What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 60 added, 57 removed, 135 unchanged (46% of the section changed)

16 unchanged sentences

Digital Solutions (“DS”) and Global Engineering Solutions (“GES”).

DS provides advanced digital and data-driven solutions including intelligence analytics, space system development, cybersecurity, and next generation IT across the federal government and commercial clients.

GES provides large-scale environmental remediation, clean energy, platform engineering, sustainment and supply chain management across all 7 continents for the U.S.

The DS segment provides advanced digital and data-driven solutions including intelligence analytics, space system development, cybersecurity, and next generation IT across the federal government and commercial clients.

The GES segment provides large-scale environmental remediation, clean energy, platform engineering, sustainment and supply chain management across all 7 continents for the U.S.

government and allied nations.

6 unchanged sentences

federal government fiscal year (“GFY”) 2025 appropriations bill was passed in March 2025.

The final bill provided a 1% increase for defense discretionary spending to $892 billion and a 1% increase in non-defense discretionary spending to $708 billion.

The GFY 2026 “skinny” budget request was submitted to Congress on May 2, 2025, and if enacted, would maintain defense discretionary spending at $892 billion and reduce non-defense discretionary spending by approximately 21% to $557 billion.

Additionally, the skinny budget request assumes an increase in defense spending based on the defense reconciliation legislation currently pending in Congress, which would result in total GFY 2026 defense spending of $1.01 trillion, an increase of 13% from the GFY 2025 enacted level.

The bill provided a 1% increase for defense discretionary spending to $892 billion and a 1% increase in non-defense discretionary spending to $708 billion.

The President’s GFY 2026 budget request was submitted to Congress on May 2, 2025, and if enacted, would maintain defense discretionary spending at $892 billion and reduce non-defense discretionary spending by approximately 21% to $557 billion.

Additionally, the budget request assumes an increase in defense spending based on the defense reconciliation legislation, which would result in total GFY 2026 defense spending of $1.01 trillion, an increase of 13% from the GFY 2025 enacted level.

On July 4, 2025, the One Big, Beautiful Bill Act was passed which made certain tax cuts permanent, reduced healthcare spending and increased spending related to border security, defense and energy production.

The bill included $150 billion in additional defense spending and $133 billion in supplemental spending for border security to be spent over the next two years and also added $10 billion in new spending for NASA’s human spaceflight programs and infrastructure modernization.

Under the Trump administration, the Department of Government Efficiency (“DOGE”) was created to propose savings through improvements to technology and increases to productivity in the federal workforce;

2 unchanged sentences

Government have been affected by DOGE and other changes in budgetary priorities by the new administration, the impact has not been material to date.

Decreases in, or delays in approving, the federal government’s budget, decreases in government spending on the types of programs that we support, delays in government contract awards, and pauses on government contracts on which we are

currently performing could have an adverse impact on our business.

For further information, please see Part I.

6 unchanged sentences

The tariffs that have been enacted by the U.S.

or other countries did not materially impact our business or financial results for the three months ended March 28, 2025.

or other countries did not materially impact our business or financial results for the three months ended June 27, 2025.

We are currently evaluating the potential future impacts of the announced tariffs on our business and financial condition.

13 unchanged sentences

• Increased investment in advanced technologies (e.g., hypersonics, microelectronics, unmanned, electromagnetic spectrum).

Results of Operations for the Three Months Ended March 28, 2025 and March 29, 2024

Results of Operations for the Three Months Ended June 27, 2025 and June 28, 2024

The following table presents our results of operations for the periods presented:

Three Months Ended

March 28, 2025 March 29, 2024 Change

June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

6 unchanged sentences

Interest expense and other, net (88) (108) 20 (18.5)

Loss on extinguishment of debt (3) (3) — —

Income (loss) before income taxes 12 (22) 34 (154.5)

5 unchanged sentences

Cost of revenues — The increase in cost of revenues was primarily attributable to the increased revenues volume from the merger with CMS.

As a percentage of revenues, cost of revenues was 89.5% for the three months ended March 28, 2025 compared to 90.2% for the three months ended March 29, 2024.

As a percentage of revenues, cost of revenues was 89.7% for the three months ended June 27, 2025 compared to 90.4% for the three months ended June 28, 2024.

Selling, general, and administrative expenses (“SG&A”) — The increase in SG&A was primarily attributable to the merger with CMS.

