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DATE

Tuesday, Aug. 4, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Vice President and General Counsel - Marie Mendoza
• President and Chief Executive Officer - Eric DeMarco
• Executive Vice President and Chief Financial Officer - Deanna Lund

TAKEAWAYS

• Revenue -- $458.8 million, representing 30.5% growth and 19.1% organic growth compared to the second quarter of 2025.
• Adjusted EPS -- $0.21, an increase from $0.11 reported in the second quarter of 2025.
• Adjusted EBITDA -- $38.2 million, which exceeded the company's estimated range of $30 million to $35 million.
• Total Backlog -- $2.084 billion, consisting of $1.572 billion in funded backlog and $512.7 million in unfunded backlog.
• Bid and Proposal Pipeline -- $15 billion, reflecting an increase from $14.3 billion at the end of the first quarter of 2026.
• KGS Segment Revenue -- $379.7 million, with 22% organic growth driven by performance in defense rocket support and turbine technologies.
• KUS Segment Revenue -- $79.1 million, reflecting 8.1% organic growth primarily due to Valkyrie-related activities.
• Defense Rocket Support Growth -- 50.2% year-over-year organic revenue growth within the Kratos Government Solutions segment.
• Turbine Technologies Growth -- 43.3% organic revenue growth compared to the second quarter of 2025.
• Microwave Products Growth -- 29.5% organic revenue growth, despite adverse impacts from foreign currency fluctuations.
• Full Year 2026 Revenue Guidance -- $1.750 billion to $1.810 billion, reflecting an increase in forecasted organic growth to 18% to 23%.
• Adjusted EBITDA Guidance -- $173 million to $176 million for the full year 2026, targeting a 100-basis-point improvement over 2025 results.
• Hypersonic Revenue Forecast -- $400 million for 2026, with management projecting an increase to at least $700 million in 2027.
• Turbojet Engine Production -- Ordering components for 3,000 Spartan engines for 2027 delivery and 5,000 units for 2028, with an average selling price of $50,000.
• Valkyrie Production Rate -- Ramping to 1.5 planes per month in 2027, with a long-term goal of 40 units annually by the beginning of 2028.
• Directed Energy Award -- $160 million initial value for a new counter unmanned aircraft system (UAS) program with the Department of Energy.
• Space Domain Awareness Award -- $100 million initial value for a new production program as space becomes a warfighting domain.
• Q3 2026 Revenue Guidance -- $460 million to $480 million, reflecting organic revenue growth of 19% to 25%.
• Q4 2026 Organic Growth -- Forecasted organic growth of 19% to 31% year over year.
• LTM Book-to-Bill Ratio -- 1.3 to 1, with total bookings of $1.99 billion over the last 12 months.
• Capital Expenditures -- $125 million to $135 million forecasted for 2026, supporting facility build-outs for engines and hypersonics.
• Rocket System Inventory Build -- $40 million to $45 million investment in Zeus and Oriole rocket motors to support future programs.
• Consolidated DSOs -- 114 days, a decrease from 130 days in the first quarter of 2026 due to milestone billing achievements.
• Contract Mix -- 67% fixed price, 29% cost plus, and 4% time and material.

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RISKS

• Lund stated, "Kratos' second quarter and 6 months ended adjusted EBITDA would have been $2.5 million and $2.8 million higher, respectively, if the increase in the shekel over the past 6 months had not occurred," noting a $5 million to $7 million estimated negative impact for the full year.
• DeMarco stated, "Kratos is currently in an investment phase aligned with the department's reindustrialization initiative," which requires significant capital deployment ahead of program revenue.

SUMMARY

Kratos Defense & Security Solutions, Inc. (KTOS +2.10%) reported organic revenue growth across its government and unmanned segments, driven by increased demand for rocket support, turbine technologies, and hypersonic systems. Management increased full-year revenue guidance and outlined a strategic shift toward mass production of low-cost munitions and engines to align with the Department of War's focus on affordable mass. The company is currently executing a multiyear investment cycle to expand manufacturing capacity in Michigan, Oklahoma, and Indiana, targeting thousands of small turbojet engines and increased Valkyrie production. Financial performance was tempered by the strength of the Israeli shekel, affecting the profitability of the microwave products business, while the space division secured major awards for software-defined command and control systems.

• CEO DeMarco attributed engine growth to being designed into programs like the JDAM-LR, stating, "We believe that JDAM LR alone, which includes the Kratos engine, could be one of the largest single opportunities for our company with the potential for tens of thousands of systems by itself."
• The company reported that Taiwan is planning to adopt a new version of the Valkyrie derivative, Mighty Hornet, with potential production decisions expected in the first half of 2027.
• Management noted a significant expansion in the hypersonic business, with DeMarco stating, "China could have approximately 4,000 hypersonic missiles by 2035 and Russia could have 1,000. There is not only a drone, missile and space arms race underway, but also a hypersonic arms race."
• The Space Force has begun receiving a new electronic warfare (EW) system containing Kratos hardware, and the company won a ground system role for a multibillion-dollar satellite constellation.
• Kratos broken ground on a new Oklahoma facility for turbofan production in partnership with GE Aerospace, with the facility expected to be operational by the summer of 2027.
• The company received an initial $30 million to $40 million in funding for the Solar Shield mobile counter UAS system, which is intended to secure nuclear assets.

INDUSTRY GLOSSARY

• JDAM-LR: Joint Direct Attack Munition - Long Range, a guidance kit that converts unguided bombs into precision-guided, extended-range munitions.
• JASSM: Joint Air-to-Surface Standoff Missile, a long-range, conventional, air-to-ground precision standoff missile.
• LRASM: Long Range Anti-Ship Missile, a precision-guided, anti-ship standoff missile.
• MACH-TB: Multi-Service Advanced Capability Hypersonic Test Bed, a program to increase the tempo of hypersonic flight testing.
• CCA: Collaborative Combat Aircraft, unmanned aircraft designed to operate alongside manned fighter jets.
• TT&C: Telemetry, Tracking, and Command, the communication functions used to monitor and control satellites.
• C5ISR: Command, Control, Communications, Computers, Combat Systems, Intelligence, Surveillance, and Reconnaissance.
• VLEO: Very Low Earth Orbit, typically defined as orbits with altitudes below 450 kilometers.

Full Conference Call Transcript

Operator: Hello, and welcome to Kratos Defense & Security Solutions Second Quarter 2026 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Marie Mendoza, VP, General Counsel. You may begin.

Marie Mendoza: Thank you. Good afternoon, everyone. Thank you for joining us for the Kratos Defense & Security Solutions Second Quarter 2026 Conference Call. With me today is Eric DeMarco, Kratos' President and Chief Executive Officer; and Deanna Lund, Kratos' Executive Vice President and Chief Financial Officer. Before we begin the substance of today's call, I'd like everyone to please take note of the safe harbor paragraph that is included at the end of today's press release. This paragraph emphasizes the major uncertainties and risks inherent in the forward-looking statements we will make this afternoon.

