Castellum, Inc. Annual Report: A Deep Dive into 2025 Performance

Considering an investment in Castellum, Inc.? This summary provides a clear, plain-English breakdown of the company's performance for the fiscal year ended December 31, 2025, helping you make an informed decision.

Castellum operates as both a "smaller reporting company" and an "emerging growth company." This classification typically applies to newer or smaller businesses, granting them specific regulatory allowances. While this can open unique growth opportunities, it also often entails higher risks compared to larger, more established firms.

Business Overview

Castellum, Inc. provides advanced cybersecurity and IT modernization services to government agencies and commercial clients. Its services include cyber defense, digital forensics, cloud security, and enterprise IT infrastructure support. The company delivers high-value solutions that address complex security and technology challenges for its clients.

Financial Performance

The fiscal year 2025 marked a period of significant strategic realignment and growth for Castellum, clearly reflected in its financial results.

Key Performance Highlights for 2025:

• Revenue: Castellum reported total revenue of $55 million, a 15% increase from the prior year (excluding the divested MFSI segment). New contract wins in its core cybersecurity division primarily drove this growth.
• Net Income: The company achieved a net income of $2.5 million. This represents a significant improvement from a net loss of $4.8 million in 2024, demonstrating the positive impact of its strategic divestiture and cost efficiencies.
• Earnings Per Share (EPS): Basic EPS reached $0.08 for the year.

Management's Discussion and Analysis (MD&A) Highlights

Fiscal year 2025 brought significant strategic realignment and operational improvements that profoundly shaped Castellum's financial performance and position.

Results of Operations: New contract wins in the core cybersecurity division primarily drove the 15% increase in revenue to $55 million (excluding the divested MFSI segment), reflecting strong demand for Castellum's specialized services. The company substantially improved its financial performance, moving from a net loss of $4.8 million in 2024 to a net income of $2.5 million in 2025. This turnaround directly resulted from the strategic divestiture of the MFSI segment and disciplined cost management initiatives implemented throughout the year. This strategic focus allowed Castellum to streamline operations and concentrate resources on its higher-margin, core cybersecurity and IT modernization services.

Liquidity and Capital Resources: Castellum significantly improved its financial position during 2025 through two pivotal actions. First, the strategic divestiture of MFSI for $18 million in cash on September 11, 2024, provided a substantial capital influx and allowed the company to shed a non-core asset. Second, to further strengthen its balance sheet and fund strategic initiatives, Castellum conducted two public offerings in March and June 2025, raising a combined $32 million by issuing new shares. As a result, the company ended the fiscal year with a robust $35 million in cash and cash equivalents, a significant increase from $10 million at the end of 2024.

As of December 31, 2025, Castellum maintained a $10 million revolving credit facility, with $3 million currently drawn. This facility offers flexible access to capital for working capital needs. The enhanced cash position and available credit facility provide Castellum with strong liquidity to manage operations, invest in growth, and navigate potential market fluctuations without immediate reliance on external financing.

Critical Accounting Policies and Estimates: Castellum prepares its financial statements following U.S. GAAP, which requires management to make estimates and judgments affecting reported asset, liability, revenue, and expense amounts. Key areas involving significant estimates typically include revenue recognition, valuation of goodwill and intangible assets, and stock-based compensation.

Market Trends & Regulatory Considerations: As an "emerging growth company," Castellum had the option to delay adopting certain new accounting standards. However, the company chose not to use this extended transition period, opting instead to adopt new accounting rules concurrently with larger, non-EGC companies. This decision signals a commitment to transparency and readiness for more rigorous financial reporting, aligning Castellum more quickly with established industry practices. The company continuously monitors evolving cybersecurity threats and regulatory requirements, which often drive demand for its services.

Risk Factors

Investing in Castellum, like any emerging growth company, involves specific risks:

• Reliance on Government Contracts: Government contracts generate a significant portion of Castellum's revenue. Changes in government spending priorities, budget cuts, or contract terminations could materially impact financial performance. The government contracting process also involves complex regulations and competitive bidding.
• Intense Competition: The cybersecurity and IT services market is highly competitive, featuring numerous established players and new entrants. Castellum faces pricing pressure and must continuously innovate to retain and win contracts.
• Talent Attraction and Retention: The specialized nature of Castellum's services demands highly skilled personnel with security clearances and specific technical expertise. An inability to attract, train, and retain qualified employees could hinder growth and operational efficiency.
• Future Capital Needs: While recent capital raises have bolstered liquidity, Castellum may require additional funding in the future to support aggressive growth strategies, potential acquisitions, or significant technology investments. Such needs could lead to further shareholder dilution.
• Cybersecurity Risks: As a cybersecurity services provider, Castellum itself remains a target for cyberattacks. A breach of its own systems or those of its clients could result in reputational damage, financial losses, and legal liabilities.

Competitive Position

Castellum differentiates itself through specialized expertise in niche cybersecurity areas and strong relationships within specific government sectors. Its strategy following the MFSI divestiture focuses on:

• Organic Growth: Expanding existing contracts and securing new business within its core cybersecurity and IT modernization segments by leveraging past performance and client relationships.
• Technology Investment: Investing in advanced tools, platforms, and methodologies to enhance service offerings and operational efficiency, staying ahead of evolving cyber threats.
• Strategic Partnerships: Collaborating with technology providers and other service firms to broaden capabilities and market reach, particularly in emerging technology areas.
• Talent Development: Building a highly skilled workforce through continuous training, certifications, and a strong company culture to meet evolving client demands and maintain a competitive edge.

Future Outlook

Castellum anticipates continued revenue growth in 2026, projecting an increase of 10-12%. A strong pipeline of potential contracts and ongoing demand for cybersecurity services across government and commercial sectors will drive this growth. The company plans to continue investing in research and development to maintain its competitive edge and explore opportunities for targeted acquisitions that align with its core strategy and expand its service offerings or market presence. Management believes the streamlined focus on cybersecurity and IT modernization positions the company for sustainable long-term growth.