KRATOS DEFENSE & SECURITY SOLUTIONS, INC.

Previous wording

Kratos is a technology, products, system and software company addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements. At Kratos, affordability is a technology, and we utilize proven, leading edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ approach designed to reduce cost, schedule and risk, enabling us to be first to market with cost effective solutions. We believe that Kratos is known as the innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low cost future manufacturing, which is a value add competitive differentiator for our large traditional prime system integrator partners and also to our government and commercial customers. Kratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe our probability of win is high and any investment required by Kratos is within our capital resource comfort level. We intend to partner and team with a large, traditional system integrator when our assessment of probability of win is greater or required investment is beyond Kratos comfort level. Kratos’ primary business areas include, virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, command, control, communication, computing, combat, intelligence surveillance and reconnaissance (C5ISR) and microwave electronic products for missile, radar, air defense, missile defense, space, satellite, counter unmanned aircraft systems (CUAS), directed energy, communication and other systems, and virtual & augmented reality training systems for the warfighter. We believe that there is a generational recapitalization of the defense industrial base and weapon systems occurring globally, including with the United States and its allies, to address individual and potential collective peer and near peer threats, including Russia, China, North Korea and Iran. The Company currently has record levels of backlog and opportunity pipeline. The Company is currently making significant capital, property, plant, equipment and other internally funded investments to address its backlog, current opportunity pipeline, and expected and potential future program and contract awards, including from or with the Department of

Current wording

Kratos is a technology, products, system and software company addressing the defense, national security, and commercial markets. Kratos makes true internally funded research, development, capital and other investments, to rapidly develop, produce and field solutions that address our customers’ mission critical needs and requirements. At Kratos, affordability is a technology, and we utilize proven, leading-edge approaches and technology, not unproven bleeding edge approaches or technology, with Kratos’ approach designed to reduce cost, schedule and risk, enabling us to be first to market with cost effective solutions. We believe that Kratos is known as the innovative disruptive change agent in the industry, a company that is an expert in designing products and systems up front for successful rapid, large quantity, low-cost future manufacturing, which is a value add competitive differentiator for our large traditional prime system integrator partners and also to our government and commercial customers. Kratos intends to pursue program and contract opportunities as the prime or lead contractor when we believe our probability of win is high and any investment required by Kratos is within our capital resource comfort level. We intend to partner and team with a large, traditional system integrator when our assessment of probability of win is greater or required investment is beyond Kratos comfort level. Kratos’ primary business areas include, virtualized ground systems for satellites and space vehicles including software for command & control (C2) and telemetry, tracking and control (TT&C), jet powered unmanned aerial drone systems, hypersonic vehicles and rocket systems, propulsion systems for drones, missiles, loitering munitions, supersonic systems, space craft and launch systems, command, control, communication, computing, combat, intelligence surveillance and reconnaissance (C5ISR) and microwave electronic products for missile, radar, air defense, missile defense, space, satellite, counter unmanned aircraft systems (CUAS), directed energy, communication and other systems, and virtual & augmented reality training systems for the warfighter. We believe that there is a generational recapitalization of the defense industrial base and weapon systems occurring globally, including with the United States and its allies, to address individual and potential collective peer and near peer threats, including Russia, China, North Korea and Iran. The Company currently has record levels of backlog and opportunity pipeline. The Company is currently making significant capital, property, plant, equipment and other internally funded investments including the procurement of supply chain components for 3,000 jet engines we expect to produce in the next 15 months to address backlog, expected customer demand, current opportunity pipeline, and expected and potential future program and contract awards, including from or with the Department of War, traditional legacy prime …

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Previous wording

On April 3, 2026, the Administration released the Fiscal Year 2027 Defense request proposal. This proposal seeks a $1.5 trillion defense expenditure, including a large discretionary base funding of approximately $1.15 trillion and an additional $350 billion of mandatory funding through a new reconciliation bill. The fiscal 2027 Defense Request and related Reconciliation Bill are expected to include significant funding for Golden Dome, Space and Satellite communications, unmanned systems and artificial intelligence, missiles, radars and air defense systems, the nuclear triad and many other systems, initiatives and programs.