Please keep these uncertainties and risks in mind as we discuss future strategic initiatives, potential market opportunities, operational outlook, financial guidance and other forward-looking statements during today's call. Today's call will also include a discussion of non-GAAP financial measures as that term is defined in Regulation G. Non-GAAP financial measures should not be considered in isolation from or as a substitute for financial information presented in compliance with GAAP. Accordingly, at the end of today's press release, we have provided a reconciliation of these non-GAAP financial measures to the company's financial results prepared in accordance with GAAP. Eric?

Eric DeMarco: Thank you, Marie. Kratos' second quarter results reflect the execution of the Kratos team and that our strategy, including making internally funded investments to be first to market with relevant hardware and software that is engineered upfront for affordable mass production, is aligned with the Department of War's priorities. Representative of this alignment, Kratos' last 12-month book-to-bill ratio of 1.3:1, total last 12-month bookings of $1.99 billion, the number of opportunities for Kratos continuing to increase with the bid and proposal pipeline of $15 billion now and our business momentum forecast to accelerate into the second half of this year and continuing into '27. Kratos' second quarter year-over-year organic growth rate was 19.1%.

We are forecasting third-quarter organic growth of approximately 19% to 25%, and we are forecasting fourth quarter year-over-year organic growth of approximately 19% to 31%. We are increasing our forecasted full year 2026 organic revenue growth up to 19% to 23%. I am emphasizing that these are all organic growth numbers. Kratos' EBITDA margins also are increasing and are forecast to continue to increase in the second half of '26 and into '27 as the business scales, production increases, and we realize financial leverage on our fixed infrastructure cost.

We are generating and forecasting for increased margins while we are making significant investments as we pursue large new Department of War opportunities that are being presented to us and also with the recent strength of the shekel adversely impacting our Israeli operations profitability. We begin the second half of '26 and look forward to '27. We are more confident than ever in Kratos' future prospects, including for the following reasons. We have recently received new hypersonic system program awards, including Kraken 1, Kraken 2 and Nemesis. We have received a new directed energy counter UAS system program award with an initial value of approximately $160 million.

We have received a new space domain awareness system production award with an initial value of approximately $100 million. The Space Force is now receiving a new EW system that includes Kratos hardware. We have recently received approximately $400 million in new hypersonic and other funding, and we expect to receive significant additional funding in the second half of this year. We hope to announce shortly a successful recent Kratos rocket system flight event directly related to missile defense, and we have been recently informed that we have received a new contract for a missile system program of record.

The Pentagon has requested multiyear procurement authority for multiple munitions and missiles, including PrSM, AMRAAM, JASSM, LRASM, TLAM and MST, THAAD, Patriot, low-cost hypersonic strike systems, family of affordable mass munitions and low-cost containerized cruise missiles. These are all Kratos-supported programs or programs that we are positioning to support in the future. Why is this significant? The family of affordable mass missiles, the FAM program, for example, which the Air Force's Future Years Defense Program or FYDP calls for 27,000 low-cost cruise missiles, has been a top strategic priority of Kratos' jet engine initiative, and it's now happening.

The Pentagon is also looking to acquire 10,000 cruise missiles under the low-cost containerized munitions program, another low-cost missile opportunity Kratos has been targeting for our engines. Other new low-cost cruise missile programs Kratos is supporting or positioned for include ERAM, ETV, ground launch cruise missile and JDAM-LR, together representing an estimated potential opportunity for tens of thousands of Kratos small turbojet engines. We believe that JDAM LR alone, which includes the Kratos engine, could be one of the largest single opportunities for our company with the potential for tens of thousands of systems by itself.

As a result, we are currently placing initial orders with our supply chain for the components for 3,000 small Kratos TDI Spartan turbojet engines we expect to produce for customers in 2027, and we currently plan to order components during '27 for an additional 5,000 engines expected to produce for customers in 2028. The average selling price of a Kratos Spartan engine, this is a turbojet, is approximately $50,000. We will produce the Kratos Spartan Turbojet engines in our new now operational state-of-the-art manufacturing facility in Michigan. In addition to these low-cost cruise missile systems, it was reported the Air Force is looking to acquire over 11,000 JASSM and LRASM missiles over the next 6 or 7 years.

This is an opportunity Kratos' BladeWorks turbofan engine family and our partner, General Electric Aerospace, have been pursuing. Kratos' new BladeWorks facility in Oklahoma, where we recently broke ground and where we plan to produce these turbofans is expected to be operational next summer, which schedule we are closely coordinating with our partner and the customer. We currently plan on turning on our BladeWorks turbofan engine supply chain in either Q4 of this year or Q1 of next so we can meet future customer-required delivery schedules. Additionally, Kratos' partner, GE, has recently revealed a new small turbofan design optimized for the cost profile of the CCA market sized for a range of mission applications.

We are expecting Kratos' engine business to be one of our company's largest and fastest growing over the coming years. Kratos' hypersonic business, which generated approximately $200 million in revenue in 2025, and we are currently tracking for $400 million in '26, increasing to at least $700 million in 2027, is positioned to become Kratos' largest business with significant increased government funding in the hypersonic area expected for the foreseeable future. We expect to begin receiving the first of the 120 solid rocket motors we previously procured in Q3 this year. And with Kratos' new hypersonic system integration facility in Indiana operational, we see these as key elements of our hypersonic business expected future growth trajectory.

Kratos' hypersonic and rocket systems business has several additional large new opportunities we are pursuing, including certain in source selection, which we expect to be awarded by the end of this year. We are confident in our hypersonic business' forecasted growth trajectory, including based on the several hundred million in funding we recently received. And also, it was recently reported that the MACH-TB program funding over the next 5 years, as reflected in the department's budget justification documents, is approximately $7 billion.

An additional data point on why we believe that Kratos' hypersonic business will be a primary future growth driver for Kratos for the foreseeable future is the threat as it was recently reported that using U.S. intelligence estimates that China could have approximately 4,000 hypersonic missiles by 2035 and Russia could have 1,000. There is not only a drone, missile and space arms race underway, but also a hypersonic arms race, each of which Kratos intends on supporting the department to win.

Kratos' microwave electronics and SATCOM business headquartered in Israel is working with the Israeli MOD and our partners, Israel Aerospace Industries, RAFAEL and Elbit to replenish stockpiles of advanced weapons, interceptors, SATCOM and other assets used in the Iran conflict. Kratos has over 700 employees in Israel, and we are working on and have access to certain of the highest technology battle-proven systems in the world. Kratos' Israeli employees, business partners and presence is a clear differentiator for our company globally. Kratos' satellite C2 and space domain awareness business, our company's largest, is also rapidly growing and expecting significant future margin expansion with space having never been more important for global security and as space increasingly becomes a warfighting domain.

On the commercial side, Kratos' relationship with our partner, global satellite operator, SES, is outstanding with SES being an industry-leading technology company with a future technology and business road map that is truly exciting for SES, its customers, industry and for Kratos. Kratos' industrial gas turbine business area continues to ramp. It is currently one of the fastest-growing business areas in our company. With certain industrial gas turbines, we are working on being air cooled, which we believe is truly differentiating in the market. Kratos' Unmanned Systems business had a solid Q2, and we expect to receive an additional Marine Corps Valkyrie order by the end of this year.

It was reported that in recently released Marine Corps budget justification documents that the Marines plan to spend $1.28 billion on their CCA program over the relevant 5-year period. Kratos Valkyries are in Europe with our partner, Airbus, and we continue to work with a number of customers on Tactical Firejet, including Taiwan. It was recently reported that Taiwan is planning to adopt a new version of the Valkyrie in addition to its Tactical Firejet initiative, Mighty Hornet. Certain Kratos jet drones are now flying with Kratos jet engines, increasing performance, capability and time to market for our customers.

The number of opportunities that Kratos has across our company has never been stronger and continues to increase, both in the United States and internationally. The Department of War is looking for companies like Kratos to invest, move rapidly, mass produce and field the product fast in large quantities at a practical cost, and Kratos is stepping up and executing. Kratos is currently in an investment phase aligned with the department's reindustrialization initiative, which is related to the number of long -- new long-term program opportunities we're receiving. We're focused on organic growth, execution, winning large new programs, supporting the United States and the Department of War and generating a return for our investors. Deanna?

Deanna Lund: Thank you, Eric. Good afternoon. In summary, our second quarter's performance exceeded our forecasted revenue and EBITDA targets. And as Eric mentioned, we continue to be on track to meet our previously reported full year 2026 revenue goal of approximately 15% to 20% of organic revenue growth and approximately 100 basis points improvement in adjusted EBITDA margin performance from our reported 2025 operating results. Revenues for the second quarter were $458.8 million, above our estimated range of $400 million to $410 million, with a consolidated organic growth rate of 19.1%, comprised of an organic growth rate of 22% in our KGS segment and 8.1% in our Unmanned Systems segment.

Notable year-over-year organic revenue growth in our KGS segment included our defense rocket support, turbine technologies, microwave products and space training and cyber businesses with organic revenue growth rates of 50.2%, 43.3%, 29.5% and 8.7%, respectively. Adjusted EBITDA for the second quarter was $38.2 million, above the high end of our estimated range of $30 million to $35 million, reflecting the increased revenue and revenue mix. Unmanned Systems second quarter 2026 revenue was up $5.9 million or 8.1% organically, with the increase primarily driven by Valkyrie-related activity.

KGS' second quarter 2026 revenue was up $101.4 million year-over-year from the second quarter of '25 with organic revenue growth of 22%, excluding the impact of the recent acquisitions of Nomad and Orbit, which contributed $40.2 million. Second quarter 2026 cash flow used in operations was $11 million, primarily reflecting the working capital requirements related to the revenue growth impacting our receivables by approximately $59 million and increases in inventory of approximately $10 million and increases in prepaid and other assets of approximately $14 million, primarily reflecting prepayments for long-lead materials as well as investments we are continuing to make related to certain development initiatives in our Unmanned Systems, Rocket Systems and Space and Satellite businesses.

Free cash flow used in operations for the second quarter of '26 was $18.9 million after reflecting funding of $17.2 million of capital expenditures and net of $9.3 million in proceeds from the sale of Valkyries, which were reported as company-owned capital assets and previously classified as capital expenditures when manufactured, and therefore, reflected as an inflow in investing activities when sold. As we planned, we are continuing to make investments to expand and build out certain of our manufacturing and production facilities in our microwave products, rocket systems, hypersonic and jet engine businesses to meet existing and anticipated customer orders and requirements and investing in related new machinery, equipment and systems.

Consolidated DSOs or days sales outstanding decreased from 130 days during the first quarter of 2026 to 114 days during the second quarter of '26, primarily reflecting the achievement of billing milestone events. Our contract mix for the second quarter of '26 was 67% fixed price, 29% cost plus and 4% time and material contracts. Revenues generated from contracts with the U.S. federal government during the second quarter of '26 were approximately 69%, including revenues generated from contracts with the DoW, non-DoW federal government agencies and foreign military sales contracts and 20% generated from foreign customers and 11% generated from commercial and state and local entities. Moving on to financial guidance.

Our financial guidance we provided today includes our expectations and assumptions for our supply chain execution, the impact of employee sourcing, hiring, retention and the related costs. Our third quarter '26 revenue guidance reflects the estimated revenue mix and estimated leverage on elevated administrative, manufacturing overhead and bid and proposal costs that we have ramped in the business to support the forecasted full year '26 growth as well as the estimated impact of foreign currency impacts, including on our microwave products Israeli business, which is being adversely impacted by the strength of the Israeli shekel versus the U.S. dollars as we are paid in U.S. dollars for work performed but pay our vendors and workforce in shekels.

Simply stated, Kratos' second quarter and 6 months ended adjusted EBITDA would have been $2.5 million and $2.8 million higher, respectively, if the increase in the shekel over the past 6 months had not occurred. Further, our forecast for the full year includes an estimated impact of approximately $5 million to $7 million negative impact to EBITDA related to the continued estimated impact of the strength of the shekel. Our third quarter revenue guidance of $460 million to $480 million reflects estimated organic revenue growth of approximately 19% to 25% as compared to the third quarter of '25.

Our revised full year cash flow guidance has been updated to include the working capital requirements related to the recent decision to commence procurement of the materials and equipment in the third and fourth quarters to ramp our production of jet engines to 3,000 in 2027 to address the demand for engines for small cruise missiles.

Also includes the shift in timing of construction and procurement of related machinery and equipment, removes certain capital expenditures, which are now funded under customer contract, and includes a shift in classification of investments for various drone opportunities, which will be classified as a use of working capital in our operating cash flow as work in process or inventory rather than capital expenditures when incurred. The forecasted total investments for the year effectively remains unchanged at approximately $250 million to $270 million. However, the geography of where certain of these investments are reported on our cash flow statement has shifted between inventory or working capital and operating cash flow versus capital expenditures or investing cash flow.

Eric DeMarco: Great. Thank you, Deanna. We'll turn it over to the moderator for questions.

Operator: [Operator Instructions] Our first question comes from the line of Sheila Kahyaoglu with Jefferies.

