Amentum Holdings, Inc. (AMTM) Q3 2026 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by. Good morning and welcome to Amentum's Third Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, today's call is being recorded. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session, and instructions will be provided at that time. I would like to turn the call over to Joe DiNardi, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. We hope you've had an opportunity to read our earnings release, which we issued yesterday afternoon and is posted on our Investor Relations website. We've also provided presentation slides to facilitate today's call, so let's move to slide two. Please note that this morning's discussion will contain forward-looking statements that are subject to important factors that could cause actual results to differ materially from anticipated. I refer you to our SEC filings for a discussion of these factors, including the risk factor section of our annual report on Form 10-K. The statements represent our views as of today, and subsequent events may cause our views to change. We may elect to update the forward-looking statements at some point in the future, but specifically disclaim any obligation to do so, except as required by applicable law. In addition, we will discuss non-GAAP financial measures, which we believe provide useful information for investors. Both our earnings relief and supplemental presentation slides include reconciliation to the most comparable GAAP measures. We do not provide reconciliations of forward-looking, non-GAAP financial measures due to the inherent difficulty in forecasting and quantifying certain significant items. These non-GAAP financial measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP. Our safe harbor statement included on this slide should be incorporated as part of any transcript of this call. With me today to discuss our business and financial results are John Heller, Chief Executive Officer, and Travis Johnson, Chief Financial Officer. We are also joined by other members of management, including Steve Arnett, Chief Operating Officer. With that, moving to Slide 3, it's my pleasure to turn the call over to our CEO, John Heller.

