Everforth Inc.

10/30/2026 | Press release | Distributed by Public on 10/30/2026 04:05

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

- Management's Discussion and Analysis of Financial Condition and Results of Operations
The information in this discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are based upon current expectations, as well as management's beliefs and assumptions, and involve a high degree of risk and uncertainty. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Statements that include the words "believes," "anticipates," "plans," "expects," "intends," and similar expressions that convey uncertainty of future events or outcomes are forward-looking statements. Our actual results could differ materially from those discussed or suggested in the forward-looking statements herein. Factors that could cause or contribute to such differences include those described in Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2025 ("2025 10-K"). In addition, as a result of these and other factors, our past financial performance should not be relied on as an indication of future performance. All forward-looking statements in this document are based on information available to us as of the filing date of this Quarterly Report on Form 10-Q and we assume no obligation to update any forward-looking statements or the reasons why our actual results may differ.
OVERVIEW
Everforth is a technology and digital engineering company that provides IT solutions to clients across the commercial and government sectors through its two segments: Commercial Segment and Federal Government Segment (see Note 1. General in Part I, Item 1 in this Quarterly Report on Form 10-Q).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED WITH THE THREE MONTHS ENDED SEPTEMBER 30, 2025
Revenues
Consolidated revenues for the quarter were $1.0 billion, up 2.0 percent year-over-year. The table below shows our revenues by segment for the three months ended September 30, 2026 and 2025 (in millions).
% of Total
2026 2025 Change 2026 2025 Change
Commercial $ 719.9 $ 711.3 1.2 % 69.8 % 70.3 % (0.5 %)
Federal Government 311.5 300.1 3.8 % 30.2 % 29.7 % 0.5 %
Consolidated $ 1,031.4 $ 1,011.4 2.0 % 100.0 % 100.0 %
Commercial Segment revenues were approximately 70 percent of total revenues and were up 1.2 percent year-over-year. From an industry perspective, the increase was attributable to higher revenue from clients across TMT and Business Services, partially offset by lower revenue from clients in Healthcare, Consumer and Industrial, and Financial Services. Federal Government Segment revenues were approximately 30 percent of total revenues and were up 3.8 percent year-over-year. The increase was driven by higher revenue from National Security and Federal Civilian agencies, partially offset by lower revenue from Defense and Intelligence agencies, and other clients.
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the three months ended September 30, 2026 and 2025 (in millions).
Gross Profit Gross Margin
2026 2025 Change 2026 2025 Change
Commercial $ 230.0 $ 235.9 (2.5 %) 31.9 % 33.2 % (1.3 %)
Federal Government 61.6 61.0 1.0 % 19.8 % 20.3 % (0.5 %)
Consolidated $ 291.6 $ 296.9 (1.8 %) 28.3 % 29.4 % (1.1 %)
Gross profit is comprised of revenues, less costs of services, which consist primarily of compensation for our contract professionals, other direct costs, and reimbursable out-of-pocket expenses.
Consolidated gross profit declined 1.8 percent year-over-year. Gross margin for the third quarter of 2026 was 28.3 percent, a compression of 110 basis points compared with the third quarter of 2025. Gross margin for the Commercial Segment was down 130 basis points year-over-year. Contributing to the compression was (i) a lower mix of high-margin permanent placement revenues, (ii) changes in foreign currency exchange rates primarily related to our delivery center in Mexico, and (iii) a shift in solutions mix, with stronger growth in certain cloud and infrastructure services that carry lower gross margins than other offerings in our portfolio. Gross margin for the Federal Government Segment was down 50 basis points year-over-year primarily due to an increase in revenues from cost reimbursable contracts which carry a lower margin than our other contract types.
Selling, General, and Administrative Expenses
Selling, general, and administrative ("SG&A") expenses consist primarily of compensation expense for our field operations and corporate staff, information systems, rent, public company expenses, and other general and administrative expenses. SG&A expenses were $217.7 million, compared with $212.2 million in the third quarter of 2025. SG&A expenses included $8.3 million in acquisition, integration, and strategic planning expenses, compared with $4.2 million in the third quarter of 2025.
Amortization of Intangible Assets
Amortization of intangible assets was $17.3 million, compared with $16.8 million in the third quarter of 2025. The increase relates to the effects of the Quinnox acquisition, partially offset by older intangibles reaching the end of their useful lives.
Interest Expense, Net
Interest expense, net, which consists primarily of cash-based interest expense, amortization and adjustments to deferred loan costs, and interest income, was $20.2 million, up from $17.4 million in the third quarter of 2025. The increase was due to higher outstanding borrowings. The weighted-average outstanding borrowings and cash-based interest rates in the third quarter of 2026 and 2025 were $1.45 billion and 5.3 percent, and $1.22 billion and 5.7 percent, respectively.
Provision for Income Taxes
The provision for income taxes was $13.3 million, up from $12.4 million in the third quarter of 2025, despite lower income before income taxes. The effective tax rate was 36.5 percent, up from 24.6 percent in the third quarter of 2025. The increase in the effective tax rate reflects higher foreign income taxes, the non-renewal of the Work Opportunity Tax Credit ("WOTC"), and lower income before income taxes.
Net Income
Net income was $23.1 million, down from $38.1 million in the third quarter of 2025.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2026 COMPARED WITH THE NINE MONTHS ENDED SEPTEMBER 30, 2025
Revenues
Revenues for the first nine months of the year were $3.0 billion, up 0.2 percent year-over-year. The table below shows our revenues by segment for the nine months ended September 30, 2026 and 2025 (in millions).
% of Total
2026 2025 Change 2026 2025 Change
Commercial $ 2,097.1 $ 2,091.6 0.3 % 69.7 % 69.7 % - %
Federal Government 909.6 908.7 0.1 % 30.3 % 30.3 % - %
Consolidated $ 3,006.7 $ 3,000.3 0.2 % 100.0 % 100.0 %
Commercial Segment revenues were approximately 70 percent of total revenues and were stable year-over-year. Revenue growth in TMT more than offset declines in Business Services, Financial Services and Healthcare, while Consumer and Industrial remained relatively flat year-over-year. Federal Government Segment revenues were approximately 30 percent of total revenues and were also stable year-over-year. The increase was attributable to revenue increases from National Security agencies, offset by lower revenue from Defense and Intelligence and Federal Civilian agencies, and other clients.
Gross Profit and Gross Margin
The table below shows gross profit and gross margin by segment for the nine months ended September 30, 2026 and 2025 (in millions).
Gross Profit Gross Margin
2026 2025 Change 2026 2025 Change
Commercial $ 664.1 $ 687.0 (3.3 %) 31.7 % 32.8 % (1.1 %)
Federal Government 178.7 178.6 0.1 % 19.6 % 19.7 % (0.1 %)
Consolidated $ 842.8 $ 865.6 (2.6 %) 28.0 % 28.9 % (0.9 %)
Consolidated gross profit declined 2.6 percent year-over-year. Gross margin for the first nine months of 2026 was 28.0 percent, a compression of 90 basis points from the first nine months of 2025. Gross margin for the Commercial Segment was down 110 basis points year-over-year. Contributing to the compression was (i) a lower mix of high-margin permanent placement revenues, (ii) changes in foreign exchange rates primarily related to our delivery center in Mexico, and (iii) a shift in solutions mix, with stronger growth in certain cloud and infrastructure services that carry lower gross margins than other offerings in our portfolio. Gross margin for the Federal Government Segment was down 10 basis points year-over-year primarily due to an increase in revenues from cost reimbursable contracts, partially offset by focused efforts to improve profitability across the contract portfolio.
Selling, General, and Administrative Expenses
SG&A expenses were $668.3 million, compared with $643.5 million in the first nine months of 2025. SG&A expenses in the first nine months of 2026 included $30.9 million in acquisition, integration, and strategic planning expenses, compared with $15.8 million in the first nine months of 2025. The increase primarily relates to costs for strategic initiatives including updates to our go-to market strategy, outsourcing of certain back-office functions, and an enterprise resource planning system implementation.
Amortization of Intangible Assets
Amortization of intangible assets was $49.1 million, compared with $48.0 million in the first nine months of 2025. The increase relates to the effects of the Quinnox acquisition, partially offset by older intangibles that have reached the end of their useful lives.
Interest Expense, Net
Interest expense, net was $57.7 million, up from $51.0 million in the first nine months of 2025. The increase was due to higher outstanding borrowings. The weighted-average outstanding borrowings and cash-based interest rates in the first nine months of 2026 and 2025 were $1.41 billion and 5.3 percent, and $1.21 billion and 5.6 percent, respectively.
Provision for Income Taxes
The provision for income taxes was $24.9 million, down from $34.8 million in the first nine months of 2025 due to lower income before income taxes. The effective tax rate was 36.8 percent, up from 28.3 percent in the first nine months of 2025. The increase in the effective tax rate reflects higher foreign income taxes, the non-renewal of the WOTC, and lower income before income taxes.
Net Income
Net income was $42.8 million, down from $88.3 million in the first nine months of 2025.
Commercial Segment - IT Consulting Metrics
The book-to-bill ratio represents the ratio of consulting bookings to related revenues for a specified period. Commercial IT consulting accounts for approximately 50 percent of the segment's revenues and has increased as a proportion of the segment's revenues over time. Bookings represent the value of new contracts entered into during the period, including adjustments for changes in contract scope and contract terminations. Measuring bookings involves the use of estimates and judgments and there are no independent standards or requirements governing the calculation of bookings. There is no assurance these bookings will result in future revenues.
