Steven Fendley
KRATOS DEFENSE & SECURITY SOLUTIONSAbout Steven Fendley
Steven Fendley is President of Kratos’ Unmanned Systems Division (US) since January 2017, with 30+ years in aerospace focused on unmanned systems; he holds a B.S. in Electrical Engineering from Auburn University and is 56 years old . Under his divisional leadership, Kratos’ Unmanned Systems segment grew revenue organically 25.1% in 2024 (from $212.2M to $270.5M) amid industry headwinds , while company performance delivered Adjusted EBITDA growth from $95.4M in 2023 to $105.7M in 2024 and stock price appreciation from $10.32 (FY22) to $26.52 (FY24), evidencing execution against growth priorities (TSR proxy figures) . Fendley’s pay is predominantly equity-based with performance RSUs tied to multi‑year Adjusted EBITDA growth, aligning incentives with long-term value creation .
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Kratos Unmanned Systems Division (KUSD) | President | Jan 2017 – present | Leads tactical UAVs and target drones; supports rapid fielding and growth in US segment . |
| Composite Engineering, Inc. (CEi; now Kratos UAS, Inc.) | SVP, General Manager/CTO | Mar 2016 – Jan 2017 | Drove technology growth in high‑performance unmanned platforms and target drones . |
| Composite Engineering, Inc. (CEi) | VP of Engineering | Feb 2014 – Mar 2016 | Enhanced technical capability and system performance across CEi’s unmanned aircraft portfolio . |
| 5‑D Systems, Inc. | President | Aug 1999 – Jan 2017 | Built systems/software engineering contractor serving DoD; foundational unmanned systems expertise . |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| 5‑D Systems, Inc. | Executive Chairman (50% owner) | Jan 2017 – Nov 18, 2020 (acquisition by Kratos) | Continued oversight of engineering services business prior to acquisition by Kratos . |
Fixed Compensation
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 400,000 | 400,000 | 400,000 |
| All Other Compensation ($) | 12,825 | 44,927 | 55,364 |
| 2023 Base Salary ($) | 400,000 | ||
| 2024 Base Salary ($) | 400,000 | ||
| Percent Change (2024 vs 2023) | —% |
Notes:
- Fendley’s 2024 base salary remained unchanged vs 2023; Kratos emphasized incentive-based pay across executives .
Performance Compensation
| Component | Structure | Target | Actual/Payout | Vesting |
|---|---|---|---|---|
| Annual Cash Bonus (Operational NEO) | Weighted by divisional and company metrics: 30% division Adjusted EBITDA; 15% division revenue; 20% division free cash flow; 10% consolidated Adjusted EBITDA; up to 25% individual goals; 90% minimum threshold per financial goal to earn payout . | Target cash bonus $240,000 (60% of $400,000 base) . | 2024 payout $174,681 (72.8% of target) . | Paid after year-end (Q1 2025) per plan . |
| Long-Term Equity – Time-based RSUs (2024 grant) | 50,000 RSUs vest ratably in 5 equal annual installments on each grant anniversary . | Grant-date fair value $18.53/share . | N/A (time-based) | Annual vest on each anniversary (2024–2029) . |
| Long-Term Equity – Performance RSUs (2024 grant) | 50,000 RSUs; 33.3% vests for each 10% Adjusted EBITDA growth vs baseline over 5-year period; threshold 10% growth for any vesting; full vest at 30% growth . | Grant-date fair value $18.53/share (assumes target) . | N/A (performance-based) | Eligible to vest annually within 2024–2028 performance window . |
| Recognition RSUs (Feb 20, 2024) | 20,000 RSUs in recognition of 2023 accomplishments; cliff vest on 1-year anniversary (Feb 20, 2025) . | Grant-date fair value $20.50/share . | N/A | Full vest Feb 20, 2025 . |
| 2025 RSU Grants (at target) | 50,000 time-based RSUs (5-year ratable) + 50,000 performance RSUs (Adjusted EBITDA growth framework; 2024 record baseline raises hurdle) . | N/A | N/A | 2025–2030 time-based; 2025–2029 performance window . |
Equity Ownership & Alignment
| Item | Details |
|---|---|
| Beneficial Ownership | 414,436 common shares; less than 1% of shares outstanding . |
| Shares Outstanding (record date) | 153,285,643 shares as of March 17, 2025 . |
| Unvested Equity (12/29/2024) | 290,000 RSUs unearned/unvested; market/payout value $7,690,800 (at $26.52 closing; assumes performance RSUs at target) . |
| Stock Options | Kratos does not currently grant options/SARs; focus is RSUs; no options exercised by NEOs in FY2024 . |
| Hedging/Pledging | Prohibited for directors and executive officers (Anti‑Hedging and Anti‑Pledging Policy) . |
| Ownership Guidelines | CEO guideline is 5× base salary; no specific published guideline for division presidents in proxy . |
| Rule 10b5‑1 Trading Plans (Q3 2025) | Company disclosed plans for certain insiders; Fendley not among adopters in Q3 2025 . |
Employment Terms
- Agreement date: Employment Agreement effective January 1, 2024 .
- Base salary eligibility and equity: $400,000 base salary; eligible for equity grants at discretion of President and Compensation Committee .