Sheila Kahyaoglu: Eric and Deanna, great quarter on the growth side. The full year growth rate still implies a meaningful acceleration in the second half, and maybe I'll hone in specifically on hypersonics. Eric, I think you mentioned $400 million this year, still going to $700 million next year. How do you think about that in the second half? And how does that fit with some of the CapEx changes as well as we think about the growth?

Eric DeMarco: Go ahead, Deanna.

Deanna Lund: Yes. So for the hypersonic business, Sheila, the expectation going from Q2 to Q3 sequentially is approximately $20 million to $25 million of increase, and that's saying $20 million to $25 million, maybe up to $30 million incremental in Q4 from Q2's level.

Eric DeMarco: And the big piece operationally, Sheila, is our hypersonic system integration facility is operational now in Q3. And we have multiple lines, production lines, integration lines, if you will, for the motors that are now coming in and the flyers that will be coming in, we integrate them and we have the launch manifest and out they'll go. And that op tempo increases Q3, Q4 and then it increases significantly in 2027, which we have the contract for and the funding for.

Operator: Our next question comes from the line of Seth Seifman with JPMorgan.

Seth Seifman: I wanted to start off asking about the engine business. And I think you've spoken a lot about the hypersonics business being sort of the fastest-growing piece of the company. It sounds like the engines have a bit of a chance to catch up. And so maybe if you can give a little more color on the phasing of that and maybe the distinction between the turbofans and the turbojets and how the different pieces of that will ramp up, let's say, over the next 2 to 3 years and how that will compare to where things are going on hypersonics.

Eric DeMarco: Yes. Very good. So let's talk turbojets first. Turbojets, think 250 pounds of thrust on down -- this is our Spartan family, which we build in Michigan. These are not PowerPoints. These are all engines that work, that are flying today. I went through the various programs. There are many more that are out there. There are literally, as I said, and you can see it in the budget justification docs in the J-Books, tens of thousands, multiple tens of thousands of low-cost $300,000 cruise missiles that are coming beginning next year.

The ones publicly that I can talk about that we're designed in on, and I'm probably going to miss some here, is JDAM-LR, Ferra, we're on several with Northrop Grumman, and we're on several more with Lockheed Martin. The big one, of course, is JDAM-LR with Boeing. We're designed in on all those, and we're in on many others. We have a building plan that indicates what we need to build in '27 and '28 and '29. We have leaned forward and we have placed the orders now for the components for 3,000 engines to be built in 2027 and were at least 3,000 for customers.

And then we have a building plan where we're going to be ordering, as I mentioned in the remarks, the components for 5,000 more engines for 2028. And I'm not going to give a specific number for 2029, but that could increase significantly. The selling price average for these is $50,000 each. So that's those. On the turbo fans. So these are roughly -- it can adjust 600 pounds of thrust on up. These are much bigger, much more sophisticated. These go in, as I mentioned, JASSM and LRASM. I gave you the numbers that were coming -- that have been publicized there on the increase for those 2 types of cruise missiles.

There are several others we cannot talk about here because we're under -- either under an NDA. That factory is going to be up and running, as I said, in the summer of '27 in Oklahoma. It's mapped into missiles coming off the production line in 2020 -- late '27, '28. That will begin LRIP in 2028. That's the partnership with GE. It's a 50-50 partnership. And so any numbers I give financially just divide them by 2 because it's 50-50. And as I mentioned, there are thousands of those planned as well. Those are the 2 biggest for us, those turbojets and those turbofans.

Seth Seifman: Okay. Excellent. And then maybe just one to follow up on the guidance for this year. You mentioned some of the headwinds from the shekel. It seems like that's limiting some of the margin expansion that's happening here in Q2 and Q3. Is there anything else we should be aware of with regard to margin? And then are there some mix factors that are pushing the margin back up in Q4?

Deanna Lund: You're correct. So the biggest headwind that we're facing is that shekel impact. So the impact for the second quarter was about $2.5 million. For the first quarter, it was much smaller at $300,000. The estimate that we are forecasting at this point is about $5 million to $7 million for the year. So we're expecting that strength, unfortunately, to continue for the second half. So that is some of the headwind. Otherwise, we would have expected to see more margin expansion in the third and fourth quarters. But that's the single most significant headwind from a margin perspective.

Eric DeMarco: Yes. And Seth, some of those other platforms we're on, we're on CMMT or COMET, we're on Speed Racer, we're on Carrera, we're on Silver Fox, we're on Gray Wolf, and we're on Lumberjack in addition to JDAM-LR. So those are the public ones I can talk about.

Operator: Our next question comes from the line of Peter Arment with Baird.

Peter Arment: Nice results. Eric, on -- you mentioned Taiwan. Maybe you could give us an update on the developments with the Mighty Hornet. It certainly seems like it's well positioned and now it sounds like there's some interest in Valkyrie. Maybe you could just give us a Taiwan download here.

Eric DeMarco: Yes. So on the first one, the Mighty Hornet, which is the derivative of our Tactical Firejet, and this is one of the Kratos drones now that has a Kratos engine. So I think it's another first for Kratos. We're the first company under the same roof that's building a plane and building an engine. We have flights coming up with the customer soon. I'm not allowed to give the specific dates. We're going to do some things, and we have to hit some things. Assuming they go well, the customer is talking about putting us into production first half of next year on the Mighty Hornet. Those would be produced initially in Oklahoma on the Valkyrie derivative.

I was very surprised that the customer came out and did the interview that they did, and they talked about this. They talked about the reason that they want to do it is because the Valkyrie is flying, it's proven. It's flown with the Air Force. It's flown with the Marine Corps, it's deployed weapons. Very importantly, I believe they also talked about is it's rail launched, but it also is runway capable. So it has incredible flexibility. And they talked about a different propulsion type of aspect they wanted to have with the airplane. And they're talking about making a decision also in the first half of next year.

I have to leave it there because that's what they said, and I'm under an NDA, but that appears -- both of those appear to be progressing very well for us.

Peter Arment: Terrific. And then just could you give us an update on kind of overall production capacity capabilities for Valkyrie now that things are starting to move forward on a number of different fronts?

Eric DeMarco: Yes. And so we're increasing our production rate right now, as I've talked about before. We -- I believe as we get into '27, we'll be up to 1.5 planes on average a month. So we'll be getting to 18. I had mentioned a couple of calls ago, I think that we were looking to get on an average of 40. It's going to depend on the configuration where we ultimately get to that the customers want. So for example, if the predominant number of the airplanes that the customer want are rail launched or trolley launched, we'll be closer to the 40 number.

