AMTM

Overall Third Quarter Financial Performance

• Total third quarter revenue was $3.5 billion, slightly below internal expectations, with normalized year-over-year growth of 1%
• Record quarterly adjusted EBITDA of $290 million, up 6% year-over-year, with an 8.3% margin (a 60 basis point year-over-year increase)
• Adjusted diluted earnings per share of 67 cents, up 20% year-over-year, driven by strong operations and lower interest expense from debt repayment
• Third quarter free cash flow was $135 million, in line with expectations

Business Development & Backlog

• Quarterly net bookings of $3.9 billion, for a book-to-bill ratio of 1.1x, and a trailing 12-month book-to-bill of 1.3x
• Total ending backlog of $48 billion, with funded backlog up 10% year-over-year to $6.2 billion
• $32 billion in pending awards (two-thirds from new business), plus $2 billion in already won work currently under protest
• On track to exceed the full-year $35 billion bid submission target, with more than half of submissions from new business
• Key third quarter awards: Over $400 million in advanced nuclear engineering/development contracts, $250 million in critical digital infrastructure awards (including hyperscaler data center buildouts), over $1 billion in national security defense contracts, and two long-term NASA IDIQ awards previously under protest

Strategic Progress in Core Growth Markets

• Three high-growth markets (nuclear energy, digital, space) combine for ~$4 billion in annual revenue, with the remaining $10 billion of annual revenue across core markets (national security, environmental remediation, homeland security)
• Total annual nuclear revenue across the company is $2 billion, with $500 million from the global advanced nuclear new-build market
• Recent key nuclear strategic developments:
  • Continued progress as global delivery partner for Rolls-Royce small modular reactors, with new selections in Sweden and ongoing work in the UK and Czech Republic
  • Announced a strategic partnership with Westinghouse to support engineering and commercial deployment of the AP1000 reactor and AP300 SMR, expanding an existing relationship
  • Selected by the U.S. Department of Energy to lead development of a multi-gigawatt nuclear facility and AI data center project at the Savannah River Site, with expected total revenue to Amentum exceeding $1 billion over the project life, plus potential future commercial economic interest as lead integrator
• Near-term revenue has been impacted by extended protest periods and procurement delays, but management notes strong underlying demand drivers, including stable U.S. and allied defense budgets
• NASA workforce insourcing initiative is now expected to reduce fiscal 2027 revenue by 3% (up from the prior 1% estimate, at the upper bound of prior scenarios), but the lower-margin profile of this business means the EBITDA impact will be smaller, and the change is accretive to overall company margins

Capital Structure

• Net leverage reached 3.0x at the end of the third quarter, hitting the Capital Markets Day target one quarter earlier than planned, with $125 million in debt repaid during the quarter
• Strong cash flow and deleveraging create more flexibility for future capital deployment, with a continued focus on high long-term return allocations

• Fiscal Year 2026 Guidance (Revised):

• Revenue is guided to a range of $13.8 billion to $13.95 billion, adjusted to remove contributions from new business under protest and update expectations for material/non-labor volume, with a midpoint reflecting ~2% normalized fourth quarter growth
• Adjusted EBITDA guidance was raised to $1.115 billion to $1.14 billion, with an 8.1% midpoint margin (20 basis points above prior guidance and 40 basis points above fiscal 2025 actuals)
• Adjusted diluted earnings per share guidance was raised to a $2.40 range (original text cut off, consistent with upward revision from prior outlook)
• Free cash flow guidance is maintained at $525 million to $575 million

• Fiscal Year 2027 Preliminary Guidance:

• Expects a 3% revenue headwind from NASA insourcing, plus an additional 1% headwind from the intentional exit of a few no-to-low margin domestic base operations programs
• The remaining portfolio is expected to deliver mid-single-digit organic growth, which more than offsets the two headwinds noted above
• Expects a 20 basis point year-over-year increase in adjusted EBITDA margins, as the NASA headwind is margin accretive, offset by planned growth investments in nuclear and digital infrastructure, and supported by favorable mix shift
• Expects continued growth in adjusted diluted earnings per share and free cash flow, driven by higher profitability, lower integration costs, and lower interest expense