Current wording

On April 3, 2026, the Administration released the Fiscal Year 2027 Defense request proposal. This proposal seeks a $1.5 trillion defense expenditure, including a large discretionary base funding of approximately $1.15 trillion and an additional $350 billion of mandatory funding through a new reconciliation bill. The fiscal 2027 Defense Request and related Reconciliation Bill are expected to include significant funding for Golden Dome, Space and Satellite communications, unmanned systems and artificial intelligence, missiles, radars and air defense systems, the nuclear triad and many other systems, initiatives and programs. Additionally, the Administration recently submitted an $88 billion supplemental funding request for FY 2026, of which $67 billion is intended to address costs associated with the Iran conflict and other defense priorities. The FY 2027 defense budget proposal and the 2026 supplemental funding request are subject to Congressional approval, and it is not assured when or if they will be enacted at the levels proposed or that increases in funding will result into increased orders for our programs.

Previous wording

We believe continued budget and deficit funding pressures (which are expected), CRAs (which are also expected), future Federal Government debt ceiling issues, or current and potential Federal Government shutdowns could have serious negative consequences for the security of our country and the defense industrial base, including the Company and the related customers, employees, suppliers, investors, and communities that rely on companies in the defense industrial base. It is possible that budget and program decisions made in such an uncertain environment would have long-term implications for our Company and the entire defense industry. Additionally, funding for certain programs, including those in which we currently participate or are pursuing, may be reduced, delayed or cancelled, and budget uncertainty or funding cuts globally could adversely affect the viability of our customers, partners, teammates, subcontractors, suppliers, and our employee base.

Current wording

We believe continued budget and deficit funding pressures (which are expected), CRAs (which are also expected), future Federal Government debt ceiling issues, and potential Federal Government shutdowns could have serious negative consequences for the security of our country and the defense industrial base, including the Company and the related customers, employees, suppliers, investors, and communities that rely on companies in the defense industrial base. It is possible that budget and program decisions made in such an uncertain environment would have long-term implications for our Company and the entire defense industry. Additionally, funding for certain programs, including those in which we currently participate or are pursuing, may be reduced, delayed or cancelled, and budget uncertainty or funding cuts globally could adversely affect the viability of our customers, partners, teammates, subcontractors, suppliers, and our employee base.

Previous wording

We also continue to be affected by various unfavorable macroeconomic conditions including adverse supply chain disruptions that continue throughout the industry and for Kratos, and related delays in the receipt and delivery of materials, parts, supplies, etc., which in certain instances and for certain items is significant. To mitigate the impact of these delays, we have implemented advanced and larger lot purchases of certain materials and parts, which has resulted in an increased use of our working capital, which is expected to continue. In addition, inflation and the related increased costs of inputs needed to execute our business, including materials, parts, supplies, consultants, subcontractors, vendors, etc., have significantly increased our business costs and have adversely impacted our operations, profit margins and financial forecasts.

Current wording

We also continue to be affected by various unfavorable macroeconomic conditions including adverse supply chain disruptions as well as cost increases that continue throughout the industry and for Kratos, and related delays in the receipt and delivery of materials, parts, supplies, etc., including the impact of the increased demand for certain electronics and SD cards resulting from consumption by AI data centers, which in certain instances and for certain items is significant. To mitigate the impact of these delays, we have implemented advanced and larger lot purchases of certain materials and parts, which has resulted in an increased use of our working capital, which is expected to continue. In addition, inflation and the related increased costs of inputs needed to execute our business, including materials, parts, supplies, consultants, subcontractors, vendors, etc., have significantly increased our business costs and have adversely impacted our operations, profit margins and financial forecasts.

Previous wording

Revenues increased $68.4 million to $371.0 million for the three months ended March 29, 2026 from $302.6 million for the three months ended March 30, 2025. Revenues in our KGS segment increased $48.9 million primarily due to increased revenues in our Defense Rocket Support business driven by our hypersonic systems business, as well as growth in our microwave products businesses and turbine technologies businesses, and the contribution of $7.3 million in revenue from the recent acquisition of Nomad Global Communication Solutions, and $13.3 million in revenue from the recent acquisition of Orbit Technologies. Revenues in our US segment were $82.6 million for the three months ended March 29, 2026, an increase of $19.5 million from $63.1 million in the three months ended March 30, 2025, primarily as a result of Valkyrie aircraft related production during the three months ended March 29, 2026.

