CTM

Castellum, Inc. (CTM) - Q2 2026 10-Q Summary

Business Context and Reporting Period

This summary covers Castellum, Inc.'s unaudited financial results for the quarterly period ended June 30, 2026. Castellum is a technology and solutions company focused on information technology, electronic warfare, information warfare, and cybersecurity, primarily serving the U.S. federal government. The company operates as a single reporting segment and is classified as a smaller reporting company and an emerging growth company.

Key Financial Metrics

Note: The company reported no outstanding debt as of June 30, 2026, having fully repaid a related-party note and a revolving credit facility in early 2026.

Material Changes vs. Prior Period

• Revenue Growth: Year-to-date revenue increased by 10% ($2.47 million) compared to the prior year, driven by the ramp-up of a $103.3 million contract with NAVAIR (awarded March 2024) and a $66.2 million contract with NAWCAD (awarded October 2025). This was partially offset by a decrease in revenue from certain Corvus Consulting subcontracts.
• Profitability: While gross profit increased slightly year-to-date, the gross margin compressed from 37.4% to 34.7% due to higher subcontractor costs on large contracts, which typically carry lower margins than direct labor.
• Operating Expenses: Total operating expenses remained relatively flat year-to-date (+1%), with increases in fringe benefits and consultant fees offset by lower stock-based compensation and amortization expenses.
• Cash Flow: Operating cash flow improved significantly, turning from a use of $2.29 million in the prior year to a generation of $2.35 million in the current year, primarily due to improved collections on accounts receivable.
• Debt Reduction: The company eliminated all debt obligations, including a $400,000 related-party note and a $2.0 million revolving credit facility, during the first half of 2026.

Outlook, Risks, and Management Commentary

• Backlog: Total scheduled backlog stands at $271.75 million as of June 30, 2026. This includes $21.3 million in funded backlog, $29.0 million in unfunded backlog, and $221.4 million in priced options. Management expects to recognize approximately 16% of remaining performance obligations over the next 12 months.
• Opportunity Pipeline: The company estimates an opportunity pipeline of approximately $953.5 million.
• Budgetary Environment: Management highlights risks related to U.S. government spending, including potential delays in appropriations, continuing resolutions, and government shutdowns. While FY2026 appropriations were completed by June 2026, future funding remains subject to political and economic uncertainty.
• Strategic Acquisitions: The company continues to actively identify potential acquisitions to expand its capabilities in cybersecurity and IT.
• Subsequent Event: In July 2026, the company amended the employment agreement of its CEO, Glen R. Ives, extending the term to December 31, 2027, with increased base salary and new stock options.

Investor Verification Checklist

• Customer Concentration: Verify the impact of the top three customers (all U.S. government entities), which represented 81% of revenue for the six months ended June 30, 2026.
• Backlog Realization: Assess the risk that the $221.4 million in priced options and $29.0 million in unfunded backlog may not be funded or exercised by the government.
• Margin Pressure: Monitor the trend of subcontractor costs versus direct labor, as increased reliance on subcontractors is compressing gross margins.
• Liquidity Runway: Confirm that the $16.9 million cash balance is sufficient to sustain operations without further equity dilution, given the company's history of net losses.
• Derivative Liability: Note the remaining $10,000 derivative liability related to 2022 Crom Warrants and its potential impact on future earnings.