Margin CompressionA large step‑down in net margin signals a material reset in profitability driven by higher fixed costs and transitional expenses. Recovery is expected over 3–5 years, meaning returns and cash generation remain constrained in the medium term until volume growth restores operating leverage.
Rising LeverageLeverage increased markedly versus prior years, weakening the balance sheet trend and reducing financial flexibility. Higher debt raises interest and refinancing sensitivity, limits downside protection during cyclicality, and constrains capital allocation until deleveraging resumes.
Negative Free Cash Flow & Capex CycleThe swing to negative FCF reflects heavy capex, facility transition costs and a working‑capital build, increasing near‑term funding needs. Continued elevated investment and inventory for A&D programs could keep cash absorption above earnings until program revenue ramps.