SG&A as a percentage of revenues increased to 4.2% for the three months ended March 28, 2025 from 3.5% for the three months ended March 29, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

SG&A as a percentage of revenues increased to 4.6% for the three months ended June 27, 2025 from 3.6% for the three months ended June 28, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

Amortization of intangibles — Amortization of intangibles primarily relates to the amortization of our backlog and customer relationship intangible assets, which increased due to the merger with CMS.

Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments and increased due to non-consolidated subsidiaries obtained in the merger with CMS, partially offset by the utilization of fair market value adjustments assigned to certain equity method investments based on the remaining period of performance for the related contract.

Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our term loan principal balance as compared to the three months ended March 29, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the three months ended March 28, 2025.

Provision for income taxes — The effective tax rate for the three months ended March 28, 2025 was 91.7%, as compared to (90.9)% for the three months ended March 29, 2024.

Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our term loan principal balance as compared to the three months ended June 28, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the three months ended June 27, 2025.

Loss on extinguishment of debt — The loss on extinguishment of debt for the three months ended June 27, 2025 and June 28, 2024 was due to a $191 million voluntary principal payment on the Term Loan and a $150 million voluntary principal payment on the previous Second Lien Tranche 1 Term Facility, respectively.

Provision for income taxes — The effective tax rate for the three months ended June 27, 2025 was 108.3%, as compared to (9.1)% for the three months ended June 28, 2024.

The change in the effective tax rate was primarily due to the recognition of a valuation allowance against a disallowed interest expense deferred tax asset relative to income (loss) before income taxes in the respective period.

Net income (loss) attributable to non-controlling interests — Net income (loss) attributable to non-controlling interests includes the utilization of fair market value adjustments assigned to certain non-controlling interests based on the remaining period of performance for the related contract partially offset by the minority interests in our consolidated joint ventures that are not wholly-owned.

Results of Operations for the Six Months Ended March 28, 2025 and March 29, 2024

Results of Operations for the Nine Months Ended June 27, 2025 and June 28, 2024

The following table presents our results of operations for the periods presented:

Six Months Ended

March 28, 2025 March 29, 2024 Change

Nine Months Ended

June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent

6 unchanged sentences

Interest expense and other, net (261) (330) 69 (20.9)

Loss on extinguishment of debt (3) (3) — —

Income (loss) before income taxes 81 (69) 150 (217.4)

5 unchanged sentences

Cost of revenues — The increase in cost of revenues was primarily attributable to the increased revenues volume from the merger with CMS.

As a percentage of revenues, cost of revenues was 89.5% for the six months ended March 28, 2025 compared to 90.2% for the six months ended March 29, 2024.

As a percentage of revenues, cost of revenues was 89.5% for the nine months ended June 27, 2025 compared to 90.3% for the nine months ended June 28, 2024.

Selling, general, and administrative expenses (“SG&A”) — The increase in SG&A was primarily attributable to the merger with CMS.

SG&A as a percentage of revenues increased to 4.0% for the six months ended March 28, 2025 from 3.4% for the

six months ended March 29, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

SG&A as a percentage of revenues increased to 4.2% for the nine months ended June 27, 2025 from 3.5% for the nine months ended June 28, 2024 primarily due to the merger with CMS and an increase in acquisition, transaction and integration costs.

Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our term loan principal balance as compared to the six months ended March 29, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the six months ended March 28, 2025.

Provision for income taxes — The effective tax rate for the six months ended March 28, 2025 was 66.7%, as compared to (72.3)% for the six months ended March 29, 2024.

Equity earnings of non-consolidated subsidiaries — Equity earnings of non-consolidated subsidiaries include our proportionate share of the income from equity method investments partially offset by the utilization of fair market value adjustments assigned to certain equity method investments based on the remaining period of performance for the related contract and was consistent with the nine months ended June 28, 2024.

Interest expense and other, net — The decrease in interest expense and other, net was primarily due to the reduction to our term loan principal balance as compared to the nine months ended June 28, 2024 combined with a decrease in interest rates, partially offset by the interest incurred on our Senior Notes during the nine months ended June 27, 2025.

Loss on extinguishment of debt — The loss on extinguishment of debt for the nine months ended June 27, 2025 and June 28, 2024 was due to a $191 million voluntary principal payment on the Term Loan and a $150 million voluntary principal payment on the previous Second Lien Tranche 1 Term Facility, respectively.

Provision for income taxes — The effective tax rate for the nine months ended June 27, 2025 was 72.8%, as compared to (52.2)% for the nine months ended June 28, 2024.

Net income (loss) attributable to non-controlling interests — Net income (loss) attributable to non-controlling interests include the minority interests in our consolidated joint ventures that are not wholly-owned partially offset by the utilization of fair market value adjustments assigned to certain non-controlling interests based on the remaining period of performance for the related contract.

Segment Results for the Three and Six Months Ended March 28, 2025 and March 29, 2024

Segment Results for the Three and Nine Months Ended June 27, 2025 and June 28, 2024

The primary financial performance measures we use to manage our reportable segments and monitor results of operations are revenues and Adjusted EBITDA.

1 unchanged sentence

Digital Solutions

Three Months Ended Six Months Ended

March 28, 2025 March 29, 2024 Change March 28, 2025 March 29, 2024 Change

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 Change June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent Dollars Dollars Dollars Percent

1 unchanged sentence

Adjusted EBITDA 114 40 74 185 % 321 118 203 172 %

The increase in revenues for the three and six months ended March 28, 2025, as compared to the three and six months ended March 29, 2024, was primarily attributable to revenues from the merger with CMS and higher volume from new contract awards, partially offset by the expected ramp-down of other historical programs.

The increase in Adjusted EBITDA for the three and six months ended March 28, 2025, as compared to the three and six months ended March 29, 2024, was primarily attributable to the revenue growth factors described above.

The increase in revenues for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to revenues from the merger with CMS, higher volume from new contract awards and growth on existing programs, partially offset by the expected ramp-down of historical programs.

The increase in Adjusted EBITDA for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to the revenue growth factors described above.

Global Engineering Solutions

Three Months Ended Six Months Ended

March 28, 2025 March 29, 2024 Change March 28, 2025 March 29, 2024 Change

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 Change June 27, 2025 June 28, 2024 Change

(Dollars in millions) Dollars Dollars Dollars Percent Dollars Dollars Dollars Percent

1 unchanged sentence

Adjusted EBITDA 160 118 42 36 % 483 350 133 38 %

The increase in revenues for the three and six months ended March 28, 2025, as compared to the three and six months ended March 29, 2024, was primarily attributable to revenues from the merger with CMS, the ramp up of new contract awards and growth on existing programs, partially offset by the expected ramp-down of other historical programs.

The increase in revenues for the three and nine months ended June 27, 2025, as compared to the three and nine months ended June 28, 2024, was primarily attributable to revenues from the merger with CMS, the ramp up of new contract awards and growth on existing programs, partially offset by the expected ramp-down of historical programs.

Revenues by Contract Type

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The following table summarizes revenues by contract type, as a percentage of revenues, for the periods presented:

Three Months Ended Six Months Ended

March 28, 2025 March 29, 2024 March 28, 2025 March 29, 2024

Three Months Ended Nine Months Ended

June 27, 2025 June 28, 2024 June 27, 2025 June 28, 2024

Cost-plus-fee 65 % 60 % 64 % 62 %

7 unchanged sentences

• Unfunded backlog represents estimated values that have the potential to be recognized as revenues from negotiated contracts for which funding has not been appropriated and from unexercised contract options.

As of March 28, 2025, the Company had total backlog of $44.8 billion, compared with $27.2 billion as of March 29, 2024, an increase of $17.6 billion primarily due to the merger with CMS.

Funded backlog as of March 28, 2025 was $5.8 billion.

As of June 27, 2025, the Company had total backlog of $44.6 billion, compared with $26.9 billion as of June 28, 2024, an increase of $17.7 billion primarily due to the merger with CMS.

Funded backlog as of June 27, 2025 was $5.6 billion.

There is no assurance that all backlog will result in future revenues being recognized, and the backlog balance is subject to increases or decreases based on the execution of new contracts, contract modifications or extensions, deobligations, early terminations, and other factors.

1 unchanged sentence

Given the nature of our operations and contract type mix, we expect the impact of inflation on our business may be limited for some of our contracts.

During the six months ended March 28, 2025, 64% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation.

During the nine months ended June 27, 2025, 64% of our revenues was generated under cost-plus-fee type contracts that have limited inflation risk as they include provisions that adjust revenues to cover costs affected by inflation.

The remainder of our revenues was generated under time-and-materials or fixed-price type contracts which we have historically been able to price in a manner that accommodates inflation and cost increases over the period of performance but changes in our expectations with respect to inflation rates or in the overall mix of our contract types could cause future results to differ substantially.

3 unchanged sentences

The Revolver and the Term Loan mature on September 27, 2029 and September 27, 2031, respectively.

The Term Loan requires quarterly principal amortization payments of $9 million commencing March 31, 2025 with the remainder of the principal

thereunder being due at maturity.

The Term Loan requires quarterly principal amortization payments of $9 million, which commenced on March 31, 2025, with the remainder of the principal thereunder being due at maturity.

In August 2024, the Company also completed an offering of $1,000 million in aggregate principal amount of 7.250% senior notes due August 1, 2032 (the “Senior Notes”).

The New Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.

The interest rates applicable to the Term Loan are floating interest rates equal to an Alternate Base Rate or Adjusted Term Secured Overnight Financing Rate plus an applicable margin based upon net leverage ratio.

The Credit Facility and the Senior Notes are guaranteed by substantially all of our wholly owned material domestic restricted subsidiaries, subject to customary exceptions set forth in the credit agreement and indenture, respectively.

Each of the credit agreement and indenture requires us to comply with certain representations and warranties, customary affirmative and negative covenants and, in the case of the Revolver, under certain circumstances, a financial covenant.

We were in compliance with all covenants as of March 28, 2025.

We were in compliance with all covenants as of June 27, 2025.

We believe that the combination of internally generated funds, available bank borrowings, and cash and cash equivalents on hand will provide the required liquidity and capital resources necessary to fund on-going operations, capital expenditures, scheduled principal and interest payments on our debt obligations, scheduled lease payments, and other working capital requirements over at least the next twelve months.

On April 23, 2025, we entered into a definitive agreement to sell our hardware and product business, Rapid Solutions, to Lockheed Martin for a purchase price of $360 million in cash, subject to regulatory approvals and customary closing conditions.

Certain proceeds from the planned sale of the Rapid Solutions business are expected to be used to accelerate our debt reduction objectives.

Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility, Senior Notes and any other indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including worldwide economic and financial market conditions.

On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $360 million in cash.

As part of our debt reduction initiatives, we made voluntary principal payments on the Term Loan of approximately $191 million and $250 million on June 27, 2025 and July 31, 2025, respectively.

Over the longer term, our ability to generate sufficient cash flows from operations necessary to fulfill the obligations under the Credit Facility, Senior Notes and any other

indebtedness we may incur will depend on our future financial performance which could be affected by factors outside of our control, including, but not limited to, worldwide economic and financial market conditions.

See “Note 6 — Sales of Receivables” and “Note 9 — Debt” of the notes to the condensed consolidated financial statements contained within this Quarterly Report on Form 10-Q.

Cash Flow Information

Six Months Ended

(Amounts in millions) March 28, 2025 March 29, 2024

Net cash provided by (used in) operating activities $ 167 $ (78)

Net cash used in investing activities (39) (6)

Nine Months Ended

(Amounts in millions) June 27, 2025 June 28, 2024

Net cash provided by operating activities $ 273 $ 160

Net cash provided by (used in) investing activities 236 (8)

Net cash used in financing activities (231) (189)

1 unchanged sentence

Net change in cash and cash equivalents $ 286 $ (34)

Net cash provided by operating activities increased by $245 million for the six months ended March 28, 2025 when compared to the six months ended March 29, 2024 as a result of a $235 million increase in cash earnings due to contributions from the merger with CMS and from $10 million in favorable changes in operating assets and liabilities driven by reduced interest payments.

Net cash used in investing activities increased by $33 million for the six months ended March 28, 2025 when compared to the six months ended March 29, 2024 as a result of increased contributions to equity method investments.

Net cash used in financing activities for the six months ended March 28, 2025 remained consistent when compared to the six months ended March 29, 2024 primarily as a result of distributions to non-controlling interests and the absence of quarterly principal amortization payments on our Term Loan, which commence in the third quarter of fiscal year 2025.

Divestiture of Rapid Solutions

The planned sale of the Rapid Solutions business is not classified as discontinued operations as it does not represent a strategic shift in our business.

Net cash provided by operating activities increased by $113 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 as a result of a $289 million increase in cash earnings due to contributions from the merger with CMS and offset by $176 million in changes in operating assets and liabilities.

Net cash provided by investing activities increased by $244 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 primarily due to the sale of the Rapid Solutions business partially offset by the cash payment made as part of the Transaction based on the final net working capital position.

Net cash used in financing activities increased by $42 million for the nine months ended June 27, 2025 when compared to the nine months ended June 28, 2024 primarily due to increased principal payments on our Term Loan and distributions to non-controlling interests.

On June 26, 2025, we completed the sale of a hardware and product business, Rapid Solutions, to Lockheed Martin Corporation for a purchase price of $360 million in cash.

The sale of Rapid Solutions, which was part of the DS segment, was not classified as discontinued operations as it did not represent a strategic shift in our business.

Critical Accounting Policies and Estimates

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis