Karman (KRMN) Q2 Revenue Jumps 35%

Key Points

• Revenue (GAAP) grew 35.3% year over year to $115.1 million, surpassing analyst expectations.

• Funded backlog expanded to $719.3 million, up 24.1% at the end of the period compared to Q4 FY2024.

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Karman (NYSE:KRMN), a fast-growing engineering and manufacturing company specializing in mission-critical space and defense systems, reported results for the quarter ended June 30, 2025, on August 7, 2025. The company posted GAAP revenue of $115.1 million and non-GAAP adjusted EPS of $0.10, both above Wall Street expectations, with GAAP revenue at $115.1 million versus a $107.6 million analyst consensus and non-GAAP EPS at $0.10, a modest beat against a $0.0975 forecast. The quarter saw continued order growth. Overall, the period showed strong sales momentum and backlog improvement, though higher costs and margin compression were noted.

Source: Analyst estimates for the quarter provided by FactSet.

Business Overview and Focus

Karman is an aerospace and defense supplier that designs and manufactures specialized systems for space and missile defense, tactical missiles, and launch applications. Its business is built on delivering technical solutions for demanding environments, ranging from hypersonic vehicles to satellite launch components. The company serves a mix of government agencies and prime defense contractors, leveraging its expertise across over 100 funded programs.

In recent years, Karman has focused on expanding through both internal product development and acquisitions. These efforts aim to strengthen its technical capabilities, diversify its market reach, and widen its customer base. Key success factors for Karman include maintaining competitive technical expertise, a broad and balanced revenue portfolio, deep customer relationships, and the ability to secure and scale new contracts as priorities shift within the defense sector.

Quarterly Highlights and Developments

This quarter, Karman achieved record GAAP revenue of $115.1 million, driven by double-digit revenue growth in all three of its main end markets. Hypersonics and Strategic Missile Defense, which covers high-speed defense and deterrence systems, contributed $35 million, up 21.6% from the prior year (GAAP). Space and Launch, the segment providing equipment and integration for launch vehicles and orbital payloads, saw revenue climb to $39.6 million, a gain of 38.9% (GAAP). Tactical Missiles & Integrated Defense, representing battlefield and platform-based missile products, grew 45.9% to $40.5 million (GAAP). This balanced sales mix helped reduce reliance on any single program or contract, fostering stability and supporting growth in backlog.

Backlog, which measures the value of contracted work yet to be completed—an important health indicator in defense—rose to $719.3 million at quarter end, marking a 24.1% increase compared to the end of the fourth quarter of 2024. Management credited both organic demand from new and existing programs, such as the Next Generation Interceptor (NGI), and recent acquisitions for this growth. More than 100 active programs and over 70 customers contributed to the backlog, confirming the company's expanding presence across U.S. defense priorities. Increased contract activity in high-urgency areas, including hypersonics, continued to be a core revenue driver.

Karman's acquisition strategy took further steps this period with the addition of MTI and ISP, both intended to strengthen its design and manufacturing footprint. The acquisitions added to expenses, with $3.9 million in transaction-related costs and $380,000 in integration charges factored into non-GAAP adjusted results. While adjusted EBITDA (non-GAAP; earnings before interest, taxes, depreciation, and amortization, with non-recurring and acquisition-related costs removed) margin eased from 32.2% in Q2 FY2024 to 30.7%, reflecting those costs and the impact of higher operating expense levels.

Profitability metrics showed several notable year-over-year gains, including a rise in net income (GAAP) to $6.8 million from $4.6 million, and an improved net income margin. Operating expenses, however, grew sharply, with general and administrative costs increasing from $9.993 million in Q2 FY2024 to $19.4 million (GAAP). This uptick was attributed mainly to ongoing integration, higher public company costs following Karman's IPO in February, and the requirements of managing a much-expanded business footprint. Management did not report any dividend activity for the period.

Looking Ahead: Guidance and Future Watchpoints

For the remainder of fiscal 2025, management raised its financial guidance. The new outlook calls for revenue between $452 million and $458 million, and non-GAAP adjusted EBITDA between $138.5 million and $141.5 million. The revised revenue and adjusted EBITDA forecasts each imply about a 32% year-over-year increase at the midpoint (non-GAAP for adjusted EBITDA) versus the prior year, signaling management’s confidence in robust order activity and contract execution.

As Karman continues to grow through acquisitions and contract wins, investors and observers will want to monitor several areas: the trend in adjusted EBITDA margin, the pace and success of acquisition integration, containment of operating expenses (especially general and administrative costs), and the evolution of the company’s significant backlog.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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