Castellum, Inc. (CTM) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the Castellum Inc.'s Third Quarter 2026 Earnings Conference Call. An earnings press release was distributed yesterday, November 5, after the close of the market. A copy of that release as well as an earnings presentation is available on the company's website in the Investor Relations section and should be reviewed in conjunction with the Form 10-Q filed yesterday with the SEC. Please note that this call is being recorded. [Operator Instructions] Before we get started, I would like to remind you that today's call may contain forward-looking statements within the meaning of the Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Each as amended, these statements represent the company's expectations or beliefs concerning future events, including our expectations for future revenue growth, new customer opportunities, improvements to cost structure and profitability. Forward-looking statements are subject to certain risks and uncertainties, which are outside of the company's control that could cause actual results to differ from those expressed or implied on this call. These include, among others, the company's ability to grow and execute on total backlog and qualified pipeline, ability to integrate and grow acquired companies, ability to identify and close additional acquisitions and factors affecting U.S. government spending, including budget delays, continuing resolutions and government shutdowns. Please also note that on this call, we'll reference non-GAAP adjusted EBITDA, which is a non-GAAP financial measure used by management to measure the company's operating performance as required by SEC rules and regulations. Non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in the earnings release issued yesterday afternoon. All forward-looking statements speak only as of today, and the company undertakes no obligation to update them, except as required by law. I would now like to turn the call over to Glen Ives, President and Chief Executive Officer of Castellum. Glen, please go ahead.

Well, thank you, and good morning to everyone on our call. Joining me today are David Bell, our Chief Financial Officer; and Drew Merriman, our Chief Operating Officer. And they'll both be available to answer questions as well during the Q&A period at the end of the call. Following my opening remarks on the company's performance during our third quarter and first nine months, David will take you through the financials in more detail, and then I'll provide some commentary on our strategic priorities and also our outlook for the balance of 2026, and then we'll get to the questions during the Q&A period. For the first nine months of 2026, we generated $42.9 million in revenue, up 6% from last year. And as previously announced, we expect record revenue for the full year period 2026. Much of that growth reflects the large Navy contracts we won in 2025. Our NAVAIR PMA-290 Special Missions Program contract continues to be a very meaningful contributor. And in August, the ceiling on that contract was increased by $32.8 million to a total of $136.2 million. And we're also seeing revenue from the five-year $66.2 million NAWCAD Naval Air Warfare Center Aircraft Division Lakehurst program, which is still early in its ramp-up. As we've regularly emphasized, we encourage investors to evaluate our performance over the long term rather than focusing too narrowly or too heavily on any single quarter. Given the nature of government contracting, the timing of the awards, program ramp-ups, revenue recognition, they can all fluctuate significantly from quarter-to-quarter and a very common factor in our industry. While those fluctuations are a normal part of our business, our year-over-year growth is what provides a much clearer picture of Castellum's overall trajectory and the steady progress that we're making. Government services revenue does not move in a straight line, particularly for a company our size with annual revenue between $55 million to $60 million. Contracts do wind-down, new contracts ramp up and the crossover quarters can look very flat even when the underlying trajectory is clearly up. Our focus, our work, our effort, our commitment is always on delivering flawlessly for our existing mission customers and growing and strengthening every opportunity that we can possibly have for sustaining our growth. Turning now to our backlog. We ended the quarter with a total backlog of $254.5 million, including $18.2 million funded and $236.3 million unfunded. This compares to $271.7 million at June 30 of this year in 2026 as part of that backlog has moved to work in progress. During the quarter, we refined how we report backlog by including priced contract options in our unfunded backlog. This change provides a much clearer view of our contracted business and aligns our reporting with industry standards. We do expect to recognize approximately 25% of our backlog over the next 12 months and about 51% over the next 24. Our qualified pipeline also grew to a record level of approximately $1.66 billion from $953.5 million at June 30 of this year. The pipeline represents potential future awards and reflects the investments we have made in our business development capacity this year, specifically to increase the volume and quality of opportunities we do pursue. Our team continues to focus on serving our Army, Navy and our federal customers pursuing new awards and expanding our work under existing programs. The August modification to the NAVAIR PMA-290 special missions contract is a very real example of how strong program execution can create additional opportunities. I think our proven CTM team knows how to execute on contracts, and we know how to grow them. Finally, I'd like to briefly discuss our investments in business development and M&A, which I will expand upon following David's discussion of our financial results. During this year, we purposely increased our investments in these areas in accordance with our current strategy. And the near-term impact on EBITDA because of these strategic investments was planned and anticipated, we view these strategic investments as the upfront work that we need to win, grow and scale Castellum as these are investments that we see new contract awards and associated revenue that we do expect to generate. We're making these investments from a position of financial strength, funded by our own operations using net operating income, and we believe they will support and strengthen our sustained growth over the next several years. Just want to reemphasize that point that we are making these investments from a position of financial strength, a strong balance sheet and funded by our own operations using net operating income. With that, let me turn the call over to David to take you through the financial results in more detail.

