We are a specialized technology focused security business providing mission
critical products, solutions and services for domestic and international customers,
with our principal customers being agencies of the U.S. Government. Our core
capabilities are sophisticated engineering, manufacturing, technology development,
system integration, and test and evaluation offerings for national security
platforms and programs. Our principal products and solutions are related to
Command, Control, Communications, Computing, Combat Systems, Intelligence, Surveillance
and Reconnaissance (“C5ISR”). We offer our customers products, solutions,
services and expertise to support their mission critical needs by leveraging
our skills across our core offering areas in C5ISR.
We historically operated in two reportable segments: Kratos Government Solutions
(“KGS”) and Public Safety & Security (“PSS”). In
the fourth quarter of 2014, we expanded the number of reportable segments to
three as we separated the KGS segment into two reportable segments: KGS and
Unmanned Systems (“US”). As a result, the KGS reportable segment
is comprised of an aggregation of Kratos’ Government Solutions operating
segments, including our electronic products, satellite communications, modular
systems and rocket support operating segments. The Unmanned Systems reportable
segment consists of our unmanned aerial system and unmanned ground system businesses
operating segment. The PSS reportable segment remains unchanged. This change
in segment reporting presentation does not change any consolidated totals. We
made this segment reporting change because we believe that the new presentation
will provide investors with greater insight into our consolidated results and
operating performance.
We organize our business segments based primarily on the nature of the products,
solutions and services offered. Transactions between segments are negotiated
and accounted for under terms and conditions similar to other government and
commercial contracts, and these intercompany transactions are eliminated in
consolidation. The consolidated financial statements in this Annual Report are
presented in a manner consistent with our operating structure. From a customer
and solutions perspective, we view our business as an integrated whole, leveraging
skills and assets wherever possible.
We believe we have robust intellectual property, capabilities, customer relationships,
platform positions and past performance qualifications in our respective business
areas, including a work force that is experienced with the various programs
and platforms we support and the customers we serve. We believe the following
key strengths distinguish us competitively:
Significant and highly specialized experience. Through existing customer engagements
and the government-focused acquisitions we have performed on and completed over
the past several years, we have amassed significant and highly specialized experience
in areas directly related to C5ISR, including cybersecurity, cyberwarfare, information
assurance and situational awareness; military range operations and technical
services; missile, rocket, and weapons systems test and evaluation; mission
launch services; modeling and simulation; UAS and UGS products and technology;
advanced network engineering and IT services; and public safety, security and
surveillance systems integration. We also produce products and provide solutions
and services related to certain C5ISR platforms, unmanned system platforms,
weapons systems, national security related assets and Warfighter systems. This
collective experience, or past performance qualifications, is a requirement
for the majority of our contract vehicles and customer engagements. Many of
our approximately 3,600 employees have specialized national security expertise.
Many of the products that we produce include or contain our intellectual property.
Many of the program positions we have are on a “sole source” basis.
We believe these characteristics represent a significant competitive strength
and position us to win renewal or follow-on business.
Specialized national security focus aligned with mission-critical national
security priorities. Continued concerns related to the threats posed by certain
foreign nations and terrorists have caused the U.S. Government to identify national
security as an area of functional and spending priority. Budget pressures, particularly
related to DoD spending, have placed a premium on developing and fielding relatively
low-cost, high-technology solutions to assist in national security missions.
Our primary capabilities and areas of focus, listed below, are strongly aligned
with the objectives of the U.S. Government:
Unmanned systems
Satellite communications and radio frequency detection
Electronic warfare, attack, missile, and radar systems
Intelligence, surveillance and reconnaissance
Ballistic missile defense
Command, control and combat systems
Cybersecurity and information assurance
Diverse base of key contracts with low concentration. Many of our contracts
are single-award and or sole source in nature, where Kratos is the only awardee
by the customer. In many cases, our ability to obtain single award, sole source
contracts is due to our intellectual property, past performance qualifications
and relative experience. Additionally, as a result of our business development
focus on securing key contracts, we are also a preferred contractor on numerous
multi-year, government-wide acquisition contracts (“GWACs”) and
multiple award contracts ("MACs"). Our preferred contractor status
provides us with the opportunity to bid on billions of dollars of business each
year against a discrete number of other pre-qualified companies. We believe
our diverse base of key contracts and low reliance on any one contract provides
us with a stable, balanced revenue stream.
In-depth understanding of customer missions. We have a reputation for successfully
providing mission-critical products, solutions and services to our customers.
Our long-term relationships with the U.S. Air Force, U.S. Army, and U.S. Navy
and other national security related customers and agencies enable us to develop
an in-depth understanding of their missions and technical requirements. In addition,
the majority of our employees are located at our customer sites, at secure manufacturing
facilities or at critical infrastructure locations, all of which provides valuable
strategic insight into our customers ongoing missions and future program requirements.
This understanding of our customers missions, requirements and needs, in conjunction
with the strategic location of our employees, enables us to offer technical
solutions tailored to our customers specific requirements and evolving mission
objectives. In addition, once we are on-site with a customer, we have historically
been successful in winning new and recompete business.
Highly skilled employees and an experienced management team. We deliver our
services through a skilled and primarily technically oriented workforce of approximately
3,600 employees. Our senior managers have significant experience with U.S. Government
agencies, the U.S. military and U.S. Government contractors. Many of our employees
hold National Security clearances. Members of our management team have experience
growing businesses both organically and through acquisitions. We believe that
the cumulative experience and differentiated expertise of our personnel in our
core focus areas, coupled with our sizable employee base, allow us to qualify
for and bid on larger projects in a prime contracting role.