Amentum Holdings, Inc. Q3 FY2025 earnings call

• CEO John Heller noted continued momentum across the business, with benefits from integration efforts and mission-focused portfolio. Completed 2 divestitures. Reduced net leverage to 3.5x. On track to achieve $30 million in net run rate cost synergies by end of fiscal year.
• Highlighted global trends including defense, space, AI/ML, and nuclear. For nuclear, Amentum has comprehensive solutions across the nuclear life cycle, opened Nuclear Center of Excellence in Oak Ridge.
• Reported $3.4 billion in net bookings this quarter, book-to-bill of 1x, pending awards of $29 billion and total backlog of $45 billion. Secured key awards like $4 billion Space Force Range Contract, Canadian Nuclear Laboratories contract, and over $500 million in Intelligence awards.

Digital Solutions generated revenues of $1.4 billion, representing 12% growth. Adjusted EBITDA increased to $114 million, with adjusted EBITDA margins at 8%. Global Engineering Solutions generated revenues of $2.1 billion. Adjusted EBITDA was $160 million, with adjusted EBITDA margins benefiting from strong operational performance, up 10 basis points.

• Raising full year organic guidance: Revenue expected in range of $13.975 billion to $14.175 billion. Adjusted EBITDA in range of $1.065 billion to $1.095 billion. Adjusted diluted earnings per share in range of $2.05 to $2.20. Free cash flow between $475 million and $525 million.

• The Space Force Range Contract is under protest. Impact of government personnel changes and potential delays in funding.

Q: Maybe starting out on bookings. Can you just clarify what the JV adjusted quarterly book-to-bill was in the quarter? And then maybe talk us through how we should think about your Space Force pipeline as well as your NASA pipeline.

A: This is Travis. I will start with your bookings question and then hand it over to cover your question on the space opportunities. So the first thing that I'd highlight is that we're obviously pleased with our awarded book-to-bill performance in the third quarter, which was 1x on a reported basis, also 1x on a year-to-date basis. And to your question specifically about our imputed JV book-to-bill, a couple of different things. We did have the Canadian Nuclear Laboratories win. That's an unconsolidated joint venture, which John highlighted in his prepared remarks. And including that award, our imputed book-to-bill for the quarter was 1.8. So really solid performance there. That brings our imputed year-to-date book-to-bill to 1.4. And probably the last thing to highlight just from a metrics perspective on book-to-bill, we also highlighted our Space Force win, which is excluded from our book-to-bill metrics given that it's currently under protest. Obviously, we look forward to that being resolved. But our reported book-to-bill would have been approximately 2 in the quarter with that and obviously well over 2 in imputed perspective. So really pleased with the business development performance that we've experienced in the third quarter and through the year so far. And with that, maybe I'll hand it over to John.

Q: Given the upcoming end of the federal fiscal year here this quarter, are you expecting a seasonally high number of kind of budget flush opportunities with the slow procurement environment up to date so far this year? And are you seeing any potential headwinds there around kind of federal contracting officer shortages, some of that money going out by the end of September?

A: Yes, I'd say we've been very pleased with how the government is kind of -- you had that transition, any administration, you're going to feel an impact of that as the administration brings in key people, lays out their priorities, the Big Beautiful Bill came out, provided clarity, provided excitement, provide direction, the leadership at these organizations are in place, they're supported by this administration. So frankly, we're seeing a government that today is working relatively efficiently and if not even more efficiently because there's a sense of urgency. There is a desire to move things forward in a pace that is probably a little different than what we're used to. So we're -- we don't expect that the impacts that we might have seen in previous quarters to come out in the fourth quarter. I think it's going to be business as usual. Our customers are focused, they know what they have to do. They're focused on executing that. RFPs are coming out as planned, awards are coming out generally on time. Of course, there's there are still protests, which is just part of the industry, and we're all used to that. So it's nothing new. And yes, we would expect fourth quarter to be pretty solid.