And thank you, everyone, for joining us today. I'll begin with a discussion of our third quarter results and updated outlook, followed by a review of our business development performance and how we're executing our strategy to create long-term value. I'll then turn to a review of our core growth areas before closing with an update on recent key developments in nuclear energy, which provides substantial support in our strategy and transformational options. Now, let's turn to our third quarter performance. Although revenue came in slightly below our expectations, strong operating performance enabled higher than anticipated profitability and cash. Notable highlights include revenue of $3.5 billion, reflecting normalized growth of approximately 1%, adjusted EBITDA of $290 million with strong margins of 8.3%, adjusted diluted earnings per share, up 20% year-over-year, and free cash flow of 100, as Travis will discuss in greater detail. We are revising our fiscal year 26 guidance to reflect near-term revenue dynamics and to incorporate our strong year-to-date performance. Turning to slide four in our business development results, we delivered another quarter of solid net bookings of $3.9 billion resulted in a quarterly booked a bill of 1.1 times and trailing 12 months of 1.3 times, an ending backlog of $48 billion. Funded backlog increased 10% year-over-year to $6.2 billion. Our key reading indicators remain strong, with pending awards of $32 billion, including two-thirds new business to momentum, as well as $2 billion of new work already won under protest. We also remain on track to exceed our full-year submits target of $35 billion, of which more than half is new business. With that, let me highlight a few notable third-quarter awards. Starting in nuclear, we had bookings for multiple commercial customers that totaled over $400 million to provide solutions supporting the initial engineering, development, and design of advanced nuclear technologies. Second, we received $250 million in awards within our critical, including Key Wins supporting hyperscaler and additional tasking in commercial network infrastructure. Within national security, we were awarded over $1 billion to provide engineering, logistics, and modernization solutions to U.S. and international. And, in Space Systems and Technologies, we built two long-term NASA IDIQ awards, which were previously under protest, including COSMOS, which supported CMOE, engineering and modernization for advanced aeronautics development. Turning to slide five, we remain well positioned for long-term growth and are demonstrating clear as indicated by continued business development momentum across the portfolio, but particularly in key markets including global nuclear energy and critical digital infrastructure. While near-term growth is impacting by extended protest periods and certain instances of procurement delays, we believe that the underlying drivers of demand, including a well-supported Department of War budget outlook, clearly point to an eventual strengthening of revenue trends. As we indicated last quarter, we are working with NASA to implement the agency's workforce directive. This initiative looks to ensource certain elements of the workforce currently provided by industry with the intention of upgrading scientific and engineering expertise within the agency. Based on conversations with our customers at NASA in recent weeks and months, we now anticipate a 3% impact to revenue in fiscal year 27. This is higher than the potential impact we shared on our second quarter call as the scope of insourcing is now assumed to be at the upper bound of prior possible scenarios. Given the margin profile of this business, we expect the impact to adjusted EBITDA to be less than that to revenue, and therefore accretive to overall margins. In the interim, our focus is on mitigating the revenue impacts from NASA with strong program execution and continuing to grow the margin accretive areas of our portfolio at a faster rate. This approach and the resiliency of our business model will drive strong earnings and free cash flow growth, which we will deploy in a disciplined manner to further enhance long-term shareholder value. Now, let's turn to slide six. In prior quarters, I have focused on three accelerating growth markets, nuclear energy, digital, and space, which combined account for just over $4 billion in annual revenue. Today, I'll cover our core growth areas that are outlined on slide 7, which represents the remaining $10 billion of revenue. We operate in three primary markets, with the majority of revenue coming from national security, followed by environmental remediation and homeland security. Across all three, momentum benefits from deep customer relationships spanning several decades of past performance and credibility, we see alignment with key drivers of growth across the portfolio, including increased defense spending in the U.S. and among our key allies, securing the border and protecting the homeland, and providing solutions to management of legacy nuclear projects. Moving to slide 8, let me provide an update on the recent strategic progress we've made in nuclear, including key recent developments in program wins. As previously discussed, total nuclear revenue across momentum is $2 billion, of which approximately half a billion dollars is in our global nuclear energy accelerating growth market, where we provide solutions to design, develop, and program manage, new build nuclear capacity. Importantly, our rich legacy in the remediation market provides a level of expertise, customer access, and a deep talent pool, which enable the success we are having in global nuclear energy. We continue to see momentum as evidenced by a few key recent developments. First, our position as global delivery partner to Rolls-Royce continues to gain momentum as they were selected for small modular reactor deployments in Sweden and signed contracts to move forward on previously announced a win in Czech Republic. We continue to see a rich pipeline ahead and are proud to support Rolls-Royce in the deployment of nuclear capacity around the world. Second, we announced a strategic partnership with Westinghouse, under which Amentum will support engineering and commercial deployment of Westinghouse's APX platform, including its AP1000 gigawatt reactor and AP300 SMR. This expands upon Amentum's existing resting house from engineering support into a long-term strategic alliance covering wider nuclear technology opportunities. Amentum was selected by the Department of Energy to lead development of an AI data center and energy infrastructure project at the Savannah River site. Under this initiative, Amentum will lead a broad consortium to develop, design, build, and operate a multi-gigawatt nuclear facility and AI data centers. While the financial framework is still being negotiated between the consortium and the Department of Energy, we would expect the economics to a momentum to be generally consistent with a two-gigawatt nuclear project with revenue in excess of $1 billion over the life of the In addition, given our role as lead integrator, we expect to have options for economic interest in the eventual commercial operations of the facility, including the monetization of tokens from the data centers and electrons from the nuclear facility. This opportunity is a clear revenue synergy with our merger and could not have been won without the global reach capabilities. We are excited about the long-term potential of the program. As we show on the slide, our expectation for growth in global nuclear reflects a combination of key contracts and partnerships already secured, as well as opportunities in our pipeline that we are closely tracking in the coming quarters and years. It also reflects the revenue profile typical in this market where project scope for the first few years is on planning, design, and engineering, which yields low tens of millions of dollars in annual revenue before transitioning into construction while forecasting the exact timing of financial impacts on certain nuclear opportunities is difficult given the long-term nature of these projects. It is clear that Amentum will have a leading position as the U.S. invests to redevelop its nuclear energy capability as a national security priority and to ensure the country's leadership, intelligence, and critical energy availability. We believe that developments announced in the quarter and those in our pipeline are clear evidence that Amentum will play a key role enabling the deployment of nuclear energy capacity in the U.S. and globally. In summary, while we recognize near-term revenue trends are below our prior expectations, our strategic progress and continued business development momentum reinforce our confidence in the long-term trajectory of the business. We remain focused on delivering profitable growth, strong cash flow, and continued value creation for our shareholders. With that, I'll now turn the call over to Travis. Thank you, John, and good morning, everyone.

