Form 4: Kratos CEO DeMarco Reports Significant Equity Holdings

Kratos Defense & Security Solutions CEO Eric M. DeMarco reported the release of 75,000 restricted stock units and related tax withholdings, alongside disclosures of significant deferred and unvested equity holdings.

Summary

• Eric M. DeMarco, President & CEO of Kratos Defense & Security Solutions, Inc. (KTOS), reported transactions on January 9, 2026.
• 75,000 Restricted Stock Units (RSUs) were released, originating from a grant on January 4, 2011, after a 5-year deferral period post-vesting.
• 29,512 shares were disposed of at a price of $79.29 to satisfy tax liabilities related to the RSU release.
• Following these transactions, Mr. DeMarco beneficially owns 732,604 shares indirectly through a trust and 62,203 shares directly.
• An administrative oversight in prior Form 4s led to an overstatement of beneficial ownership by one share.
• As of January 9, 2026, Mr. DeMarco holds 1,137,500 deferred RSUs that have vested but are subject to a 5-year deferral, with most scheduled for release by January 2029.
• An additional 600,000 RSUs are currently unvested, contingent on achieving specific performance terms outlined in the April 4, 2025 proxy statement.
• A new grant of 300,000 RSUs was made on January 3, 2026, with 150,000 vesting ratably over five years and 150,000 being performance-based.

Sentiment

Score: 5

Explanation: The filing reports routine executive equity transactions (RSU release and tax withholding) and provides an update on the CEO's overall equity holdings, which is a neutral event in itself. It doesn't indicate positive or negative operational performance.

Positives

• Release of 75,000 previously granted Restricted Stock Units (RSUs) indicates a successful vesting event for the executive.
• Significant total beneficial ownership of 794,807 shares (732,604 indirect + 62,203 direct) demonstrates strong alignment between the CEO's interests and shareholder value.
• Substantial future equity incentives, including 1,137,500 vested but deferred RSUs and 900,000 unvested/newly granted RSUs, suggest continued long-term commitment and motivation.

Negatives

• 29,512 shares were disposed of at $79.29 to cover tax liabilities, reducing the direct share count.

Risks

• 600,000 unvested RSUs and 150,000 newly granted performance-based RSUs are contingent on achieving specific performance criteria, meaning they may not fully vest if targets are not met.
• The 5-year deferral period for 1,137,500 vested RSUs means the executive's ability to realize value from these shares is delayed until their release, mostly by January 2029.

Future Outlook

Mr. DeMarco has significant future equity incentives, with 1,137,500 vested but deferred RSUs scheduled for release mostly by January 2029. Additionally, 600,000 unvested RSUs and 150,000 newly granted performance-based RSUs are contingent on achieving future performance criteria, aligning the CEO's compensation with long-term company success.

Industry Context

This Form 4 filing is a routine disclosure of executive equity transactions, common across publicly traded companies. It reflects standard executive compensation practices involving Restricted Stock Units (RSUs) and their release upon vesting, often accompanied by tax-related share withholdings. The significant deferred and unvested RSU holdings are typical mechanisms used to align executive incentives with long-term shareholder value in the defense and security industry.

Stakeholder Impact

• Shareholders: The CEO's substantial equity holdings, including significant deferred and unvested RSUs, align his long-term interests with shareholder value creation. Routine RSU releases are expected and do not typically impact share price significantly.
• Employees: The mention of the Employee Stock Purchase Plan (ESPP) and 401(k) indicates standard employee benefits, though the filing primarily focuses on executive compensation.

Next Steps

• Continued vesting of 600,000 unvested RSUs based on performance criteria.
• Ratable vesting of 150,000 newly granted RSUs over a five-year period.
• Vesting of 150,000 newly granted performance-based RSUs upon meeting specific criteria.
• Scheduled release of 1,137,500 deferred RSUs, with most expected by January 2029.

Key Dates

Keywords

Kratos Defense & Security Solutions, KTOS, SEC Form 4, Executive Compensation, Restricted Stock Units, Insider Trading, CEO Stock Holdings, Defense Industry, Equity Incentives, Corporate Governance