Amentum Q3 FY2026 Earnings Call - Margins Expand as Nuclear Strategy Gains Traction Despite Near-Term Revenue Headwinds

Operator: 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, 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 Joseph DeNardi, Senior Vice President of Investor Relations. Please go ahead.

Joseph DeNardi, Senior Vice President of Investor Relations, Amentum: 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 have also provided presentation slides to facilitate today’s call, so let’s move to slide 2. 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 Factors 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 release and supplemental presentation slides include reconciliations 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 Arnette, Chief Operating Officer.

With that, moving to slide 3, it’s my pleasure to turn the call over to our CEO, John Heller.

John Heller, Chief Executive Officer, Amentum: Thank you, Joe, and thank you everyone for joining us today. I will begin with a discussion of our third quarter results and updated outlook, followed by a review of our business development performance and how we are executing our strategy to create long-term value. I will then turn to a review of our core growth areas before closing with an update on recent key developments in nuclear energy, which provides substantive proof points supporting our strategy and transformational opportunity in this market. Now, let us 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 of $0.67, up 20% year-over-year, and free cash flow of $135 million.

As Travis will discuss in greater detail, we are revising our fiscal year 2026 guidance to reflect near-term revenue dynamics and to incorporate our strong year-to-date performance that increases our expectations for adjusted EBITDA and adjusted diluted earnings per share. Turning to slide 4 in our business development results, we delivered another quarter of solid execution. Net bookings of $3.9 billion resulted in a quarterly book-to-bill of 1.1x and trailing 12 months of 1.3x, an ending backlog of $48 billion. Funded backlog increased 10% year-over-year to $6.2 billion. Our key leading indicators remain strong with pending awards of $32 billion, including two-thirds new business to Amentum, 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 from 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 across several contracts within our critical digital infrastructure market, including key wins supporting hyperscaler data center build-outs 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 defense customers. In space systems and technologies, we booked two long-term NASA IDIQ awards, which were previously under protest, including COSMOS, which supports flight mission operations, and CMOE, where Amentum provides research, engineering, and modernization for advanced aeronautics development. Turning to slide 5.

We remain well-positioned for long-term growth and are demonstrating clear and tangible progress 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 in certain instances of procurement delays, we believe that the underlying drivers of demand, including a well-supported Department of Defense 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 insource 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 2027.

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 in 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 6.

In prior quarters, I have focused on three accelerating growth markets: nuclear energy, Digital Solutions, 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, Amentum benefits from deep customer relationships spanning several decades of past performance and credibility supporting critical customer missions. 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 support the U.S. and international customers 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 and program wins. As previously discussed, total nuclear revenue across Amentum 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 across the globe. 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 awards in the U.K. and 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 strategic relationship with Westinghouse from engineering support into a long-term strategic alliance covering wider nuclear technology opportunities. Lastly, 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 Amentum to be generally consistent with a 2-gigawatt nuclear project with revenue in excess of $1 billion over the life of the project. 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 in clear revenue synergy with our merger and could not have been won without the global reach, capabilities, and customer access of the combined entity.

We are excited about the long-term potential of the program, but also the short-term synergies it contributes to our broader nuclear strategy. 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 with expected progress in the coming quarters and years. It also reflects the revenue profile typical in this market, where project scope focused in 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 with annual revenue several multiples higher.

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 in the deployment of artificial intelligence and critical energy availability. We believe the 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.

Travis Johnson, Chief Financial Officer, Amentum: Thank you, John, and good morning, everyone. I will now discuss Amentum’s third quarter financial results, which demonstrate continued strong operational performance, improving profitability, and solid cash generation. I will also review our capital structure highlights, as well as our updated fiscal year 2026 guidance and preliminary expectations for fiscal year 2027. 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 protest delays and low-margin material volume. Normalized 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 our 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 enabled by our successful refinancing in April. Moving to our reportable segment results on slide 10. Digital Solutions delivered revenue of $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 transitions, a divestiture, and the expected ramp down of certain historical programs. 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 year-over-year increase in 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. Now turning to slide 11 to cover our cash flow and capital structure highlights.

