Adjusted EBITDA for Q2 2025 was $28.3 million, above the forecasted range of $21 million to $25 million, despite increased contractor and material costs in Unmanned Systems and a less favorable mix in Space, Training and Cyber.
Cash flow used in operations was $10.6 million, reflecting working capital needs from revenue growth, increased inventory, and investments in development initiatives.
Contract mix for Q2 was 65% fixed price, 31% cost plus, and 4% time and material, with 71% of revenues from U.S. government contracts.
Days sales outstanding (DSO) improved slightly from 104 to 103 days quarter-over-quarter.
Free cash flow used was $31.1 million after $20.5 million in capital expenditures, primarily for expanding manufacturing and production facilities.
KGS segment revenue increased by $64 million year-over-year with organic growth of 27.1%, excluding the impact of the Norden Millimeter acquisition.
Second quarter 2025 revenues were $351.5 million, exceeding the estimated range of $300 million to $310 million, with notable growth in defense rocket support and C5ISR businesses.
Unmanned Systems revenue declined by $12.6 million year-over-year due to prior year international target drone shipments, partially offset by increased tactical drone revenues.
Cash and cash equivalents increased to $190.4 million, debt was $374.5 million, and inventory decreased by $32.2 million compared to March 31, 2025.
Gross margin was 46.7%, consistent with the prior year quarter despite higher input and labor costs, with North America gross margin at 49.7% and Europe at 36.2%.
Net income totaled $103.5 million or $2.47 per fully diluted share, compared to $97.8 million or $2.31 per share last year.
Net sales for Q2 2025 were $631.1 million, up 5.7% year-over-year, with North America net sales increasing 6.4% to $492.7 million and Europe net sales increasing 2.7% to $133.4 million.
Operating expenses increased 6.5% to $154.4 million, driven by higher personnel costs, variable compensation, and software/hardware costs.
Operating margin was 22.2%, flat with the prior year, and consolidated adjusted EBITDA increased 4.8% to $159.6 million, with a margin of 25.3%.
Strong cash flow from operations of $124.7 million enabled capital expenditures of $39.9 million, dividends of $11.8 million, and $35 million in share repurchases.
Volumes were relatively flat year-on-year, with North American volumes exceeding U.S. housing starts by approximately 240 basis points over the last 12 months.
Adjusted earnings per share were $0.89, up 7% as reported and 10% on a constant currency basis.
Adjusted EBITDA was $293 million, up 3% on a constant currency basis, with a margin of 22%, up 70 basis points year-over-year.
Food segment net sales were $896 million, flat year-over-year, with adjusted EBITDA of $210 million, up 3%, and margin at 23.4%.
Free cash flow for the first six months was $81 million, down from $207 million in the prior year period, driven by increased incentive compensation and tax payments.
Net leverage ratio stood at 3.6x, with a target to reduce to approximately 3.0x by end of 2026.
Net sales for Q2 2025 were $1.34 billion, down 1% on a constant currency basis.
Protective segment net sales were $439 million, down 3% reported and 4% constant currency, with adjusted EBITDA of $78 million, down 5%, and margin at 17.8%.
Volumes declined 2% overall, with Food volume weakness primarily due to softer industrial food processing volumes in North America.
Dafinchi