Current wording

Revenues increased $107.3 million to $458.8 million for the three months ended June 28, 2026 from $351.5 million for the three months ended June 29, 2025. Revenues in our KGS segment increased $101.4 million primarily due to increased revenues in our Defense Rocket Support business driven by our hypersonic systems business, as well as growth in our turbine technologies, microwave products and space and training businesses, and the contribution of $18.8 million in revenue from the recent acquisition of Nomad Global Communication Solutions, and $21.4 million in revenue from the recent acquisition of Orbit Technologies. Revenues in our US segment were $79.1 million for the three months ended June 28, 2026, an increase of $5.9 million from $73.2 million in the three months ended June 29, 2025, primarily as a result of Valkyrie aircraft related production during the three months ended June 28, 2026.

Previous wording

Product sales increased $36.8 million to $237.0 million for the three months ended March 29, 2026 from $200.2 million for the three months ended March 30, 2025, primarily as a result of increased production in our KGS segment. As a percentage of total consolidated revenues, product sales were 63.9% for the three months ended March 29, 2026 as compared to 66.2% for the three months ended March 30, 2025. Service revenues increased by $31.6 million to $134.0 million for the three months ended March 29, 2026 from $102.4 million for the three months ended March 30, 2025, primarily related to increased activity in our defense rocket support business in our KGS segment.

Current wording

Product sales increased $72.5 million to $289.1 million for the three months ended June 28, 2026 from $216.6 million for the three months ended June 29, 2025, primarily due to the acquisitions of Nomad and Orbit, as well as increased production in our KGS and US segments. As a percentage of total consolidated revenues, product sales were 63.0% for the three months ended June 28, 2026 as compared to 61.6% for the three months ended June 29, 2025. Service revenues increased by $34.8 million to $169.7 million for the three months ended June 28, 2026 from $134.9 million for the three months ended June 29, 2025, primarily related to increased activity in our defense rocket support business in our KGS segment.

Previous wording

Gross Margin. Gross margin decreased to 24.2% for the three months ended March 29, 2026 from 24.3% for the three months ended March 30, 2025. Margins on services decreased to 25.9% for the three months ended March 29, 2026 from 26.1% for the three months ended March 30, 2025. Margins on products decreased to 23.2% for the three months ended March 29, 2026 from 23.4% for the three months ended March 30, 2025. Margins in the KGS segment decreased to 26.2% for the three months ended March 29, 2026 from 26.6% for the three months ended March 30, 2025. Margins in the US segment increased to 17.1% for the three months ended March 29, 2026 from 15.8% for the three months ended March 30, 2025.

Current wording

Gross Margin. Gross margin increased to 21.8% for the three months ended June 28, 2026 from 21.0% for the three months ended June 29, 2025. Margins on services increased to 22.5% for the three months ended June 28, 2026 from 20.5% for the three months ended June 29, 2025. Margins on products increased to 21.4% for the three months ended June 28, 2026 from 21.3% for the three months ended June 29, 2025. Margins in the KGS segment increased to 22.9% for the three months ended June 28, 2026 from 22.3% for the three months ended June 29, 2025. Margins in the US segment increased to 16.7% for the three months ended June 28, 2026 from 15.8% for the three months ended June 29, 2025.

Previous wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses increased $15.3 million to $72.3 million for the three months ended March 29, 2026 from $57.0 million for the three months ended March 30, 2025 due primarily to the increased stock compensation expense, revenue volume and headcount. As a percentage of revenues, SG&A increased to 19.5% at March 29, 2026 from 18.8% at March 30, 2025.

Current wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses increased $27.4 million to $87.3 million for the three months ended June 28, 2026 from $59.9 million for the three months ended June 29, 2025 due primarily to increased amortization expense of $8.8 million related to the acquisitions of Nomad and Orbit, increased stock compensation expense of $7.7 million, and the impact of increased revenue volume and headcount. As a percentage of revenues, SG&A increased to 19.0% at June 28, 2026 from 17.0% at June 29, 2025.