Free cash flow in the third quarter and year to date totaled $135 million and $213 million respectively, which is in line with our expectations and reflects strong cash earnings and our disciplined approach to working capital management. This performance enabled debt repayments of $125 million during the quarter and reduced our net leverage to 3 times at quarter end, reaching an important milestone we set at Capital Markets Day one quarter earlier than expected. We remain on track to achieve net leverage less than 3 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 returns. Now turning to slide 12 and our fiscal year 2026 full year outlook. Based on year-to-date performance and our current visibility into the fourth quarter, we are updating our fiscal year 2026 guidance.

We now expect revenue between $13.8 billion and $13.95 billion, which removes contributions from new business awards under protest and our latest expectations on materials 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 between $1.115 billion and $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 2025 actuals. We are also increasing guidance for adjusted diluted earnings per share to a range of $2.40 to $2.50, given the strong year-to-date operational performance and interest expense benefits from our debt refinancing.

Finally, we are maintaining our free cash flow guidance between $525 million and $575 million. As a reminder, fourth quarter cash flow will benefit from seasonally strong collections and one fewer pay cycle relative to the prior year quarter. Looking ahead, let’s turn to slide 13 to discuss our preliminary views for fiscal year 2027. From a revenue perspective, as John indicated, we now expect a 3% impact from NASA’s workforce directives. In addition, consistent with our commitment to allocate resources to higher return opportunities, we have made an intentional decision to exit a few no- to low-margin programs, notably in domestic-based operations, in 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 accretive 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 mix shift 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 drive sustained margin improvement in the years ahead. Finally, we expect continued strong earnings per share and free cash flow growth as a result of the increased profitability and reductions to both integration and interest expense.

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 our shareholders. With that, operator, please open the line for questions.

Operator: 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 one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are 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.

Toby Sommer, Analyst, Truist: Thank you. 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?

Travis Johnson, Chief Financial Officer, Amentum: Hey, Toby. Good morning. How are you? Travis here. Well, thanks for your question. Obviously, we are pleased with the progress we have 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 3 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 Markets Day. So really pleased with the progress. As you can imagine, we have 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.

In terms of how we deploy the capital, as stated in our prepared remarks, it should and will be determined based on what presents the best long-term return for Amentum and our shareholders. So that obviously requires we be realistic and disciplined about both Amentum’s risks and opportunities, but also about those of the companies we would look to potentially acquire from an M&A perspective. And I would say also it should require that we take a responsive look at where stock price and valuation are, and taking a look at things like intrinsic value and making sure that we are obviously taking that into consideration as we make those decisions. As appropriate, and as we move throughout the year, we will continue to keep you guys updated. But just keep in mind our approach will focus on maximizing free cash flow per share and driving long-term shareholder value.

John Heller, Chief Executive Officer, Amentum: What I would add to that, Toby, it’s John. Thanks for the call. We are 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 are getting, all organic. I think what we are showing is the enterprise of Amentum has the ability to go to market in our core growth areas. Today, with the organic investments we are making, does not require transformational M&A. That does not say that M&A could not be part of our strategy, but I think the point would be that we are very comfortable with the capabilities we have to compete and win in areas that can drive higher margin and growth.

Toby Sommer, Analyst, Truist: Thank you. I was wondering if you could, it might be early, I know, but you gave a preliminary look at the next fiscal year. Do you expect top line organic growth in the fiscal year after that? 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.

Travis Johnson, Chief Financial Officer, Amentum: Yeah. 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 had not originally contemplated. But at the same time, our performance this year I think demonstrates our ability to mitigate the impact of lower revenue on both EBITDA and free cash flow, and the preliminary outlook we provided for 2027 has that trend continuing. Then directly at your question, looking ahead, as John really highlighted in his prepared remarks, and then obviously in response to your prior question, we are really pleased with the business development momentum, and we continue to see attractive opportunities across the portfolio, with particular momentum in nuclear energy and critical digital infrastructure.