Amentum reports two reportable segments for the third quarter of fiscal 2026:

1. Digital solutions: Generated revenue of $1.5 billion, with 3% year-over-year growth driven by ramp-up of new contracts in digital infrastructure and space markets. Adjusted EBITDA came in at $116 million, with an adjusted EBITDA margin of 8%, flat year-over-year and up 80 basis points from the second quarter of 2026. This segment accounted for approximately 42.9% of total third quarter revenue.
2. Global engineering solutions: Generated revenue of $2 billion, which was impacted by a joint venture transition at Devastature and the expected ramp-down of legacy historical programs, partially offset by contributions from new contracts and on-contract growth. Adjusted EBITDA was $174 million, with an adjusted EBITDA margin of 8.6%, an 110 basis point year-over-year increase. This segment accounted for approximately 57.1% of total third quarter revenue.

• Extended award protest periods and government procurement delays have pushed near-term revenue recognition out to future periods, creating volatility in quarterly top-line results • NASA's workforce insourcing initiative will reduce fiscal 2027 revenue by 3%, with transition activity currently underway • U.S. government implementation of a new firm-fixed-price executive order is slowing the new award process as policies are updated, though management expects this to improve long-term profitability • A portion of pending new awards remains under protest, creating uncertainty around the timing of future revenue recognition • Continuing resolutions for U.S. federal budgets are expected through at least the first quarter of fiscal 2027, creating some near-term budget uncertainty

• Long-term nuclear project revenue depends on regulatory milestones, government policy support, and project negotiation timelines that are difficult to predict accurately

Q: Now that deleveraging is complete one quarter early, how will management deploy capital going forward, and what is the medium-term top-line organic growth outlook?

A: Management is evaluating multiple capital deployment options, including M&A, share repurchases, and further debt reduction, with all decisions focused on maximizing long-term returns and free cash flow per share for shareholders. Organic business development momentum is strong, with the full-year $35 billion bid target already exceeded several months before year-end, and the portfolio excluding NASA is already growing at a mid-single-digit rate, with a positive long-term trajectory driven by wins in nuclear and digital infrastructure.

Q: How much visibility does management have into fiscal 2027 revenue from existing backlog and pending awards, and what is the current pace of organic portfolio shaping?

A: Approximately 92% of expected fiscal 2027 revenue is already covered by existing or expected follow-on work, providing strong visibility this early in the planning cycle. Portfolio shaping is happening organically: the business is seeing a steady shift toward higher-margin fixed-price contracts, OTAs, and technology-enabled solutions, driven by shifting government procurement rules and a focus on higher-return opportunities across the existing portfolio.

Q: What changed with NASA's insourcing initiative that led to the higher 3% revenue impact estimate, and why should investors be confident the impact will not grow further?

A: NASA has now finalized its insourcing plan to bolster internal engineering expertise for future deep space missions, and management has worked through the plan center-by-center and contract-by-contract with NASA customer leadership. The 3% impact reflects the upper bound of the initial estimated range, based on concrete shared plans, and while some contract modifications are still being negotiated, management has clear visibility into the full expected impact. The impacted contracts are low-margin, so EBITDA impact will be smaller than the revenue impact, and larger remaining NASA contracts still include IDIQ mechanisms for future growth on new missions.

Q: What milestones need to be achieved for nuclear growth to accelerate meaningfully, beyond the natural progression of long-term project timelines?

A: Key milestones include continued U.S. government progress on its goal of starting 10 new gigawatt-scale nuclear plants by 2030, driven by growing demand for reliable power to support AI data centers. The Savannah River project is a major early milestone, and additional greenlighting of small modular reactor projects across the U.S. will open further large growth opportunities. Continued progress on European projects with Rolls-Royce will also contribute to accelerating growth over the next several years.