Thank you, Glen, and good morning to everyone. I'll go over our financial results for the quarter and the first nine months, then discuss cash flow and our balance sheet. Third quarter revenue came in at $14.7 million compared to $14.6 million a year ago and $13.9 million last quarter. The NAVAIR, PMA-290 special missions and NAWCAD Lakehurst MO&I contracts continue to contribute revenue as work continues to ramp up, although timing of work across our contracts can be affected and can affect individual quarters. Gross profit for the quarter was $5.3 million compared to $5.5 million last year. Gross margin was 36.1% compared to 37.6% a year ago, but improved from approximately 34% in the second quarter of this year. The main factor driving this fluctuation is contract mix. During the third quarter, we carried a higher mix of subcontractor work on larger programs, and that generally carries a lower margin than our own direct labor. As just stated, sequentially, gross margin has improved from approximately 34% last quarter. Operating expenses were $5.9 million for the quarter versus $5 million a year ago. The increase reflects the business development team we've added, higher employee-related costs, outside support for acquisition activities and stock-based compensation. These are areas where we made intentional investments as part of our growth plan rather than unexpected expenses, just as Glen stated a second ago. Adjusted EBITDA for the quarter was positive at approximately $600,000 compared to $1.1 million last year. The calculation excludes non-cash expenses such as $800,000 for stock-based compensation and employee stock purchase plan costs as well as $300,000 in depreciation and amortization. The full non-GAAP reconciliation is available in our earnings press release and presentation. As Glen mentioned, the decline in adjusted EBITDA was planned and anticipated as we made a deliberate decision to invest in our business development and acquisition efforts. We have the capacity to spend more, but we're taking a measured approach, investing where we see the strongest potential return while protecting our financial flexibility. We reported a net loss of about $500,000 for the quarter versus a net income of $400,000 last year. The majority of this net loss was due to noncash items such as stock-based compensation and depreciation and amortization. Of course, the growth initiatives I just discussed had a real cost and impact. Looking at the nine-month period puts those results in context. Revenue increased by 6% to $42.9 million from $40.3 million a year ago, driven primarily by the ramp-up of our Navy contracts. Nine-month gross profit was essentially flat at $15.1 million. Gross margin was 35.2% compared to 37.5% last year. Operating expenses were $17.4 million compared to $16.5 million a year ago. Adjusted EBITDA remained positive at approximately $1 million versus $1.8 million and a net loss of $1.8 million compared to $1.1 million last year. Those figures reflect the contract mix and the investment decisions that both Glen and I have just discussed. Turning to cash flow, which I think is a highlight of the period. Net cash provided by operating activities was $1.1 million for the period compared to a use of $1.3 million in the nine months of the prior year, a positive swing of $2.4 million. That improvement was primarily driven by a smaller increase in accounts receivable in 2026 than in 2025. Importantly, we continue to generate positive operating cash flow while investing in business development and M&A. Turning to liquidity. We ended September with $15.7 million in cash and $8.8 million in net accounts receivable or $24.5 million combined. That combined balance was approximately $23.1 million at the end of 2025. That's an increase of roughly $1.5 million or about $500,000 per quarter on average. Receivables are not the same in cash, but together with these balances provide a useful context for our liquidity and working capital. We also ended the quarter with no outstanding debt and approximately $36.3 million of stockholders' equity. Finally, an additional word on backlog composition. As Glen mentioned, total backlog was $254.5 million at quarter end with $18.2 million funded and $236.3 million unfunded. We expect to recognize approximately 25% of our backlog over the next 12 months and approximately 51% over the next 24. Importantly, these figures reflect only our existing backlog and do not include potential revenue from new contract awards or other business not currently included in our backlog. As with all government contracting, the timing of funding and option exercises rest with our customers. But this backlog provides a multiyear foundation of revenue visibility. So to summarize the current financial picture, first nine months of revenue is up 6%, adjusted EBITDA and operating cash flow are positive, and we have $24.5 million in cash and accounts receivable with no outstanding debt. While our investments in business development and M&A have weighed on near-term earnings as expected, we anticipate to begin seeing the benefits of these investments over the next six to 12 months. Building on this momentum, we remain on pace for record full year revenue for 2026. And with that, I'll turn the call back to Glen to discuss our strategy and our outlook.

