Investor Briefing
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Kratos Defense & Security Solutions, Inc. Investor Briefing December 2019 NASDAQ: KTOS 1 Kratos Defense & Security Solutions - Overview Technology Company in National Security Industry Product and System Focused Proven Leader in Rapidly Developing, Demonstrating and Fielding Affordable, Leading Technology Systems Focused on “Leading Technology” Not “Bleeding Technology” = Reduced Financial, Schedule and Delivery Risk NASDAQ: KTOS 2 Kratos Defense & Security Solutions Overview Unmanned Satellite Training Microwave Turbine Systems Communications Systems Electronics Technologies . High performance jet powered unmanned . Leader in providing . Offers systems & . One of the largest . Leading technology and aerial drone systems secure management, solutions across the international independent innovation leader in delivery and distribution entire training continuum microwave solutions advanced turbine ─ Aerial drone target of data and information developers engines systems from space and land . Exhibit knowledge and skills to develop a . Products used in a . Development and ─ Tactical combat . Used by more than 75% lifecycle training program variety of demanding production of small, drones of the world’s satellite to support specific environments, including affordable, high- operators and 85% of training needs airborne, ground and performance, jet engines for next generation of . Rail launched and U.S.-based space naval systems; missiles, tactical weapon systems parachute recovered missions . Leading training systems radar, aircraft, guided and tactical jet (runway independent) & solutions provider for munitions . C3, RFI detection and ground, air and sea unmanned aerial systems (UAS) . Rapid mission turn mitigation products platforms around . Low Cost / Affordable Ballistic Missile Laser Systems Patriot System THAAD System Hypersonic Systems Defense Targets NASDAQ: KTOS 3 Disruptive Defense Technologies for Drones, Space, Missile Defense and Hypersonics Kratos owns substantially all of the key IP related to its core portfolio of products Tactical & Target Drones Ballistic Missile Targets Kratos has invested over $100mm in the last several years developing a robust suite of high-performance, jet powered UAVs, leading to the ownership of critical IP that provides competitive advantages and creates high barriers to entry Exclusive perpetual rights to Oriole solid rocket motor Autonomous capabilities Ability to rapidly develop / deliver working systems Designs affordable control systems, countermeasures, decoys and other Vertical integration classified systems Rail launched (runway independent) Integrates existing solid rocket Low cost / affordable motors to meet customer requirements Open architecture for seamless payload integration Satellite & Space Ground Systems Hypersonic Systems Integrated Common Data Link Multiple stack technology hypersonic motor technology Only commercially available RF over IP transport with data restoration solution Hypersonic vehicle testing Space Situational Awareness Network Proprietary space network MDA hypersonic target roaming capability across vehicle development satellites and bands NASDAQ: KTOS 4 Kratos – Aligned with National Security Priority Areas . After Years of Decline, Defense and Security Budgets are Increasing Globally . A Recapitalization of Strategic Weapon Systems to Address Peer Threats is Underway for the U.S. and our Allies . Priority Areas for Increased Budgets and Technology Advancement Include: . Unmanned Systems & Artificial Intelligence . Satellite Systems and the Space Segment . Electronic Warfare, Missile and Radar Systems Kratos is Well . Missile Defense, Hypersonic Systems and Directed Energy Positioned . Lethality, Operational Readiness and Training in Virtually All of These . Science and Technology Priority . Strategic Triad Areas! NASDAQ: KTOS 5 Federal Budget Continuing Resolution Authorization (CRA) Currently in Effect . Kratos is Aligned with the Existing U.S. National Defense Strategy to Address Peer/Nation State Threats and the Recapitalization of Strategic Weapon Systems . Kratos has a Number of Existing Production Programs with Expected Increased Future Production and Expected New Production Programs Included in the 2020 DoD Budget Request . Under a CRA, Typically no New Program Starts or Increased Production on Existing Programs - Kratos is Watching the Current DoD Budget Process Carefully . We Believe that Kratos’ Long Term Organic Growth Trajectory is “Up and to the Right” Based on our Under Contract Programs and Opportunity Pipeline Irrespective of Potential Short Term DoD Budget Delays NASDAQ: KTOS 6 Kratos – Unmanned Systems NASDAQ: KTOS 7 Industry Leader in High Performance Unmanned Aerial Target