Castellum Q2 Earnings Call Highlights

Revenue growth accelerated: First-half 2026 revenue rose 10% year over year to $28.2 million, driven by the ramp-up of three Navy prime contracts. Castellum expects record full-year revenue, supported by $271.7 million in backlog and a $953.5 million qualified pipeline. Profitability weakened near term: Second-quarter gross margin fell to 34% from 36%, while adjusted EBITDA was approximately break-even and the net loss widened to $1.0 million. Management attributed the pressure to subcontractor mix and planned investments in business development, investor relations and acquisitions. Cash supports expansion: Cash increased to $16.9 million, with no long-term debt, and operating cash flow turned positive in the first half. Castellum plans to use internally generated cash to fund organic growth and pursue strategically aligned acquisitions rather than prioritize share repurchases. Castellum reported record first-half revenue for 2026 as growth from recently awarded Navy prime contracts helped offset the wind-down of certain programs and lower volume on some subcontract work. For the six months ended June 30, revenue rose 10% year over year to $28.2 million, while gross profit increased 2% to $9.8 million. The company said it expects to report record revenue for the full year, supported by its contract backlog and pipeline. Second-quarter revenue was essentially flat at $13.9 million, compared with $14.0 million a year earlier. Chief Executive Officer Glen Ives said the quarter reflected normal timing factors in government contracting, where contracts wind down, new awards ramp up and revenue can vary from period to period. “The 10% first-half growth and the ramp-up still ahead of us with our new prime contracts are the much better measures of where our business is heading,” Ives said. Management attributed first-half growth primarily to the ramp-up of three Navy prime contracts won in 2025. These include a $103.3 million NAVAIR PMA-290 Special Missions Program award to GTMR, a $66.2 million five-year NAWCAD Lakehurst Mission Operations and Integration contract awarded to Specialty Systems, and an approximately $49 million ALRE SSA NAWCAD Lakehurst prime contract. Collectively, the three awards represent about $220 million of prime contract value and provide five-plus-year runways, according to Ives. Castellum ended the second quarter with total backlog of $271.7 million, compared with $273 million at March 31 and $265 million at year-end 2025. Its qualified pipeline grew to $953.5 million from $938 million at the end of the first quarter. Chief Financial Officer David Bell said the company expects to recognize at least 16% of its June 30 backlog over the following 12 months and about 48% cumulatively over the following 36 months. However, he noted that government customers control the timing of funding and option exercises. During the quarter, Castellum’s CTM joint venture secured a position on the Navy’s Logistics IT Integration and Support multiple-award contract, an IDIQ vehicle with a maximum value of about $250 million. The position enables the venture to compete for task orders under the program. Specialty Systems also received a $4 million directed subcontract to modernize the Navy’s Aircraft Data Management and Control System, or ADMACS. Ives said the work had begun and that successful modernization could lead to related opportunities involving other Navy systems and platforms. Second-quarter gross profit was $4.7 million, or 34% of revenue, compared with $5.1 million, or 36%, in the prior-year quarter. Bell attributed the lower m.