control, and other systems, both for commercial and national security spacecraft, reflect certain of the highest technology space capabilities in the world, with Kratos the clear first to market industry leader with software-defined systems and products. Similarly, Kratos' global owned and operated Space Domain Awareness system, with approximately 190 worldwide sensors and more than 20 sites, is a Kratos crown jewel and one of the most valuable, technologically advanced dual use assets of our company. Another critically important Kratos partner is global space solutions company, SES, which in my opinion, similar to Kratos, is an industry-leading satellite and space technology company.
Kratos and SES are now working together on a number of initiatives, including dual use, both commercial and national security focused. I am confident that similar to other Kratos partnerships, SES and Kratos will together be providing significant, relevant technology and industry-leading solutions, generating real, tangible value for our respective stakeholders. Key Kratos assets driving our space and satellite business, including our OpenSpace, TT&C software, C2 software, other software, and artificial intelligence, including for Kratos' Global Space Domain Awareness system, which is the only such SDA system in the world today.
I do not emphasize it often. Kratos' OpenSpace satellite and space system-focused software is the only software-defined networking solution designed so that virtually every piece of the satellite ground station can now be turned into software, accelerating the reaction time to changing satellite capabilities and space conditions. Kratos OpenSpace is one of the software jewels of our company.
As you know, the number of space and satellite opportunities globally, national security related and commercial, is rapidly increasing, and as a result, Kratos' space and satellite business opportunity pipeline is particularly robust, even after generating a Q4 and 12-month book-to-bill ratio of 1.2 to 1, and now having a record backlog of $600 million at the end of Q4. Related to the market position of Kratos' technology and first to market OpenSpace satellite software suite, Kratos has recently been informed that we have been selected for an initial approximate $500 million program award that I will hopefully be able to provide additional information on a future call.
Similar to what we typically see at most of Kratos' calendar fiscal year ends, and as we saw again at the end of 2025, certain Kratos' satellite and space customers, similar to commercial software companies, historically make software, data, and other Kratos product purchases in the October, November, and December time period, generating higher margins for our company, which we once again expect and forecast to occur in Q4 2026.
The U.S. Department of Defense has recently established a new acquisition model to expand munitions procurement and production, including delivering long-term demand signal certainty to the industry and incentivizing private investment to increase production. Related to this initiative, the U.S. Department of Defense has executed multiple up to 7-year deals, including with Lockheed Martin and Raytheon, for air defense, missile-related and other systems, including several programs that Kratos supports.
Northrop also recently announced that the Integrated Battle Command System, or IBCS, another Kratos hardware-supported program, is moving towards increased production. Kratos is an industry leader in high volume manufacturing of military-grade hardware and systems, including hardware with high altitude electromagnetic pulse protection, an important Kratos technology differentiator, and we are a go-to provider of hardware for our national security-related customers and partners.
Accordingly, we applaud the U.S. Department of Defense on these long-term production agreements and plans, which clarity provides companies like Kratos, the long-term planning visibility for investment, resource allocation, and financial forecasting confidence. In Kratos Turbine Technologies, under our engine business, there are several new low-cost cruise missile, drone, hypersonic, and loitering munition programs and systems that require next-generation, new technology, engines and propulsion systems. Here again, Kratos is first to market.
including with our Spartan family of jet engines, which are running and flying today. We continue to win important new engine-related program awards, including what we were able to report this morning, that Kratos and our partner, GE Aerospace, have now received an award from the Air Force to design an engine for the expendable Combat Collaborative Aircraft, or CCA.
I can now also report that Kratos expects to begin low rate initial production of small engines in the second half of this year for certain missile programs, and we are also currently responding to a customer-requested rough order of magnitude quote for 15,000 engines for a system that has been specifically designed around a Kratos Spartan jet engine. Directly related to the expected future quantities of low-cost missiles, drones, and powered munitions required, we are now in our new 40,000 engine per year capacity facility in Michigan.
The expected ramp in our engine and propulsion system businesses, which can generate certain of our company's highest margins, including from the financial leverage we expect to realize on certain fixed manufacturing, overhead, and other costs as the business ramps, are expected to be contributors to our expected increased overall Kratos EBITDA margins as we progress through 2026 and into 2027. We continue to execute on the new industrial gas turbine, or IGT program, I mentioned on our last call, which we are under an NDA on. There has been important information reported publicly, including on CNBC, which such program, if successful, could be a significant future catalyst opportunity for Kratos.
Since our last update call, Kratos Turbine Technologies is now under contract in the high-profile eVTOL area, under what we refer to internally as Project Pegasus, where Kratos is designing and is expected to deliver propulsion systems, including for a very well-known eVTOL company. Kratos' technology and propulsion systems in the eVTOL area is another representative example of Kratos being a provider of real dual-use products. Kratos Microwave Electronics is also expected future high growth business area for our company, including in the U.S., Israel, and elsewhere internationally, both organic and inorganic, that is also currently expected to continue to generate certain of the highest profit margins in our company. As you know, Kratos Microwave has several hundred employees in Israel, where Kratos is working with certain of the most technologically advanced companies in the world.
I recently met in Israel with my very close partners, including the CEOs of Elbit, Rafael, and Israel Aerospace Industries, each of which Kratos has been working with for decades. Simply stated, virtually every national security system globally needs military-grade microwave electronics, and we are focused on investing in and growing this business area to support our partners. Consistent with our expectations and what we communicated in our Q3 update call, we recently announced that our teammate, Northrop, received the MUX TACAIR Collaborative Combat Aircraft, or CCA, program award, with Kratos Valkyrie as the CCA aircraft equipped with Northrop's mission systems. It was also reported that MUX TACAIR was a competitive CCA solicitation that Kratos' Valkyrie won and was selected for.
As I have mentioned before, Northrop is an incredibly valuable partner of Kratos and one of the most innovative technology companies in the industry. This includes the new defense technology companies. As reported, this initial MUX TACAIR award is approximately $230 million and will be split approximately 50/50 between Kratos and Northrop, with an approximate 24-month period of performance, also consistent with our previous expectations. As a reminder, there is initial MUX TACAIR funding of approximately $275 million included in the 2025 reconciliation bill and an additional $58 million included in the 2026 appropriations bill. This is expected to be just the beginning for this program. As I have previously communicated in detail, this initial award includes the sale of a number of Valkyrie systems. This is not yet high rate production, which is expected to come next.
There has been a lot of information reported on the Marine Corps program of record on Valkyrie being the first CCA expected to be fielded. I encourage you to take a look at this data, as I believe it validates the current favorable competitive positioning of Kratos Valkyrie and the future expectations that we have for this system. Okay, importantly, we have now also successfully received another separate U.S. tactical drone program of record contract award, that we are not allowed to provide any details at this time. Additionally, I believe that we are in a sole source position for two additional tactical drone opportunities, including for Valkyrie, which we will hopefully receive in late Q4 this year.
We are also in another competitive CCA solicitation with the Valkyrie and a partner, which we also currently expect to be notified on by the end of this year or early next. As a result of our recent progress, we intend to execute a plan to increase our Valkyrie production from a current approximately 8 aircraft annually, up to a projected annual production rate of approximately 40 aircraft annually by the end of 2028. We currently expect to have definitized with our customers later this year or early next, the production quantities of Valkyrie required to be contractually delivered and the timing of these deliveries, which in part will be related to the 2027 federal budget defense appropriation and when it is approved.
At a planned production rate of approximately 40 Valkyries annually, we believe that we will be well-positioned to address expected current underprogram, customer-required delivery schedules once definitized, while also maintaining an adequate number of white tail aircraft in inventory to be able to continue to address RDT&E, S&T, and potential new customer requirements. We will continue to include in Kratos' base case financial forecasts, as we provided today, only the RDT&E and S&T Valkyrie sales quantity levels, until we have definitized production, funding, and delivery schedules, so that we can accurately forecast expected larger quantities by fiscal quarter and fiscal year. In summary, the Marines are expected to field the first CCA. We will not let them down, and we will keep you informed with the progress to the extent we are able to discuss.
Kratos recently received a Gauntlet award under the Department of War's $1 billion Drone Dominance Program to acquire small lethal drones over the next 2 years. We have a family of small drones in this class that we have not discussed previously. This is a Phase 1 award. This program is scheduled to move very rapidly, if we continue to be successful in future phases, Drone Dominance Program could be another meaningful program to our company. Kratos' Mighty Hornet Tactical Firejet CCA program initiative continues to progress with the Taiwan NCSIST.