David, thanks very much. Yes, the financial results reflect the choices that we planned for and that we've been making throughout this year. That is continue to serve and grow our existing mission customers while putting more resources behind the next phase of our growth here at Castellum. So let's focus just for a minute here on how we are positioning Castellum for that next very important phase of growth and why we see acquisitions as really our greatest opportunity to achieve the scale that we are driving towards and are absolutely 100% committed to. That is, again, grow organically and scale inorganically. Organic growth does remain important for us. It is a top priority as we move through the end of 2026 and into 2027. It's disciplined execution that always remains our priority. And I believe our CTM team over the last 1.5 years has really proven that and hammered that home. We expect record revenue for 2026, supported by the work we've already won. We've also strengthened our business development team to pursue larger opportunities and the increase in our qualified pipeline gives us more to compete for. We will also keep delivering flawlessly on our Army and Navy contracts and programs and also our federal civilian contracts that we've already won. Strong execution supports and fortifies our business today and provides that rock-solid business foundation for the right acquisitions that we're looking to make. However, organic growth alone, as I've said, will not get us to scale. So we are definitely targeting acquisitions to get to the pace that we want to achieve. Again, that is why M&A is at the center of our growth strategy. This year, we've invested additional time and resources in identifying, screening and evaluating potential businesses, including support from outside advisers. We've targeted businesses that complement our current capabilities, strengthen our position with federal customers, add useful contracts and profitable contracts or technologies and contribute meaningful revenue and earnings, but scale alone is not the goal. The price, the cultural fit, the chemistry and ability to integrate the business all must make sense to us and to our shareholders. We believe the work we put into that process is bringing us much closer to the right acquisition opportunity, and we are fast approaching that next phase. And while no transaction is assured and timing can change, our goal is to begin showing investors tangible results from these efforts over the next six to 12 months. We're actively evaluating several opportunities, and we intend to move quickly as we determine the strategic fit and financial terms are right. We do see acquisitions as a primary way to accelerate our growth here at Castellum and improve our earnings potential beyond what organic expansion alone can deliver. That is why we have worked hard to position ourselves for this acquisition phase of our strategic plan. We've built a strong business foundation with multiple large prime contracts that take us well over five years. We've got a strong cash position, no debt, a very strong and healthy balance sheet. And so we're ready to move. As we move through the end of 2026 and 2027, we expect the next six to 12 months to be a very important period for demonstrating our potential to scale and our goal once again to grow Castellum to our shareholders. I'd like to thank once again all our shareholders, our employees, our partners, our mission customers for your ongoing support, trust, confidence and commitment to CTM and our vital national security and defense mission. I feel very blessed to have an incomparable world-class team of the very best professionals in our industry. I truly believe and are wholly committed to our important and purposeful mission as directly supporting our nation's war fighters to help ensure our freedom of security. That may sound a lot like mom and apple pie, but it's our truth, and it's what drives your CTM team to do our very best to grow and scale and bring real value to our shareholders, our mission customers and our people. That concludes our prepared remarks. Let's go to questions.

[Operator Instructions] And our first question comes from Derek Greenberg with Maxim Group.

I wanted to start off with -- I think it was important the point you made about how short-term results aren't really as important and as indicative of company performance as the long term and as those contracts get recognized over their long length. I was wondering maybe if you could just talk about how visibility is in your current contracts in terms of those beginning to ramp? And if you could comment maybe on -- I noticed the backlog, the percent you expect to recognize over the next 12 and 24 months, both jumped a decent amount sequentially. So I was wondering if you're expecting acceleration from current contracts.

Yes. Derek, thanks very much for your question and the point about how to look at government contracting for -- especially for a company our size at $55 million to $60 million in revenue, how those contracts are executed, what those time lines are, our relationship with our mission customers and the government and how all that impacts when we realize revenue on those contracts. I do think it may be helpful for some of our callers or our listeners and our shareholders who don't always hear this part of the business to maybe give a little more detail on the contracts themselves because that's the strength of our company, right? These are all technology services and solutions contracts in very, very key tech domains that our war fighters and our mission customers need, obviously, to deal with all the different situations across the world. So the fact that they're so relevant and so important gives us great confidence that these contracts and the value of these contracts are going to be realized over their five-year period of performance. But I've got my Chief Operating Officer, Drew Merriman, on the line here. Drew, can you share with our listeners just a little bit about our contracts and how we execute on them?

Sure. So I'll go over the top 3. The first being the 290 special missions contract, which is supporting the PA program with intelligence, reconnaissance, surveillance and targeting. And that's one we recently expanded the scope on as we're continuing to perform well. We've got some new requirements, which answers one of the questions on why we see our -- executing our backlog has grown a little bit. And then also on our mission operations and integration contract, I think that's a good example to explain the ramp-up. So that contract was in its base year, and it's a consolidation contract with logistics, engineering and cyber. And so as other contracts come to an end, that work rolls in. So the ramp-up in the base year is a little bit slower as it is in the out years. And then our other large contract is the software support activity up at Lakehurst, supporting aircraft launch and recovery where we do all of the software development for the systems that involve launching aircraft and landing them on the carriers. That's kind of an overview of our top 3.

