Everforth Q3 Revenue Rises 2% as Earnings and Cash Flow Decline

Everforth Inc. (EFOR) reported higher third-quarter revenue as both its Commercial and Federal Government segments grew, but lower margins, earnings and cash generation tempered the top-line gain. The company expects fourth-quarter revenue to range from $965 million to $995 million, representing a year-over-year change of negative 1.5% to positive 1.5%.

Revenue for Q3 2026 rose 2.0% to $1.031 billion from $1.011 billion a year earlier. Gross profit declined to $291.6 million from $296.9 million, narrowing the gross margin to 28.3% from 29.4%.

Operating income fell to $56.6 million from $67.9 million, while net income decreased to $23.1 million from $38.1 million. Diluted earnings per share were $0.56, compared with $0.87 a year earlier. The diluted share count declined to 41.1 million from 43.7 million.

On a non-GAAP basis, adjusted EBITDA fell to $106.3 million from $112.6 million, and the adjusted EBITDA margin contracted to 10.3% from 11.1%. Adjusted net income declined to $45.5 million from $57.3 million, while adjusted diluted earnings per share fell to $1.11 from $1.31.

Commercial revenue rises as TMT and business services expand

Commercial segment revenue increased 1.2% year over year to $719.9 million. Technology, Media and Telecom revenue grew 14.6% to $157.1 million, while Business Services rose 7.2% to $83.1 million. Those gains were partly offset by declines of 7.2% in Healthcare, 2.3% in Consumer and Industrial, and 1.9% in Financial Services.

The segment’s gross profit decreased to $230.0 million from $235.9 million, with gross margin falling to 31.9% from 33.2%. Adjusted EBITDA declined to $78.3 million from $88.6 million, reducing the adjusted EBITDA margin to 10.9% from 12.5%.

Commercial consulting’s trailing-12-month book-to-bill ratio was 1.1 to 1, compared with 1.2 to 1 in both the second quarter of 2026 and the third quarter of 2025. The company noted that Commercial IT consulting represents approximately half of segment revenue and that bookings may not ultimately result in revenue.

Federal growth supported by national security and civilian work

Federal Government segment revenue increased 3.8% to $311.5 million. National Security revenue rose 23.7% to $99.8 million, and Federal Civilian revenue increased 7.7% to $61.5 million. Defense and Intelligence revenue declined 7.0% to $121.5 million, while Federal Other fell 9.2% to $28.7 million.

Federal gross profit increased slightly to $61.6 million from $61.0 million, though gross margin eased to 19.8% from 20.3%. Adjusted EBITDA rose to $34.7 million from $33.5 million, while adjusted EBITDA margin was 11.1%, compared with 11.2% a year earlier.

New federal contract awards reached $584.4 million, up from $461.4 million in the year-earlier quarter and $169.3 million in Q2 2026. Total backlog was $2.943 billion at Sept. 30, up from $2.671 billion at the end of June but below $3.087 billion a year earlier. Funded backlog increased to $638.1 million from $609.8 million year over year, while unfunded backlog declined to $2.305 billion from $2.477 billion.

The federal segment’s trailing-12-month book-to-bill ratio was 0.9 to 1, compared with 1.0 to 1 a year earlier. Its backlog coverage ratio was 2.5 times, down from 2.6 times in Q3 2025 but up from 2.3 times in the preceding quarter.

Cash flow declines as debt increases

Cash provided by operating activities fell 30.0% to $58.7 million. After $12.2 million of capital expenditures, non-GAAP free cash flow declined 35.4% to $46.5 million.

Everforth ended the quarter with $147.5 million in cash and cash equivalents, compared with $161.2 million at the end of 2025. Long-term debt increased to $1.391 billion from $1.169 billion, including $850.0 million of senior secured debt and $541.0 million of senior fixed-rate unsecured notes. The net leverage ratio stood at 3.1 to 1, and the company reported $223 million of available revolving-credit capacity after outstanding letters of credit.

Fourth-quarter outlook

For Q4 2026, Everforth expects revenue of $965 million to $995 million. Adjusted EBITDA is projected at $93 million to $103 million, implying an adjusted EBITDA margin of 9.6% to 10.4%.

The company also expects adjusted net income of $39.2 million to $45.7 million and adjusted diluted earnings per share of $0.95 to $1.11.

Everforth cautioned that its outlook is subject to risks and uncertainties and that actual performance could differ materially from its estimates. The company also said there is no assurance that contract backlog, new federal awards or commercial bookings will convert into future revenue.