We have certain future flight-related milestones we need to achieve with the potential production decision possible late this year or early next. As was recently reported, with the Taiwan NCSIST, the ultimate objective of this program is for very high quantities of affordable mass fleet of Mighty Hornet IV systems to be deployed in Taiwan.
Kratos' Athena program and UAS has had additional successful flights under contract with the U.S. customer. As I believe you can see, the tactical drone opportunity is happening real time for Kratos, that this is occurring as a result of the threat, and that the customers believe that they are out of time and that they need to field relevant systems now. Kratos' Anaconda Radar, Helios Hypersonic, system-related Arc Jet, Prometheus Solid Rocket Motor and Energetics, BladeWorks Jet Engine, and our new Poseidon program facility are all expected to be coming online over the next 24 months, contributing to the expected future growth, margin, and value increases for the business.
New initiatives that Kratos is currently either pursuing or assessing, that I can mention, include Kraken and Aries, both in the hypersonic area, Vulcan in the rocket system area, and Elysium, which is the largest, and for competitive reasons, I will not get into it this time. Each of these, if successful, have either customer or partner backing. Kratos' business plan remains unchanged, including that we do not buy back stock or pay dividends, but rather we invest our capital in rebuilding our country's defense industrial base, rapidly developing, producing, and delivering affordable, relevant systems to the war fighter and generating a financial return for our investors.
As Deanna will discuss, we have closed on a small tuck-in acquisition, Nomad Global Communication Solutions, a technology, hardware, and systems company focused on mobile command, control, and communication systems, including as related to unmanned systems, counter UAS, homeland security, and some other systems. Nomad was a negotiated transaction between Kratos and the Nomad owners, consistent with the type of opportunities Kratos continues to be approached with. We continue to expect the previously announced acquisition of Israeli-based satellite communications company, Orbit Technologies, which forecasted financial performance is not included in the guidance we provided today, to close by the end of Q1. Once Orbit closes, we will include them in our forecasting. Deanna?
Deanna Lund (EVP and CFO)
Thank you, Eric. Good afternoon. As we have included a detailed summary of the Q4 and full year 2025 financial performance, as well as the initial Q1 and full year 2026 financial guidance in the press release we published earlier today, I will focus on the highlights in my remarks today. Revenues for the Q4 were $345.1 million, above our estimated range of $320 million-$330 million, with overachievement of forecasted revenues across the majority of our businesses, with a revenue organic growth rate of 20% over the Q4 of 2024, as compared to our estimated organic growth rate of 14%-15%. The largest contributors to the overachievement were our space and satellite, turbine technologies, C5ISR, and microwave products businesses.
Notable year-over-year organic revenue growth was reported in our Defense Rocket Support, Microwave Products, and Space Training and Cyber businesses, with organic revenue growth rates of 47.4%, 32.4%, and 22.7% respectively. Adjusted EBITDA for the Q4 of 2025 was $34.1 million, just above the high end of our estimated range of $29 million-$34 million, reflecting the increased volume and revenue mix, offset partially by continued increased subcontractor and material costs on certain multi-year fixed price contracts in our Unmanned Systems business, revenue mix, and elevated bid proposal and other new opportunity pursuit costs. Unmanned Systems' Q4 2025 revenue was up $7.4 million, or 12.1% organically, with the increase primarily driven by Valkyrie-related activity.
KGS Q4 2025 revenue was up $54.6 million year-over-year from the Q4 of 2024, with organic revenue growth of 22.2%, excluding the impact of the February 2025 acquisition of certain assets of Norden Millimeter, Inc. Q4 2025 cash flow generated by operations was $12.1 million, primarily reflecting the working capital requirements related to the revenue growth impacting our receivables by approximately $29 million and increases in inventory of $20 million, and increases in other assets of approximately $3 million, primarily reflecting investments we are continuing to make related to certain development initiatives in our Unmanned Systems business.
Free cash flow used in operations for the Q4 of 2025 was $100,000, after reflecting funding of $24.2 million of capital expenditures, net of $12 million in proceeds from the sale of Valkyries, which were reported as company-owned capital assets and previously classified as capital expenditures, and therefore reflected as an inflow in investing activities when sold. As we planned, we are continuing to make investments to expand and build out certain of our manufacturing and production facilities in our microwave products, rocket systems, hypersonic, and jet engine businesses to meet existing and anticipated customer orders and requirements, and investing in related new machinery, equipment, and systems.
Consolidated DSOs, or Days Sales Outstanding, increased from 111 days in the Q3 to 121 days, reflecting the nearly 22% revenue growth and the timing of milestone billings and contractual funding. The impact of the federal government shutdown and its impact on government program, administrative, and other offices and functions was more significant than we had anticipated, which has resulted in the delay in timing of certain contract funding and certain expected government contract receivable payment dates to be delayed, resulting in an increase in customer accounts receivable Days Sales Outstanding. Our contract mix for the Q4 of 2025 was 70% of revenues from fixed price contracts, 26% from cost type contracts, and 4% from time and material contracts.
Revenues generated from contracts with the U.S. federal government during the Q4 were approximately 67%, including revenues generated from contracts with the DOD and non-DOD federal government agencies and FMS contracts. Moving on to financial guidance. Our financial guidance we provided today includes our expectations and assumptions for our supply chains execution, the impact of employee sourcing, hiring, retention, and the related cost. Our Q1 and full year 2026 guidance includes the estimated contribution from the recently closed Nomad Global Communication Solutions acquisition from the date of acquisition, which closed in mid-February. As Eric mentioned earlier, we have not included the estimated impact of the pending Orbit Technologies acquisition in our guidance and will not do so until it is closed.
We expect our Q1 2026 guidance to be the lowest in revenue and adjusted EBITDA, which includes the impact of the extended U.S. federal government shutdown in the Q4 of 2025, with impacts to certain contract awards, program and funding. Our Q1 revenue guidance of $335 million-$345 million reflects estimated organic growth of 7.5%-9.5% as compared to the Q1 of 2025. Our adjusted EBITDA guidance of $25 million-$30 million reflects the estimated revenue mix and less leverage on elevated administrative manufacturing overhead and bid and proposal costs that we have ramped in the business to support the forecasted full year 2026 growth.
Our full year 2026 revenue guidance is $1.59 billion-$1.675 billion, which reflects an organic growth rate of 12.7%-18.5% over 2025 actual performance, which came in higher than our previous full year 2025 estimate. Our guidance continues to include the impact of increased material and subcontractor costs on our multi-year fixed price contracts, specifically in our Unmanned Systems Target Drone business, where we have experienced cost growth from certain ancillary materials on our targets and for which we are unable to seek recovery from the customer until the renewal of future production lot contracts occurs. We are continuing to aggressively manage costs where we can to minimize the impact to our margins.
Our operating cash flow guidance includes the continued use of working capital to fund our organic revenue growth, which includes the increase in accounts receivable and the impact of delays in contract funding to enable customer billings and collections, and increases in inventory and related prepaid asset balances as we ramp production and procure long lead materials for our target and tactical drones, solid rocket motors, and our turbofan and turbojet engines. Kratos's operating cash flow guidance also assumes certain investments in our rocket systems and unmanned systems businesses related to the procurement of rocket and related systems, and our plan to begin producing approximately 40 Valkyries annually, beginning by the end of 2027, as well as the completion of certain of our unmanned systems and related derivatives and vehicles.
Additional forecasted investments in 2026 include our funding of the Prometheus joint venture established last year, which we estimate will be ratably throughout 2026, or an aggregate for the year of approximately $50 million. Funding of the pending Orbit Communication Systems acquisition, our Project Anaconda radar program, our Project Helios Hypersonic and Arc Jet program, our Indiana Payload Integration Facility, our GEK and BladeWorks engine facilities, and our Vulcan, Kraken, Elysium, Nemesis, Hermes, and other initiatives. Our forecasted capital expenditures of $135 million-$145 million for 2026 includes approximately $30 million-$35 million, which was originally forecasted for 2025, which has moved to the right.
Eric DeMarco (President and CEO)
Great. Thank you, Deanna. We'll turn it over to the moderator now for questions.
