Key Highlights

  • Adjusted EPS of USD 1.11 topped the USD 1.02 consensus estimate but fell from USD 1.31 a year earlier.
  • Revenue rose 2% to USD 1.03 billion, with Commercial at USD 719.9 million and Federal Government at USD 311.5 million.
  • Gross margin narrowed 110 basis points to 28.3% while adjusted EBITDA margin reached 10.3%, the top of the guided range.
  • Debt dropped USD 52.8 million in the quarter, and a new five-year USD 600 million revolver was put in place.

Everforth, Inc. (NYSE:EFOR) reported third-quarter 2026 adjusted earnings per diluted share of USD 1.11, a non-GAAP measure, above a consensus estimate of USD 1.02 and below the USD 1.31 posted a year earlier. On a GAAP basis, diluted EPS was USD 0.56 against USD 0.87, and net income declined to USD 23.1 million from USD 38.1 million. Revenue of USD 1,031.4 million, or USD 1.03 billion, was above a consensus estimate of USD 1.01 billion and up from USD 1,011.4 million in the prior-year quarter.

Adjusted EBITDA came to USD 106.3 million, compared with USD 112.6 million a year earlier, and the margin eased to 10.3% from 11.1%. Chief executive Ted Hanson said revenue and adjusted EBITDA both cleared the top of the company's guidance, and he linked demand to AI and data, cybersecurity, cloud and IT modernization work.

Segment Mix and Margin Pressure

The Commercial segment generated USD 719.9 million, up 1.2%, and carried a gross margin of 31.9%, down 130 basis points. The company cited fewer high-margin permanent placements, currency effects tied to its Mexico delivery center, and faster growth in lower-margin cloud and infrastructure services. Technology, media and telecom revenue rose USD 20.0 million, or 14.6%, and business services added USD 5.6 million, or 7.2%, while the other three industries declined.

The Federal Government segment contributed USD 311.5 million, up 3.8%, with gross margin of 19.8%, down 50 basis points on a larger share of cost-reimbursable contracts. Consolidated selling, general and administrative expenses were USD 217.7 million versus USD 212.2 million, including USD 8.3 million of acquisition, integration and strategic planning costs against USD 4.2 million a year earlier. Operating income was USD 56.6 million, down from USD 67.9 million.

Fourth-Quarter Guidance and Deleveraging

For the fourth quarter, the company guided to revenue of USD 965.0 million to USD 995.0 million, net income of USD 17.9 million to USD 25.5 million, and diluted EPS of USD 0.43 to USD 0.62. Adjusted EBITDA is projected at USD 93.0 million to USD 103.0 million, a margin of 9.6% to 10.4%, with adjusted EPS of USD 0.95 to USD 1.11. The quarter has 61 billable days, three fewer than the third quarter, and the guidance assumes no deterioration in the markets served.

Operating cash flow was USD 58.7 million and free cash flow was USD 46.5 million, roughly 44% of adjusted EBITDA, against a full-year conversion target of 60% to 65%. Cash stood at USD 147.5 million, about USD 227.0 million was available under the revolver, and no shares were repurchased, leaving roughly USD 923 million of authorization. The company's chief financial officer put net leverage at 3.1 times and said management targets 2.5 times or below.

Key Readings Ahead

Four items frame the next report. The first is revenue against the USD 965.0 million to USD 995.0 million range, versus USD 1,031.4 million in the third quarter. The second is adjusted EBITDA margin against the 9.6% to 10.4% range, with the third quarter at 10.3%. The third is bookings: federal awards were USD 1.0 billion over the trailing twelve months at a book-to-bill of 0.9 to 1, while commercial IT consulting book-to-bill was 1.1 to 1. The fourth is net leverage of 3.1 times against the 2.5 times target, alongside the USD 541.0 million of 4.625% notes due 2028 and a Term Loan B balance of USD 485.0 million.