If the type of airplane that the customer wants is conventional takeoff and landing CTOL, it will be closer to a 35 number because they're a little bit more sophisticated to make in the factory and the customer will want less of them. And so we're tracking for a ramp in '27 that as we head into '28, we're going to be able to handle our U.S. customer. You know who that is, hopefully, the Taiwan customer. And we have 2 other international customers. I'm hoping we're going to be able to get through State Department, and we're going to be able to announce those very soon.

Operator: Our next question comes from the line of Mike Crawford with B. Riley Securities.

Michael Crawford: I believe, Eric, in the beginning, you mentioned ERAM, that extended range attack munition, which I think is called the Rusty Dagger. And is that another one of the derivatives that's coming, that's driving some of your engine growth?

Eric DeMarco: I cannot talk about any of those because of NDAs. I can't. The ones that I mentioned are the ones I can talk about.

Michael Crawford: Okay. And then just for the follow-up question. So it's great to see that Valkyrie production rate rise at your expanded facility. In the past, you've also had a number of other CCA-type tactical unmanned aircraft with perhaps greater performance that have been through various phases of development. Are any of those still in the running? Or are we distilled now to like Firejet and Valkyrie derivatives?

Eric DeMarco: No. There are 2 others that are in the running. Both of them now are classified. We are both -- we are under contract on both of them. And one of them is in the release of weapon phase. So there are -- so in addition to Tactical Firejet and Valkyrie, there are 2 others that are under contract.

Operator: Our next question comes from the line of Trevor Walsh with Citizens.

Trevor Walsh: Eric, maybe just a clarification. You called out the new GE engine that's going for some of the, I think, the increment to CCAs little higher thrust. It wasn't exactly clear when I -- as I read and we read the PR on that as to how you would be partnering with GE on that one. So could you maybe just either confirm or just explain if that's -- how that is either the same or different maybe than the first GEK engine, if you could?

Eric DeMarco: Yes, yes, absolutely. So on the -- we have a number of, I'll call them, programs going with GE. The one that's most public and that's most talked about is the GEK partnership, and that's for a range of a certain thrust class, think of missiles that fall into those missiles. And that's a 50-50 partnership, and that's the one that we're -- that I've been talking about, we're moving forward with them on those certain missile systems. We are also working with them in a contractor role, but it's more than a contractor, it's a partnership role.

And I have to be careful here because we're under NDA, but everyone that they've talked about, we're working on that I'm aware of. If I'm missing any, I apologize. So we are working on them. I would look at Kratos with GE. GE brings incredible depth, breadth, technology, credibility, capability, especially if you're talking building 10,000 jet engines that are going in $2 million cruise missiles. Kratos brings the ability to do very low-cost engineering and NRE and very low-cost mass production of those engines, which makes us a very formidable team. So just think of that on all of these small engines, how we're working with GE.

Trevor Walsh: Great. That's terrific. I appreciate the added clarity there. Deanna, maybe a follow-up for you, but Eric feel free to chime in, too. I appreciate all the callouts for the KGS growth rates across the different business lines, pretty high double digits for a lot of those. Can you -- it's probably easy just based on the prepared remarks to understand how durable the defense and rocket support business growth rate is, probably turbine too.

But as far as microwave products and space, I guess I'm just trying to understand as we think about modeling these out a little bit or just applying them to what we're doing is how much those latter 2, again, the microwave and space kind of those percentages that you called out for this quarter, if that's sort of a decent kind of foreseeable future next couple of quarters and next year type of growth rate? Or could there be some flux to those?

Deanna Lund: I think there may be some flux in the microwave one, so -- but it will still be meaningful. We're still forecasting meaningful growth rates, but it may be a little bit lower than what we just experienced in this last quarter. And I think the space satellite and training and cyber business, that should be probably along the same lines of what we just did in the second quarter.

Operator: Our next question comes from the line of Jonathan Siegmann with Stifel.

Jonathan Siegmann: Congratulations on strong results. Hoping you could maybe talk a little bit about -- you guys have been through a couple of cycles with sometimes when Washington throws a wrench in things. You've expressed a lot of confidence on the outlook, but just how you're thinking about maybe risks of extended time periods, that sort of budget and any kind of interruptions that Washington might throw at you.

Eric DeMarco: Yes. Yes. So our forecast basically assumes there's going to be a Q4 CRA. So October, November, December, it will get settled out sometime in January. That's kind of what we're -- how we've modeled everything out because that's kind of what we've seen 4 out of the last 5 years. A significant amount of our work is program of record based. So it's in the base budget. It's in the base appropriation. We have some work that was in Reconciliation Bill 1 or Big Beautiful Bill 1. A significant amount of that we have received the funding for. The money has been obligated. We've seen it.

So we are in pretty good shape on the $1 trillion spend for fiscal '26, which was $850 billion plus $150 billion. As we head into '27, we're looking at a $1,150 billion base. So it's up 15% on the base, and I think that's pretty bipartisan, and I think that's a minimum of what we're going to get. As we all know, there's a Reconciliation 2, it's now called Reconciliation 4 for $350 billion to get '27 potentially up to $1.5 trillion. My tummy tells me we're going to be somewhere between $1.15 trillion and $1.5 trillion. And even if we're not at $1.15 trillion, that's significant growth.

And within that growth, as I think you can all see, in that bubble where there's only so much money, there's a huge shift going on to lower-cost mass munitions. The future force structure for the foreseeable future, look at it like a barbell. On one side, there's going to be a ton of and attritable and expendable munitions and -- attritable, expendable munitions, drones, missiles, et cetera. On the other side of the barbell, there's going to be a handful. There's always going to be exquisite of exquisite weapons and munitions and there's not going to be much in the middle.

As you know, we're the merchant supplier to both the new defense technology companies, and we're producing our own low-cost weapon systems as a prime on the left. And on the right-hand side, we are the go-to military-grade hardware supplier to the primes on the exquisite. So we feel pretty good about our spot irrespective of what may happen in the budget dynamics.

Jonathan Siegmann: That's great. And it sounds like we're just starting to see some contributions from the new CapEx. You mentioned the hypersonic facility opened in Q3. Is there any else -- any other new capacity contributing to '26 that we should be aware of? Or is this all '27?

Eric DeMarco: Yes. Remember, Anaconda, which is our radar program. So the Anaconda facility is underway. It's not ready yet. But because of the demand of what we're doing, we are already starting to work on SPY-1 radars. So that is ramping a little bit in the second half of '26. When this facility comes online, middle of next year, this Anaconda, anechoic chamber radar facility, radar refurbishment facility is going to be one of the next legs up for us going into '28. And again, we've got the contract, we've got the program, et cetera. And the other one is Helios. Helios, we're going to be hopefully breaking ground on that later this year.

That will be up and ready to go into '27, beginning of '28. This is a hypersonic system arc chamber and laser facility. A lot of the work is classified, but that is going to be another leg for us step up in 2028.