Operator (participant)
Thank you so much. As a reminder to ask a question, simply press star one one on your telephone and wait for your name to be announced. To remove yourself, press star one one again. One moment while we compile the Q&A roster. Our first question comes from the line of Josh Sullivan with JonesTrading. Please proceed.
Josh Sullivan (Managing Director of Equity Research)
Evening, Eric, Deanna.
Deanna Lund (EVP and CFO)
Hey, Josh.
Eric DeMarco (President and CEO)
Good afternoon.
Josh Sullivan (Managing Director of Equity Research)
If, if I could just start off with a question on maybe some of your perspectives on defense tech valuations in the market? You know, reports of Anduril reportedly at $60 billion for $8 billion in funding. What do you think that means for Kratos? What would an order of magnitude of nearly $8 billion allow Kratos to accelerate? You know, you just mentioned a number of programs and wins you're working on, and then tied in with, you know, the secretary's comments you also mentioned.
Eric DeMarco (President and CEO)
Okay. I, I believe that Kratos is the most valuable defense company in the industry, private or public. I'm taking nothing away from Anduril or any of the other defense tech companies. I want them to all succeed for U.S. national security. We're the most valuable, and I can go through that if you, if you'd like me to. On the second part of your, your question, we all have different strategies and, and business plans. Our, our business plan is to, is to be balanced as best we can, drive organic growth like we're doing, invest significant amounts to rebuild the industrial base like we're doing, but always be mindful of generating an adequate return on investment for the investors. So that's how I see it, Josh.
Josh Sullivan (Managing Director of Equity Research)
Got it. Then I guess just on Kratos' partnership with Boom and the Superpower IGT. You know, I know there's an order from Crusoe for 29 units and tie-ins with OpenAI, but what can you say about other customers and backlogs at this point since you've announced?
Eric DeMarco (President and CEO)
Right. Yeah, thank you for the question. As I mentioned, take a look at the. There was an interview on CNBC by the CEO of Boom, Blake Scholl, where he walked through the opportunity that we have here. Now, to your question, Josh, when, when Kratos acquired Florida Turbine, in 2019, the primary business of Florida Turbine was industrial gas turbines. That's our expertise, Kratos's. We have not been focused on it and talking about it because we've put our engineering team on low-cost engines for cruise missiles and drones. The market has definitely come our way now on the industrial gas turbine area, and we are, we are moving out on this aggressively.
Our number one priority is to do it with, with our, our partner, but this is an area of expertise for us, and we, we have a lo-- we are a merchant supplier, and there are multiple companies in this area that are coming to us now for our assistance.
Josh Sullivan (Managing Director of Equity Research)
Just one last one on, on the THAAD order you mentioned. Can you just remind us of Kratos' exposure on the ground and infrastructure equipment?
Eric DeMarco (President and CEO)
Yeah. As, as I alluded to in the remarks, the U.S. Department of Defense moving out with, with the big primes on the air defense systems and the missile systems, Lockheed Martin and, and, and Raytheon, multiple platforms on each one of them. I mentioned, I mentioned Northrop Grumman looking to. I think they said they're gonna go up 4x on their Integrated Battle Command System platform. Kratos is the merchant supplier to each one of those guys and many others for the ground infrastructure, for radars, command and control systems, battle command systems, et cetera, et cetera, for virtually every missile and radar system. This, this is, this is significant for, for Kratos, for our business, and for our clarity going forward.
These long-term, I'll call them supplier commitment agreements, the Department of War is doing with the prime, because we're partnered with, with the primes on, as you said, THAAD and Patriot and Indirect Fires, IFPC, on Integrated Battle Command System, on SHORAD. I could go on and on. This is important for us, what is happening here.
Josh Sullivan (Managing Director of Equity Research)
Great. Thank you for the time.
Eric DeMarco (President and CEO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Michael Ciarmoli with Truist Securities. Please proceed.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Hey, Eric, Deanna, good evening. Nice results, thanks for all of this detail, especially the CapEx bridge. Eric, at, or Deanna, is this the, the CapEx peak, do you think, or are we just getting started here? I mean, are you comfortable with the balance sheet? I think post-Orbit, you'll have roughly $200 million in cash. You know, I, I think obviously spending your own money, not doing buybacks or dividends, clearly aligned, but have you, have you talked or engaged with the Department of War or even Office of Strategic Capital? I mean, there's been some pretty creative transactions out there. Just curious on the terms of color there.
Deanna Lund (EVP and CFO)
Yeah, Mike, thanks for the, the question. The CapEx table that we've included in the press release is on the growth side, so it does not include potential government, whether it be federal or state funding, that, that we may receive, that, that we are working on a parallel path. We've, we've tried to present what, what we think are, is the worst case for, for 2027.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Okay. Got it.
Eric DeMarco (President and CEO)
Yeah, and.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
You can
Eric DeMarco (President and CEO)
Yeah, and, and Mike, a data point on that, take, take a look. Anduril announced yesterday or the day before, they just received another $40 or $45 million in Title III funding. Kratos is right in the middle of that on Title III funding, on IBAS funding, et cetera. As Deanna said, we're throwing the gross number out there, but, I, I believe you'll see a significant number of offsets this year.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Okay. That's good to know. Eric, this one might be a tough one, but of all these initiatives and these CapEx projects, I mean, what, in your view, offers the most potential for revenue growth, EBITDA generation? I don't know, I don't know if it's easy to maybe tie it to the $13.7 billion pipeline you talked about. Anything jumping off the page there?
Eric DeMarco (President and CEO)
Yep. The hypersonic franchise, Mike. I was, obviously, I was in Indiana this week. I was at Crane for the groundbreaking of Prometheus. Right next to, right next to where we were breaking ground is Kratos' Hypersonic Integration Facility that's 90% complete. All right? Okay. Right, right next to that, we've broken ground on Anaconda, and behind it, we're gonna break ground on Helios. Our hypersonic franchise, the programs we have, the additional funding we expect to get, and the demand to test, fly, test, fly, is so significant, and in our base case, this will drive our growth trajectory and our profitability for the foreseeable future.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Okay. Okay, that's helpful. That, that $700 million line of sight you talked to, I mean, it sounds like there could be upside to that based on.
Eric DeMarco (President and CEO)
Absolutely.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Breaking ground, additional-
Eric DeMarco (President and CEO)
Ab-
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Okay.
Eric DeMarco (President and CEO)
Absolutely.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Okay.
Eric DeMarco (President and CEO)
No question. If we were to get a 2027 appropriations bill, kind of, sort of on time, instead of a 4-month continuing resolution, that would be a home run for Kratos.
Michael Ciarmoli (Managing Director of Aerospace and Defense Equity Research)
Got it. Okay. good stuff. I'll, I'll get out of the way here. I've got... There's a lot of detail there that you've given, but, thanks for the call, guys.
Eric DeMarco (President and CEO)
Thank you.
Deanna Lund (EVP and CFO)
Thanks, Mike.
Operator (participant)
Our next question comes from the line of Anthony Valentini with Goldman Sachs. Please proceed.
Anthony Valentini (VP)
Hey, guys, thanks for the question. Eric, I, I just wanna talk on the Marine Corps program for Valkyrie. Can you just give us a little bit of color? I thought it was a little bit surprising that you guys aren't the prime and Northrop is. Can you just talk a little bit why that's the case?
Eric DeMarco (President and CEO)
Absolutely. We are in it to win it, if that means being the prime, like we are on some of the other ones I mentioned, we're going to do that. I mentioned that we've won another CCA program, type program, where we can be the prime. Where it makes more sense for us to be the sub, we will be the sub. Northrop Grumman has certain mission systems that are fantastic, they have been working on these and investing in these, specifically related to the Valkyrie, for a long, long time, they expect to continue to do that going forward. We have a strategy here with Northrop, relative to the Valkyrie, that goes far beyond the Marine Corps.
Very candidly, I believe our probability of win, of winning at all, is much higher with Northrop as the prime than if Kratos was the prime. Additionally, it reduces risk to Kratos on the integration of, of those, those very exquisite and capability, but not necessarily in cost, mission systems that Northrop is putting on. It's a risk reduction for Kratos, and we are getting a full stop profit margin on the aircraft. Last point, I'm really glad you asked this. Last point, we are kind of, sort of turning into the merchant supplier of tactical jet drones, because we're the only guy that has anything flying right now. You've got, you've got some of these new guys that have done a few flights. Ours have been flying since 2019, 2015 on the Mako.
