Financial Data and Key Metrics Changes - Revenue for Q2 2026 declined by 2.7% year over year, primarily due to slower conversion of on-contract growth opportunities into revenue and program disruptions [5][14][17] - Adjusted EBITDA for Q2 was $185 million, resulting in an adjusted EBITDA margin of 10.5%, reflecting an increase of 180 basis points quarter over quarter and 80 basis points year over year [15][18] - Free cash flow improved to $150 million in Q2, although challenges related to invoice payment timing were noted [16][19] Business Line Data and Key Metrics Changes - On-contract revenue growth slowed to 3% in Q2 from 8% in Q1, with a significant headwind from Cloud WAN compute and store revenue [14][17] - The company expects organic revenue to decline by approximately 5.54% in Q3 and Q4 of FY 2026 [17] Market Data and Key Metrics Changes - The company is experiencing a more challenging environment than previously forecasted, with delays in new business awards and increased scrutiny on government spending impacting revenue [6][7][12] - The pipeline of expected awards remains solid, with a year-to-date book-to-bill ratio of 1.4 [5][11] Company Strategy and Development Direction - The company is focusing on aligning its cost structure with the expected revenue environment, implementing cost efficiency initiatives to mitigate the impact on EBITDA and free cash flow [8][9] - There is an emphasis on leveraging artificial intelligence to drive efficiency and improve margins in the coming years [12][45] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current market volatility and its impact on near-term revenue but remains optimistic about long-term growth opportunities [10][12] - The company has revised its revenue guidance for FY 2026 to a range of $7.25 billion to $7.325 billion, reflecting a more subdued outlook [17][18] Other Important Information - The company is increasing its FY 2026 adjusted EPS guidance to a range of $9.4 to $9.6, benefiting from a favorable tax settlement [18][19] - The capital deployment plans remain focused on driving long-term value for shareholders, with a commitment to share repurchases and capability-focused M&A [19] Q&A Session Summary Question: Can you comment on the impacts on on-contract growth? - Management noted challenges in converting on-contract growth to revenue, particularly in areas undergoing significant transformation, such as the Army and the Department of Treasury [21][22][24] Question: How do you see the structure of the industry changing? - Management indicated that while there are new entrants in the market, the focus remains on mission integration, which is essential for operating within the government environment [28][32][54] Question: What are the expectations for government fiscal year-end flush? - Management expressed that the flush environment has been irregular and does not expect significant opportunities from it [80][81] Question: How would a government shutdown impact the P&L? - A traditional shutdown is expected to have a marginal impact on revenues, with little to no impact on cash flow [82][83] Question: What would it take to become more constructive on the outlook? - Key indicators include improvements in on-contract growth, timely adjudication of new business awards, and increased ramp-up velocity on existing programs [96][97]