A month has gone by since the last earnings report for Kratos (KTOS). Shares have lost about 15.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Kratos due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Kratos Defense Q4 Earnings Top, Revenues Rise Y/Y

Kratos Defense & Security Solutions reported fourth-quarter 2023 adjusted earnings of 12 cents per share, up 50% from 8 cents reported in the prior-year quarter. The bottom line also surpassed the Zacks Consensus Estimate of 8 cents by 50%.

Kratos Defense reported GAAP earnings of 2 cents per share against a loss of 7 cents per share in the fourth quarter of 2022.

For 2023, the company recorded adjusted earnings of 42 cents, up from 32 cents reported in 2022.

Total Revenues

Total revenues were $273.8 million, which surpassed the Zacks Consensus Estimate of $252 million by 8.6%. The figure also increased 9.8% from $249.3 million recorded in the year-ago quarter.

The year-over-year improvement can be primarily attributed to the Kratos Government Solutions segment’s revenue growth.

For 2023, the company generated revenues worth $1.04 billion, up from the year-ago reported revenues of $0.90 billion.

Operational Update

Kratos Defense’s selling, general and administrative expenses went up 9% year over year, while research and development expenses were down 24.5%. Depreciation expenses increased 31.3%, while expenses related to the amortization of intangible assets surged 109.1%.

The company reported fourth-quarter 2023 operating income of $11.7 million, up 185.4% from the year-ago quarter’s actuals.

The company posted consolidated book-to-bill ratio of 1.2-1.0, with bookings worth $330 million for the fourth quarter.

The total backlog at the end of the fourth quarter was $1.24 billion compared with $1.17 billion at the end of the third quarter.

Segmental Performance

Unmanned Systems: Net revenues improved 12.1% year over year to $100.8 million.

Government Solutions: Net revenues increased 8.5% year over year to $173 million.

Financial Details

As of Dec 31, 2023, cash and cash equivalents totaled $72.8 million, down from $81.3 million as of Dec 25, 2022. The long-term debt amounted to $219.3 million as of Dec 31, 2023, down from $250.2 million recorded as of Dec 25, 2022.

During 2023, cashflow from operating activities totaled $65.2 million against cash outflow of $25.6 million in the previous year.