Kratos

Kratos Defense & Security Solutions

Investment Thesis

Kratos Defense & Security Solutions, Inc. is a formidable force in the defense and national security sectors, leveraging its deep technological expertise to deliver affordable, mission-critical solutions ^[2]^[3]^[6]. The company is strategically positioned to capitalize on increasing defense budgets and the growing space sector, evidenced by its projected revenue increase and successful funding rounds ^[1]. Kratos's model of rapid manufacturing and acquisition, combined with its diverse portfolio spanning hypersonic flight, unmanned systems, and crucial space infrastructure, presents a compelling investment thesis. Its engagement in programs like the SDA's AFCGI system and its use of Rocket Lab's HASTE for hypersonic testing highlight its expanding footprint and validated capabilities ^[2]^[5].

Key Differentiators

• Focus on affordability and rapid manufacturing for defense and national security needs, enabling agile response to evolving threats ^[2]^[3]^[6].
• Broad and integrated technology portfolio including hypersonic vehicles, unmanned aerial drone systems, C5ISR, and satellite ground systems ^[6].
• Strategic acquisition strategy to enhance capabilities, exemplified by the recent $356.3 million acquisition of Orbit Technologies, bolstering its satellite mobile systems offerings ^[2]^[3].
• Key player in critical defense testing programs, including hypersonic vehicle development and launch services through partners like Rocket Lab's HASTE for programs like MACH-TB 2.0 ^[2]^[4].

Risk Factors

• High reliance on government contracts, which are subject to budget fluctuations and policy changes ^[1].
• Intense competition in the defense technology and aerospace sectors, requiring continuous innovation and cost control ^[6].
• Integration risks associated with acquisitions, such as the Orbit Technologies deal, which require successful operational and cultural alignment ^[2]^[3].

Rocket Lab Relationship

Kratos represents a significant strategic customer for Rocket Lab, particularly in its launch services segment. Kratos utilizes Rocket Lab's HASTE rocket for its hypersonic testing programs, such as MACH-TB 2.0, requiring dedicated suborbital launch capabilities ^[2]. This relationship generates direct revenue for Rocket Lab's launch business and validates the HASTE vehicle's utility for critical defense clients, enhancing Rocket Lab's market position in hypersonic testing. The potential for repeat launches on HASTE signals strong repeat business potential. Furthermore, Kratos's own expansion into space systems, including defense-oriented ground integration for the SDA ^[5], could potentially create future opportunities for Rocket Lab's spacecraft components or mission services if Kratos chooses to outsource specific elements or require partners for complex integration. The partnership underscores Rocket Lab's ability to serve high-value defense contractors.