Kratos Defense & Security Solutions (KTOS) Financial Report Summaries

Risks

• The U.S. Government provides a significant portion of our revenue, and our business could be adversely affected by changes in the fiscal policies of the U.S. Government and other governmental entities.
• Significant delays or reductions in appropriations for our programs and U.S. Government funding more broadly may negatively impact our business and programs and could have a material adverse effect on our financial position, results of operations and/or cash flows.
• If we fail to establish and maintain important relationships with government agencies and prime contractors, our ability to successfully maintain and develop new business may be adversely affected.
• The loss of one or more of our largest customers, programs, or applications could adversely affect our results of operations.
• Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise, or are dependent upon factors not wholly within our control. Failure to meet these obligations could adversely affect our profitability and future prospects. Early termination of client contracts or contract penalties could adversely affect our results of operations.
• If our subcontractors or suppliers fail to perform their contractual obligations, our performance and reputation as a contractor and our ability to obtain future business could suffer.
• Our earnings and profitability depend, in part, on subcontractor and supplier performance and product availability.
• We face intense competition from many competitors that have greater resources than we do, which could result in price reductions, reduced profitability or loss of market share.
• Our business is dependent upon our ability to keep pace with the latest technological changes.
• We may not receive the full amounts estimated under the contracts in our backlog, which could reduce our revenue in future periods below the levels anticipated. This makes backlog an uncertain indicator of future operating results.
• A preference for minority-owned, small and small disadvantaged businesses could impact our ability to be a prime contractor and limit our opportunity to work as a subcontractor on certain governmental procurements.
• U.S. Government in-sourcing could result in loss of business opportunities and personnel.
• If we experience systems or service failure, our reputation could be harmed and our customers could assert claims against us for damages or refunds.
• disrupt our business or cause significant injuries, which could adversely affect our financial results.
• Our cash flow and profitability could be reduced if expenditures are incurred prior to the final receipt of a contract.
• We have incurred and may continue to incur goodwill impairment charges in our reporting entities, which could harm our profitability.
• Failure to properly manage projects may result in additional costs or claims.
• We use estimates when accounting for contracts, and any changes in such estimates could have an adverse effect on our profitability and our overall financial performance.
• We expect to incur substantial research and development costs and devote significant resources to identifying and developing new products and services, which could significantly reduce our profitability and may never result in revenue to us.
• If we are unable to manage our growth, our business and financial results could suffer.
• We may need to invest in new information technology systems and infrastructure to scale our operations.
• The loss of any member of our senior management could impair our relationships with U.S. Government customers and disrupt the management of our business.
• If we fail to attract and retain skilled employees or employees with the necessary National Security clearances, we might not be able to perform under our contracts or win new business.
• Cybersecurity breaches or disruptions of our information technology systems could negatively impact our operations.
• Our operations expose us to the risk of material environmental liabilities.
• Changes in foreign tax laws and regulations could expose us to additional tax liabilities and could adversely affect our financial results.
• Our international business exposes us to additional risks.
• We have substantial long-term borrowings, which could adversely affect our cash flow, financial condition and business.
• We and our subsidiaries may incur more debt, which may increase the risks associated with our leverage, including our ability to service our indebtedness.
• A portion of our business is conducted through foreign subsidiaries, and the failure to generate sufficient cash flow from these subsidiaries, or otherwise repatriate or receive cash from these subsidiaries, could result in our inability to repay our indebtedness.
• The agreements governing our debt impose significant operating and financial restrictions on us and our subsidiaries that may prevent us and our subsidiaries from pursuing certain business opportunities and restrict our ability to operate our business.
• The discontinuance of LIBOR and the replacement of LIBOR with an alternative reference rate may adversely affect our borrowing costs and could impact our business and results of operations.
• We may be unable to protect our intellectual property rights.
• Disclosure of trade secrets could cause harm to our business.
• We may be harmed by intellectual property infringement claims.
• Our failure to comply with complex procurement laws and regulations could cause us to lose business and subject us to a variety of penalties.
• Our contracts and administrative processes and systems are subject to audits and cost adjustments by the U.S. Government, which could reduce our revenue, disrupt our business or otherwise adversely affect our results of operations.
• We are subject to environmental laws and potential exposure to environmental liabilities. This may affect our ability to develop, sell or rent our property or to borrow money where such property is required to be used as collateral.
• Natural disasters or severe weather conditions could disrupt our business and result in loss of revenue or higher expenses.
• Some of our contracts with the U.S. Government are classified, which may limit investor insight into portions of our business.