I'll now discuss Amitim's third-quarter financial results, which demonstrate continued strong operational performance, improving profitability, and solid cash generation. I'll also review our capital structure highlights, as well as our updated fiscal year 26 guidance and preliminary expectations for fiscal year 27. With that, let's begin with an overview of our financial performance on slide 9. As John mentioned, third-quarter revenue totaled $3.5 billion and came in slightly below our expectations as a result of the impact from process delays and low-margin materialized year-over-year growth of 1% was driven by the ramp-up of new contract awards and on-contract growth, which more than offset the expected continued wind-down of certain legacy programs. Adjusted EBITDA increased to $290 million, up 6% from the prior year quarter, and reflects record quarterly adjusted EBITDA margins of 8.3%, a 60 basis point year-over-year increase. The strong margin performance was enabled by continued progress on a margin expansion strategy, including a favorable mix shift and strong operational performance. Adjusted diluted earnings per share of $0.67 increased 20% year-over-year, reflecting continued strong operational performance as well as lower interest expense from almost $700 million in debt repayments over the last 12 months and a lower cost of debt and able buyers' successful refinancing in April. Moving to our reportable segment results on slide 10, digital solutions delivered revenue to $1.5 billion, representing 3% growth, driven by the continued ramp-up of new contract awards in our digital infrastructure and space markets. Adjusted EBITDA increased to $116 million due to the higher revenue volume, resulting in adjusted EBITDA margins of 8%, consistent with the prior year and up 80 basis points from the second quarter. Turning to global engineering solutions, revenue was $2 billion, reflecting impacts from JV transition and divestiture, and the expected, all of which were partially offset by contributions from new contract awards and on-contract growth. Adjusted EBITDA of $174 million benefited from 110 basis points and adjusted EBITDA margins to 8.6%. This strong performance in the quarter was driven by a continued focus on higher margin growth opportunities, favorable contract mix, and disciplined program execution. This performance enabled debt repayments of $125 million during the quarter and reduced our net leverage to three times at quarter end, reaching an important milestone we've bet a capital market today one quarter earlier than expected. We remain on track to achieve net leverage less than three times in the fourth quarter, which positions us well to be more flexible and opportunistic with capital deployment, and our approach will remain focused on allocating capital towards the highest long-term return. We are updating our fiscal year 26 guidance. We now expect revenue between $13.8 and $13.95 billion, which removes contributions from new business awards under process and our latest expectations on material and non-labor volume. The midpoint reflects normalized revenue growth of approximately 2% in the fourth quarter, which is consistent with our performance year-to-date after adjusting for the impact of the government shutdown in Q1. As a result of our strong year-to-date performance, we are raising our outlook for adjusted EBITDA to $1.14 billion, reflecting adjusted EBITDA margins of 8.1% at the midpoint, a 20 basis point improvement from our prior guidance, and a 40 basis point increase from fiscal year 25 actual. We're also increasing guidance for adjusted diluted earnings per share to a range of $2.40 to $2.50, giving the strong year-to-date operational performance and interest expense benefits from our debt refinancing. And finally, we are maintaining our free cash flow guidance between $525 and $575 million from seasonally strong collections and one fewer pay cycle relative to the prior year quarter. To slide 13, to discuss our preliminary return opportunities, we have made an intentional decision to exit a few no-to-low margin programs, notably in domestic-based operations, that total approximately 1% of revenue. At the same time, given our continuing business development momentum, we expect mid-single-digit growth in the remaining portfolio, more than offsetting the impacts from NASA and the exit of low-margin work. Looking at adjusted EBITDA, given the relative profile of our NASA portfolio, we expect the impact will be accreted to overall margins. After taking into consideration some investments we are making to drive long-term growth, particularly in nuclear and digital infrastructure, as well as a favorable makeshift and other operational improvements, we expect a 20 basis point year-over-year increase in margins. Given our strong execution to date and further benefits of MIX, as higher margin areas of our portfolio continue to grow faster, I'm confident in our ability to draw sustained margin improvements in the years ahead. That continued strong earnings per share and free cash flow growth as a result of the increased profitability and reductions to both integration and engagement. In closing, our focus as a management team remains on execution, prudent investments to support long-term growth in our strongest markets and deploying capital to maximize long-term return on investment. We have conviction that our ability to deliver on these areas of focus will translate over time into significant value for a shareholder.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Toby Sommer with Truist. Toby, your line is open. Please go ahead.

I wanted to start out, if I could, looking forward as your commitment to delever to a reasonable range comes to a conclusion, how are you planning to deploy your capital as you look into the following fiscal year?

Hey, Tony. Travis here. Well, thanks for your question. Obviously, we're pleased with the progress we've been able to make to date as it relates to our deleveraging objectives. The cash flow performance in the quarter allowed us to get to net leverage of three times at the end of the quarter, which, as you know, is one quarter earlier than we expected when we set that goal back at a capital market space. So, really pleased with the progress. As you can imagine, we've been preparing in recent months to be ready as our capital opportunities broaden for deployment. And that obviously includes working internally and with our board on the various strategic options, including M&A, share repurchases, and continued debt reduction. So in terms of how we deploy the capital, I've stated in our prepared remarks, it should and will be determined based on what presents the best long-term return for a minimum of our shareholders. So that obviously requires we be realistic and disciplined about both, you know, a minimum risk and opportunities, but also about those of the companies we would look to potentially acquire from an M&A perspective. I think also should require that we take, you know, a responsive look at where stock price and valuation are and taking a look at things like intrinsic value and making sure that we're obviously taking that into consideration as we make those decisions. So, as appropriate and as we move throughout the year, we'll continue to keep you guys updated. So, just keep in mind our approach will focus on maximizing free cash flow per share and driving long-term shareholder value.

