{
  "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": 38,
  "pageCount": 49,
  "prevPage": 37,
  "nextPage": 39,
  "slideType": "expose_contradiction",
  "function": "expose_contradiction",
  "density": "dense",
  "nDataPoints": 42,
  "notes": "Uses red boxes and arrows to highlight specific data points that contradict management's narrative.",
  "elementsJson": [
    "headline_text",
    "paragraph",
    "data_table",
    "footnote"
  ],
  "metadataConfidence": 1,
  "imagePath": null,
  "slideHref": "/slides/019dd923-622c-750b-8b98-64474d65435b/38",
  "deckHref": "/decks/019dd923-622c-750b-8b98-64474d65435b",
  "deckJsonHref": "/decks/019dd923-622c-750b-8b98-64474d65435b.json",
  "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-64474d65435b#slide-38",
  "components": [
    {
      "bbox": null,
      "kind": "callout",
      "text": "Something doesn't add up!",
      "attrs": null,
      "subkind": null,
      "toolName": "Visual emphasis",
      "toolSlug": "visual-emphasis",
      "confidence": null,
      "componentId": "019dd953-0935-737e-8dc4-5b8c571bb7a0",
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    },
    {
      "bbox": null,
      "kind": "metric",
      "text": "Free Cash Flow: $12-$19m",
      "attrs": null,
      "subkind": "primary",
      "toolName": "Quantification",
      "toolSlug": "quantification",
      "confidence": null,
      "componentId": "019dd953-0935-737e-8dc4-5fde9be8655d",
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    {
      "bbox": {
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      "kind": "paragraph",
      "text": "Kratos raised 2017 revenue guidance twice, but could not increase its EBITDA forecast. In Q3'17 management significantly increased its cash flow burn guidance. The explanation was related to certain milestones in the unmanned systems and public safety business of $26-$28m expected to occur in Q1 and Q2 2018. Kratos touted its Q4 and full year results “exceeded” estimates, but digging beneath the surface everything is not rosy. We find that Kratos dramatically curtailed Unmanned System capital spending and unexpectedly sold its PSS division for $70m at a depressed valuation (0.5x and 6.5x ‘18E Sales and EBITDA, respectively) to raise cash, but still says it will generate free cash flow of $12-$19m in 2018. Something doesn't add up!",
      "attrs": null,
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      },
      "kind": "source-note",
      "text": "1) Management said $17 - $22m on the Q3'17 conference call, but the 10-Q kept the guidance unchanged\n2) Per management guidance, adjusted for PSS divestiture which was forecast for 2018 to produce $140-$150m of sales and $9 - $12m of EBITDA. We note that Kratos' EBITDA guidance for 2018 was a disappointment vs. expectations of $58 to $61m\n3) Includes $1.6m of capex included in accounts payable and accrued expenses noted at the bottom of the cash flow statement",
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    {
      "bbox": {
        "h": 0.48,
        "w": 0.94,
        "x": 0.03,
        "y": 0.36
      },
      "kind": "table",
      "text": "Financial performance table comparing Q3'16 through Pro Forma 2018 across Revenues, EBITDA, Total Capex, Unmanned System Capex, and Free Cash Flow.",
      "attrs": null,
      "subkind": "data",
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      "componentId": "adce4914-6624-4c8f-9736-f59496b69a9a",
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      },
      "kind": "title",
      "text": "Inability To Generate Free Cash Flow, Now Selling Assets At Depressed Values",
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      "subkind": "headline",
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  ],
  "metrics": [],
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  "frameworks": [
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      "name": "ceo-quote-contradiction",
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      "matchId": "c64d954c-2129-4e39-bf34-9b5166354706",
      "evidence": "Contrasts management's optimistic guidance with historical performance and asset divestiture data.",
      "confidence": 0.9
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      "beatId": "c8c5750b-e949-493d-b2c9-6a5df35ee395",
      "arcName": "Problem-Agitate-Solution",
      "arcSlug": "problem-agitate-solution",
      "beatName": "Solution",
      "beatSlug": "problem-agitate-solution-solution-provide-relief",
      "evidence": "The deck presents Spruce Point's solution, a strong sell rating with 40-70% downside risk.",
      "position": 2,
      "confidence": 0.8,
      "parentBeatName": "Resolution",
      "parentBeatSlug": "resolution"
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