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DATE

Thursday, Aug. 6, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Senior Vice President of Investor Relations and Corporate Communications - Steven A. Gitlin
• Chief Executive Officer - Jonathan Rambeau
• Chief Financial Officer - Michael Willis
• Chief Operating Officer - Jonathan Beaudoin

TAKEAWAYS

• Revenue -- $182.1 million, increasing 58.2% year over year and 20.4% sequentially due to growth across all end markets.
• Organic Revenue Growth -- 24.4% year over year for the second quarter, supported by core production programs and emerging platforms transitioning to production.
• Backlog -- $1.3 billion at the end of the second quarter, rising 65% compared to the end of fiscal year 2025.
• Bookings -- nearly $500 million during the quarter, reflecting a large long-term agreement with a space and launch customer.
• Adjusted EBITDA -- $54.6 million, representing a 54.7% increase year over year and a 30.0% margin.
• Non-GAAP Adjusted EPS -- $0.14, representing a 43% increase over the prior-year period.
• Tactical Missiles and Integrated Defense Systems Revenue -- $63.0 million, rising 55.4% year over year driven by demand for unmanned aircraft systems and counter-UAS programs.
• Hypersonics and Strategic Missile Defense Revenue -- $43.4 million, up 24.2% year over year reflecting increased production for interceptor and surface-to-surface missile systems.
• Space and Launch Revenue -- $42.1 million, growing 6.3% year over year as content for legacy and emerging launch providers was partially offset by shifting schedules.
• Maritime Defense Systems Revenue -- $33.6 million, driven by legacy and next-generation submarine program requirements.
• Full-Year 2026 Revenue Guidance -- $730 million to $745 million, representing approximately 57% year-over-year growth at the midpoint.
• Full-Year 2026 Adjusted EBITDA Guidance -- $215.0 million to $222.5 million, reflecting a 29.7% margin at the midpoint.
• Acquisition -- approximately $94 million for Walker Precision Engineering to establish a defense presence in the European market.
• Debt Repricing -- 50 basis point reduction in the term loan B interest rate to SOFR plus 2.25%, expected to save approximately $4 million in annual interest payments.
• Capital Expenditures -- $22.0 million year to date, supporting capacity expansion for nozzles, UAS launchers, and maritime programs.
• Full-Year CapEx Guidance -- 5% of total revenue, which management noted implies a sequential decrease in spending for the second half of 2026.
• Free Cash Flow Guidance -- $15 million to $20 million expected in the second half of 2026 as volume and cash generation accelerate.
• Leverage Ratio -- 3.7x adjusted EBITDA on a pro forma basis, with a target of approximately 3.5x by the end of 2026.
• Gross Profit -- $78.2 million, yielding a gross margin of 43.0% for the second quarter.
• Cash and Cash Equivalents -- $51.7 million, up $17.8 million since the end of fiscal year 2025.
• Inventory and Contract Assets -- $16.3 million and $187.1 million, respectively, reflecting working capital requirements for production ramps.
• Customer Diversification -- more than 150 programs and customers, with no single vendor exceeding 10% of accounts payable.

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RISKS

• Rambeau noted that while the company is making progress on remediating a previously disclosed material weakness in internal controls, he stated, "We anticipate the necessary controls to be fully implemented by the end of 26," with testing of operating effectiveness expected to continue into early 2027.
• Willis reported that growth in the Space and Launch end market was "partially offset by customer order timing associated with shifting launch schedules," which impacted year-over-year growth rates for that segment.
• Rambeau identified potential pricing pressure, stating, "we recognize that as our customers pursue some of these generational increases and in capacity and look to lock in long term arrangements, there could be pressure put on our pricing," prompting a focus on operational efficiency to maintain margins.

SUMMARY

Management reported record second quarter performance with 58.2% revenue growth and raised its full-year 2026 financial outlook. The company is currently executing on a capacity expansion strategy, including the fit-up of a 200,000-square-foot facility in Salt Lake City to meet unprecedented demand for munitions and interceptors. Karman Holdings Inc. (KRMN -2.28%) is also pursuing a second-source supplier strategy to capture market share on established defense programs where prime contractors seek supply chain redundancy. Additionally, the company is transitioning to a Big 4 auditor and implementing a new executive compensation framework that will prioritize free cash flow generation starting in 2027.

• CEO Rambeau confirmed the company is tracking to 20% to 25% annual organic growth for the foreseeable future, noting that "revenue could double in 3 to 4 years with potential inorganic growth accelerating that timeline."
• The company reported that some customers are requesting production increases "by as much as a factor of 10x," significantly exceeding previous projections of 2x to 4x multiples.
• COO Beaudoin highlighted the qualification of proprietary MG resin as an alternative for high-temperature materials, stating that "it is probably call it, a year to 2 years for a full qualification at a platform level."
• Management identified five specific second-source opportunities, including separation motors for munitions, small propulsion systems for anti-armor weapons, and solid rocket motor cases.
• The company is advancing an AI initiative titled "Project Moonshot" designed to apply historical engineering data to accelerate design and proposal workflows.
• CEO Rambeau addressed the Blue Origin New Glenn mishap, stating that conversations with the customer indicated production remains "full steam ahead" and has not slowed down.
• The company executed a five-year long-term agreement in the space and launch sector, which Rambeau noted will "burn off at a relatively level rate across the following 4.5 or so years" after an initial ramp in the second half of 2026.