And what I would add to that, Toby, it's John. Thanks for the call. We're making great progress across our portfolio from a business development standpoint. The numbers we talked about today, the volume of bids, our success in nuclear energy, and the partnerships we're getting, all organic. So I think what we're showing is the enterprise of momentum has the ability to go to market in our core growth areas today with the organic investments we're making and does not require transformational M&A. That doesn't say that M&A couldn't be part of our strategy, But I think the point would be that we're very comfortable with the capabilities we have to compete and win in areas that can drive higher margin and growth. Thank you.

And I was wondering if you could – it might be early, I know, but you gave a preliminary look at fiscal – the next fiscal year.

Do you think – do you expect top-line organic growth in the fiscal year after that? And I know it's far away, so not an official guide or anything like that complete, but any kind of color you could provide would be helpful. Yeah, so as you can appreciate, a fair bit has changed over the last 24 months, especially as it relates to dynamics that are impacting our near-term revenue situation, obviously, as we covered in the prepared remarks, NASA headed into next year, which, as you would expect, we hadn't originally contemplated. But at the same time, you know, our performance this year, I think, demonstrates our ability to mitigate the impact of lower revenue on, you know, both EBITDA and pre-cash flow, and the preliminary outlook we provided for 27 has that trend continuing. And then directly at your question, looking ahead, as John really highlighted in his prepared remarks and obviously in response to your prior question, we're really pleased with the business development momentum, and, you know, we continue to see attractive opportunities across the portfolio with particular momentum in nuclear energy and critical digital infrastructure. And at the same time, we're also making progress across our technology-enabled businesses where our differentiated capabilities across engineering, digital space, national security, we see really aligning well with emerging customer priorities and long-term investment. So, you know, all together, when you look at the portfolio next year, you know, aside from, you know, the impact we're seeing from NASA, it's growing at that mid-single-digit rate. And, you know, we're really excited about the trajectory and what that means for a mid-term in the medium and long-term.

And we're really just keeping our heads down on our strategy, and it's working. The combination of business development momentum, we're seeing margin expansion. We're generating very strong free cash flow. If you look at LTM book-to-bill 1.3 this past quarter, 1.1 book-to-bill. We said we were going to bid over $35 billion this year. We've already done that, which means even with several months to go in the year, we've already exceeded what we did last year. So the things that are happening in the strategy and the tactical execution of the team is working, and we feel very comfortable on how we're managing the business and where it's going to go from here.

Your next question comes from the line of Seth Seichman with J.P. Morgan. Seth, your line is open. Please go ahead.

Good morning. This is Rocco on for Seth. Kind of building on the second question there, looking at the preliminary color on 2027, how should we think about the split between DS and GES? GES has seen some not great growth in 2026 so far, while DS has posted strong growth, even with the RAP solutions divestiture. Should we be expecting that trend to continue next year?

Good morning. Obviously, you know, it's a little bit early to get into any segment-specific guidance, But what I would say at a macro level is, you know, from an underlying perspective, obviously NASA, which is in our digital solutions segment, will put some pressure on the growth in that segment. But setting that aside, we do see we're getting growth opportunities across both segments for next year, as well as even a margin expansion opportunities across both segments.

Great. And then how should we be thinking about Amentum's involvement in U.S. allied nuclear power programs? For example, the recorded agreement with Saudi Arabia. Would this be an opportunity for Amentum, and are there any other kind of big international opportunities to call out here?

Well, we have a strong pipeline of opportunities that we're working globally. We certainly see opportunities in countries like Saudi Arabia as open to Amentum with our brand, global brand. We definitely get inbounds and understand where growth is going to happen in the near term. And we are very active. Obviously, we've been involved in 17 nuclear power plant construction projects in the U.K. We have a great brand in Europe working in various countries across Europe now with our Rolls-Royce partnership. So we're very well established in the European continent in the nuclear energy space. and we would see and are tracking opportunities globally in our pipeline that could provide opportunities for growth in the near term.

Your next question comes from the line of Colin Canfield with Cantor Fitzgerald. Colin, your line is open. Please go ahead.

Hey, thanks for the question. For 27 growth outlook or preliminary growth outlook, Can you just talk about how much of that revenue outlook is covered by both your backlog today as well as your expected pending awards over, call it, the next six to 12 months? And then if – I know you didn't want to go into segment detail, but maybe talk about, like, just the level of on-contract growth that you're assuming as part of that number.

