Earnings per share rose 28% year over year to $8.15, driven by higher sales, improved segment performance, and a $1.04 gain from the training services divestiture.
Free cash flow for the quarter was $637 million, with full-year guidance increased to $3.05 billion to $3.35 billion.
Northrop Grumman reported second-quarter 2025 sales of $10.4 billion, up 1% year over year and 9% sequentially from Q1, with all segments contributing to growth.
Organic sales were $10.3 billion, up 2% year over year, reflecting divestiture of training services.
Segment margins improved notably in Defense Systems (12.7%) and Mission Systems (14%), with Space Systems margin up 50 basis points despite lower sales volume.
Segment operating income increased 11% year over year, with a segment operating margin of 11.8%, up 100 basis points.
Adjusted EBITDA increased 80% to $131.7 million, with a record adjusted EBITDA margin of 16.9%, up 280 basis points from last year.
Capital expenditures totaled $36.7 million for the quarter, with full-year guidance of $130 million to $140 million.
Debt to trailing 12 months EBITDA ratio was 3.17x, with a target to reduce leverage to approximately 2.5x by late fiscal 2026.
Net income was $44 million, with adjusted net income at $45.2 million or $0.81 per diluted share.
Operating cash flow was $83 million, more than doubling from $35 million a year ago, with a strong conversion rate of 80% to 85% of EBITDA to cash flow expected for FY 2025.
Q3 revenue was $779.3 million, up 51% year-over-year, driven 5% by organic growth and 46% by acquisitions.
Adjusted EBITDA was $3.9 million, an improvement of $6.6 million year-over-year, reflecting strong operating leverage.
CapEx was $6.9 million, primarily software-related, with expected quarterly CapEx of approximately $7 million for the remainder of 2025.
Cash and cash equivalents and marketable securities totaled $226 million at quarter end, down $5 million from Q1 due to CapEx investments.
Completed convertible debt refinancing with $250 million of new 0.75% convertible notes due 2030, improving terms and reducing dilution risk.
Gross profit was $65.2 million with a record gross margin of 40.1%, marketplace gross margin reached 35.4%, up 190 basis points year-over-year.
Marketplace revenue was $148 million, up 26% year-over-year, while supplier services revenue was $14.3 million, declining slightly.
Q2 2025 revenue increased 23% year-over-year to $163 million, driven by strong marketplace growth.
U.S. segment adjusted EBITDA was $6.9 million with a 5.1% margin, improving $6.6 million year-over-year; International segment loss was $2.9 million, flat year-over-year.
Consultant headcount ended at 937, a 3.2% decrease year-over-year, but flat when adjusted for portfolio optimization.
Consultant utilization improved year-over-year to 76%, supported by replenishing sales pipeline and a 2% increase in project lead flow, or 5% adjusted for IP team transition projects.
DSO stood at 110 days, consistent with prior year, with 73 days billed and 37 days unbilled.
Effective tax rate on a non-GAAP basis was 29.0%, down from 29.4% in Q2 2024.
First half of fiscal 2025 surpassed the record first half of fiscal 2024 for non-GAAP net income, EPS, and EBITDA by 6%, 8%, and 8%, respectively.
Legal and regulatory services revenue increased nearly 11%, supported by a 17% increase in total case filings and 6% increase in court judgments compared to Q2 2024.
Non-GAAP selling, general and administrative expenses were 16.3% of revenue, slightly improved from 16.4% a year ago.
North American and international operations contributed to revenue growth, increasing 9.4% and 7.0%, respectively.
Returned $46.6 million to shareholders in Q2, including $3.4 million dividends and $43.2 million share repurchases.
Revenue in the second quarter increased by 9% year-over-year to $186.9 million.
Seven of eleven practices grew year-over-year, with Antitrust & Competition Economics, Energy, Intellectual Property, and Labor & Employment practices posting double-digit revenue growth.
Dafinchi