Performance in 2025 was driven by the successful ramp of the TSA PreCheck enrollment program and new contract wins across Security Solutions.

Management attributed significant margin expansion to a rigorous expense management initiative launched in late 2024, which reduced cash operating expenses by $8,000,000.

The company is pivoting toward a more efficient operating model, utilizing a new company-wide restructuring plan to streamline operations for 2026.

Strategic positioning remains focused on mission-critical, non-discretionary government spending in cybersecurity, identity verification, and secure communications.

The Secure Networks segment underwent a $14,900,000 goodwill impairment, reflecting a strategic transition as legacy large programs reached natural completion.

Xacta AI was launched to differentiate the core GRC platform, utilizing highly contextualized datasets to provide automated, high-confidence risk recommendations.

Revenue guidance of $187,000,000 to $200,000,000 is primarily underpinned by existing programs, including the expansion of confidential federal IT security work.

The 2026 framework assumes a continued ramp of the IT GEMS program and increased transaction volumes and market share gains in TSA PreCheck.

Management expects adjusted operating expenses to decline further in 2026 due to the Q4 restructuring, driving anticipated EBITDA margin expansion to 11%-14%.

The business development pipeline stands at over $4,200,000,000, with approximately 20% of that value expected to reach award decisions in the first half of 2026.

Capital allocation will prioritize organic growth investments and returning capital to shareholders, supported by an increased share repurchase authorization of $75,000,000.

A $16,400,000 total charge was recorded in Q4, comprising a $14,900,000 noncash goodwill impairment and a $1,500,000 restructuring charge.

Management noted a shift in contract awards 'to the right' due to government funding constraints and more detailed federal bid reviews.

Gross margins face a temporary 'artificial' headwind of approximately 200 basis points in 2026 due to the compressed GAAP accounting recognition of prepaid TSA PreCheck expenses.

The revenue mix is shifting toward lower-margin third-party hardware and software within the IT GEMS program, which will dilute total company gross margins in the near term.

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The upward revision from previous estimates is driven by the expansion of confidential IT security work and better visibility into IT GEMS hardware orders.

TSA PreCheck is performing ahead of expectations due to strong travel demand and successful market share capture.

Initial sales include 400 licenses to two major federal customers, with a focus on upselling the existing Xacta customer base first.

Management claims the AI tool can reduce the time and effort required for an 'Authority to Operate' (ATO) by as much as 90%.

Management expects 2026 to represent the 'full dilutive effect' of the IT GEMS revenue mix.

Excluding accounting-driven prepaid expense recognition, underlying cash gross margins remain in the low 40% range, which management views as healthy.

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