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REVENUE
 6 Months Ended
Jun. 30, 2025
Revenue from Contract with Customer [Abstract]  
REVENUE

 

2. REVENUE

 

Disaggregation of Revenue

 

The following tables present the Company’s revenue disaggregated by contract type and revenue recognition method:

 

    Three months ended
June 30,		     Six months ended
June 30,		  
    2025     2024     2025     2024  
Government subcontracts   $ 12,266,475     $ 16,963,874     $ 23,593,083     $ 31,965,642  
Prime government contracts     1,335,358       2,601,347       4,128,970       5,383,228  
Commercial contracts     1,577,275       1,245,113       2,857,663       2,542,607  
    $ 15,179,108     $ 20,810,334     $ 30,579,716     $ 39,891,477  

 

    Three months ended
June 30,		     Six months ended
June 30,		  
    2025     2024     2025     2024  
Revenue recognized using over time revenue recognition model   $ 15,067,724     $ 20,596,186     $ 30,325,516     $ 39,466,552  
Revenue recognized using point in time revenue recognition model     111,384       214,148       254,200       424,925  
    $ 15,179,108     $ 20,810,334     $ 30,579,716     $ 39,891,477  

  

Favorable/(Unfavorable) Adjustments to Gross Profit

 

We review our Estimates at Completion (“EAC”) at least quarterly. Due to the nature of the work required to be performed on many of the Company’s performance obligations, the estimation of total revenue and cost at completion is complex, subject to many inputs, and requires significant judgment by management on a contract-by-contract basis. As part of this process, management reviews information including, but not limited to, any outstanding key contract matters, progress towards completion and the related program schedule, identified risks and opportunities, and the related changes in estimates of revenues and costs. The risks and opportunities relate to management’s judgment about the ability and cost to achieve the schedule, consideration of customer-directed delays or reductions in scheduled deliveries, technical requirements, customer activity levels, and related variable consideration. Management must make assumptions and estimates regarding contract revenue and costs, including estimates of labor productivity and availability, the complexity and scope of the work to be performed, the availability and cost of materials including any impact from changing costs or inflation, the length of time to complete the performance obligation, the availability and timing of funding from our customer, and overhead cost rates, among others.

 

Changes in estimates of net sales, cost of sales, and the related impact to operating profit on contracts recognized over time are recognized on a cumulative catch-up basis, which recognizes the cumulative effect of the profit changes on current and prior periods based on a performance obligation’s percentage-of-completion in the current period. A significant change in one or more of these estimates could affect the profitability of one or more of our performance obligations. Our EAC adjustments also include the establishment of, and changes to, loss provisions for our contracts accounted for on a percentage-of-completion basis.

 

 

Net EAC adjustments had the following impact on our gross profit during the three and six months ended June 30, 2025 and 2024: 

 

   Three months ended  Six months ended
   June 30,  June 30,
   2025  2024  2025  2024
Net adjustments  $(3,966,358)  $(185,317)  $(7,095,588)  $(1,358,178)

 

The net adjustment of $4.0 million for the three months ended June 30,2025 is driven primarily by an unfavorable adjustment of $2.3 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $1.7 million were driven primarily by the Next Generation Jammer Mid-Band Pod program (“NGJ Mid-Band Pod”) and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.

 

The net adjustment of $7.1 million for the six months ended June 30, 2025 is driven primarily by an unfavorable adjustment of $4.5 million associated with the termination of our A-10 program. Additional net unfavorable adjustments of $2.6 million were driven primarily by the NGJ Mid-Band Pod and the T-38 Classic Structural Modification Kits program were due to increased labor and material costs.

 

Transaction Price Allocated to Remaining Performance Obligations

 

As of June 30, 2025, the aggregate amount of transaction price allocated to the remaining performance obligations was approximately $86.8 million. This represents the amount of revenue the Company expects to recognize in the future on contracts with unsatisfied or partially satisfied performance obligations as of June 30, 2025.