Karman Holdings Inc.

Previous wording

We specialize in the rapid design, development and production of critical, next-generation system solutions for launch vehicle, satellite, spacecraft, missile defense, hypersonic and UAS customers. 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 and space sector initiatives. We estimate that no single program accounted for more than 11% of sales in the three months ended March 31, 2025 or the three months ended March 31, 2024, with revenue from over 100 active programs supporting current production and next-generation space, missile, hypersonic, and defense applications.

Current wording

We specialize in the rapid design, development and production of critical, next-generation system solutions for launch vehicle, satellite, spacecraft, missile defense, hypersonic and Unmanned Aircraft Systems (“UAS”) customers. 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 11% of sales in the six months ended June 30, 2025 or the six months ended June 30, 2024, with revenue from over 100 active programs supporting current production and next-generation space, missile, hypersonic, and defense applications.

Previous wording

Our solutions are deployed across three growing, core end markets including: Hypersonics and Strategic Missile Defense, Tactical Missile and Integrated Defense Systems, and Space and Launch. We currently serve a diverse customer base supported by long-term relationships and engineering partnerships and believe that our differentiated technical design, intellectual property, and track record of mission success provides us with a value proposition that proves difficult to replicate by current competitors and potential future entrants. By utilizing our vertically integrated, concept-to-production capabilities, we have created a business model aimed at creating long-term, sustainable value for our customers, the programs we support, and the warfighter.

Current wording

Our solutions are deployed across three growing, core end markets including: Hypersonics and Strategic Missile Defense, Tactical Missiles and Integrated Defense Systems, and Space and Launch. We currently serve a diverse customer base supported by long-term relationships and engineering partnerships and believe that our differentiated technical design, intellectual property, and track record of mission success provides us with a value proposition that proves difficult to replicate by current competitors and potential future entrants. By utilizing our vertically integrated, concept-to-production capabilities, we have created a business model aimed at creating long-term, sustainable value for our customers, the programs we support, and the warfighter.

Previous wording

We are focused on delivering innovative and customized solutions for our customers, with more than 204 multi-discipline engineers supporting our comprehensive in-house design and manufacturing capabilities. Our unique set of capabilities is supported by decades of experience across advanced material design, proprietary digital models, material science and testing, and manufacturing expertise. We believe that this collection of vertically integrated capabilities provides a strong value proposition for our customers who seek to simplify their supply chains, increase their speed to market, and reduce costs – all while benefitting from quality integrated system solutions. Our differentiated market offering is supported by significant sole- and single-source contract positions.

Current wording

We are focused on delivering innovative and customized solutions for our customers, with more than 200 multi-discipline engineers supporting our comprehensive in-house design and manufacturing capabilities. Our unique set of capabilities is supported by decades of experience across advanced material design, proprietary digital models, material science and testing, and manufacturing expertise. We believe that this collection of vertically integrated capabilities provides a strong value proposition for our customers who seek to simplify their supply chains, increase their speed to market, and reduce costs – all while benefitting from quality integrated system solutions. Our differentiated market offering is supported by significant sole- and single-source contract positions.

Previous wording

We currently operate as a corporation under the name Karman Holdings Inc. Prior to our initial public offering (the “IPO”), we converted from a Delaware limited liability company named TCFIII Spaceco Holdings LLC. In the conversion, all of our outstanding equity interests and all outstanding P Unites were converted into 123.8 million shares of common stock of Karman Holdings Inc.

Current wording

We currently operate as a corporation under the name Karman Holdings Inc. Prior to our initial public offering (the “IPO”), we converted from a Delaware limited liability company named TCFIII Spaceco Holdings LLC. In the conversion, all of our outstanding equity interests and all outstanding P Units were converted into 123.8 million shares of common stock of Karman Holdings Inc.

Previous wording

We consider the acquisition of businesses and investments that we believe will expand or complement our current portfolio and allow access to new customers or technologies. We also may explore the divestiture of businesses that no longer meet our needs or strategy or that could perform better outside of our organization.

Current wording

We consider acquisitions of businesses and investments that we believe will expand or complement our current portfolio and allow access to new customers or technologies. We also may explore the divestiture of businesses that no longer meet our needs or strategy or that could perform better outside of our organization.

Previous wording

Comparison of the Three Months Ended March 31, 2025 and 2024

Current wording

Comparison of the Three and Six Months Ended June 30, 2025 and 2024

Previous wording

The following table sets forth, for the three months ended March 31, 2025 and 2024, certain operating data of the Company, including presentation of the changes in amounts between reporting periods:

Current wording

The following table sets forth, for the periods presented, certain operating data of the Company, including presentation of the changes in amounts between reporting periods:

Previous wording

The increase in revenues for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 was primarily attributable to organic growth across all end-markets, Tactical Missile and Integrated Defense Systems, followed by Hypersonics and Strategic Missile Defense and Space and Launch.

Current wording

The increase in revenue for the three months and six months ended June 30, 2025 as compared to the same periods in the prior year, was primarily attributable to organic growth across all end-markets, Tactical Missiles and Integrated Defense Systems, followed by Space and Launch and Hypersonics and Strategic Missile Defense.

Previous wording

As described in additional detail below, the results of operations include the following disaggregation of end market revenues:

Current wording

As described in additional detail below, the results of operations include the following disaggregation of end market revenue:

Previous wording

Growth in Hypersonics and Strategic Missile Defense revenue was driven by a net increase in funded development and production programs, primarily progress on the Next Generation Interceptor (“NGI”) program, partially offset by a decrease in revenue from another development program that did not advance to production.

Current wording

Growth in Hypersonics and Strategic Missile Defense revenue for the three and six months ended June 30, 2025 from the comparable periods in the prior year, was driven by a net increase in funded development and production programs, primarily on the Next Generation Interceptor (“NGI”) program and classified programs, partially offset by a decrease in revenue from another development program due to the timing of program funding.

Previous wording

Gross margin increased by 4.5% to 39.4% for the three months ended March 31, 2025, from 34.9% for the three months ended March 31, 2024, which was primarily driven by operating leverage and improved operating efficiency.

Current wording

Gross margin was relatively flat for the three months ended June 30, 2025 compared to the same period last year. Gross margin increased 2.3% for the six months ended June 30, 2025 compared to the same period last year, which was primarily driven by operating leverage and improved operating efficiency.

Previous wording

General and administrative expenses increased to $23.3 million for the three months ended March 31, 2025 from $10.1 million for the three months ended March 31, 2024. General and administrative expenses and the related percentage changes for the three months ended March 31, 2025 and 2024 were as follows:

Current wording

General and administrative expenses and the related percentage changes for the three and six months ended June 30, 2025 and 2024 were as follows:

Previous wording

Interest expense, net for the three months ended March 31, 2025 decreased by $0.7 million, or (5.7%), to $11.4 million compared to $12.1 million during the three month ended March 31, 2024. Both the Revolving Credit Facility and Term Note payable are variable interest rate loans with an applicable spread. For additional information related to debt, see Note 6, Debt, in the Notes to the Condensed Consolidated Financial Statements.

Current wording

Interest expense, net decreased by $1.5 million, or 11.3%, and $2.2 million, or 8.6%, for the three and six months ended June 30, 2025 from the comparative period of the prior year. Both the Revolving Credit Facility and Term Note payable are variable interest rate loans with an applicable spread. The decrease was primarily driven by a lower year-over-year interest rate, partially offset by the $2.5 million write-off of unamortized issuance costs related to the extinguishment of the TCW Term Note in the second quarter of 2025. For additional information related to debt, see Note 6, Debt, in the Notes to the Condensed Consolidated Financial Statements.

Previous wording

Other income (expense) for the three months ended March 31, 2025 and 2024 was ($0.1) million and $0.8 million, respectively. The difference between periods was primarily attributable to the gain from a settlement of a shareholder note in the three months ended March 31, 2024.

Current wording

Other income for each of the three months ended June 30, 2025 and 2024 was immaterial. Other income for the six months ended June 30, 2025 and 2024 was $0.3 million and $0.8 million, respectively. The difference between periods was primarily attributable to the gain from a settlement of a shareholder note in the six months ended June 30, 2024.

Previous wording

The provision for income taxes was $3.3 million and $0.1 million for the three months ended March 31, 2025 and 2024, respectively. The increase in provision for income taxes was attributable to net loss during the three months ended 31, 2025. For additional information regarding provisions for taxes, see Note 13, Provision for Income Taxes, in the Notes to the Condensed Consolidated Financial Statements.

