Aug 31, 2026 earnings call — Raised guidance and Project Orbit implementation
Raised FY 2027 revenue midpoint to $7.25 billion and reported Q2 revenue of $1.9 billion.
Revenue $1.9B (est $1.8B) · EPS $3.01 (est $2.31) · Next-quarter revenue outlook $7.3B
Key quotes
"Project Orbit, or optimizing resources for a better impact tomorrow is moving into its implementation phase."
"At this point, we expect approximately $150 million in annual run rate savings by the end of the 3-year implementation period."
"On contract growth, or OCG, of 9% was well ahead of our plan."
"But right now, I what I have set is that the standard for how we are defining success is for it to be at or above 90%."
Analyst Q&A 7
on-contract growth outlook
Q (Jonathan Siegman · Stifel): They asked what the company assumes for on-contract growth in the second half and whether the upside came from market improvement or company actions.
A: Management said on-contract growth is roughly double what it was this time last year and the faster pace is broad based across customers. They expect that velocity to continue through the balance of the year and that execution plus prior cost reductions also helped push margins higher.
"And the velocity that we see there is expected to continue through the balance of the year, which is the basis upon which we have altered our guidance for the year." — James C. Reagan (CEO)
Project Orbit and savings
Q (Sheila Kahyaoglu · Jefferies): They asked why Project Orbit was started and how the reported $150 million of annualized savings was achieved in a labor-heavy business.
A: Management said Orbit started because the company needed to run the business more smoothly after focusing on organization and growth. They crowdsourced about 3,500 ideas, are implementing process and sourcing changes, and view the $150 million as what they have identified today while expecting to look for more opportunities over time.
"And so the opportunity that I saw were you know, greater opportunities for organizational efficiency as well as putting some tools and processes in place to make the business run easier." — James C. Reagan (CEO)
Orbit margin path over years
Q (Citi): They asked if margin improvement from Orbit will be linear, backloaded, or have another shape, and when leading indicators might turn.
A: Management said they view a path to about 11% margin over a couple of years, targeting 20 to 30 bps higher in fiscal 2029 and 11% in fiscal 2030, but they warned the path will not be perfectly linear. They added that winning new work can pressure near-term margins, and that stronger recompete and new-win rates plus normalizing RFP timing would help growth next year.
"Ideally, we would say, we would wanna get, you know, 20 to 30 bps higher in fiscal year 2029, and then get to 11% in fiscal year 2030." — Prabu Natarajan (CFO)
fixed-price contracting trend
Q (Jonathan Siegman · JPMorgan): They asked how quickly the shift to fixed-price contracting is happening and how much it can drive margin expansion.
A: Management said fixed firm-price (FFP) today is about 15% to 18% of sales and the pipeline is inflecting to roughly one-third fixed-price work. They said civil customers are more comfortable with fixed-price and civil EBITDA margins run north of 15%, so winning the right fixed-price work could be an incremental lever for margins, while defense and intel are moving slower toward fixed price.
"I would say our FFP right now is about 15% to 18% of our sales." — Prabu Natarajan (CFO)
fixed-price cause and portfolio plans
Q (Gautam Khanna · TD Cowen): They asked if the fixed-price pipeline shift is by choice or a market change, and what portfolio or M&A actions might be coming.
A: Management said they see a broader market shift to more fixed-price work across defense, intel and civilian, but changes are gradual and can be noisy quarter to quarter. On portfolio, they said they have done a deep strategic review, will focus on investments not far from their core partly funded by Orbit, and will discuss portfolio direction on the December call.
"we are gonna hold off until our December call." — James C. Reagan (CEO)
recompete win-rate target
Q (Tobey Sommer · Truist): They asked what recompete win rate the company expects going forward.
A: Management set the standard for recompete success at or above 90% and said they have organized proposal activity to reach that level. They also said they expect new-work win rates of at or above 30%, and combining strong recompete and new-win rates would create a growth 'flywheel.'
"But right now, I what I have set is that the standard for how we are defining success is for it to be at or above 90%." — James C. Reagan (CEO)
contracting environment and CR assumption
Q (Matt Akers · BNP): They asked what the company is seeing in awards, RFP pacing, and whether management is assuming a continuing resolution (CR) for the next government year.
A: Management said outlays are improving and some prior months' outlays are translating into revenue, but RFPs and awards are still moving in fits and starts and submit volume fell to about $24 billion this year. For budgeting, their base case is to start the fiscal year with a CR, and they are not banking on materially better budgets for planning.
"Our base case is that we will start the year with a CR." — Prabu Natarajan (CFO)