Karman (NYSE:KRMN) reported record fiscal first-quarter results and raised its full-year outlook, citing broad-based growth across its legacy markets, contributions from recent acquisitions and increasing demand tied to defense, space launch and maritime programs.
Chief Executive Officer Jon Rambeau, who joined the company six weeks before the call, said Karman delivered “another set of record results” in the quarter, including quarterly revenue of $151 million, record gross profit of $64 million, record adjusted EBITDA of $45 million and an all-time high backlog of more than $1 billion.
“We’re off to a strong start in 2026, and we believe market dynamics point to continued opportunity through the end of the decade and beyond,” Rambeau said.
Revenue rises 51% as all legacy markets grow
Chief Financial Officer Mike Willis said first-quarter revenue rose 51% from the year-earlier period to $151 million. Gross profit increased 62% to $64 million, representing a gross margin of 42%. Net income was $8 million, compared with a $5 million loss in the prior-year quarter.
Adjusted EBITDA increased nearly 50% year over year to $45 million, while adjusted earnings per diluted share more than doubled to $0.11 from $0.05. Backlog increased 61% year over year to more than $1 billion.
Willis said each of Karman’s three legacy end markets posted year-over-year growth:
- Hypersonics and Strategic Missile Defense: Revenue grew 19% to $36 million, driven by increases in strategic programs.
- Space and Launch: Revenue rose 29% to $44 million, supported by the timing of orders for critical content for legacy and emerging launch providers and spacecraft.
- Tactical Missiles and Integrated Defense Systems: Revenue increased 25% to $45 million, primarily due to demand tied to advanced drone and loitering munitions systems and higher production output for GMLRS.
- Maritime Defense Systems: The newly added market contributed $26 million, primarily from ongoing submarine and LCAC programs.
Karman’s first-quarter revenue mix was 30% tactical missiles and integrated defense systems, 29% space and launch, 24% hypersonics and strategic missile defense, and 17% maritime defense systems.
Rambeau said the January acquisition of Seemann Composites and Materials Sciences Corporation contributed two months of revenue in the quarter and accounted for about half of the company’s year-over-year quarterly revenue growth.
Guidance raised on backlog and demand visibility
Karman raised its fiscal 2026 outlook following the stronger-than-expected start to the year. The company now expects full-year revenue of $720 million to $735 million and non-GAAP adjusted EBITDA of $208.5 million to $219.5 million, with a 29.4% margin at the midpoint.
Rambeau said the updated forecast implies 54% year-over-year revenue growth and 47% adjusted EBITDA growth. He said Karman expects its 2026 revenue growth to be evenly split between organic and inorganic sources, with the higher guidance affecting the second half of the year.
The company said its backlog, combined with first-quarter revenue, provides about 90% visibility to the midpoint of its full-year revenue guidance. The remaining 10% is expected from anticipated contracts on existing programs.
Willis said Karman ended the quarter with $74 million in cash and cash equivalents, up $40 million from year-end 2025. Capital expenditures totaled $7 million in the quarter and supported growth in nozzle capacity, UAS launchers, launch vehicles and spacecraft manufacturing capabilities. Total debt stood at $758 million, and the company expects leverage to decline to approximately 3 times adjusted EBITDA by the end of 2026.
Defense budget request points to procurement growth
Chief Operating Officer Jonathan Beaudoin said the demand environment remains “very favorable” and pointed to the President’s fiscal 2027 defense budget request as an early indicator of potential procurement increases for programs Karman supports.
Beaudoin said the request includes proposed sharp funding increases in hypersonics and strategic missile defense programs, including a tripling of SM-6, a near quadrupling of PrSM, and more than eight-fold increases in SM-3, PAC-3 and THAAD funding.
He also noted that the prime contractor for PAC-3, PrSM and THAAD recently announced a multi-year framework agreement with the U.S. government to triple PAC-3 production and quadruple production of THAAD and PrSM.
In tactical missiles and integrated defense systems, Beaudoin cited more than $53 billion in the request for drone dominance, including more than $14 billion for Counter-UAS development and deployment. He said recent conflict in the Middle East has driven demand for Karman’s UAS launch systems production.
For maritime defense, Beaudoin said funding for Columbia-class and Virginia-class submarine programs is set to rise by more than 30%, from $23 billion in 2026 to more than $31 billion in 2027. In space and launch, he said the request includes $71 billion for the Space Force, including $4.2 billion for launch services and a target of 22 national security launches in fiscal 2027.
Capacity expansion and customer commitments
Karman is investing in additional capacity to support expected demand. Beaudoin said the company is installing advanced production technology to improve output, quality and productivity, with deployments continuing through the year.
He said Karman’s current capacity for nozzles and UAS launchers places it ahead of demand, and that its new Salt Lake City facility is expected to add nearly 200,000 square feet of operating floor space. The facility remains on track for initial production capability in the fourth quarter. The company is also completing a logistics and polymer facility at its Gulfport site.
Rambeau said Karman has received written contingent demand commitments from four of its largest customers in the space and defense sectors. The commitments cover payload protection, propulsion and space launch core stage products and guarantee certain multi-year production levels, subject to those customers receiving contracts from their own end customers.
The commitments span four to seven years and have the potential to generate more than $1 billion in revenue if fully realized, Rambeau said.
During the question-and-answer session, Rambeau said the commitments vary by customer and include letters of intent and draft long-term agreements that have not yet been finalized. He said Karman is seeing customers request longer-term production ramps, with volumes increasing consistently year over year.
Asked about supply chain constraints, Beaudoin said Karman is engaging with suppliers and passing along demand signals to secure inputs. “Right now we’re not foreseeing any significant constraints there, but it is something that we manage on a regular basis,” he said.
Rambeau also said Karman continues to maintain a pipeline of potential acquisition candidates, focused on close adjacencies to current capabilities, including advanced materials and missiles and munitions. He said he would not be surprised to see another small bolt-on acquisition before year-end, though he did not provide specifics.
About Karman (NYSE:KRMN)
We specialize in the upfront design, testing, manufacturing, and sale of mission-critical systems for existing and emerging missile and defense, and space programs. Our integrated payload protection, propulsion, and interstage system solutions are deployed across a wide variety of existing and emerging programs supporting important Department of Defense (“DoD”) and space sector initiatives. We estimate that no single program accounted for more than 10% of sales for the nine months ended September 30, 2024 or the twelve months ended December 31, 2023, with revenue from over 100 active programs supporting current production and next-generation space, missile, hypersonic, and defense applications.
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