Hey, good morning, Colin. So, you know, this is a few months earlier, obviously, than we provide outlooks, you know, in the prior years. But what I would say from, you know, how we see the year shaping up from a sources of revenue perspective, as we sit here today, we expect approximately 92% of the revenue in FY27 to come from existing or follow-on work. So that's a really good place to be in terms of a level of visibility this early, right? So, you know, FY26 isn't over yet, right? So we've still got a few months to go in terms of the $32 billion of pending awards that John mentioned and seeing how those get adjudicated in the coming months will obviously have an impact on FY27. Books are really good about the visibility we have as we sit here today and we'll continue to keep you updated as we move throughout the year. Got it.

We did mention that there have been factors that have impacted the revenue, Like the current fixed-price executive order, that has created kind of a slowdown, a reconsideration of some new business. So we've seen some new business delays, award delays because of that, which we deem is very positive. The opportunity to do more fixed-price work, and we are seeing that shift happen in real time, so it slows the process down. And then, of course, we've had a significant number of protests on new business, new new business, that new business. So those type of things will work their way out over the next year that the executive order for a firm fixed price has to be implemented by the government by the middle, this time next year. So we still have some time for that to continue to play out, but overall I think it will be real positive for the profitability of the business.

Got it. And then maybe if we could talk about portfolio shaping. Travis, if you may be characterized kind of where you're at in terms of selling additional pieces and delivering faster and how you think about kind of the sizing of those pieces. Thank you.

I think there's an inherent portfolio shaping going on in what's happening organically in the business right now. I mean, some of our current contracts we're seeing increments or sub-elements of the contract effort, you know, shift, as John mentioned, to higher margins. some, you know, fixed price types of elements, and a lot of that's coming through some of the IDIQ mechanisms in our existing contracts. I would say even if you look at the trends in our current business development activities, really across the portfolio we've begun to see an incremental shift towards, you know, OTAs, other transactional authorities, and commercial service offering type procurements, and our team's been very responsive to that. So I think even without some kind of inorganic-type activity organically, that shift is happening. And as John mentioned, it's coming through in the contract mix as we see more and more of the portfolio migrate towards fixed price. So there is kind of this steady trend of organic portfolio optimization happening.

Yeah, and I think Travis mentioned this. You know, a lot's changed in the last 24 months. And if you think of FY25, that was a year of integration. and our business development pipeline was pretty much already set before the merger. But we've had now almost two years to really work with the combined enterprise that the new momentum represents, which has opened the doors to a lot of our technology-enabled opportunities that have allowed us to shift our focus in our pipeline from lower margin, say, managed services type work to technology-enabled work, and we're prioritizing that, and it's starting, you know, to – it's going to take time. We'll see a little bit of that this year, but as we think about 27 and 28, and we'll see that shift to more fixed price, more T&M, less cost plus, more technology-enabled solutions, all driving towards, you know, higher margins. In some cases, you know, fewer product buys, which are just part of the contracts we do, which does impact kind of revenue in the short term. But I think in the long term, we're excited about where that growth will come from.

Your next question comes from the line of Gavin Parsons with UBS. Gavin, your line is open. Please go ahead.

I just wanted to dig into the backlog, kind of visibility to revenue conversion, right? Nice growth in funded, nice growth in total. I mean, how do I reconcile that with the 0% to 1% growth next year? I mean, is that massive that just needs to come out and otherwise, you know, kind of 10% funded backlog growth gives you pretty good visibility to mid-single digits? Or how do I think about backlog converting to revenue?

Yeah, so as we've talked about before, you're always going to see some kind of quarter-to-quarter fluctuations in terms of both funded and unfunded backlog. But at a high level, you know, we're really pleased with, as John mentioned, in the business development performance and getting to that kind of $40 billion in backlog. And as you noted, you know, funded backlog is up 10% year over year. We've always said kind of, you know, despite the kind of fluctuations you can see from quarter to quarter on that, you know, we feel comfortable in that $5 to $6 to $7 billion worth of funded backlog range, providing, you know, the right visibility we need to achieve, you know, our revenue objectives. and we really haven't seen any notable changes in the conversion of unfunded and defunded, so we feel good about the eventual conversion of bookings into revenue as we set up for next year. And as I mentioned earlier, we've got 92% of our revenue visibility next year and from our follow-on work.

Then could you spend a little bit more time on what changed at NASA now that you're assuming kind of the high end of the range of revenue being insourced and just remind us your total NASA exposure and how we get confidence that that doesn't expand more than to the 3%.