Operator: Our next question comes from the line of Andre Madrid with BTIG.

Andre Madrid: In the same way that you provided color on kind of the step-up in the hypersonics business, can you provide something similar for KTT or maybe if I could throw some numbers at you and maybe gauge your read of that, if that's all right. Is it safe to assume an incremental like $150 million next year related to the turbofans? And if so, I know that the base business is pretty small, probably call it, barely 8 figures as of now. Excluding this, how should the rest of the KTT business grow into next year?

Eric DeMarco: Yes. So the forecasted big jump for 2027 over 2026 on the engines is the turbojets. That's the big jump, the turbojets. And that's the low-cost cruise missiles. And if you guys know -- you see what's required next year, the missiles that the airframers have got to put together and deliver next year, '28, '29 and that -- the big step up '27, '28 is the turbo jets. On the turbofans, if everything comes together according to plan and according to the funding documents, 2028, that's going to begin. And then that steps up big time in '29 and '30.

And so '28, '29 is where we will be at significant production rate for both -- the plan holds for both the turbojets and the turbofans. And KTT is in there, of course. Now drilling down even more into KTT. We do -- we have a lot of engine programs that I don't talk about, or we'd be here for hours, right? We are -- we put out a press release in the past week or 2 on a critical element engine of a new weapon system, okay? This is in KTT.

If this goes into production, which would be second half of '27, beginning of '28, this could be a $200 million to $300 million a year run rate program by itself. But we don't talk about it because we can't. But we're designed in, it's ours, okay? There's a space program where we are working on the propulsion system for the prime. If that program is to go, that's going to begin in KTT in '28. So we've got some biggies out there that we're designed in on. We're the guy.

I think on the first one, we're under an exclusivity arrangement that if it goes, and I think it's going to go within the funding docs, it's going to be another step up for us. So that's kind of the framework on how we're looking at the two.

Andre Madrid: Got it. That's really helpful. And then I guess now pivoting maybe to Unmanned Systems. You added that organic growth of 10% to the guide, which is new. Can you provide us a little more color on how that should progress through the second half and into '27? And I guess on that point, with the increase in '26, should we assume some level of growth into '27 as well? I'm pretty sure right now your preliminary '27 outlook does not really account for much KUS contribution.

Eric DeMarco: So we have to be very careful here because of the customer, all right? And so we can't get into much detail on this because then it will give away what they're doing. You could probably tell in today's prepared remarks that I purposely, because it's the fact, focus -- tried to focus everybody on where we have very clear line of sight quarterly, yearly, the hypersonics, the engines and the space business. I mean those 3 alone are just -- they're ripping. Our space business is ripping, and a lot of the work is classified.

On the drone side, we're going to be very cautious, and we may not be able to report it to you until we ship it, and it shows up in the numbers. And then we may not be able to say much about it, but you're going to know what it is. And I'm sorry, I don't like to operate that way, but we have to, based on what the customers told us here.

Andre Madrid: No, I understand, and I appreciate what color you can give.

Operator: Our next question comes from the line of Clarke Jeffries with Piper Sandler.

Clarke Jeffries: Just sort of a clarifying question around that expansion that you did to Oklahoma City. Trying to put in context what you've said earlier in the call around maybe some upside with Mighty Hornet. Just how does this expansion kind of put you on track for expanding the sort of 165 high-performance jet drones. It seems like Mighty Hornet or the Tactical Firejet would be early in fiscal '27. But also, how much does the expansion explicitly help that 35 to 40 production run rate for Valkyrie in out years? And then one follow-up.

Eric DeMarco: Yes. So right now, as you said, we're -- I think we're the largest jet drone producer in the world that I'm aware of, maybe outside of the Ukraine at 165 or 170 a year. The Oklahoma facility, and this ties back to a question Mr. Crawford asked. The Oklahoma facility right now is producing Valkyries, Tactic Firejet -- Tactical Firejet and one other. We've just recently approved an expansion of the facility by another 50,000 square feet or so that is happening, okay? That additional 50,000 square feet is going to be needed for -- it's a mix now, Valkyrie, Firejet target drones.

You can imagine with what everything that's going on in the world right now, the target drones are in great demand because so many people are buying missile systems and radars, they've got to exercise the weapon system and train the crew, okay? It's also going to be very important for Tactical Firejet and Mighty Hornet. And then very importantly, Mr. Crawford asked about some other drone programs. If one of these goes into production, I think it will second half next year, we're going to build that other one at this facility because it's going to have a classified space.

Clarke Jeffries: Perfect. And then just you talked about 2 months ago, maybe a month ago, $150 million single award for counter UAS Solar Shield. Just curious what's the expected time line for that contract? And maybe help us think about what the opportunity for like mobile C-UAS from the Department of Energy might look like long term.

Eric DeMarco: Yes. So that one, we got -- this is a very important program. We received -- I forgot the number, $30 million or $40 million of funding already right out of the chute. So we have begun on this. This is part of our ramp, by the way, into Q4 of this year. One of the reasons we're comfortable with our Q4 is because of this program and we got the funding for it. As you probably saw, this is with the Department of Energy, and it's related to securing nuclear assets, okay? It's a mobile and transportable system. We are the prime. We are the prime system integrator.

We are responsible for the entire system working, including the directed energy weapon system. If we're successful, I believe this program is going to grow or this initiative is going to grow significantly because this type of a capability is needed right now, and we're the guy that has it at low, low cost -- low cost. We're doing these systems in Montana. So that's the backdrop there. It's ramping now. It's going to be big in Q4, and it's going to continue to ramp into 2027.

Operator: Our next question comes from the line of Pete Skibitski with Alembic Global.

Peter Skibitski: Just want to review a couple of things. Eric, you mentioned the $7 billion in the FYDP for MACH-TB over 5 years. So I guess, would it be reasonable for us to factor in that business being $1 billion plus type of run rate starting in 2028 or so, just on the...

Eric DeMarco: Brother, yes, that's what's there to go take a look at the justification documents and you can -- and I'm not trying to be coy here because Deanna and I -- we got a forecast for this year. We got an outline for next year. I don't want to get ahead of myself in any of this. But this is one of the reasons for the last couple of calls, including today's call. I've been trying, as I said a minute ago, to orient the investors on our hypersonic franchise. It's growing rapidly. And if things come together the way you're indicating, which is there, this could be very, very substantive for the next 5 years.

Peter Skibitski: Yes, that's great. That's great. Just shifting gears to JASSM and LRASM. Obviously, these missiles have been around for a long time, right? So is the dynamic that's going on the DoW, they want a second source engine supplier and you guys are filling that role? And if that's a dynamic, what do you think your share would be on that when you kind of ramp?