Since we're the only guy, the mission system companies are coming to us, and if the mission system guys want to be prime, and that means we can sell more airplanes faster, that's what we're gonna do.
Anthony Valentini (VP)
Okay, that makes sense. Eric, I think that you had talked about in the past, it being $10 million a copy. Is that the right way for us to continue to think about it with Northrop as the prime and 50/50, you know, split of the revenue, so you guys are $5 million of content per aircraft?
Eric DeMarco (President and CEO)
No, no. Don't, don't look at it that way. Nope, nope. Look at $10 million per aircraft for Kratos. Okay. Might be a little less, might be a little more, depending on the configuration. As you know, we have, we have 3 different Valkyries now, that are 3 different ones, rail-launched, trolley-launched, conventional takeoff and landing. Depending on the type of aircraft, it might move around a bit, but if you use 10, you're in good shape for Kratos.
Anthony Valentini (VP)
Okay. Okay, that's incredibly helpful. Then the last one for me, Eric, like, you've outlined a ton of different opportunities here. Like, hypersonics alone, I think, is 10% growth. I recognize that you don't have the, the scaled production of Valkyrie and the numbers yet, but is there anything significant that we should know about that's rolling off over the next couple of years? It seems to me like the growth that you're outlining is pretty, you know, pretty large, maybe above the 20% that you're talking about.
Eric DeMarco (President and CEO)
There is nothing of significance rolling off. We have 0 recompetes of any size for the foreseeable future. We won the last one last year, C2 and space segment, for 7+ years. We, we are in a very fortunate position because we're a hardware company and an intellectual property company.
Anthony Valentini (VP)
Okay, great. Thank you, Eric.
Eric DeMarco (President and CEO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Mike Crawford with B. Riley Securities. Please proceed.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
Thank you. I hope you're doing well in that Gauntlet competition that started 5 days ago. Can you just talk a little bit more about what you offer with small drones, and if you have any capabilities in the counter-UAS area?
Eric DeMarco (President and CEO)
I'm sorry, Mike. We have a family of small drones, Class one drones, some Class two drones that we just haven't been talking about, that we have primarily been working with the United States Army on for multiple, multiple years. Very candidly, you have not heard me talk about this one, because I was not sure we were gonna be successful in the first round. We were. The way this works, in summary, is there are different phases, phase one, phase two, phase three, et cetera. The winners of the initial phase, which we are, we can pick our spot when we want to bring our suite of airplanes in, our drones in, based on the requirement of the phase.
I don't want to get ahead of myself, but we, we feel pretty good about this, especially as the phases progress. As they progress, they are more in line with our differentiating capabilities. That's, that's really all I should say about it because it's literally in. As you said, we're gonna be going out there very, very soon, if we continue with phase one.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
These would be more offensive.
Eric DeMarco (President and CEO)
Yes.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
-drones?
Eric DeMarco (President and CEO)
Yes.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
You're not involved in the counter-UAS phase of that competition?
Eric DeMarco (President and CEO)
I, I've been focused on the offensive one, Mike, we're, we're focused on relative to the Drone Dominance program, we are, we are focused on the offensive one. We are involved in several other counter-UAS programs, where we are building hardware, and we have initiatives where Kratos has tethered drones, not the fiber optic ones, not the first-person view fiber optic, but tethered drones that are involved in C-UAS capabilities.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
Okay. Thank you. Just one more for me. Can you just go a little bit into the capabilities that you've gained with Nomad and maybe potential LCM revenue that that business had?
Eric DeMarco (President and CEO)
Yeah, on the, on the business side, this, in my opinion, this is, this is one of Kratos' 1 plus 1 equals 4s. They do mobile systems, as we know from recent conflicts, if you're static, you're dead. There are a significant number of programs coming, many, a number of which Nomad is one, many more which we intend for them to win with us, for mobile command and control systems, mobile counter UAS systems, mobile systems to control offensive UAVs, and this one I'm gonna be careful on, mobile systems relative to missiles. That is the business objective we saw for, for Nomad. I'll let Deanna comment on the financial piece.
Deanna Lund (EVP and CFO)
Yeah, LTM fiscal year revenue is about $75 million, Mike.
Mike Crawford (Senior Managing Director and Head of the Discovery Group)
Okay, excellent. Thank you very much.
Operator (participant)
Thank you. Our next question comes from the line of Jonathan Siegmann with Stifel. Please proceed.
Brock Cannon (Equity Research Associate)
Hey, guys, this is Brock on for John tonight. Appreciate the question. You touched on it earlier, but you recently announced the successful test of the Mighty Hornet system. I just wanted to know if you had any more details around your timing there and planning capacity in Taiwan for this project, and then how you're gonna be recognizing revenue for the program?
Eric DeMarco (President and CEO)
I'll leave that, that last part for Deanna. On the, on the first part, let me be just very, very crisp on this. We have flight demonstrations that we're preparing for, where we have to do something. Our understanding is that if we are successful there, we have done something like this before, so this is not a bleeding-edge type of a thing, that a production decision will be made in the second half of this year, Q4. I believe the Taiwan agency that we're working with, they did an interview, I think, at the Singapore Airshow a few weeks ago, I think, where I saw this, where they have said that they are looking for hundreds, if not thousands, of these, and to be deployed ASAP as a deterrence.
That, that is the extent of what I can discuss with you right now. I'd like to emphasize the reason why I, why, why we're, why we've won where we are. We are where we are, is because our Tactical Firejet and our Air Wolf small tactical jet drones have been flying for a long time. They are both in production. The customer comes to the factory, they can see them in production, they can actually see the cost build up, so they know what they're gonna cost, and we can give them actual flight performance data. We're seeing this more and more now. As I mentioned in my, my remarks, many customers feel that they're out of time, and they need to start fielding things now in order to defer, to deter, and that's where we are on Mighty Hornet.
Deanna Lund (EVP and CFO)
As far as your question on revenue recognition, that will depend on the contractual terms that are negotiated. Clearly, on the services, on the demonstrations, that's gonna be as performed. For aircraft, it's gonna depend on the contractual terms of whether it would be percentage completion or at delivery. It will, it will, it will be dependent on that.
Brock Cannon (Equity Research Associate)
Okay, great. Thanks for the call, guys. I'll go ahead and hand it back over.
Operator (participant)
Thank you. Our next question comes from the line of Ken Herbert with RBC Capital Markets. Please proceed.
Ken Herbert (Managing Director)
Yeah, hi, good afternoon, Eric and Deanna. Hey, Eric, you, you talked about the funding backdrop and, and the supplemental, the $450 billion, that, that sounds like will, will get requested and, and debated here this spring. How do we think about your top-line organic growth numbers you've put out, maybe if, if, if we are in a, a $1.5 trillion potential for fiscal 2027, relative to a sort of a, you know, maybe low to mid-single-digit growth in, in defense spending all in? I mean, it sounds like you're gonna hit your numbers even if defense spending comes in at slight growth relative to fiscal 2026 and 2027. How do you think the puts and takes and the budget impact your outlook here in the next 1 to 2 years?
Eric DeMarco (President and CEO)
Yeah. What you just said at the end there is exactly correct. We are putting aside assume a normal growth trajectory for our defense budget, so let's say 5% a year. We are in great shape to achieve, if not exceed, our forecast for 26 and 27, with it potentially accelerating in 28 and 29. This is what current funding, normal growth. Why is that? Within that funding, money is moving from previous priorities to new priorities. Kratos, we are very fortunate that we are extremely well-positioned with contracts in programs in certain of the highest priority areas there are, and those are gonna be, as I mentioned before, number one, is gonna be the hypersonic area. That is gonna be a significant growth driver for us. Number two, this is, this is very recent, our space and satellite business.
