Kratos Defense (NASDAQ: KTOS) reported Q4 EPS of $0.09, $0.02 better than the analyst estimate of $0.07. Revenue for the quarter came in at $202.2 million versus the consensus estimate of $194.99 million.

Financial Guidance

The Company also announced today that it has signed a definitive agreement to divest its PSS business for net cash proceeds of approximately $70 million, which transaction is expected to close in the next 90 days, contingent on customary closing conditions and regulatory approvals. As a result of the announced divestiture, PSS will now be reflected as a discontinued operation going forward in the Company’s financial statements. Accordingly, all prior year comparative data in future financial statements will be recast to reflect this business as discontinued operations for all periods presented. Kratos’ PSS business was forecast to achieve full year 2018 revenues and Adjusted EBITDA of approximately $140 to $150 million, and $9 to $12 million, respectively. Kratos’ PSS business generated full year 2017 revenues and Adjusted EBITDA before corporate overhead costs of $149.9 million and $6.9 million, respectively. As a result of the pending sale, Kratos’ 2018 Q1 and full year financial guidance provided today excludes PSS, as does all other financial information noted below.

Kratos’ first quarter 2018 financial guidance for revenues excluding the PSS business is $140 to $150 million, as compared to $132.0 million for the first quarter of 2017, and first quarter 2018 Adjusted EBITDA guidance of $9 to $11 million, as compared to $10.2 million for the first quarter of 2017. Kratos’ full year 2018 financial guidance for revenues excluding the PSS business is $640 to $650 million, as compared to $603.2 million for the full year of 2017, and full year 2018 Adjusted EBITDA guidance of $55 to $59 million, as compared to $47.5 million for the full year of 2017. Kratos is forecasting 2018 positive cash flow from operations of $35 to $45 million.

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