Kratos Defense & Security Solutions Profile
Kratos Defense & Security Solutions, Inc. (Kratos) operates as a technology, products, system and software company. The company is addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address its customers’ mission critical needs and requirements.
Kratos intends to pursue program and contract opportunities as the prime or lead contractor. The company intends to partner and team with a large, traditional system integrator when its assessment of probability of win is greater or required investment is beyond Kratos comfort level. Kratos’ primary business areas include, virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, command, control, communication, computing, combat, intelligence surveillance and reconnaissance (C5ISR) and microwave electronic products for missile, radar, missile defense, space, satellite, counter unmanned aircraft systems (UAS), directed energy, communication and other systems, and virtual and augmented reality training systems for the warfighter.
Kratos is under customer contract and working on a number of customer funded tactical UAV contracts and programs. Kratos is producing two lots of 12 Valkyrie drone systems, certain of the first lot of 12 which have been delivered to the respective customer(s), with others either committed to customer funded contracts or currently being produced with Kratos funds in advance of potential expected customer contracts. The request of new, additional tactical drone programs in the fiscal year 2023 DoD budget request by the Office of the Secretary of Defense, as well as other statements and disclosures made by the DoD and others, reflect the continued commitment by the Pentagon to large quantities of autonomous, unmanned systems. The company is well-positioned to address the DoD’s requirements if it decides to move forward in procuring numbers of unmanned combat tactical drone systems, which may include drone systems under contract, in development, or flying by Kratos, and/or other future systems.
Kratos is an industry leader in high performance, jet powered, unmanned aerial target drone systems, which are designed to replicate state of the art, leading technology adversarial fighter aircraft, missiles, drones and other threats. Kratos is the sole source or primary unmanned aerial target drone system provider to the U.S. Air Force, the U.S. Army, the U.S. Navy, and numerous allied foreign defense agencies. Leveraging off of this technology, for which Kratos owns important intellectual property, since 2013 the company has made significant investments developing Kratos’ first UCAS, its Unmanned Tactical Aerial Platform (UTAP-22).
Kratos is an industry leader in ground-based command, control and communications systems (C3), Telemetry Tracking and Control (TT&C) and other systems for satellites, and a leader in related radio frequency interference identification, geolocation and mitigation, or Space Domain Awareness. The company’s primary customers include the U.S. Air Force, Space Command, Space Development and other agencies, and also commercial customers, enterprises and entities. The company’s OpenSpace software products and technology is a new approach to enable dynamic ground system operations by turning hardware to software that can react rapidly, dynamically and affordably to changing conditions in the satellite industry, including satellites with spot beams and software defined payloads.
Kratos is an industry leader in rocket systems and motors, ballistic missile targets, suborbital vehicles, sounding rockets and hypersonic systems. Kratos is the recognized rapid development and system fielding, affordable, industry leader in each of these areas. Kratos systems, products and technology have disrupted the traditional market dynamics, including recent important new program and contract awards in the hypersonic areas with the Multi-Service Advanced Capability Hypersonics Test Bed (the MACH TB) and Mayhem Hypersonic System (Mayhem) programs. Kratos is working on two new, internally funded hypersonic related initiatives, Zeus and Erinyes.
The company’s microwave electronics business products have designed-in positions on critical combat system programs, including Barak, Gripen, Iron Dome, Sling of David, F-15, F-16, Arrow and other C5ISR programs, including space and satellite programs and certain classified programs.
The company’s advanced capabilities in the training systems and solutions market, including mixed, virtual and synthetic reality technology, products and systems for aircraft, combat and other vehicles, have allowed it to successfully remain at the forefront of defense industry readiness initiatives.
The company’s strategy of internally funding the research and development of many of its systems, products, software, solutions and capabilities, will continue to enable Kratos to be first to market and advance its position in high growth markets, such as high performance UCAVs, satellite communications, turbine and engine technologies, hypersonic systems, ballistic missile targets and microwave electronics, and allow it to grow, over the long-term, at a rate greater than that of the industry.
Segments
The company operates in two segments, The Kratos Government Solutions; and The Unmanned Systems.
The Kratos Government Solutions (KGS) reportable segment consists of an aggregation of KGS operating segments, including its microwave electronic products, space, satellite and cyber, training solutions, C5ISR/modular systems, turbine technologies, and defense and rocket support services operating segments.
The Unmanned Systems (US) reportable segment consists of the company’s unmanned aerial, unmanned ground, unmanned seaborne and related command, control and communications system businesses.
Strategy
The company’s strategy is to be a leading technology, systems, software and products provider to the defense, national security and relevant commercial and related global markets, and to disrupt its market focus areas, by being first to market with internally funded and developed offerings, engineered and designed to be mass produced. In executing the company’s strategy, Kratos primarily seeks to utilize proven technology, which it modifies, adopts, changes, integrates and applies to address market opportunities that it identifies jointly with its customers and with its partners. This approach allows the company to rapidly develop and field relevant offerings, while reducing technical, schedule and financial risk.
Customers
A representative list of government customers in the company’s KGS and US segments during 2023 included the U.S. Air Force, U.S. Army, U.S. Navy, U.S. Marines, Missile Defense Agency, Space Command, NASA, the AFRL, foreign military sales (FMS), the U.S. Southern Command, STRATCOM, the SCO, DIU or DIUx, the Rapid Capabilities Offices, the U.S. intelligence community, DARPA, Office of the Secretary of Defense (OSD), and certain confidential customers. A representative list of non-government customers during 2023 included tier one, large U.S. Government contractors and system integrators such as Northrop Grumman, Lockheed Martin, General Dynamics, Raytheon Technologies, BAE Systems, L3Harris, and Boeing, as well as Intelsat, Blue Halo, Microsoft, Amazon, Siemens, Rolls Royce, Boom, GE Aerospace and others.
Revenue from the U.S. Government (which includes FMS) includes revenue from contracts for which it is the prime contractor, as well as those for which the company is a subcontractor and the ultimate customer is the U.S. Government.
Competition
Competition in the KGS and US segments include tier one, large U.S. Government contractors and system integrators, such as Northrop Grumman, Lockheed Martin, General Dynamics, Raytheon Technologies, BAE Systems, L3Harris, General Atomics, and Boeing. Tier two competitors include smaller government contractors such as Mercury Systems, Qinetiq, Cobham, Anduril, CACI, Peraton, Linquest, Viasat and AAR Corp.
Research and development (R&D) Expenses
The company’s R&D expenses were $38.4 million for the year ended December 31, 2023.
Government Regulation
The company is subject to various government regulations, including various the U.S. Government regulations as a contractor and subcontractor to the agencies of the U.S. Government. Among the most significant the U.S. Government regulations affecting the company’s business are:
The Federal Acquisition Regulations and supplemental agency regulations, which comprehensively regulate the formation, administration, and performance under government contracts;
The Truthful Cost or Pricing Data Statute (formerly the Truth in Negotiations Act), which requires certification and disclosure of all cost and pricing data in connection with contract negotiations;
The Cost Accounting Standards, which impose accounting requirements that govern the company’s right to reimbursement under cost-based government contracts;
The Industrial Security Manual, which establishes the security guidelines for classified programs and facilities as well as individual security clearances;
The Foreign Corrupt Practices Act, which prohibits the U.S. companies from providing anything of value to a foreign official to help obtain, retain or direct business, or obtain any unfair advantages;
The False Claims Act and the False Statements Act, which respectively, impose penalties for payments made on the basis of false facts provided to the government and impose penalties on the basis of false statements, even if they do not result in a payment; and
Laws, regulations and executive orders restricting the use and dissemination of information classified for national security purposes and the exportation of certain products and technical data.
Certain aspects of the company’s business are subject to further regulation by additional the U.S. government authorities, including the Federal Aviation Administration (FAA), which regulates airspace for all air vehicles in the U.S. National Airspace System; the National Telecommunications and Information Administration and the Federal Communications Commission, which regulate the wireless communications upon, which its unmanned aerial systems (UAS) depend in the United States; and the Defense Trade Controls of the U.S. Department of State that administers the International Traffic in Arms Regulations, which regulate the export of controlled technical data, defense articles and defense services.
In addition, the export from the U.S. of certain of the company’s products may require the issuance of a license by the U.S. Department of Commerce under the Export Administration Act, as amended, and its implementing regulations as kept in force by the International Emergency Economic Powers Act of 1977, as amended. Some of the company’s products may require the issuance of a license by the U.S. Department of State under the Arms Export Control Act and its implementing regulations, which licenses are generally harder to obtain and take longer to obtain than do Export Administration Act licenses.
History
Kratos Defense & Security Solutions, Inc. was incorporated in the state of New York in 1994. It was reincorporated in the state of Delaware in 1998.
