Castellum, Inc. 2026 Q2 Earnings Call

Welcome to Castellum, Inc.'s second quarter 2026 earnings conference call. An earnings press release was distributed yesterday, August 6th, after the close of the market. A copy of that release, as well as an earnings presentation, is available on the company's website in the investor relations section and should be reviewed in conjunction with the Form 10-Q filed yesterday with the SEC. Please note that this call is being recorded and all participants are in listen-only mode. Following management's prepared remarks, we will open the line up for a question and answer session. Before we get started, I'd like to remind you that today's call may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, each as amended.

These statements represent the company's expectations or beliefs concerning future events, including our expectations for revenue growth, new customer opportunities, improvements to cost structure, and profitability. Forward-looking statements are subject to certain risks and uncertainties, many of which are outside of the company's control, that could cause actual results to differ from those expressed or implied on this call. These include, among others, our ability to grow and execute on our total backlog and qualified pipeline, our ability to integrate and grow acquired companies, our ability to identify and close additional acquisitions, and factors affecting U.S. government spending, including budget delays, continuing resolutions, and government shutdowns. Please also note that on this call, management will be referencing non-GAAP adjusted EBITDA, which is a non-GAAP financial measure used by management to measure the company's operating performance.

As required by SEC rules and regulations, non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. All forward-looking statements speak only as of today. The company undertakes no obligation to update them except as required by law. Speaking on today's call will be Glen Ives, President and Chief Executive Officer, and David Bell, Chief Financial Officer. I'd now like to turn the call over to Glen. Glen, please go ahead. Well, hey.

Thank you very much, Val, and a very good morning, everyone. Thanks for joining us. With me today are David Bell, our Chief Financial Officer, and Drew Merriman, our Chief Operating Officer, and they'll both be available as well during the question and answer session at the end of the call. Following my opening remarks on the company's performance during the quarter and first half of the year, David will take you through the financials in more detail. I'll then provide some commentary on our strategic priorities and outlook for the balance of 2026, and then we'll open the line for your questions. That is the part of our call this morning that I'm most looking forward to. During the first half of 2026, Castellum delivered record revenue of $28.2 million.

This first half revenue, combined with our current trajectory, leads us to anticipate record revenues for the full year. The second quarter played out largely as we anticipated with regards to contract execution, timing factors, for month-to-month, quarter-to-quarter in our industry, and we continue to focus on funding our growth investments entirely from our own operations, with a debt-free balance sheet and a growing cash position. Revenue for the first six months of 2026 grew 10% year-over-year to, as I stated earlier, $28.2 million, and gross profit increased to $9.8 million. That growth was driven by the continued ramp-up of the three major long-term prime contracts we won in 2025, which were the NAVAIR PMA-290 Special Missions Program. That was our $103.3 million award to our GTMR subsidiary that ramped up through 2025. Also, the NAWCAD Lakehurst Mission Operations and Integration award.

That was our $66.2 million five-year full and open contract won by our Specialty Systems subsidiary last October. Their second win was our ALRE SSA NAWCAD Lakehurst prime contract win of approximately $49 million shortly after that one. These are all multi-year, 5-plus year runway Navy prime contracts, and they represent approximately $220 million of prime contract value and form the growth base for us in 2026 and well beyond. This first half growth trajectory, combined with a total backlog of approximately $272 million and a qualified pipeline that continues to expand, gives us very real confidence that Castellum is on track to deliver record revenue for the full year of 2026. Q2 revenue was stable as compared to the prior year at $13.9 million.

The $100,000 variance primarily reflects gains from the ramp-up of SSI's NAWCAD Lakehurst contract, partially offset by the expected 2026 wind down of two firm fixed price contracts that contributed meaningful revenue in the second quarter of last year, 2025. We also saw lower volume on certain Corvus subcontracts due to a slower paced trend we have observed in the government backfilling funded open positions. These are all dynamics that we continue to work through, they are cyclical in nature in our industry. This kind of quarter-to-quarter revenue recognition factor is common in our industry. Obviously, government services revenue does not move in a straight line. Contracts do wind down, new contracts ramp up, and the crossover quarters can look flat even when the underlying trajectory is clearly up.

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. We also ended the quarter with a total backlog of approximately $271 million, compared to $273 million March 31st, 2026, and $265 million December 31st, 2025. Our qualified pipeline totaled $953.5 million as of June 30th, 2026, compared to $938 million as of March 31st, 2026. We expanded our business development capacity this year specifically to increase the volume and quality of the opportunities we pursue, we are seeing that investment show up in our pipeline. Our pipeline is a very key tool we use to help drive our business development efforts, one can bet that our pipeline is constantly audited for realism.

During the quarter, we continued to strengthen our position with the U.S. Navy and Department of Defense through both contract wins and a key certification milestone. Our joint venture, CTM JV, secured a key position on the U.S. Navy's Logistics IT Integration and Support Multiple Award Contract, a very important IDIQ vehicle with a total maximum value of approximately $250 million. This win provides us the opportunity to compete for and capture individual task orders under this broader program. Our subsidiary, Specialty Systems, was also awarded a $4 million directed subcontract to modernize the Navy's mission-critical Aircraft Data Management and Control System, serving as lead system integrator for a phase software and DevSecOps modernization effort. This was a very significant win for us.

Although the monetary value may not be large, there is real potential for further growth, as importantly, and something that should reassure all of us, our government mission customer specifically chose SSI based upon their remarkable past performance and their ability to do the job here with this new requirement to modernize a system that is critical to all our aircraft carriers in the Navy. In addition, we achieved Cybersecurity Maturity Model Certification Level 2, confirming that Castellum and all subsidiaries meet advanced cybersecurity requirements for protecting controlled, unclassified information and supported Department of Defense programs, positioning us to pursue a broader set of CMMC Level 2 opportunities. Although the Department of Defense is reassessing their CMMC certification process, our Level 2 certification achievement has truly strengthened Castellum, I believe will still prove to be key to our ability to compete and operate in the defense sector.

Finally, a word on investment. 2026 is a year in which we are purposefully and strategically investing in business development, investor relations, and meaningful acquisition activities. Let me say that one more time. 2026 is a year in which we are purposefully and strategically investing in business development, investor relations, and meaningful acquisition activities. These investments will be visible in our near-term EBITDA, David will walk you through those numbers. We think about these investments as the upfront work required to win, grow, and scale Castellum. They come before new contract awards and before the associated revenue shows up in our results. We are making these investments from a position of financial strength, funded by our own operations, we believe they are setting up CTM for a much stronger multi-year growth profile. There may be concern about our current net profitability.

I can say that there are actually many ways to ensure profit, but as a young company on the move and committed to real growth and value, these growth investments are healthy and vital to our longer-term net profitability. With that, let me turn the call over to David Bell, our CFO, to take you through the financial results in more detail.

David? Glenn, thank you very much.