INDUSTRY GLOSSARY

• IDS: Integrated Defense Systems, a segment of the defense market focusing on comprehensive defensive hardware.
• LTA: Long-Term Agreement, a multiyear contract defining supply terms and pricing between a manufacturer and a customer.
• MAC: Munitions Advisory Council, a grouping of programs involving critical ammunition and missile systems.
• MG Resin: A proprietary high-temperature composite material used in aerospace and defense applications.
• Second Source: An alternative supplier qualified to provide components for a program originally served by a single source to ensure supply chain resiliency.
• SOFR: Secured Overnight Financing Rate, a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities, used as a benchmark for interest rates.
• SRM Cases: Solid Rocket Motor cases, the high-strength containers for solid propellant used in missiles and space vehicles.
• UAS: Unmanned Aircraft Systems, commonly referred to as drones.

Full Conference Call Transcript

Operator: Hello, everyone. Thank you for joining us. And welcome to the Karman Space and Defense second quarter fiscal year 26 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Steven A. Gitlin, Vice President of Investor Relations. Steven, please go ahead.

Steven A. Gitlin: Good afternoon, and thank you for joining Karman Space and Defense's Second Quarter Fiscal Year 26 Earnings Conference Call. I am Steven A. Gitlin, senior vice president of investor relations and corporate communications. Joining me today are Jonathan Rambeau, chief executive officer Michael Willis, chief financial officer and Jonathan Beaudoin, chief operating officer. Before we begin, please note that many of the statements made on this call are forward looking. These statements involve risks and uncertainties that may cause actual results to differ materially We encourage you to review the risk factors discussed in our filings with the SEC.

I would also like to note that we will discuss a number of non GAAP financial measures today that we believe can be useful in evaluating our performance. Such non GAAP financial measures should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Our earnings release, which we filed today, can also be found under the heading News and Events on the Investors section of our company's website and contains a reconciliation of any non GAAP financial measure to the most comparable GAAP measure. The content of this conference call contains time sensitive information that is accurate only as of today, 08/06/2026.

The company undertakes no obligation to make any revision to any forward looking statements contained in our remarks today, or to update them to reflect the events or circumstances occurring after this conference call. We have posted our earnings release and presentation on our website at karmansd.com. Now I will turn the call over to John.

Jonathan Rambeau: Good afternoon. In the 4 months I have been with Karman, I have worked intensely and methodically to evaluate our strategy, our operations, and our progress as we continue in our second year as a mid cap public company. I am very proud of what Karman has accomplished and I am pleased to see our hard work reflected in milestones such as our recent addition to the S&P Small Cap 600 Index. Against all measures of progress, we are seeing positive results.

Shown on page 4 of our earnings presentation, highlights in and since the second quarter include sequential revenue growth of 20.4% from the first quarter to the second Year over year quarterly organic growth of 24.4% representing revenue growth from businesses we have owned for more than 12 months. Record backlog of $1.3 billion, record quarterly bookings of nearly $500 million initial fit up of a 200 thousand-square-foot factory in Salt Lake City with production capability online before the end of 26. A large long term agreement executed with a space and launch customer further to the contingent agreement received earlier this year. Meaningful progress toward remediating the material weakness previously shared in our public filings.

We anticipate the necessary controls to be fully implemented by the end of 26. With testing of operating effectiveness expected to continue into early 27. Selection of and transition to PwC as our new audit firm, moving Karman into the ranks of other established public companies working with a Big 4 auditor. Signed agreement to acquire Walker Precision Engineering, establishing a beachhead position in Europe, with relationships across the spectrum of European defense primes. Additional details on the Walker acquisition can be found on page 5. With these accomplishments as background, today I will summarize our record second quarter performance, highlight the progress we have made, and outline the priorities guiding our next phase of growth.

Then Mike will discuss our financial results and guidance, Jonathan will provide updates on demand, integration and capacity expansion and I will discuss our growth trajectory before we take your questions.

Michael Willis: From a performance point of view, as shown on page 6, we delivered another quarter of record financial results. With quarterly revenue of $182 million, non-GAAP adjusted EBITDA of $55 million and backlog reaching $1.3 billion, giving us 95% visibility to the midpoint of our full year revenue guidance.

Jonathan Rambeau: We expect our strong organic growth rate to continue and want to provide additional clarity on why short term organic growth is not as useful a metric for our integrated business model as it may be for other companies. Some companies manage newly acquired businesses in more of a holding company fashion with minimal operational integration. In contrast, we identify and acquire companies that bring unique and valuable capabilities to Karman. Capabilities that allow us to offer greater value to our customers, and we begin the integration process on day 1. This means that we seek to exploit these capabilities immediately.

To the benefit of Carmen and our customers regardless of the amount of time they have been a part of the company. For example, if a newly acquired business is better suited to manufacture products for a long standing program, then we will move production to that site regardless of whether the output is considered organic or inorganic. An example is what we are doing now in Gulfport where we are transitioning certain products for our space and launch end market from another long standing business. We categorize this as inorganic even though it is really organic business that we are simply moving to a recently acquired site that is best suited to its delivery.

From an operational and customer perspective, what we call that revenue is much less important than making the best business decision for the customer and the enterprise. To provide a second and slightly different example, following the acquisition of our Cedar City Utah energetics business, we immediately began pursuing new use cases and customers, for its capabilities. Having seen rapid success, we created new revenue streams within that recently acquired business that would not have been possible had they remained independent.

We aim to continue pursuing this strategy of moving work and combining capabilities across all of our businesses and will not constrain that strategy by managing to a quarterly organic growth metric that could reduce long term value capture for the enterprise. With that said, we remain focused on end markets with very strong organic growth vectors, and we remain confident in our ability to deliver 20% to 25% annual organic growth for the foreseeable future. Demonstrated performance supports that growth rate. Quarterly year over year organic growth in the 5 full quarters since our IPO has ranged 19% to 36%. Including 24.4% organic growth year over year in the most recent quarter.

As we move forward, we will periodically share organic growth at a minimum annually while continuing to focus on optimizing the company for maximum shareholder returns over time. Beyond our financial results, we achieved significant commercial milestones that position Karman for sustained profitable growth. As we first announced in May 2026, we secured 4 large contingent supply agreements, 1 of which converted to a firm contract in the second quarter with the others expected to close by the end of the year. Additionally, while protecting our single and sole source positions on Munitions Advisory Council, or MAC programs remains a top priority, we see this moment as an opportunity to also go on offense.

In terms of increasing our share as a second source to prime contractors. Not all suppliers have invested as proactively as Karman, positioning us to step in and become a second source where we are not participating today. Here are several examples of the progress we have made. First, separation motors for a major munitions program. Second, expected selection as a second source on a small propulsion system for a widely deployed anti armor weapon system. Third, emerging opportunity as a second supplier for large solid rocket motor or SRM cases.

Fourth, an opportunity to be a second source supplier for a shroud system on a widely recognized interceptor program And finally, we are also engaging with customers on an opportunity for a future lower cost interceptor program. These wins and opportunities reflect growing confidence in Karman's ability to scale, innovate, and deliver critical hardware at speed and at high volume. They also reinforce what industry leaders have recently demonstrated. Framework agreements are converting into large production contracts as highlighted by the more than $90 billion in THAAD and PAC-3 interceptor contracts recently awarded to Lockheed Martin. And these large contracts are not limited to missile defense.

As the Navy recently awarded an historic $76.6 billion in contracts for 5 new Columbia and 9 new Virginia class submarines. Programs that we support extensively through our maritime defense end market. Those contract awards underscore the strength of our pipeline and the state of the global security environment that drives our customers' mission every day. The demand environment remains strong with an urgency to replenish depleted munitions and interceptor stockpiles at an unprecedented rate. In fact, some customers are now citing demand to increase certain annual production buys by as much as a factor of 10x. Which would dwarf earlier projections of 2, 3, or 4x multiples of current build rates.

Karman is purpose-built to respond to this market demand, and we continue to partner with prime contractors to help them deliver reliably, and efficiently. Having covered our Q2 highlights, I would like to turn for a moment to my go forward priorities. First, continue our track record of strong financial performance while capturing generational demand that we see continuing through at least the end of the decade. Second, fully unlock the value of Karman. Leveraging differentiated IP, a growing and well capitalized development and production system and a talented workforce. Having now visited 17 of our 20 current and expected to be acquired sites, I have confidence the whole will be realized as more than the sum of the parts.

And third, drive operational excellence through technology, capacity, and a rigorous operating rhythm. To support these priorities, we have identified key areas of focus. First, drive disciplined delivery of free cash. While we still view growth and margin performance as top priorities, you will see increased focus on this metric in 2027, and this will be reflected in our executive compensation incentive framework beginning next year. Second, create financial flexibility. As we find opportunities for operational efficiency and operating leverage, this will provide options for price reduction, business reinvestment or margin improvement In a way that best maximizes long term shareholder returns.

And third, continued expansion of our total addressable market within the high growth end markets we currently occupy through both organic and inorganic means. I am pleased with the progress we have made at the midpoint of the year and I remain confident that 2026 will be another year of record performance. With that, and to further discuss that performance, I will turn it over to Mike.

Michael Willis: Thank you, John. Our record second quarter results demonstrate the continued strength and momentum of the Karman business model. Pages 7 and 8 include key financial metrics. Revenue of $182 million up 58% year over year, and 20% sequentially. Gross profit of $78 million up 66% with a gross margin of 43%. Net income of $14 million, up 106% year over year. Adjusted EBITDA of $55 million up 55% year over year, adjusted EPS of $0.14, 43% above last year backlog of $1.3 billion, up 65% compared to the end of fiscal year 2025, Bookings in the quarter totaled nearly $500 million from all end markets including a large space and launch LTA.

Organic revenue grew 24.4% year over year in the quarter. As John mentioned, full quarterly organic revenue growth since our IPO has ranged between 19% to 36%, supporting our annual 20% to 25% organic revenue growth target. Each of our legacy markets delivered year over year quarterly and year to date growth. Tactical missiles and IDS grew 55% to $63 million year over year quarterly, and 41% to $108 million year to date, led by strength in core production programs including unmanned encounter UAS, and emerging programs transitioning into production. Maritime defense systems contributed $34 million in the quarter, and $60 million year to date, driven by legacy and next generation submarine programs.

Hypersonics and strategic missile defense grew 24% to $43 million year over year quarterly and 22% to $79 million year to date. Driven by growth in key interceptor program production and increased production associated with a new surface to surface missile system. Space and launch grew 6% to $42 million year over year quarterly and 17% to $86 million year to date, supported by content for both legacy and new launch providers. Partially offset by customer order timing associated with shifting launch schedules. Our second quarter revenue mix was as follows: Tactical Missiles and IDS, 35%; Hypersonics and SMD, 24%; space and launch, 23%; and maritime defense systems, 18%.

For the 6 months ending June 30, revenue rose to $333 million up 55% year over year. Gross profit increased to $142 million up 64% year over year. Net income grew to $22 million up from $2 million a year ago. Adjusted EBITDA jumped to $99 million up 51% year over year. And adjusted EPS climbed to $0.25 up 56% year over year. Looking now at the balance sheet, we continue to prioritize growth as we make capital allocation decisions, understanding that CapEx and working capital will continue to consume cash through this high growth cycle.

That said, we are also placing increased emphasis on cash management and will include free cash flow metrics in our executive compensation program as John described earlier. Cash and cash equivalents totaled $52 million up $18 million from year end. Cash used in operations was $4 million, driven primarily by increases in accounts receivable and contract assets. This reflects the working capital requirements associated with the 58% revenue growth driving our receivables. As well as contract assets from production ramps investments we are making to expand our capacity. We expect volume and cash generation to accelerate in the second half of 26.

Delivering free cash flow of $15 million to $20 million Accounts receivable growth in the second quarter was a function of timing and our growth. With significant deliveries taking place late in the quarter. Accounts receivable is likely to continue to grow in Q3 and Q4, but we do not expect AR days to grow. CapEx year to date was $22 million supporting growth across nozzle capacity, UAS launchers, launch vehicles, maritime programs, and spacecraft manufacturing. This represents a slightly higher run rate than our 5% guidance for the year, implying a step down in CapEx in the second half of 26. Our CapEx does not include customer funded capital.

We are investing ahead of orders to strengthen our ability to respond to the generational demand cycle we expect to persist for a number of years. Turning now to leverage. Net debt was $752 million at the end of the second quarter. Our Q2 leverage ratio was roughly 3.7x adjusted EBITDA on a pro forma basis. Subject to regulatory approval of the Walker acquisition, we expect our pro forma leverage ratio to be approximately 3.5x by the end of the year. Since the quarter end, we repriced our term loan B to SOFR plus 2.25%,. A 50 basis point reduction. Equivalent to a savings of approximately $4 million a year in interest payments.

We also previously increased our revolving credit facility from $50 million to $150 million, providing greater strategic flexibility. Now I would like to provide a brief update on M&A and our auditor. We announced the execution of an agreement to acquire Walker with a total consideration of £70 million or approximately $94 million. The adjusted EBITDA multiple we expect to pay at closing is consistent with the other acquisitions we have made since our IPO. The regulatory review process is underway, and we expect the acquisition to be completed by year end. Our integration of Seemann Composites and MSC is on track. Delivering higher than expected margin as we prepare to transition space and launch work to the Gulfport location.

We are not seeing meaningful changes in valuation expectations across our robust proprietary M&A pipeline, we continue to represent an acquirer of choice for IP rich first or second generation owners seeking long term growth for the businesses they have created. We engaged PwC as our new auditor this quarter, Their scale and expertise are well aligned with our business model and growth strategy. I will now provide an update on our full year guidance. Given our strong first half results, record backlog and 95% visibility, we are raising our 2026 outlook shown on page 9.

We now expect full year revenue of $730 million to $745 million and non GAAP adjusted EBITDA of $215 million to $222.5 million 29.7% margin at the midpoint. This represents year over year revenue growth of 57% and adjusted EBITDA growth of 51% to the midpoint. This outlook does not include the financial results from the Walker acquisition. Importantly, we reaffirm expectations of 25% or higher organic growth in 26. We expect second half revenue to increase sequentially with approximately a 47%/53% split between Q3 and Q4. With high visibility, much of our growing record backlog supports our plans for 2027 and beyond.

Lastly, for 2026 modeling purposes, we expect a statutory tax rate of 26.5% and capital expenditures of 5% of revenue. Roughly $37 million. Now I will turn the call over to Jonathan.

Jonathan Beaudoin: Thank you, Mike. As John stated earlier, integration of acquired businesses is key to our strategy, and enables us to create value that would not exist if these businesses remained stand-alone. Integration of our recent acquisitions continues to move ahead smoothly. Including Seemann Composites and MSC, which remains on track for completion this year. We are realizing early benefits, capturing new business pursuits, leveraging our collective capability, along with increasing production of existing Karman products by utilizing available capacity at the newly acquired facilities. For example, our Cedar City, Utah business is helping secure our positions to compete for second source propulsion system opportunities on a MAC interceptor and a key program of record air to ground missile system.

An additional illustration is our initiative to manufacture space launch vehicle systems at the Gulfport facility leveraging its large scale maritime production capabilities to meet the specialized demands of space launch products. All business development opportunities and pursuits have been incorporated into our company wide BD systems. Allowing us to fully utilize Karman's capabilities to address customer needs. We have started implementing the Karman operating system across all companies acquired since our IPO with progress varying by location. In the second quarter, our machine utilization monitoring system was launched at our Albany, Oregon facility. Given the unprecedented levels of demand, it is imperative to ensure we have sufficient capacity to satisfy our customers' requirements ahead of their need.

We are optimizing existing assets by evaluating utilization rates at recently acquired businesses and leveraging the Karman operating system to identify and address output constraints. In addition, we are investing in expanded capacity to accommodate future demand. Installation of advanced equipment is underway to support our significant space launch award with enhanced spacecraft production capabilities slated for deployment in Q4 26. We continue to advance our Salt Lake City manufacturing center which will support both tactical missile and IDS and Hypersonics and SMD customers. The first production equipment arrived last month and we expect initial production capability in the fourth quarter 26.

The transition of select production from the Seattle area to SLC will release meaningful capacity to support development, low rate, and full rate production at that location. Maintaining strong visibility across our supply chain is necessary to support our growth strategy. As our business continues to grow, so does our customer and program count, now at more than 150. This increased diversification also applies to our supply chain, with no 1 vendor now making up 10% of our accounts payable. Our customers control the supply of key high temperature composite materials ensuring that we have access to the materials required to support them.

In parallel, we are working to qualify our proprietary MG as an alternative solution to support the significant expansion at high temperature material demand. We continue to monitor raw metallic material availability and at this time, we have not experienced any constraints for our products. Turning now to our AI initiatives. We are advancing AI enabled capabilities across engineering and select business with the goal of reducing cycle times and expanding capacity. Our core initiative, what we call project moonshot, is focused on securely applying AI to our historical engineering program data. Accumulated over several decades to accelerate design, engineering, and proposal workflows. Over time, we believe these capabilities could improve capture probability and drive growth.

We expect to share additional examples of our progress next quarter. Now I will turn it back to John.

Jonathan Rambeau: Thank you, Jonathan. As we look toward the balance of the year, we remain focused on performance and growth. Complementing our strong organic growth, we also expect to continue to pursue our growth strategy through additional acquisitions. With the focus on munitions, and space capabilities that complement our current footprint in domestic and international markets. Beyond the current year, we believe that we are well positioned to deliver 20% to 25% annual organic growth for a multi year period. At that growth rate, revenue could double in 3 to 4 years with potential inorganic growth accelerating that timeline. there is no question that this is an exciting time for Karman and we are just getting started.

Now let's take your questions.

Operator: We will now begin the question-and-answer session. Please limit yourself to 1 question and 1 follow-up at which point you may return to the queue for another 2 questions. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the q and a roster. Your first question comes from the line of Peter Arment with Baird. Your line is open. Please go ahead.

Peter Arment: Yeah. Thanks. Good afternoon, guys. Nice results. And maybe just first question, the new LTA within space and launch, could you give us a little more color on kind of the timing of when you expect that to start to contribute to the top line?

Jonathan Rambeau: Yeah, sure. Sure, Peter. I will start off with that 1. If I could. You know, this is 1 we had mentioned in our prior quarter earnings call. We talked about a contingent supply agreement that we were actively negotiating in space and launch. And at that time, I think we had mentioned approximately a $250 million value for that LTA. That did come through just a bit below that number, but not too far from it. And it is a 5-year agreement. So you can see there will be some amount of that will start to feather in over the balance of this year.

Following on to some prior-year agreements that had already been in place, and that will just burn off on, you know, following this year, it will burn off at a relatively level rate across the following 4.5 or so years.

Peter Arment: Okay. Super helpful. And then just as a follow-up, The second the guidance that I raised, the second half implies kind of a sequential step up on the top line. Would you do we assume that tactical missiles IDS will still be the main driver of the top line? Or maybe any color you could give on markets or segments? Thanks.

Michael Willis: I think end markets are going to continue to be kind of steady course from what you saw in the first 6 months. So we would expect tactical missiles and IDS to remain pretty strong in the second half. Got it.

Peter Arment: Thanks. I will jump back in the queue. Thanks, guys.

Jonathan Rambeau: Thanks, Peter.

Operator: Your next question comes from the line of Louie DiPalma with William Blair. Your line is open. Please go ahead.

Louie Dipalma: Great. John, Michael, Jonathan and Steven, nice work on the strong quarter. Thank you. Thank you On the prior quarter earnings call, you announced that you were in negotiations with several framework agreements I was wondering if you could provide an update in terms of the progress with those framework agreements and potential timing on when they might become definitized.

Jonathan Rambeau: Yeah, sure. I would be happy to answer that, Louie. We continue to have active discussions with our with our prime customers on those 3 contingent supply agreements. We have made progress on all 3 of those, and we are continuing to anticipate as we did prior quarter that those would have firm agreements in place between now and the end of the year. We have, I would say, reasonable confidence that we will see initial contracts coming through as early as Q3. But, again, I think by the end of the year, we will see those fall into place.

We have been going back and forth and as you might imagine, as the prime contracts come through, you know, we have to, you know, sort of have our time in the queue to get to the detailed negotiation with those customers. But the conversations are ongoing. And if anything, I think the expectation in terms of the total quantity volume that we will be seeing coming through those is going to be at or above what was anticipated last quarter.

Louie Dipalma: Great. And across the industry, John, you have observed and many investors have observed how the Department of War is looking for second suppliers for many of the leading platforms For instance, Northrop Grumman was added as a second supplier for the PAC 3 system. Like, overall, in aggregate, do you view this second supplier trend as having a positive, neutral, or potentially negative impact on Karman's business?

Jonathan Rambeau: Yeah. I can tell you, Louie, that it is an active conversation that we are having almost every day. And certainly, as you are, we are well aware of the conversation around second sourcing. I would call it a net opportunity for Karman. And the reason I would say that is first off, we really have leaned out, ahead a bit in terms of where demand was going to be, getting equipment on order, getting facilities in place. You know, Jonathan talked a little bit about our expansion facility that is well underway and we are quite excited about that.

So while we know our customers are being asked to look hard at second sourcing, our commitment is a, we will convince them that we have the volume I am sorry, the capacity in place to support the volume, and we are gonna continue to be a reliable and competitive partner to them. And if there is an instance where they are asked to develop a second source, we would work with them to make sure that was more of a contingency plan versus a meaningful diversion of volume from Karman.

On the other side of the coin, I think a big positive for us in terms of our opportunity to go on offense here and look for opportunities where other suppliers have not been able to build confidence with the primes that they are going to be able to meet the demand and meet the production ramp. And so we have had, as I mentioned in my remarks just a few minutes ago, a number of opportunities that have either come through or that we feel reasonably confident will come through for us to be a second source on certain programs for certain components.

And then at least a couple of these instances, those will be meaningful, large, long term upside opportunities for Karman. So, while those are not all in the bag yet, I am feeling optimistic so far based on the conversations we have had. Great. Great. Thanks, John.

Operator: Your next question comes from the line of Kenneth Herbert with RBC Capital Markets. Your line is open. Please go ahead.

Kenneth Herbert: Yeah. Hi. Good evening. Thank you very much for the time and the question. John, I wanted to follow-up on just a comment you made right there at the end of your prepared remarks, and that involved post 2026 sort of 20% to 25% organic growth framework for the business.

I mean, it does represent a slight, at least at a headline level, slowdown from what we are seeing this year But maybe you could just talk about confidence around that, how you see, you know, maybe the opportunity to continue with sort of this mid twenties organic growth framework And maybe just as you have thought about providing that sort of longer term outlook what you went through as the puts and takes as you think about that?

Jonathan Rambeau: Yeah. I guess, Kenneth, I did not intend to communicate a slowdown. In fact, we see a very steady trend over time as we look back across the last 5 or so quarters that we have been public. And as we look to the foreseeable future, we see it being a consistent trajectory. And I think if you just look at the end markets and some of the demand we are seeing there, you know, particularly the missiles, interceptors, where we see space and launch headed, where we see the unmanned systems and, know, counter UAS systems going. I think it is it easily supports, that continued demand signal at least through the end of the decade. Thanks.

Kenneth Herbert: And if I could, just on the on the comments around free cash, we can appreciate sort of where you are in the investment cycle and supporting growth But maybe if you could just remind us again and appreciate as well the increased focus on you are bringing to the business. How we think about sort of conversions maybe the near term, but more importantly, what you think the business should or could support in the longer term as we continue to see the growth and ideally some of the investments in terms of CapEx and working capital start to moderate a bit?

Michael Willis: Yeah. Thank you. And this is Mike. I think that longer term, we would still maintain that free cash flow should be the range of 80% to 90% of net income. Now in this growth cycle we are in right now, we do have a use of cash for both working capital as well as CapEx. On the working capital side, at this level of growth that we are seeing, we certainly have an increase on receivables and which is would be expected. We also are leaning forward to help support the upcoming ramp, and so you are seeing inventory and contract assets that are on the rise First half of the year was a little bit heavier on CapEx.

We were able to pull things to the left to help support the ramp coming. That is why we do expect CapEx to be a little bit lower as a percentage of revenue in the second half. And, long term, we would still maintain that where we are at in terms of 5% of revenue on CapEx. We think that is an adequate level to support the growth that we are seeing for the rest of the decade.

Kenneth Herbert: Great. Thanks, Mike.

Michael Willis: Thank you.

Operator: Your next question comes from the line of Amit Daryanani with Evercore. Your line is open. Please go ahead.

Amit Daryanani: Yep. Thanks a lot. I have 2 as well. I guess maybe just to start with on the operating leverage side, your EBITDA margin, I think, came in around 29.8% in the first half. And the full year guide sort of implies it is gonna step down a bit in the back half of this year despite sales, I think, being higher. Can you just walk through like what is driving that margin drop? Is it just the acquired entity that perhaps at a lower margin or the start up cost that is capacity investments.

Love to just understand kinda what is driving that downtick and there is a way to think about normalized EBITDA margin as you go into 2027.

Michael Willis: Hey, Amit. So our guidance on the full-year EBITDA margins, they are in line with the margins that we guided to a quarter ago better. But the reason why they were a little bit stronger in the first half of the year is really due to a mix of contract type, and that does relate a little bit to acquisitions. And when you think about the Seemann Composites and MSC acquisition that we did in February, happen to have a much higher percentage of cost plus type contracts. And those naturally do carry a lower EBITDA margin than a firm-fixed.

So what we saw in the first half, and particularly in the second quarter, is favorable contract mix where we did not have as much revenue proportionately coming from those cost plus contracts. So we see that normalizing in the second half. But still better than what we thought we would be a quarter ago.

Amit Daryanani: Got it. Perfect. that is helpful. And then your the $1.3 billion backlog number, obviously, very impressive. Can you just talk about what is the duration of this thing look like? Is there a way for us to at least conceptually think how much of that would convert to sales in the back half of this year versus 2027 Then what is beyond that? Would love to just kind of understand how much of this uptick is being driven by duration versus than anything else. Thank you.

Michael Willis: I can start with that. So the very strong booking nearly $500 million that we had in the second quarter. Much of that, in fact, most of it was to support 2027 and beyond. And so that gives us great confidence for the outlook. Now we do only have 5% left to book this year. there is no white space or go get. it is really just timing of PO placement. Of those bookings and specifically of the large LTA that we ended up getting on space and launch, there is opportunity that of that revenue will start to occur in the, back half of this year. But most of the bookings really are supporting our longer term strategy.

Amit Daryanani: Perfect. that is it for me. Thanks a lot.

Michael Willis: Thank you.

Operator: Your next question comes from the line of John Godyn with Citi. Your line is open. Please go ahead.

John Godyn: Hey, guys. Thanks for taking my question. It was it is great to see the organic growth reaccelerate in the second quarter. And just because of the laser focus on that, I was hoping maybe we could just revisit organic growth in the back half of the year. You could kind of discuss the shape in a little bit more detail just to level set everybody.

Michael Willis: Hey, John. Yeah. Great quarter in the second quarter at the 24.4%. On organic. We do believe that on the year, we are going to be at 25% or slightly better on organic. So we are gonna expect to see that continue to increase Q3 and again in Q4. So kind of that sequential, buildup that we were talking to a little bit at the start of the year in terms of how the year would play out, but we would get to 25% or slightly better on the full year, so you are gonna see an acceleration in the second half.

John Godyn: Got it. And it sounds like you have you mentioned you are 95% covered for the year. So tremendous visibility into that. Is there anything that can happen between now and the end of the year that would actually create upward pressure to that number. Like, what would be a source of upside surprise to organic growth from here?

Jonathan Rambeau: In terms of upside surprise that you might see, I if the framework agreements that we talked about would convert earlier than the end of the year, there could be some additional upside that we might see. as that gets up and running. As we had previously discussed, we are anticipating right now and planning for those to really start hitting us in the first part of 2027. But as we have seen, there is a sense of urgency to get that work contracted and we are hopeful that we might see some opportunity for upside, but it is a little bit too early to count on that right now.

John Godyn: Got it. And if I could just ask, 1 more. John, in the prepared remarks, you were talking about fully unlocking the value of Karman. 1 of the things you mentioned was margin. In the conversations that I have with investors, it is not unusual that investors think kind of 30% EBITDA margins are the right normalized level, roughly. But it sounded to me like you might think over the long term, there could be upside beyond that. Did I hear that correctly? And maybe you could just sort of you know, unpack that those comments a little bit more.

Jonathan Rambeau: Yeah. Certainly happy to do that. I do not wanna set an expectation that margins will exceed 30% on a continuing basis as we go forward. However, what we are very focused on right now is we continue to integrate the company. it is it has been very apparent to me as I have traveled around to almost every 1 of our physical locations that as you would expect with a number of recently acquired businesses, their initial integration has been completed and there is still more opportunity. To optimize the enterprise. And the way we are thinking about that optimization is to find opportunities for financial flexibility. And we are thinking about that in 3 ways.

1 is, you know, we recognize that as our customers pursue some of these generational increases and in capacity and look to lock in long term arrangements, there could be pressure put on our pricing, and we wanna make sure we have contingency in place to be able to manage that while still maintaining our margin performance.

We are also looking at whether we might want to take that financial flexibility and look at reinvestment in the business to capture the next generation franchises that are yet to be identified And the third opportunity would be obviously if we decided the best, the best long term value to our shareholders was to deliver that as additional margin for the that is an option that we would like to have available as well. So it is a strategy we are gonna continue to, I would say, pursue very intentionally and we will provide updates as we start to make progress on that.

John Godyn: Alright, guys. Thanks a lot.

Operator: As a reminder, if you would like to ask a question, press *1 to raise your hand.

Michael Leshock: Your next question comes from the line of Michael Leshock with KeyBanc Capital Markets. Line is open. Please go ahead. Hey, good afternoon.

Jonathan Rambeau: Maybe just a follow-up on the margins there. I am curious if you have a sense of what the margin difference is between a second opportunity and maybe a legacy Karman sole sourced program. It sounds like there is quite a bit of second source opportunities that you are pursuing, and you mentioned it is a net positive. Just curious what your expectations are on the margin impact should that become a bigger piece of revenue over time?

Michael Leshock: Yeah. Thanks for the question, Michael. I do not see that there is gonna be an appreciable, you know, either increase or decrease in margins as a result of the second source opportunities. You know, certainly, will perhaps be a bit more aggressive initially in pricing if we needed to secure a very nice long term franchise for the company, but we were would not you know, enter into something that would be significantly dilutive to margins over the long term.

Jonathan Rambeau: We would we would have an appropriate business case and think that through carefully before we made that decision. Know, obviously, we wanna look at finding a way to meet our customers where they are today, look at the price point they are paying today, can we be competitive with that, can we can we make the business case close in terms of any capital investment what we might have to make there? But as I said, for the ones that are that are already in the that we have clear visibility to, I think we feel comfortable that you know, Karman type margins would be would be in family with these new ones.

Michael Leshock: Okay. Great. And then maybe on space, if you could provide any details on the new Glenn anomaly and the impact that had, if any, at all? I would expect it to be minimal, but just you know, curious on the puts and takes as we look longer term given they are a meaningful cost customer within that segment.

Jonathan Rambeau: Yeah. Sure. The long term outlook for space and launch overall continues to be very favorable for us. And, you know, we certainly do talk on a regular basis with Blue Origin and I might have mentioned last quarter that the conversations we have had with them from almost immediately following the mishap were that things are full steam ahead from a production point of view, the has not slowed down. If anything, it is it is accelerated and strengthened over time. So I feel very good about where we are and what we will where we will continue to go as a partner with, with Blue Origin.

Michael Leshock: Great. Thanks so much.

Operator: Your next question comes from the line of Alexandra Eleni Mandery with Truist Securities. Your line is open. Please go ahead.

Alexandra Eleni Mandery: Hey, nice results, and thanks for taking my question. You mentioned working to qualify your MG resin. I guess what are qualification lead times right now? And are there any discussions with the department of work to just to support the acceleration of those processes to support demand more quickly?

Jonathan Beaudoin: Yeah. Appreciate the question. This is Jonathan. We are receiving funding to further develop MG resin. it is both for uses, an ablative material and solid rocker motor nozzles and for, carbon carbons or kind of 2 applications of the MG resin system. So that will further advance it and then we are working with the propulsion primes to find a project or a platform that we would then insert it. At that time, it is probably call it, a year to 2 years for a full qualification at a platform level.

Alexandra Eleni Mandery: Awesome. Thank you.

Operator: We have a follow-up question from Amit Daryanani with Evercore. Line is open. Please go ahead.

Amit Daryanani: Yep. Thanks for letting me get back on. I guess, John, you were initially talking about just the organic growth and you talked about how the way you integrate acquisitions makes it difficult for people to disclose the quarterly organic growth going forward. Guess the question for you would be, when you evaluate an acquisition target, presumably part of the model separates the return on the target standalone organic base you would get, the return on integration synergies, like moving the Gulfport type point that you just cited. Historically, has that split been formal when you look at a deal and you underwrite it for IRR and stuff internally.

I guess the question will be that now that you are just you are gonna disclose the organic, inorganic less frequently. Does that change how you internally are looking at deals pre and post synergies at all? Or is this really purely an external reporting decision of not giving information?

Jonathan Rambeau: Yeah. Thanks for the question, Amit. I guess first off, I would say, you know, this is something that our approach how we think about it has remained consistent. And typically when we evaluate an opportunity, we would we would really make the base investment decision based on the current business plan or projection that we would see as we model the opportunity or the property. So really there from there, we bring the business on as a call it an instant bolt on. We start the integration process and then we typically will work the upside opportunities from there.

We certainly do talk about as we are evaluating an acquisition, the strategic value and how we could bring the portfolio more tightly together and unlock additional opportunities. But the base case is typically made on the call it, the organic growth we would see resident in that business. So as we think about our model going forward our plans to talk about organic growth annually, I do not see that really changing the way we would evaluate a target. Perfect. Thank you.

Operator: There are no further questions at this time. I will now turn the call back to Jonathan Rambeau, CEO, for closing remarks.

Jonathan Rambeau: Hi. Well, thank you, everyone, for joining the call today. Before we close, I would just like to emphasize 3 key points from today's call. First, Karman continues to deliver 20% to 25% annual organic growth and we reaffirm our expectation of delivering 25% or higher organic growth in 2026. This growth rate varies quarter to quarter, but has remained consistent on average over the 5 full quarters since our Q1 25 IPO. Second, we are strengthening our platform expanding internationally, adding valuable new capabilities deepening customer relationships, producing higher operational efficiency, and tightening our focus on cash.

And third, we are deploying capital effectively by expanding our capacity to address generational demand and positioning Karman to deliver sustained, 20% to 25% organic growth and adjusted EBITDA margins of up to 30% for years. Supplemented by inorganic growth. This is only made possible by the efforts of our outstanding Karman employees whose relentless focus on serving our customers continues to inspire. Thank you for joining us today for your interest in Carmen's space and defense. You can find our SEC filings and relevant news on our website at karmansd.com. We look forward to speaking with you again following our next quarter.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.