Thanks, Drew. And so Derek, going back to your question, just a lot of factors that influence how we execute on contracts in terms of requirements that change depending upon our mission customers and how they fund them. So going back to your point about why it's important to look at revenue growth and EBITDA for us across more of a year time frame than a quarter-by-quarter is because those requirements change regularly, constantly. And so something that they had planned to do for one quarter, they may push to the next and something else may come up where they want to -- for us to take on. So it's very, very difficult to predict. And so when we're looked at quarter-to-quarter, you're going to see a lot of ups and downs. And our goal is by the end of the year to achieve our objectives, both in terms of how we support a customer and the revenue and EBITDA that we're able to attain. Does that answer you, Derek?

Yes. That was very helpful. And then maybe turning to the pipeline. Maybe if you could just give some more color that shot up pretty significantly quarter-over-quarter. But I was wondering if you could maybe talk about the composition of that pipeline, how far along those opportunities are and maybe like a rough estimate of when those potential opportunities could potentially be converted upon.

Sure. Yes. So the strength of our pipeline and the growth of our pipeline is due directly to the investments we've been making in business development over the past year. So we all know that in government contracting, we're basically on five-year cycles. And so it's an imperative for us to have not just a pipeline of good opportunities, but a very realistic one, one that matches up with our sweet spot, the things that we do really, really well. And I think our listeners on this call understand what we do here at CTM, right? We provide those tech solutions and services in those key tech domains, whether it's C5ISR, a mission domain like that or a tech domain, whether it's AI or cyber or any of those that are very relevant to our mission customers. So the idea behind our pipeline is to ensure that we have the kind of opportunities that work directly to our strengths and to the mission customers that we feel we are very, very familiar with, and can compete on these opportunities for. But we also want to balance the pipeline to get us into new markets. And the ones I just spoke about with our current market and our current mission customers tend to be more near term because we're ready to jump on those opportunities. The pipeline opportunities that we have that are longer term are really associated with markets that are newer to us, ones that we have not penetrated yet. That's going to take us some time to do the kind of capture and the kind of development that we need to do. So I feel very good about our pipeline. It's a good balance of opportunities that will test us in terms of staying on top of our game from a technology perspective. But it's also a pipeline that's balanced in terms of opportunities related to customers and markets that we know where I know we can be very, very competitive. But then also opportunities that will stretch us, right, and hopefully get us into new markets. But that ties directly into the message that I was really trying to send today, Derek, and that is it's just not about pipeline. It's just not about organic growth. We've proven that we can win. We've proven we can compete when it comes to organic growth. 2025 was certainly a year that I think should reinforce that. But as importantly, organic growth will just -- it will be steady and take us so far. It's going to have to be our acquisition strategy and our acquisition efforts and doing that part of the business properly that will help us really scale the company. So that blend of organic and inorganic growth is a vital part of our strategy, and it's what's going to drive CTM to the kind of value that we outlined.

Glen, I can add a little more, too. So as far as the composition and time line, so we track our top 10 for 2027, and we prioritize by our core market, which is NAVAIR and then we look at new markets from same capabilities. So we have opportunities in Space Force, Air Force, Army, where the capabilities line up and the pipeline goes out to 2030. So as we start to qualify new opportunities, the pipeline is strong and keeps growing based on -- we know there's a real requirement. We know there's money behind it, and we know we have same capabilities. Does that answer the question.

Yes, that's really helpful. And then I was curious just how you view the investments you've made so far this year in terms of where you're at now with business development and the other areas of investment, do you feel comfortable with the level you've made? Or do you think there'll be more investments to be made going forward? Just your outlook on that.

Yes. So Derek, that's a question I think I ask myself just about every day because when -- again, when you're a company our size, you really have to be very, very smart and disciplined about your resources. We certainly are not a $1 billion company, and we don't have the kind of resources that some of our large business competitors have. So we have to make the most of what we have. And so we challenge ourselves as a team literally every day to ensure that we're balancing our costs and getting the most out of our -- the most return out of our investments when it comes to business growth. So I feel like the honest answer is that it's never enough, right? If I could get two more business developers and two more proposal developers and add another consultant to help in our acquisition strategy, I jump all over it. But no, I can't do that. We need to balance that with what we can really, really do I feel very confident that, that's what we've done. We've really managed our finances, managed our costs, managed our resources so that we're in a very strong battle rhythm. We're operating optimally. I put our company against any company in our business when it comes to organic growth. Over the summer and the fall, we have really geared up when it comes to our acquisition strategy. I think I'll be able to share some progress and news as we go into the new year. I feel very, very good about where we're at as a company. Again, strong business foundation, contracts that have five-plus years. We will realize the value of those contracts over those five-plus years, a healthy balance sheet, strong cash position, no debt. And we are very, very postured for not just the organic piece, but the inorganic piece.