Eric DeMarco: Yes. It's a double dynamic. It's -- obviously, the department is trying to foster the industrial base that they have the reindustrialization initiative I mentioned, and they want additional competition. The current provider on JASSM and LRASM is outstanding. It's an outstanding company. The CEO is outstanding. They're doing a great job. But the quantities, as I mentioned, and those, I think, 10,000 or 11,000, they're incredible. They're going up 3x or 4x a year. And so it's second source for national security purposes, and it's quantities and capacity to do it. And I don't want to get into any numbers here in specific.

But GE and Kratos, we're looking at thousands of these over -- thousands over a period of time.

Operator: Our next question comes from the line of Austin Moeller with Canaccord.

Austin Moeller: So it seems like in the Iran war, there's been a pretty significant expenditure of both cruise missiles and rocket artillery. So just given the opportunity there to add turbojets or guidance kits on to what would be considered dumb bombs, do you have a sense of how many JDAMs, SDBs or other dumb bombs are out there available for you to add turbojets or guidance kits to?

Eric DeMarco: Tens and tens and tens of thousands. There are many numbers -- it's a great question. There are many numbers floating around on putting a wing kit on and bolting on a small turbo jet and now you have extended range and reach and it's much more capable. The numbers are staggering. We have an initiative in Kratos that we've had going on, another one I just haven't talked about because I give you guys so much. You've heard about deep demilitarization, demil. So think of what you just said, you take old ordnance and you burn it or you destroy it, or you take stuff out of it and then you dispose of it. It's expensive to demil.

We have an initiative going in here. We're actually doing it. We're remilling it where it's less costly to repurpose an existing ordnance for something you just talked about than it is to destroy it. And it's one of our -- we're doing that under the radar, under the cover because I don't want anybody else to figure out what we're doing. But it ties exactly into what you're saying because of the amount of ordnance out there that is scheduled to be demil, but we're remilling it. That's our plan is to remil it.

Austin Moeller: Okay. And there's some large contracts that are starting to go out for the space component of Golden Dome. Do you have a sense on when we might start seeing already appropriated dollars either from Big Beautiful Bill, which you say a lot of that's gone out or from the '26 Space Force budget to purchase virtualized or software-defined ground system to support these satellites that are going to be going up?

Eric DeMarco: That's another great question. So about -- in the last 3 weeks, 2 companies were awarded a multibillion-dollar constellation for exactly what you're talking about. We are the ground for one of them with our software-defined command and control, TT&C and tracking. We can't talk about it. I don't think we're ever going to be able to talk about it, but it's exactly what you just said and our team won, and we're the ground. On other programs that we have, 2 of which we've announced in the last 2 quarters, we are seeing -- we have seen significant funding and it's increasing.

As I mentioned in my prepared remarks where I said there's a hypersonic arms race going on, the big dog is the space arms race. And we've all heard about LEO and MEO and GEO. VLEO is happening now. And VLEO is another major opportunity area for Kratos because of the nature of our software-defined command and control.

Operator: Our next question comes from the line of Ken Herbert with RBC Capital Markets.

Kenneth Herbert: You continue to call out pretty significant investment, $40 million to $45 million for the rocket system inventory build. Can you just update us, Eric, and apologies if I missed it, but update us on what you're seeing on that supply chain, how you're handicapping risk on that supply chain as you think about the ramp of hypersonics and some of your other businesses and sort of your optimism that, that supply chain continues to get the kind of improvement and unlock that you need to see the ramp in your business?

Eric DeMarco: Yes. So our Zeus solid rocket motors, L3 Aerojet is building them for us. They are doing an outstanding job for us. We don't have what I'll call a partnership agreement with them, but they're a true partner of Kratos. And they are doing an incredible job. They have met every milestone on time, on budget. So at least when it comes to Zeus, for us, they're doing a hell of a job. And part of it may be because they see the next 5, 7 years, what's coming in addition to what we've already done, okay? On the second one, Oriole, this is our partner, Northrop Grumman, Northrop Orbital ATK.

Ken, here again, when it comes to us, I can't speak for what I read in the press about other system issues. They are outstanding with us. I mean we're getting ready. We're looking at having to place another order for dozens and dozens more, and they have been very accommodating. And again, they're on time and on schedule. So I can only speak for Kratos, but -- we do some other ones, but those are the 2 primary ones. L3Harris and Chris is great and Northrop Grumman and Kathy is great, and they're just outstanding.

Kenneth Herbert: Okay. That's excellent, Eric. And [Technical Difficulty] Prometheus and where you stand and some of the next major milestones as we think about [Technical Difficulty] Facility.

Eric DeMarco: Ken, you broke up a little. When I think about which facility, Buddy?

Kenneth Herbert: Prometheus, sorry, the investments there on the motor side.

Eric DeMarco: Yes. I'm so glad you said that. If you all haven't seen it, a podcast came out this morning on Prometheus with a major publication, and it walks through the entire campus. It walks through the platforms, that walks through the timing, it walks through everything with our partner, RAFAEL. So go take a look at that for details on what I'm about to say. It's incredible. I didn't know it was coming out this morning and it did. Ken, we are on track for first fire next year. We are on track with our partner, RAFAEL. And I got to tell you, RAFAEL is outstanding. They are stable, outstanding, and they are bringing proven military-grade qualified energetics.

This is so far ahead of any of these other guys that are saying they're going to stand up an energetics facility. They got to get qualified, et cetera, et cetera, et cetera. We is. So this is going to begin middle of next year. I think we'll get into production, what year is next year, '27, '28, we'll get into production.

Operator: Our next question comes from the line of Joe Gomes with NOBLE Capital.

Joseph Gomes: So you guys are talking about the 3,000 and then the 5,000 and it starting to add up or starting to get the ordering of the component parts later this year and into '27. As you look at the supply chain there, are there any critical suppliers for certain parts? Or do you have multiple part suppliers for the components there that maybe we need to keep an eye on?

Eric DeMarco: Yes. So Joe, as you know, we have lots of Kratos systems here. One of my favorite Kratos systems is what's the most important part. It's the one you don't have, to complete a system. So we got to make sure every one of our vendors and every one of our suppliers, including their backup and the backup to the backup is qualified. We're giving them production quantity, so they're in production and they're going through quality, through delivery and through integration. So we are -- this is one -- obviously, I'm not going to say we're bulletproof, but this is so important to the company, to our company.

We are going to incredible length with the people we're bringing in from the auto industry, from the Department of War, from primes that are coming in to work with us, to work for Kratos to set up these lines, work the supply chain, work the quality, control and delivery schedules with them in redundancy. So we are -- this is a huge effort because, as I said, you just said, we're going to do a minimum of 3,000 next year, a minimum of 5,000 in '28. It could be 8,000, 10,000 in '29 if things come together. So -- and these are just the turbojets.