As I mentioned, we were just informed that we have won a brand-new, just under $500 million program. Hopefully, we're gonna be able to talk more about that going forward, but we were just informed verbally that we, we, we received that, so our, our, our space, our space business. Number 3, that's gonna be kicking in later this year, and I expect it to accelerate in 2027 and seriously in 2028, is the small engines. We are designed in on a number of, of, of new cruise missiles. I can go through those. I, I know you guys know who they are. I expect us to go on LRIP later this year, and we could get into full rate production as early as 2027. We are in really, really good shape under the current funding construct.
the budgets go from $1 trillion to $1.5 trillion. I believe if the priorities don't, don't change, I don't believe they will, because the threat environment is not gonna change, in my opinion. That is going to be very good for us, and I could see it meaning that our numbers could, could actually go up from where they are, just because there's gonna be more, more demand than supply of stuff.
Ken Herbert (Managing Director)
That's helpful. Is it fair to say you've seen an acceleration maybe in the pace of contracting activity? I mean, obviously, we had a shutdown in the calendar Q4. We've got a new administration that's, you know, had some natural transitions and, and bureaucratic delays and, and other issues. But it sounds like now, at least as we've flipped the calendar, we're seeing an uptick in contract activity. I'm curious if you're seeing that in your business and if you expect it to continue to accelerate as we go through the calendar year.
Eric DeMarco (President and CEO)
Yeah. Very recently, in the past 3 weeks, 4 weeks, we've seen an acceleration. Okay. I, I, I believe it's because, you know, a month ago or so, the 2026 appropriation was signed. I, I think, I think that's what's driving the acceleration, that we're seeing it. We are starting to see, starting to see some of the reconciliation money come in. I think there's $120 of the $150 billion is gonna be spent in fiscal 2026. We're starting to see that come in. I anticipate that's gonna be accelerating this quarter, Q1 and Q2. overall, right now, Ken, the, the environment is, is very good, and it's improving for us, and I believe for the industry.
Ken Herbert (Managing Director)
Great. Thanks, Eric.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Thank you. Our next question is from Colin Canfield with Cantor. Please proceed.
Colin Canfield (Director)
Hey, thank you for the question. Maybe if you could talk about the sensitivity of the tactical drone production quantities that you've discussed, and essentially, how do we think about kind of the 40 units per year versus the other branch opportunities that you're considering?
Eric DeMarco (President and CEO)
Right. So, as I mentioned, we're looking at approximately, to get to a run rate, production rate, an annual production rate of approximately 40 per year. Think 35 to 45, and so the midpoint was the 40. The number one driver on that is the mix of airplanes. So whether it's going to be a conventional takeoff and landing, a CTOL, whether it's gonna be a, a dual capability, so runway and rail launch, or if it's gonna be rail launched. So that's the number one that's gonna drive that. Number two is this: it's under the program we have, and I can't get ahead of the customer, and I never will. We have a very good idea of what that demand is going to look like beginning next year.
As you know, I've been trying to communicate to you that we have some other potential customers that I think we're gonna get, specifically for the Valkyrie. We're gonna get better clarity on that between now and the end of this year. Those two factors, mix and the clarity we're gonna get on some of these other opportunities on types of planes and quantities, that's gonna drive where we ultimately end up on, on our annual run rate. Oh, and I, and I wanna mention, one of the key—the third key factor is the engine. The long lead on that is about 14 months, and so we have to be, we have to be cognizant on the engine buy and when the deliveries are relative to when the integration process can occur with the aircraft.
Colin Canfield (Director)
Got it. So sounds like the 40 is perhaps, you know, 2 CCA programs and then expansion beyond that, if you win it, is, is perhaps the third and fourth CCA programs.
Eric DeMarco (President and CEO)
Nope.
Colin Canfield (Director)
Um-
Eric DeMarco (President and CEO)
No.
Colin Canfield (Director)
No.
Eric DeMarco (President and CEO)
No, no, don't characterize it that way. Look at it as, look at it as one, plus we're gonna continue to have, I, I, I call demonstration airplanes, so science and technology and RDT&E, that are gonna be sold every year, I think four or five, like we, like I think we have in our plan for this year. Then on top of that, I wanna have a number, think of a handful, we might not be able to get there, a handful of white tails sitting there, because this has been part of the keys to our kingdom. Think, think about it with, with Airbus and the Luftwaffe. We had airplanes in inventory they could come over and check out, and we delivered them. So those are flex factors also, but think one program.
If we have additional programs with quantities, we may have to take that number up if we're gonna hit deliveries in 2028 and 2029.
Colin Canfield (Director)
Got it. Got it. Thank you for the color.
Eric DeMarco (President and CEO)
Yeah.
Colin Canfield (Director)
Perhaps one follow-up, now that we have that kind of construct in place, how do you think about kind of the sensitivity of cash investment versus that production schedule, and then relative to the, we'll call it the timing of the risk events that you alluded to earlier on the call, in terms of kind of customer feedback, that their time has run out, and the probability of that occurring perhaps this year versus next year?
Eric DeMarco (President and CEO)
Right. On the first one, we are very sensitive and cognizant of cash. Let me give you a specific example. Earlier in the Q&A, I think Josh asked, "What happens if you guys were private and raised $8 billion?" Okay. You know, we have a balanced approach, and we're gonna stay balanced. We're gonna organically grow the company, we're gonna satisfy the customer, and we're gonna generate a return, a profit for the investors. If we didn't have to worry about the profit part for a few years and we had $2 billion. Kratos could absolutely run the table in many of these drone areas because we don't have to develop anything. We got the airplanes.
We'd go into production, the customers would buy them. We have to be cognizant of cash, like you said. We are very cognizant of the cash and the investing. We are mapping that into the customer funding profiles that we have, okay? On something like an engine, there are deposits required. We're gonna have to make deposits and things like that, so that's gonna be cash out. I mentioned the timing of the appropriation, like the 2027 appropriation, God willing, it happens on October 1st. It probably won't. That can impact the cash until the appropriation comes through, the customer gets the money, and they can pay us.
I'm saying a lot, but we have, we have a major simultaneous equation that we're, that we're always managing to make sure that we satisfy the contractual requirements, and we don't get too far ahead of ourselves on the capital side. Does that kind of answer it?
Colin Canfield (Director)
Great. No, thank you. I appreciate it.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Thank you. Our next question comes from the line of Peter Arment with Baird. Please proceed.
Peter Arment (Senior Research Analyst)
Yeah, good afternoon, Eric and Deanna. Eric, nice results, as always. Hey, thanks. On the Spartan jet engine opportunity, Eric, what's the best way to kinda frame up when things could start to move into kind of production and scale things up there?
Eric DeMarco (President and CEO)
Yep. use, use $40,000 or $50,000 an engine, okay? Somewhere in there per, per engine. We have, we have been informed by 2 customers. These are customers. We're designed in, it's our engine, that platform has been designed around. It might be 3, 2 or 3, that they intend on us beginning to go into LRIP in the second half of this year. Think hundreds of airplanes, hundreds of engines, pardon me, that we start to build, with the, with deliveries beginning in, in 2028. All right? If, if things work out the way I think they're going to work out, and again, go back to the 2027 appropriation and timing, second half of 2028, we could see, like, a step function.
You know, where we're we're delivering hundreds of engines, and we're getting to ready to build thousands of engines to deliver in 2029. It's, it's coming. You know, one I can Peter, one I can mention to you that's out there, that it's public, that we're the engine on, if you pull it up. You may have seen what happened with the Powered JDAM in, in the maritime strike version with Boeing. In the last 2 weeks, it was given a new designation. I believe it's called PJDAM-XR, and they talked about some of the things I'm talking to you about here. All right? We're, we're also, I think it's public, it's publicly out there, that we are on a number, I think, 3 of Lockheed Martin's low-cost, cruise missiles.
We are— I think it's out there. I think I can say we're on one of Northrop Grumman's, and we are on at least a handful, I don't know the number off the top of my head, of these new defense technology guys that have won ETV, Franklin, and MACE. There, there, there, there, there's a lot of them out there that are, are, are coming, and that's the how I see it playing out over the next couple of years.
Peter Arment (Senior Research Analyst)
Yeah, that's, that's great color, Eric. Just one last one on, you know, you've, you've given us a lot of details on the growth opportunities. Outside of hypersonics this year, what, what is kind of the next one or two that you would highlight as the next main growth drivers for you in 2026?
