...ADS Tactical, Inc.'s (ADS) ratings reflect its position as the largest small business supplier to the U.S. Department of Defense, with an estimated 75% market share on the $33 billion Special Operation Equipment Tailored Logistic Support (SOE TLS) contract. The ratings are also supported by ADS's strong order backlog (>1x revenue as of September 2023), which provides revenue and EBITDA visibility for the next one-year plus, as well as its value-added, salesforce-focused, commercial off-the-shelf procurement model. Management is also taking organic and inorganic steps to further diversify its revenue mix and enhance its solutions-linked platform exposure. Fitch Ratings views ADS's diversification, market position, profitability, financial structure (forecast 3.5x EBITDA leverage) and financial flexibility as generally consistent with high 'B' rating tolerances. This includes forecast EBITDA interest coverage of around 3.0x and negative FCF margins linked to working-capital growth....
