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    KRMN
    Earnings call· Jun 2026(Q2 FY26)

    Karman Holdings Q2 FY26 earnings call KRMN

    Aug 6, 2026 Source

    Executive summary

    Karman Holdings Q2 FY26 — Record Backlog and Strong Organic Growth Drive Raised Outlook

    Karman Holdings delivered a strong Q2 FY26, marked by robust organic growth and record backlog, leading to a raised full-year outlook. The company is strategically integrating acquisitions and expanding capacity to capitalize on generational demand in defense and space, while increasing focus on free cash flow management and operational efficiency for sustained multi-year growth.

    Highlights

    5

    • Sequential revenue growth of 20.4% from Q1 to Q2 FY26.

    • Year-over-year quarterly organic growth of 24.4% in Q2 FY26.

    • Record backlog of $1.3 billion, providing 95% visibility to full-year revenue guidance midpoint.

    • Record quarterly bookings of nearly $500 million, primarily supporting 2027 and beyond.

    • Raised full-year FY26 revenue guidance to $730M-$745M and adjusted EBITDA to $215M-$222.5M.

    Concerns

    3

    • Cash used in operations was $4 million in Q2 FY26, driven by increases in accounts receivable and contract assets.

    • Expected normalization of H2 FY26 EBITDA margins to a slightly lower level due to a higher percentage of cost-plus contracts from recent acquisitions.

    • Material weakness remediation controls expected to be fully implemented by end of 2026, with testing of operating effectiveness continuing into early 2027.

    Guidance & targets

    11
    CategoryTargetConfidence
    Full-year revenue
    $730 million to $745 million
    high materiality
    High
    Full-year non-GAAP adjusted EBITDA
    $215 million to $222.5 million
    high materiality
    High
    Full-year organic growth
    25% or higher
    high materiality
    High
    Free cash flow
    $15 million to $20 million
    medium materiality
    Medium
    Statutory tax rate
    26.5%
    low materiality
    High
    Capital expenditures
    5% of revenue, roughly $37 million
    medium materiality
    High
    Walker acquisition completion
    by year-end
    medium materiality
    Medium
    Material weakness remediation
    fully implemented by the end of 2026, with testing of operating effectiveness expected to continue into early 2027
    medium materiality
    Medium
    H2 revenue split
    approximately a 47%-53% split between Q3 and Q4
    low materiality
    High
    Annual organic growth
    20% to 25%
    high materiality
    High
    Adjusted EBITDA margins
    up to 30%
    high materiality
    Medium

    Segment performance

    4
    SegmentRevenueYoYQoQMargin
    Tactical Missiles and IDS
    Led by strength in core production programs, including unmanned and counter-UAS and emerging programs transitioning into production.
    YTD Revenue: $108 millionYTD Growth: 41%Q2 Revenue Mix: 35%
    		$63 million55%——
    Maritime Defense Systems
    Driven by legacy and next-generation submarine programs.
    YTD Revenue: $60 millionQ2 Revenue Mix: 18%
    		$34 million———
    Hypersonics and Strategic Missile Defense
    Driven by growth in key interceptor program production and increased production associated with a new surface-to-surface missile system.
    YTD Revenue: $79 millionYTD Growth: 22%Q2 Revenue Mix: 24%
    		$43 million24%——
    Space and Launch
    Supported by content for both legacy and new launch providers, partially offset by customer order timing associated with shifting launch schedules.
    YTD Revenue: $86 millionYTD Growth: 17%Q2 Revenue Mix: 23%
    		$42 million6%——

    Operational metrics

    22
    Revenue
    $182 millionup 58% year-over-year; 20.4% sequentially
    Q2 FY26

    Record financial results.

    Gross profit
    $78 millionup 66%
    Q2 FY26

    Record financial results.

    Net income
    $14 millionup 106% year-over-year
    Q2 FY26

    Record financial results.

    Adjusted EBITDA
    $55 millionup 55% year-over-year
    Q2 FY26

    Record financial results.