At the same time, we are 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. Altogether, when you look at the portfolio next year, aside from the impact we are seeing from NASA, it’s growing at that mid-single digit rate. We are really excited about the trajectory and what that means for Amentum in the medium and long term.

John Heller, Chief Executive Officer, Amentum: We are really just keeping our heads down on our strategy. It is working. The combination of business development momentum, we are seeing margin expansion. We are generating very strong free cash flow with, 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 have already done that, which means even with several months to go in the year, we have already exceeded what we did last year. 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 are managing the business and where it is going to go from here.

Operator: Your next question comes from the line of Seth Seifman with JPMorgan. Seth, your line is open. Please go ahead.

Rocco, Analyst, JPMorgan: 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 Rapid Solutions divestiture. Should we be expecting that trend to continue next year?

Travis Johnson, Chief Financial Officer, Amentum: Yeah, good morning. Obviously, it is a little bit early to get into any segment-specific guidance. What I would say at a macro level is 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 organic growth opportunities across both segments for next year, as well as even a margin expansion opportunities across both segments.

Rocco, Analyst, JPMorgan: Great. Thank you. How should we be thinking about Amentum’s involvement in U.S. allied nuclear power programs? For example, the reported 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?

John Heller, Chief Executive Officer, Amentum: Well, we have a strong pipeline of opportunities that we are working globally. We certainly see opportunities in countries like Saudi Arabia as open to Amentum with our global brand. We definitely get inbounds and understand where growth is going to happen in the near term. We are very active. Obviously, we have 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 are very well established in the European continent and 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.

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

Colin Canfield, Analyst, Cantor Fitzgerald: Hey, thanks for the question. For 2027 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, however call it, the next 6-12 months? If, I know you did not want to go into segment detail, but maybe talk about just the level of on-contract growth that you are assuming as part of that number. Thank you.

Travis Johnson, Chief Financial Officer, Amentum: Hey, good morning, Colin. This is a few months earlier, obviously, than we provide outlooks in the prior years. What I would say from 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 FY 2027 to come from existing or follow-on work. That’s a really good place to be in terms of a level of visibility this early, right? FY 2026 isn’t over yet, right? We’ve still got a few months to go in terms of the $32 billion of pending awards that John mentioned. Seeing how those get adjudicated in the coming months will obviously have an impact on FY 2027. But we feel really good about the visibility we have as we sit here today. We’ll continue to keep you updated as we move throughout the year.

Colin Canfield, Analyst, Cantor Fitzgerald: Got it.

John Heller, Chief Executive Officer, Amentum: We did mention.

Colin Canfield, Analyst, Cantor Fitzgerald: Refresh video on like.

John Heller, Chief Executive Officer, Amentum: We did mention.

Colin Canfield, Analyst, Cantor Fitzgerald: Oh, go ahead.

John Heller, Chief Executive Officer, Amentum: Sorry. Yeah. I will just call out that we did mention that there have been factors that have impacted the revenue, like the firm-fixed-price executive order. That has created kind of a slowdown, a reconsideration of some new business. So we have seen some new business delays, award delays because of that, which we deem as very positive. The opportunity to do more fixed price work, and we are seeing that shift happen in real time. But it slows the process down. Then, of course, we have had significant number of protests on new business, new business. That new business. So those couple of things will work their way out over the next year that the executive order for firm-fixed-price has to be implemented by the government by this time next year. So we still have some time for that to continue to play out.

Overall, I think it will be real positive for the profitability of the business.

Colin Canfield, Analyst, Cantor Fitzgerald: Got it. Thank you. Maybe if we could talk about portfolio shaping. Travis, if you maybe characterize 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.

Steve Arnette, Chief Operating Officer, Amentum: I think there’s an inherent portfolio shaping going on in what’s happening organically in the business right now. Some of our current contracts we’re seeing increments or sub-elements of the contract effort shift, as John mentioned, to higher margin, some firm-fixed-price types of elements, and a lot of that’s coming through some of the IDIQ mechanisms on 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 Other Transaction Authorities, other transactional authorities, and commercial service offering type procurements, and our team’s been very responsive to that. I think even without some kind of inorganic type activity, organically, that shift is happening. As John mentioned, it’s coming through in the contract mix as we see more and more of the portfolio migrate towards fixed price.

There is kind of this steady trend of organic portfolio optimization happening.

John Heller, Chief Executive Officer, Amentum: Yeah, I think Travis mentioned this. A lot’s changed in the last 24 months. You think of FY 2025, that was a year of integration. Our business development pipeline was pretty much already set before the merger. We’ve had now almost two years to really work with the combined enterprise that the new Amentum represents, which has opened the doors to a lot of other technology-enabled opportunities that have allowed us to shift our focus and our pipeline from lower margin, say, managed services type work to technology-enabled work. We’re prioritizing that, and it’s going to take time. We see a little bit of that this year. As we think about 2027 and 2028, we’ll see that shift to more fixed price, more T&M, less cost plus, more technology-enabled solutions, all driving towards higher margins.

In some cases, fewer product buys, which are just part of the contracts we do, which does impact kind of revenue in the short term. But in the long term, we are excited about where that growth will come from.

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

Gavin Parsons, Analyst, UBS: Thank you. Morning.

Travis Johnson, Chief Financial Officer, Amentum: Morning.

John Heller, Chief Executive Officer, Amentum: Morning.

Gavin Parsons, Analyst, UBS: I just wanted to dig into the backlog kind of visibility to revenue conversion, right? Nice growth in funded, nice growth in total. How do I reconcile that with the 0% to 1% growth next year? Is that NASA that just needs to come out and otherwise, 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?

Travis Johnson, Chief Financial Officer, Amentum: Yeah. 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. At a high level, we’re really pleased with, as John mentioned, the business development performance and getting to that kind of $48 billion in backlog. As you noted, funded backlog is up 10% year over year. We’ve always said despite the kind of fluctuations you can see from quarter to quarter on that, we feel comfortable in that $5 billion-$7 billion worth of funded backlog range, providing the right visibility we need to achieve our revenue objectives. We really haven’t seen any notable changes in the conversion of unfunded into funded, so we feel good about the eventual conversion of bookings into revenue as we set up for next year.

As I mentioned earlier, we’ve got 92% of our revenue visibility next year in firmer follow-on work.

Gavin Parsons, Analyst, UBS: Got it. Could you just 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%.

Steve Arnette, Chief Operating Officer, Amentum: Sure. Maybe I’ll just back up and level set quickly and get to the specifics of your question. As John mentioned, NASA’s taking this initiative to bolster the scientific engineering expertise as they think about a bigger mission set, more bold mission set into the future, programs like Moon to Mars and all of that. As you cite, our initial view based on preliminary input from the client was like a 1% impact, and we talked about that last time. Since then, NASA has solidified their plan, and we’ve been able to sit with our NASA customer, and I mean center by center, individual contract by contract. So now, NASA’s firmed up their plan. They’ve shared the plan with us, and we have a detailed view on that.

You are correct, the insourcing 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 are confident in that estimate. Just to better characterize, we do not have all the contract actions in hand. Some contract mods right now are in negotiation, in progress, and NASA is actually moved out on beginning to hire employees. So this transition is underway, and we have a good view. I would just offer two other quick points that I think are important. It was mentioned in John’s remarks, but the impacted contracts, they are margin dilutive to Amentum, so the EBITDA impact will certainly be less than the revenue.

It is also true that some of the remaining work on our contracts will transition to firm-fixed-price consistent with the Trump administration’s executive order. So this too will incrementally lessen the EBITDA impact. The second point I would mention, kind of thinking longer term, just as the CMOE II and the COSMOS awards this quarter highlight, Amentum remains a trusted partner. So we are navigating the strategic reset that NASA is executing, knowing that 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 IDIQ mechanisms that will allow NASA to mobilize Amentum as these big missions come into reality. So we absolutely see continuing opportunity in the mid to longer term.

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

Greg Parrish, Analyst, Morgan Stanley: Hey, guys. Good morning. Wanted to kind of think 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, too, maybe. Maybe if you could 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 2027, or could it also be a headwind early next year? Thanks.

Travis Johnson, Chief Financial Officer, Amentum: Sure. Yeah. I think you covered well, the dynamics that we’re seeing as we look to close out fiscal year 2026. Roughly, $175 million from new business delays, notably around the new business that we’ve won, that is under protest, that is spread across the portfolio. It’s a handful of opportunities. It’s not 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, just having that impact on the year. Then, 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 FY 2026. I would say that as we look into Q4, 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, our highest revenue-generating quarter. So the 26% contribution for the full year that you see there is consistent with historical trends. Then 99% of it is from our follow-on. So we feel really good about the Q4 guide. Second part of your question, headed into 2027. As we put those preliminary expectations out there for 2027, we’ve contemplated our latest thinking and views and what we’re seeing in terms of the award environment, in terms of what we’re seeing in how long it takes to get through protests or corrective action. So I think we’ve factored that in in an appropriate way in how we see 2027 play out.

Greg Parrish, Analyst, Morgan Stanley: Okay, fair enough. Thanks for that. Then maybe just zooming back a little bit. What needs to happen to kind of bring this all together, right? You’ve had, I think, a ton of success commercially. Great bookings trends. You’re in great markets. But it seems like there’s 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-single digit potential?

Steve Arnette, Chief Operating Officer, Amentum: Yeah. We talked a lot about nuclear. I think we have seen consistent success there over the past two years.

John Heller, Chief Executive Officer, Amentum: We feel really good about the outlook of our pipeline and the opportunities. I think seeing those mature over the next couple of years to be funded into construction, then you see a very significant ramp-up, and we provided that slide in the presentation to provide some flavor of what we’re seeing in terms of the volume of opportunities. The Savannah River AI data center, nuclear power project is a great example. This is going to be a decades long project. It represents a very significant opportunity for Amentum and our partners. 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.

A project like that is going to take years to see matriculate into something that really impacts the business. 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 could see more projects awarded and brought online into the future.

Operator: Your next question comes from the line of Trevor Walsh with Citizens. Trevor, your line is open. Please go ahead.

Trevor Walsh, Analyst, Citizens: Great. Good morning, everyone. Thanks for taking my questions. Maybe just a couple higher level, more macro for both the Digital Solutions and the nuclear opportunities. Love to hear your opinion or thoughts on this, Steve. Great to see the Digital Solutions wins overall that you announced from the quarter. Is there a way for you all to just lean into that a little bit more? Whether it’s by 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 defined set of opportunities, and it is what it is? I just would like to start there, if we could.

John Heller, Chief Executive Officer, Amentum: Sure. Great question. Very timely, actually. We are real excited about the continued accelerating progress in the critical Digital Solutions infrastructure space. The team continues to focus on that. I would say that as a practical matter, we have a great track record of being able to find entrée with a client, demonstrate significant value add, and then scale with a client. 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 entrée with a second, 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 launch into an opportunity to scale.

I think the reason that’s happening and the reason that we’re able to demonstrate value is 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? I think we’ve been able to bring a little bit of an improved solution to that, where kind of engineering with systems integration, being able to stitch all that together in a way that optimizes schedule and minimizes delivery risk for the project. So there’s just a real receptive market there. So we absolutely see the continued opportunity to scale. To your point about resource allocation, we are incrementally biasing resources there.

We’ve continued 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 Digital Solutions infrastructure.

Trevor Walsh, Analyst, Citizens: Awesome. Thanks for the color, Steve. That’s great. Maybe just one quick follow-up then. John, it may be best for you. Appreciate the perspective around the kind of anticipated growth rates for the nuclear energy revenue opportunity. I understand kind of the dynamics of these deals and these contracts just generally where in the planning stages, revenues may be kind of a little bit smaller scale or slower to develop. Then as the project really kicks off, kind of in the back years is when you really see the top line impact. 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 look that you kind of have contemplated in the slide?

John Heller, Chief Executive Officer, Amentum: Yeah. I think if you look at Europe, we’re having great success, and we have great history, and we’re involved in a whole host of projects. 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. That is progress in the U.S. 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. 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. 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. That’s going to be a key milestone. The Savannah River project is one of those engagements that can get two of, 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 Amentum. 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.

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 U.S. So as we see continued progress and start to see some additional SMR projects green-lit, that will point to a real window of opportunity for our business to really accelerate.

Operator: Your next question comes from the line of Ken Herbert with RBC Capital Markets. Ken, your line is open. Please go ahead.

Ken Herbert, Analyst, RBC Capital Markets: Yeah. Hi. Was this maybe for Ken Herbert with RBC?

John Heller, Chief Executive Officer, Amentum: Hey, Ken. Good morning.

Ken Herbert, Analyst, RBC Capital Markets: Yeah. Hey, good morning. Hey, just wanted to follow up on the. You’ve got 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?

Steve Arnette, Chief Operating Officer, Amentum: 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, there’s some diversification even within that because not only the U.S., but 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 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 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.

Travis Johnson, Chief Financial Officer, Amentum: We are very much engaged in enduring no-fail missions, but the continuous integration of 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 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 Amentum portfolio in national security happening as we go.

Ken Herbert, Analyst, RBC Capital Markets: Okay. Thanks, Steve. Is it 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 would that might be a little ambitious?

Steve Arnette, Chief Operating Officer, Amentum: Yes, I think as we view it today, Ken, certainly our base case is not to see any significant impact to the budgets that impact Amentum from what we are hearing in terms of the overall defense spending. If that were to occur, it would certainly be a tailwind to how we are viewing that part of the portfolio. We do think, as I said earlier, that a lot of the things we are doing and the capabilities that we have are directly aligned with what this administration is trying to accomplish. So obviously, we are 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 Solutions infrastructure. So I think our expectation naturally over time is that those will make up a larger percentage of the portfolio.

Travis Johnson, Chief Financial Officer, Amentum: But as Steve said, that is not to say that we do not see growth opportunities across our core, including in national security.

John Heller, Chief Executive Officer, Amentum: Ken, we really love this question because it gets to kind of the strategy. I think this touches on one of the real differentiators and strengths of Amentum, and that is our global presence in that

Amentum 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 are moving ahead with infrastructure projects for the upcoming nuclear infrastructure that they are going to have with nuclear subs. Amentum is going to be a part of that. Our position in Australia, our position in the U.K., our position across Europe on a defense standpoint. When we think of defense and you ask that question, we are thinking globally, and of course, we are 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 are going to be focused there. But we like the broader opportunities that exist in that defense market.

Operator: 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. Bank Corp BTIG. Andre, your line is open. Please go ahead.

Andre Madrid, Analyst, U.S. Bank Corp BTIG: Yep. Thanks. Good morning. I was wondering if you can comment on what specific budget scenarios are contemplated in the 2027 preliminary outlook. I know you kind of touched on it slightly there, but I wanted to hit on it a bit more pointedly.

Travis Johnson, Chief Financial Officer, Amentum: Yeah. Our base case is, I’ll say, stable budget environments. 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. I’d say, especially within kind of the range of outcomes that we anticipate, we factored in a relatively consistent budget environment.

Andre Madrid, Analyst, U.S. Bank Corp BTIG: Got it. On the exiting of low to no margin work, I think you mentioned that this is base ops related. I wanted to clarify, though. Is this decision in part impacted by the current global threat environment at all? This is something we’re seeing across some peers, or is this just purely based on the margin profile?

Travis Johnson, Chief Financial Officer, Amentum: Yeah, it is not related at all to the global threat environment. It’s domestic here. As we’ve talked about, 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. 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.

Operator: There are no further questions at this time. This concludes today’s call. Thank you for attending. You may now disconnect.