0001628280-26-034156
SEC filingRevenue declined modestly year-over-year, but operating and net income surged significantly, reflecting improved earnings power driven by disciplined cost management and lower interest expense from term loan principal reduction.
Gross profit totaled $345.0 million, down 6.0% year-over-year, resulting in a gross margin of 9.9%. The decrease in gross profit aligns with the revenue decline, as cost of revenues decreased proportionally — consistent with management’s observation that cost of revenues is primarily driven by the level of revenue recognized. Margin compression was not attributable to pricing pressure or cost inflation but reflects the mix and timing effects of contract transitions.
Operating income increased 37.3% to $151.0 million, with operating margin expanding to 4.3%. This improvement reflects disciplined cost management across selling, general and administrative expenses and reduced amortization — outcomes tied to CMS merger integration and the completion of amortization for certain prior-year backlog-related intangible assets. These structural efficiencies demonstrate progress in realizing merger-related synergies without requiring new assumptions about future cost behavior.
Net income rose 1250% to $54.0 million, and diluted EPS increased tenfold to $0.22. This dramatic growth stems from both higher operating income and favorable non-operating items: a lower effective tax rate and reduced interest expense. As noted in Management’s Discussion, the decline in interest expense and other, net was primarily due to term loan principal reduction — a concrete outcome of prior debt repayment activity, not forward-looking guidance or projections.
Net cash provided by operating activities was $89.0 million, down from $167.0 million in Q2 FY2025. Free cash flow totaled $78.0 million after $11.0 million in capital expenditures. The decline in operating cash flow reflects working capital outflows — notably in payables and accruals — which are timing-related and reversible, rather than indicative of deteriorating operational cash generation.