Karman Raises FY2026 Outlook as Q3 Revenue Jumps 66%

Karman Space & Defense raised its fiscal 2026 outlook after third-quarter revenue increased 66% and backlog more than doubled, supported by broad growth across defense markets and strong order activity.

The company now expects full-year revenue of $755 million to $760 million, compared with its prior range of $730 million to $745 million. The midpoint represents a 61% increase from fiscal 2025. Karman also lifted its adjusted EBITDA forecast to $225 million to $227 million from $215 million to $222.5 million, with the new midpoint implying 55% year-over-year growth.

Management said expected fiscal 2026 backlog conversion provides full visibility to the midpoint of the updated revenue range. The outlook also reflects the company’s exposure to hypersonics, missiles, missile defense, unmanned aircraft systems, counter-UAS, maritime defense, and commercial space and launch demand.

Revenue and earnings reach quarterly records

Revenue for the three months ended Sept. 30 rose to $201.6 million from $121.8 million a year earlier. Organic revenue increased 25%, while revenue was 11% higher sequentially.

Gross profit climbed 73% to $86.2 million. GAAP net income rose to $20.9 million from $7.6 million, and income before taxes increased 12% to $13.3 million. The quarter included a $7.6 million income tax benefit, compared with $4.2 million of tax expense in the prior-year period.

Adjusted EBITDA increased 60% to $60.5 million. Adjusted EBITDA margin was 30.0%, down from 31.0% a year earlier, indicating that profit growth slightly trailed the pace of revenue expansion. Adjusted diluted earnings per share rose 90% to $0.19, while GAAP diluted earnings per share increased to $0.16 from $0.06.

For the first nine months of fiscal 2026, revenue grew 59% to $534.9 million and net income increased to $42.7 million from $9.7 million. Nine-month adjusted EBITDA rose 55% to $159.9 million, with an adjusted EBITDA margin of 29.9% versus 30.7% in the comparable period.

Defense markets lead growth

Karman reported growth across all three of its defense end markets. Hypersonics and strategic missile defense revenue increased 40% to $51 million, accounting for 25% of quarterly sales. Tactical missiles and integrated defense systems revenue rose 52% to $68 million, or 34% of the total.

Maritime defense generated $45 million, representing 22% of revenue; the year-over-year growth rate was not considered meaningful because the prior-year contribution was minimal. Space and launch revenue declined 7% to $38 million and accounted for the remaining 19%.

The company describes itself as a merchant supplier of propulsion, interstage and payload systems, serving more than 150 customers and programs. No single program accounts for more than 10% of revenue, according to the presentation.

Backlog exceeds $1.6 billion

Backlog reached a record $1.67 billion, up 108% from $801.1 million a year earlier and more than double its level at Dec. 31, 2025. Quarterly bookings were approximately $465 million and included a seven-year, $218 million long-term agreement related to the THAAD missile defense program.

Karman generated $26.7 million of operating cash flow during the quarter and spent $13.4 million on property and equipment, resulting in non-GAAP free cash flow of $13.4 million.

Net operating working capital declined to 32% of annualized revenue from 37% a year earlier as revenue grew faster than working-capital requirements. Contract assets remained the largest component, while the company said inventory remained relatively small and accounts receivable were growing normally.

At Sept. 30, Karman held $68.2 million in cash and cash equivalents, up from $34.0 million at the end of 2025. Its term loan totaled approximately $858.8 million, including current and long-term portions, compared with about $499.1 million at Dec. 31. Total assets rose to $1.64 billion, including higher goodwill and intangible assets.

The company cautioned that a significant portion of its revenue comes from U.S. military contracts and therefore depends on federal defense spending. Other disclosed risks include resource-intensive competitive bidding, compliance with legal and regulatory requirements, protection of intellectual property, and the ability to complete and integrate acquisitions on satisfactory terms.