Karman Holdings Inc. Q1 FY2026 earnings call

New CEO Overview

• New CEO John Rambo (joined 6 weeks prior) visited 6 company sites across the U.S., and confirmed the existing company strategy is working; no substantial strategic changes are planned.
• Rambo’s key priorities are strengthening customer and investor relationships, delivering on-time product commitments, driving continued organic and inorganic growth, and optimizing cross-company capability integration to unlock full enterprise value.
• Two new leadership appointments: Doug Lorendo joined as Chief Growth Officer, and Stephanie Sawhill assumed the role of Chief Technologist to evolve the company’s technology roadmap.

Core Operational Results

• The company achieved record Q1 results: $151 million in total revenue, $64 million in gross profit, $45 million in adjusted EBITDA, and an all-time high backlog of over $1 billion, growing 61% year-over-year.
• The January 2026 acquisition of Semen Composites and MSC contributed two months of revenue this quarter, accounting for approximately half of the quarter’s year-over-year revenue growth; integration of the acquisition is progressing well, and has already expanded the company’s advanced materials technologies, IP, and manufacturing capabilities across all end markets.
• Carmen supplied key subsystems for the successful April 2026 Artemis II moon mission; the restructured Artemis program with annual missions planned through and beyond 2029 has increased customer engagement and contracting momentum.

Demand Environment

• The U.S. President’s FY2027 defense budget request includes sharp procurement funding increases for key programs Carmen supports: tripling of SM6 funding, near quadrupling of PRISM funding, over eight-fold increases for SM3, PAC3, and FAB funding, $53 billion for drone dominance (including $14 billion for counter-UAS development and deployment), over 30% funding growth for Columbia and Virginia class submarine programs, and $71 billion for the U.S. Space Force with $4.2 billion allocated to launch services.
• A prime contractor for PAC-3, PRISM, and THAAD recently reached a multi-year framework agreement with the U.S. government to triple PAC-3 production and quadruple THAAD and PRISM production, driving demand for Carmen’s components.
• The company has received written contingent multi-year demand commitments from four of its largest space and defense customers, covering payload protection, propulsion, and space launch core stage products. These commitments have a 4-7 year time horizon, could generate over $1 billion in total revenue when fully realized, and provide greater certainty for capacity and investment planning.
• Proposal volume and total proposal value for integrated next-generation systems have increased substantially as customer demand grows.

Capacity Expansion

• The company is investing in advanced production technology to boost output, quality, and productivity, with deployments continuing through FY2026.
• The new 200,000 square foot Salt Lake City facility remains on track for initial production in Q4 FY2026, and will maintain the company’s capacity ahead of growing demand for nozzles and UAS launchers.
• A large logistics and polymer facility is under completion at the Gulfport site to support continued regional growth.
• AI is already being used to improve the efficiency and accuracy of business processes, and the company is exploring broader AI applications for enterprise transformation.

Carmen Space and Defense reported total Q1 FY2026 revenue of $151 million, a 51% year-over-year increase. The financial performance for each segment is as follows:

1. Hypersonics and strategic missile defense: Revenue of $36 million, a 19% year-over-year increase, contributing 24% of total Q1 revenue. Growth was driven by increases in strategic programs.
2. Space and launch: Revenue of $44 million, a 29% year-over-year increase (29.5% including organic growth adjustments), contributing 29% of total Q1 revenue. Growth was driven by order timing for critical content supporting legacy and emerging launch providers and spacecraft.
3. Tactical missiles and integrated defense systems: Revenue of $45 million, a 25% year-over-year increase, contributing 30% of total Q1 revenue. Growth stemmed from demand for advanced drone and loitering munition systems and increased production output for GMLRS.
4. Maritime defense systems (newly added segment post-acquisition): Revenue of $26 million, contributing 17% of total Q1 revenue, primarily from ongoing submarine and LCAC programs.

• Management raised full year FY2026 guidance from prior levels, now expecting total revenue of $720 to $735 million and adjusted EBITDA of $208.5 to $219.5 million, representing 54% year-over-year revenue growth and 47% year-over-year adjusted EBITDA growth, with a 29.4% adjusted EBITDA margin at the guidance midpoint.
• Half of full year FY2026 revenue growth is expected to come from organic sources, and half from inorganic acquisitions, with the increased guidance primarily impacting the second half of FY2026.
• The company currently has approximately 90% revenue visibility to the midpoint of its full year FY2026 guidance, with the remaining 10% expected from anticipated contracts on existing programs.
• Management expects to pursue 1-2 targeted bolt-on acquisitions per year, at similar valuation multiples to past transactions, to complement organic growth, with a possible additional small acquisition before the end of FY2026.
• Leverage is expected to decline to approximately 3x adjusted EBITDA by the end of FY2026, with full year capital expenditure projected at ~5% of total revenue, or approximately $36 million, and a statutory tax rate of 26.5%.
• Substantial generational demand for the company’s solutions, growing proposal volume, and multi-year customer commitments provide a clear runway for continued growth momentum through 2027 and beyond.

• The FY2027 U.S. defense budget request is only the first step of the congressional appropriations process, which takes multiple months and may result in compromises, changes, or delayed funding obligations that could impact projected revenue.
• As production ramps up, ongoing supply chain management is required to secure necessary raw material and component inputs, though management does not currently foresee any significant constraints.
• While the company has secured written contingent customer commitments, these commitments are conditional on customers receiving final contracts from their end customers, so full projected revenue from these commitments is not guaranteed.

Q: The analyst asks for clarification on the nature of the new multi-year customer framework agreements, including whether there are formal volume minimums, and what the timeline for revenue growth from these agreements will look like, following reports of production acceleration from other defense industry peers. / A: Management explains the commitments vary by customer and cover both defense and space and launch programs, delivered via non-finalized forms including letters of intent and draft long-term agreements. All commitments reflect customer requests for longer-term production ramps, with consistent year-over-year volume increases expected. The stated volumes act as a floor with potential upside, as customers are forecasting conservatively to account for overall supply chain ramp uncertainty.

Q: The analyst asks what portions of the $54 billion FY2027 drone dominance funding allocation Carmen can participate in, and where the company’s capability sweet spot lies across small to large unmanned systems including collaborative combat aircraft (CCA). / A: Management confirms demand is already growing for Carmen’s core UAS launch systems and related components, strengthened by recent conflict in the Middle East, and the new Salt Lake City capacity will enable the company to meet this rising demand. While opportunities exist across the full spectrum of unmanned systems, Carmen’s existing heritage integrating payloads onto UAVs and larger fixed-wing aircraft positions it to pursue additional opportunities for payload integration and dispensing on larger systems, though these opportunities are still emerging.

Q: The analyst asks what acquisition target profiles Carmen prioritizes, including whether the company is targeting geographic expansion, additional capacity, or new end markets, and which end market will be the first focus for new capability additions. / A: Management states the company prioritizes small bolt-on acquisitions that are close adjacencies to Carmen’s existing capabilities. Key focus areas include expanding advanced materials capabilities, and incremental expansion in missiles and munitions. Management notes there may be another small acquisition completed before the end of FY2026.

Q: The analyst asks whether the 90% full year 2026 revenue visibility includes any revenue from the new multi-year framework agreements. / A: Management confirms the 90% visibility includes a mix of existing forecasted work and some modest upside from the new framework agreements for 2026. The majority of the revenue from the new commitments falls in 2027 through 2029 and beyond, providing substantially greater long-term visibility.