Yes. That makes sense. Last one from me, and then I'll pass the line. I was wondering if you can maybe just comment macro-wise, if you're seeing any impact either from just the elections or if you have any visibility in terms of funding and appropriations and if those will have any impacts on your business over the next couple of years?

Sure. I think the election piece is probably a little too early to really give you an intelligent comment on. Although there are some things I think we can probably anticipate. For example, there's a very key initiative right now that the Small Business Administration is considering, and that is changing the small business high standards. Depending upon how that plays out, that could be a very significant change in a very positive way for Castellum and companies like ours. But the beauty of the business we're in when it comes to government contracting, Derek, and I think you know this, and I'm sure many of our listeners do, too, is that it can be a very reliable, a very steady in terms of expectations, opportunities, how contracts are executed over those five years. But every administration, every change in Congress does come with some impact. But I think history has proven, especially with our company that we're pretty resilient. The changes that we see with administration changes and changes in Congress, even with some policy changes, we're able to sort of work through and weather. And there may be some spikes up and down in terms of impact to some of our contracts or some of our opportunities quarter-to-quarter. But over the period of our sales cycle, which basically in government contracting is about five years because of the length of contracts, we're able to mitigate those. And I don't see how that's going to change. I feel like we'll still be in a position to mitigate and work through any of the changes that may be coming from all the different dynamics that impact our business and our industry.

Thank you for taking my questions.

No problem, Derek. I think you actually asked four. So we're trying to keep it to two, but that's okay.

Your next question comes from Chip Rewey with Rewey Asset Management.

Glen, you projected a lot of confidence on this call, and it's really good to hear. And I guess I'll ask one question probably with seven parts. Sorry about that. But looking at the stock reaction, I'm perplexed, I mean you've guided to 12-month revenues going forward over $63 million if you just do the math. And I know that may not be a straight line quarter-over-quarter, but it's definitely good confidence. And so it looks like the one analyst who's on the line will have to raise numbers and your stock is down incredibly on what's good news. And then you announced a pipeline that's $1.66 billion. And I'm a little confused that a lot of the conversation has been, boy, we have to go out and do a lot of M&A. So I'm wondering how much of that pipeline can you convert on your current operations? And do you have to do M&A to convert that pipeline kind of is, a, and then b, the acquisitions at this point, it seems to me your best acquisition will be taking $5 million in your own stock and buying back 13% of your company. There's no risk there. It's cheap and carpe diem, and I'm not a person that says repurchase, repurchase, repurchase. I mean, it's really carpe diem. It's really by when you want it, there seems to be a giant disconnect, again, with your confidence, your pipeline, your guidance on the conversion to revenues, your guidance on really the quality of the business and the fact that most of your business is the U.S. government, which is well funded over time. So one, can you just talk about the ability to convert that pipeline with the operations that you have? And two, why would you not buy a significant amount of your stock, $5 million or so?

Chip, thanks for your questions here. So let's break that down a little bit. And I'm going to start with -- I'm not sure it was the first one, but I think you -- they're all related and you asked, do you have to do an M&A? No. I mean, we really don't have to do an M&A. But then I would maybe ask, what is the purpose of Castellum, right? We're a publicly traded company. We're an industry that our team believes in, in terms of national security and national defense. We're at $55 million to $60 million. Our stock is trading below $0.50. Is that where we want to be? No, I don't think so, right? I think the long-term vision is to make the company perpetual and enduring and of value to our shareholders. And to me, just based on my own experience in this business, we need to grow the company, and we need to grow it in a way that makes sense. It's disciplined, it's deliberate, it's thoughtful. But it also needs to be -- there also needs to be a sense of urgency, right? There needs to be a sense of drive. Let's move this company forward as quickly as we can. disciplined, smart, but quickly, expeditiously. Stock buyback, they're all, I think, meet strategies. But at the end of the day, I've got to grow the company and organic growth is something that is certainly achievable. It's certainly a part of our plan. It's certainly a priority of our plan. But I think anyone who has run a business in our industry will tell you that organic growth is a grind. It's tough. It takes time. It doesn't happen. You don't go from $55 million to $60 million to $120 million in 18 months with just organic growth, unless you're very, very, very fortunate and very, very lucky. And so if you look at various models in our industry, whether it's private or public, there is an acquisition plan. And so it's a plan -- it's a strategy that just about every successful company, and I mean a successful company in our industry employs. And that is a mix of -- the right mix of organic and inorganic growth. Because if you do not integrate those strategies, you're looking at long-term growth that takes you over an extended period of time. And if you're privately held and you have the patience, that works great. And I've had that experience before. But if you're publicly traded, you don't have that same time line. You don't necessarily have the same patience from your investors and your shareholders. They're expecting more. And here at CTM, that's what we're trying to do, Chip, is we're trying to move the company forward in a way that makes sense for us. And it's not just -- I don't want you to think that we're just making acquisitions haphazardly. There's a lot of planning and thought that goes behind them. They have to be the right acquisition. And so when we look at our plan, we know that to scale the company to get it to where we want it to go, organic growth is not enough. Stock buybacks are not enough. I want to leverage our cash. I want to leverage our position to the maximum extent possible and do what's best for the company in terms of how quickly we can grow in a way that is sustainable. And it has to be through M&A. And again, it's not rocket science. It's not an exceptional model. Many companies have performed to it successfully. But it's the execution piece, right? It's not the model itself. It's understanding the model, but it's really the execution piece. Can you take advantage of your pipeline? Can you make it real? We can, and we will. But I don't have the patience to wait five years for that to happen to realize all those opportunities or even longer. We have to have a smart strategy. And I like it to -- I don't know if you watched the ball game last night with the Jags beat the Ravens. I happen to be a Jags fan, so I got at least half the game. The Jags won because they have a balanced attack. They had a strong ground game and a strong passing game. Our ground game is the organic growth and our passing game is the inorganic growth. And the teams that have the balanced strategy and can execute on them are the ones that are going to succeed. And that's basically what we're trying to do.

I hear you, and I think that's a great strategy. I think I've been doing this a very long time. And your balance sheet right now has a lot of cash on it. I guess the question is, if a balanced passing running game sounds fine. I don't understand why repurchase can't be part of that. Again, your stock, you said $0.50 a share. I don't know if you know this morning, it's $0.39 a share. Down big this year. And it's not your fault. I like the company. I like the strategy. But the amount of your company you can buy back at the current valuation with the current backlog and the current pipeline, I would say, should not stand as an either/or versus acquisition. And if you can do an acquisition, it's fine. That's what I want to hear. $1.20, we would not be having this conversation. And look, I hear you. You've given very thoughtful answers. I just want you to express my opinion. I'm a fan of the company, and it's just an observation. So I'll let it stand there. I'm not trying to be confrontational.

You want to be confrontational. And I do appreciate your question. It's never either/or, right? And we're constantly adjusting our strategy. And the strategy you brought up in terms of a share stock buyback, you can bet we discuss it, right? We strategize about it. And we go through the pros and cons. And I'm going to leverage that cash right now for an M&A that I think will help really move us forward and gain us momentum. And there may be a time for a buyback. But when I consider the pros and cons of a buyback as opposed to M&A near term, right now, we're on that path to do the right M&A. So thanks, Chip. Appreciate your question.

[Operator Instructions] Our next question comes from Charles Bichiro from GTM Capital.

Also, I just want to congratulate you on the excellent numbers. I feel that you guys are on the right track and going in the right direction. A lot of my questions have already been answered on the call, but I just have a couple of small questions that you would like to clarify. The first one is job openings. You guys had a bunch of job openings on your website. I know some have been filled, some haven't been filled. Were those positions for current contracts or those for future contracts the positions that were posted.

Charlie, thanks for jumping on the call and asking your questions here. Drew, do you want to take that one on? And I can pile on if you want.

Yes, absolutely. So the vast majority of them are for current contracts where we're doing on contract growth. There are a couple for prospective new opportunities as well. But I would say 80% to 85% are on contract growth.

Okay. Great. And I noticed -- I know in one of your press releases, I know you guys are doing a lot of subcontracting work. Is that something that's in the future that you guys are really looking into? Or is that something you're going to not do? Because I know the profit margins are not as good as in-house.

Yes. Great question because subcontracting work is sort of a way of life in our business to a certain extent. As we grow, currently, right now, the subcontracting work is important to us, right? Because as we build teams to win contracts, we really try to pick the right team, the right subcontractors for prime contract opportunities. And they bring certain areas of expertise that can enhance our ability to win these contracts. So again, Charlie, we don't just bring people on as subcontractors unless there's a real reason behind it. And then as we grow larger and as we strengthen certain areas of our own capabilities, there will probably be fewer subcontractors that we would work with. But then again, as much as we are always looking to be the prime contractor, there may be opportunities where we actually perform as a sub as well. So the question is, how do you balance that to ensure that you make that you're as effective as you can be as a prime and as a good sub. And that balance is something that we're always working.

Great. And I know this is another subject that's brought up already. The acquisitions, the merger and acquisitions, what you're looking at, is there anything you can just spell out for investors as far as what area you're looking in and how large of an acquisition it would be? And I know you did three acquisitions, which were very successful in the past. Would they be a similar structure? I know some were cash, some were stock, some were equity and some were financed. Any way you can throw something our way, just to clear color on which way you're going?

You bet. I'll let David weigh in here just a second on how we're potentially structuring these deals. But as far as the kind of companies that we're looking at, Charlie, it's really important to us that what I mentioned earlier, it has to be the right fit and it has to bring the right things to us as a company and further our ability to grow. So some of that is tied to which companies are available, right? That sort of drives some of your selection criteria to be honest. But ideally, we are a company that we can finance where we can do it intelligently and smartly in terms of any debt, just the number of options for the number of shares that we would use, the amount of equity we would use, the amount of cash we would use. David can talk to that. But the kind of companies we're looking for are ones that would take us deeper into our market or into an adjacent market where we can leverage our capabilities even to a greater extent. Companies that have the kind of contracts that we feel are -- that we can strengthen and grow upon and continue to strengthen the company, those will be very, very important. Companies that have great relationships with their mission customers that we can further develop and strengthen and take advantage of as well. So there's some real basic criteria that we look at. And then obviously, with every company we look at in terms of size is, one, is it affordable for us? And typically, I think companies from $15 million to $25 million to $30 million in revenue are very affordable for us. And then there's companies about our size that I think are also potential candidates as well. So we've done much of this due diligence over the summer and through the fall. And so as I said in my earlier remarks, we're going to see some movement as we go into the first of the year in 2027. That is our goal. And David, do you want to talk a little bit about it.

Yes, I'll jump in real quickly. Yes. And thank you very much for that question, Charles. Like Glen said, we're going to be smart about the acquisitions. The first and foremost, as Glen said, is cultural fit that we have to run the right company that has our attitude, our approach, our willingness, our service and our allegiance, I guess, you'd say. But we're also not chasing like top dollar revenue just to bulk ourselves up. We're going to make an intelligent acquisition when we look at the accretion of the acquisition top to bottom, not just revenue, not just gross profit, not just EBITDA, but all the way down to the bottom line. We want to make sure that it works for us and we don't overleverage ourselves that we don't give away too much in an acquisition that we don't pay for the next 10 years of profits. So one thing we're doing where we've invested so much, we've got people that are maybe we're looking for companies that are not -- they're not in a process. They're not trying to sell themselves right now. And Glen is doing it. And with Glen's reputation and other leaders' reputations in our area, those companies that don't want to sell to somebody else who don't want to become part of another company, they'll take Glen's call, they'll take other leaders' calls because they like us, they like the culture fit, they like the work that we do. And so by not getting to a competition and being patient about what we're doing, we're not going to get so worried about the one deal in front of us that we pay to the nose for it. Like I said, we're going to be intelligent about it. And the combination will be some cash that we have. That's why we're holding the cash that we have right now when we do the first, second transaction. We'll figure out what to do with the cash, any excess cash later, take some intelligent debt out, issue some shares, maybe. One thing that we're really keen on is we want people that want to come to the company that want to stay and want to help grow. So we're going to expect some of the sellers to convert their equity over to Castellum stock so that they will share in the successes of the company with the consideration that they receive. Hopefully, that provides a good background on what we're trying to do, Charles.

No, that's a great observation. But have you guys ever thought about thinking outside the box as far as your merger and acquisition? I mean, obviously, about 60% to 70% of the mergers out there in your industry. One-for-one merger, meaning merger with a company directly your size and you switch stock. I mean, that happens a lot. Is that a consideration you consider? Or is that something you wouldn't even look at?

Like Glen said earlier, we're looking at small, medium and large acquisitions. So we're not limiting ourselves to the size of it. But we're looking at the culture fit and how ultimately will benefit the shareholders, the customers and our people.

Okay. All right. My final questions will be here will be your advanced technology products, the XRA and the GuardTower. Can you just give a brief description of what you want to do with those? And are they salable? I mean, is there any way to make money on them? And can you use them in other technology and other areas?

Yes, Charlie, absolutely. Drew, do you want to start with that one?

Sure. So I'll start with GuardTower, which is an appliance that has some AI capabilities where it spins up what I would say, artificial processes, and it's designed to detect insider threats inside your organization where when a hacker gets in your system, they try to move left and right, so they fall on these trip wires. We have a really good partnership with GuardTower, and we're helping them enhance some capabilities, and we're working with them to do the test and evaluation. And it's not quite ready yet, but we expect in another six months or so, it will be ready, and that is something we do expect to be able to sell as a certified reseller, and we also provide the services we support. So a really good partnership with them. XRA is an extended reality maintenance tool. So if you think about it in the context of you have a maintainer on a ship or really anywhere with a subject matter expert somewhere else, but you have a very complicated piece of equipment that needs to be repaired, you may have a maintainer that doesn't have all of the subject matter expertise. So you have the augmented reality glasses that allow the subject matter expert who's not there to remotely see what the maintainer can see and also put things like user manuals up with like live wiring tracing. So it's like, okay, this is a 4-millimeter nut, we need this kind of tool or the wire you want is right here and it highlights in red. Again, we're also working on sort of adding more capability to that before we really go all in on bringing it to market. But again, we are very excited about that product, and it's platform independent. And it's very bleeding-edge technology that we're excited about.

Great. I'm a firm believer in your company and your products and all we need now is your stock price to realize what the actual company is doing.

[Operator Instructions] Our next question comes from Moe Bee, which is a private investor.

There were some good questions asked in this call, but I would like to expand on it, not going to be direct because I think a lot of shareholders on this call can do the same way I do. I want to start with what I believe. This team has won large prime contracts, build a pipeline that keeps growing and kept this company free of debt. I followed it closely, and I defended it. I'm here because I want it to succeed. I also have to tell you what I hear from shareholders every day. The business has been built up for years and stock hasn't followed. People have been asked to be patient for a long time and the stock is making new lows. It trades around its book value with no debt, which tells me the market doesn't really believe what you built. So my first question is, many shareholders are afraid that if the price doesn't recover, the answer will be a reverse split. I understand the math, and I know it doesn't change where anyone owns a paper. So I still feel like betrayal to shareholders who have waited for years and to the employees who are paid in the stock and buy it through the stock purchase plan. A reverse split is what people expect from a company in trouble, and this company has cash, but no debt. So is a reverse split under any consideration? And can you rule it out?

David, do you want to start with that one?

I'd say that I wouldn't say we have not -- reverse split is not on the table for us right now. I can't say what we're going to do, not going to do, but it's not something that we think is the way to improve the stock price of the company. I think Glen has said, build the company, execute on our story, execute on our plan. We believe that as we grow through the business development, the ground game and the passing game of the acquisition that the market will start to see it. So we're growing long term. We don't want to take necessarily short-term steps, short-term impacts, but we're looking long term. So hopefully, that answers your question. We're still looking long term, and we're growing, and we're committed to that.

Thanks for the call and thanks for your question. Yes. So we here at CTM, we're not unlike our shareholders, right? There's certainly frustration on our part in terms of where our stock price is at. A day doesn't go by that I don't think there is. But I would say, Mo, that with many of our shareholders, I know some have been with us for quite some time and some are much newer. For those that joined us four or five years ago, I can't say enough, my hats off to you for believing in us and sticking with us. But the point I would like to make is that we're a very different company since 2024, really over the last two years than the previous four. The previous four years, the first phase of this company from 2020 until 2024, there were a lot of good things done. But the company was in a very tricky place midyear 2024 because it had made seven acquisitions, right, seven events where they brought it down to three companies and did a great job of doing that. But while doing it, the company accumulated over $12 million in debt. And the companies that we had acquired at the time were all very small businesses and three of them had done extremely well, but they certainly weren't postured for continued organic growth. So in mid-2024, we realized that the company really needed to adjust in a big way. And we went from integrating those companies into Phase 2, and that was, hey, we absolutely have to focus and grow this company organically. And so when you think about the time frame, we started that process, that Phase 2 process really towards the tail end of 2024 and into 2025. And in 2025, I'm not sure you can find a company out there that can say that they were able to, in that short period of time, develop an organic growth plan and execute it and bring three prime contracts with a value of $220 million approximately over five-plus years. That is due in large part to the team that we've built here. And that's important to understand because it's one thing to do business in our industry as a large business or a small. It's a completely different science and art to grow a business from small to large. And that's what we're doing, right? And so the team that we have here at CTM, we understand how to do that. We have a model that we know works. We have a strategy that we're always adjusting. But bottom line is we're going to continue to press organically. We're going to continue to press to make the right acquisitions, and that's how we're going to scale. And that's how we're going to get our stock to where it needs to be. We can talk about buybacks. We can talk about reverse splits. We can talk about all those kinds of things. But what I want to do is make sure that we have a healthy, strong company that's going to endure for our shareholders and bring that value that they're looking for. I can't guarantee that in six months. No. But if you hang in there for a little while here while we execute on our strategy and give us a chance to do that, I think we'll also attract more institutional investors, which has to be a big part of our plan. There needs to be a good balance of our retail investors and obviously, our institutional investors as well. All that will come with the kind of growth that we're talking about here. So thanks again, Mo. Really appreciate your question.

And with no further questions in queue, I'd like to turn the call back over to Glen for closing remarks.

Thanks, Colby. Much appreciate you guys kind of run this for us. And I want to thank all our listeners today, our shareholders, all of you that are interested in our company and have shown the support that you have over the last few years. I just want you to know that we are truly committed to making this work for everybody involved. And not a day goes by that your team here at CTM is giving it their very, very, very best. So I want to thank you for your time, and we look forward to updating you as we progress throughout the year and obviously, into 2027. We're really looking forward to that. Thanks very much.

This concludes today's conference call. You may now disconnect.