What Karman (KRMN) Said on Its Q3 Earnings Call

Key Points

• Record growth prompted higher 2026 guidance: Q3 revenue rose 66% year over year to $202 million, and Karman raised its revenue outlook to $755 million–$760 million and adjusted EBITDA outlook to $225 million–$227 million.
• Defense orders are building: Backlog reached $1.7 billion, and quarterly bookings totaled nearly $465 million, including a $218 million Lockheed Martin agreement. The company expects additional long-term missile agreements and says production rates should increase.
• Growth across defense markets offset a 7% decline in space and launch revenue, which Karman partly attributed to a shifted Vulcan launch schedule; it expects space revenue to rebound next year. The company also increased its second-half free cash flow target to at least $20 million.

Karman NYSE: KRMN raised its full-year 2026 outlook after reporting record third-quarter revenue and a backlog of $1.7 billion, as defense orders and acquisitions helped drive growth.

The space and defense supplier reported revenue of $202 million, up 66% from a year earlier, while organic revenue grew 25%. Net income rose 174% to $21 million, and adjusted earnings per share nearly doubled to $0.19. Adjusted EBITDA increased 60% to $61 million, representing a 30% margin.

Chief Executive Officer Jon Rambeau said the company’s backlog, which more than doubled from the end of 2025, and revenue already recorded this year provide full visibility to the midpoint of its increased annual revenue outlook. Karman says its backlog includes only firm, binding customer commitments.

Guidance Rises as Orders Build

Karman now expects 2026 revenue of $755 million to $760 million and adjusted EBITDA of $225 million to $227 million. At the midpoint, those figures imply year-over-year growth of 61% and 55%, respectively.

Chief Financial Officer Chris Boynton said most of the guidance increase reflects year-to-date performance and expectations for the fourth quarter, although it also includes some contribution from the acquisition of Walker, now called Karman Europe.

The company reiterated its expectation for annual organic revenue growth of 20% to 25% and an adjusted EBITDA margin of about 30% in 2026. It also expects 20% to 25% organic revenue growth and a 30% adjusted EBITDA margin in 2027.

Quarterly bookings totaled nearly $465 million, including a $218 million long-term agreement with Lockheed Martin for THAAD missile shrouds. Rambeau said Karman expects to sign two additional seven-year agreements with solid rocket motor providers this year. The agreements will cover multiple missile types, with some bookings expected in 2026 and additional orders anticipated in 2027 as quantities are finalized.

Rambeau said production rates for missile types already defined for 2027 are expected to rise more steeply than originally forecast before continuing at elevated levels. He also said the agreements are not expected to be a headwind to Karman’s overall margin profile.

Defense Growth Offsets Space Revenue Decline

All of Karman’s defense end markets grew year over year in the quarter, Boynton said. Tactical missiles and integrated defense systems revenue rose 52% to $68 million, while hypersonics and strategic missile defense revenue increased 40% to $51 million.

Maritime defense systems contributed $45 million, up 30% from the second quarter. Boynton said the business was performing ahead of the company’s year-to-date plans.

Space and launch revenue fell 7% from a year earlier to $38 million, partly reflecting a shift in United Launch Alliance’s Vulcan launch schedule. Boynton said Karman received increased orders for New Glenn during the quarter and expects space and launch revenue to rebound next year, supported by backlog that includes a previously announced $250 million long-term agreement.

Rambeau said Karman is pursuing five opportunities to become an additional supplier on programs where customers need more capacity. Two have entered qualification, a process he estimated could take about a year or longer. He does not expect a significant financial impact from those opportunities in 2027, with benefits expected as qualifications come through by 2028.

Cash Flow and Capacity Investments

Karman generated $13 million in free cash flow in the third quarter and is now targeting at least $20 million for the second half of 2026, up from its earlier goal of $15 million to $20 million. Boynton said the quarterly result reflected improvements across working capital rather than a single driver, while cautioning that cash flow could remain uneven.

Net debt stood at $791 million at quarter-end, up $325 million from the end of 2025. Boynton said the company expects net leverage to fall below three times adjusted EBITDA by year-end and continue to decline in 2027, notwithstanding any future acquisitions.

Capital spending totaled $35 million through the first nine months of 2026. Boynton expects capital expenditures to run at about 5% to 6% of revenue in the fourth quarter and in 2027 as Karman adds capacity.

Chief Operating Officer Jonathan Beaudoin said initial production has begun using automated equipment in Salt Lake City. The company has also broken ground on a polymer facility in Gulfport for specialized naval coatings and is expanding its Cedar City facility to support demand for unmanned aircraft propulsion systems.

Rambeau said a change in congressional control could affect the timing and form of U.S. defense appropriations. He added that Karman’s backlog for 2027 supports continued production during a continuing resolution, while international defense and space provide funding streams that are largely independent of the U.S. political environment.

About Karman (NYSE:KRMN)

Karman Holdings Corp., doing business as Karman Space & Defense, is an aerospace and defense company that develops and manufactures mission-critical components, assemblies and structures. Its products are used in space-launch vehicles, missiles, hypersonic systems and other defense applications where performance, reliability and precision are essential.

The company's capabilities include the production of composite and metallic structures, propulsion-related components, precision-machined parts and other highly engineered hardware.

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