Contradictory Signals in 2025 Q2: Capacity, Backlog, and Revenue Expectations Unpacked

Revenue and Earnings Growth:
- Karman Space & Defense reported record revenue of $115 million for Q2, representing a 35% increase compared to the second quarter of fiscal year '24. Adjusted EBITDA jumped to $35.3 million, a 29% year-over-year increase.
- The growth was driven by strong execution across all aspects of the business and broad-based growth across all three end markets: hypersonics and strategic missile defense, space and launch, and tactical missiles and integrated defense systems.

Funded Backlog and Future Outlook:
- The company's funded backlog reached an all-time high of $719 million, giving more than 100% visibility to the midpoint of their full-year revenue guidance range.
- This is supported by strong demand signals across the board, national security priorities driving increased defense spending, and continued momentum in the commercial space market.

Strategic Acquisitions and Market Expansion:
- Karman completed two strategic acquisitions, MTI and ISE, which deepened their capabilities and customer contacts, with both acquisitions being immediately accretive on the financial front.
- These acquisitions have expanded their scope of business and opened up opportunities for increased partnerships with prime platform partners, contributing to growth in various segments.

Operational Investments and Capacity Expansion:
- The company installed advanced machining centers and added nozzle curing equipment to expand tactical missile nozzle production capacity by approximately 50%.
- These investments have enhanced throughput, quality, and allowed for scaling without significant additional CapEx, contributing to operational performance and capacity utilization.

Financial Strength and Liquidity Improvement:
- Karman refined its credit facility, saving more than $8 million in annual interest expense, and completed a $1.2 billion secondary offering, improving financial flexibility and liquidity.
- The strong financial performance and strategic acquisitions have positioned the company well for future growth and expansion in the defense and space markets.