Amentum Holdings, Inc. Q4 FY2025 earnings call

• Fiscal year 2025 was Amentum's first full year as a public company, marked by disciplined execution and strong performance.
• Strategic wins included the U.S. Space Force Range contract ($4 billion 10-year IDIQ), Sellafield remediation partnership ($1.8 billion 15-year contract), NASA Cosmos contract ($1.8 billion 9-year joint venture), and nearly $700 million in awards for intelligence customers.
• Hired thousands of skilled professionals, maintained low attrition, and opened a nuclear Center of Excellence in Oak Ridge, Tennessee.
• Completed integration of legacy businesses, on track to deliver $60 million in net run rate synergies by end of fiscal year 2026.
• Core growth areas include RDT&E, intelligence operations, homeland security, etc., while accelerating growth markets are space systems, critical digital infrastructure, and global nuclear energy.

Digital Solutions generated revenues of $1.5 billion for the quarter and $5.5 billion for the year, representing 11% and 7% growth respectively. Adjusted EBITDA increased to $116 million for the quarter and $437 million for the year, resulting in full year growth of 8% and adjusted EBITDA margins of 7.9%. Global Engineering Solutions generated revenues of $2.4 billion for the quarter and $8.9 billion for the year, representing 9% and 2% growth respectively. Adjusted EBITDA increased to $184 million for the quarter and $667 million for the year, resulting in full year growth of 3% and adjusted EBITDA margins of 7.5%.

• Fiscal 2026 revenue expected in range of $13.95 billion to $14.3 billion (3% midpoint) after normalizing for working days, JV transitions, etc.
• Adjusted EBITDA expected in range of $1.1 billion to $1.14 billion (5% midpoint) driven by margin expansion and cost synergies.
• Adjusted diluted EPS expected $2.25 to $2.45 (12% midpoint).
• Free cash flow expected $525 million to $575 million (12% midpoint), with Q1 impacted by government shutdown but sequential increases expected later in the year.

• Protests on the NASA Cosmos contract, which is not included in fourth quarter backlog or book-to-bill results.
• Government shutdown impact on spending and award decisions, with approximately 1% impact on fiscal 2026 revenues.
• Recompete risk less than 5% of revenues in fiscal 2026.

Q: Can you discuss timing, onetime margin, cash flow dynamics, Section 174 benefits, and merger-related margin/cash pull forward/pushout?

A: Travis Johnson discussed additional working days impact, tax benefits from OBA law changes, and margin progression towards FY '28 goals of 8.5%-9% margins.

Q: How to think about multiyear margin progression, synergy contribution, and shutdown-related dynamics?

A: Travis Johnson mentioned FY '26 margin expansion of 20 basis points, on track with Capital Markets Day goals, and shutdown impact pushing some activities but fundamentals still strong.

Q: Update on SLS award timing and portfolio divestitures?

A: Stephen Arnette discussed the cleared protest on the Space Force Range contract and ongoing execution, with excitement about the contract and portfolio leveraging across capabilities.

Q: How big is the nuclear business and when will growth inflect?

A: John Heller stated nuclear business is mission-critical across life cycle, with growth in gigawatt plants, SMRs, and plant life extension, expecting activity to accelerate through the decade.

Q: Timing and mix issues in modeling fiscal '26 quarterly cadence of revenue and EBITDA?

A: Travis Johnson noted Q1 impact from government shutdown, with sequential increases expected in FY '26, driven by Digital Solutions and Global Engineering Solutions growth.

Q: When may Amentum go on offense with capital deployment and inorganic growth?

A: Travis Johnson said on track to reach net leverage <3x by end of fiscal 2026, with focus on maximizing free cash flow and considering M&A to accelerate growth in accelerating markets.

Q: Margin drivers for reaching 8.5%-9% by '28?

A: Travis Johnson mentioned accelerating growth markets (space, digital infrastructure, nuclear) and cost synergy initiatives as key drivers.

Q: Shutdown impact on fiscal '26 and debt paydown pace?

A: Travis Johnson said 1% impact from shutdown, with most cash flow generated in second half of FY '26 leading to debt paydown below 3x net leverage.

Q: Organic investment areas poised for growth?

A: John Heller highlighted core markets and accelerating growth markets (space, digital infrastructure, nuclear) as areas for organic investment.

Q: Recompete risk in fiscal '26?

A: Travis Johnson stated less than 5% recompete risk, with over 90% of revenues from firm and follow-on work.