Kratos expects 'several' target drone program awards in coming months

By Briana Reilly / August 4, 2021 at 11:06 AM

Kratos' chief executive said the company hopes to win a multiyear award from the Air Force for a target drone program in the coming months, one of "several" deals he's looking forward to seeing from the Defense Department before year's end.

Kratos President and CEO Eric DeMarco told analysts on a second-quarter earnings call Tuesday the Air Force contract would be among the "big programs we're expecting to book in the second half' of the year.

"We're expecting to receive a multiyear award, which would be base years plus options," he said in response to a question about whether the unmanned pickups would allow the company to make book-to-bill for the year. "I believe this is a sole source that'll carry us through."

While DeMarco didn’t provide further details about the anticipated award in the call, the company has previously received contracts from the Air Force's Subscale Aerial Target program for Kratos' BQM-167A aerial target drone system.

In addition to the expected Air Force contract, DeMarco said Kratos is poised to receive "a very large Navy target drone award" that he also said will be multiple years. The company has previously received awards under the Navy's Subsonic Aerial Target program tied to the BQM-177A. He mentioned a third target drone program award from the Army, though he didn't share details.

In the meantime, DeMarco said Kratos is working to integrate components of the Air Force's Skyborg system and payloads onto two Valkyrie drones, a portion of the 12 aircraft the company opted to internally fund last year.

The decision to launch the production line was made in anticipation of a future contract with the service, which came in December 2020, when the Air Force Life Cycle Management Center announced Kratos won a $37.7 million award tied to the Skyborg autonomous aircraft program. The program aims to bring together a low-cost drone, leveraging artificial intelligence, with manned aircraft to perform joint missions.

It's unclear how many aircraft Kratos is planning to deliver to the Air Force this year, as well as the timeline for getting those out the door. DeMarco said during a 2020 fourth-quarter earnings call that "it could be six to 10 this year," though he cautioned that it depends "on that customer dynamic."

In the earnings call this week, DeMarco didn't share an update on the delivery timeframe.

DeMarco also expects to see a test flight of Skyborg's autonomy core system, this time integrated with a Valkyrie sometime in the near future, though he declined to elaborate. The first flight test of Skyborg's ACS was aboard a Kratos UTAP-22 in April.

In addition to Kratos, General Atomics and Boeing are on contract to deliver aircraft for flight demonstrations. In June, General Atomics' MQ-20 Avenger unmanned aerial system flew with Skyborg's ACS.

Asked about Kratos' position within Skyborg compared to competitors like General Atomics and Boeing, DeMarco responded his company's "position is far and ahead the best."

"We were first to fly the core," he said, of the ACS. "We're integrating Skyborg payloads on the new Valkyries now and we are extremely confident and comfortable with our position on this program."

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