- Severance (no cause): 12 months of base salary; earned incentive compensation; continuation of medical/dental benefits for one year (employee cost unchanged) .
- Change-of-control (double trigger): If within 12 months post‑CoC terminated without cause or resigns for good reason, entitled to 12 months base salary, earned incentive compensation, 1 year benefits continuation, and accelerated vesting of 100% of outstanding/unvested stock options and RSUs; payments contingent on release .
- Cause (definition excerpt): Misconduct; violation of posted policy; willful refusal to follow lawful directions or material breach; breach of duty of loyalty causing or likely to cause injury; failure to timely secure or loss of necessary security clearance .
- Good Reason (definition excerpt): Material diminution of role/responsibilities; relocation >30 miles causing commute increase >30 miles; material Company breach of the Agreement .
- Illustrative CoC value (12/29/2024): Accelerated vesting of unvested equity valued at $7,690,800; severance $400,000; benefits continuation valued at $21,151 for one year .
- Clawback: Incentive Compensation Recoupment Policy updated for Rule 10D‑1; broader than SOX; potential recovery if results restated .
- Tax gross-ups: Company policy to eliminate excise tax gross‑ups in new or renewed CoC agreements (policy statement) .
Multi‑Year Compensation (as reported)
| Metric | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary ($) | 400,000 | 400,000 | 400,000 |
| Stock Awards ($) | 2,183,800 | 1,003,000 | 2,263,000 |
| Non‑Equity Incentive ($) | 51,429 | 60,000 | 174,681 |
| All Other Compensation ($) | 12,825 | 44,927 | 55,364 |
| Total Compensation ($) | 2,648,054 | 1,507,927 | 2,893,045 |
Annual Incentive Outcomes (2024)
| Named Executive Officer | Target ($) | Maximum ($) | Actual Payout (% of Target) | Actual Payout ($) |
|---|---|---|---|---|
| Steven Fendley | 240,000 | 240,000 | 72.8% | 174,681 |
RSU Grants Summary
| Year | Time-based RSUs (No.) | Vesting | Performance RSUs (No.) | Performance Framework |
|---|---|---|---|---|
| 2024 | 50,000 | Ratably over 5 years | 50,000 | 33.3% vest per 10% Adjusted EBITDA growth; 5‑year period (threshold 10%; full at 30%) |
| 2024 Recognition | 20,000 | Cliff vest 1 year (Feb 20, 2025) | — | — |
| 2025 | 50,000 | Ratably over 5 years | 50,000 | Adjusted EBITDA growth vs 2024 record baseline |
Performance & Track Record
- Division growth: Unmanned Systems revenue increased from $212.2M (2023) to $270.5M (2024), +25.1% organically .
- Company revenue/EBITDA: 2024 revenue $1.136B vs $1.037B (2023); Adjusted EBITDA $105.7M vs $95.4M (2023) .
- Booking indicators: Record backlog $1.445B and bookings $1.354B in 2024; bid pipeline $12.4B .
- Notable accomplishments: Tactical UAS programs and UTAP‑22 flight milestones referenced in 2017 leadership transition, underscoring track record in high‑performance jet UAVs .
Compensation Committee & Shareholder Signals
- Say‑on‑Pay: 92.22% approval at 2024 Annual Meeting (advisory) .
- Compensation Peer Group (2024 benchmarking): AAR Corp., Hexcel Corporation, Kaman, Mercury Systems, Palantir Technologies, Barnes Group, Comtech Telecommunications, V2X, Ducommun, VSE Corporation .
- Program design: Approximately 50% performance RSUs and 50% time‑based RSUs at target; new equity awards include double‑trigger CoC vesting .
Risk Indicators & Red Flags
- Hedging/Pledging: Prohibited (reduces misalignment risks) .
- Option repricing: Company does not currently grant options/SARs, mitigating repricing risk .
- Clawback: Enhanced compliance under Rule 10D‑1 (recoupment on restatements) .
- Insider selling pressure: 2024 RSUs vest annually; a 20,000 recognition grant cliff‑vested on Feb 20, 2025, potentially adding vest‑related liquidity events; Fendley did not adopt a Rule 10b5‑1 plan in Q3 2025 .
Investment Implications
- Alignment: High equity mix with performance‑based RSUs tied to Adjusted EBITDA growth (10–30% thresholds) strengthens pay‑for‑performance and long‑term alignment; time‑based RSUs with 5‑year ratable vesting support retention .
- Retention/CoC economics: Double‑trigger CoC terms plus full acceleration of unvested equity can be value‑protective for the executive yet may concentrate vesting value ($7.69M as of 12/29/2024) in event-driven scenarios; base severance is 1× salary, modest vs peers .
- Ownership: Beneficial holdings are <1% of shares outstanding (414,436 shares), while unvested RSUs are sizable (290,000), indicating primary leverage via incentive equity rather than outright ownership; pledging/hedging restrictions and clawback reduce governance risk .
- Execution signal: US segment growth (+25.1% in 2024) and company EBITDA/revenue gains, alongside robust backlog and bookings, corroborate operational execution in Fendley’s domain; continued vesting of performance RSUs depends on sustaining Adjusted EBITDA growth against a higher 2024 baseline .