Eric DeMarco (President and CEO)
Number one is, and I, I haven't talked about this a lot, it's our microwave electronics business. You know, I, I, I, I mentioned I was in Israel very recently. I was with Israeli—on the microwave thing specifically, I was with Israel Aerospace Industries, and I was with Rafael. We, we are on virtually every one of both of those guys' missile systems and radars. This is Iron Dome, this is Arrow, this is SPYDER, this is David's Sling, this is Barak. I can go on and on. We are—we, we do microwave electronics for, for both of those. Our U.S. microwave business, I don't talk about it a lot. It's proprietary. We, we have recently received a production award on a very large, well-known missile program. I'm under an NDA with the prime. I can't talk about it.
We're on that one. Our microwave business is ripping, and as I said in the prepared remarks, virtually every system globally, whether it be a missile, a radar, an air defense, a drone, et cetera, it needs microwave electronics. We are all over it. We are designed in, and we're getting designed in more. here's the third, here's the third one, our space and satellite business, and in particular, on the national security side. It is amazing what is happening. I mentioned the win we were informed of very recently. Virtually everything we're bidding on, we're winning. It's because we have a software-defined command and control and telemetry tracking and control system that can interface with these new constellations that are going up, including very recently, LEO. That's where the game is at.
Our, our space business is looking great in the second half of this year, when we start delivering a bunch of this, the software-defined products. Then in 2028, I think our space business is gonna knock it out of the park. Those are the three, hypersonics, microwave, electronics, engines, and space. Those are the four.
Peter Arment (Senior Research Analyst)
Got it. Thanks, Eric. Thanks, Deanna.
Deanna Lund (EVP and CFO)
Thanks, Peter.
Operator (participant)
Thank you. Our next question comes from the line of Seth Seifman with JPMorgan. Please proceed.
Seth Seifman (Executive Director)
Hey, thanks very much, and good, good afternoon, and good results. Just wanted to ask, in the-- just understanding in, in the Q4, I think the, you know, the release talks about Valkyrie being a driver of growth, and we saw some good profitability in, in the unmanned segment in, in the Q4. How did Valkyrie play into that? Then kind of, what does that mean for, for Valkyrie in 2026? I, I know you mentioned you weren't including production yet, but, but, you know, how do we think about what is in there?
Deanna Lund (EVP and CFO)
The Valkyrie related activity, that is some of the new contracts we just received, that we've just talked about earlier, and that is expected to continue in 2026.
Seth Seifman (Executive Director)
Okay. Okay. If, if we were breaking down the, the expected growth between the, the segments, I know you guys have sometimes talked about that. How, how do we think about KGS versus versus unmanned?
Deanna Lund (EVP and CFO)
The lion's share of the growth is expected in KGS.
Eric DeMarco (President and CEO)
driven by hypersonic, the hypersonic business and the microwave-
Seth Seifman (Executive Director)
Yeah, microwaves and space.
Eric DeMarco (President and CEO)
The space.
Deanna Lund (EVP and CFO)
space business.
Eric DeMarco (President and CEO)
Space. Those, those are the three big horses.
Deanna Lund (EVP and CFO)
Because as, as we mentioned earlier, as Eric mentioned in his prepared remarks, we're not including any large production type awards in our unmanned systems business. That, that is not contributing as much of the growth. The, the lion's share of the growth rate is in KGS, that, that we've provided guidance on.
Seth Seifman (Executive Director)
Got it. Got it. If I could sneak in maybe just one more bigger picture. If you could, I know we saw the groundbreaking on Prometheus. If you could talk, or maybe just update us on, you know, how things are going there, the investment levels and, you know, how the investment is reflected here. Then, you know, since that's a JV, when we go forward, is that something that's gonna be consolidated into Kratos results? Or is it something where we're just gonna see, you know, maybe your, your share of the earnings?
Deanna Lund (EVP and CFO)
It would just be our share of the earnings. Thus far, you can see it on the face of our balance sheet. I believe through 12/12/2028, our year-end, there was about $5 million of investment that we, that we put into the, the venture. As there are operating results for Prometheus, it will be our percentage of 49.9%. You won't see anything on, on any, any of the detailed line items on the income statement. No revenue, no cost of sales, no SG&A or R&D. It would just be one line, income or loss in investee, depending what. Obviously, in the beginning of the startup activity, I would think there's gonna be some, some operating losses because there's gonna be depreciation.
That's gonna be. It's gonna be a lot of non-cash losses with depreciation of the facilities, and that it will just be our percentage of that, whatever the, the income or loss is on the, on the income statement.
Seth Seifman (Executive Director)
Right. No, that's, that's super helpful. Maybe, Eric, when you, you think about the, the growth there, at the time that you did this, I don't know that we, we knew that, that all these multi-years were gonna be coming. Does, does that present more opportunities for the rocket motors you'll be manufacturing there?
Eric DeMarco (President and CEO)
Yes, sir. It's, it's a That's a great question. Last week, I was with the Rafael team, Seth, we were going through the forecast as a result of the new dynamic you just mentioned. The forecast has improved significantly. Let me give you an idea, kind of, sort of, what this looks like. We're gonna be producing. We'll begin in the second half of 2027. This is a classic high growth model. This is very similar to Kratos, then when it gets to full rate production, it's projected to be a significant cash generator. Seth, it's gonna go something like $100 million, $200 million, $400 million, $1 billion in revenue. Something like that. Think 2030, 2031 at full rate production for the first three phases.
It's $1 billion in revenue. Think 20% and divide by 2.
Seth Seifman (Executive Director)
Hmm. Excellent. Thanks. Thanks very much for all the color.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Thank you. Our next question comes from the line of Pete Skibitski with Alembic Global. Please proceed.
Pete Skibitski (Director of Aerospace and Defense Equity Research)
Hey, good afternoon, guys. couple of questions. First one, just, just to clarify on the 2026 growth on, on unmanned, I want to make sure I understand. I, I thought you guys said your share of MUX TACAIR would be about $120 million, and it would be over a couple of years. We, we should expect unmanned to grow at least $60 million or so in 2026. Is, is that a fair assumption, just on the MUX TACAIR contract?
Deanna Lund (EVP and CFO)
No. What, what I, in answering Seth's question, I said it will be relatively flat year-over-year, so there's not as much growth in unmanned because as, as just a reminder, in 2025, we had the Airbus, with shipment in 2025, and that was, let's call it roughly $20 million, and it was not on a % complete basis, so an apple to an apple. It, so as we move forward, it'll be more on % complete. And we have not included a lot of the, any production awards in that, forecast. I would, I would, it, it's not an incremental $60 million.
Pete Skibitski (Director of Aerospace and Defense Equity Research)
Okay.
Deanna Lund (EVP and CFO)
It's roughly, I would call it more like flat year-over-year, at what we've assumed in the forecast today.
Pete Skibitski (Director of Aerospace and Defense Equity Research)
Got it. Okay. Okay, fair enough. Then last one for me is just on hypersonics, the growth you're going to see over the next couple of years. Eric, I just want to get a sense of which contract vehicles are driving that growth. You know, is, is MACH-TB the majority of the growth? You know, when you talk about all these Zeus and Oriole SRMs on order, are, are those all under MACH-TB, are those other contract vehicles? Maybe to some extent, you could name those other contracts.
Eric DeMarco (President and CEO)
Yep, there are, there are others. Number one is MACH-TB. Number two is the Navy program. That's coordinated very closely with the Missile Defense Agency. Very closely. Okay? Number three, it's with the Prime. I can't talk about it, but it's with the Prime. Hold on. I want to make sure I'm not missing a piece. Those are the big three primaries. MACH-TB, a Navy/MDA program. Space and Missile Defense Command may be in there somewhere, too, a little bit, and then the Prime, then a big Prime.
Pete Skibitski (Director of Aerospace and Defense Equity Research)
Okay, got it. MACH-TB will be, you know, Zeus, maybe Orioles, but also all of the other, you know, all of your partners' missiles that they are.
Eric DeMarco (President and CEO)
Yeah. The in MACH-TB, the big drivers for, for us is Zeus 1 and 2, Erinyes, Dark Fury, and some other things I can't talk about that we're gonna be flying.
Pete Skibitski (Director of Aerospace and Defense Equity Research)
Okay. Okay, great. No, I appreciate the color.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
For our next question.
Eric DeMarco (President and CEO)
Thank you.
Operator (participant)
It comes from the line of Andre Madrid with BTIG. Please proceed.
Andre Madrid (VP and Aerospace and Defense Analyst)
Deanna, thanks for taking my question.