We have to do the same thing with the turbofans beginning, as I said, we're going to start ordering for those probably -- I said Q4 this year, Q1 next year, probably Q1, we're going to have to start ordering for those, and then we'll make a very big order Q4 of '27 or Q1 of '28 because that factory will be set.

Joseph Gomes: Okay. And then Eric, I just want to try and get your views on this or your -- point me in the right direction here. So as you know, there's a big private company out there, which I consider a peer in the same space as you guys that's been raising capital here at valuations at multiples of where Kratos is trading at on an enterprise value to EBITDA or excuse me, revenue basis. And I'm wondering, am I incorrect they are not a peer? Is there a disconnect something there that we saw Kratos stock run up and now it's come back down.

And this private company is now saying there's rumors out there they're raising even more money at even a higher valuation that just as I sit here, looking at the 2 companies kind of shake my head and just seeing, am I missing something? I'm just trying to get your view as to what the disconnect there is.

Eric DeMarco: Yes. Anduril is an absolute peer of Kratos. We're peers, okay? They have Lattice, their software that ties everything together. We have OpenSpace, our software that ties together space assets, space vehicles, space ground, et cetera, et cetera. They have unmanned jet drones. Kratos has unmanned jet drones. You may have seen recently now they're getting into the hypersonic area. We're in the hypersonic area, okay? They're in solid rocket motors. They acquired Adranos, so they're in solid rocket motors. We're in solid rocket motors with our partners and then also our new facility with RAFAEL. They are an outstanding company. I want them to succeed. The United States needs them to succeed.

We are absolute peers, no question about it. The only difference I see between -- and they are partners with us, we work. We work together, and I can't talk about what we're working together on. The only difference I see right now between the 2 of us is financial because they're private and we're public. And because they're private, they can take different approaches on things and invest more because they don't have to -- they're not held to yet. If they get public, then they'll be held to it. They're not held to certain metrics that a public company is held to. So that might be an advantage for them.

I have some advantages on them being public and it brings me access to certain things. From a valuation standpoint, I can't speak to that. I think I said on the last earnings call or the one before it. In my opinion, I'm the CEO, I drink the Kool-Aid. Kratos is the most valuable defense company there is. And you listen to our calls, you look at our programs, look at our growth rates. I mean, we could grow 30% in Q4 and make money, okay? And we're going to keep going in '27 and '28.

We're the most valuable one to our investors, and we're the most valuable one to the department, and I'm sure they would say the same thing that they are.

Operator: Our next question comes from the line of Cashen Keeler with BNP Paribas.

Cashen Keeler: You guys brought up a pair of facilities this year, you're bringing up some more next year. Can you maybe just talk about or quantify any start-up costs related to ramping these, what the payback periods look like? And what sort of awards you might need to get to that 100 basis points of margin improvement next year as well?

Eric DeMarco: Yes. I didn't hear the first part of your question. You said investing in and then I think blipped a little bit. Investing in what?

Cashen Keeler: Yes. No, you're just bringing up some more facilities next year. Just curious on start-up costs related to ramping those and payback periods as well.

Eric DeMarco: Got it. Yes. So just -- it's a good question. So as a reminder, we don't do a build it and they will come. We don't do that, okay? We built our hypersonic integration facility because we won the MACH-TB program and some other programs. So we knew what the operational tempo would be. We built the facility to satisfy that; plus some other things I think we're going to get. We did not build our new turbojet engine facility in Michigan until I was extremely comfortable that we were going to be designed into multiple cruise missiles, which I went through today. We've just now broken ground on the facility in Oklahoma for the turbofans with our partner, GE.

You've heard me talk about the programs. I can't get into much more detail than that, but it is not a build it and hope they come. It is a build it because we have a program or we have a partner or we have a contract, and we can model out the quantities, we can model out the profitability, and we can model out the rate of return we're going to get on our investment. Anaconda, which I mentioned, the radar one, I think that's SPY-1. I think that, that program was announced for us goes through 2053 publicly for the radars. That's on Anaconda.

On Helios, we've already got 2 or 3 customers signed up that who said that if we built that arc jet facility for the hypersonic test, they would sign up. So everything we do, we've got a customer, a partner, a program or funding, and we can do a rate of return calculation, so we know we're getting an adequate rate of return for our investors.

Operator: Our next question comes from the line of Gabriel Flouret with Cantor Fitzgerald.

Gabriel Flouret: This is Gabriel Flouret on for Colin Canfield. Can you discuss how your customers are talking about CCA volumes relative to their national security outlook? Specifically, where is Kratos seeing customer pricing and production schedule pull to the left? How should we think about that momentum versus U.S. production scaling?

Eric DeMarco: I'm not -- if you can see me, I'm smiling because that program, that is one you haven't heard me talk about that for a long time. I cannot talk about the CCA program with the Air Force. Can't talk about it. It is a classified, super classified program, and we can't say anything. On the Marine Corps CCA program, you saw how I said today, it's been reported that the program of record is this much money. It's been reported because that's how I have to talk because I'm not approved to talk about anything. So again, I'm sorry, but I just can't get into any of that because we do not have approval to discuss it.

Operator: Our next question comes from the line of Brian Dobson with Clear Street.

Jonah Henschel: First of all, congrats on a great quarter. And this is Jonah Henschel speaking on behalf of Brian Dobson here at Clear Street. Given the Valkyrie momentum you've described tonight, I'm curious what kind of updated color you can provide when it comes to the LRIP Phase 1 timing.

Deanna Lund: What were the last few words?

Eric DeMarco: Yes, the last part, you broke up. The what timing?

Jonah Henschel: Sorry. Sorry. The LRIP Phase 1...

Eric DeMarco: LRIP, so low-rate initial production. I got it. I got it. So as I said in my prepared remarks, we expect to receive by the end of the year, an additional award where we're partnered with Northrop on that MUX TACAIR program with Northrop and the Marines. That's all I can say right now is that we expect something by the end of this calendar year.

Jonah Henschel: Okay. Understood. And then just a quick follow-up. When Valkyrie ended up scaling, I'm curious how can we think about margins in that segment?

Eric DeMarco: Right. Yes, I think 10% to 15% EBITDA margin depending on configuration. And that's domestic, I'm -- very important domestic because we got another -- a number of international ones going. And the international ones are typically higher fees for us because they're international and there are different aspects. And in certain instances, we're not held to TINA, Truth in Negotiations Act, because we're not sole source. So international, I think 15% to 20%, domestic think 10% to 15%, depending on configuration and quantity.

Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Eric for closing remarks.

Eric DeMarco: Great. Excellent. Thank you for joining us this afternoon, and we look forward to talking to you when we report Q3, I think, in the first week of November. Thank you.

Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect.