Karman Holdings Inc. Morgan Stanley's 14th Annual Laguna Conference

Thanks everyone for joining us this morning. Phil Ingle, Morgan Stanley investment banker, been at the firm for 25 years. Very pleased to be joined by Jon Rambeau, the CEO of Karman Space & Defense. We've got a little bit over 30 minutes. Before I get stuck into questions, Jon, I don't know if you'd like to add anything to this, just want to bring to everyone's attention that the company did release this morning a set of investor materials that has some details around some commonly asked questions from people in this room and outside around growth, working capital, how some of the M&A acquisitions have been performing. So, I don't know if you want to add anything to that, Jon.

I think you hit it perfectly.

Yeah. As we receive inquiries from investors, we think it's important to receive that feedback and respond to it.

I think the materials we put out this morning should help to clear up some of the questions folks have had in recent weeks.

Great. First question from me, Jon. You've been at Karman now for around six months. You've come from an extremely long pedigree history in the defense space at Lockheed Martin and L3Harris for 30 years. So you've got a lot of context. It'd be good just to get your perspective, having been in the seat now for six months, on what you've seen that you've liked most about Karman, and then also, I don't know if there's one or two things that you've noticed that, hey, this is where some real opportunities are to improve and drive performance.

Yeah. Happy to start off with that. It has been a real joy joining the Karman organization. I really enjoyed my time in the defense industry over the last 30 years or so, 26 years with Lockheed Martin, and then several years with L3Harris. Great companies, great colleagues there, good friends that I'll have for the balance of my career. I have to say, coming to Karman was just a completely different and exciting opportunity for me. As I've gotten to know the company, what I've appreciated most is the creative thinking, the agility, the drive to continue to perform and deliver.

As I've looked at the company carefully coming on board, the careful selection of the businesses and the end markets that they're in, the growth trajectories of those end markets, and then the synergies we can unlock by bringing some of those complementary capabilities together. It's an exciting company at a really exciting time where we're seeing significant demand in these end markets. In terms of areas of focus, I think it's the logical things, the continuing integration of the company. I've gone out and visited every one of our operating locations now. It took me a few months to make that happen, and I can say that there is significant opportunity to continue to optimize the infrastructure. As you might imagine, having put this business together over a series of years here with about 10 different component companies, some acquired pre-IPO and some we've acquired since.

A lot of opportunity to continue to optimize, to migrate work across that enterprise and most efficiently use the capability that we already have, and that's only going to give us lift as we continue to mature and to grow as a public company. Another area, which I'm sure we'll talk about a little bit, is as we continue to grow and scale, continuing focus on working capital, continuing to efficiently manage cash and provide a little bit more insight into that as we move forward into 2027 and beyond. A few things you'd probably expect that are still opportunities for us, but overall, I'm very optimistic about where the company is, and I'm excited about the future.

Thanks, Jon. That perspective's useful, and you look at the company, you look at the growth numbers you've put up, sort of 50% top line, I think split half organic, inorganic. We'll come back to some data points on growth, including the strong book-to-bill that the company's continued to drive 30% EBITDA margins, which again, are best in class in defense. All that looks good. Multiples come down, though, over the last six months. What are investors, if anything, missing? What are some of the misconceptions that people on the outside, giving your perspectives from the inside, may be missing about the company?

Right. Yeah. I know for those of you who follow the stock closely, who are investors in the company, you know the story pretty well. But just to give a little bit of an overview, some of the things that I think differentiate the company a bit and that people don't always understand when they first start looking at Karman. First off, we're not a holding company. Karman was built, as I said, through a series of acquisitions, both pre- and post-IPO. At the same time, we don't run those businesses as they were when we bought them. We actually integrate those businesses to operate as an effective unit.

We optimize at the enterprise level with common systems, common processes, and leveraging common infrastructure and factory capabilities across Karman to process work in all of our end markets in the factories that are most efficiently in best position to do so. That's led to some interesting conversations about the importance of organic growth. We had historically been periodically providing organic growth updates. I think there was a demand from investors for more of that sort of information. So on our last quarterly earnings call, we provided a lot more granularity on historical quarterly organic growth. That was really well received, and so as we go forward, recognizing there are some puts and takes as we move work around the enterprise, I think net, it is still valuable for us as a business to offer quarterly organic growth metrics every quarter.

We are committed to do that going forward. So that's been a really important and valuable set of feedback I received as the new CEO of the company. The other thing I would say about Karman is it differentiates us from many of the companies that have entered into the defense tech space. We are not bringing a capability that we've invested in and grown organically and bringing that to market as a prime contractor. Instead, we've taken the approach of being a merchant supplier operating as a first-tier subcontractor to the prime. So we're represented on 150 different programs with 150 unique customers.

That gives us real durability as we see the ebb and flow of individual programs because, in the end, we're kind of across each of the end markets in its totality, supporting virtually all of the customers that compete in those markets as primes. So that's a benefit for us. It's a risk mitigator for us. We also have tended to largely acquire existing mature production lines that have proven products that are present on existing established programs. So relatively quick return, relatively lower risk sorts of business. Even as we enter into new development activities, it's typically designing the next generation of something that we already know how to design and something we already know how to build. So risk profile of the company is, I think, very attractive as investors consider what differentiates Karman from some of the others that are out there.

Last thing I would talk a little bit about in terms of understanding is backlog. We did make an adjustment to the nomenclature by which we refer to backlog earlier this year. We changed from the terminology of funded backlog to backlog. I want to be very clear, that did not change our definition at all. That did not change how we book contracts into backlog at all, and we made zero backward-looking adjustments to backlog as a result of the change. The nuance there is as a first-tier subcontractor, we focus less on whether a program is funded at the government level, and we've always focused on whether we did or did not have a binding commitment to do business from a customer. A firm purchase order, a signed contract, a written authorization to proceed to incur cost and invoice against that cost.