Press release·03/03/2025 14:11:00

Financial Performance Overview

The company has reported strong financial results for the three and six months ended December 31, 2024, with significant growth in revenues, income from operations, and net income compared to the same periods in the prior year.

Revenues for the three-month period increased by 14.5% to $2.10 billion, while for the six-month period, revenues grew by 12.8% to $4.16 billion. This growth was primarily driven by new contract awards, expansion of existing programs, and the impact of two acquisitions completed during fiscal 2025.

The company’s income from operations rose by 36.0% to $181.3 million in the three-month period and by 33.4% to $361.1 million in the six-month period. Net income also increased substantially, up 31.1% to $109.9 million in the three-month period and 35.4% to $230.1 million in the six-month period.

Revenue Trends

The company’s revenue growth was broad-based, with increases across all major customer segments:

Customer Type	3 Months Ended Dec 31	Change	6 Months Ended Dec 31	Change
Department of Defense	$1,578,733	16.2%	$3,113,266	14.8%
Federal Civilian Agencies	$433,691	11.2%	$873,062	9.5%
Commercial and Other	$87,385	2.2%	$170,370	-3.2%
Total	$2,099,809	14.5%	$4,156,698	12.8%

The largest segment, Department of Defense, saw revenues increase by 16.2% and 14.8% in the three and six-month periods, respectively. Federal civilian agency revenues also grew, up 11.2% and 9.5%, while the commercial and other segment saw more modest growth of 2.2% in the three-month period and a 3.2% decline in the six-month period.

Profitability Analysis

The company’s profitability improved significantly, with income from operations rising at a faster rate than revenues. This was driven by several factors:

1. Direct Costs: As a percentage of revenue, direct costs decreased from 68.4% to 66.8% in the three-month period and from 68.6% to 67.8% in the six-month period. This improvement in direct cost efficiency helped expand the company’s gross margins.

2. Indirect Costs and Selling Expenses: While these costs increased in absolute terms, they declined as a percentage of revenue, from 22.3% to 22.2% in the three-month period and from 22.1% to 21.5% in the six-month period. This indicates the company is achieving greater cost leverage.

3. Depreciation and Amortization: This expense increased, primarily due to intangible asset amortization from the two acquisitions completed in fiscal 2025.

4. Interest Expense: Interest expense and other costs rose by 60.1% and 28.2% in the three and six-month periods, respectively, due to higher outstanding debt levels related to the acquisitions.

5. Income Taxes: The company’s effective tax rate decreased slightly, from 20.7% to 19.9% in the three-month period and from 21.9% to 21.5% in the six-month period, primarily due to research and development tax credits and the impact of stock-based compensation.

Overall, the company’s strong operational performance, combined with effective cost management, has resulted in significant improvements in profitability.

Backlog and Liquidity

The company’s total backlog as of December 31, 2024, was $31.8 billion, an 18.2% increase from the prior year. This backlog provides good visibility into future revenue streams. The company’s funded backlog stood at $4.1 billion, indicating a substantial pipeline of contracted work.

In terms of liquidity, the company has a $3.2 billion credit facility, consisting of a $1.975 billion revolving facility and a $1.225 billion term loan. As of December 31, 2024, the company had $1.22 billion outstanding under the revolving facility and $1.103 billion outstanding under the term loan.

To further strengthen its financial flexibility, the company entered into a $750 million senior secured bridge loan commitment in September 2024, which was subsequently replaced by a new $750 million senior secured Term Loan B facility in October 2024.

The company’s cash flow from operations increased by $18.9 million in the six-month period, primarily due to higher earnings and an increase in cash received from the company’s receivables securitization program, partially offset by unfavorable changes in working capital.

Investing activities used $1.588 billion in cash during the six-month period, primarily for the two acquisitions completed in fiscal 2025. Financing activities provided $1.473 billion in cash, mainly from increased borrowings under the credit facilities.

Overall, the company appears to have a strong liquidity position, with access to ample credit facilities and cash flow from operations to support its ongoing operations, capital expenditures, and acquisition activities.

Strengths and Weaknesses

Strengths:

• Diversified customer base, with 75% of revenues from defense-related customers and the remainder from federal civilian agencies and commercial/other sources
• Strong backlog growth, providing good revenue visibility
• Improving operational efficiency, as evidenced by the decline in direct costs and indirect costs/selling expenses as a percentage of revenue
• Access to ample liquidity through credit facilities and cash flow from operations

Weaknesses:

• Increasing interest expense due to higher debt levels, which could pressure profitability if interest rates continue to rise
• Potential risks from continuing resolution (CR) funding environments, which can delay new program starts and contract awards
• Competition for skilled personnel with security clearances, which could impact the company’s ability to staff projects

Outlook and Future Considerations

The company appears well-positioned to continue its growth trajectory, given the favorable budgetary environment and the company’s alignment with well-funded priorities in areas such as cyber, space, and advanced technologies.

However, the company will need to closely monitor the potential impact of continuing resolutions, which can disrupt the timing of new program starts and contract awards. Additionally, the company should remain vigilant in managing its cost structure and workforce to maintain its competitive edge.

The company’s recent acquisitions also present integration challenges that will need to be carefully managed to ensure the expected synergies and growth opportunities are realized.

Overall, the company’s strong financial performance, robust backlog, and access to liquidity suggest a positive outlook, but the company will need to navigate potential headwinds in the budgetary and competitive environment to sustain its growth and profitability.