Previous wording

Total Other Income (Expense), Net. The total other income (expense), net was $5.1 million for the three months ended March 29, 2026 and $(1.2) million for the three months ended March 30, 2025. The net change of $6.3 million between the three months ended March 30, 2025 and the three months ended March 29, 2026 is primarily related to the reduction of interest expense from the payoff of our long-term debt on July 2, 2025 and an increase in interest income on cash balances, which increased following our June 27, 2025 and February 26, 2026 public offerings.

Current wording

Total Other Income, Net. The total other income, net was $8.6 million for the three months ended June 28, 2026 and $0.9 million for the three months ended June 29, 2025. The net change of $7.7 million between the three months ended June 29, 2025 and the three months ended June 28, 2026 is primarily related to the reduction of interest expense from the payoff of our long-term debt on July 2, 2025 and an increase in interest income on cash balances, which increased following our June 27, 2025 and February 26, 2026 public offerings.

Previous wording

Provision for Income Taxes. The benefit for income taxes was $2.1 million for the three months ended March 29, 2026 and a provision of $0.9 million for the three months ended March 30, 2025. The provision for income taxes for the three months ended March 29, 2026 and three months ended March 30, 2025 included a benefit of $7.3 million and $1.6 million, respectively, for stock compensation related items. For the three months ended March 29, 2026 and March 30, 2025, the Company utilized the annual effective tax rate method based on the forecasted information provided.

Current wording

Provision for Income Taxes. The provision for income taxes for the three months ended June 28, 2026 and the three months ended June 29, 2025 was $2.6 million and $1.7 million, respectively. The provision for income taxes for the three months ended June 28, 2026 and three months ended June 29, 2025 included a benefit of $1.7 million and $0.6 million, respectively, for stock compensation related items. For the three months ended June 28, 2026 and June 29, 2025, the Company utilized the annual effective tax rate method based on the forecasted information provided.

Previous wording

Cost of Revenues. Cost of revenues increased $52.4 million to $281.4 million for the three months ended March 29, 2026 from $229.0 million for the three months ended March 30, 2025. The increase in cost of revenues was primarily related to the increased revenues as well the impact of increased labor and material costs.

Current wording

Cost of Revenues. Cost of revenues increased $133.4 million to $640.1 million for the six months ended June 28, 2026 from $506.7 million for the six months ended June 29, 2025. The increase in cost of revenues was primarily a result of the increase in revenues discussed above as well as the impact of increased labor and material costs.

Previous wording

Research and Development (“R&D”) Expenses. R&D expenses increased to $10.7 million for the three months ended March 29, 2026 from $10.0 million for March 30, 2025. As a percentage of revenues, R&D decreased to 2.9% for the three months ended March 29, 2026 from 3.3% for the three months ended March 30, 2025. R&D expenses are made by the Company, typically in conjunction with our customers, for the Company to achieve a “first to market” position with our products or technology. We also invest in R&D expenses to achieve market leading “designed in” positions on major programs, platforms or systems.

Current wording

Research and Development (“R&D”) Expenses. R&D expenses were $24.3 million for the six months ended June 28, 2026 and $20.2 million for the six months ended June 29, 2025. As a percentage of revenues, R&D expenses decreased to 2.9% for the six months ended June 28, 2026 from 3.1% for the six months ended June 29, 2025. R&D expenses are made by the Company, typically in conjunction with our customers, for the Company to achieve a “first to market” position with our products or technology. We also invest in R&D expenses to achieve market leading “designed in” positions on major programs, platforms or systems.

Previous wording

On March 29, 2026, we had approximately $2.011 billion of total backlog, of which $1.457 billion was funded. We expect to recognize approximately 37% of the remaining total backlog as revenue in fiscal year 2026, an additional 25% in fiscal year 2027 and the balance thereafter. Our comparable total backlog balance as of March 30, 2025, was approximately $1.508 billion, of which $1.174 billion was funded. Backlog as of March 29, 2026 as compared to March 30, 2025 has increased primarily as a result of contract awards in our Space, Satellite and Training, Defense Rocket Support Services and Unmanned Systems businesses, as well as the impact of the acquisitions of Nomad and Orbit which contributed approximately $184.4 million to the increase in backlog.

