Karman Space & Defense (NYSE: KRMN) reported fiscal Q2 2026 revenue of $182.1 million, up 58.2% from $115.1 million, while diluted EPS increased to $0.11 from $0.05. Organic revenue grew 24.4%, net income more than doubled to $14.0 million, and backlog reached $1.3 billion, although adjusted EBITDA margin edged down to 30.0% from 30.7%.
Core Earnings Data
For the quarter ended June 30, 2026, growth extended across Karman’s end markets. Total revenue grew considerably faster than the company’s 24.4% organic growth rate, indicating that organic operations accounted for only part of the overall increase.
GAAP profitability improved faster than revenue: gross profit rose 66.4%, operating income increased approximately 73.2%, and net income advanced 106.1%. Adjusted EBITDA increased 54.7%, slightly trailing revenue growth and producing modest margin compression.
| Metric | Fiscal Q2 2026 | Fiscal Q2 2025 | Year-over-year change |
|---|---|---|---|
| Revenue | $182.1M | $115.1M | +58.2% |
| Gross profit and margin | $78.2M / approximately 43.0% | $47.0M / approximately 40.9% | Profit +66.4%; margin +approximately 2.1 pts |
| Operating income and margin | $34.8M / approximately 19.1% | $20.1M / approximately 17.5% | Income +approximately 73.2%; margin +approximately 1.7 pts |
| Net income | $14.0M | $6.8M | +106.1% |
| Diluted EPS | $0.11 | $0.05 | +120% |
| Adjusted EBITDA and margin | $54.6M / 30.0% | $35.3M / 30.7% | EBITDA +54.7%; margin -0.7 pts |
| Adjusted EPS | $0.14 | $0.10 | +40% |
Adjusted results exclude transaction and integration expenses, lender fees, share-based compensation, and other costs that management does not consider representative of ongoing operations.
Business and Segment Performance
Tactical Missiles and Integrated Defense Systems was the fastest-growing comparable end market, with revenue rising 55.4%. Hypersonics and Strategic Missile Defense also delivered double-digit growth, while Space and Launch grew more slowly because shifting launch schedules affected customer order timing.
| End market | Fiscal Q2 2026 revenue | Fiscal Q2 2025 revenue | Year-over-year change |
|---|---|---|---|
| Tactical Missiles and Integrated Defense Systems | $63.0M | $40.5M | +55.4% |
| Hypersonics and Strategic Missile Defense | $43.4M | $35.0M | +24.2% |
| Space and Launch | $42.1M | $39.6M | +6.3% |
| Maritime Defense Systems | $33.6M | Not provided | Not meaningful |
Tactical growth came from core production programs, including unmanned aircraft and counter-UAS systems, as well as emerging programs moving into production. Hypersonics growth reflected higher production on interceptor programs and a new surface-to-surface missile system. Maritime revenue was supported by legacy and next-generation submarine programs, but the company did not provide a directly comparable prior-year figure under the current presentation.
Quarterly bookings totaled nearly $500 million, including a large multiyear agreement with a space and launch customer. Backlog ended the quarter at a record $1.3 billion, 65% above the fiscal 2025 year-end level.
Profitability, Debt, and the Balance Sheet
Karman’s GAAP gross, operating, and net margins all improved. However, adjusted EBITDA margin declined by 0.7 percentage points because adjusted EBITDA grew slightly more slowly than revenue. The company notes that adjusted EBITDA can be affected by volume, contract mix, program performance, administrative expenses, and investment levels, but it did not identify one specific factor as the cause of the quarterly margin decline.
Cash and cash equivalents increased to $51.7 million at June 30 from $34.0 million at December 31, 2025. Over the same period, total current and long-term term-note balances rose to approximately $756.9 million from $499.1 million. Quarterly net interest expense consequently increased to $15.3 million from $11.9 million a year earlier.
Karman completed a debt repricing that it expects will lower annual interest expense by approximately $4 million. This should reduce part of the financing burden, although the company’s higher outstanding debt remains relevant to future net income and cash requirements.
GAAP Margins Improved While Adjusted EBITDA Margin Edged Lower
The quarter showed a divergence between reported and adjusted margin trends. GAAP net income margin expanded to 7.7% from 5.9%, supported by faster growth in gross profit and operating income. By contrast, adjusted EBITDA margin slipped to 30.0% from 30.7%, showing that revenue growth did not produce adjusted operating leverage during the quarter.
The distinction matters because adjusted EBITDA excludes several expenses included in GAAP results. Investors will need to watch whether adjusted EBITDA growth returns to a pace at or above revenue growth as Karman expands capacity and integrates acquired operations.
Fiscal 2026 Guidance
Management raised its full-year fiscal 2026 outlook, supported by the record backlog and quarterly bookings. The release did not provide the previous guidance ranges, so the exact size of the increase cannot be determined from the available information.
| Metric | Latest fiscal 2026 guidance | Basis |
|---|---|---|
| Revenue | $730M-$745M | Full year; excludes the impact of future acquisitions |
| Adjusted EBITDA | $215.0M-$222.5M | Non-GAAP; excludes the impact of future acquisitions |
Karman did not provide a GAAP reconciliation for forward-looking adjusted EBITDA, citing the difficulty of forecasting transaction-driven and other non-core items.
Management’s View
CEO Jon Rambeau said the demand environment continues to strengthen. Management pointed to more than $90 billion of recent prime-contractor awards related to THAAD and PAC-3 interceptors and more than $76 billion associated with Columbia- and Virginia-class submarines. These figures describe broader prime-contractor awards rather than contracts awarded directly to Karman.
The company is also negotiating three additional long-term defense agreements with a combined potential value exceeding $1 billion. These remain potential agreements and are not identified as part of reported backlog. Karman said it is expanding capacity to meet existing program requirements while pursuing alternative-supplier positions on additional programs.
Separately, Karman agreed to acquire Walker Precision Engineering for approximately $94 million, a transaction intended to expand its presence in the European defense market.
Risks Investors Should Monitor
- Adjusted margin pressure: Adjusted EBITDA margin declined despite rapid revenue growth. Continued capacity investment or an unfavorable contract mix could limit adjusted operating leverage.
- Debt and interest costs: Term-note balances increased substantially from the end of fiscal 2025, while quarterly interest expense rose year over year. The completed repricing offers some relief but does not remove the financing burden.
- Program and order timing: Shifting launch schedules already partially offset Space and Launch growth. Further timing changes could create quarterly revenue volatility.
- Government contract exposure: A significant share of the business depends on U.S. military spending and competitive government contracting processes.
- Acquisition execution: Karman has completed and proposed acquisitions, making timely integration and cost control important to reported profitability and balance-sheet management.
Summary
Karman’s fiscal Q2 2026 results combined 58.2% revenue growth with stronger GAAP margins, record bookings, and a $1.3 billion backlog, leading management to raise full-year guidance. Tactical missile and strategic defense programs were important growth drivers, while Space and Launch was moderated by order timing. The main follow-up issues are whether adjusted EBITDA margin stabilizes, how effectively Karman manages its higher debt load, and how quickly backlog converts into profitable revenue.
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