Maybe I'll just back up and level set quickly and kind of get to the specifics of your question. But as John mentioned, NASA is, you know, taking this initiative to bolster the scientific engineering expertise as they think about a bigger mission set, more bold mission set into the future, you know, programs like Moon to Mars and all of that. And so, as you side, our initial view, based on preliminary input from the client, was like a 1% impact. And we talked about that last time. But since then, NASA has solidified their plan, and we've been able to sit with our NASA customer. I mean, center by center, individual contract by contract. So, we now, you know, NASA's firmed up their plan. They shared the plan with us, and we have a detailed view on that. You're correct. In fact, the end sourcing goes to the upper bound of what we originally thought could possibly occur, but now that we understand and kind of summing up the impacts, we have good visibility on the 3% impact, and we're confident in that estimate. Just to better characterize, we don't have all the contract actions in hand. Some contract mods right now are in negotiation and progress, and that has actually moved out on beginning to hire employees, so this transition's underway and we have a good I would just offer two other quick points that I think are important. It was mentioned in John's remarks, but the impact of contracts, they are margin dilutive to Amentum, so the EBITDA impact will certainly be less than the revenue. And it's also true that some of the remaining work on our contracts will transition to perfect price consistent with the Trump administration's executive order. And so this, too, will incrementally lessen the EBITDA impact. And the second point I would mention, kind of thinking longer term, you know, just as the CMOE2 and the Cosmos Awards this quarter highlight, Amintum remains a trusted partner. And so we're navigating this strategic reset that NASA's executing, knowing that, you know, a strong agency is good for the nation and world, and we expect there will be future growth opportunities. Our larger contracts remain in place, so they offer, you know, IEIQ mechanisms that will allow NASA to mobilize them in them as these big missions come into reality. So we absolutely see continuing opportunity in the mid to longer term.

Your next question comes from the line of Greg Parrish with Morgan Stanley. Greg, your line is open. Please go ahead.

I want to do a quick thing through the revenue guide for 2026, specifically the business delays. Hey, good morning. I think you called out a few things, right, protests and procurement delays, a little bit on the executive order. to maybe – maybe if you just maybe unpack some of those items a little bit more. Are they particular markets? And is that something you expect to return to a normal cadence in 27, or could it also be a headwind early next year?

Sure. Yeah, so you – I think you covered well the dynamics that we're seeing as we look to close out fiscal year 26. You know, roughly, you know, $175 million from new business delays, It's notably around the new business that we've won that is under protest that is spread across the portfolio with a handful of opportunities that's not kind of concentrated in one particular area or another. And just the timing that it's taking to get those through the process, including some that are in corrective action, you know, just having that impact on the year. And then, you know, materials and non-labor volume, obviously somewhat a little bit harder to control and predict in terms of when things are delivered or procured. So those are the dynamics that are driving FY26. I would say that as we look into Q4, you know, we're expecting growth. It's really consistent with what we've done from a year-to-date perspective, which is 2% at the midpoint. Again, consistent with our year-to-date performance, excluding the shutdown impact in Q1. And also Q4 seasonally, you know, our highest revenue generating quarter. So the 26% contribution for the full year that you see there is consistent with historical trends. And then 99% of it is from or far on. So we feel really good about the Q4 guide. Second part of your question headed into the 27th. As we put those preliminary expectations out there for 27th, we've contemplated, you know, our latest thinking and views and what we're seeing in terms of the award environment, in terms of what we're seeing and how long it takes to get through protest or corrective action. So I think we've factored that in in an appropriate way in how we see 27 playing out.

Thanks for that. And maybe just zooming back a little bit, like what needs to happen to kind of bring this all together, right? You've had a ton of success commercially, great bookings trends, you're in great markets, but things like just sort of little unique items that have been working against you. In your view, sort of what needs to happen to get you towards your mid-tinkled-digit potential?

Yeah, we've talked a lot about nuclear. I think we have seen consistent success there over the past two years. We feel really good about the outlook of our pipeline and the opportunities. But I think seeing those mature over the next couple of years to be funded into construction, and then you see a very significant ramp up, and we provided that slide in the presentation. that provides some flavor of what we're seeing in terms of the volume of opportunities. And the Savannah River AI Data Center nuclear power project is a great example. This is going to be a decades-long project, but it represents a very significant opportunity for Amentum and our partners. And we will see progress made that we can articulate milestone achievements. First thing is to get the lease negotiated with the U.S. government and put our business plan together, and we'll be able to talk to that and these milestones as they're achieved. But a project like that is going to take years to see matriculate into something that really impacts the business. And so I think the one thing that I would be looking for is just continued progress in the U.S. nuclear industry and other global opportunities that we're tracking around the Rolls-Royce Partnership, the Westinghouse Partnership, where we can see more projects awarded and brought online into the future.