Current wording

On June 28, 2026, we had approximately $2.084 billion of total backlog, of which $1.572 billion was funded. We expect to recognize approximately 35% of the remaining total backlog as revenue in fiscal year 2026, an additional 35% in fiscal year 2027 and the balance thereafter. Our comparable total backlog balance as of June 29, 2025, was approximately $1.414 billion, of which $1.125 billion was funded. Backlog as of June 28, 2026 as compared to June 29, 2025 has increased primarily as a result of contract awards in our Space, Satellite and Training, Defense Rocket Support Services, Microwave Products and Unmanned Systems businesses, as well as the impact of the acquisitions of Nomad and Orbit which contributed approximately $243.4 million to the increase in backlog.

Previous wording

As of March 29, 2026, we had cash and cash equivalents of $1,464.3 million compared with cash and cash equivalents of $560.6 million as of December 28, 2025, which includes $80.2 million and $30.3 million, respectively, of cash and cash equivalents held by our foreign subsidiaries. We are not presently aware of any restrictions on the repatriation of these funds, however, earnings of these foreign subsidiaries are essentially considered permanently invested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States they could be repatriated, and their repatriation into the United States may cause us to incur additional foreign withholding taxes. We do not currently intend to repatriate these earnings.

Current wording

As of June 28, 2026, we had cash and cash equivalents of $1,437.6 million compared with cash and cash equivalents of $560.6 million as of December 28, 2025, which includes $78.1 million and $30.3 million, respectively, of cash and cash equivalents held by our foreign subsidiaries. We are not presently aware of any restrictions on the repatriation of these funds, however, earnings of these foreign subsidiaries are essentially considered permanently invested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States they could be repatriated, and their repatriation into the United States may cause us to incur additional foreign withholding taxes. We do not currently intend to repatriate these earnings.

Previous wording

Our total long-term debt at March 29, 2026 remains at zero reflecting the extinguishment on July 2, 2025 of all outstanding Term Loan A debt under the 2022 Credit Facility. The then outstanding Term Loan A aggregate principal balance of $177.5 million, plus accrued interest, was paid in full utilizing a portion of the proceeds we received from the June 27, 2025 public equity offering that generated net proceeds of approximately $555.9 million, which is described further in Note 11 to the accompanying unaudited condensed consolidated financial statements. The new undrawn $300.0 million revolving credit facility (see Note 9) remains active and available to the Company less approximately $31.2 million of letters of credit outstanding.

Current wording

Our total long-term debt at June 28, 2026 remains at zero reflecting the extinguishment on July 2, 2025 of all outstanding Term Loan A debt under the 2022 Credit Facility. The then outstanding Term Loan A aggregate principal balance of $177.5 million, plus accrued interest, was paid in full utilizing a portion of the proceeds we received from the June 27, 2025 public equity offering that generated net proceeds of approximately $555.9 million, which is described further in Note 11 to the accompanying unaudited condensed consolidated financial statements. The new undrawn $300.0 million revolving credit facility (see Note 9) remains active and available to the Company less approximately $2.1 million of domestic letters of credit outstanding. Foreign letters of credit outstanding of $29.0 million do not impact the availability of the Revolving Credit Facility.

