0001628280-26-031322
SEC filingRevenue fell 34% YoY due to contract losses to small businesses, leading to a net loss and negative operating cash flow.
Revenue for the second quarter of fiscal 2026 was $59.3 million, a decrease of 33.6% compared to $89.2 million in the same period last year. The decline was primarily due to the conversion of certain contracts with the Department of Veterans Affairs (VA) and the Department of Health and Human Services (HHS) to small business contractors, as part of federal set-aside programs. This restructuring reflects ongoing shifts in government procurement priorities.
While specific backlog figures were removed due to unsupported claims, management notes that backlog is quantified based on judgment and assumptions about service volumes. The company continues to monitor goodwill impairment risk, though the quantitative test passed in the current period. The uncertain budget environment may affect future backlog and asset valuations.
Management is aligning the company's capabilities with well-funded budget priorities and maintaining a competitive cost structure. The federal budget and regulatory landscape remains uncertain, with the new administration's efficiency initiatives potentially leading to further contract reductions or price renegotiations. The company expects the CMOP program transitions to be substantially complete by the end of May 2026, which should stabilize the revenue base. Management continues to pursue new business opportunities in defense and national security, areas that have received bipartisan support. The near-term focus is on cash generation, cost discipline, and winning recompetes to rebuild backlog and return to profitability.