Drone Systems BQM-177 BQM-167 MQM-178 . Kratos is the Leader in Development and Production of High Performance Unmanned Aerial Drone Target Systems . Kratos’ Target Drone Systems Represent the Most Advanced Aerial Threats of Our Adversaries and Operationally Test U.S. and Allies’ Weapon Systems . Kratos’ High Performance Jet Powered Unmanned Aerial Drone Systems are The Highest Performance UAVs In the World . Kratos’ UASs are Rail Launched and Parachute Recovered, i.e., Runway Independent NASDAQ: KTOS 8 Kratos BQM-177A Receives Initial Operating Capability from U.S. Navy (NAVAIR) BQM-177A target achieves initial operational capability Published: Feb 28, 2019 Naval Air Systems Command, Patuxent River, Md. The U.S. Navy's next-generation Sub-Sonic Aerial Target (SSAT), BQM-177A, reached Initial Operational Capability (IOC) Feb. 27 and will begin land-based operations in Point Mugu, California. NASDAQ: KTOS 9 Kratos – High Performance, Jet Powered Unmanned Combat Aerial System NASDAQ: KTOS 10 Proven Approach to Rapid-Development of Affordable, Working Systems Kratos distinguishes itself from competitors with its demonstrated ability to rapidly design, develop and deliver working systems and platforms to its customers at an affordable cost Kratos Leverages its Unique Culture to Rapidly Deliver Affordable, Complete Systems Iterative Approach Leading v. Bleeding Edge Supply Chain Efficiency Leverages past program experience to deliver Emphasizes use of proven technologies to Commonality in supply chain across avionics, continuous and incremental improvements reduce cost and risk without compromising electronics and other subsystems and capabilities components further reduces cost Success on early programs builds trust in Years of experience across its portfolio has capabilities and helps win subsequent awards Vertically integrated manufacturing reduces made leveraging commercial technologies a development time for new iterations and core competency further reduces cost Rapid-Development Case Study: Kratos’ Leading Unmanned Platforms ACE March 5, 2019 High-Performance Dog Fighting Capability Operational in 2023 Skyborg 3 Years Autonomous Combat Tactical Drone 3 Years Operational in 2022 NGAT 5th Generation Aerial Target Valkyrie Mako Stealth, Long-Range BQM-167 Jet-Powered Tactical Strike Loyal Wingman ADDRESSABLE MARKET Subscale Aerial Drone Target Drone TIME NASDAQ: KTOS 11 Kratos – UCAS “Loyal Wingman” to Manned Aircraft – Low Cost, High Performance Force Multiplier See YouTube Video – Search “UTAP-22” and enjoy NASDAQ: KTOS 12 Kratos XQ-58A Valkyrie NASDAQ: KTOS 13 X-61A Gremlin NASDAQ: KTOS 14 Industry Leader in High Performance Tactical Drones Kratos’ unmanned tactical drones align with defense mission requirements and budget trends and would resolve the U.S. Air Force’s current constraints Current Landscape Representative Kratos’ Solutions . U.S. fighter and attack aircraft fleet has Valkyrie is a Step Change in Aerial Fighter Jet Capability been shrinking for decades and has been Loyal wingman to F-35 and F-15EX Launchable by fighter, bomber, cargo and focused on asymmetric warfare and other platforms from outside combat zone terrorism High subsonic flight at long distances without refueling High altitude and nap-of-the-earth flight . Shortage of highly trained pilots to address peer threats, as well as maintenance and Rail take-offs and parachute landings do Higher, sustained g-force tolerance than repair shortfalls, has pressured readiness not require runway or aircraft carrier manned jets . A2/AD environments and increasing adversary lethality pose an increasing risk Significantly Lower Cost than Alternatives to U.S. assets, including manned aircraft and ships Proven rapid, low-cost design and manufacturing capabilities derived from production of low-cost aerial target drones and successful tests of next-gen tactical platforms . DoD focused on attritable, unmanned systems to increase force quantity, defeat Vertically integrated manufacturing further increases speed, and reduces cost & risks enemy air defenses and aircraft, and Tactical drones priced for as little as $1-3mm, making them “attritable” – inexpensive bolster the capabilities of its limited number of manned aircraft enough in both dollars and lives to risk losing in dangerous missions Kratos’ Solutions XQ-58A “Valkyrie” UTAP-22 “Mako” (Unmanned Tactical Aerial Platform) Cost-effective way to augment the USAF’s fleet with Operational tactical drone and testbed for tactical additional quantities, firepower and sensors by serving unmanned capabilities. Approved for potential sale to 8 as a Loyal Wingman. Valkyrie has been approved for allied countries. potential marketing to the U.K., Australia, Japan and Canada “Program F” “Gremlins” Program F is executing a series