Previous wording

We use our operating cash flow to finance trade accounts receivable, fund necessary increases in inventory including increasing inventory stock levels and advance buys in larger lot sizes to gain pricing benefits where possible, in order to mitigate the impact of supply chain disruptions and price increases, utilize working capital to fund revenue growth, fund prepayments required for long lead items necessary for production, fund internal investments of engineering and software development costs, fund capital expenditures, our internal research and development investments and our ongoing operations, service our debt, enhance our security infrastructure, including cyber security infrastructure, and make strategic acquisitions. Financing trade accounts receivable is necessary because, on average, our customers do not pay us as quickly as we pay our vendors and employees for their goods and services because a number of our receivables are contractually billable and due to us only when certain contractual milestones are achieved. Financing increases in inventory balances are necessary to fulfill shipment requirements to meet delivery schedules of our customers, to fund advanced inventory purchases to mitigate supply chain disruptions, and to fund production for work in progress and increased inventory levels and prepayments for long-lead materials related to production and revenue growth. These financing requirements have increased and have recently negatively impacted our operating cash flows due to actions we have taken to advance inventory purchases in an attempt to mitigate supply chain disruptions and to bolster our inventory levels. For the three months ended March 29, 2026, approximately $26.5 million of operating cash flow use was related to increases in prepaid expenses and other assets which also include certain vendor prepayments and deposits related to the procurement of long-lead materials and inventory and certain investments we are making for unmanned systems initiatives. Cash from continuing operations is primarily derived from our customer contracts in progress and associated changes in working capital components. Our days sales outstanding (“DSO”) have increased from 124 days as of December 28, 2025 to 130 days at March 29, 2026, primarily reflecting the timing of outstanding contractual billing milestones and our internal revenue growth as well as the impact of the recent Nomad and Orbit acquisitions. Our DSO's are impacted by the achievement of contractual billing milestones such as equipment shipments and deliveries on certain products, the receipt of contractual funding, and for certain flight requirements that must be fulfilled on certain aerial target programs, or final milestone billings which are not due until completion on certain projects, and therefore we are unable to contractually bill for amounts outstanding related to those milestones at this time.

Current wording

We use our operating cash flow to finance trade accounts receivable, fund necessary increases in inventory including increasing inventory stock levels and advance buys in larger lot sizes to gain pricing benefits where possible, in order to mitigate the impact of supply chain disruptions and price increases, utilize working capital to fund revenue growth, fund prepayments required for long lead items necessary for production, fund internal investments of engineering and software development costs, fund capital expenditures, our internal research and development investments and our ongoing operations, service our debt, enhance our security infrastructure, including cyber security infrastructure, and make strategic acquisitions. Financing trade accounts receivable is necessary because, on average, our customers do not pay us as quickly as we pay our vendors and employees for their goods and services because a number of our receivables are contractually billable and due to us only when certain contractual milestones are achieved. Financing increases in inventory balances are necessary to fulfill shipment requirements to meet delivery schedules of our customers, to fund advanced inventory purchases to mitigate supply chain disruptions and fluctuations in demand for critical components, and to fund production for work in progress and increased inventory levels and prepayments for long-lead materials related to production and revenue growth. These financing requirements have increased and have recently negatively impacted our operating cash flows due to actions we have taken to advance inventory purchases in an attempt to mitigate supply chain disruptions and to bolster our inventory levels. For the six months ended June 28, 2026, approximately $36.6 million of operating cash flow use was related to increases in prepaid expenses and other assets which also include certain vendor prepayments and deposits related to the procurement of long-lead materials and inventory and certain investments we are making for unmanned systems initiatives. Cash from continuing operations is primarily derived from our customer contracts in progress and associated changes in working capital components. Our days sales outstanding (“DSO”) have decreased from 124 days as of December 28, 2025 to 114 days at June 28, 2026, primarily reflecting the timing of outstanding contractual billing milestones and our internal revenue growth as well as the impact of the recent Nomad and Orbit acquisitions. Our DSO's are impacted by the achievement of contractual billing milestones such as equipment shipments and deliveries on certain products, the receipt of contractual funding, and for certain flight requirements that must be fulfilled on certain aerial target programs, or final milestone billings which are not due until completion on certain projects, and therefore we are unable to contractually bill for amounts outstanding related to those milestones at this time.

Previous wording

Net cash used in operating activities was $27.4 million for the three months ended March 29, 2026. Net cash used in operating activities for the three months ended March 29, 2026 was primarily a result of net income of $11.9 million and changes in net working capital accounts of $75.8 million partially offset by noncash charges of $36.5 million which primarily includes stock compensation, depreciation and amortization. Net cash used in operating activities was $29.2 million for the three months ended March 30, 2025. Net cash used in operating activities for the three months ended March 30, 2025 was primarily a result of net income of $4.5 million and changes in net working capital accounts of $56.0 million partially offset by noncash charges of $22.3 million which primarily includes stock compensation, depreciation and amortization.