Your next question comes from the line of Trevor Walsh with Citizens. Trevor, your line is open. Please go ahead. Good morning, everyone. Thanks for taking my questions.

Maybe just a couple higher level, more macro for both the digital infrastructure and the nuclear opportunities. Love your opinion or thoughts on this, Steve, but great to see the digital infrastructure wins overall that you announced in the quarter. Is there a way for you all to just lean into that a little bit more, whether it's by, you know, resource allocation, et cetera, or is the opportunity set there particular to you and what you guys can deliver, just a finite or a more, you know, defined set of opportunities, and it is what it is. So I just would like to start there if we could.

Sure. Great question. Very timely, actually. I mean, we are really excited about the continued accelerating progress in the critical digital infrastructure space. The team continues to focus on that. I would say that, you know, as a practical matter, we have a great track record of being able to find entree with a client, demonstrate significant value add, and then scale with a client. And so we're right now, if you think about kind of the data center world specific and the hyperscalers, we're kind of moving to scale with a client. We've kind of found entree with a second and also making approaches with one or two others where we're getting started. So we really do feel like we're kind of at that attractive part of the curve where we're beginning to, you know, launch into an opportunity to scale. And I think the reason that's happening and the reason that we're able to demonstrate value is, you know, there's so much volume of project activity happening so quickly, lots of projects happen simultaneously, and the industry is still trying to figure out how do I engineer, how do I construct, how do I integrate these complex facilities. And I think we've been able to bring a little bit of an improved solution to that, where engineering with systems integration, being able to stitch all that together in a way that, you know, optimizes schedule and minimizes delivery risk for the project. And so there's just a real receptive market there. So we absolutely see the continued opportunity to scale. And to your point about resource allocation, we are incrementally biasing resources there. We continue to make key strategic hires to bolster not only the business development, but also the project leadership part of that team. So really excited about the quarters to come for critical.

Awesome. Thanks for the call, Steve. That's great. Maybe just one quick follow-up, and, John, it may be best for you. Appreciate the perspective around the kind of anticipated growth rates for the nuclear energy revenue opportunity. And I understand kind of the dynamics of these deals and these contracts just generally where, you know, in the planning stages, revenues may be, you know, kind of a little bit, you know, smaller scale or slower to develop. And then as the project really kicks off, it kind of in the back years is when you really see the top line impact. Are there any other, other than that just natural progression, are there any other milestones either from a regulatory standpoint or anything else that we should be mindful of to get to that 20-25% in the out years type of, you know, look that you kind of have contemplated in the slide?

Yeah, I think if you look at Europe, we're having great success and we have great history and we're involved in, you know, a whole host of projects and we see other opportunities. I think the real question mark and that we are starting to see some progress with the Savannah River announcement would be, I think, a tremendous milestone, but that is progress in the United States. That if you look at the last 30 years, very little new build activity. I think this administration is very much focused on the need for additional electricity to power the AI economy and that it's a national security issue. So this administration is very supportive. I think the hyperscalers fully understand that if they're going to get the ability to build the data centers they need to sustain their businesses, they need additional electricity. So I think there are two things. One that's driving it is the Trump administration's desire for 10 more gigawatt plants under construction by 2030. I think they are absolutely focused on that to make that happen. So that's going to be a key milestone. The Savannah River Project is one of those engagements that can get two or more of those 10 under construction by 2030. And there are others that are being contemplated by the U.S. government in partnership with other companies, including Momentum. I think the other thing is just the overall SMR market with a whole host of OEMs, including Westinghouse and, of course, Rolls-Royce, where we're working with. But there are other OEMs that are putting tremendous investment, and the U.S. government is supporting those companies because the need for alternatives to larger gigawatt plants and having smaller, say, between 100 to 400 megawatt opportunities to build and maybe in a faster way and a bit more flexibility in communities across the United States. So as we see continued progress and start to see some additional SMR projects greenlit, that will point to a real window of opportunity for our business to really accelerate.

Your next question comes from the line of Mete Roberts with RBC Capital Markets. Mete, your line is open. Please go ahead.

Was this maybe for Ken Herbert with RBC?

Hey, Ken.

Yeah. Hey, good morning. I just wanted to follow up on the, you know, you've got, you know, basically 50% of your revenues within the national security business. Maybe you can comment on how you're thinking about this business within sort of a focus within the core business. I can appreciate a lot of growth opportunities. As we think about this business, which does appear to be a bit of an anchor on sort of sentiment on the overall business, should this just naturally continue to mix down as you see better growth in other areas, or is there a real maybe sort of unlock on either revenues or margins within the national security business in particular that could help sort of the underlying core outlook?

Thanks for the question. I think that if you look at today at the portfolio, it's actually shifted just incrementally less, but, yeah, approaching 50% of the portfolio and kind of national security, of course, that does – there's some diversification even within that because all of the U.S. though we have a strong presence both in the U.K. and Australia, so there's some nice diversification there as well. We absolutely would not characterize that as an anchor. I mean, I think there are large parts of the portfolio that are really going through some pretty exciting transformations. Some is organic, kind of driving more technology solutions into the missions we drive and support. And, you know, our teams are kind of getting used to, and I think it holds for the whole sector, our teams are kind of operating in a mode of transforming the mission while we execute the mission. And, you know, we're very much engaged in enduring no-fail missions, but the continuous integration of, you know, digital AI approaches to be able to more quickly integrate technologies, to deal with evolving threat environments. That is the norm now for our business. As we think about it, even our national security work, as we execute in that manner, we have opportunities now driven by, you know, the catalyst of the EO from the Trump administration to shift more of our work out of this kind of cost plus by the hour into a solution base, whether it be as a service or just a fixed price enterprise solution. So there is absolutely kind of an organic transformation of that part of the momentum portfolio and national security happening as we go.

Okay. Maybe just to put a finer point on it, is it realistic to think that as we continue to see growth in broader defense spending that that part of the portfolio could get to mid-single-digit growth, or that might be a little ambitious?

Yes, I think as we view it today, Ken, you know, certainly our base case is not to see any, you know, significant impact to the budgets and impact momentum from what we're hearing in terms of the overall defense spending. If that were to occur, it would certainly be a tailwind to how we're viewing that part of the portfolio. And we do think, as I said earlier, that, you know, a lot of the things we're doing and the capabilities that we have are directly aligned with what this administration is trying to accomplish. So, obviously, we're excited about that. At the same time, we do see probably higher growth opportunities in our accelerating growth markets, as John talked about energy, as Steve talked about critical digital infrastructure. So I think our expectation naturally over time is that this will make up a larger percentage of the portfolio. But as Steve said, that's not to say that we don't see growth opportunities across our core, including in national security.

And, Ken, we really love this question because it gets to kind of the strategy. And I think this touches on one of the real differentiators in Strengths of Momentum, and that is our global presence. And that Momentum is a true global company, if you think about the peer set. We have 7,000 employees in the U.K. When you look all across Europe, Australia is a huge presence for us. Australia announced that they're moving ahead with infrastructure projects for the upcoming nuclear infrastructure that they're going to have with, you know, nuclear subs. Momentum's going to be a part of that. I mean, our position in Australia, our position in the UK, our position across Europe on a defense standpoint. So when we think of defense, and you asked that question, we're thinking globally. And we, of course, we're not trying to be in every country in the world. We have a great presence in the U.K. We have a great presence in Australia, certainly those two markets. And we feel really good about the growth prospects there, as well as being one of the leaders in the U.S., which has the largest budget. So, of course, we're going to be focused there. But we like the broader opportunities that exist in that defense market.

As a reminder, if you would like to ask a question and join the queue, please press star 1 to raise your hand. Your next question comes from the line of Andre Madrid with the U.S. Bancorp BTIG. Andre, your line is open. Please go ahead.

Good morning. I was wondering if you can comment on what specific budget scenarios are contemplated in the 2017 preliminary outlook. I know you kind of touched on it slightly there, but I wanted to hit on it a bit more pointedly.

Yeah, so our base case is, I'll say, stable budget environments, and obviously we're headed toward what's likely to be a continuing resolution, at least through the better part of our first quarter, so we've contemplated what that could look like. So I'd say, especially within kind of the range of outcomes that we anticipate, hey, we factored in, you know, a relatively consistent budget.

Got it. And then on the exiting of low to no margin work, I think you mentioned that this is, you know, base off-to-off related. I wanted to clarify, though, is this decision in part impacted by the current global threat environment at all? Is this something we're seeing across some peers? Or is it just purely based on the margin profile?

Yeah, it is not related at all to the global threat environment. It's domestic here. And as we talk about, you know, allocating resources towards higher growth, higher margin opportunities is something that we're focused on. So this is isolated to just a few low-to-no-margin kind of base operations programs here in the U.S. And, you know, as we said, they represent about 1% of revenue. So really just an intentional decision on where we're prioritizing our resources for the highest return opportunities.

There are no further questions at this time. This concludes Kanae's call. Thank you for attending. You may now disconnect.