Deanna Lund (EVP and CFO)
Sure.
Andre Madrid (VP and Aerospace and Defense Analyst)
Could you maybe provide more color as to what the split between target drone and tactical drone revenue was in the quarter? I mean, was target drones especially impacted, and this held the segment back and prevented, you know. I, I, I'm just trying to find the puts and takes there because I, I think I might have expected more from, from the MUX TACAIR award than we saw. Maybe just, like I said, the puts and takes on the segment.
Deanna Lund (EVP and CFO)
Yeah, the tactical revenue for the Q4 was roughly $8 million-$9 million.
Andre Madrid (VP and Aerospace and Defense Analyst)
Got it. Got it. Okay, that's helpful. I guess kind of on the same subject, maybe a little less, but you know, talking about CCA potential opportunities being the GEK 1500, are there any anchor customers in place for that platform yet?
Eric DeMarco (President and CEO)
I, I, I cannot talk. Sorry, brother, I can't talk about this. I, I can't talk about it.
Andre Madrid (VP and Aerospace and Defense Analyst)
No, that's all good. I, I get it. Then I guess if, if I may, you know, there was, the increment two of CCA that they said that they had selected 9 companies for, that were in given concept refinement contracts. Can you, you know, disclose whether or not you were one of those companies?
Eric DeMarco (President and CEO)
I can absolutely not talk about that.
Andre Madrid (VP and Aerospace and Defense Analyst)
Got it. Got it. I guess 1 last one. The Drone Dominance Program, it seems like that's flowing through DRSS as opposed to KUS. Could you maybe just explain the reason why there?
Eric DeMarco (President and CEO)
Yep. That's, that's actually a very good question. In unmanned systems, those are all Class IV, all Class IV aircraft. They're, they're jets. Then in Yep, you got and then down in Huntsville, which is in DRSS, Class 1, 1, and 2. Very, very good question. That-that's why. Obviously, because the customers are different, the supply chain is different, et cetera, et cetera, et cetera, we, we left them separate.
Andre Madrid (VP and Aerospace and Defense Analyst)
No, that makes, that makes total sense. All right, I'll leave it there. Thank you both so much.
Deanna Lund (EVP and CFO)
Thank you.
Operator (participant)
Thank you. Our next question comes from the line of Trevor Walsh with Citizens. Please proceed.
Trevor Walsh (Director and Senior Equity Research Analyst)
Great, thanks. Hey, hey, Deanna and, and Eric, thanks for taking the question. Just probably a quick one for me, most of them have been asked already. On the, the CapEx color that you gave, Deanna, around some of the, the spend from 25 slipping into 26, which is how we get to that $135. Can you just elaborate a little more? Was that a single initiative where it slipped, or was it more broad-based across the, the spend expected in 25? Then relatedly, is there anything that could slip kinda into, into 27 and, like, kind of in a similar fashion? Thanks.
Deanna Lund (EVP and CFO)
Yeah, sure. What slipped, it's really two programs. It's the Indiana Payload Integration Facility as well as the Birmingham Advanced Manufacturing Hypersonic Facility. Those were just construction plans that, as you know, construction takes longer always. They were originally forecasted for 2025, but they slipped in just from a timing perspective, and then 2026. For 2026, moving into 2027, right now, since we've just started the year, we, we believe everything is gonna be incurred in 2026 that we forecasted, but some of that's gonna be construction related, so some may, some may push out, but at this point, we think that's, that's a good range for 2026.
Trevor Walsh (Director and Senior Equity Research Analyst)
Perfect. Super helpful. Thank you.
Operator (participant)
Thank you. Our next question is from the line of Hans Baldau with NOBLE Capital Markets. Please proceed.
Hans Baldau (Equity Research Analyst)
Hello, I'm on the call for Joe Gomes. On the second Valkyrie production, the $25 million-$28 million in CapEx you're planning for 2026, can you help us understand the downside protection there? You know, if the contract awards or delivery schedules slip, how exposed Kratos is?
Eric DeMarco (President and CEO)
Yeah. Right now, where we stand right now, I don't believe there's any. There's 0 risk. I believe those airplanes will all be spoken for under, under what we have. I don't, I don't see a risk there.
Hans Baldau (Equity Research Analyst)
Okay. Thank you. With the microwave products, how much is that tied to missile and air defense programs specifically versus other, you know, applications?
Eric DeMarco (President and CEO)
Okay, I'm gonna at least, at least 50%, okay? It may be as high as 60, so think 50%-60%. Think 20% satellite, communication satellites. Think the vast majority of the rest, communication systems, comms.
Hans Baldau (Equity Research Analyst)
Okay. All right. That's helpful. Thank you.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Thank you. One moment for our next question. It's from the line of Austin Moeller with Canaccord Genuity. Please proceed.
Austin Moeller (Director of Equity Research)
Hi, good evening. Just my first question here, Eric and Deanna, $400 million incremental for MACH-TB, $4.6 billion for space and boost glide interceptors, and $3 billion for hypersonic defense systems was in the big, beautiful bill. In the fiscal year 2026 appropriations, there was $13.5 billion added specifically for Golden Dawn within the Space Force budget. Just thinking about the programs that you're bidding on and the RFP process and when task orders might go out, how much of this funding do you think might be captured in the second half of 2026 versus 2027?
Eric DeMarco (President and CEO)
Right. On our related programs, either we're prime or we're working with one of the traditionals, okay? The funding on the ones you just went through, it's the vast majority of it is Q2, Q3, and Q4 of this year, and then 2027 will be very significant for that funding.
Austin Moeller (Director of Equity Research)
Okay.
Eric DeMarco (President and CEO)
That's how we see it.
Austin Moeller (Director of Equity Research)
Okay. On MUX/TACAIR, which you're partnered with, Northrop is the prime. I think you alluded to this a little bit earlier, Northrop is also bidding on the Navy CCA program, and the Marine Corps, of course, operate off of ships. Should we be thinking about potential opportunity for Valkyrie airframes for other agencies within the Navy Department?
Eric DeMarco (President and CEO)
What a great question. I cannot, I cannot talk, I cannot talk about that right now. Excellent, excellent question.
Austin Moeller (Director of Equity Research)
Well, great. Thank you very much.
Eric DeMarco (President and CEO)
You got it.
Operator (participant)
Our next question comes from Kashyin Kailer with BNP Paribas. Please proceed.
Kashyin Kailer (Analyst)
Yeah. Hi, guys. Thanks for squeezing me in here. I guess on the organic growth outlook for the year, you know, it's a bit lower than the initial 15%-20% you had laid out last quarter. I guess, is, is that just mathematically coming in higher for the year on revenues, or is there anything else that's, that's driving that lower?
Deanna Lund (EVP and CFO)
That's, that's correct.
Eric DeMarco (President and CEO)
That-
Deanna Lund (EVP and CFO)
That's correct. As I, as I had said in my prepared remarks, we had originally forecasted 14%-15% organic growth for 2025, and we came in at 20%. That, that is a—so it is a mathematical.
Eric DeMarco (President and CEO)
Yeah, we're.
Kashyin Kailer (Analyst)
Okay.
Eric DeMarco (President and CEO)
The business is doing, the business is doing great. We, as you know, we beat the heck out of the Q4 numbers. Now that we have an appropriations bill and the shutdown is done, hopefully, 2026 will be really good too.
Kashyin Kailer (Analyst)
Got it. Okay. Then just on free cash flow, obviously, you have a lot of opportunities in investments, you know, in the pipeline right now. As we think about free cash flow longer term, is there a timeline when you would expect to be kind of more neutral or, or positive on free cash flow?
Eric DeMarco (President and CEO)
Absolutely. I mentioned this on the... I'm glad you're asking. I mentioned on the last call, we're starting, we're starting to see it now on the starts on the operating cash flow. The operating cash flow is starting to increase, and it's gonna start to ramp in 2027 and 2028. It's just gonna depend on the number of new opportunities that we're presented with from the, from the Department. I went, I went through, Deanna went through a list, I went through several, and my prepared remarks were, once again, the government, the customer has come to us, and they have said: "Here's an opportunity.