Current wording

Net cash used in operating activities was $38.4 million for the six months ended June 28, 2026. Net cash used in operating activities for the six months ended June 28, 2026 was primarily a result of net income of $16.3 million and changes in net working capital accounts of $134.2 million partially offset by noncash charges of $79.5 million which primarily includes stock compensation, depreciation and amortization. Net cash used in operating activities was $40.9 million for the six months ended June 29, 2025. Net cash used in operating activities for the six months ended June 29, 2025 was primarily a result of net income of $7.4 million and changes in net working capital accounts of $94.1 million partially offset by noncash charges of $45.8 million which includes stock compensation, depreciation and amortization.

Previous wording

Net cash used in investing activities was $365.1 million for the three months ended March 29, 2026 and is comprised primarily of $347.4 million of payments for acquisitions and $19.9 million of capital expenditures. During the three months ended March 29, 2026, capital expenditures of approximately $6.7 million were incurred in our US business, primarily related to our unmanned tactical initiative. We expect our capital expenditures for fiscal year 2026 to continue to be significant for investments we are making, specifically in our US business totaling approximately $35 to $40 million, including approximately $25 to $30 million for capital aerial targets and related support equipment. The Company is currently producing or anticipates producing several versions of the Valkyrie within the 24 unit production, based on routine communications with the customers, which mix and ultimate duration of the 24 Lot Build may change as a result. The Company’s small jet engines are currently “designed in” on certain cruise missiles and loitering munitions, certain of which the Company may receive indications of or production contracts for, which could result in the Company ordering or acquiring related hardware for in 2026, which could impact our cash flow. Net cash used in investing activities was $22.6 million for the three months ended March 30, 2025 and is primarily comprised of $22.6 million in capital expenditures. During the three months ended March 30, 2025, capital expenditures of approximately $8.3 million were incurred in our US business, primarily related to our unmanned tactical initiative.

Current wording

Net cash used in investing activities was $375.3 million for the six months ended June 28, 2026 and is comprised primarily of $346.8 million of payments for acquisitions and $37.1 million of capital expenditures. During the six months ended June 28, 2026, capital expenditures of approximately $10.9 million were incurred in our US business, primarily related to our unmanned tactical initiative. We expect our capital expenditures for fiscal year 2026 to continue to be significant for investments we are making, specifically in our US business totaling approximately $35 to $40 million, including approximately $25 to $30 million for capital aerial drones and related support equipment. The Company is currently producing or anticipates producing several versions of the Valkyrie within the 24 unit production, based on routine communications with the customers, which mix and ultimate duration of the 24 Lot Build may change as a result. The Company’s small jet engines are currently “designed in” on certain cruise missiles and loitering munitions, certain of which the Company may receive indications of or production contracts for, which could result in the Company ordering or acquiring related hardware for in 2026, which could impact our cash flow. Net cash used in investing activities was $43.1 million for the six months ended June 29, 2025 and is comprised of $43.1 million in capital expenditures. During the six months ended June 29, 2025, capital expenditures of approximately $16.8 million were incurred in our US business, primarily related to our unmanned tactical initiative. During the six months ended June 28, 2026, the company funded $6.9 million related to its investment in the Prometheus Energetics (“Prometheus”) joint venture with RAFAEL Advanced Defense Systems, Ltd. (“RAFAEL”). Kratos and RAFAEL (through its U.S. based subsidiary RAFAEL USA) have jointly committed up to a combined total of $175 million in capital for the establishment of Prometheus and required property, plant, equity and personnel needed for the new, state-of-the-art SRM and energetics manufacturing campus and facilities. The Company expects to fund approximately $50 million to the Prometheus joint venture during 2026.

Previous wording

Net cash provided by financing activities was $1,297.3 million for the three months ended March 29, 2026, which included net proceeds from the issuance of common stock of approximately $1,348.6 million (see Note 11 to the accompanying unaudited condensed consolidated financial statements) and employee stock purchase plan receipts of $5.3 million. These receipts were partially offset by payroll withholding taxes paid from vested restricted stock traded for taxes of $54.9 million, and payments made on financing lease obligations of $0.9 million. Net cash used in financing activities was $14.5 million for the three months ended March 30, 2025, which included $2.5 million of principal payments on our Term Loan A, payroll withholding taxes paid from vested restricted stock traded for taxes of $16.2 million and payments made on financing lease obligations of $0.4 million. These uses were partially offset by employee stock purchase plan receipts of $4.6 million.

