Karman Holdings Inc. Revenue Disclosure

Revenue and Costs Recognition

The Company recognizes revenue for each separately identifiable performance obligation in a contract representing a promise to transfer a distinct good to a customer. In most cases, goods provided under the Company’s contracts are accounted for as a single performance obligation due to the complex and integrated nature of its products. These contracts generally require significant integration of a group of goods to deliver a combined output. Warranties are provided on certain contracts, but do not typically provide for services beyond standard assurances and are therefore not considered to be a separate performance obligation. Assets recognized from costs to obtain or fulfill a contract are not material. Payment terms are typically forty-five days, but may vary.

In evaluating the timing of revenue recognition, the Company assesses whether performance obligations are satisfied over time or at a point in time. Substantially all of the Company’s revenue is recognized over time as the customer simultaneously receives and consumes the benefits of our performance or because our performance does not create an asset with an alternative use and we have an enforceable right to payment for work performed to date.

Accounting for the majority of the Company’s long-term contracts requires the use of various techniques to estimate the total transaction price and the costs to complete. For long-term contracts, the Company uses the estimated transaction price, total estimated cost at completion, and costs incurred to date to measure progress toward completion and recognize revenue. Unforeseen events and circumstances may alter management’s estimate of costs and the potential profit associated with a particular contract. Total estimated costs, and thus contract revenue and income, may be impacted by factors, such as changes in productivity, scheduling, labor costs, subcontracts, materials and equipment. The Company applies a portfolio approach in recognizing revenue for groups of contracts with similar characteristics when management reasonably expects that the results of applying ASC 606 to the portfolio would not differ materially from applying the standard to individual contracts. This approach includes using historical margins, pattern of performance, and grouped estimated costs at completion (EAC) methodologies for similar types of contracts.

The Company generates revenue under a range of contract types including fixed-price, time and material and cost-plus fixed fee contracts. Substantially all revenue is recognized as control is transferred to the customer over time based on an input measure of progress based on costs incurred compared to estimated total costs at completion. In general, the Company’s contracts contain termination clauses that entitle the Company to payment for work performed to-date for goods that do not have an alternative use. Amounts recoverable in the event of terminations include reasonable profit margins. Control is effectively transferred as the Company performs its contractual obligations. The Company generally recognizes revenues over time using the input method, measured by the percentage of total costs incurred to-date to estimated total anticipated costs for each contract. This method is used because the Company considers total costs to be the best available measure of satisfaction of its performance obligations. Use of the input method requires the Company to make reasonable estimates regarding the revenue and costs associated with the design, manufacture, and delivery of its products. The Company estimates profit on these contracts as the difference between total estimated revenues and total EAC and recognizes profit as costs are incurred. Significant judgment is used to estimate total costs at completion. EAC’s are estimated using historical actual margins as a percentage of revenue, applied to open jobs. Unforeseen events and circumstances can alter the estimate of the costs and potential benefits associated with a particular contract.

Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as payroll taxes, employee benefits, equipment rental, indirect labor, rent, workers’ compensation insurance, utilities, and shop supplies. General operating, selling, and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability, and final contract settlements may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

As of December 31, 2025, the Company had $550.6 million of remaining performance obligations under its existing contracts at such time. The Company expects to recognize approximately 73.5% of the remaining performance obligations as revenue in 2026, 17.0% in 2027, and 9.5% thereafter.

The timing of Company billings is generally dependent upon agreed-upon contractual terms, milestone billings based on the completion of certain phases of the work, or when products are provided. Billing can occur prior to revenue recognition, resulting in deferred revenue or subsequent to revenue recognition, resulting in unbilled revenue. The asset, “contract assets” represents revenues recognized in excess of amounts billed. These contract assets are not considered a significant financing component of the Company’s contracts as the payment terms are intended to protect the customer in the event the Company does not fulfill its obligations under the contract. The liability, “contract liabilities” represents amounts billed in excess of revenues recognized. Contract liabilities are not a significant financing component as they are generally utilized to pay for contract costs within a one-year period or are used to ensure the customer meets contractual requirements.

The Company’s contracts with customers relate to the design, manufacturing and delivery of its products in the following markets:

Substantially all of the Company’s customers are government or commercial enterprises based in the United States.