You, you can get a very long-term, multi-year decade program if you'll invest the capital to stand up this very specialized facility to build these things. We definitely have line of sight on it, but I don't wanna give you a time, and then because you guys are punitive on this, and then the goalpost moves because two new opportunities came that generate a significant return for the shareholder. We're cognizant of it. We see it, but right now, this, with the budgets increasing, the government trying to rebuild the industrial base, and them providing companies like Kratos, the non-traditionals, with significant large opportunities, we're gonna go for these right now and build a hell of a company here.
Kashyin Kailer (Analyst)
Got it. Thanks for the call.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Our next question comes from the line of Clarke Jeffries with Piper Sandler. Please proceed.
Clarke Jeffries (VP and Senior Research Analyst)
Hello. Thank you for taking the question. I wanted to ask around the guidance of the guidance philosophy for hypersonic, you know, mentioning an expectation to double hypersonic this year and 75% in 2027. You know, where was that compared to a quarter ago? Just maybe can help us level set on the areas where you're not including in the base case, hypersonic revenue versus where you are. That'd be, that'd be very, very helpful. Then one follow-up.
Eric DeMarco (President and CEO)
Yeah. So the, the, the number 1 is the engines and the motors, the 120 motors that are, that are gonna start coming in late Q2, early Q3, then those, those deliveries are gonna ramp throughout 2027 and 2028. Those are tied to missions and launch manifests. You know, our, our Aerojet Rocketdyne on Zeus and ATK, on Oriole, they've really stepped up, so we are getting much more comfortable now with, with that. Okay, number 2, the glide vehicles. There's, there's 1, there's 1 company in the United States that has the carbon-carbon material for, for our systems. We've placed the long leads. We have a number of vehicle systems worth of materials coming in, starting in Q3, I, I believe in Q3, then that's gonna accelerate into, into 2027 and 2028.
Then on, on top of that, and I, I know I've said it a couple times, we now have an appropriation bill, which was very, very important for us. Taking all that, we are really comfortable for the rest of this year and going into next year with the hypersonic business, and I'll say the middle of the fairway numbers we provided to you. Where you were going on that. There's a, I mentioned, I'm hopeful that there's another $1 billion sole sourcer I think we're gonna get. Let's say we get that by the end of this year. That could be additive to 2027.
You know, we'd have to take a look at long leads and things like that, but that, that could be additive to 2027 and could provide upside on it.
Clarke Jeffries (VP and Senior Research Analyst)
Perfect. Then just, you know, the number of tactical drone opportunities that you're talking about that are sort of in the pipeline, just wondering if you could frame, you know, group 3 versus group 4 kind of opportunities, and then just generally, with the context of Drone Dominator, you know, how interested are you in group 1 and 2 in terms of really putting more investment and capital against those opportunities?
Eric DeMarco (President and CEO)
Right. We are very, very interested in Group 5. Valkyrie, Mighty Hornet, Tactical Firejet, Air Wolf, Mako, that is our expertise, low cost, high performance jet drones. Group 5 is the sweet spot, and that's where I did most of our talk, my talking today, because that's where the customers are coming to us. Group 1 and 2, like on Drone Dominance, we have a business there. We want a slot. I believe we want it because of our design capability and the capability of the drones. Okay, we'll see, but that is. We will make the investment necessary to satisfy any customer requirement, but that is not the strategic focus of Kratos, including from an investment standpoint.
Clarke Jeffries (VP and Senior Research Analyst)
Perfect. Thank you very much.
Eric DeMarco (President and CEO)
Yep.
Operator (participant)
Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed.
Sheila Kahyaoglu (Managing Director)
Good evening, Eric and Deanna. Eric, maybe if we could just, one big picture question and one, micro one. If we could just dig into the size of your microelectronics, Microwave Electronics business, just given the production rate increases we're seeing. Can you size it? What was the growth in 2025? How do you think about the growth in 2026, and what are some of the larger programs driving it?
Eric DeMarco (President and CEO)
Yeah, Deanna will help me on the numbers.
Deanna Lund (EVP and CFO)
Yeah, so the, the growth for the year, was about organic 17%.
Sheila Kahyaoglu (Managing Director)
Got it. how-
Eric DeMarco (President and CEO)
Big, big programs are Iron Dome, Tamir, Arrow, Barak. There's next 2, the next 2 are, are, are classified. Those are the big 5, 2 classified, and those 3 I mentioned.
Brock Cannon (Equity Research Associate)
Perfect. Maybe you've given us so much color on this call. Can you, I don't know if it's easy to distill, like, the three upcoming catalysts we look for with Kratos?
Eric DeMarco (President and CEO)
Yeah. From, from, from my opinion, number one is, I'm as I, I mentioned, I, I'm expecting that we're gonna receive a very, a very large potential billion, billion-dollar plus hypersonic opportunity. I think we're gonna get that. That is looking pretty good. I'm, I'm hopeful that a customer is going to let us announce, or they will announce, that we have received another tactical drone CCA-type program award. I can't control that. I'm hopeful that happens. That, that, that financially and from a company standpoint is a catalyst. Oh, number three, I, I, I think it's possible that, you know, one of our customers in the jet engine area could announce a very large production contract for the jet engines. That would definitely be a catalyst because that'll, that'll be a new growth driver leg for the company.
Sheila Kahyaoglu (Managing Director)
Understood. Thank you so much.
Eric DeMarco (President and CEO)
You're welcome.
Operator (participant)
Thank you. Our last question comes from the line of Gavin Parsons with UBS. Please proceed.
Gavin Parsons (Director of Aerospace and Defense Equity Research)
Good evening. Thank you.
Eric DeMarco (President and CEO)
Good evening.
Operator (participant)
Thank you.
Gavin Parsons (Director of Aerospace and Defense Equity Research)
You guys have a lot to talk about.
Eric DeMarco (President and CEO)
A lot going on.
Gavin Parsons (Director of Aerospace and Defense Equity Research)
A lot going on. Well, I appreciate the, the question. Two-part question on the framework you talked about for the primes. I guess, first part, does that accelerate your growth or more so give you better visibility into sustaining it for a longer period of time?
Eric DeMarco (President and CEO)
For the, for the near term, it's, it's great visibility and sustainment, and we'll see what happens over the next quarter or two relative to timing of things that'll accelerate for us.
Gavin Parsons (Director of Aerospace and Defense Equity Research)
Okay. Then the second part, you know, the primes are finally leaning into investment, right, announcing major increases in CapEx, doing less buybacks. Does that result in more direct competition, or are they looking at more dual source as they look to grow faster? What's the risk there?
Eric DeMarco (President and CEO)
Yeah, we, we really don't compete with the traditional primes. We rarely do. It's. We, we partner with them. I, I went through a little earlier that for, for every one of the major primes that builds missile, radar, air defense-type systems, the ones that are gonna be involved in Iron Dome, we build the hardware for them. We partner with them. Look, with Northrop, we're delivering them tactical jet aircraft. What the primes are doing now and leaning forward, this is going to be an accelerator for Kratos, is what it's gonna be. I mean, take, take a look at, at Northrop, and you know, that, that's one of our closest, if not closest, partner. I mean, they, they talked about it last week or 2 weeks ago. They're looking to increase production on Integrated Battle Command System by 4x.
We, we build a significant amount of the hardware on IBCS. That would be incredible for us. Take a, take a look at Leidos Dynetics. Okay, I, I believe, I believe Tom, or his CFO, said in their earnings call, in their transcript, I believe they said, check me, that by the end of 2029 or 2030, they need to deliver 300 or 400 indirect fire systems. Kratos builds a significant amount of the hardware for Dynetics, for indirect fires, that they then do integration work on with the weapon system. I can go on and on. These, these companies, like, like Leidos Dynetics and Lockheed and, and Northrop and Raytheon, that are leaning forward, especially including these, these large multiyear orders, there's nothing bad here for Kratos.
There's nothing that comes to mind, competitorily, and this, this could be an accelerator for us going forward.
Gavin Parsons (Director of Aerospace and Defense Equity Research)
Very clear. Thank you.
Eric DeMarco (President and CEO)
Thank you.
Operator (participant)
Thank you so much. This concludes our Q&A session. I will turn it back to Eric DeMarco for closing comments.
Eric DeMarco (President and CEO)
Great. We appreciate you all joining us and taking the time to ask us the questions. Sincerely, your interest in the business, and we look forward to chatting with you when we report Q1. Thank you.
Operator (participant)
This concludes our conference. Thank you for participating. You may now disconnect.