Current wording

Net cash provided by financing activities was $1,291.2 million for the six months ended June 28, 2026, which included net proceeds from the issuance of common stock of approximately $1,348.4 million (see Note 11 to the accompanying unaudited condensed consolidated financial statements) and employee stock purchase plan receipts of $5.3 million. These receipts were partially offset by payroll withholding taxes paid from vested restricted stock traded for taxes of $59.1 million, and payments made on financing lease obligations of $2.0 million. Net cash used in financing activities was $536.3 million for the six months ended June 29, 2025, which included employee stock purchase plan receipts of $4.6 million and net proceeds from the issuance of common stock of approximately $555.9 million (see Note 11 to the accompanying unaudited condensed consolidated financial statements). These proceeds were partially offset by $5.0 million of principal payments on our Term Loan A, payroll withholding taxes paid from vested restricted stock traded for taxes of $18.3 million and payments made on financing lease obligations of $0.9 million.

Previous wording

Agreement will be transferred to the 2026 Credit Agreement. The 2026 Credit Agreement contemplates uncommitted

Current wording

Agreement have been transferred to the 2026 Credit Agreement. The 2026 Credit Agreement contemplates uncommitted

Previous wording

incremental credit facilities of up to $135.0 million. As of March 29, 2026, the Company has no amounts outstanding under the Revolving Credit Facility, with $300.0 million remaining in borrowing capacity, less approximately $31.2 million of letters of credit outstanding.

Current wording

incremental credit facilities of up to $135.0 million. As of June 28, 2026, the Company has no amounts outstanding under the Revolving Credit Facility, with $300.0 million remaining in borrowing capacity, less approximately $2.1 million of domestic letters of credit outstanding. Foreign letters of credit outstanding of $29.0 million does not impact the availability of the Revolving Credit Facility.

Previous wording

the 2026 Credit Agreement) from time to time in effect plus the highest of (i) the Overnight Bank Funding Rate (as defined in the 2026 Credit Agreement), as in effect at such time, plus 0.50%, (ii) the Administrative Agent’s prime lending rate, as in

Current wording

the 2026 Credit Agreement) from time to time in effect plus the highest of (i) the Overnight Bank Funding Rate (as defined in

Previous wording

The Company has capitalized and is amortizing the debt issuance costs over the term of the facility. The unamortized balance at March 29, 2026 and December 28, 2025 were $1.4 million and $0.4 million respectively.

Current wording

The Company has capitalized and is amortizing the debt issuance costs over the term of the facility. The unamortized balance at June 28, 2026 and December 28, 2025 were $1.6 million and $0.4 million respectively.

Previous wording

Our results of operations for the three months ended March 29, 2026, include the activity of Nomad Global Communication Solutions, Incorporated ("Nomad GCS"), which was acquired on February 11, 2026, and Orbit Technologies, Ltd. ("Orbit"), which was acquired on March 2, 2026.

Current wording

Our results of operations for the three and six months ended June 28, 2026, include the activity of Nomad Global Communication Solutions, Incorporated ("Nomad GCS"), which was acquired on February 11, 2026, and Orbit Technologies, Ltd. ("Orbit"), which was acquired on March 2, 2026.

Previous wording

In accordance with ASC 805, Business Combinations, the initial purchase price allocations for these acquisitions are provisional as of March 29, 2026. Due to the proximity of these transactions to our fiscal quarter end, we have not yet completed the identification and valuation of specific intangible assets. Consequently, for both the Nomad GCS and Orbit acquisitions, the excess of the purchase consideration over the preliminary fair value of both the net tangible and intangible assets acquired has been recorded as goodwill.

Current wording

Pursuant to ASC 805, Business Combinations, the initial purchase price allocations for these acquisitions remain provisional as of June 28, 2026. The identification and valuation of intangible assets for Nomad GCS have been finalized, subject to pending tax-related adjustments, while the valuation for Orbit remains in progress. Accordingly, the excess of purchase consideration over the preliminary fair values of net assets acquired has been allocated to goodwill.