Current wording

The provision for income taxes was $1.8 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively. The provision for income taxes was $5.1 million and $0.4 million for the six months ended June 30, 2025 and 2024, respectively. The increase in the provision for income taxes for the three months and six months ended June 30, 2025 from the comparative periods of the prior year was attributable to discrete items, including the change in entity classification, non-deductible officers’ compensation, and interest and penalties related to prior year tax returns and uncertain tax positions. For additional information regarding provisions for taxes, see Note 13, Provision for Income Taxes, in the Notes to the Condensed Consolidated Financial Statements.

Previous wording

EBITDA/Adjusted EBITDA - We define EBITDA as our net income before income taxes, depreciation and amortization and interest expense. References to Adjusted EBITDA refer to EBITDA plus, as applicable for each period any non-cash share-based compensation expenses, including non-cash gains and losses on equity, non-cash gains and losses on derivative instruments associated with equity, termination expenses, and personnel expenses from discontinued operations. Additionally, Adjusted EBITDA excludes certain nonrecurring costs that management excludes in contemplation of budget decisions and are not costs of operating the business such as entity wide re-branding initiatives or acquisition integration costs. Adjusted EBITDA excludes the costs associated with lender and administrative agent fees associated with one-off amendments, as these are not directly related to the operations of the business and are non-recurring. Lastly, Management excludes other non-recurring costs including net gains from disposition of assets, non-cash gains and losses from any hedging arrangements, non-cash impairment losses, business interruption insurance proceeds, and any non-recurring transaction expenses.

Current wording

Adjusted EBITDA refers to EBITDA plus, as applicable for each period, adjustments for certain items management believes are not indicative of ongoing operations. Adjusted EBITDA excludes non-cash share-based compensation expenses. Additionally, Adjusted EBITDA excludes certain nonrecurring costs that management excludes in contemplation of budget decisions and are not costs of operating the business, such as entity wide re-branding initiatives or acquisition integration costs, and lender and administrative agent fees associated with one-off amendments. Lastly, Adjusted EBITDA excludes other non-recurring costs including gains or losses from disposition of assets, non-cash impairment losses, non-recurring transaction expenses and other charges or gains that the Company believes are not part of the ongoing operations of its business. The resulting expense or benefit from these other non-recurring costs is inconsistent in amount and frequency.

Previous wording

Represents legal and due diligence fees incurred in connection with planned and completed acquisitions, which are required to be expensed as incurred. During the periods presented, these costs were incurred for due diligence and legal fees related to an acquisition of equipment and intangible assets. Additionally, the Company incurred certain professional service fees related to its IPO that did not meet the requirements to be deferred issuance costs, these costs are considered non-recurring and outside the ordinary course of business, and therefore are not indicative of ongoing operating performance. During the three months ended March 31, 2025, the $1.9 million was mostly related to such IPO related expenses.

Current wording

Represents legal and due diligence fees incurred in connection with planned and completed acquisitions, which are required to be expensed as incurred. For the three months ended June 30, 2025, these expenses related to the MTI and ISP acquisitions. Additionally, the Company incurred certain professional service fees related to its IPO that did not meet the requirements to be deferred issuance costs. These costs are considered non-recurring and outside the ordinary course of business, and therefore are not indicative of ongoing operating performance, which was reflected in the six months ended June 30, 2025.

Previous wording

These costs include company-wide system implementation expenses and Company re-branding costs. This category also includes post-acquisition integration costs, and employee expenses related to acquisitions or restructuring activities.

Current wording

Includes company-wide system implementation expenses and Company re-branding costs. This category also includes post-acquisition integration costs, and employee expenses related to acquisitions or restructuring activities.

Previous wording

Reflects share-based compensation expenses associated with the Company’s P Units and Phantom Units that were fully vested in connection with the completion of the Company’s IPO in February 2025.

Current wording

Reflects share-based compensation expenses associated with the Company’s P Units and Phantom Units. These Units were fully vested in connection with the completion of the Company’s IPO in February 2025.

Previous wording

For the impairment test, we first assess qualitative factors, macroeconomic conditions, industry and market considerations, triggering events, cost factors, and overall financial performance, to determine whether it is necessary to perform a quantitative goodwill impairment test. Alternatively, we may bypass the qualitative assessment for some or all of its reporting units and apply the quantitative impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). For the quantitative impairment test we estimate the fair value by weighting the results from the income approach and the market approach. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. For purposes of testing goodwill for impairment, we operate as a single reporting unit. There was no impairment of our goodwill during the three months ended March 31, 2025 or 2024.

Current wording

For the impairment test, we first assess qualitative factors, macroeconomic conditions, industry and market considerations, triggering events, cost factors, and overall financial performance, to determine whether it is necessary to perform a quantitative goodwill impairment test. Alternatively, we may bypass the qualitative assessment for some or all of its reporting units and apply the quantitative impairment test. If determined to be necessary, the quantitative impairment test shall be used to identify goodwill impairment and measure the amount of a goodwill impairment loss to be recognized (if any). For the quantitative impairment test we estimate the fair value by weighting the results from the income approach and the market approach. These valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, terminal value, discount rates, and comparable multiples from publicly traded companies in our industry and require us to make certain assumptions and estimates regarding industry economic factors and future profitability of its business. For purposes of testing goodwill for impairment, we operate as a single reporting unit. There was no impairment of our goodwill during the six months ended June 30, 2025 or 2024.

Previous wording

Acquired intangible assets include: customer relationships, customer production backlog, patents and know-how. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits of such assets are consumed. We assess amortized intangible assets for impairment when events or circumstances suggest that the carrying values may not be recoverable. This assessment involves comparing the carrying value of the assets to their undiscounted expected future cash flows. If the total undiscounted future cash flows are less than the carrying amount, we recognize an impairment loss equal to the difference between the carrying amount and the fair value of the assets. Determining fair value requires management to make estimates and judgments based on various factors, including projected revenues and associated earnings. We did not recognize any impairment losses during the three months ended March 31, 2025 or 2024.

Current wording

Acquired intangible assets include: customer relationships, customer production backlog, patents and know-how. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method which approximates the pattern in which the economic benefits of such assets are consumed. We assess amortized intangible assets for impairment when events or circumstances suggest that the carrying values may not be recoverable. This assessment involves comparing the carrying value of the assets to their undiscounted expected future cash flows. If the total undiscounted future cash flows are less than the carrying amount, we recognize an impairment loss equal to the difference between the carrying amount and the fair value of the assets. Determining fair value requires management to make estimates and judgments based on various factors, including projected revenues and associated earnings. We did not recognize any impairment losses during the three or six months ended June 30, 2025 and 2024.

Previous wording

As a privately-held company, we were not required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes- Oxley Act (“Section 404”). As a public company, we will be subject to significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. In addition, we will be required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.

Current wording

As a privately-held company, we were not required to evaluate our internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes- Oxley Act (“Section 404”). As a public company, we are subject to significant requirements for enhanced financial reporting and internal controls. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company. In addition, we are required, pursuant to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting.

Previous wording

In April, 2025, we entered into a new Credit Agreement (the “Citi Credit Agreement”) by and among Karman, the lenders from time to time party thereto and Citibank, N.A. (“Citi”), as the administrative agent for the lenders, and, substantially contemporaneously therewith, certain direct and indirect subsidiaries of Karman are expected to terminate all outstanding commitments and repay all outstanding obligations under the TCW Credit Agreement. This transaction resulted in the extinguishment of the aforementioned TCW Term Note and facilities under the TCW Credit Agreement and the issuance of a new $300.0 million term loan and $50.0 million revolving line of credit. The new term loan will mature on April 1, 2032 and the new revolving line of credit will mature on April 1, 2030.

Current wording

In April, 2025, we entered into a new Credit Agreement (the “Citi Credit Agreement”) by and among Karman, the lenders from time to time party thereto and Citibank, N.A. (“Citi”), as the administrative agent for the lenders, and, substantially contemporaneously therewith, certain direct and indirect subsidiaries of Karman terminated all outstanding commitments and repaid all outstanding obligations under the TCW Credit Agreement. This transaction resulted in the extinguishment of the aforementioned TCW Term Note and facilities under the TCW Credit Agreement and the issuance of a new $300.0 million term loan and $50.0 million revolving line of credit. The new term loan will mature on April 1, 2032 and the new revolving line of credit will mature on April 1, 2030.

Previous wording

Based on our current outlook, we believe that net cash provided by operating activities and net proceeds of $147.3 million from the offering will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to expand our business, including by any acquisitions we may make, we may in the future require additional working capital for increased costs.

Current wording

We believe that our cash and cash equivalents as of June 30, 2025, together with available borrowings under the Citi Credit Agreement and expected net cash provided by operating activities will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to grow our business, including by any acquisitions we may make, we may in the future require additional working capital in the future.

Previous wording

Net cash provided by operating activities for the three months ended March 31, 2024 was $3.1 million, primarily consisting of net income of $2.1 million, non-cash items of $6.2 million and a net change in our operating assets and liabilities of $5.3 million. Change in our operating assets and liabilities was primarily driven by a decrease in accounts payable, accruals and income tax payable of 5.1 million, which was mainly due timing of payment.

Current wording

Net cash used in operating activities for the six months ended June 30, 2025 was $31.0 million , primarily consisting of net income of $2.0 million, non-cash item of $23.3 million and a net change in our operating assets and liabilities, excluding $11.7 million change related to acquisitions related accrued expenses, of $37.4 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $26.4 million, a decrease in contract liabilities of $10.1 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts payable, accruals and income tax payable of $18.9 million, which was mainly due to timing of payments.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 was $13.6 million , primarily consisting of net loss of $4.8 million, non-cash item of $13.0 million and a net change in our operating assets and liabilities of $21.8 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $14.9 million, a decrease in contract liabilities of $3.9 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts payable, accruals and income tax payable of $20.0 million, which was mainly due to timing of payment and a decrease in accounts receivable of $7.5 million, which was due to timing of invoicing and improved collection.

Current wording

Net cash provided by operating activities for the six months ended June 30, 2024 was $9.2 million, primarily consisting of net income of $6.7 million, non-cash items of $11.7 million and a net change in our operating assets and liabilities of $9.2 million. Change in our operating assets and liabilities was primarily driven by an increase in contract assets of $11.4 million, a decrease in contract liabilities of $5.5 million, which was mainly due to initial and subsequent measurement of contracts with customers, changes in business volume, and progress of existing contracts. Change in our operating assets and liabilities was also driven by a decrease in accounts receivable of $3.4 million,which was due to timing of invoicing and improved collection and a decrease in inventory of $5.8 million which was due to increased production activity to support higher sales volume.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 was $11.0 million, as a result of purchases of property and equipment.

Current wording

Net cash used in investing activities for the six months ended June 30, 2025 was $140.9 million, as a result of MTI and ISP acquisitions of $126.3 million in total and investment in convertible note of $6.0 million.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 was $32.3 million, which was principally attributable to the RMS acquisition.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 was $37.4 million, which was principally attributable to the RMS acquisition.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2025 was $126.8 million, which was primarily driven by net proceeds from our IPO of $153.8 million, partially offset by repayment of revolving line of credit of $25.0 million and repayment of notes payable of $2.3 million.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2025 was $187.8 million, which was primarily driven by net proceeds from our IPO of $153.8 million, proceeds from our new Citi credit facilities of $398.5 million (net of debt issuance costs), partially offset by repayment of our old TCW credit facilities of $337.1 million.

Previous wording

Net cash provided by financing activities for the three months ended March 31, 2024 was $31.0 million, which was primarily driven by net proceeds from increasing our TCW Term Note by $34 million (net of debt issuance costs), partially offset by repayment of TCW Term Note of $2.7 million.

Current wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $27.4 million, which was primarily driven by net proceeds from increasing our TCW Term Note by $34.0 million (net of debt issuance costs), partially offset by repayment of TCW Term Note of $5.0 million.

Previous wording

On a consolidated basis, lease activity for the three months ended March 31, 2025 and 2024 were as follows:

Current wording

On a consolidated basis, lease activity for the three and six months ended June 30, 2025 and 2024 were as follows:

Previous wording

On a consolidated basis, supplemental cash flow information for the three months ended March 31, 2025 and 2024 were as follows:

Current wording

On a consolidated basis, supplemental cash flow information for the six months ended June 30, 2025 and 2024 were as follows: