Financial Data and Key Metrics Changes - The company reported total revenue of $1.6 billion, a decrease of 5% from the prior year period and down 9% on an organic basis. Excluding a confidential contract, total revenue grew 138% on an organic basis, driven by growth in transportation and cyber markets [28][29] - Adjusted EBITDA was $149 million, comparable to 2024, with an adjusted EBITDA margin expanding by 40 basis points to 9.4%, a second quarter record [29][30] - The company achieved a free cash flow conversion rate of 151% for the quarter and 125% on a trailing twelve-month basis [8][34] Business Line Data and Key Metrics Changes - In the Federal Solutions segment, total revenue decreased 19% from the prior year period but increased 88% on an organic basis when excluding the confidential contract, driven by growth in cyber and intelligence markets [30][15] - The Critical Infrastructure segment saw a revenue increase of $97 million or 14% from 2024, with organic growth of 8% and adjusted EBITDA increasing 73% [32][33] Market Data and Key Metrics Changes - Total infrastructure revenue grew 148% on an organic basis in the second quarter, with North America revenue growing 177% [10][11] - The Middle East infrastructure business is expected to grow over 10% in 2025, marking the fourth consecutive year of double-digit organic revenue growth in the region [12][13] Company Strategy and Development Direction - The company is focused on hard infrastructure projects, aligning with bipartisan support and administration priorities, particularly in North America and the Middle East [11][12] - The acquisition of Chesapeake Technology International is expected to enhance capabilities in electronic warfare, cyber, and autonomous systems, strengthening relationships with key customers [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about future growth, citing a robust backlog of nearly $9 billion, with 70% funded, and a pipeline of $55 billion [26][37] - The company anticipates a stronger Q3, traditionally the strongest quarter for federal business, and expects to maintain a book-to-bill ratio of 1.0 or better [51][40] Other Important Information - The company won three contracts over $100 million in the second quarter, including a $176 million contract with the U.S. Army Corps of Engineers [10] - The reconciliation bill is expected to provide significant funding for defense and infrastructure projects, aligning with the company's capabilities [18][21] Q&A Session Summary Question: Opportunities regarding Golden Dome and FAA procurement - Management highlighted strong past performance with the FAA and readiness to pursue the integration contract, emphasizing their partnership with IBM and capabilities in system engineering [42][45] Question: Expectations for Q3 book-to-bill ratio - Management expects a robust Q3, with a book-to-bill ratio of 1.0 for the full year, driven by task orders and new large awards [50][51] Question: Impact of the One Big Beautiful Bill on infrastructure - Management noted a shift in funding priorities towards hard infrastructure, which aligns well with the company's portfolio [56][57] Question: Organic growth outlook and contributors - Excluding the confidential contract, management expects 18% organic growth in the second half, driven by existing contracts and strong hiring [64][65] Question: Unbooked backlog and funding environment - The unbooked backlog is over $11 billion, with strong funding alignment and cash flow [102][105] Question: Federal Solutions margin and performance - Management indicated that margins were impacted by lower volume on the confidential contract but expect improvements in the second half due to new business wins [83][84]

Defense Investment Plan - NATO leaders agreed on The Hague Defense Investment plan, fueling a quantum leap in collective defense [1][2] - The plan aims to boost defense industries, increasing security and creating jobs [1] Financial Commitment - Allies agreed to invest 5% of GDP in defense [3] - At least 3.5% of GDP is invested in core defense requirements [3][4] - An additional 1.5% of GDP will go towards investments supporting defense and security [4] - The 3.5% investment will fund militaries and equipment, including air defenses, ammunition, drones, and tanks [4] Strategic Focus - NATO reaffirmed unwavering support for Ukraine [1] - The alliance is ready to defend every inch of its territory, ensuring the freedom and security of 1 billion people [2] - The decisions made will profoundly impact NATO's ability to deter and defend against challenges from Russia, terrorism, cyber attacks, sabotage, or strategic competition [1][2]

Defense Spending & Investment - Canada will meet NATO's 2% of GDP target this year, ahead of schedule [1] - Increased investment in armed forces to meet new security imperatives [1] - Prioritizing made in Canada manufacturing and supply chains for defense investments [2] - Redirecting defense capital spending away from the US [3] - Investing in new submarines, aircraft, ships, armed vehicles, artillery, radar, drones, and sensors [3] Strategic Priorities - Strengthening Canada's defense capabilities across land, sea, air, and cyberspace [2] - Protecting Canadian interests and allies [2] - Ensuring Canada is protected from coast to coast to coast [4] - Creating higher paying jobs across the land [4] Geopolitical Positioning - Canada aims to lead with its values, resources, and economy within the G7 [4]

Financial Data and Key Metrics Changes - FFO per share for 2024 was $2.57, representing a 6.2% increase over 2023 [4][28] - Same property cash NOI increased by 9.1% year over year, the highest increase reported [5][28] - Same property occupancy ended the year at 94.1%, a 30 basis point increase year over year [28] Business Line Data and Key Metrics Changes - Executed 500,000 square feet of vacancy leasing, exceeding the initial target by 25% [19] - Tenant retention rate reached 86%, the highest level in over twenty years [5][14] - The Defense IT portfolio occupancy was 95.6%, with overall portfolio occupancy at 93.6% [15] Market Data and Key Metrics Changes - Over 40% of vacancy leasing was executed in Navy support and other markets, indicating strong demand [19] - The company has a strong leasing pipeline with over 170,000 square feet in advanced negotiations [20] Company Strategy and Development Direction - The company is focusing on defense-related developments, particularly in response to the new presidential administration's priorities [6][8] - Plans to commit $200 million to $250 million for new investments and $250 million to $300 million for development projects in 2025 [35][38] - The company aims to maintain a strong development pipeline with 600,000 square feet of active developments, 75% of which are pre-leased [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in continued strong demand for their properties, particularly in defense sectors [13][14] - The company anticipates a 3.5% growth in FFO per share for 2025, with a focus on maintaining high tenant retention [6][38] - Management noted that the operating environment remains favorable despite potential delays in defense budget appropriations [51][53] Other Important Information - The company has minimal exposure to GSA leases, with only 8 leases totaling 185,000 square feet, representing less than 1% of annualized rental revenue [10][12] - The company has a strong balance sheet, with 100% of debt at fixed rates [29] Q&A Session Summary Question: How would you expect demand to evolve in your markets around the three defense priorities? - Management expects strong demand in Huntsville, particularly with potential relocations of Space Command and missile defense initiatives [41] Question: Could there be an indirect impact to COPD if there's increased focus on contractor customers? - Management believes that service companies are well-positioned to bring efficiencies to the DoD, indicating a positive outlook for contractor relationships [44] Question: Can you provide an update on your data center land in Iowa? - Management confirmed they are working through power requests and have a path to a gigawatt, but timing remains unclear [45] Question: Do you foresee any potential issues with defense budget appropriations? - Management acknowledged the uncertainty but noted bipartisan support for increased DoD funding over the past years [51][52] Question: Have you seen any ability to push on pricing with private sector tenants? - Management indicated they are focused on reducing concessions and maintaining tenant relationships rather than aggressively pushing for price increases [54] Question: Can you provide additional color on development starts for 2025? - Management confirmed plans to start new developments in response to anticipated demand, particularly for defense IT [61][62] Question: What is the natural level of frictional vacancy in the portfolio? - Management suggested that a natural occupancy level of 95% to 96% is expected, with opportunities to improve slightly [78] Question: What does the pipeline look like for acquisitions? - Management is seeing some distressed opportunities but emphasized strict criteria for any potential acquisitions [82][84]