KRATOS DEFENSE SECURITY SOLUTIONS INC

The following list summarizes the compensation decisions that our Compensation Committee made in 2023 for fiscal year 2024 executive compensation. Decisions for our named executive officer base salaries and equity incentive awards effective for the start of fiscal year 2024 were made in December 2023.

•After numerous years of being frozen, the base salaries of three division presidents were increased in order to align their salaries to reflect the performance and growth of their divisions, each of their increased roles and responsibilities, and to be consistent with other Company division presidents. Excluding the base salaries of the three division presidents, the base salaries of all other NEOs were frozen in 2024.

•Issued an approximate 50%/50% mix (at target) of performance‑based and time‑based RSUs to incentivize the Company’s executive officers to build long‑term equity value and to align the interests of our executive officers with our stockholders’ interests. The Compensation Committee previously evaluated the long-term equity-based incentive grants in the Company’s peer group and over the past several years has more closely aligned such Kratos grants with the equity packages granted in the Company’s peer group. The Compensation Committee continued the equity package grants consistent with the modifications made in prior years, whereby performance-based RSUs granted in January 2024 vest based on the Company’s Adjusted EBITDA growth during a five-year period, with 33.3% vesting for every 10% increase in Adjusted EBITDA, as compared to the Company’s Adjusted EBITDA for 2023.

•The performance-based RSUs may vest at the end of each year if the performance goals are satisfied within a five-year period. Time‑based RSUs vest ratably on each of the first five anniversaries of the date of grant, which the Compensation Committee believes provides a strong long-term retention tool and long-term alignment with stockholder interests. The Compensation Committee believes that the long-term growth, value, and success of the Company is best measured by growth in Adjusted EBITDA, on which the Company is primarily valued, based on the reasons described below and based on feedback from the Company’s stockholder outreach and communication program. The Compensation Committee believes that growth in Adjusted EBITDA reflects the quality of the Company’s revenue growth; the Company’s return on internal investments made; the profit contribution and quality of that profit from growth in revenues; the expected leverage on the Company’s fixed overhead, manufacturing, research, development and SG&A infrastructure as the Company grows; and the expected increase in profits, cash flow and stockholder returns as strategic initiatives and programs successfully transition from investment to development to production.

•The Compensation Committee believes that the use of long-term Adjusted EBITDA growth as a performance measure appropriately incentivizes, as it reflects the appropriate long-term balance between investment and new product and system developments made by the Company, while also requiring management focus on adequate and expected long-term returns for Kratos stockholders. The Compensation Committee believes that long-term growth metrics of the Company, including revenue and Adjusted EBITDA, closely align with the growth profile expectations of the Company’s stockholders, including as noted above from our routine stockholder outreach and communication program.

•Since the Compensation Committee began issuing performance-based LTI grants in 2020, which account for approximately 50% of the LTI grants (or between 60% and 80% of the executive’s target annual compensation), the Company has reported growth of Adjusted EBITDA of 23.4% as of December 31, 2023 and 36.7% as of December 29, 2024, respectively, as compared to the baseline Adjusted EBITDA in 2019, and with a recent annual sequential 10.8% growth in Adjusted EBITDA from 2023, while also continuing to make significant internal investments including rocket and hypersonic systems and unmanned systems enhancements and initiatives.

•Continued its practice of eliminating excise tax gross-ups in any new change in control agreements or renewals or material amendments of existing change in control agreements.

•Maintained double trigger vesting upon a change in control (requiring a change in control and a certain common stock closing price increase from the date of grant) on all equity awards granted in 2024, subject to any applicable employment or change of control agreements.

•Continued the Company’s Anti-Hedging and Anti-Pledging Policy.

•Continued Stock Ownership Target Guideline for the Chief Executive Officer of five times the Chief Executive Officer’s base compensation. For the purposes of this guideline, stock ownership includes stock purchased on the open market or through the Employee Stock Purchase Plan, stock held through the Company’s 401(k) plan, and vested RSUs.

•Evaluated performance goals set in 2024 for executive management to achieve their annual cash incentive bonuses.

•Maintained the Incentive Compensation Recoupment Policy for executive officers, which has a broader application than the clawback requirements under the Sarbanes-Oxley Act. Additionally, we updated our compensation recovery policy in 2023 to meet the requirements under Rule 10D-1 under the Securities Exchange Act of 1934, as amended, and the corresponding rules adopted by the NASDAQ Stock Market.