Castellum (NYSEAMERICAN:CTM) reported nearly flat third-quarter revenue and a net loss as higher spending on business development and acquisition planning weighed on earnings. Management said it expects record revenue for 2026 and is evaluating acquisitions to accelerate growth.
The government contractor generated $14.7 million in revenue for the quarter, compared with $14.6 million a year earlier. Adjusted EBITDA fell to approximately $600,000 from $1.1 million, while the company reported a net loss of about $500,000, compared with net income of $400,000 a year earlier.
President and CEO Glen Ives said the earnings decline was anticipated as Castellum invested in winning new contracts and identifying acquisition targets. He urged investors to assess the company over longer periods, noting that government contract awards, ramp-ups and revenue recognition can vary from quarter to quarter.
Navy Contracts Drive Nine-Month Growth
For the first nine months of 2026, revenue rose 6% to $42.9 million from $40.3 million, primarily due to the ramp-up of Navy contracts, Chief Financial Officer David Bell said. Adjusted EBITDA declined to approximately $1 million from $1.8 million, and the net loss widened to $1.8 million from $1.1 million.
Quarterly gross margin narrowed to 36.1% from 37.6% a year earlier, although it improved from approximately 34% in the second quarter. Bell attributed the year-over-year change primarily to contract mix, including a higher proportion of subcontractor work on larger programs, which generally carries lower margins than Castellum’s direct labor.
Quarterly operating expenses rose to $5.9 million from $5 million. Bell cited additions to the business development team, higher employee-related costs, outside support for acquisition activities and stock-based compensation.
Ives said the company’s NAVAIR PMA-290 Special Missions contract remains a significant contributor. Its ceiling increased by $32.8 million in August to $136.2 million. Castellum is also generating revenue from a five-year, $66.2 million Naval Air Warfare Center Aircraft Division Lakehurst program that is still early in its ramp-up.
Backlog Falls as Pipeline Expands
Castellum ended the quarter with $254.5 million in total backlog, down from $271.7 million at June 30 as some backlog moved into work in progress. The quarter-end total comprised $18.2 million in funded backlog and $236.3 million in unfunded backlog.
The company said it refined its reporting during the quarter to include priced contract options in unfunded backlog. Management expects to recognize approximately 25% of total backlog over the next 12 months and 51% over the next 24 months. Bell cautioned that customers control the timing of funding and option exercises.
The qualified pipeline of potential future awards rose to approximately $1.66 billion from $953.5 million at the end of June. Ives attributed the increase to business development investments and said the pipeline includes both nearer-term opportunities with familiar customers and longer-term prospects in new markets.
Chief Operating Officer Andrew Merriman said Castellum tracks its top 10 opportunities for 2027 and sees prospects involving the Space Force, Air Force and Army. The pipeline extends to 2030, he said.
Acquisitions Take Priority Over Near-Term Buyback
Ives described acquisitions as central to Castellum’s strategy for reaching greater scale, while saying organic growth remains a priority. The company is evaluating several opportunities and aims to show tangible results from its acquisition efforts over the next six to 12 months, although no transaction is assured, he said.
Ives said potential targets could include companies with roughly $15 million to $30 million in revenue or businesses closer to Castellum’s own size. Bell said financing could involve cash, debt and shares, and that the company would assess potential acquisitions through their effect on the bottom line.
During the question-and-answer session, Rewey Asset Management Chief Investment Officer Chip Rewey urged the company to consider buying back shares. Ives said a buyback and acquisitions were not mutually exclusive, but that management currently wants to use its cash for an acquisition. He said the company discusses the pros and cons of a repurchase.
Asked by private investor Mo B whether a reverse stock split was under consideration, Bell said it was “not on the table for us right now,” while stopping short of ruling it out in the future.
Cash Flow Improves
Castellum generated $1.1 million in operating cash flow during the first nine months of 2026, compared with $1.3 million used in the same period a year earlier. Bell said the improvement was driven primarily by a smaller increase in accounts receivable.
The company ended September with $15.7 million in cash, $8.8 million in net accounts receivable and no outstanding debt. Bell said management expects to begin seeing benefits from its business development and acquisition investments over the next six to 12 months.
About Castellum (NYSEAMERICAN:CTM)
Castellum, Inc is a U.S.-based technology and defense contractor that provides cybersecurity, intelligence, information technology and engineering services. The company primarily serves federal government customers, including agencies and organizations involved in defense, national security and critical infrastructure.
Its offerings include cybersecurity assessments and operations, network and information technology support, intelligence analysis, electronic warfare capabilities, systems engineering and mission-support services.
