Karman Holdings Inc. Q3 FY2025 earnings call

Key Highlights - Posted record quarterly revenue of $122 million, record gross profit of $50 million, and adjusted EBITDA of $38 million. - Funded backlog reached $758 million. - Completed a $1.2 billion nondilutive secondary equity offering. - Upsized credit facility and acquired Five Axis Industries. - End markets had strong demand with customers supporting over 80 customers on over 130 programs. - In the third quarter, saw large new contract announcements from the U.S. Army. - Invested in Albany, Oregon facility to double forging capacity. - Recognized by ULA as Enterprise Operations Supplier of the Year 2025.

In the third quarter, Karman Space & Defense posted record quarterly revenue of $122 million. Gross profit was $50 million, and adjusted EBITDA rose to $38 million. Funded backlog reached an all-time high of $758 million. By end market: Hypersonics and Strategic Missile Defense revenue was $37 million, representing 30% of quarterly revenue; Space and Launch revenue was $41 million, representing 33% of quarterly revenue; Tactical Missiles and Integrated Defense Systems revenue was $44 million, representing 37% of quarterly revenue.

Guidance - Raised full year 2025 revenue guidance to $461 million to $463 million and adjusted EBITDA to $142 million to $143 million. - Anticipate 20%-25% organic growth in 2026 as a preliminary view. - Expect statutory tax rate for fiscal year 2025 of 25.5% and CapEx to be approximately 4.5% of the midpoint of revised revenue guidance range. - Expect to capture 50 bps of EBITDA margin expansion annually from operating leverage.

Risks - Forward-looking statements based on current expectations, forecasts and assumptions involve risks and uncertainties such as economic, competitive, governmental and technological factors. - Federal government shutdown could impact program timings, though currently no impact to 2025 as of now, with some meetings and solicitations delayed.

Q: Could you give us what the organic growth was for the third quarter? And on 2026 as to how you're thinking about organic growth as a baseline assumption.

A: Michael Willis said it's hard to separate organic and inorganic as they blur, vast majority of growth is from organic; Tony Koblinski said for 2026, with current assets, anticipate consistent growth of 20% to 25% as a preliminary view Q: Talk a little bit about what are the assumptions that are underpinning the growth of 20% to 25%? And how much coverage do you think you already have from the $758 million of backlog for 2026?

A: Tony Koblinski said view 20% - 25% as preliminary, backlog of $758 million is strong and multiyear, well on path with 75% plus of future year booked by beginning of the year Q: Are you seeing any program level concentration on your backlog? Or is the backlog much more distributed and balanced out versus the revenue run rate is?

A: Tony Koblinski said backlog is consistent with revenue, all 3 end markets grow, no single program making up over 10% concentration Q: There's been some chatter in the marketplace about some of your customers looking to maybe dual source some of your offerings just as a way of supporting a greater revenue ramp across missiles and other programs. Are you seeing that? And is that at all factoring into maybe any of the maybe slightly more conservative outlook in 2026?

A: Tony Koblinski said not aware of any dual source effort on products beyond existing, no effort to displace as primary provider Q: On Golden Dome, are you seeing - or have you bid or seeing RFPs yet on any of these areas that are specific to Golden Dome? Or what's your view on how this program could potentially impact you from a timing standpoint?

A: Tony Koblinski said seeing increased demand signals on existing assets, new content still too early, involved in meetings but no hard RFQs yet; Jonathan Beaudoin added leaning into facilitization to be ready when POs arrive Q: Going forward, is it becoming harder to find deals that would enhance your EBITDA given how high it is relative to the rest of the industry?

A: Tony Koblinski said no, M&A pipeline healthy, continue to be approached by folks wanting to be part of Karman story, expect more deals ahead Q: If NASA were to implement any major changes to the Artemis program, would that impact you? And in general, what are you assuming for the Artemis program?

A: Tony Koblinski said have volume and content for Artemis program, including Orion capsule and related, look forward to supporting it Q: Can you provide margin guidance for 2026? And should we think about EBITDA margin expansion in what range could we expect?

A: Michael Willis said continue to think would capture 50 bps a year of EBITDA margin expansion from operating leverage Q: Are you seeing any impact of the government shutdown on bookings and any impact on 1Q 2026?

A: Tony Koblinski said depends on how long it goes, right now no impact to 2025, no impact to 2026 as of now with some meetings and solicitations delayed