{
  "docId": "019dd923-622c-750b-8b98-64474d65435b",
  "docSlug": "68bd393edc75",
  "documentTitle": "Kratos Defense & Security Solutions (KTOS)",
  "authorId": "54_Spruce_Point_Capital",
  "authorName": "Ben Axler",
  "documentKindSlug": "activist-deck",
  "documentKindLabel": "Activist deck",
  "sourceTypeSlug": "short_seller",
  "sourceTypeLabel": "Short seller",
  "presentationDate": "2018-03-16 00:00:00",
  "orientation": "landscape",
  "aspectRatio": 1.3333334,
  "pageNumber": 27,
  "pageCount": 49,
  "prevPage": 26,
  "nextPage": 28,
  "slideType": "peer_benchmark",
  "function": "compare_peers",
  "density": "overcrowded",
  "nDataPoints": 8,
  "notes": "The slide uses a stacked bar chart to show cumulative spending and a simple bar chart for R&D intensity, aiming to expose a discrepancy in Kratos's reported investment levels.",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "bar_chart_stacked",
    "bar_chart_vertical",
    "footnote"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b98-64474d65435b/27",
  "deckHref": "/decks/019dd923-622c-750b-8b98-64474d65435b",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b98-64474d65435b.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-64474d65435b#slide-27",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "We believe much of the costs have circumvented the income statement and been accounted for as capex spending.",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-0935-737e-8dc1-fe83c6232bfe",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.42,
        "w": 0.47,
        "x": 0.03,
        "y": 0.34
      },
      "kind": "chart",
      "text": "Cumulative Capex and R&D Since 2013 Among UAV / Drone Companies",
      "attrs": null,
      "subkind": "bar-stacked",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "874d1346-8177-4269-91b4-6ad223cb7556",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.42,
        "w": 0.45,
        "x": 0.52,
        "y": 0.34
      },
      "kind": "chart",
      "text": "LTM R&D as % of Sales Among UAV / Drone Companies",
      "attrs": null,
      "subkind": "bar-vertical",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "67432ce0-2661-4ebd-a3ff-758ab8a79d4c",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "R&D as % of Sales: 2.4%",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd953-0935-737e-8dc2-057f6e9943b2",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.08,
        "w": 0.94,
        "x": 0.03,
        "y": 0.88
      },
      "kind": "paragraph",
      "text": "a. Q3'16 CEO: \"Kratos has made in the unmanned aerial systems area since 2013, which aggregate to over $50 million in internal research and development, contract design development and capital expenditures\"\nb. FY 2017 10-K \"The 2017 capital expenditures included approximately $13.2 million related to investments we are making in our US segment to build Company-owned tactical aircraft and related equipment related to the LCASD and UTAP-22 or Mako platforms\"",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "7f9b1ea5-0277-43f8-9b76-4306b42c12b7",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.09,
        "w": 0.94,
        "x": 0.03,
        "y": 0.18
      },
      "kind": "paragraph",
      "text": "There are limited pure-play drone companies except for AeroVironment and Parrot S.A. However, according to public filings, each has spent $255 and $355m, respectively, of combined capex and research and development costs since 2013. During the same period, Kratos has spent approximately $63m. We believe much of the costs have circumvented the income statement and been accounted for as capex spending.",
      "attrs": null,
      "subkind": "paragraph",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "d09df670-6694-4f50-90cb-ee5ea21fe3d9",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": null,
      "kind": "quote",
      "text": "Q3'16 CEO: \"Kratos has made in the unmanned aerial systems area since 2013, which aggregate to over $50 million in internal research and development, contract design development and capital expenditures\" — Kratos CEO",
      "attrs": null,
      "subkind": null,
      "toolName": "Authority citation",
      "toolSlug": "authority-citation",
      "confidence": null,
      "componentId": "019dd953-0935-737e-8dc2-0107c17eca9b",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.05,
        "w": 0.94,
        "x": 0.03,
        "y": 0.82
      },
      "kind": "source-note",
      "text": "1) Includes Total Capex and R&D related to unmanned aerial systems. KTOS doesn't disclose Capex or R&D spending by segment, but the Company has made the following statements suggesting total investment of $63m since 2013",
      "attrs": {
        "numbered": true
      },
      "subkind": null,
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "1ac9ee10-6bae-4265-b8fb-eb0ea1899abb",
      "frameworkName": null,
      "frameworkSlug": null
    },
    {
      "bbox": {
        "h": 0.08,
        "w": 0.65,
        "x": 0.31,
        "y": 0.03
      },
      "kind": "title",
      "text": "Hyped Drone Opportunity: Signs of Significant Capital Underinvestment",
      "attrs": null,
      "subkind": "headline",
      "toolName": null,
      "toolSlug": null,
      "confidence": null,
      "componentId": "b9f7ebfc-3914-4c33-8c5e-14e7581d899d",
      "frameworkName": null,
      "frameworkSlug": null
    }
  ],
  "metrics": [],
  "tools": [
    {
      "name": "Slide recipe: the peer-gap chart",
      "slug": "peer-gap-chart-recipe",
      "agent": "designer",
      "layer": "slide",
      "matchId": "942fd9e2-e0df-4ed0-8b68-3c909b01b4d5",
      "evidence": "chart/bar-stacked: Cumulative Capex and R&D Since 2013 Among UAV / Drone Companies",
      "confidence": 0.7
    }
  ],
  "frameworks": [
    {
      "name": "fraud-exposure",
      "slug": null,
      "matchId": "b3d891ee-2143-4263-9fd3-67977737770a",
      "evidence": "The slide explicitly argues that costs have 'circumvented the income statement' to suggest underinvestment.",
      "confidence": 0.9
    }
  ],
  "arcBeats": [
    {
      "to": 31,
      "from": 15,
      "beatId": "d2657ee3-5da5-4b6a-bc86-c3bb2e7a8906",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Agitate",
      "beatSlug": "problem-agitate-solution-agitate-make-it-worse",
      "evidence": "The deck highlights Kratos' management problems, overhyped business segments, and poor valuation.",
      "position": 1,
      "confidence": 0.8,
      "parentBeatName": "Development",
      "parentBeatSlug": "development"
    }
  ],
  "loops": [],
  "imagePathAlt": null,
  "thumbSrc": null,
  "thumbSrcAlt": null,
  "locked": true
}