    Adjusted EPS
    $0.14up 43% year-over-year
    Q2 FY26

    Record financial results.

    Organic revenue growth
    24.4%year-over-year
    Q2 FY26

    Supporting annual 20% to 25% organic revenue growth target.

    Organic revenue growth (since IPO)
    19% to 36%
    5 full quarters

    Range of quarterly year-over-year organic growth since IPO.

    Revenue
    $333 millionup 55% year-over-year
    YTD June 30

    For the 6 months ending June 30.

    Gross profit
    $142 millionup 64% year-over-year
    YTD June 30

    For the 6 months ending June 30.

    Net income
    $22 millionup from $2 million a year ago
    YTD June 30

    For the 6 months ending June 30.

    Adjusted EBITDA
    $99 millionup 51% year-over-year
    YTD June 30

    For the 6 months ending June 30.

    Adjusted EPS
    $0.25up 56% year-over-year
    YTD June 30

    For the 6 months ending June 30.

    Cash and cash equivalents
    $52 millionup $18 million from year-end
    Q2 FY26

    Balance sheet item.

    Cash used in operations
    $4 million
    Q2 FY26

    Driven primarily by increases in accounts receivable and contract assets.

    Capital expenditures
    $22 million
    YTD FY26

    Supporting growth across nozzle capacity, UAS launches, launch vehicles, maritime programs, and spacecraft manufacturing. Slightly higher run rate than 5% guidance for the year.

    Net debt
    $752 million
    Q2 FY26

    Balance sheet item.

    Leverage ratio
    3.7x
    Q2 FY26

    Expected to be approximately 3.5x by year-end subject to Walker acquisition regulatory approval.

    Term Loan B interest rate reduction
    50 basis points
    since quarter end

    Repriced Term Loan B.

    Revolving credit facility
    $150 millionincreased from $50 million
    current

    Provides greater strategic flexibility.

    EBITDA margins
    29.8%
    H1 FY26

    Stronger in H1 due to a more favorable contract mix, expected to normalize in H2.

    Customer count
    >150
    current

    Increased diversification.

    Supplier concentration
    No 1 vendor >10%
    current

    Increased diversification in supply chain.

    Industry KPIs

    5
    MetricValueDetails
    Book to bill ratio—
    Total company backlog$1.3 billionUSD
    Defense program awards—
    Program segment backlog—
    Production capacity expansion—

    Orderbook & backlog

    2
    Total Backlog$1.3 billionQ2 FY26

    up 65% compared to the end of fiscal year '25

    Gives 95% visibility to the mid-point of full year revenue guidance. Much of it supports 2027 and beyond.

    Quarterly Bookingsnearly $500 millionQ2 FY26

    record quarterly bookings

    Most of it to support 2027 and beyond. Includes a large space and launch LTA.

    Deals & partnerships

    2
    Walker Precision EngineeringEstablishes a beachhead position in Europe with relationships across the spectrum of European defense primes.GBP 70 million (approximately $94 million)

    Integration of Seemann and MSC is on track, delivering higher-than-expected margin.

    Space and Launch customerLarge long-term agreement (LTA) for supply.slightly below $250 million5 years

    Converted from a contingent agreement received earlier this year.

    Capital programs

    3
    Salt Lake City manufacturing centerunderway

    Benefit: 200,000 square foot factory; will support Tactical Missile and IDS and Hypersonic and SMD customers, release meaningful capacity in Seattle area.

    Initial fit-up, first production equipment arrived last month. Initial production capability expected in Q4 2026.

    Enhanced spacecraft production capabilitiesunderway

    Benefit: Support significant space launch award.

    Installation of advanced equipment is underway.

    MG Resin developmentunderway
    Funding: receiving funding

    Benefit: Alternative solution for high-temperature material demand, for use as an ablative material in solid rocket motor nozzles and for carbon carbons.

    Working to qualify proprietary MG Resin.

    Risks & headwinds

    3
    Material weakness remediationthrough early 2027

    Necessary controls to be fully implemented by end of 2026, with testing of operating effectiveness expected to continue into early 2027.