Three Months Ended Trailing-Twelve-Months Ended
September 30, September 30,
2026 2025 2026 2025
Book-to-Bill Ratio
0.9 to 1
1.0 to 1
1.1 to 1
1.2 to 1
Federal Government Segment Metrics
Contract backlog for our Federal Government Segment represents the estimated amount of future revenues to be recognized under awarded contracts, including task orders and options, at a point in time ("Contract Backlog"). These estimates are subject to change and may be affected by the execution of new contracts, the extension or early termination of existing contracts, the non-renewal or completion of current contracts, and adjustments to estimates for previously included contracts. There is no assurance our contract backlog will result in future revenues. The timing of the execution of new contracts and other changes are affected by the funding cycles of the government and can vary from quarter to quarter. New contract awards are the estimated amount of future revenues to be recognized under contracts awarded during a specified period, including adjustments to estimates for contracts awarded in previous periods ("New Contract Awards"). Information regarding New Contract Awards is not comparable to, nor should it be substituted for, an analysis of reported revenues. Due to variability, New Contract Awards are presented on a trailing-twelve-months ("TTM") basis. The book-to-bill ratio for our Federal Government Segment is the ratio of New Contract Awards to revenues for a specified period. Contract backlog coverage ratio is calculated as total Contract Backlog divided by TTM revenues.
TTM Ended September 30,
(Dollars in millions) 2026 2025
New Contract Awards $ 1,049.2 $ 1,158.6
Book-to-Bill Ratio
0.9 to 1
1.0 to 1
(Dollars in millions) September 30,
2026 		December 31,
2025 		September 30,
2025
Funded Contract Backlog $ 638.1 $ 492.9 $ 609.8
Negotiated Unfunded Contract Backlog 2,305.3 2,455.6 2,476.7
Contract Backlog $ 2,943.4 $ 2,948.5 $ 3,086.5
Contract Backlog Coverage Ratio
2.5 to 1
2.5 to 1
2.6 to 1
Liquidity and Capital Resources
Our working capital, which is current assets less current liabilities, at September 30, 2026, was $528.5 million, and our cash and cash equivalents were $147.5 million. Our cash flows from operating activities have been our primary source of liquidity and have been sufficient to meet our working capital and capital expenditure needs. At September 30, 2026, we had approximately $227.0 million available under the $600.0 million revolving credit facility. We believe that our cash and cash equivalents on hand, expected operating cash flows, and availability under our revolving credit facility will be sufficient to fulfill our obligations, working capital requirements, and capital expenditures for the next 12 months and beyond.
Net cash provided by operating activities was $129.4 million for the first nine months of 2026, compared with $225.6 million in the same period of 2025. Net cash provided by operating activities before changes in operating assets and liabilities was $178.9 million, compared with $217.9 million in the same period of 2025. Changes in operating assets and liabilities resulted in net cash usage of $49.5 million for the first nine months of 2026, compared with net cash provided of $7.7 million in the same period of 2025. This year-over-year change primarily related to an increase in accounts receivable days sales outstanding in the first nine months of 2026.
Net cash used in investing activities for the first nine months of 2026 was $311.1 million, comprised of $283.6 million used to acquire Quinnox and $27.5 million used for capital expenditures. Net cash used in investing activities for the first nine months of 2025 was $337.3 million, comprised of $306.1 million used to acquire TopBloc and $31.2 million used for capital expenditures.
Net cash provided by financing activities was $168.8 million for the first nine months of 2026 and included net borrowings under the senior secured credit facility totaling $225.5 million, offset by $50.5 million used to repurchase the Company's common stock. Net cash provided by financing activities in the first nine months of the prior year was $31.8 million and included net borrowings under the senior secured credit facility totaling $134.6 million, offset by $105.9 million used to repurchase the Company's common stock.
For details on the (i) senior secured credit facility, comprised of a revolving credit facility, and term loan B, and (ii) unsecured senior notes, see Note 5. Long-Term Debt in Part I, Item 1 in this Quarterly Report on Form 10-Q.
Commitments and Contingencies - There have been no material changes to our contractual cash obligations from those described in our 2025 10-K.
Recent Accounting Pronouncements
There have been no recent accounting pronouncements that significantly impact the Company.
Critical Accounting Policies
There were no material changes to our critical accounting policies and estimates during the third quarter of 2026 compared with those disclosed in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our 2025 10-K.
Everforth Inc. published this content on October 30, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on October 30, 2026 at 10:06 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]