    Mitigation: Implementing necessary controls, transition to PwC as new audit firm.

    Cash used in operations due to growthQ2 FY26

    $4 million cash used in operations in Q2 FY26, driven by increases in accounts receivable and contract assets.

    Mitigation: Increased emphasis on cash management, free cash flow metrics included in executive compensation program starting 2027. Expect volume and cash generation to accelerate in H2 FY26.

    EBITDA margin normalization in H2H2 FY26

    H1 FY26 EBITDA margins were 29.8%, full-year guide midpoint is 29.7%. Expected downtick in H2 due to higher percentage of lower-margin cost-plus contracts from recent acquisitions.

    Mitigation: Focus on optimizing the integrated company to find financial flexibility for price reduction, business reinvestment, or margin improvement.

    What to watch in Q3 FY26

    5

    Conversion of remaining contingent supply agreements

    Q3 FY26 / by year-end
    Current3 agreements still contingent
    TargetFirm contracts in place

    Why it matters

    These represent significant future revenue streams and validate Karman's ability to secure large production contracts.

    We continue to have active discussions with our prime customers on those 3 contingent supply agreements. We've made progress on all 3 of those, and we are continuing to anticipate as we did prior quarter that those would have firm agreements in place between now and the end of the year.

    Q&A highlights

    7

    Could you provide more color on the new LTA within Space and Launch, including timing and expected contribution to the top line?

    The LTA was previously a contingent agreement for approximately $250 million, which came in slightly below that value. It's a 5-year agreement, with some revenue expected in the second half of this year and the rest feathering in level across the next 4.5 years.

    “This is one we had mentioned in our prior quarter earnings call. We talked about a contingent supply agreement that we were actively negotiating in Space and Launch. And at that time, I think we had mentioned approximately a $250 million value for that LTA. That did come through just a bit below that number, but not too far from it. And it's a 5-year agreement.”

    asked by Peter Arment · answered by Jonathan Rambeau

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Integration & Value Creation

    Karman's strategy involves deep integration of acquired businesses to unlock greater value, moving production and combining capabilities across sites, rather than managing them as separate entities. This approach optimizes for long-term value over short-term organic growth metrics, as exemplified by transitioning space and launch products to Gulfport and creating new revenue streams within recently acquired businesses like Cedar City, Utah energetics.

    02

    Generational Demand & Second Sourcing Opportunities

    The company is experiencing "generational demand" driven by the urgent need to replenish munitions and interceptor stockpiles, with some customers citing demand increases by a factor of 10. Karman views the industry trend of seeking second sources as a net opportunity, leveraging its proactive investments in capacity to become a reliable partner and gain share in new programs, such as separation motors, small propulsion systems, SRM cases, and shroud systems for interceptors.

    03

    Operational Excellence & Capacity Expansion

    Karman is focused on driving operational excellence through technology, including the Karman operating system and AI initiatives like "Project Moonshot" to accelerate design and engineering workflows. Significant capacity expansion is underway, including the initial fit-up of a 200,000 sq ft factory in Salt Lake City with production capability online by Q4 2026, and enhanced spacecraft production capabilities slated for deployment in Q4 2026.

    04

    Financial Flexibility & Cash Management Focus

    Management is increasing its focus on free cash flow, incorporating it into executive compensation for 2027, and aiming to create financial flexibility. This flexibility can be used for potential price reductions, business reinvestment, or margin improvement. This comes as the company is in a high-growth cycle requiring significant working capital for receivables, inventory, and contract assets, and CapEx for capacity expansion.

    05

    Supply Chain Resilience & Material Qualification

    Karman maintains strong supply chain visibility, with no single vendor making up more than 10% of accounts payable, and customers controlling the supply of key high-temperature composite materials. The company is also working to qualify its proprietary MG Resin as an alternative solution for high-temperature material demand, receiving funding for its development for solid rocket motor nozzles and carbon-carbon applications, with full qualification expected in 1-2 years at a platform level.

    AI-generated summary of the company’s earnings call. Not investment advice.